Nanoco Group (LSE:NANO) — Final results for the year ended 31 July 2021

0:02 Good morning, ladies and gentlemen, and welcome to the NANOCO GROUP PLC final results investor presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Just please simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via our investor meet company dashboard, and we'll notify you by email when they are ready for your

0:34 review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll. And if you give that to your kind attention, we would be very grateful. And I'd now like to hand over to Liam Gray, finance director, and Brian Tenner, CEO from NANOCO PLC. Good morning to you both. Good morning. Thanks, Mark. So this is Brian Tenner talking to you at NANOCO, and welcome everybody to this shareholder presentation. We did an analyst briefing yesterday using very much the same content. We will go slightly faster through it since it is a repeat of yesterday, so that we can focus on, the questions, questions and answers that we'll be doing at the end of this session. As Mark said with me, I've got Liam Gray, our UK finance director and company secretary.

1:24 And just before jumping into the presentation, for those who may be new to the company, I will just give a a very quick summary or highlights of who we are, who NANOCO are. So the company was founded in 2001. It's headquartered in Manchester in The UK, where you today, have around 40 employees, a significant number of whom have got, at least one PhD, whether that's in chemistry or physics. And in summary, the company, in our view, is the leader in the r and d licensing and manufacture of heavy metal free quantum dots and semiconducting nanoparticles. Our key strengths are around that CFQD or cadmium free quantum dot portfolio. We have around 550 patents and patents pending today around various types of nanomaterials, both materials and the processes.

2:17 And fundamental to our technology was that our founder Nigel Pickett solved the problem of how to, in a repeatable and replicable, high quality way, mass produce quantum dots because it's easy to make them in a lab in a one gram scale. Actually making them at kilograms or hundreds of kilogram scales, it was a completely different proposition. And that's one of the key underpins for our technology. As well as that highly capable r and d team, we have two production facilities in Runcorn, It's near Liverpool, for those who aren't, familiar with the geography of the Northwest. And our production facilities, if they were fully loaded, can deliver in excess of a £100,000,000 worth of revenue if they were fully loaded, with production orders for materials.

3:07 We are today focused on two very large, addressable end markets. The primary focus is on sensing, but there's also a secondary focus on display. And then alongside that, because they, our nanomaterials and the platform technology is relatable to other markets, we're, also involved in life sciences and lighting. So that's just a quick introduction to who, NANOCO are, what we're about, and a bit of our history. And I'll now turn to the actual, results presentation for the year ended July 31, 2021. So if we look at slide three, you can see from the highlights that it's been a busy year for the company. Our major customer, a very large European electronics, customer is now nearing commercial production in the short to medium term.

4:01 In parallel with that development, we have significantly expanded the range of materials that we make and also the number of customers that we're engaged with in our sensing portfolio. During the year, we completed a restructuring that brought us down to that, roughly 40 headcount, that I mentioned, and that has significantly reduced our cost base to around £400,000 per month. That's gross. So that's before revenue and that's before our r and d tax credit, which is just under £1,000,000 most years. And then finally, by no means least, we've made very significant progress during the year on our litigation against Samsung. I mentioned earlier IP portfolio and the mass production of cadmium free quantum dots.

4:48 Again, for those who aren't aware, the company previously collaborated with Samsung for four or five years and helped, Samsung solve this problem. And we're then disappointed when Samsung launched its range of QDTVs that there was no licensing agreement put in place with NANOCO. And fundamentally, that's what our litigation with Samsung is about. During the year, there was a Markman hearing or, a claim construction hearing, where the parties were arguing about the definition of five key terms in the patents in the case. We won on four of those terms Samsung won on the fifth term. What that means in terms of the patents in the case, we want to write on four of the patents in the case. And in the fifth patent, we had one construction that we won and Samsung won one. So you could call up four wins and a draw on the litigation.

5:41 In terms of financial highlights, we delivered all the customer milestones, technical milestones, and material requests from our various customers during the year, and that led to revenue being just above expectations. I've already mentioned the cost savings that we've made. That's got our our cost base down to that £400,000 per month. And then in July just past, so July 21, we issued a non dilutive series of debt notes to our two largest shareholders. Those netted us £3,000,000. And the reason we did a debt raise rather than an equity raise is fundamentally the board was of the view that our equity was undervalued and that we thought the dilution from an equity issue at that point in time would not be in the best interest to shareholders. So that's why we did the debt raise.

6:27 The result of that combined with that £400,000 per month cost base, when you also consider the contracted revenue and our revenue expectations for the the next two years ahead was to extend our organic cash runway into the second half of twenty twenty two. Throughout this presentation, if you can keep that date in your head because you will see as I turn the pages here that there are a number of key events that happened during 2022. So having a cash runway that extends past those key value indicators or key value signal points is very, very helpful for the business. So if we now turn over the page to slide number four, what you'll see is three key areas of value that the business is focused on today.

7:21 If I look at the the gray circle in the top left, that's an organic part of our business. That's our our sensing business. And as I've already mentioned, we are hoping, that during 2022, in the second half of twenty twenty two, we will get visibility on production orders, which will be the first time in the company's twenty year history, actually, that we've finally got one of our products into a commercially available product that you will be able to buy, you know, in a shop. Because our expectation is that it will be a consumer electronics item, although we aren't actually fully aware of the end application as yet. If you then look at the circle in the center there, the litigation, I'd describe this as a nonorganic piece of business there.

8:14 That litigation is potentially transformative for shareholder value. And in simple terms, what we mean by transformative is if we are successful, that the outcome of that case would be measured in multiples of our current market cap. It could be at the low end of multiples, could be at a higher end, but that is all predicated on us being successful in the lawsuit. But that gives you a sense of the scale of this this lawsuit. And again, we'll say more about it later on. But two key milestones to look out for on the lawsuit are the patent trial and appeal board will review, will issue its opinion on the validity of our patents in May 2022. That's almost a fixed date. Excuse me.

9:02 And then once that happens, we expect the judge in Texas to reschedule the the court case, the trial for the second half of twenty twenty two by and at the end of that trial, literally in the the trial last one week in verdict and you get the preliminary damages number. But again, we'll say more about the litigation as we move on. And then if you look at the sort of purple circle on the top round, right hand side of that slide, this door is linked closely back to the litigation. The litigation is about our IP in the display space. So if we're successful there against Samsung, it's highly likely that a significant number of other companies are going to have to take out licensing agreements for our display technology. On the organic side of the display business, though, we have continued to engage with a small number of customers during the year and we have delivered a number of small scale development projects and a number of those also continue today.

9:59 So those are, if you like, a reminder of the three key areas of value for the business. The two that are closest in terms of time are sensing and litigation. As I've already mentioned during 2022, we expect to see key value indicators or past key key value milestones. We now go over the page to page five. On the following slides, what I do is I go into a little bit more detail on each of those areas that I've just summarized. In terms of IR sensing, you might ask, well, what problem is it that NANOCO's material is actually solving? What's the issue here? So today, there are many billions, literally billions of silicon sensors being deployed in various applications, in various markets and in various countries around the world. However, silicon sensors have very, very poor, efficiency in the infrared. And, actually, once you go out past, you know, 900, a thousand nanometers wavelength of infrared light, silicon effectively becomes blind, can't see anything.

11:03 And even, at the shorter wavelengths where it can see, the infrared light and pick it up as a signal, it's only picking up something like six or 7% of the available signal, again, because it's inefficient. Silicon sensors also suffer from interference from natural sunlight, which I think as most people know also have some natural infrared in it. Silicon sensors today are also impacted by atmospheric conditions. If you look in the the couple of pictures below under the the heading atmospheric conditions, those are the infrared camera and one taken without. So you can see whether it's fog, rain, sand, snow, or just darkness. Silicon sensors today without infrared quantum dots being attached to them do suffer very significantly in terms of performance.

11:58 And one way of partly overcoming that is to increase the power of the laser in those sensors, which of course in a mobile device isn't great because you're then just reducing the battery life of the of the mobile device. And finally, the the only real effective alternative to a CMOS sensor today is something called an ingas sensor. So that's indium gallium arsenide. Those are incredibly expensive. And by incredibly, what I mean is anywhere up to 100 or 1,000 times more expensive than an equivalent silicon sensor. And when I tell you that their applications are in military and also in space, you know, we think there are there are some in gas centers up there in Mars right now. You can see that that's a very, very niche market.

12:43 So that's that's the problem if you like today. So why quantum dots? Why NANOCO's nanomaterials? Well, simply by taking a silicon sensor and coating it with, our, nanomaterials, you significantly expand the range, of the sensor. So instead of being blinded at thousand nanometers, a CMOS sensor with, our nanomaterials can actually see out, to 2,000 nanometers potentially beyond. And there are a number of applications that want to operate at 940 nanometers, eleven fifty nanometers, 1,300, 1,500, and beyond. And we have materials as you'll see later covering, all of those, different wavelengths. Once you go out further, you you're overcoming, sunlight, issues. You're also, as you can see in those pictures below in the atmospheric conditions on, you're overcoming those atmospheric conditions. So infrared light, you know, is happy working in the dark.

13:40 It's happy working through fog, through smog, through particulate in the atmosphere. Because you can see out further and you can see further into the infrared, you can actually then reduce the power of the lasers that you're using because when coated with our quantum dots, the sensitivity of the sensors moving from capturing six or 7% of the of the signal to 60 or 70%. So it's a tenfold increase. And last but no main, Lisa, as I've already mentioned, a CMOS sensor covered with quantum dots can be up to 100 times, if not a thousand times cheaper than than an ingas. And those are the sorts of economics, which means a a QD coated CMOS sensor actually is ready for the the mass market, whether it's in consumer electronics, whether it's in automotive, whether it's in health care, whether it's in agriculture, industrial control systems, etcetera, etcetera, etcetera. There's a huge, range of different applications.

14:39 As I've already mentioned, we have significant production capability here in place in Runcorn and for infrared nano materials, we can literally support hundreds of millions of end use devices. We do have multiple tunable wavelengths. And really importantly, many of these materials, if not all, either sit directly on our IP platform or are protected by trade secrets and business know how. So again, we do have those barriers to entry to competitors coming into that space. You can see examples of various uses below on the quality control. The first set of images is infrared actually penetrating an opaque container to actually see what the fill level is. It's easy to imagine how that can be used in quality systems. The lower picture, that's an apple on the left hand side.

15:34 And on the right hand side, you can actually see the the the bruising in the apple again, quality control. Atmospheric conditions, we've covered. Digital health care, some of you may be wearing smartwatches, which are already sending signals through the upper layers of your skin, into your your your wrist, longer wavelength. So going out to shortwave infrared sort of 1,300, fourteen, fifteen hundred actually penetrates deeper, so you can actually do more, you can have more health care applications. And then finally, FUC will be very familiar with face recognition and now growing in importance iris recognition. But those are just examples. Basically, about the Internet of things where machines need to be able to see in inverted commas, agricultural applications, other wearable devices, etcetera. These are all applications.

16:25 And importantly, they're all value added applications. So the focus is on the value, not on the the cost, which is a helpful economic background to what's going on in the sensing market today. But now turn the page just very quickly. I mentioned we'd significantly expanded our portfolio back in early twenty eighteen, we were working with a very large US, company on one material at one wavelength. If you fast forward to today, the chart, at the bottom left shows that actually we're working with there are five on here. We're actually working with more customers than that and there are eight distinct materials on here at a number of wavelengths. If you're looking at the legend on the bottom right, d means it's at a development stage. And typically, from starting to develop a material to go into a go, no go decision for going into production can be three to four years.

17:17 And again, you can see that very first material admittedly now with a different customer. So customer one on the top chart is not the same as customer one on the second chart. That product is now effectively fully ready for validation and could go into production in the very short term depending on customer adoption of the final technology. And if I reference you back earlier, it's that material and the other material in the top row. That's where we're expecting visibility on, potential production orders during the second half of twenty twenty two because the the material that's in gray at the optimization stage, that's very near to being ready for validation and then being capable of going into production. And all the other blue dots are at various stages of customer engagement. Some are right at the start of new designing parameters. Some of them have already started doing the work and are starting to improve the parameters.

18:11 Other things to add around the customer portfolio during the year, we added a very major Asian chemical company. And I emphasize it is a chemical company. It's not an electronics company. They're a chemical company, but they're a major supplier into global electronic supply chains and they themselves are an extremely large international multibillion dollar chemical company. Of that customer portfolio I've mentioned on the left hand side, at least two of those have strategic scale potential. What that means is that if they placed an order for production material, we would very rapidly get towards, if not beyond, being a self financing business, which would be a very significant step, for, NANOCO. And it just reflects that the applications we're talking about, on the sensing side of the business, you're not talking about someone ordering a 100 units or, 50,000 units or even, you know, 1,000,000 units, you're talking about millions, if not tens, if not hundreds of millions of potential units. So, getting into production on that product, would be very important and, transformational for NANOCO.

19:19 And as I was explaining yesterday on our analyst call, already public customer published roadmaps do support our view that we will get visibility on production in the second half of twenty twenty two because those customer roadmaps suggest that they'll be in commercial production of end use devices during 2023. So if we now sorry, just to summarize on sensing, our overall goal, as it says at the bottom of the slide is to have one material in commercial production by 2023 and a second fully validated, ready for commercial production once customer demand is received. Now I'm going over the page, quickly looking at display. Display is less of a focus for us at the moment with our resources and also actually with the nearness of the opportunities.

20:14 So, summarizing the display opportunity, QDTVs, Samsung, originally were 100% of the market. Their market share is now below 90%. And if you look at the, the little chart on the bottom right, you can see the number of QDTVs out there is growing each year. So there are a number of other players who've got QDTVs. Of the ten ten other players at the moment, half of that is probably cadmium based. So it's not applicable for NANOCO. But it is worth noting that the European Union this year finally received the recommendation to implement the ban on cadmium in displays, certainly to limit parts per million. That still has to be legislated, but it is worth noting that various countries around the world and various states in The United States all have their own versions of ROHAS, all of which include limits on on cadmium.

21:10 And the reason this is important and the reason that Samsung's market share falling below 90% is important is it means there is more demand starting to come into the market. There is more momentum and potentially more customers coming to, NANOCO for solutions. That will partly depend and link back to, as I said earlier, what happens on the litigation. Because if we're successful against Samsung, then it will be clear to the players in the market that then if they're going to access mass produced cadmium free quantum dots, then they're going to need access to NANOCOO technology, which could lead to licensing agreements. It is worth noting though that we still have a production facility here in Runcorn that could service a couple of million TV or display units a year.

21:56 It's smaller scale than the the in than the infrared production facility, but it's still significant and meaningful. And again, just to summarize if you like NANOCO's advantages or differentiation in this space, we are cadmium free, which is important. The quality of a QD TV, the display is significantly better than many other displays on the market. The main competitor being LG and OLED. Although again, many of you will have seen LG starting to look at potentially using Quantum Dot technology. It's also worth noting second generation QD TVs. So instead of having a film with a quantum dot jam sandwiched in that film, they'll actually have QDs, quantum dots in inks, which will then be potentially directly printed either onto a surface or onto a micro LED.

22:51 And so our technology, it's not a case of that once film based TV fades away, then the technology is no longer relevant because it is relevant to generation two. And we also believe that it's relevant to generation three, which is potentially four or five years away, and that's electroluminescent displays. We then go over the page to slide number eight. Just quickly on two adjacent technologies or markets that I mentioned earlier. Our technology is a genuine platform technology. That means it can be transferred into other applications. Both these applications for NANOCO at the moment are are are are less strong areas of focus, but there is activity going on in both of these. And you can understand looking at them that potentially the markets here are very large. But again, are focusing on sensing in the near term because of the nearness of the opportunity.

23:47 On the left hand side on life sciences, we received government grant. We're currently working on a rapid diagnostic test for COVID using quantum dots. We've completed the proof of concept on that and we're now partnering on creating a working prototype or a device if you like. There are many hundreds of COVID tests out there, so there's a danger of it being a me too application. But one of the advantages we believe of quantum dots is they can be retasked to other pathogens or you could actually be testing for multiple pathogens at the same time. Very, very simply, you could be testing for flu and COVID at the same time so that I think you'd all agree knowing the difference whether you've got covid or whether you've got flu is an important piece of knowledge.

24:34 But it is worth emphasizing the shoot emphasize. This is still at a very early stage of development.

24:41 And we are looking at what the next steps will be as that grant funding extends through to May 2022. On the right hand side, just very quickly lighting, including horticultural. And there are a number of applications either putting quantum dots on a light to actually tune that light to a a more conductive or a a a wavelength more conducive for accelerated plant growth or higher yields, or alternatively, actually in a greenhouse environment, instead of actually having to spend money putting energy into a light, using natural sunlight and tuning that to a a wavelength that's more favorable for the plant or indeed actually installing solar energy, applications onto very, very large greenhouses.

25:27 So you're actually not forfeiting any plant growth, but you're also then capturing sunlight and generating that as well. So those are both two areas where we're actively engaged with customers. We've got work ongoing, but relatively small and still at an early stage and further away from commercialization than than display or sensing in particular. We then go over the page. We've got a couple of quick slides on, Samsung litigation, and I'll try to speed up because I'm conscious that we do want to get to q and a, in the second half of of the I've already mentioned the claim construction hearing. And again, as a reminder, we have 47 claims in this case and we need one to succeed. Ideally, you'd succeed with 47, but it's actually impossible in a one week trial to explain 47 claims and five patents to a jury. So whatever comes out of the patent review board saying these are the valid claims or these are the valid patents. We are highly likely to then have to down select from those. And of course, we would be down selecting to what we think are our strongest claims in the case to then take to trial.

26:39 And as I say, we only need to have one claim found by the jury to be valid, to have been infringed. And then you're having the conversation about damages, which makes me takes me on to we have not put any definitive numbers in the market and I'm sure you can understand why we wouldn't. But in terms of high damages, we'd be calculated and how they relate to The US litigation. The U the case in The US is just about sales in The United States. If you wanted to include the rest of the world, you would triple the number of TV units that are being sold. Equally, the case in The United States only deals with historical sales. By the time we get to trial in the second half of twenty twenty two, it will only be backward looking. The judge may award a future royalty, but it doesn't have to. And if they didn't, then we'd either have to negotiate a royalty agreement with, SAMHSA, assuming we're successful in the case, or have another piece of litigation to get future TVs covered by our claim.

27:39 And finally, the jury will make a decision on willfulness. What that means is they'll decide if this patent has been infringed, whether or not Samsung did it knowingly and deliberately. The reason that's relevant is that, if it's found to be deliberate, then damages can be multiplied by up to three times. Now I should say that the practice, of the court in Texas, which is where the case has been hearing, is actually just a 1.5 times multiplier. That's sort of the average. But legally, it can be up to three times. If it was fine to be almost accidentally willful, then it might be 1.1. But that's the range and the state, the historical practice in Texas has been around one and a half times. In terms of the actual damages models, you can argue that the quantum dots are fundamentally enabling the entire TV and that is NANOCO's position. We don't think you'd buy a QD TV if the picture wasn't significantly better than, a regular TV mainly because, the TV can cost up to a thousand dollars more than a than a regular TV. So our argument is damages should be based around the total value of the TV. There are other damages models though, where you would argue that the damages should be based on the individual component containing the quantum dots, in which case that's the film in the TV.

28:59 And that is just one component in the makeup of the bill of materials of the TV.

29:04 But in all scenarios, we're successful, we believe if we got a modest outcome to the case, and what I mean by modest is yes, sales only, historical sales only, no finding for willfulness, and using the component only argument for the the damages model. That's what we mean when we say a modest outcome. And in that situation, after paying the contingent fees to various advisers, we believe we would retain around 50% of any final award or outcome. As the award got larger, if it included future sales, if it included the rest of the world, if there was willfulness, if you were using the total value argument about damages at the upper end of the range or, you know, you quickly move towards NANOCO retaining around 80% of any award.

29:56 So the simple message, if you like, on the lawsuit, it is absolutely potentially transformative for NANOCO's future prospects of the business and also for shareholder value. Just moving over the page, there's a very short summary timeline here. Two separate processes, the top process, that's the patent trial and appeal board process. The next key date is May 22. That's when the, PTAB will decide which, if any, of our claims and patents are still valid. Our expectation is as soon as that initial judgment is given, the Texas judge will unlock the legal process and will reschedule the trial for the second half of twenty twenty two. Even though, both parties in the PTAB will be able to, be

30:44 launching appeals of whatever decision is. And those appeals could take up to a year. But we believe again, based on previous practice that the legal process will start again. We'll get a go to trial in October 22. The trial will, it is fixed, it is one week long. So both sides have to split that time evenly between them, and the jury have to have time to go and consider a verdict and come back with a verdict and a damages number. So it's a very compact week. So you can see why us narrowing the claims down and having a very focused argument, which by the time we get to court will no longer have to consider validity because the patent trial and appeal board will have decided validity. So by the time we get to court, we can focus our arguments on infringement and on damages.

31:32 The judge then issues a formal opinion, shortly after. Say shortly, it could be anything up to six months later, in which he will make a decision. He will decide if there is willfulness what the multiplier is. They also decide on future royalties, etcetera, etcetera. And that can then be appealed, and that appeal process could take a number of years. But clearly, if we win at IPRs, if we win in trial, if we've got a good verdict, if we've got a good damages number, the amount of pressure that we'll be building on, Samsung in this case to actually come to a negotiated settlement, we'll be building. They do, of course, so have have the right if they want to to actually

32:13 The last thing I'd like to emphasize on the litigation is that the litigation, the IPR process, and the appeals of both processes are covered by third party litigation funding, and that funder, only earns your return if we are successful, if there is a successful outcome, whether negotiated or because of a court mandated settlement, to to, the litigation process. And at that point, I'll hand you over to Liam. Thank you, Brian. Good morning, everyone. So we move on to the first slide, show some of our financial highlights for the year ended 07/31/2021. Firstly, our adjusted operating loss is largely unchanged from the prior year, with a small decrease from £4,800,000 to £4,700,000 This is in spite of the £1,700,000 reduction in revenue and other operating income.

33:04 This has been achieved through careful cost management of the business, ensuring we focus our resource on areas commercial development and cross training our staff. As Brian mentioned, our monthly gross cost burn cash burn is about naught 400,000 per month. And from April 22, we'll save an additional naught 0.5 to naught 600,000 per year when we vacate the 1st Floor in our Manchester head office site. The reduced cost base ensures our year end cash position provides us with an organic cash runway through to 2022, and new business wins will help maintain this. Moving on to the next slide. So this is our summary income statement for the year compared to prior year. As mentioned previously, our revenue and other other operating income has fallen by £1,700,000 compared to the prior year, and this is a result of the completion of the contract with The U. S. Customer in H1 of twenty twenty.

33:58 However, during the year, this reduction was more than offset by cost reductions, resulting in adjusted EBITDA in line with the prior year at £2,900,000 and an improved operating loss of £5,100,000 which compares with £6,000,000 in the prior year. As you can see from the table, our R and D tax claim will be lower than prior year due to our reduced cost base, we still anticipate this will be around naught 700,000, and we should receive this in h one of twenty twenty two. The next slide shows our revenue and billings in the prior year, and currently just ended. So as you can see, these are heavily weighted towards our sensing customers and opportunities. New customer wins in the sensing sector have partially offset the loss of revenue from the end of the contract with a US customer. And just to highlight on here, we do still continue to generate display revenues from ongoing projects with customers.

34:45 Billings in FY '21 largely follows the revenue profile. But as you can see in FY twenty, billings were considered to lower as a result of invoicing in advance in FY nineteen. This unwinds in the current year, and we don't anticipate any material differences between revenue and billings going forward.

35:01 So the next slide shows our movement in net loss. So you can see FY 2020, we had $5,100,000 net loss. And this has been sorry. The reduction in net revenue of this, 1,700,000, as we said a bit earlier, has been offset by savings in R and D activities, admin expenses. And also prior year, we incurred exceptional cost of 800,000, which went up based in the current year. This gets us to our net loss position of £4,400,000 in FY 2021. The next slide shows our movements in cash. So FY 2020, we closed finished the year with 5,200,000 Adjusted EBITDA during the year is 2,900,000 and offset another r and d tax credit of 900,000, which we received in January 2021.

35:47 We then have adverse deferred income and working capital movements, totaling 1,300,000, and we had our operating lease to pay of 700,000. You add in to that our CapEx of 400,000, you get a net cash consumption of 4,400,000 during the year. As Brian mentioned earlier, in July 2021, we did raise net debt of 300,000 of 3,000,000, sorry, which meant our closing cash position for the year was 3,800,000.

36:16 And so just to summarize, in regards to our expectations for FY 2022, we anticipate a similar level of revenue as FY 2021, which is currently supported by an ongoing contractual order book of around 1,000,000. On our costs, our gross cost our gross cash cost base is stabilized around and we are identifying further savings where possible, such as the naught 0.5 to naught 600,000 per year from vacating the 1st Floor of our premises in Manchester. These will be realized from April 22 onwards. In spite of our cost reductions, we do retain a core workforce who are highly competent, adaptable, and flexible. This means we have capability for both service and production revenue, and we have a full operational capabilities in r and d, scale, and production. Whilst our display rep our display facility remains mothballed in Roonkorn, we can be mothballed at short notice, and there's also the option to adapt this to provide increased capacity for sensing materials should the need arise.

37:14 On cash, taking into account our r and d tax claim and our forecasted revenue, we're estimating to burn around north of 2,000,000 per month. We do retain the options to go down to an IP shell to protect the lawsuit, which would reduce our monthly cash burn further, but but this is something we would only pursue if our short to medium term commercial opportunities came to an end. But to clarify, both of these paths, being the commercial business and the IP shell, deliver a cash runway beyond key location milestones and visibility on commercial production orders, which are both due in the calendar year 2022. And with that brief summary on our finances, I'll pass you back to Brian. Okay. If we just turn to Slide 19, it's a very quick summary then of the year before we'll be moving on to questions. And I think Mark will be explaining, if not already explained, how to actually pose those questions.

38:01 So just to recap, in the Samsung litigation, we absolutely have transformative value potential, and we do expect those two key events in 2022. May 22 is the statutory reporting deadline for the p tab on the IPR review. And our expectation is that the Texas trial would then be rescheduled for a point after that. And our expectation is around in the second half of twenty twenty two, if not the the fourth quarter. We also expect during 2022 in the second half to get visibility on potential production orders for 2023. And those are, the three key value indicators, if you like, that we expect to see in 2022.

38:48 But the focus for myself, the management team and all of our staff, today is really on generating value from the organic business. The IP and the litigation against Samsung, the responsibility of that just falls on a very small number of us who and the rest of the team can focus on the organic business. The opportunity we've still got are critical capabilities of R and D scale up and very importantly significant production capacity has been retained. We are still looking at some of those smaller display opportunities and cabinet free quantum dots as I I mentioned earlier. And it's just worth noting that a a major success in either sensing or display would actually either immediately achieve or move the company significantly towards achieving its goal of becoming self financing in the medium term.

39:42 Liam summarized our cash runway. As you said, it extends beyond those key value dates that you're seeing in 2022. And if you like the key takeaway message here for the presentation before we move to questions is we have two pretty short term, I. 2022 value creation opportunities. One's in the lawsuit, one's in our sensing organic business. Those are really, really strong, but we also have a contingency plan in the event that the commercial opportunities either don't succeed because we have been here before or if they are slower to mature and that's in creating the IP shelf. But as I say, at the moment, our focus is on the organic route, and delivering organic value from the business while, prosecuting the Samsung lawsuit.

40:30 So that's it from the presentation. Mark, I'm not sure if you need to explain on the questions. Otherwise yep. That's perfect. Brian and Liam, thank you very much for updating investors this morning. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right hand corner of your screen. I just want let Brian and Liam take a few moments to review those questions submitted already. I'd like to remind you that the recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard, and we'll notify you by email when that's ready for your review. Importantly, I'd also like to remind you that your feedback is important to the company. And immediately after this presentation's ended, we'll redirect you for the opportunity to provide your feedback in order the company can better understand your views and expectations. Brian, Liam, I haven't given you a lot of time to to look at the questions that have come in, but we did receive a number of pre questions. So perhaps I could just hand over to you, if I may, just to read out those questions and give a response. Thanks, Mark. Sorry. I'm just clearing my throat. Sorry. That's so loud. So we do have a number of presubmitted questions.

41:36 I'll read them quickly. Some of them are quite long, so if I don't read out every word, please excuse me. But question one, what happened regarding the PLC small screen use of NANOCO materials? Is it still active? Folk may be aware that very, very soon after signing that agreement with PLC, PLC then actually signed an agreement with Facebook that effectively tied up 100% of their development production research capacity. So that meant that agreement, while it's legally in place, there's been no further activity on that. So and plus you're obviously focused on that Facebook opportunity. Second question was, appreciated the website product change. Does it indicate anything more directly commercial in near term?

42:22 We have made some changes to the website. It is it has been updated to reflect our dot only strategy and also a general refresh of the the site. What I mean by dot only is historically, company had got into resin systems, film systems, had basically moved a long way from its core competency of nanomaterials. We focus back on that. We want to make the best nanomaterials in the world. We want to make nanomaterials that meet our customers objectives. We retain knowledge on the next steps in production processes, but we are not actively, you know, getting involved in resin systems and film, for example. So that's why some of those changes. We also felt it was more important for the website actually to reflect a stronger profile for our sensing business because that is very much our our focus today.

43:13 Whereas previously for many years, the the website had still focused around display and we thought that was out of balance. And as I mentioned, some some display products now, if you like, being deemphasized because of our focus on on dot only. So that's the background to to the website. And it it isn't it's it's it's not indicating something more directly commercial in the near term other than the fact that the sensing opportunities are are there. We've got a question. What do you mean when you describe the group retaining 50% of a modest outcome to the Samsung litigation? I actually think I expanded on this at some length in the litigation sections of the slide, meaning, you know, in in in a worst case win, and I mean win because, obviously, if we lose, we get we get nothing out of this lawsuit. But if we win and it's just America, it's just history, it's no future royalties, it's the, component, damages model, that's what we mean by modest.

44:13 The figures that we have quoted in the past are US historical sales by the time we go to trial are going to be around 10,000,000 TVs. Those TVs average retail price $2,000. Like on average, again, over the four or five years I've been out there, cost a thousand dollars more than a regular TV. So a thousand times 10 millions is a 10,000,000,000 market. And what we're saying is our technology is enabled part of that and we deserve part of it. We have said nothing about what percent of that we would expect or would think is a fair outcome for a royalty. But just to emphasize, the market that we're talking about is enormous, and therefore, that's why we say that the the the value potential in this lawsuit is transformational for the company. Again, as I said earlier, transformational means you measure it in multiples of our our current market cap, which, you know, at the low end or, you know, today, it's it's around a $100,000,000 on market cap.

45:12 And we've seen quite a lot of speculation and got a question on why were the results delayed. And, unfortunately, it's a very prosaic or bland answer. Despite the fact that normality has returned to a lot of place workplaces around the world, COVID is still having an impact on staff resources and the delivery of services in many, many old, service companies. And all the companies are no exception. And given that most audits run to very, very tight timetables where there is no scope for any slip, even a very, very large audit company, like PWC, if one audit slips, then you've got repercussions for others, etcetera. So we took a proactive decision to have a two week delay rather than say go for four days or six days and then find out actually you need a seventh day, which would just be embarrassing.

45:57 So that's why we took a conscious decision to lay for two weeks to to allow the audit to complete. And and that is the story or non story behind the delay to the results. Got the question. What do you mean by organic cash runway as opposed to an IP shell? Liam explained, we've got two ways of running this business. We can carry on as an organic business with our 40 staff, with our two production facilities, with our r and d in Manchester. The cash drain on that is obviously higher. It's at 400,000 a month. But equally, those organic opportunities create, organic revenue opportunities. We already earn around 200,000 a month of income. We also get our r and d tax credit. So you can see, you know, again, I think as Liam summarized, we're we we burn typically around 200,000 per month by going the organic route.

46:49 But that's the route that can create organic value by accessing those sensing markets, displaying markets. The alternative, if we decided actually that the organic commercial opportunities have have failed, if, all of our customers decided, you know what? This sensing thing, we're just not interested. Our contingency plan, our fallback is to actually become an IP shell where where the group would only have a handful of staff involved in maintaining our IP and in prosecuting the lawsuit. Clearly, that would cut off any organic, routes to value. The cash burn in that situation would be lower still. It might only be a £100,000, but you can see there's no income to go with it. There's nothing to offset that once you get it down to that, you know, £100,000 a month. That's what you're stuck with until you get an outcome to the lawsuit.

47:37 It's also worth noting that in order to implement an IP shell, you would have a one off upfront restructuring up restructuring charge. So while the the monthly cash burn would be lower, the net impact once you take in the restructuring, etcetera, would be a slightly longer cash runway. I think we've said into 2023 if we had to implement an IP shell in the near future and on the organic 2022. So when we say organic cash runway, that's what we mean. It is an important distinction compared to the the the IP cash runway. If I then looking at questions on the screen, can you explain why you're developing multiple material sets for each wavelength?

48:27 There are different reasons for that. Some materials are while they're not yet on any restricted substance list, might become restricted five to ten years out. Equally, you get completely diff you can get completely different performance characteristics. So for example, some materials, the sensor reacts much, much faster than other materials. You can understand why in an automotive, application or indeed many applications, you want a fast response time. If it takes you twenty minutes and, you know, none nothing would ever take twenty minutes. But if it takes twenty minutes for a sensor to understand what's going on, it's pointless. And actually, the sorts of speeds we're talking about, you know, whether it's a microsecond or a nanosecond, that, you know, it's a factor of a thousand, that actually, matters.

49:17 So that's another reason for developing different material sets. It also means that with some customers, if some customers are actually funding development and they want exclusivity around a certain material set, we can't sell that material set to other customers. So that's why we want to have our own developed range of materials that we've paid for, that actually we can avoid those exclusivity discussions. But equally where where those exist, we can sell materials to other customers. So that's why we've got multiple material sets. Next question, is there still an ongoing relationship with Diodes Could they manufacture sensing materials? So the Dai relationship was set up explicitly focused on cadmium free quantum dots for display. Some of you may be aware that the Dai facility actually borders the Samsung facility.

50:06 Dai were expecting at the same time, NANOCO were expecting to go into production, with Samsung. Dai were expecting to do that. So they were equally disappointed if you like when Samsung decided to go it alone, using one of their their captive suppliers. So today the die facility is still there. Our agreement with them is in place, but the die facility is mothballed. They could in theory be asked to produce sensing materials, but you would need very, very significant changes to the plant. It is completely different process and it's completely different capital spend. So while they're still a partner of the business and we could have that discussion, it would take some time for that to actually come to fruition.

50:55 Next question, do we see ingas as becoming much cheaper and thus increasing its market share in sensing? So we know people are trying to make ingas cheaper, but, again, I'm not a technical person, but ingas sensors quite often have to be cooled. And by cooled, mean cooled to minus 140 degrees. So while there is work ongoing on that, if an ingas sensor to times more expensive than a CMOS sensor with quantum dots, you know, so literally, you're talking the difference between $10 and $10,000. I think it will be some time even with that development work on ingas. The ingas sensor actually has grown in a completely different way.

51:43 You'll all be able to Google how you actually make an ingas sensor, but it completely different and a very expensive and highly controlled process to grow the wafers for an ingas sensor rather than just take a, a silicon substrate and coat it with quantum dots. Next question is candidate for the PTAB May 2022 be brought forward? In theory, yes, but, there are a number of steps. Again, you can see this on the PTAB website. There are a number of mandated steps in the process. And because the process started, I don't think it was going to be dismissed out of hand. So for example, in January, both parties are allowed to ask for an oral argument. In February, if PTAB has agreed to an oral argument and it's been requested, then the oral argument is held in February.

52:35 I think if Pete even if PTAB were minded to accelerate that May deadline, I think they're they and we, NANOCO, would say they would run the risk of an appeal on the basis of improper process or unfair process or, you know, obligation of process. So I think it's fair to say that it is likely to go to May. And, again, to the actual day in May, I can't remember off the top of my head. Again, that's available, the website, but they'll actually go to the, you know, the full one year, from the from the institution of the IPR. It is theoretically possible for May to be delayed, but it would only be in an extremely rare situation where one of the parties was able to demonstrate that they were suffering unfairly due to, you know, some factor that needed more time.

53:27 If you read the judgment of the Texas judge when he agreed to stay the trial, I think it's very clear, and the PTAB should take the form same view. This law case started back in '20 Valentine's Day in 2019. The idea that somebody needs more time and then the organization is like Samsung size hasn't had time to prepare, I think, in my view, farcical. So, I wouldn't expect that it to be delayed, but equally as I've said, I wouldn't expect it to be, brought forward. And the next question, it's very long one. Have you got sufficient staff to drive new sales through the organic business, marketing materials directly and suppliers? And will the move in April to new headquarters purchased outright properly with a high energy efficiency rating and with further opportunity for production?

54:20 Then the synergy of having a new head office owned instead of leased would be a cost saving. So just to be clear, our Manchester headquarters has got two floors, a Ground Floor and the 1st Floor. Both of them are leased. The 1st Floor, when the lease comes to an end next April, we're exiting it. So we're staying in the Ground Floor. We're not got a new headquarters building. We certainly aren't looking to be buying property at this point in time. It would be an option, for any, award coming out of a lawsuit if the award was big enough, but equally if the business actually needed it. So today, we are, and this is addressing the staffing point. Today, we are appropriately sized for the business activity.

55:07 Now if we had to go into full scale production, you're running a full shift in rum corn for either display or for sensing materials, we would have to hire a number of staff, but you're talking maybe five or six people. My operations director might prefer me to say nine, but I'm being honest. We can already run a half shift with what we've got. So five or six extra people. And we've been relatively successful in in the past in recruiting up here in the Northwest And also our production agreements or agreements with our customers actually do require six months notice before going into commercial production. So we would have advanced notice if we needed to to recruit people. So I think that's picked out all the key points from that.

56:01 There's something in there about higher energy efficiency, but as I say, we're not looking to buy a property. So when the time comes, we'll look at that, but not right now. If the litigation is successful in The US, will you pursue further legal action around the rest of the world? So I'll break that into two parts. It is highly likely that and, again, this is based on advice from, our lawyers, our funder, and our strategic adviser, but also on, Samsung's previous history. If Samsung lose the case or settle the case, they are highly likely to be looking for world peace. And what I mean by world peace is to negotiate a settlement agreement outcome that actually covers the whole world at all time and likely in a one off payment.

56:48 Theoretically possible that they might agree to a royalty, but a a future royalty. But, again, they're more likely to say, we estimate future royalties would be x. We're gonna discount that by y percent, and you can have the cash today. So so it's highly unlikely that we will need to sue Samsung anywhere else in the world, but we've gone after The US because it's the biggest market. If we end up with a court, a a judged settlement in in The United States and Samsung haven't negotiated a worldwide license, then, yes, we absolutely will litigate. The markets you can imagine are the major economies in Western Europe and in the Far East. As we estimate that we actually our IP is registered covering 80 or 90% of Samsung's global sales of QD TVs around the world.

57:40 So you can see why it'd be in their best interest to go for a a global settlement. In terms of non Samsung companies, I'll just say that it's an activity that we we we record, we monitor, we look at other companies that we believe may be infringing our IP, and we've made no secret of the fact that we believe that anyone, anywhere in the world who's mass producing cadmium free quantum dots is highly likely, to be, using technology that is protected by NANOCO's IP. So that is something we absolutely would look to do. And Clearly, that would be one possible use of funds if there was a large settlement coming out of The United States. We then be able to either fund on our own additional legal action or we'd still have just have the option because we work very successfully with the litigation funder in The US right now. If they wanted to, you know, fund that going forward, we could look at other uses for for the funds.

58:37 So the simple answer is yes. If we're successful in The U. Yes, we will look at other legal action around the world, though not necessarily against Samsung for the reasons given. Next question, are NANOCO's products applicable to LIDAR? Yes is the simple answer. Autonomous vehicle. Now you may or may not know vehicles have got a lot of sensors. They can have them inside and outside. So for instance, if you're driving the car your car today, there are sensors that can monitor whether or not your eyelids are drooping and whether you're in danger of falling asleep. There'll be sensors that are picking up hand movements. So instead of having to reach across and look for the the defrost button, you know, hand signals bit like on some gaming consoles, some hand signals you can program the car that it will respond. If you stick your thumb up, it makes it turns the temperature up. If you stick a finger down, it all adds to driver safety because inside the vehicle you can keep your hands on the steering wheel and and still put up a a finger, although apologies for that metaphor. And equally on the outside of the car and actually, you can put LiDAR on the back of a phone so you can have a world facing LiDAR sensor. You can have a front facing, etcetera, etcetera. So, yes, it is applicable to LIDAR, and we know that a number of our customers are working with vehicle manufacturers on applications for sensing.

1:00:02 Next question. Are the QDs for sensors priced the same as QDs for display and other technologies? The answer is no. They are not. Very, very different end markets. You've got, you know, even going down to the raw material level, you've actually got quite different bills and material. A sensor material is actually a lot more expensive than display material equally because CFGDs for display have been around for for six years. You've seen the price erosion both for market price of finished quantum dots, but also you've seen some reductions in input material costs. Equally, our operations director here in Rumcorn's done a him and the team have done a fantastic job in reengineering our processes to get higher yields, which again impacts the pricing, etcetera. So so the simple answer is they're quite different prices.

1:00:58 Again, even though sensor material costs more to make it, the amount of material in the application because the sensors are so small is actually less. So from an economic point of view, a TV, being sold would make NANOCO a lot more money than one sensor, being sold. But that's why I go back to, you know, sensing applications potentially in mobile phones where there are 1,500,000,000 sold every year, you know, capturing a decent size of that. We do think the sensing opportunity is bigger even though the unit price for one sensor quantum dots will be less than one TV's worth of quantum dots. Very confident question from Simon here. When we win the Samsung litigation, what other avenues will be looked at to protect our IP and value creation. I've already mentioned one avenue will be further litigation.

1:01:53 You do tend to follow the money. So going after the person who makes the end device, that's where the most of the money is. But, clearly, whoever was making the quantum dots or whoever was putting the quantum dots into a component, who then put it into a TV, etcetera, all of those would be potential targets for us to say, look, you need to take out a license or we're going to litigate. And clearly, I think once you've already litigated in one, once you can demonstrate that, you know, a party, particularly in that jurisdiction, is actually using that technology, then it should be an easier conversation without having to litigate to actually get to a license agreement. That's it. We would then also look sorry. We would then also look at into other panel manufacturers as well beyond Samsung.

1:02:43 I apologize for cutting in there, Brian, but thank you so much. And thank you to all those thank you to all those investors that have taken time to submit questions both ahead of today's event and during the event and and to to to you guys for responding. And you've actually addressed every question that's been submitted, So thank you once again. Brian, I know, Liam, I know investor feedback is important to you, and I will shortly redirect investors to provide you with their thoughts and expectations. But before doing so, Brian, I wonder if I can just hand back to you for a few closing comments just to wrap up with. Sure. Thanks, Mark. So, I guess I'd like to leave you with a message I repeated at the end of, you know, when we're going through the slide deck. NANOCO has been close before. We got close with Samsung, and you know where that has led to. We got very close with The US customer, in 2019.

1:03:34 But the position of the company today, both in terms of the robustness and the controlled cost base that we've got, We still got our all of our core capabilities. The opportunities in front of us both organic from sensing, but also on the litigation are as strong, if not stronger than any, that we've had in our twenty year history, potentially including the run up to Samsung launching their TV and even The U. S. Customer. So very strong near term value opportunities. 2022 is going to be a very important year for the group. But as I said, we do have that fallback and protection for the IP and for the value potential in the lawsuit if we have to go down to that IP shale. But as I we don't want to do that because we believe that the organic opportunities in front of us right now merit us keeping the organic business in place and that's what we're focused on developing value from.

1:04:32 That's great. Brian, Liam, thank you once again for updating investors this morning. Could I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order the company can better understand your views and expectations? This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of NANOCO GROUP PLC, we'd like to thank you for attending today's presentation. That now concludes today's session, and good morning to you all.