Nanoco Group plc

Thanks very much, and good morning, everyone. Welcome to this webinar on our interim results presentation for the six months ended 31st of January 2024.

My name is Brian Tanner. I'm the CEO of Nanoco and I'm joined today by Liam Gray, our CFO.

Just as an introductory comment, because we actually recorded this entire presentation last Wednesday morning, and it is available on our website, today, what we are going to do, because there have been a significant number of questions submitted in advance, we are just going to take you through the introduction to Nanoco in the presentation pack, particularly for, those who are new to the story, but also as refresher for people already know us. And then I will talk about the highlights and summary on both the operational part of the business and in the financial part of the business and that will allow us to spend, more time than we normally are able on questions and answers.

As I said, there have been a significant number of questions submitted in advance, and the answers to a number of them are actually quite long and involved, so we do want to spend time on that. Without further ado, we'll turn to Page 5 in the presentation, which is part of the introduction to Nunoco.

Just a reminder of, who we are and what we actually do. Excuse me.

We were founded in 2001 by Dr. Nigel Pickett, who's still our CTO today and professor Paul O'Brien.

The company was a spin out from Manchester, University. We are a material science company, and I can't emphasize that enough.

We make materials that are suspended in the solution, whether it's Advanced Materials or a chemical company, that's who we are and what we are. We're not a device company.

We're not a TV company. We're not a phone company.

We are a material science company. We are the leader in the R&D, scale up, manufacturing, and licensing of high performing semiconductor nanoparticles.

We have a very large IP portfolio and that was recently validated by the US Patent Trial and Appeal Board, which is part of the US Patent Office. Our headquarters and production facility is in Runcorn in the UK.

Today, we have around 50 staff, 30% of whom have PhDs and we employ people from eight different nationalities and we make quantum dots that are cadmium free and hence nontoxic. And you can see an image on the bottom right there of some of the quantum dots that we can make for use in display applications.

You then can ask yourself legitimately, well, what is a quantum dot? Quantum dot is a fluorescent semiconducting nanoparticle, typically 1 to 10 nanometers in size.

Now, again, 1 to 10 nanometers, those are not measurements that people normally use in their everyday life. What does that actually mean in terms of scale?

Well, one way to look at it is, typically, a quantum dot can be 100,000 times thinner than a human hair, So, that's looking at a very, very small scale. If you want to think of something big that was reduced to the Nanosys well, if you took the planet Earth and you reduced it to the Nanosys, it would actually fit inside that sort of golf ball size, golf ball shaped red, quantum dot image on the top left of this slide.

So, the simple, thing to say about them is they are tiny, and there are many billions if not trillions in a, kilogram of material. Okay.

So that's what a quantum dot is, but what does it actually do? Well, a quantum dot has size-determined optical and electronic properties.

What that means is just by changing the size of the quantum dot, so not necessarily making it from different, chemicals, different compounds, just by changing the size, you can get it to perform in different ways. So, the most obvious example of that on the right-hand side of this slide, a quantum dot that's only 2 nanometers wide when stimulated with energy.

That energy can be electricity. It can be light, the photons in the light.

But the 2-nanometer quantum dot, when excited in that way, will, emit blue light. A 5-nanometer quantum dot made of the exactly the same material will emit green light, and a 10-nanometer quantum dot will emit red light.

So, in summary, again, using slightly technical language, the quantum dots are very efficient absorbers. That's what broadband means.

They absorb across a wide range of energy types, but they're also very narrow band emitters. What that means is that when they emit those, three colors of light, what you get is a very, very specific wavelength of light, which gives you very high definition, very good color gamut, and very, very, crystal clear colors.

So that's what a quantum dot does. It emits and it absorbs.

And depending on the application you're looking at, you may be trying to optimize one or both of those characteristics. So next question is having established, well, what are they?

What do they do? Or where are they used?

Here at Nanoco, we have a dot only strategy. That means we focus on the quantum dots themselves.

We don't focus on, the ways to get them into final devices. We don't stretch our capabilities, further away from our core competence of the actual quantum dots.

And in that strategy, and that's why we've set out displays and sensors here, we focus on where we believe the nearest term value opportunities are. So, the two opportunities you can see here are in displays of any kind, whether it's a TV, a watch, a phone, any industrial control system, etcetera, any kind of display, focused on the visible light.

And that's where we create those quantum dots I mentioned above, for emitting blue, green, and red light. The other place you can then or that we're focusing on using, quantum dots is on sensors.

Sensors were actually exploiting the absorptive characteristics of the quantum dot. And they are typically what they're absorbing is an infrared light usually generated by an infrared laser, and that then outputs an electrical signal which can be interpreted by a silicon chip or a readout integrated circuit and turned into an image or a picture, a dynamic image, etcetera.

So that's the other type of material or application that we're focused on at the moment. So that's a very brief summary of who, Nanoco are, what we do, and what a quantum dot is and the sorts of areas that it can be used.

As I mentioned earlier, the full presentation, and this entire slide deck, I just won't be running through it all, is available on our website, will be available on the IMC website so people can digest that at their leisure. If I turn now to Slide number 8, and it's just a summary of what we've achieved in the last six months or the six months to January '24.

So, first thing is, for the first time in our history, we received and fulfilled two commercial production orders. And when I say two, it was for two different materials for one customer.

Those were low volume orders, relatively low value, but they are the difference between us being an aspirational R&D company and actually now transitioning into an actual production company. We do expect the demand and volume from those first three orders to ramp up over time.

The other thing then that we did during the last six months, we signed two, joint development agreements with two global customers. Apologies.

I'm about to say two again, but each of those agreements involves two different second generation, nanomaterials for use in infrared sensing. The second-generation materials will typically be higher performing, have different, operating parameters, and in particular, we'll be able to operate consistently at higher temperatures, and that actually opens up new potential applications for the materials.

Both those agreements are two years long, and I'll say a little bit more about them in relation to a question that's been asked about what we'll get from them. During the last six months and indeed since then, we've delivered all JDA milestones both in those new agreements and in the agreements, that we've been operating under with those two global customers in the period, before that.

At the end of the six-month period, we received the final litigation proceeds from Samsung. So that was $75 million gross less withholding tax to give us $71.75 million that was converted into sterling after the period end.

Given the successful outcome to the Samsung litigation, given that we'd spent four years or five years just fighting for survival and it really trimmed back on investments, in a number of areas, we have been able to start spending a little bit more on the business. And one area that I'd like to call out for that is that we are have added roughly 50% to our, floor space here at Runcorn, and we are building a new, wafer device, fab.

That's an R&D scale or lab scale device fab, and it will give us capabilities of depositing our materials onto a silicon wafer that will also have top and bottom electrodes. We have laser etching, lithography, et cetera, et cetera.

So, we'll actually be able to create a pilot scale devices. The reason that's important is that, two things.

One is that we'll be able to talk to semiconductor customers about what they actually will get if they put our materials onto a device because we'll be able to show them. Rather than today, we say, well, here's some material.

Why don't you experiment with it and see what you get? The second thing is it will significantly accelerate our development cycles.

So currently, with our two customers, two global customers, we make material, with a new recipe, say. We test it ourselves, but as a chemical.

It then goes to them for testing. Sometimes it can go to two or three different sites in those customers.

Basically, by the time the learning cycle is complete, it can be two months to three months later. If you want to maximize the speed at which you develop new products and the chances of success, you need to increase the number of reaction cycles, the number of recipes that you are experimenting with.

The best way to do that is to shorten that time period. By bringing that device capability here into Runcorn, we should be able to see if anywhere between 30% and 40%, if not more of the normal development time.

And that, device fab and all the equipment in it is now being commissioned. And then the last thing I want to say, just about the highlights of the first half of the year is that, the return of value is underway.

Folk will be aware that we're doing a tender for up to £30 million to be followed by an on-market buyback of £33 million. I can say a little bit more about those later, again, when we get to the questions.

In summary, Nanoco in the last six months has become a fully-funded commercial business with commercial traction for actual products in the market, which I guess is the initial or interim target for every single high-tech business that's bringing in new products to the market. I'll now hand over to Liam, who will take you through the financial highlights and summary, and then I'll come back just to summarize.

Thanks, Brian. I'll just skip ahead to Slide 22, which is the financial highlights slide for the period end of 31st Jan, 2024.

As it says on here, revenue was up 150% on the comparative prior period and this is driven by the licensing agreement which has contributed £3 million to £4 million of revenue. If we exclude this license revenue, income from products and services is down £0.6 million and that's used to the gap between completing previous R&D contracts and sign up the new agreements, one with the Asian chemical customer in November '23 and the other with STMicroelectronics in January '24.

Our adjusted EBITDA is £0.7 million which compares with a loss in the prior period of £1.1 million and the move to choose the high revenue figure, the majority of which has no significant associated costs. As we've mentioned previously, we have been investing in our capabilities and we have taken on additional space at our site in Nunkhorns [ph] to facilitate our new device lab.

We have also increased our headcount to support this expansion. This means, our cash cost base has increased from around £0.5 million per month to around £0.6 million.

It is worth noting that, it's still significantly below where the Group has been previously and any investments are carefully assessed to make sure they will deliver commercial and operational value. The hedge we took out on receivable from Samsung was worth a positive £2.5 million at the period end and this was realized in February when we transferred the cash from USD into GBP.

At the period end, we had cash of £59.3 million and the cash we are retaining in the business will support our continuing operations through to cash flow breakeven. These investments will also improve our commercial operational capabilities.

Finally, and this is a particularly important point, our cash position now proves we are a robust supplier in the complex supply chain and we can and will continue to deliver for our customers, without the question existing around our short-term viability. If we quickly move on to the outlook and summary slide, we still expect services and material revenue to be in line with FY 2023.

Whilst H1 of FY '24 is behind the prior period, we are looking to make up this shortfall in H2. The Samsung IP license income will generate £6 million per annum for around eight years, but this has been prepaid, so no future associated cash inflows.

Our cash cost base has increased to £7 million and this reflects our investments on footprint to create our device lab, investments in our equipment to improve our current offerings both existing and new customers and our investments in people to be able to operate the lab and support the operations. All investments are discussed internally to ensure we are utilizing the resources we have to the fullest extent.

On cash, our net monthly cash burn is around £0.3 million to £0.4 million and we plan on spending around £2 million in capital projects in FY'24, around half of which has already been spent in H1. And finally, as Brian mentioned, the process to return up to the S3 1 million shareholders is currently underway.

And with that, I'll pass you back to Brian.

So now moving to Slide number 29, to talk about the outlook and what our priorities are for the rest of this calendar year, where we're looking to deliver steady growth on a farm foundation. We do expect more low volume production orders during calendar year '24, and we've been notified and told to expect some.

And we just haven't been told when as yet. We are working to add new material development contracts to our portfolio.

So, if you think back in 2019, we had one customer, one product, one application, and, actually, when that project came to an end, Revit started 2020 and we actually had zero customers. So that has gone increased to one global customer that then, increased to a second global customer, and we are aiming to add a third global customer to our portfolio in the next six months or so.

We're also, working to finish the commissioning of our wafer device fab. I've already talked about the benefits that will bring.

So, the sooner that can be brought up to speed, the better. It is a very significant capital project, and we've managed to do that a very discounted price, because we do have customers who actually want us to provide services with that equipment.

In the next month or so, we will complete, the return of value in the form of the tender. The on-market buyback, it it's hard to say how long that will last.

It will really depend what's happening on the prices, what's happening with liquidity of the stock after the tender completes. We also announced, previously, and it was reiterated in the detailed interim results statement, which you can find on our website, that, the chair, doctor Christopher Richards, after nine years with Nanoco, or he will have completed nine years in Nanoco at the end of this calendar year, so around November, December, He's indicated he's going to stand down at the next AGM, which is either going to be at the end of November or early December.

That chair succession process will be run by, doctor Alison Fielding, our senior independent director, and we'll be starting, soon. And then lastly, I've often said in a number of, meetings and presentations that for the last four years or five years, we effectively were hiding under a still, in that given the uncertainty around the IP resolved by the litigation, working out in our favor, given uncertainty about the products getting into commercial production, again, result in our favor.

We very much, when it comes to, media, social media, and, trumpeting our achievements, unlike many others, actually wanted some concrete achievements to talk about. So, therefore, we will be making some small, modest, increases in raising our profile in the markets, that we participate in.

So, in terms of summarizing the outlook, and as I said, at the very start, we now are a fully funded business with commercial traction and a lot to build upon. I'll hand you over to our host who will just remind people how to answer questions, and then it will be coming back to Liam and myself to actually go through submitted questions and any new ones that are coming in, while we're speaking.

Okay. That’s great.

Thank you. So, we'll adopt the usual format that the person answering the question will read the question out.

I would point out just before we start going through these, you will see that I refer to in a number of answers to other, previous announcements and publications by Nanoco. That's not to scold people for not having read all of those, but it's just a reminder that, a lot of this information, is already available.

And if you want more detail on it, referring back to those original announcements, you will see more detail if I don't, repeat them word for word here. So, question number 1.

It's not clear when you expect the 2nd generation materials to go into volume production. Is it at the end of the two-year framework agreements with the Asian customer, and STMicro, i.e., in 2026, or is it likely to be later?

So, I'd refer back to two previous RNSs, 12th January 24 with STMicro, 7th November 23 with the Asian customer. The STMicro, RNS says the, JDA is a two-year program to optimize the performance of the 2nd generation, material.

The new JDA will include revenue for services, and that's the device lab that I was talking about. It then says, if all of the technical milestones in the two years of the JDA are achieved, the next step in the process will be to scale the new material into an industrialized process capable of supporting high volume applications.

Those of you who are familiar with our presentations that we've given over the last few years and indeed in the current presentation know that our typical product development cycle has a development phase, an optimization phase, then a scale up phase, final validation and of our process, and the material with the customer, and then production. So, the simple answer for both of those JDAs is they, will complete the optimization phase.

They may deliver some of the scale up phase because while you're optimizing, you will be looking at scale up. They will not immediately they'll lead to commercial production.

So, there will be some scale up work to be done after that and some validation work that could last up to 12 months, it could potentially be shorter, but it really depends on the customer and their application. So, the simple answer is those two development agreements will get us to an optimized material, but it will not get us to a material that is actually, immediately ready for commercial production.

Question number 2, long-term loyal shareholder here with an average weighted buying price of £0.247. How is selling back my shares at a loss or retaining my shares with a very possible dip after your buyback consistent with returning value to shareholders?

I guess the very obvious statement is, everybody's got a different purchase price. We did it when we announced the tender and the only thing we can really refer to is the actual current market price because that's telling us what the market believes the shares are worth.

When we announced the tender on 11th of March at £0.24 price was a 25% premium to the closing mid-market price on the 8th March and it was a 20% premium to the 60-day VWAP. That clearly is of benefit to shareholders, compared to the market price and it's really the only benchmark we can use.

It's also worth noting that, over 93% of those voting at the general meeting voted in favor of the tender exercise and giving the Board the authority to do that tender exercise. And then lastly, I guess, again, this goes without saying, individual shareholders now have a choice.

They can decide to sell their shares or retain their shares or do other some kind of strategy, with their holding based on their own personal circumstances, but also based on their expectations and belief in the company and its future. Next question, question number 3.

To what extent is the expectation of being cash flow breakeven in calendar year '25 a result of guidance from STMicro, or is it a purely internal estimate? Simple answer is, it's an internal estimate based on a number of sources of information, including indications from customers on their expectations for their products.

But, as I was saying earlier about the next purchase orders, it is not based on a firm committed ramp up in demand, but rather the expectation of our sales and our customers of ramp-up in demand, whether from their end customers or a growing number of customers. It also to a certain extent incorporates market forecasts, so outside of customer views, but actually independent forecasters' views of when product sales will ramp up.

Question number 4, is Nanoco looking to litigate against any infringement in 2024? If yes, what might be the size of the claim?

Something like Samsung question mark. I know we didn't cover it today, but it is available on the website.

I'd refer you to, Slide number 19 in the presentation deck. As we've said a number of times before, outside of Samsung, the market for devices containing cadmium-free quantum dots is currently very small, that's supported by our own review and teardowns of a number of products in the market, some of which claim quantum technology.

But when you look at the device, they don't actually contain any types of quantum dots. I guess that's part of the warning about advertising, speak.

The truth is, a small market is not an attractive target for litigation because the costs vastly outweigh the possible returns. Again, I'm emphasizing the market today.

As the market grows over time, that position and stance will change. Eventually, it will become economically sensible to consider litigation.

Something just to remind folk of, and, again, as long-term holders will be aware, Samsung actually launched their QD TV in 2015, and we filed suit in 2020, and we settled on the courthouse steps in January 2023. So that was an 8-year process from start to finish.

Before we filed suit, there were two years to three years of quite detailed interactions in terms of understanding, both our own position and trying to persuade the other side to come to some kind of arrangement that would avoid litigation. So, the simple statement is it is a long process, and the short answer to this question is, no, you should not expect, litigation in 2024.

That's not, never say never, but you should not expect, litigation in 2024. It also goes without saying, given that Samsung is 90% or somewhere between 80% and 90% of the quantum dot TV market, and the other 10% to 20% is dominated by cadmium quantum dots that any claim against another infringing partner couldn't get close to matching the scale of the Samsung outcome in today's market size.

I would like to emphasize, though, that this is not the same as saying that we are doing nothing in 2024. We're not just sitting here waiting for the market to grow.

Litigation is an expensive last rule of the dice. And as we've said many times before, our primary goal as a commercial production company and, again, I said it a couple of times last week.

We're not an IP licensing company. Our primary goal is to generate value from development, production, and sale of nanomaterials, and we're actively leveraging our IP to that end today.

But equally, that is not the same. Again, just to remind focus saying that we're not doing anything with our IP.

If we can't get commercial production agreements, if we can't get development agreements, then with certain third parties, we would consider licensing, the IP, but clearly not to our competitors. Question number 5, which use case does Nanoco see as the one driving maximum adoption of its technology?

I think the simple answer to that is adoption of this technology in a mobile phone or multiple mobile phones would drive very high levels of adoption. The adoption in a phone could be on either or both of the face facing side of the phone and also the world facing side of the phone.

If it was on both sides of the phone, that would mean two devices in each phone, so a 100 million phones. If it was two devices, we'd give you 200 million units, not 100 million units.

The reason that a mobile phone stands out so strongly and as the single biggest driver for maximum adoption of the technology is that it's actually very hard to think of a company around the world that sells 100 million units of an individual item of one model of what they make. And mobile phones, as I say, are the thing that stand out.

Question number 6, why was the share buyback offered rather than a special dividend given to all shareholders from the Samsung proceeds? So, the board obviously have, excuse me, evaluated, tender, special dividend, and different options.

And the reason we came down on the tender, there's a number of reasons for that. Firstly, the tender treats everyone equally, and it also gives shareholders a choice.

Special dividend would treat everyone equally, but we give people no choice. We did consult with just under 40% of our total shareholders, and the vast majority, favored a tender, I'd say, in excess of 90%.

Again, the vote at the general meeting, with more than 93% of shareholders, voting in favor of the tender, again, supports the board's conclusion that the tender was the right way forward. Shareholders could have rejected that.

Coming back to the dividend point, forcing shareholders to take a dividend, as I said, while treating everybody equally, would mean some shareholders received a dividend they didn't want and might actually have to pay income tax on that rather than capital gains tax. And you can imagine, if we're actually giving 40% or get giving back the equivalent of, 10p a share or so in dividend.

If someone then has to pay 40% tax on that, they're losing a very significant portion of it. The board also felt that a special dividend would have a larger and longer term more detrimental impact on the share price and, hence, shareholder value for remaining shares and for, well, I guess, everyone would be participating.

And what I mean by that is a special dividend would likely have led to a penny for penny, reduction in share price. So potentially a net zero or worse for shareholders.

So, on balance, combining the freedom of choice, the premium to the market price, and the long-term impact, tipped the board to prefer a tender exercise. Last point on this, we did consider trying to give shareholders a choice, as we said we would try, but changes in HMRC rules mean that even if shareholders are given a choice of dividend or capital return inland revenue actually default to considering it income.

So, it would not be a real choice. You would end up with the distribution being treated as a taxable income event.

Moving to question 7. With the recent announcement of the Metalenz Samsung partnership and their PolarEye sensor targeted at face ID, Does Nanoco think that this technology will impact potential demand for QD based sensors and handset face ID, or, other technologies.

And simple answer to that is image sensors and cameras use lenses, and we see the technology as complementary. I'd also point out that STMicro themselves, who we've worked with for a number of years and continue to work in long-term development programs, actually announced their own collaboration with Metalenz back in 2021.

So, the two are obviously not mutually exclusive. And, frankly, the more devices that need high performance image centers sensors, the better the likelihood of a sustainable, ecosystem developing around this kind of technology.

Question number 8, the introduction of commercial supply is most welcome, but do you think, that the lack of detail on what is being used what it is being used in is harming confidence in the company prospects going forward? That’s a very good question.

However, I think it partly reflects our position in the supply chain, which may in itself be an issue for confidence. So, let me explain.

As I said earlier, we are a materials company. Our nanomaterials are used by semiconductor companies, and that's who we sell them to.

We don't sell our materials to film companies, to car companies, to white good companies, to building companies. We sell them to semiconductor companies.

If I take you back to 2018 when I joined Nanoco, we were in the highly unusual position that we were working directly with the end user OEM for a large-scale consumer electronics device, namely the US company. Can't emphasize enough.

That's highly unusual that a company right at the end of a supply chain actually has control and oversight of every step through the supply chain. It's not a normal situation.

We, at that time, working with the end customer, were also working closely with the direct customer for our material, i.e. the semiconductor company.

because of that, back in 2018, 2019 that we were aware of the proposed final product for the use of our materials. But again, just to emphasize, that is not a normal situation.

Whereas today, the supply chain is now organized in a more typical way. A reminder, our technology is a platform technology.

That means, instead of each material being applicable to only one application in one device for one customer, as was the original application with the US customer, it is applicable to a wide range of applications in a wide range of devices for a wide range of our customers' customers. And we have pointed out that our customers, directly or indirectly have over 200,000 customers each.

What all that means is, if a silicon wafer is being used to make sensors and includes Nanoco's materials, depending on the size of the dyes cut from the wafer, those sensors are equally applicable to a huge range of end users and customers without any further customization. To say the only thing that would change from a 300-millimeter wafer, for the end use would be the size of the dee that you cut out.

That's obviously linked to the size of the end device. A large device might use, physically large device can use a larger sensor, whereas a device without much real estate, a pair of glasses or whatever, would have to be a much smaller sensor.

The positive thing is that, we no longer have single end use customer concentration risk. Already said, ''Our direct customers, hundreds of thousands of customers, and simply by changing the size of the dye, they can be used in a phone, a watch, a house, a robot, an industrial control system, a wearable, a security camera.

In fact, anything at all that needs to see.'' The downside to that lack of concentration risk is that, we do not have visibility of the actual intended end use application, when our customer places production orders on us.

This is no different from when a semiconductor company orders unprocessed silicon wafers from a wafer company. They are not going to know the end application because the opportunities are so diverse.

But coming back to the positives of this situation for Nanoco, we do know that our customers, over 200,000 customers of their own. We know that, our other customer is working with the world's largest, sensing company.

We also know that; no large semiconductor company gets into a new product with the goal of selling a few million units a year. The economics just do not work.

If I give you a parallel example, it would be like using a $500 million oil rig to drill for $1 million of oil. You would just never do it.

We know that, our customer is targeting a wide range of different applications to generate those high volumes. They published papers to this effect and have mentioned a huge range of different devices and applications.

We also know that, we shipped our first commercial production orders in November '23. So, while I can understand people would like to know what is the name of the company that's using the end device and exactly what is the application, becomes a diverse uses for our product at this stage that we do not know the actual end device, but instead, we have a huge range of opportunities because of the platform nature of our technology.

Next question. In the analyst meeting, the CEO expressed some doubt that the product was presently on the market.

Will the components be in a product for sale to consumers or used in r and d programs for undisclosed OEMs? So, our customers already published papers freely available via, Internet and Google stating that engineering samples were available to product engineers back in the start of 2022 or even earlier, and I presume that's what's meant in the question by R&D programs.

So, the end users, OEMs, have had lots of time to explore the sensor functionality and possible use cases, and we have obviously been filling the need, material needs for those engineering samples throughout the development programs of the last two years to three years. The point about the product being for sale in the market when I made that comment, last week is simply this.

We fulfilled our commercial orders in November 2023. And depending on the processing time at our customers, module assembly time, integration time, and stock build, four months from our shipping date is highly unlikely to be enough time to get a product into the market.

Each individual product may literally undergo thousands of processing steps. There are a number of places you can find information on semiconductor and chip manufacturer and how long it takes.

A device fab can take one to one and a half days to put down a single layer on a wafer, and some wafers have 60 or more layers. And that's just the wafer point.

Regarding the consumer point, I think I've explained the same sensors with Nanoco materials can be used in all sorts of devices including consumer, industrial, healthcare, agriculture, security, surveillance, quality control, Internet of Things, smart buildings, etcetera, etcetera. Moving on to the next question, which I think has just been edited since it was, submitted, so I'm going to read this from the screen rather than where I printed it off.

Will smaller companies offering competing quantum dot sensors sorry? Quantum dot sensor IP, such as Quantum Science Limited and Curve negatively impact Nanoco's future market share?

Assuming they can move toward volume production, will the expiration of an important molecular seeding patent in 2025 allow them to produce materials without infringing? So, you can never be complacent, and I won't comment on the two specific companies mentioned.

However, I would point out that in a world of social media, it's very easy for private companies to appear more threatening than they are and to make claims about their technology. It's also, fortunately, in a number of territories, very, very simple to look at those company accounts that are freely available from various international company registrars to put any potential threat into context.

It's also relatively straightforward to identify if they actually have any IP of the room, and a consequence of that is it's also easy to find out if any of the unique or world first claims that they make are actually true. I made the point earlier that we were going to increase our, profile in the market on the basis of hard concrete significant, achievements, whether that was invalidating our IP, which was validated by the U.S.

Patent Office, and I should say, produced the largest ever payment for access to the IP of any QD company in the world. I'd also point out the ongoing strength of our balance sheet gives us a huge competitive edge when we're being looked at as a potential supplier.

So, I'd ask you the question. As someone who's investing 200 million, 300 million, 500 million in a plan to make this technology.

Are you going to invest in a company that spends and loses a couple of million quid a year, has no IP, has no production facility? So, the extended part of this question, assuming they can move towards volume production, the size of that assumption is off the scale, because they have no way to move to volume production, unless someone, is prepared to spend those sorts of money with them, which seems unlikely.

The data by the expiration of an important molecular seeding patent, I think we pointed out, and you can see it in the annual report, we had a significant number of patents both in the litigation and the last of those expires in 2028. So, 2025 on its own doesn't unlock anything.

And we also have a significant number of other patents with much longer lives that are also relevant to this. So, not going to be complacent.

We welcome the competition, but equally, we're not going to jump at shadows. So, moving on to the next question.

Could you give more color around when end users release products onto the market and on what stage they have to inform you? Is this when it is partial or complete worldwide?

Well, I'll break that down into, a number of different pieces, but the truth is an end user never has to tell Nanoco products in the market. There's no reason why they should, especially since they're often a number of steps away from us in the supply chain, with no direct contractual relationship with Nanoco.

Going back to my oil analogy, it would be like an oil company announcing that someone had just launched a new brand of soap using the oil that they've extracted from under the North Sea. If there is a direct relationship with the end customer, as we did have with the U.S.

customer in the past, then we would have more insight, and we'd have to weigh up public disclosure obligations with customer commercial confidentiality. I know everybody wants to know who's the customer, what's the device, etcetera, but I'm sure it's obvious that shareholders would rather that we have customers with confidentiality clauses than new confidentiality, closes, but no customers.

And that's the reality of the switching markets that we're working in. In terms of the timeline, refer back to the answer above.

So, meaning the length of the production process of the actual wafers, then the device integration, module testing, packaging, all that kind of stuff takes a very significant length of time. Obviously, a contrast to this is that in software industry, once a piece of software is ready to go, it can be launched immediately.

Once it's ready and immediately distributed. Nanoco is part of the hardware process, and that process is much longer.

Next question. Do you have more initiatives and work than you can deal with or spare capacity?

How do you rank your projects? So, again, I'll break this down into different parts.

Spare capacity for commercial production, i.e., can we do more production volume, in what we're already delivering? On staffing, yes, our current staff resourcing is more than adequate to produce volumes of material that would see us, profitable and cash generative.

Again, for the avoidance of doubt, what that means is, revenue of around excluding the license income, which is prepaid revenue of around, £8 million to £9 million or so. And so, our current capacity is more than enough to do that.

On the equipment side, as we've said before, we already have installed capacity to deliver up to £100 million of sensing revenue and £20 million to £30 million of display revenue. Next question or other subpart of that question, spare capacity for development or service revenue.

R&D services are limited to the number of staff, I guess, like any professional services company. Today, we have enough technical staff to deliver all of the projects in our pipeline and also enough to be able to self-fund some additional development work where we see opportunities.

For instance, our work on antimonide, we're self-funding that. In the short-term, as an attractive customer funded project came along, we could allocate those internally allocated staff to work on.

They're currently working on self-funded projects to do that fee earning project, and then we could backfill them with other staff. For the last four or five years, we've been closely managing our staff levels and bench strength, since I joined the company to balance our ability to take on more work against the cost of maintaining that resource.

The truth is today, with the retain from Samsung, it's a little bit easier to maintain that balance. In terms of ranking of projects, again, without dismissing the question, it is a fairly standard business school approach, I guess, to ranking up projects and it involves criteria such as customer viability and ability to pay end market size, the investment that we might have to make, competitive landscape, the technical feasibility.

Again, you'll see in our main presentation, that's one reason that we are not doing a lot of work on electroluminescence, i.e. the next fourth generation of display because, as a concept, that's been five years away probably for the last 10 to 15 years and it's very, very challenging.

In evaluating projects, we also look at operational feasibility, health and safety, environmental issues, risks and also, we look at what's the downside if we don't do this project? It's a fairly standard approach to evaluating projects.

Next question. Has the company scanned the market or done any tear downs of products to try and determine if Nanoco's materials are present in them?

As Brian Tenner stated, they would in the 2023 presentation. I'd refer you back to the slide deck that we issued at the time of the general meeting last August and also the preliminary results presentation that we gave in August last year.

Both presentations have got the results of market reviews for potential infringement and that work continues as new products come to market. I should say that, those two presentations focused very much around display, but we would take a similar approach if we sell QD sensing products in the market.

Question 13. Why were only large shareholders given an opinion on what form they wanted the return of cash to take where the company had previously stated they wanted all shareholders to have a choice between capital and dividend return?

I've already mentioned the changes in certainly UK tax legislation meant that, if a shareholder has a choice, then it's not a choice because it's automatically treated as income. As I said before, dividend would have treated all shareholders equally, but give no choice, whereas a tender also treats everyone equally, but actually gives a choice.

And, again, referencing back to 93% of votes cast at the recent general meeting the approved, the tender suggests that it was the overwhelmingly preferred choice even if, unfortunately, it wasn't necessarily everyone's, first choice. Question 14, what will the new directors bring to the company that existing directors did not?

Again, as we set out in last year's results statement and in the RNS' appointing doctor Jalal Bagherli and Dieter May to the board, both of them and I joined the board. The primary skills that we sought in looking for those nonexecutive directors was experience in commercializing new technology in semiconductor supply chains with a bias towards consumer electronics applications.

The existing directors, just to remind folk, already have significant experience of corporate governance, operations, specialty chemicals, early stage technology, corporate finance, and high-tech industries. Question 15, how will the increased publicity?

Brackets from Sky News appearances and newspaper articles, etcetera? Brackets help a company that makes a very niche product.

After all, it is unlikely that the people who see these videos articles will decide they want to buy some quantum dots off the back of them. So, yes, our products are very specialized as however, as I explained earlier, our products have the potential to be included in millions of devices every year.

If the question meant not targeted at a consumer audience, that might make more sense. Market presence and customer awareness of Nanoco is clearly important.

We have in the past received inquiries from potential customer's positive, publicity. And, again, as I've mentioned earlier, while we were struggling for financial survival and awaiting validation of our products and IP through commercialization, and also the U.S.

Patent Office, it seemed prudent to keep our powder dry and wait until we had something concrete, to speak about. Now that we do have major concrete achievements to speak about, we've consciously decided to increase our market presence in a relatively low-cost way to leverage our success and make clear that Nanoco is the real success story amongst all the independent quantum dot companies.

And the truth is, again, researchers, supply chain guys, procurement guys who go looking for quantum dots and sources of nanomaterials, that sort of, positive publicity, around Sky, newspaper articles, etcetera, etcetera. They're all good ways to make sure that we are channeling, that research and inquiries towards, Nanoco.

Liam, one for you.

Thanks. Given the threefold increase in OpEx monthly cash burn around $300,000 to $400,000 equivalent to $4 million plus per year, why has the monthly cash burn traveled and does this place at risk reaching cash breakeven during calendar year '25?

So, as we have stated, our net monthly cash burn has increased following our investments in our commercial and operational capabilities and we obviously aren't immune to inflationary increases either. And so, our average net monthly cash burn has increased whilst our income generating revenue is still at a similar level to prior years.

But just to clarify, whilst this may appear that the net cash cost base has trebled, if we had revenue of 8 million and our cash cost base increased from 8.1 million to 8.4 million you could argue that our net cash consumption quadrupled. We are starting from a low base, and it's probably worth stating the comparative prior period also includes the receipt of the R&D tax credit, which obviously we aren't entitled to in FY23 as we made a promise during that year.

Our current forecast to see us getting to cash flow breakeven during calendar year '25 are based on our current projected cost base, which includes a number of assumptions such as inflationary increases. The main risk included in those projections is the ramp up in revenue.

Back to you, Brian.

Next question. When is it expected that the first material commercial order will be signed this year by materiality, I'm assuming any long-term commercial deal which could ramp up in time to larger orders?

I'm slightly confused by that, because the second part of the sentence, materiality means any long-term commercial deal, which could ramp up in time to larger orders. We've already done that, and the orders that we shipped in November could ramp up in time to larger orders.

Long-term commercial deals, with respect to the ordering of materials, I think you'll find that those typically are not long-term. They're normally run on the basis of purchase orders with firm commitments and longer-term indications, which aren't actually contractually committed.

Anyone who worked during the financial crisis in manufacturing in 2009, '10 and we'll understand that. When will I take on the first part of the question, when is it expected the first material commercial order will be signed this year?

As I mentioned earlier, our customers said we should expect orders, but they haven't told us when. So, I can't answer that question, because we don't know.

Next question. Iris Scanning has been one of the applications listed for QD enhanced infrared sensors.

Does the board believe that safe, effective, and affordable iris scanning can be achieved for consumer devices using non-QD based sensors? So, the simple answer is that iris scanning already exists as a technology.

Those things you see on the movies where someone leans in against a scanner, that wraps around their eyes and it reads their iris, that already exists. The degree of safety, I don't know how safe it is.

I'd like to think, if it's been approved for sale, it's obviously safe. But the further you go out into the infrared; the more eye safety is increased.

So, because our products take sensors much further out into, the infrared, even if the sensors today are already eye safe, then the degree of safety, increases. Talks about affordable iris scanning.

Well, currently, and, again, this is truly available on Google. Currently, an iris scanner.

And I do just mean the chipboard and the scanner part. I don't mean the whole device.

Costs anywhere between a 150 quid, 400 quid, sorry, for people listening overseas. Whereas the target price for a QD enhanced CMOS sensor is maybe $10.

So, $10 rather than £400. So, yes, the technology exists.

Yes, you should never be complacent, but it seems that today, that technology is operating at shorter wavelengths if it's using silicon, because it can't do anything else, and then operate at a shorter wavelength. And equally, they seem to be prohibitively expensive for mass market adoption inside a mobile phone.

But that's not to say if those, couldn't be brought down to, $10 rather than £400, and if they couldn't have their wavelengths extended out 100 of nanometers into the infrared, but, they wouldn't be a competitive threat.

Next question. And so, these are live ones coming in today.

Are all directors currently meeting their obligations for direct equity shareholding? If not, why not?

And the director's obligations for, direct equity holding. Our policy is that, people have to build up over a period of time, to that.

You are not required to do it on day one. If you receive any shares from either bonus the fair bonuses or from long-term incentives, then long-term incentives, you actually have to keep it all, until you actually hit the required shareholding level and on deferred bonuses and then you have to keep 50% of it.

So, we are meeting our obligations. We haven't yet got to the targets post tender.

For those who are not participating in the tender, that will no doubt change. Obviously, again, that's partly dependent on the share price.

If the share price rises, then those direct equity shareholdings, may achieve the targets. Equally, if the share price falls, they may not.

All of our Board have invested significant amounts of personal money in buying shares. I think that policy is consistent with most other PLCs.

Next question. Why are you choosing such a low price for share buybacks and not a higher price for a smaller percentage?

I think many are unhappy with this. If I put the question, turning the question slightly on its head, if I went into the market say and bought shares for £1 today, would that be a good use of shareholder money?

Because the truth is the market is telling us, we can buy shares today at £0.20 or £0.21. I wouldn't buy any other asset for way over its market price.

I can understand the rationale behind the question, but equally, if somebody bought their shares, say, at £0.06 in 2019, they'll be laughing all the way to the bank if we went out and offered a higher price of a £1. Clearly, though, anyone who bought shares at £1.65 in 2013 or 2014 at £1 a share is still making a significant loss.

I think the only reference price you can actually logically use is the market price. As I say, the 20% premium to the market price is actually at the top end of the range.

We looked at a sample of 20 different companies, who've recently done buybacks. And some of those were at a discount to the market price, believe it or not, but the average was in the low-teens.

25% premium to the last trading day and 20% to the 60-day VWAP. It's actually quite a generous premium because, again, the market is telling us that, that's what the market, will accept as a price for those shares.

Next question. Can you please comment more on the 19 potential IP infringers?

How's that number have grown? Who at Nanoco is leading the effort to monetize value lost to IP infringers?

I mentioned earlier again about the size of the market. The value of that infringement market today is low.

We have a hybrid team of internal experts who obviously accumulated significant expertise through the Samsung litigation. External experts, both from the point of view of legal advisers and also strategic advice and commenting more on the 19 potential IP infringers, I mean, I could make general comments.

Some of those infringers may well be competitors. Anyone who understands these markets, would understand there is no point suing a chemical company, because their piece of the value chain is tiny.

If you were going to litigate, you would be litigating against the OEM. Those potential infringers include people throughout the supply chain.

The number of dollars change. It grows.

It can shrink if we can, do enough work on analyzing what it is they're actually doing. So, at this point, there isn't a whole lot to add around this.

And as I said, I think the key message I want people to understand is driving value from your IP. Our primary goal is around commercial orders or development contracts.

If we have, potential customers who don't want either of those that do want to license our IP, then we will discuss it with them. Starting to litigate is the last roll of the dice.

Equally, because we want to generate real value. Some IP licensing companies, I'll refer to them as shakedown merchants.

They basically turn up and say, look. It's going to cost you 2 million to litigate.

Give me 2 million. I'll go away.

That's not who we are, not what we're about. We want to generate meaningful value from our IP.

Next question, can the withholding tax on litigation award be recovered? And if so?

Yes. So, I'll take this one.

In short, yes. It will be recovered.

Withholding tax paid has been recognized as an asset and will be amortized at the same period over which the licensing comes recognized. So, this will have the impact of reducing the profits chargeable to corporation tax, which will ultimately either reduce the corporation tax payable or reduce the historic losses utilized to avoid a cash tax payable position.

Obviously, no go due to its historic status loss being an entity has significant historic losses, which can be used to offset paying cash tax charges in the future. Back to you, Brian.

So next question. What quality skill set do you think the incoming chair will need for this moment in time in Nanoco's progression?

And, well, there are a whole bunch of different dimensions to that, and our senior independent director will no doubt be consulting with various members of the board on what they see as what's needed at this point in time. Clearly, PLC, UK PLC experience, is going to be needed, because we are a, we have a premium listing on the main market of London Stock Exchange, so we need that.

Some familiarity with high-tech industries would be, very useful. I think the two new nonexecks we added cover off and commercializing IP in, I'm sorry, commercializing new technology in, semiconductor supply chains.

I think it needs to be an inclusive chair, a chair who obviously, as current chair, listens to all shareholders. So other than that, it's a watch this space for announcements on this process.

Next question. Nanoco is financially secure, has cash, good IP portfolio, and obviously good products.

If quantum dots become even more established on the market, Nanoco would be a good takeover target for many large players in the market, especially due to the current market cap. Why doesn't the Nanoco hold back more of the shares it receives through the tender offer as treasury to prevent a hostile takeover?

And interesting one, I think they normally in a tender, the expectation is that, shares will be canceled. We are holding some back because we do have obligations to all members of staff with regard to deferred bonus plans.

I think you can see across the UK stock market, small cap companies, are at risk of takeover. So, I think we've always said our goal, as a company is to obviously generate shareholder value.

And if someone comes along with really deep pockets who wants to pay that value, then that will be for shareholders to decide. I'm not certain that, I think legally as well, I'm not certain that shares that are held in treasury, can actually be voted.

We'd need to check on that. But if the shares held in treasury can't be voted, then it can't do anything to stop a hostile takeover other than, they would have to be, they would be included in the assets of the company that was being bought.

Keith oh, sorry. I shouldn't be saying people's names.

I'm sorry. Although I guess there's no harm in it.

Our names are known, so, people's still names aren't on here. And in your opinion, which semiconductor companies are leading the market in looking at potential applications for quantum dots and chip technology?

The answer is very, very clear. Sony, who are the biggest, sensor company in the world by some distance, are looking at, QDs as our STMicro are, a direct customer that we're working on those second-generation materials with.

Aside the answer to that's obvious, again, googling it on any number of market reports will tell you those are the two companies that are looking significantly at it. There might be other tiny semiconductor companies.

We know one company, tiny revenues that actually makes a very specialist type of camera, and we've dealt with them in the past. But other than that, so simple answer, if it's semiconductor companies, it's those two.

It's Sony and STMicro. This next one looks like a statement rather than a question.

The tender was my favorite choice, but the buyback price is what I take umbrage with. As I said, if we picked a significantly higher price, we'd still have generated losses for some people.

We'd have generated more gains for other. We might have tipped some people from, loss into profit.

But, equally, if you go back to the, if I was a shareholder who's not participating in the tender, I'd be asking management, why did you pay so much to buy shares that you could have bought in the market at 20p or 21p? Why did you pay 30p or 50p or whatever?

Next question. If a mobile device uses Nanoco's QDs, how much would the leap of technologies force other handsets to use the technology to prevent them losing market share?

Well, I think what you see is, most mobile phones actually copy each other and certainly depending on the identity of the person that goes first, if it's groundbreaking technology, you could expect then others to follow. I know that, one of our customers is represented in half the mobile phones in the world and with various devices, that are sold every year.

And that's 750 million phones out of the 1.5 billion a year mobile phone market. So, yes, the expectation is that whether it's a mobile device, a watch, a TV, smart building, whatever, if it's a technology breakthrough, you would expect other people to want to follow.

And that's where our production capability, which very few others have, protected by our IP means that the natural company, the natural supplier for anyone to come to, for that technology would be Nanoco and not one of those other small startups that people were talking about earlier who don't have any production capability. Next question.

Why do you think the current share price represents only cash and not IP, real estate equipment, et cetera, et cetera? So, I think our current market cap is probably £70 million, I want to say.

Our net cash, after a loan for debt, is £55 million or so. Around some -- people are saying the enterprise value of the business is £15 million.

There is value there. I think when we were down at £0.16, it might have been cash on it.

And so, there is some value there, but, clearly, not as much as we think there should be for IP. Real estate, we don't own any real estate.

We're in leasehold facilities. Equipment, again, focal know secondhand scientific equipment is relatively inexpensive.

I think what's more important actually is those, two very large customer relationships and contracts we have, but, of course, those are valuable if they turn into commercial orders. I think that, we validated our IP.

We have validated our products with commercial orders, but I guess the market's always asking, what are you going to do next? A ramp-up in demand, finding out what an end device is or an end application is, those are the kind of things that people are waiting to see.

But again, I think what the question draws out is, it's a stark contrast. In February 2020, just before we filed our lawsuit, we were valued at £65 million or so, on the market, £0.21 again.

We had new customers. We had new cash.

Our IP had not been validated. We had less equipment than we have now and we didn't have those two big anchor long-term agreements.

I guess that's the market for you that despite everything that's been achieved, the price is where it is. I go back to what I was saying earlier about UK small cap is a pretty torrid place to be on the market at the moment.

It's across all sectors. Next question.

With the current cash balances at envisage that any further litigation could be commenced without involvement of litigation financiers? Simple answer is, yes.

It could be. Clearly, involving third-parties and starting litigation, whether it's lawyers, et cetera, you have more option to generate skin in the game, i.e.

they work at a discount if the prize is bigger. It is possible that, if we wanted to start a litigation without large commercial prizes at the end for strategic or tactical reasons, you might have to pay full whack to lawyers.

Yes, some of the money could be used for that. However, I know some shareholders in the past have very strongly said, look, you can lose litigation, you can win low, you can win middle.

You can win high. It can go on for years years years.

Why would you tie up shareholder money in that, even if you then give away 40% of the proceeds? Again, as I said before, when you win litigation, litigation finance looks expensive.

When you lose, it's free. It's cheap as chips.

There is a choice. We have that option.

Like, Liam mentioned the quality of our balance sheet with respect to very large customers. Quality of our balance sheet is obviously a message to people that we're engaging with, ideally on production or supply agreements or licensing agreements.

If those are unproductive with potential for litigation. That appears to be, excuse me, the end of the questions.

Apologies that we've run over 15 minutes. I'll just hand you back to our operator for any last comments.

Thanks for that. Yes.

So just to remind people, in some ways, this coming year, you know, the next six-month, 12-month, business as usual, steady, growth on a on a firm foundation. It's something of a relief, I guess, for staff and should be for shareholders that we no longer have those big binary events.

So, what's going to happen to your IP, what's going to happen on the litigation? Are you going to get into production?

Now what we're looking at is adding more customers, adding more development contracts, receiving more, low volume production orders as our ramp up increases, being able to offer more services both to existing customers and new customers through our wafer device and completing that that re return of value. But as I say, what I think shareholders in Nanoco have today, which is a very, very rare bird, for a for a high-tech small cap company, fully funded with commercial traction.

Thanks very much.