Xeros Technology Group (LSE:XSG) — Full year results for the year ended 31 December 2020

0:01 Good afternoon, ladies and gentlemen, and welcome to the XEROS TECHNOLOGY GROUP PLC Investor Presentation for the Full Year Results for the Year Ended 12/31/2020. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the q and a tab situated on the right hand corner of your screen. Simply type in your question and press send. The company may not be in a position to answer every question it receives 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

0:31 your investment company dashboard, and you'll be notified once these are ready for your review. I'd also like to remind you this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Mark Nichols, CEO and Paul Dennis, CFO of XEROS TECHNOLOGY GROUP. Good afternoon. Yes. Good afternoon. Welcome to our annual results presentation of twenty twenty. My name is Mark Nichols. I'm the CEO of XEROS Technologies, and I'm joined here today by Paul Denny, our CEO. We have for you today a presentation which we think will take approximately thirty minutes and have allowed up to another thirty minutes after that to answer questions.

1:23 I'd just like to introduce the meeting by saying our annual results, given the nature of their company and where we are today, is not a numbers rich presentation. And that will become apparent why as we go through, but Paul Denny will actually update you in terms of where we are opposite our financials and where we intend to get to over the next two years. But what we can do today is to provide a good update in terms of the progress that we've made with our technologies and the plans that we have for them. 2020 was a year of establishing a platform for licensing by executing some of the developments with our licensees to prepare them and make them ready for their marketplaces, which indeed they are now entering with our technologies, something that started in late last year twenty twenty and continues now.

2:27 And what we believe will be the case is this year will be a platform for high margin revenues, which will grow significantly next year, not just from with our current licensees that we've got, but also those that we will add during the course of this year in territories in which we think are important in terms of a financial opportunity, but also in specific need of the environmental benefits that our technology brings. I appreciate that we have perhaps a number of people on our call who know us reasonably well, some who don't know us particularly well. And so I thought it might be of some use just to share what we do and why we do it and actually start in reverse order.

3:21 Why are we doing what we do in XEROS? In the last twenty years, the amount of garments produced on this planet each year has doubled. The resources that they are demanding of this planet, which are indeed finite, are already at the situation where it is truly unbearable. The textiles that we use in the garments that we wear and the fabrics that we deploy, there's one statistic there we've got on the slide here today, which is 93,000,000,000 me meters cubed of water being consumed in in in that production.

4:08 It's probably not well known, but by our calculations, 93,000,000,000 cubic meters of water is the equivalent of hydrating the populations of China and also India for a period of something like forty two years. And as our population increases and the wealth of each individual, if that increasing population increases, this population will put demands, which are already unbearable, into the point which is it is completely untenable for a number of the geographies where these garments are made and where the fibers are produced.

4:55 And so for a considerable period of time, our mission within XEROS is actually to be to work on and to bring about a reduction and a slowing down in the resources that are consumed in the clothes that we wear. And so to give you an idea of the what in terms of our technologies, we are involved in the garment life cycle and the fabric life cycle from the point that they are cut, made, and trimmed. They are in their raw state, and our technologies work in processes downstream of that, which are obviously very, very significant. We're working on a a dyeing application, but today we are in the garment finishing market, specifically in denim.

5:47 And then subsequently, once these garments are made and they're in our hands and also in the hands of other commercial launderers, for example, we're applying our technologies to radically reduce the consumption and the pollution within those articles. And so on the left hand side of this chart, just to to give you a sense of the increasing impact that we're having on the planet, is we're obviously enhancing the outcomes of the businesses that we work with in terms of reducing the resource consumption that they have, which has tremendous, obviously, cost benefit, not just to them in terms of profits, but what they actually produce. The second thing that we're doing is that the trends which are forced upon those industries, which are indeed secular, will not change, and that's reducing the consumption of those finite resources and reducing the the pollution, which is equal and opposite from those inputs.

6:47 And secondly, you know, in this $1,400,000,000,000 industry, we're addressing two fundamental human needs which grow with the population. One is water and water stress, and secondly is our clothing. So I just wanted to bring that to the forefront in terms of context, in terms of what we do and why we do it, but now to move specifically in terms of our technologies and the progress that we're making in India. Just a quick refresher to everybody, we have two platform technologies. We've got the XORB and XDRAWM technology, which works in combination, and the XORBs are introduced into those processes from beyond the cut, make, trim right the way through to the end of the laundering process.

7:37 And in the XDrums, they apply themselves to reducing the water, the chemistry, the energy, the pollution, whilst having extraordinary outcomes in terms of in terms of, for example, the laundering process, not only prestowing those benefits, but extending the life of those garment and fabrics by a significant amount, and in fact, over 20%. And so if we go back to that very first page and think about all those metrics in terms of the consumption and resource depletion, our technologies in the garment life cycle have the capacity to reduce the washable wardrobe's impact on the planet by 20% per annum, which is a phenomenal set of achievements. And these are now recognized in two of the largest countries on the planet with our first licensees in our garment finishing and also, indeed, our, laundering both in large scale premises and also the home.

8:45 And I will talk shortly about the progress that we've made there. And the second platform technology that we've got, every time we wash our clothes, and I think everybody's now critically aware of this, is that we produce microfibers. It's the largest source of microfibre pollution which comes from our washing machine, which is now found across the entire trophic range, I e, the the food chain, including our good cells. And for a period of five years, we've been working on finding a solution to that by creating what we believe is the best filtration solution for both industrial and domestic washing machines. And not just in our XORB XDRAMP technology, we made significant progress during 2020 and since.

9:37 In terms of licensing those applications, we've now on the cusp of having a commercial agreement for the large filtration device that we've got for large machines. But today, we've got a very significant expose in terms of where we've got our Xfiltrate domestic filtration design. So I'll just move on now to to go through some specifics before we move into some greater detail on Xfiltrate. So

10:11 licensees that we've got, Ramsons, they're in South Asia. They entered the market in November last year with one of the largest denim manufacturers and garment finishes in South Asia. Machines in up and running. And in addition to that, we've obviously got our commercial laundry applications with IFB in India and Sea Lion in China. They've gone back due to COVID, not by a substantial amount, but both of those companies will be entering the market very, very shortly with our technologies and are ready to do so. They've completed all the developments in preparation there too. But within the very near future, they will be entering the markets under license from us, and we will be anticipating man making announcements on those within the next couple of months.

11:06 And in spite of the COVID situation thus far in India, our first domestic market entry with the XSORB XTRON Technologies, we anticipate in q four. That's the advice that we've got from our licensee, IFB. This obviously is a very high volume, high value application for us. But where we stand at the moment is that we obviously have to be a little circumspect opposite what's happening in India at this particular point in time. But quite clearly, there is a firm and fixed determination to enter the market with more than one product range. And at this particular point in time, we have an eight month lapse time of work that needs to be completed in order to do so, which may or may not be impacted by by COVID.

12:03 But as and when we might be, quite clearly, would advise to that fact. And as I mentioned at the outset, we are currently working and in discussions in additional geographies to supplement the license income that we've already got in this XORP, XTRUM arena. So that's by way of a a short update in terms of that platform. Technology. Now we're gonna spend some time on an area which perhaps is not so well known. The the microfiber problem that we have across the world is 36% of it comes from our washing machines, about 35% from the cars tires that are attached to the cars that you drive.

12:51 Knowing that this is the largest source and the easiest way to address it is through filtration within machines. The French government has legislated to put in place an environment whereby every washing machine manufacturer has to have a filter within their machines by the 01/01/2025. In effect, that means the whole of Europe, and in fact, Europe is actually looking to adopt this legislation. Every machine in Europe will have that because there will not be a machine made specifically for France without a filter, whereas the rest of Europe will, dint of that fact, will actually have a machine with a filter within it.

13:37 Secondly, we've had The UK, very, very recently saying that they are going to table legislation for filtration within machines. And importantly, whilst the first paper has said that we've seen on the subject 2030, there is considered opinion that that will be brought forward to 2025. And, also importantly, given the nature of California, not just its size, but also its progressiveness opposite the environmental agenda, California has also tabled legislation, the most aggressive legislation that washing machines have to be fitted with a filter by the 01/01/2024. Knowing five years ago that this was a problem that needed to be solved, we've been working on creating a solution, and we believe the the best device that can meet these requirements within the time scales, in fact, in advance of the time scales that are being laid forth in front of a number of jurisdictions.

14:43 So to give you a sense of the dynamic, it's a 100,000,000 washing machines worldwide. About half of them are in Asia, about a a quarter in Europe. The largest producer in the world of a quarter of machines is a Chinese company called Haier. And as you can see, Whirlpool, Medea, and others as we move up the or down the size. But in aggregate, the market is dominated by eight or nine companies. These companies have all been late to the party in terms of looking for a solution. And in the last, number of months, the level of activity and interaction that we have had with these parties has moved up considerably, both reactively and proactively.

15:34 And it is done so because we have started to be recognized as an enterprise that quite likely has the solution to the regulations that are going to befall them imminently.

15:51 And so what we're going to share today and announce today is the plan that we have for the productization and commercialization of the world's first in machine filtration device, which has the leading aspects in terms of durability, reliability, efficacy, cost, and as importantly, consumer expectations and needs. And I'll come on and show you what we have developed. The organizations that I've shared on the previous slide do not have a history of working together in any way, shape, or form.

16:40 They've not had a history of developing significant new features and benefits in terms of the machines that they provide to the market, only having major change minor changes in in the designs that they provide and the upgrades that they make year on year. So the challenge that was befalling the industry was, is there a product out there in the marketplace which meets all the criteria, will meet the regulatory standards when they're enshrined into law, and where would we source such a design from? The long and the short of it is they want a part. They want a serviceable, replaceable part.

17:27 So acknowledging this dimension, what we have done starting six months ago, we established a relationship and a contract for the design whereby we would take our intellectual property, the principles of our design, and design a product which would meet all the needs and would fit easily in a standardized manner in every single washing machine being manufactured today by any manufacturer on the planet to repeat a standard part. Today, you are going to see that in two forms. One, in a in an animation, a computer generated image.

18:15 And secondly, we're gonna go on and show you the device that has now been built and is now being tested in washing machines as we speak in under our own management and control ahead of a program whereby we would anticipate having field trials of our product design with a number of those very large manufacturing companies, appliance companies that were on the previous register thereof, and that we would have a number of agreements whereby having completed successful field trials that we would have previously, determined the commercial terms and outline that would be agreed between us once successful trials had taken place.

19:11 With that, we have a view that given the product design life cycles and testing life cycles, the market introduction life cycles that those companies have, that we could likely have a product introduction maybe in, like, late twenty twenty two, but more likely in 2023. And so what we have in XEROS today potentially, ultimately, is a product which will firstly find its way into maybe all the machines that are sold in Europe, firstly. And secondly, as legislation and indeed demand of which consumers are asking for increasingly would be deployed more widely under license from XEROS.

20:04 And so what I'd like to do now is share with you these two artifacts that we've had to give you a very good impression of the product design that we've now brought together. And just before I do so, I'd like to say that obviously our first patent on this was filed in 2017, but we now have what we call a patent thicket around it where we have something in the region of seven patents that we filed, protect this invention, but not only that, some of the ancillary functionality

20:40 that you're now about to see. So if we could now run the the video, that would be great. Thank you. Thank you. So having

22:24 settled on

22:25 that design that you've now seen, we've been working with Tata to bring that design into reality whilst making sure, as I said before, that we had the patent portfolio around it, which enables us to share with you today the the actual manifestation of the product design now. So if we could just run the second video. So for me, just to describe what's happening here, what you have is in that design, which we've spoken to manufacturers in terms of the the total cost. I'm not gonna share that cost today, but it's certainly within expectations in terms of being a low cost part to add to the machine.

23:26 It's an integrated pump filter and dewater. That's the unique combination. And what happens is is that the the fibers come in post the coin trap into that device, which is spinning at about 1,200 RPM, and the fibers start to get caught through centrifugal force on the walls of the mesh. They're quite clever how we designed the fibers to accumulate such that the two dimensional becomes a three-dimensional mesh with the fibers compounding and also acting as a filtration media as well. And the spinning of the cylinder that you see continues after the finishing of the cycle and what that enables the the filter material which we call fight filter to do is to dry and to become a very very consistent semi dry cake which makes it easy to dispose of into the solid waste.

24:31 And we have a similar version of this for the commercial market where there's an automated dispensing mechanism. And the the device itself meets a lot of the criteria, but at this particular point in time, it's unique in terms of having all those features, which is why I think we've had such a significant increase in the both the reactive and proactive interactions with a large number of those OEMs that we've seen. So I'm just going to move quickly on just to say, 2020 and since has been a very, very significant year for us in terms of validation of our technologies from which we've got, we believe, a solid platform for growth, both in the XORB, XDRAW, and the the garment finishing and the laundry world and also Xfiltr.

25:26 And then we have very little more now to do in terms of proving our technology, and it's really about orientating ourselves to enhancing its marketing, but in addition to increasing the number of licensees that we have in each of those application areas. And as I said at the outset, obviously, to start to build upon these first licensing comes with significant growth within the existing contracts and additions there too. And then I think I would like to move on to share the screen with Paul Denny, who's going to give a quick update in terms of where we are financial situation. Thank you, Mark. Good afternoon, everybody.

26:12 As Mark said, 2020 was a year of transition, and the financials clearly show that. The the story of 2020 and indeed of 2019 before that was all about bringing the the cost base down and bringing the cash burn down and moving out of the direct operations in North America and other parts of the world and moving to a pure licensing model. So what you can see with net cash outflow from operations reducing by 55% last year, adjusted EBITDA loss reducing by 53% last year, is that we've made significant strides in bringing that cost base down. And we now have a position where the cost base is the right size to take the business forward, and the licensing income will start to flow in 2021 from the portfolio of licensing agreements, whether that's ramsancing in in the garment manufacturing world, whether that's IFB on C Line in commercial laundry, IFB in domestic, commercial XfiltrA, all of those application areas are going to produce license revenue this year, and domestic XfiltrA is slated to produce revenue possibly end of twenty twenty two, more likely 2023.

27:33 Now what this means in terms of the cost base is that since July last year through to the end of April this year, ten month period, the average monthly cash burn for the organization is now at 0.4, 0.45 per per month. And as I said, that is the right size to take to take the business forward. And with that, and with the fact that all of the licensed partners that we have have either launched or planning to launch this year, we have not changed the overall guidance. Our overall guidance is that we still plan to reach month on month cash breakeven by the end of twenty twenty two, with 2023 being the first year of first full year of cash breakeven.

28:26 So let me just say a little more about cash because you would all have clearly seen that we had a very successful oversubscribed funding round, in March of this year where we raised £9,000,000 gross, and, I'll talk about that as well. But in terms of cash, at the end of this month, at the end of April, I. E, tomorrow, we we will have £11,500,000 of cash in the business. We also, this year and next, I would anticipate that we will receive a further million pounds from HMRC for r and d tax credits. So call that 12.5. 12.5 with 400,000 average spend per per month, that funds us through deep into 2023 even on the assumption of no gross margin income over the next two years, which is clearly not a realistic assumption. We would plan to significantly increase the gross margin contribution we get as license income comes through.

29:33 But the point of running through this is that we are funded through to the point of cash breakeven. We have a stronger balance sheet than we've had for a number of years now, and that is really off off the back of the the story that Markus walked you through was very well received by our investor community last month, and they were minded to make sure that we absolutely had necessary funding both to go fast at the XSGROUP opportunity, but also to provide us with a contingency funding in the event of further COVID delays. And clearly, the situation in India is one that we're very mindful of, but it's worth saying that the IFB, who are who are our partner in India, are proving to be incredibly resilient.

30:30 They plan to they they they still plan to launch their commercial laundry machines into the market in about three weeks' time, and we will update the market on that when that launch is taking place. They're planning a virtual mark market launch, and they are actively building a pipeline of sales for that. And at the same time, they tell us that they still commit to the q four market launch for domestic washing machines. But, you know, clearly, we need to see how the balance of this year plays out for that. So I am actually gonna address one of the questions that was raised. I'm gonna address it now because I think it it fits now. And it was David who raised the question. I'm not gonna I'm not gonna read out the full question.

31:22 This is quite a lengthy question with lots of numbers in it. But, basically, the point of the question is to ask for clarification around our cash burn on a monthly basis just in the first quarter of this year. It is worked out that it appears that that the cash burn for the first quarter of this year is higher than 0.4. And what I want to say on that is that the question is maths is entirely right. Cash burn on average over the last ten month period, as I said, has been a 0.4, but that does not mean it's consistently 0.4 every month. Q1 is traditionally quite a high cash burn period for the company, and it was higher this this quarter, this year, for a number of reasons. One, we have our intellectual property insurance renewal payment comes out in q one, and that is a very very sizable cash payment, and that consistently comes through every year. But also this year, we've accelerated a lot of the IP work and filing work and external fees around XSGROUP to ensure that with the soft launch of the product that we're doing today and then with the launch in front of OEMs that we will do over the next few months, we have the IP portfolio in place.

32:51 So therefore, we we we have actually spent a lot more than we otherwise would on IP in the first quarter of this year, and that was with the confidence as well of the funding support from our shareholders. So I just want to say that, yes, quarter one cash burn has been high, but that that's not evidence of a consistently high spend. You know, that was balanced by the fact that q four last year, we were consistently coming in under 0.4. So with that and with the overall sort of closing statement for on my part that we see no reason to change our financial plans and our guidance off the back of COVID.

33:36 We we still stick to the plan that says we intend to reach cash breakeven by the end of next year. So with that, I will hand back to Mark for his closing remarks on slides. I think what I'll do is give the closing remarks at the end, but perhaps we could have the first question, and Paul, you and I can work through those questions that we've now received. Mark Pollard, thank you very much indeed for your presentation. And gentlemen, do please continue to submit your questions using the Q and A tab situated on the right hand corner of the screen. But just while the company take a few moments to review those investor questions submitted already, I'd like to remind you the recording of the presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard on the Investor Meet company platform.

34:23 I'd also like to remind you that your feedback is important to the company and immediately after the presentation has ended, you'll be redirected to the opportunity to provide feedback in order that your, views are better understood by the company. Mark, Paul, perhaps before we just touch on those live questions we've had in, we did have a a pre submitted question and did touch on it slightly. But may I just read this one out? And if there's anything further to add, that'd be great, and we can just move into the live q and It reads as follows. You recently conducted a placing to raise new capital. Can you explain the reason for this and what the funds will be used for? Yeah. Sure. Thanks thanks for that. So and this is this was laid this was laid out in the share in the shareholder circular that was published in the tie at the time and is still available on the investor relations website.

35:13 But we went out initially asking to raise £5,000,000, and the principal reason for that was to accelerate the commercialization of XSGILTRA. As as Mark as Mark said and as I touched upon in my piece, we think there is a two year time line between now and when XSGULTRA is producing consistent royalty revenue for us. And that two year time line is roughly what we think it will take for us to move the industry from its position now to one off significant adoption. And that that that spend was really to allow us to do two things. One was to put some marketing resource around XSfiltr because having the product that we have now, knowing that we would have the product now, we need to tell the world about this, and we need to put some significant marketing investments around this. And the other part of it was to have the was to have the resource and the project management capability to run multiple sets of field trials with with OEMs, potentially in multiple parts of the world, to bring the OEMs to a point where we can sit down and talk and talk terms with them around adoption.

36:37 Now the other part of the, fundraise was to ensure that we had a contingency on the balance sheet to see us through any impact of COVID because, clearly, you know, it's it's an ever evolving situation. A position that the world is in with COVID now is is distinct from that which it was at the start of the year. We can't say with with any confidence. I don't think anybody can say with any confidence what position the world is gonna be in over the next three to six months, but it was incumbent upon us to make sure that we were well funded for any eventuality. Now what we actually found when we were talking with our major institutional shareholders, that they were very bullish around XSGROUP and really wanted to make sure that we were well funded with that, but also to make sure that they had a part of this. And so we were oversubscribed, and that's why we ended up with 9,000,000.

37:44 So with that, I think that was the only published question. I think we'll address some of the questions that have come in during the meeting. That'd be fantastic. If you don't mind just reading out the question and and giving your answer where appropriate to do so, thank you very much. Okay. Thanks, Paul. And and indeed, you know, having the the funding that we've got in our balance sheet, obviously, like a very good and balanced table opposite some of the very large companies that we're actively engaged with. So we've got one question here, which is one of the videos I watched before investing in XEROS was of laundry that washed for the hotel industry. And they said that not only it needed less detergent, but the result was better and the towels were better. In what ways are you still promoting this aspect of the XORB solution?

38:36 So so this is this is an axiomatic point about our washing technology, how our XORB and XTRON work together. And it goes back to the very outset of the presentation, is that every day in everybody's homes across the world, the washing machines that you use are not only using huge amounts of resource, but they are foreshortening the length, the length, and lifetime of your clothes. Levi's, two days ago, started their new program, buy better, wear longer.

39:25 In the course of the last year, working with IFB and and Sea Lion, who undertaken trials with their customers, trials customers, pilot customers, and in addition, in conducted independent research about what our technology does to improve garment care and extend garment life. XEROS does prolong the life of your clothes whilst reducing the environmental and and financial cost. This is profound not just in terms of the economic argument for the consumer, but one pair of jeans, the cotton that is within them takes five tons of water to grow.

40:22 If you reduce the amount of denim required in the planet by 20%, that one pair of jeans extending its life by 20% is a ton of water. That ton of water is about one and a half people's drinking or hydration needs for a year. And reducing that burden in the upper upper ends of that value chain, you're reducing that burden in areas which are under acute water stress. And it is absolutely no surprise that we operate in the two countries which actually have the highest issues with regard to, you know, garment manufacturing also in terms of water stress.

41:14 To to to accentuate the point in terms of how this is now being marketed and sold, IFP on the domestic side of things are entering the market not just with the environmental and also the, economic benefits, but they're putting together, and I won't, betray or or or steal the march on their marketing plans because they are confidential to them, but the whole value proposition being marketed in India, and elsewhere is around the Fabric Care and Garmin Life Extension with the additional benefits that I've alluded to. So it is a fundamental part of what we do, what we bring, and it not just has the impact of the the washing laundry process, but it has very significant upstream impacts in terms of reducing clothing demand.

42:16 And I I guarantee within the next ten years, we won't be talking about fast fashion. We'll be talking about slow fashion. And with the marketing that Paul has been talking about and with the examples of what we've got in the field and increasingly so, we we will be one of the companies whose technologies really add to the slow fashion equation. We have another question here. In terms of competitor analysis, how strongly do you regard other XSGROUP competing products against your own, and how will you beat them to the to the enviable position of being in every machine that's produced? Yeah. That's a that's a good question. And, obviously, we we spend a lot of time thinking about that.

43:04 We do undertake very comprehensive intellectual property appraisals and searching. And at this particular point in times, in terms of patents that we can see, at this particular point in time, you can never say never, but there's there's nothing out there from a protected position that is worrying to us opposite the proposition that we have and that that we've protected, number one. Number two, generically, if you want to go for our device, you could go for what's called a cartridge device, so a generic alternative. There's none inside a machine at the moment, and they do they do exist outside a machine.

43:55 But that requires you to put up a a a cartridge, which has got a dense three-dimensional polymer matrix in it. The water's flushed through it, and the fibers and a lot of other stuff as well is in that matrix. And then you take that cartridge out, you send it off, and you put a a a new one in. The the the product that we see in the market outside the machine that's on the cartridge basis is a subscription model at about a 130 a year. I'm not gonna give any indicate indicative pricing opposite our technology, but it is a fraction of that, bearing in mind that would be an annual cost. So we think opposite the criteria both in terms of protection from a patent perspective and also from the durability, reliability, efficacy, cost, ease of use, we have advantages across that spectrum, number one.

44:58 And number two, I mean, Paul spoke of this, is that it's no good just having all those things. We have to occupy the market very, very quickly, which is why we've took take took the decision to create a product design which can be universally deployed. So that's a broad response in terms of intellectual property out there and also generic competition. Another question on X filter. Who will be responsible for manufacturing X filter? XEROS or the washing machine manufacturer? We we spend a long lot of time getting out of being a direct being involved in direct businesses, build, own, operate. That's not what we do.

45:44 We have a spectacularly talented team of engineers, scientists who have the capability to do what we've presented earlier in the presentation. And so just bear with me. That's quite expensive. Yeah. So we would never be in a situation of manufacturing. The the appliance manufacturers today either outsource the manufacturing of parts or indeed some of them manufacture their own. We our primary objective is to license our design to the washing machine manufacturers and for them to make the decisions on whether they want to make or buy.

46:33 But irrespective of those two production strategies or sourcing strategies, we would intend to have a royalty per device. Does the introduction of your device require significant change to manufacturing processes of machines? And who with those manufacturers not create their own version of the part noted to the existing part. Okay. So I think I've answered the patent part. We spent five years on creating this differentiation and the intellectual property around it. But in terms of significant changes to the to the machine, the location of where we've put the X filter on the top left hand side, much of the detergent drawer is actually redundant.

47:23 And the reason the detergent drawer went on the top left hand side is that that's where the spare space is within machines. And I think you saw from the CGI rendering that we've got a device that fits in that top left hand corner, and we've done that to make sure that it doesn't interfere with the rest of the machine. And to give you an idea what what happens, there's gonna be some telemetry which is connected up to the controller on the top right hand side, but that's that's simple wiring and changes to the to the code on the the PCB. And whereas today, you've got an effluent pipe, which is on the downstream of the f of the coin trap.

48:09 That will then run up to the top left hand side that you see, and then we've got an outflow from the X filter then runs down to what would have been the effluent pipe previously. So in terms of internal changes, it doesn't interfere, and the additions going in are very simple and low cost, and that's all been part of our own and our joint design brief with Tata. Yeah. Okay. So I'll pick up a question. So question, £1,000,000 tax credit was expected in 2020 and 2021 combined. Is that still the case? And was the tax credit received in 2020? Yes. The if you look at the the the cash flow statement that was published along with the r and s this morning, you'll see that last year, that was Q4 last year, we received £698,000 from HMRC for tax credit.

49:05 For in 2021, I suspect we will receive a slightly smaller amount than that. So in aggregate, we we will receive over £1,000,000. So, yes, that was received. There's also a question. I'll pick this up as well. Question was, will IFB launch its commercial machines in q two? With the COVID situation in India, how does the revenue model work? And do they have to sell those machines before you get the license money? So the first part of that question in terms of launching q two, we answered that earlier. Yes. They absolutely will launch. It's it's a matter of weeks away.

49:53 In terms of the license model, we receive both a license for the machine. So every time IFP or Sea Lion or Ramsons sell a machine, we receive a a high mid single digit royalty on that machine. We also receive ongoing royalties for the provision of XORPs, you know, the classic kind of razors and blades model. So, yes, I mean, of course, though those companies have to sell those machines for us to get the license income, and this is the point that we've consistently made over the last twelve months, is that the the top line of XEROS and the revenue of XEROS, because we are a full licensing model, our top line now is is entirely dependent on the sales activities of our licensed partners. But if we've chosen to license the technology to, generally, the incumbent market leaders in every territory and every application that that we play in, that's what gives us the confidence around the revenue growth.

51:04 There's a question here. So does the XORP technology work the same in smaller domestic laundry machines compared with the commercial? The the XORP XTRON technology is a platform technology. It works it's the same approach that use is used in the garment and denim finishing world as well as the commercial laundry machines and the smaller domestic machines. It is exactly the same. We do use different polymer XORBs in the garment finishing side of things and the reason we use that is that we're not looking for stain removal or cleaning in garment finishing, not significantly anyway. We we're actually looking to deposit molecules. So we actually use a a different polymer in in that end of the business.

51:59 But elsewhere, it is all completely uniform. The shape, size, and density of the XORBs are also uniform. So we actually have a standard size platform that we use throughout our XORB and XTRUM technologies. We have some other questions now, but I think what we should do is answer those in terms of the written form. I'd just like to summarize if I may. So we have developed our technologies. They are now working and the benefits that accrue are real and they're now proven.

52:45 Proven to the point that we have launches happening of incredibly credible companies in very large geographies from which we can grow our license platform from. And it is very clear where we want to grow. We've defined the scope of our company, and so now we have growth paths. We've defined the applications, the growth paths for our XORB XTRUM technology are quite clearly going to be China and India and then selected geographies elsewhere, which have very specific needs, both economic, environmental opposite those technologies. And, of course, our ambition in our XORB extermin technologies is to see it in many homes across the world.

53:35 And with IFB being the segue, we believe, to that eventuality or reality. And increasingly, we've conducted market research, including in in India, is that there is very strong appeal and demand for our domestic laundry technology. And in XSfiltr, quite clearly, we may just have the de facto solution for the largest source and easiest to remediate, I, within our washing machines, the easiest and best solution to deal with it. And not only that, but having it in a near term horizon with regulatory enforcement increasingly becoming clear to mandate it.

54:27 We do need to invest the money that we've raised and and invest it incredibly wisely. We're we're very selective. We we as I've said, we don't need to have very significant increases in our technical capability. And Paul's talked about our intellectual property being, you know, slightly bumpy curve, but we know what that curve is and what it what its profile will be over time. But we do want to make sure that our marketing capability really is what it needs to be. And five years ago, I said there will come a time in XEROS when we are at a level of confidence, belief, and proof that we should reach around the intermediaries between us and our and our end consumers and tell consumers what we do such that they would then ask those who supply them. And those some of those companies that we saw earlier would have consumer pull of XEROS technologies such that those companies would want to embrace and and license the inventions that we've created.

55:48 And so therefore, that is gonna be a significant area for us. And it's also true to say that we need to increase our competence within our management team. And so we are looking to increase the competence of two of our teams. Firstly, our executive management team and we're actively recruiting in that sphere to achieve that objective. And we strengthened our board last year. We increased early last year the numbers of our board with bringing on board our new Chairman, Clas de Boer, who represents our strategic investor, COFR. But it is also his and the board's intention to increase the relevant capability and diversity on our board to be able to have a better insight and better connections with the worlds that we're now working with.

56:50 And quite clearly, that is in the consumer domain and also in the consumer appliance domain. And so on that second tier, the the board level tier, an active program to to do that. And, hopefully, in the not too distant future, we will see that our board develops such that it is a balanced opposite the demands and opportunity that we have. And then last but no means least, Paul mentioned it, we have the funding that we need to execute. With that increased capability, we we will have that capability to execute. We have the technology. We have the IP, and we also have the cushion against potential further impacts of COVID.

57:43 Not that they've been profound upon us thus far, but we do have that contingency. I'd just like to thank everybody for attending the call. We we do appreciate it significantly. We do value this opportunity to explain what we do to a number of investors that we don't frequently get to meet. And we also welcome the candor and challenge of the questions that we receive. And, whilst, as I think I've said this before, it is difficult for us to answer them in different forums apart from this, we hope today has been of value in so doing.

58:29 And we look forward to doing so again with our interims, firstly. But secondly, we've obviously trailed some very significant events, which would be worthy of news flow, and we're very much hope hopeful and expectant that they will recruit within the timescales that we've shared today. So on behalf of myself and Paul and our board, thank you very much. Mark, Paul, thank you again for updating investors today. Could I please ask investors not to close the session as you'll be automatically redirected for the opportunity to provide your feedback? If you've accessed the meeting from our website, the feedback page will appear in front of you. If you've accessed the meeting from the link we sent to you in the email, you'll simply be asked to log back in to submit your feedback. It takes just a couple of seconds, and it's greatly appreciated by the company. On behalf of the management team of XEROS TECHNOLOGY GROUP PLC, thank you very much for attending today's presentation.

59:27 Good afternoon.