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

Good morning, and welcome to the Nanoco Group plc Interim Results Investor Presentation. [Operator Instructions]. I'd now like to hand you to Brian Tenner, CEO. Good morning, sir.

Thanks very much, and good morning, everyone. Welcome to this webinar on our interim results presentation for the 6 months ended 31st of January 2024. My name is Brian Tenner, I'm the CEO of Nanoco, and I'm joined today by Liam Gray, our CFO. And just as an introductory comment, because we actually recorded this entire presentation last Wednesday morning, and it is available on our website. Today, what we're going to do, because there have been a significant number of questions submitted in advance, we're just going to take you through the introduction to Nanoco in the presentation pack particularly for those who are new to the story, but also as a refresher for people who already know us. And then we'll talk about the highlights and the summary in both the operational part of the business and in the financial part of the business, and that will allow us to spend more time than we normally are able on questions and answers. There have been -- as I said, there have been a significant number of questions submitted in advance. And the answers to a number of them are actually quite long and involved. So we do want to spend time on that. So without further ado, we'll turn to Page 5 in the presentation, which is part of the introduction to Nanoco. So just a reminder of who we are and what we actually do. We are founded in 2001 by Dr. Nigel Pickett, who's still our CTO today; and Professor Paul O'Brien. The company was a spinout from Manchester University. We are a material science company, and I can't emphasize that enough. We make materials that are suspended in a solution. So whether it's advanced materials or a chemical company, that's who we are and what we are. We're not a device company. We're not a TV company. We're not a phone company. We are a material science company. We are the leader in the R&D, scale up manufacturing and licensing of high-performing semiconductor nanoparticles. We have a very large IP portfolio and that was recently validated by the U.S. Patent Trial and Appeal Board, which is part of the U.S. Patent Office. Our headquarters and production facility is in Runcorn in the U.K. Today, we have around 50 staff, 30% of whom have PhDs, and we employ people from 8 different nationalities. And we make quantum dots. That are carbon free and hence, nontoxic. And you can see an image on the bottom right there of some of the quantum dots that we can make for use in display applications. So then can ask yourself legitimately, well, what is a quantum dot? Quantum dot is a fluorescent semiconducting nanoparticle, typically 1 to 10 nanometers in size. Now again, 1 to 10 nanometers, those are not measurements that people normally use in their everyday life. So what does that actually mean in terms of scale? Well, one way to look at it is, typically a quantum dot can be 100,000x thinner than a human hair. So that's looking at a very, very small scale. If you want to think of something big that was reduced to the nano scale, well, if you took the planet Earth and you reduced it to the nanoscale, it would actually fit inside that sort of golf ball size, golf ball shaped and red quantum dot image on the top left of this slide. So the simple thing to say about them is they are tiny and there are many billions, if not trillions, in a kilogram of material. Okay. So that's what a quantum dot is, but what does it actually do? Well, a quantum dot has size determined optical and electronic properties. What that means is just by changing the size of the quantum dot, so not necessarily making it from different chemicals, different compounds, just by changing the size, you can get it to perform in different ways. So the most obvious example of that on the right-hand side of this slide, quantum dot, it's only 2 nanometers wide, when stimulated with energy. That energy can be electricity. It can be light, the photons in the light, but the 2-nanometer quantum dot when excited in that way will emit blue light. A 5-nanometer quantum dot made of exactly the same material will limit green light and a 10-nanometer quantum dot will emit red light. So in summary, again, using slightly technical language, the quantum dots are very efficient absorbers. That's with broadband means, they observed across a wide range of energy types, but they are also very narrow band emitters. What that means is that when they emit those 3 colors of light, what you get is a very, very specific wavelength of light which gives you very high definition, very good color gamut and very, very crystal clear colors. So that's what a quantum dot does. It emits and it absorbs and depending on the application you're looking at, you may be trying to optimize one or both of those characteristics. So next question is having established, well, what are they? What do they do? Or where are they used? Here at Nanoco, we have a dot only strategy. That means we focus on the quantum dots themselves. We don't focus on the ways to get them into final devices. We don't stretch our capabilities further away from our core confidence of the actual quantum dots. And in that strategy, and that's why we've set out displays and sensors here, we focus on where we believe the nearest-term value opportunities are. So the 2 opportunities you can see here are in displays of any kind, whether it's a TV, a watch or phone, any industrial control system, et cetera, any kind of display focused on the visible light, and that's where we create those quantum dots mentioned above for emitting blue, green and red light. The other place you can then -- or that we're focusing on using quantum dot is on sensors. Sensors, we're actually exploiting the absorptive characteristics of the quantum dot, and there, typically, what they're absorbing is an infrared light usually generated by an infrared laser. And that then outputs an electrical signal, which can be interpreted by a silicon chip or a readout integrated circuit and turned into an image a picture or a dynamic image, et cetera. So that's the other type of material or application that we are focused on at the moment. So that's a very brief summary of who Nanoco are, what we do and what a quantum dot is the sorts of areas that can be used. As I mentioned earlier, in an affiliate presentation on this entire slide deck, it just won't be running through though, is available on our website, will be available on the AMC website so people can digest that at their leisure. I'll now turn now to Slide #8, and just a summary of what we've achieved in the last 6 months or the 6 months to January '24. So first thing is, for the first time in our history, we received unfulfilled 2 commercial production orders. When I say 2, it was for 2 different materials for one customer. Those were low-volume orders, relatively low value but they are -- the difference between us being an aspirational R&D company and actually now transitioning into an actual production company. We do expect the demand and volume from those first 2 orders to ramp up over time. The other thing then that we did during the last 6 months, we signed 2 joint development agreements with 2 global customers. Apologies, I'm about to say 2 again, but each of those agreements involves 2 different second-generation nano-materials for use in infrared sensing. The second-generation materials will typically be higher performing, have different operating parameters and in particular, we'll be able to operate consistently at higher temperatures, and that actually opens up new potential applications for the materials. Both those agreements are 2 years long. And I'll say a little bit more about them in relation to your question that's been asked about what we'll get from them. During the last 6 months and indeed since then, we've delivered all JDA milestones both in those new agreements and in the agreements that we've been operating under -- with those 2 global customers in the period before that. At the end of the 6-month period, we received the final litigation proceeds from Samsung. So that was $75 million gross less withholding tax to give us $71.75 million that was converted into sterling after the period end. Given the successful outcome to the Samsung litigation, given that we've spent 4 or 5 years just fighting for survival and then really trimmed back on investments in a number of areas, we have been able to start spending a little bit more on the business. And one area that I'd like to call out for that is that we are -- have added roughly 50% to our floor space here at Runcorn and we are building a new wafer device fab. That's an R&D scale or a lab scale device fab. And it will give us capabilities of depositing our materials onto a silicon wafer that will also have top and bottom electrodes. We have laser etching, lithography, et cetera, et cetera. So we'll actually be able to create a pilot skilled devices. The reason that's important is that, two things. One is that we'll be able to talk to semiconductor customers about what they actually will get if they put our materials on to a device because we'll be able to show them. Rather than today, we say, well, here's some material, why don't you experiment with it and see what you get. The second thing is it will significantly accelerate our development cycles. So currently, with our two customers, we -- two global customers, we make material with a new recipe, say. We tested our sales, but as a chemical. It then goes to them for testing. Sometimes they can go to 2 or 3 different sites in those customers. So basically, by the time the learning cycle is complete, it can be 2 to 3 months later. If you want to maximize the speed at which you develop new products and the chances of success, you need to increase the number of reaction cycles and number of recipes that you're experimenting with. The best way to do that is to shorten that time period by bringing that device capability here into Runcorn, we should be able to see if anywhere between 30% and 40%, if not more, of the normal development time. And that device fab and all the equipment in it is now being commissioned. And then the last thing I want to say just about the highlights of the first half of the year is that the return of value is underway. So be aware that we're doing a tender for up to GBP 30 million to be followed by an on-market buyback of GBP 3 million. I can say a little bit about -- more about those later again when we get to the questions. So in summary, Nanoco in the last 6 months has become a fully funded commercial business with commercial traction for actual products in the market, which I guess is the initial or interim target for every single high-tech business that's bringing a new product to the market. I'll now hand over to Liam, who will take you through the financial highlights and summary and then I'll come back just to summarize.

Thanks, Brian. I'll just skip ahead to Slide 22, which is the financial highlights slide for the period ended 31st Jan 2024. So as is on here, revenue was up 150% on the comparative prior period, and this is driven by the licensing agreement, which has contributed GBP 3 million to GBP 4 million of revenue. If we exclude this license revenue, income from products and services is down GBP 0.6 million and that's used the gap between complete and previous R&D contracts and sign up the new agreements, one with the Asian Chemical customer in November '23 and the other with ST Microelectronics in January '24. Our adjusted EBITDA is GBP 0.7 million, which compares with a loss in the prior period of GBP 1.1 million, and the movement to use the high revenue figure, the majority of which has no significant associated costs. As we've mentioned previously, we have been investing in our capabilities, and we are seeing an additional space at our site in [indiscernible] to facilitate our new device lab. We have also increased our head count to support this expansion. This means our cash cost base has increased from around GBP 0.5 million per month to around GBP 0.6 million. This worth is still significantly below where the group has been previously, and significant any investment, sorry, are carefully assess to make sure they will deliver commercial and operational value. The hedge we took out on receivable from Samsung was worth a positive GBP 2.5 million at the period end, and this was realized in February when we transferred the cash from USD into GBP. At the period end, we had cash of GBP 59.3 million, and the cash we're retaining in the business will support our continuing operations through to cash flow breakeven. These investments will also improve our commercial and operational capabilities. Finally, and this is a particularly important point, our cash position now proved through our robust supplier and the complex supply chain, and we can and will continue to deliver to our customers. That was a question existing around our short-term liability. So let me quickly move on to the outlook and summary slide. We still expect services and material revenue to be in line with FY '23 whilst H1 of FY '24 is behind the prior period, we are on to make up the shortfall in H2. The Samsung IP license income will generate GBP 6 million per annum for around 8 years. But this has been prepaid, so no future associated cash inflows. Our cash cost base has increased to GBP 7 million, and this reflects our investments in footprint to create other base lag and investments in our equipment to improve our current offerings, both to existing and new customers, and our investment in people to be able to operate the lab and support the operations. All investments are discussed internally to ensure we are utilizing the resources we have to the fullest extent. On cash, our net monthly cash burn is around GBP 0.3 million to GBP 0.4 million, and we plan to spending around GBP 2 million of capital projects in FY '24, around half of which has already been spent in H1. And finally, as Brian mentioned, the process to return up to as GBP 3 million to shareholders is currently underway. And with that, I'll pass you back to Brian.

So now moving to Slide #29 to talk about the outlook and what our priorities are for the rest of this calendar year. We're looking to deliver steady growth on a firm foundation. We do expect more low volume production orders during calendar year '24. We've been notified and told to expect some. And we just haven't until when those yet. We are working to add new material development contracts to our portfolio. So if you think back in 2019, we had one customer, one product, one application. And actually, when that project came to an end, rather started 2020. We actually had 0 customers. So that has got increased to one global customer. That then increased to a second global customer, and we are aiming to add a third global customer to our portfolio in the next 6 months or so. We're also working to finish the commissioning of our wafer device fab. We've already talked about the benefits that will bring. So the sooner that can be brought up to speed the better. It is a very significant capital project and we've managed to do a very discounted price because we do have customers who actually want us to provide services with that equipment. In the next month or so, we will complete the return of value in the form of the tender. The on-market buyback. It's hard to say how long that will last. It will really depend on what's happening on the prices, what's happening with liquidity of the stock after the tender completes. We also announced previously, and it was reiterated in the detailed interim results statement, which you can find on our website. But the Chair, Dr. Christoper Richards, after 9 years with Nanoco, or he will have completed 9 years in Nanoco at the end of this calendar year, so around November, December. He's indicated he's going to stand dine at the next AGM, which is either going to be at the end of November or early December. That chair succession process will be run by Dr. Alison Fielding, our Senior Independent Director, and we'll be starting soon. And then lastly, I've often said in a number of meetings and presentations, for the last 4 or 5 years, we effectively were hiding under a still in that, given the uncertainty around the IP resolved by the litigation working out in our favor, given uncertainty about the products getting into commercial production, again, result in our favor. We're very much when it comes to media, social media and trumping our achievements, unlike many others actually wanted some concrete achievements to talk about. So therefore, we will be making some small modest increases in raising our profile in the markets that we participate in. So in terms of summarizing the outlook and as I said at the very start, we now are a fully funded business with commercial traction and a lot to build upon. I'll hand you over to our host, who will just remind people how to answer questions, and then it will be coming back to Liam and myself to actually go through submitted questions and any new ones that are coming in while we're speaking.

[Operator Instructions]Brian, Liam, at this point, if I could just hand back to you just to read out those questions and give responses where it's appropriate to do so. I'll pick up from you at the end.

Okay. That's great. So we'll adopt the usual format, that the person answering the question will read the question, right. I would point out just before we start going through these, you will see that I refer to in a number of answers to other previous announcements and publications by Nanoco, that's not to scold people for not having read all of those, but it's just a reminder that a lot of this information is already available. And if you want more detail on it, referring back to those original announcements, you will see more detail, if I don't repeat a word for word here. So question number one. It's not clear when you expect the second generation materials to go into volume production. Is it at the end of the 2-year framework agreements with the Asian customer and ST Micro i.e., in 2026? Or is it likely to be later? So I'd refer back to 2 previous RNSs, 12th of January '24 with STMicro, 7th of November '23 with the Asian customer. The STMicro RNS says the JDA is a 2-year program to optimize the performance of the second-generation material. The new JDA will include revenue for services, and that's the device lab that I was talking about. It then says if all of the technical milestones in the 2 years of the JDA are achieved, the next step in the process will be to scale the new material into an industrialized process capable of supporting high-volume applications. Those of you who are familiar with our presentations that we've given over the last few years and indeed in the current presentation, know that our typical product development cycle has a development phase, an optimization phase, then a scale-up phase, final validation of our process and the material with the customer and then production. So the simple answer for both of those JDAs is they will complete the optimization phase. They may deliver some of the scale-up fees because while you're optimizing, you will be looking at scale up. They will not immediately lead to commercial production. So there will be some scale up work to be done after that and some validation work. That could last up to 12 months and it could potentially be shorter, but it really depends on the customer and their application. So the simple answer is, those 2 development agreements will get us to an optimized material, but it will not get us to a material that is actually immediately ready for commercial production. Question number two, long-term loyal shareholder here, with an average weighted buying price of 24.7p, highest selling back my shares at a loss or retaining my shares with a very possible debt after year buyback, consistent with returning value to shareholders? Well, I guess the very obvious statement is, everybody's got a different purchase price. We did -- when we announced the tender and the only thing we can really refer to is the actual current market price because that's telling us what the market believes the shares are worth. When we announced the tender in the 11th of March, we -- the 24p price was a 25% premium to the closing mid-market price on the 8th of March, and it was a 20% premium to the 60-day VWAP. That clearly is a benefit to shareholders compared to the market price, and it's really the only benchmark we can use. It's also worth noting that over 93% of those voting at the general meeting voted in favor of the tender exercise and giving the Board the authority to do that tender exercise. And then lastly, I guess, and again, this goes without saying individual shareholders, now I have a choice. They can decide sell their shares or retain their shares or do other some kind of strategy with their holding based on their own personal circumstances, but also based on their expectations and belief in the company and its future. Next question, question number three. To what extent is the expectation of being cash flow breakeven in calendar year '25 a result of guidance from STMicro? Or is it a purely internal estimate? Simple answer is it's an internal estimate based on a number of sources of information, including indications from customers on their expectations for their products. But as I was saying earlier about the next purchase orders, it is not based on a firm committed ramp-up in demand, but rather the expectation of our sales and our customers of ramp-up in demand, whether from their end customers or a growing number of customers. It also, to a certain extent, incorporates market forecasts, so outside of customer views but actually independent forecasters views of when product sales will ramp up. Question number four, is Nanoco looking to litigate against any infringement in 2024? If yes, what might be the size of the claim? Something like Samsung?. I know we didn't cover it today, but it is available on the website. So I'd refer you to Slide #19 in the presentation deck. As we've said a number of times before, outside of Samsung, the market for devices containing cadmium-free quantum dots is currently very small. And that's supported by our own review in [indiscernible] of a number of products in the market, some of which claim quantum technology, but -- when you look at the device, they don't actually contain any types of quantum dots. So I guess that's part of the warning about advertising speak. And the truth is a small market is not an attractive target for litigation. Because the costs vastly outweigh the possible returns. And again, I'm emphasizing the market today. So as the market grows over time, that position and stance will change. Eventually, it will become economically sensible to consider litigation. Something just to remindful folk of and again, as long-term holders will be aware, Samsung actually launched their QD TV in 2015, and we filed suit in 2020, and we settled on the Cortez steps in January 2023. So that was an 8-year process from start to finish. Before we filed suit, there were 2 to 3 years of quite detailed interactions in terms of understanding both our own position and trying to persuade the other side to come to some kind of arrangement that would avoid litigation. So the simple statement is, it is a long process. And the short answer to this question is no, you should not expect litigation in 2024. That's not -- never say never, but you should not expect litigation in 2024. It also goes without saying, given that Samsung is 90% or somewhere between 80% and 90% of the quantum dot TV market, and the other 10% to 20% is dominated by cadmium quantum dots, but any claim against another infringing partner couldn't get close to matching the scale of the Samsung outcome in today's market size. I would like to emphasize though that this is not the same as saying that we are doing nothing in 2024. We're not just sitting here waiting for the market to grow. Litigation is an expensive last rule of the dice and as we've said many times before, our primary goal as a commercial production company, and again, I said it a couple of times last week, we're not an IP licensing company. Our primary goal is to generate value from development, production and sale of nano materials, and we're actively leveraging our IP to that end today. But equally, that is not the same, again, just to remind folks are saying that, we're not doing anything with our IP. If we can't get commercial production agreements, if we can't get development agreements, then with certain third parties, we would consider licensing the IP but clearly not to our competitors. And question number 5, which use case does Nanoco see as the one driving maximum adoption of its technology? I think the simple answer to that is adoption of this technology in a mobile phone or multiple mobile phones would drive very high levels of adoption. The adoption in phone could be on either or both of the facing side of the phone and also the world facing side of the phone. If it was on both sides of the phone, that would have mean 2 devices in each phone. So 100 million phones, if it was 2 devices, we give you 200 million units, not 100 million units. The reason that a mobile phone stands out too strongly as the single biggest driver for maximum adoption of the technology is that it's actually very hard to think of a company around the world at sales, 100 million units of an individual item of one model of what they make. And mobile phones, as I say, are the things that stand out. Question number 6. Why was the share buyback offered rather than a special dividend given to all shareholders from the Samsung proceeds? So the Board obviously evaluated tender, special dividend and different options. The reason we came down on the tender, there's a number of reasons for that. Firstly, the tender treats everyone equally. And it also gives shareholders a choice. Special dividend would treat everyone equally, but we give people no choice. We did consult with just under 40% of our total shareholders and the vast majority favored tender, I'd say, in excess of 90%. Again, the vote at the general meeting with more than 93% of shareholders voting in favor of the tender, again, supports the Board's conclusion that the tender was the right way forward. Shareholders could have rejected that. Coming back to the dividend point, forcing shareholders to take a dividend, as I said, while treating everybody equally would make some shareholders received a dividend they didn't want and we might actually have to pay income tax on that rather than capital gains tax. And you can imagine if we're actually giving 40% or giving back the equivalent of 10p a share or so in dividend, if someone then has to pay 40% tax on that, losing a very significant portion of it. The Board also felt that a special dividend would have a larger and longer-term more detrimental impact on the share price and hence, shareholder value for remaining shares. And for -- well, I guess, everyone will be participating. And what I mean by that is a special dividend would likely have led to a $0.01 for $0.01 reduction in share price. So potentially a net 0 or worse for shareholders. So on balance, combining the freedom of choice, the premium to the market price and the long-term impact to the Board to prefer a tender exercise. Last point on this, we did consider trying to give shareholders a choice. As we said, we would try but changes in HMRC rules mean that even if shareholders are given a choice of dividend or capital return inland revenue actually default to considering net income. So it would not be a real choice. You would end up with the distribution being treated as a taxable income event. Moving to question 7. With the recent announcement of the Metalenz and Samsung partnership and their polarized sensor targeted at face ID, does Nanoco think that this technology will impact potential demand for QD-based sensors and handset, face ID or other technologies? A simple answer to that is image sensors and cameras use lenses. We see the technology as complementary I'd also point out that STMicro themselves, who we've worked with for a number of years and continue to work in long-term development programs, actually announce their own collaboration with Metalenz back in 2021. So the two are obviously not mutually exclusive. And frankly, the more devices that need high-performance image sensors, the better the likelihood of a sustainable ecosystem developing around this kind of technology. Question #8. The introduction of commercial supply is most welcome. But do you think the lack of detail on what is being used, what it is being used in is harming confidence in the company prospects going forward? This is a really good question. However, I think it partly reflects our position in the supply chain, which may in itself be an issue for confidence. So let me explain. As I said earlier, we are a materials company. Our nano materials are used by semiconductor companies, and that's who we sell them to. We don't sell our materials to film companies, to car companies, to white good companies to building companies. We sell them to semiconductor companies. So if I take you back to 2018, when I joined Nanoco, we were in the highly unusual position that we were working directly with the end user OEM for a large-scale consumer electronics device, namely the U.S. company, can't emphasize enough, that's highly unusual that a company right at the end of the supply chain actually has control and oversight of every step through the supply chain. It's not a normal situation. So we, at that time, working with the end customer, we're also working closely with a direct customer for our material, i.e., the semiconductor company. So because of that back in 2018, 2019, that we were aware of the proposed final product for the use of our materials. But again, just to emphasize, that is not a normal situation. Whereas today, the supply chain is now organized in a more typical way. So a reminder, our technology is a platform technology. That means instead of each material being applicable to only one application in one device for one customer, as was the original application with the ES customer, it is applicable to a wide range of applications in a wide range of devices for a wide range of our customers. And we have pointed out that our customers directly or indirectly have over 200,000 customers each. So what all that means is if a silicon wafer is being used to make sensors and includes Nanoco's materials, depending on the size of the die is cut from the wafer, those sensors are equally applicable to a huge range of end users and customers without any further customization, to say the only thing that would change from a 300-millimeter wafer for the end use would be the size of the die that you cut out. And that is obviously linked to the size of the end device. So a large device might use -- a physically large device can use a larger sensor, whereas a device without much real estate, a pair of glasses or whatever, would have to be a much smaller sensor. So the positive thing is that we no longer have single end-use customer concentration risk. Already said, our direct customers, hundreds of thousands of customers. And simply by changing the size of the die, they can be used in a phone, a watch, a house, a robot, an industrial control system, a wearable, a security camera. In fact, anything at all that needs to see [indiscernible]. The downside to that lack of concentration risk is that we do not have visibility of the actual intended end-use application. When our customer places production orders on us. This is no different from when a semiconductor company orders on processed silicon wafers from a wafer company. They are not going to know the end application because the opportunities are so diverse. But coming back to the positives of this situation for Nanoco, we do know that our customer is over 200,000 customers of the year. We know that our other customer is working with the world's largest sensing company. We also know that new large semiconductor company gets into a new product with the goal of selling a few million units a year. The economics just do not work. If I give you a parallel example, it would be like using a $500 million oil rig to drill for $1 million of oil, you would just never do it. We know that our customer is targeting a wide range of different applications to generate those high volumes, they have published papers to this effect and have mentioned a huge range of different devices and applications. And we also know that we shipped our first commercial production orders in November '23. So while I can understand people would like to know what is the name of the company that's using the end device and exactly what is the application because of the diverse uses for our product at this stage, we do not know the actual end device. But instead, we have a huge range of opportunities because of the platform nature of our technology. Next question. In the analyst meeting, the CEO expressed some doubt that the product was presently on the market. Will the components be in a product for sale to consumers or used in R&D programs for undisclosed OEMs? So our customers already published papers, readily available by Internet and Google, stating that engineering samples were available to product engineers back in the start of 2022 or even earlier. And I presume that's what's meant in the question by R&D programs. So the end users OEMs have had lots of time to explore the sensor functionality and possible use cases. And we have obviously been filling the material needs for those engineering samples throughout the development programs over the last 2 to 3 years. The point about the product being for sale in the market when I made that comment last week, is simply this: We fulfilled our commercial orders in November 2023. And depending on the processing time at our customers' module assembly time, integration time and stock build, 4 months from our shipping date is highly unlikely to be enough time to get a product into the market. Each individual product may literally undergo thousands of processing steps. There are a number of places you can find information on semiconductor and chip manufacturer and how long it takes. A device fab can take 1 to 1.5 days to put down a single layer on a wafer, and some wafers have 60 or more layers. And that's just the wafer point. Regarding the consumer point, I think I've explained the same sensors with Nanoco materials can be used in all sorts of devices including consumer, industrial, healthcare, agriculture, security, surveillance, quality control, Internet Things, smart buildings, et cetera, et cetera. Moving on to the next question. I think it's just been edited since it was submitted. So I'm going to read this from the screen rather than where I can to develop. Will smaller companies offering complete and quantum dot sensors -- sorry, quantum dot sensor IP, such as Quantum Science Limited and curve negatively impact Nanoco's future market share? Assuming they can move toward volume production, will the expiration of an important molecular seating patent in 2025 allow them to produce materials without fringing? And -- so you can never be complacent and I won't comment on the two specific companies mentioned. However, I would point out that in a world of social media, it's very easy for private companies to appear more threatening than they are and to make claims about their technology. It's also, fortunately, in a number of territories, very, very simple to look at those company accounts that are freely available from various international company registrars to put any potential threat into context. It's also relatively straightforward to identify if they actually have any IP of the room. And a consequence of that is, it's also easy to find out if any of the unique or world first claims that they make are actually true. I made the point earlier that we were going to increase our profile in the market on the basis of hard concrete significant achievements, whether that was in validating our IP which was validated by the U.S. Patent Office. And I should say, produce the largest ever payment for access to the IP of any QD company in the world. I'd also point out the ongoing strength of our balance sheet gives us a huge competitive edge when we are being looked at as a potential supplier. So I'd ask you the question, is someone who is investing GBP 200 million, GBP 300 million, GBP 500 million in a plant to make this technology. Are you going to invest in a company that stands and loses a couple of million cut a year. How is new IP, has no production facility? So the extended part of this question, assuming they can move towards volume production, the size of that assumption is off the scale because they know where to move to volume production, unless someone is prepared to spend those sorts of money with them, which seems unlikely. A bit about the expiration of an important molecular setting patent? I think we've pointed out, and you can see it in the annual report. We had a significant number of patents both in the litigation and the last of those expires in 2028. So 2025 on its own doesn't unlock anything. And we also have a significant number of other patents with much longer lives that are also relevant to this. So not going to be complacent. We welcome the competition. But equally, we're not going to jump at shadows. So moving on to the next question. Could you give more color around when the end users release products onto the market and on what stage they have to inform you? Is this when it is partial or complete worldwide? Well, I'll break that down into a number of different pieces, but the truth is an end user never has to tell the Nanoco products in the market. There's no reason why they should especially since they are often a number of steps away from us in the supply chain, with no direct contractual relationship with Nanoco. Yes. Going back to my oil analogy, it would be like an oil company and like seeing that someone had just launched a new branded soap using the oil that they've extracted from under the North Sea. If there is a direct relationship with the end customer as we did have with the U.S. customer in the past, then we would have more insight, and we'd have to weigh up public disclosure obligations with customer commercial confidentiality. I know everybody wants to know who's the customer, what's the device, et cetera, but I'm sure it's obvious that shareholders would rather that we have customers with confidentiality closes, then no confidentiality closes but no customers. And that's a reality of the social markets that we're working in. In terms of the time line, I'd refer back to the answer above. So meaning the length of the production process of the actual wafers, then the device integration, module testing, packaging, all that kind of stuff takes a very significant length of time. Obviously, a contrast to this is that in software industry, once a piece of software is ready to go, it can be launched immediately once it's ready and immediately distributed. Nanoco is part of the hardware process and that process is much longer. Next question, do you have more initiatives and work that you can deal with or spare capacity? How do you rank your projects? So again, I'll break this down into different parts. Spare capacity for commercial production, i.e., can we do more production volume in what we're already delivering. So on staffing, yes, our current staff resourcing is more than adequate to produce volumes of material that would see us profitable and cash generative. And again, for the avoidance of doubt, what that means is, revenue excluding the license income, which is prepaid revenue of around GBP 8 million to GBP 9 million or so. And so we can -- our current capacity is more than enough to do that. And on the equipment side, as we've said before, we already have installed capacity to deliver up to GBP 100 million of sensing revenue and GBP 20 million to GBP 30 million of display revenue. Next question -- or other subpart of that question, spare capacity for development or service revenue? R&D services are limited to the number of staff, I guess, like any professional services company. Today, we have enough technical staff to deliver all of the projects in our pipeline and also enough to be able to self-fund some additional development work where we see opportunities. So for instance, our work on [indiscernible], we're self-funding that. In the short term, it's been an attractive customer, funded project came along, we could allocate those internally allocated staff to work on. We are currently working on self-funded projects to do that fee earning project, and then we can backfill them with other staff. For the last 4 or 5 years, we've been closely managing our staff levels and bench strength, since I joined the company, to balance our ability to take on more work against the cost of maintaining that resource. The truth is today, with the return from Samsung, it's a little bit easier to maintain that balance. In terms of ranking of projects, again, without dismissing the question, it is a fairly standard business school approach, I guess, to ranking of projects and it involves criteria such as customer viability and ability to pay and market size, the investment that we might have to make competitive landscape, the technical feasibility. Again, you'll see in our main presentation, that's one reason that we're not doing a lot of work on electroluminescence, i.e., the next fourth generation of display because as a concept, that's been 5 years away, probably for the last 10 to 15 years, and that's very, very challenging. In evaluating projects, we also look at operational feasibility, health and safety, environmental issues, risks. And also, we look at, well, what's the downside if we don't do this project. So it's a fairly standard approach to evaluating projects. Next question, how does the company scanned the market or done any teardowns of products to try and determine if Nanoco's materials are present in them? As Brian Tenner stated, they would in the 2023 presentation. So I'd refer you back to the slide deck that we issued at the time of the General Meeting last August and also the preliminary results presentation that we gave in August last year. Both presentations have got the results of market reviews for potential infringement, and that work continues as new products come to market. I should say that those 2 presentations focused very much around display, but we would take a similar approach if we sell QD sensing products in the market. Question 13, why really large shareholders given an opinion on what form they wanted the return of cash to take where the company had previously stated, they wanted all shareholders to have a choice to make capital and dividend return? And I've already mentioned the changes in certain U.K. tax legislation meant that if a shareholder has a choice, then it's not a choice because it's automatically treated as income. As I said before, dividend would have traded all shareholders equally, but given the new choice, whereas the tender also treats everyone equally but actually gives a choice. And again, referencing back to 93% of votes cast at the recent general meeting they approved the tender suggests that it was the overwhelming preferred choice, even if unfortunately, it wasn't necessarily everyone's first choice. Question 14, what will the new directors bring to the company that existing directors did not? Again, as we said out in last year's results statement and in the RNS is appointing Dr. Jalal Bagherli; and Dieter May to the Board, both of them and I joined the Board. The primary skills that we sought and looking for those nonexecutive directors was experience in commercializing new technology in semiconductor supply chains with a bias towards consumer electronics applications. The existing directors, just to remind folk, already have significant experience of corporate governance, operations, specialty chemicals, early-stage technology, corporate finance and high-tech industries. Question 15, how will the increased publicity (from [indiscernible] news appearances and use paper articles, et cetera) help a company that makes a very niche product. After all, it is unlikely that the people who see these videos articles will decide they want to buy some quantum dots off the back of them? So yes, our products are very specialized. However, as explained earlier, our products have the potential to be included in millions of devices every year. If the question meant not target the consumer audience, that might make more sense. Market presence and customer awareness of Nanoco is clearly important. We have, in the past, received inquiries from potential customers on the back of positive publicity. And again, as I mentioned earlier, while we were struggling for a financial survival and awaiting validation of our products and IP through commercialization, and also the U.S. patent office, it seems prudent to keep our powder dry and wait until we have something concrete to speak about. Now that we do have major concrete achievements to speak of about, we've consciously decided to increase our market presence in a relatively low-cost way to leverage our success and make clear that Nanoco is the real success story amongst all the independent quantum dot companies. And the truth is, again, on researchers, supply chain guys, procurement guys, here go looking for a quantum dots and sources and nano materials, that sort of positive publicity around Sky, newspaper articles, et cetera, et cetera. They're all good ways to make sure that we are channeling that research and inquiries towards Nanoco. Liam, one for you.

Thanks. Given the threefold increase in OpEx monthly cash burn at around GBP 300,000 to GBP 400,000 equivalent to GBP 4 million plus per year. Why has the monthly cash burn troubled? And does this place at risk reaching cash breakeven during calendar year '25? So as we have stated our net only cash spent has increased following our investments in our commercial and operational capabilities, and we obviously aren't immune to inflation increases either. And so our gross monthly cash spent has increased whilst our income generating revenue is still at a similar level to prior years. But just to clarify, whilst this may appear that the net cash cost base has traveled, we had revenue of GBP 8 million and our cash cost base increased from GBP 8.1 million to GBP 8.4 million. You can argue that our net cash consumption of quadrupled. We are starting from a low base, and it's probably why the state in the comparative prior period also includes the receipt of the R&D tax credit, which obviously we are in title II in FY '23 as we made the progress during that year. Our current forecast, we see us getting to cash flow breakeven during calendar year '25 are based on our current projected cost base, which includes a number of assumptions, such inflationary increases. The main risk included in those projections is the ramp-up in revenue. Back to you, Brian.

Okay. Okay. Next question. When is it expected that the first material commercial order will be signed this year by material [indiscernible] assuming any long-term commercial deal, which could ramp up in time to larger orders? I'm slightly confused by that because the second part of the sense materiality means any long-term commercial they which could ramp up in time to larger orders. We've already done that, and the orders that we shipped in November could ramp up in time to larger orders. Long-term commercial deals and with respect to the ordering of materials, I think you'll find that those typically are not long term. They're normally a run on the basis of purchase orders with firm commitments and longer-term indications which aren't actually contractually committed to anyone who worked during the financial crisis in manufacturing in 2009, '10, will understand that. When will -- taking the first part of the question, when is it expected the first material commercial order will be signed this year? As I mentioned earlier, our customers said we should expect orders, but they help haven't told us when? So I can't answer that question because we don't know. Next question, iris scanning has been one of the applications listed for QD enhanced infrared sensors. Does the Board believe that see if effective and affordable iris scanning can be achieved for consumer devices using non-QD based sensors? And so the simple answer is that iris scanning already exists as a technology. Those things you see on the movies where someone leans in against a scanner that wraps around on their eyes and read their iris. That really don't exists. The degree of safety. I don't know how safe it is. I'd like to think if it's been approved for sale, it's obviously safe. But the further you go out into the infrared, there is more eye safety has increased. So because our products take sensors much further out into the infrared even if the sensors today are already is, then the degree of safety increases. And talks about affordable iris scanning? Well, currently, and again, this is freely available on Google, currently in Iris scanner. And I do just mean the chipboard and the scanner part, I don't mean the whole device costs anywhere between GBP 150p and GBP 400 -- GBP 400, sorry, for people listening overseas. Whereas the target price for a QD enhanced single sensor is maybe $10. So we get $10 rather than GBP 400. So yes, the technology exists. Yes, you should never be complacent. But it seems that today, that technology is operating at shorter wavelengths if it's using silicon because it can't do anything else and then operate at a shorter wavelength. And equally, they seem to be prohibitively expensive for mass market adoption inside a mobile phone. But that's not to say if those couldn't be brought down to $10 rather than GBP 400, and if they couldn't have their wavelengths extended out, hundreds of nanometers into the infrared, but they wouldn't be a competitive. Great. Next question, so these are live ones coming in today. Are all old directors currently making their obligations for direct equity shareholding. If not, why not? And the directors obligations for direct equity holdings, our policy is that people have to build up over a period of time to that, you're not required to do it on day one. If you received any shares from either bonus deferred bonuses or from long-term incentives than long-term incentives, you actually have to keep it all, until you actually hit the shareholder -- required shareholding level and on deferred bonuses and then you have to keep 50% of it. So we are meeting our obligations. We haven't yet got to the targets, post tender and for those who are not participating in the tender, that will do not change. And obviously, again, that's partly dependent on the share price. If the share price rises, then those direct equity shareholdings may achieve the targets and equally if the share price falls, they may not. So all of our Board have invested significant amounts of personal money in buying shares. So yes, I think that policy is consistent with most other PLCs. Next question. Why have you chosen such a low price for share buybacks and not a higher price for a smaller percentage, I think many are unhappy with this? If I put the question -- turn to the question slightly on its head. If I went into the market, say and bought shares for a time today, would that be a good use of shareholder money? Because the truth is the market is telling us, we can buy shares today to 20p to 21p, would buy any other asset for way over its market price. So I can understand the rationale behind the question, but equally, somebody bought their shares, say at 6p in 2019. They'll be laughing all the way to the bank if we want and offer a higher price of a point. Clearly, though anyone who bought shares at 1.65 in 2013 or 2014, at a point share still making a significant loss. So I think the only reference price you can actually logically use is the market price. And as I say, a 20% premium to the market price is actually at the top end of the range of -- we looked at a sample of 20 different companies, and we've recently done buybacks. And some of those were at a discount to the market price, believe it or not, but the average was in the low teens. So 25% premium to the day -- last trading day and 20% to the 60-day V1. It's actually quite a generous premium because again, the market is telling us that that's what the market will accept as a price for those shares. Next question, can you please comment more on the '19 potential IP infringers. How is that number have grown? Who had Nanoco's leading the effort to monetize [indiscernible] loss to IP infringers? Well, I mentioned earlier again about the size of the market. So the value of that infringement market today is all out. And we have a hybrid team of internal experts, who obviously accumulated significant expertise through the Samsung litigation, and external experts, both from the point of view of legal advisers and also strategic advice. Commenting more on the '19 potential IP infringers. I mean I can make general comments. Some of those infringers may well be competitors. Anyone who understands this markets, will understand there is no point saying a chemical company because their piece of the value chain is tiny. If you were going to litigate, you would be litigating against the OEM. So those potential infringers include people throughout the supply chain. The number does change. It grows. It can't shrink if we can do enough work on analyzing what it is they're actually doing. So at this point, there isn't a whole lot to add around this -- and as I said, I think the key message of what people to understand is driving value from our IP, our primary goal is around commercial orders or development contracts if we have potential customers who don't want either of those, but they want to license our IP, then we will discuss it with them, starting to litigate is the last role of the dice, equally because we want to generate real value, some IP licensing companies, I'll refer to them as shakedown merchants, they basically turn up and say, look, it's going to close to GBP 2 million to give me GBP 2 million, we will go away. And that's not who we are and not what we're about. We want to generate meaningful value from our IP. Next question, [indiscernible] withholding tax and litigation award be recovered? And if so...

Yes. So I'll take this one. And sure, yes, it will be recovered. Withholding tax paid has been recognized as an asset and we'll be amortized at the same period with the license income is recognized. So this will have the impact of reducing the profit chargeables corporation tax, which will ultimately either reduce the corporation tax payable or reduce the historical losses utilized to avoid a cash tax payable position. Also due to historic states [indiscernible] has significant historical losses, which came view to offset paying cash tax charges in the future. Back to you, Brian.

So next question. What quality skill set do you think the incoming chair will need for this moment in time in Nanoco's progression? And we'll -- there are a whole bunch of different dimensions to that. And our Senior Independent Director, will no doubt be consulting with various members of the board on what they see as what's needed at this point in time. Clearly, PLC, our U.K. PLC experience is going to be needed because we are a -- we have a premium listing on the main market of London Stock Exchange, so we need that some familiarity with high-tech industries would be very useful. I think the two new nonexecs we added cover off and commercializing in -- or sorry, commercializing new technology in semiconductor supply chains. I think it needs to be an inclusive chair, a chair who obviously, as the current chair listens to all shareholders. So other than that, watch this space for announcements on this process? And next question, Nanoco is financially secure, has cash, a good IP portfolio and obviously good products. The quantum dots become even more established on the market. Nanoco would be a good takeover target for many large players in the market, especially due to the current market cap. Why doesn't the Nanoco go hold back more of the shares it received through the tender offer as treasury to prevent a hostile takeover? And interesting one, I think, the -- normally in a tender, the expectation is that shares will be canceled. We are holding some back because we do have obligations to all members of staff with regard to deferred bonus plans. I think you can see across the U.K. stock market, small-cap companies are at risk of takeover. So I think we've always said that our goal as a company is to obviously generate shareholder value. And if someone comes along with really deep pockets who wants to pay that value, then that will be for shareholders to decide. I'm not certain, but I think legally as well, I'm not certain that shares that are held in treasury, can actually be voted. We need to check on that. But if the shares held in treasury can't be voted then it can't do anything to stop a hostile takeover other than they would have to be -- they will be included in the assets of the company that was being bought. Keith -- sorry, I should be saying people's names. I am sorry. Although I guess there's no harm in it, our names are known. I think we still names aren't on here. In your opinion, which semiconductor companies are leading the market and looking at the potential applications for quantum dots and chip technology? And the answer is very, very clear. Sony, who are the biggest in terms of company in the world by some distance, are looking at QDs as our STMicro or direct customer that we're working on those second-generation materials with. I'd say the answer to that is obvious again, googling it on any number of market reports, we'll tell you, those are the two companies that are looking significantly that there might be other timing semiconductor companies. We know one company, tiny revenues that actually makes a very specialist type of camera. And we've dealt with them in the past, but other than that. So simple answer is that semiconductor companies, it's those certainly in STMicro. This next one looks like a statement rather than a question. The tender was my favorite choice, but the buyback price is what I think I'm [indiscernible] with. As I said, if we picked a significantly higher price, and we still have generated losses for some people. We have generated more gains for other. We might have picked some people from loss into profit. But equally, if you go back to the -- if I was a shareholder who is not participating in the tender, I'd be asking management, why didn't you pay so much by shares that you could involve the market at 2020 p or '21 p? Why do you pay 30p or 50p or whatever? Next question, if a mobile device users, Nanoco's QDs, how much we the [indiscernible] technology force other handsets to use the technology to prevent them losing market share? Well, I think what you see is most mobile phones actually copy each other and certainly depending on the identity of the person that goes first, if it's groundbreaking technology. you could expect the others to follow. I know that one of our customers is represented in half of the mobile phones in the world with various devices that are sold every year, and up 750 million tons, it of the GBP 1.5 billion a year mobile phone market. So, yes, the expectation is that whether it's a mobile device, I watch a TV smart building, whatever. If it's a technology breakthrough, you would expect other people to want to follow. And that's where our production capability, which very few others have, protected by our IP means that the natural company, the natural supplier for anyone to come to for that technology would be Nanoco and not one of those other small start-ups that people were talking about earlier. We don't have any production capability. Next question, why do you think the current share price represents only cash and not IT, real estate, equipment, et cetera, et cetera? So I think our current market cap is probably GBP 70 million, I want to say. And our net cash, so after a loan for debt is GBP 55 or so. So running some people are saying the enterprise value of the business is GBP 15 million. So there is value there. I think when we were down at GBP 16 million, it might have been cash. So there is some value there, but clearly not as much as we think there should be for real estate. We don't own any real estate, we're in leased facilities equipment. Again, [indiscernible] second hand scientific equipment is relatively inexpensive. I think what's more important actually is there's 2 very large customer relationships and contracts we have. But of course, those are valuable if they turn into commercial orders. So I think that, we've elevated our IP. We have validated our products with commercial orders, but I guess the market is always asking what are you going to do next? So a ramp-up in demand, finding out what an end devices or an end application is. Those are the kind of things that people are waiting to see. But again, I think what the question draws out is, it's a stark contrast in February 2020, just before we filed our lawsuit. We were valued at GBP 65 million or so on the market, 21p again. And we have new customers. We had new cash -- our IP has not been validated. We had less equipment than we have now, and we didn't have those two big anchor long-term agreements. So I guess that's the market for you that despite the movement that's been achieved, the price is where it is. And I go back to what I was saying earlier about U.K. small cap is pretty torrid pace to be on the market at the moment. It's across all sectors. Next question, with the current cash balances at envisaged that any further litigation could be commenced without involvement or litigation financiers? So simple answer is, yes, it could be. clearly involving third parties and starting litigation, whether it's lawyers, et cetera, you have more option to generate skin in the game, i.e., they work at a discount if the prize is bigger -- it is possible that if we wanted to start litigation without large commercial prices at the end for strategic or tactical reasons, you might have to pay [indiscernible] to layers. And so yes, some of the money could be used for that. However, I know some shareholders in the past have very strongly said that, you can lose litigation, you can win low, you can win middle, you can win high, you can go on for years and years and years. Why would you tie up shareholder money in that, even if you then give away 40% of the proceeds? And again, as I've said before, when you win litigation, litigation finance looks expensive. When you lose, it's free, it's cheapest checks. And so there is a choice. We have that option. I think Liam mentioned the quality of our balance sheet with respect to very large customers. Quality of our balance sheet is obviously a message to people that we're engaging with ideally on production or supply agreements or licensing agreements and then if those are unproductive with protection for litigation. That appears to be the end of the questions. Apologies that we've run over 15 minutes. And I'll just hand you back to our operator for any last comments.

Perfect. Brian, Liam thanks for answering all of those questions from investors. You've been very generous of your time. And of course, the company can review all the questions submitted today, and we'll publish responses out on the Investor Meet Company platform. But just before redirect investors provided with their feedback, is particularly important to both. Brian, can I just ask you for a few closing comments.

Thanks for that. Yes. So just to remind people, in some ways, this coming year, the next 6, 12 months, business as usual, steady and growth on a firm foundation. It's something of a relief, I guess, for staff and should be for shareholders that we no longer have those big binary events. So what's going to happen to your IP, what's going to happen on the litigation? Are you going to get into production? Now what we're looking at is adding more customers, adding more development contracts, receiving more low volume production orders as a ramp-up increases, being able to offer more services, both to existing customers and new customers through our wafer device and completing that return on value. But as I say, what I think shareholders in Nanoco have today, which is a very, very rare bird, for the [indiscernible] count company, fully funded with commercial traction. Thanks very much.

Perfect. And thank you once again 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 that the management team can better understand your views and expectations. This going to take a few moments to complete, but some shall be greatly valued by the company. On behalf of the management team of Nanoco Group plc, we'd like to thank you for attending today's presentation, and good morning to you all.