Nanoco Group plc (GXG.DU) Earnings Call Transcript

Good day, and welcome to the Nanoco results webcast and conference call. At this time, I would like to turn the conference over to Brian Tenner, CEO. Please go ahead, sir.

Thanks, Holly. Good morning, everybody, and welcome to Nanoco's Interim Results Presentation for Financial Year 2021, so that's for the 6 months ending 31st of January 2021. My name is Brian Tenner, I'm the Chief Executive of Nanoco. I'm joined by Liam Gray, who is our U.K. Finance Director and also our Company Secretary. There will be a Q&A session at the end of this presentation. And I think everyone is aware how to submit those questions via the webcast. So now turning to the highlights of the period, and I'm looking at Page 3 in the slide deck now. First thing, I'm pleased to say that the important JDA that we were working on throughout the 6 months of the interim period, we delivered all the technical and commercial milestones in that JDA. We also are now engaged with multiple commercial negotiations, including regarding a possible extension for that JDA, but also with other customers across a range of new and existing materials. And that's very much in line with our strategy not to exclusively rely on one customer. Third highlight, operational highlights of the period in terms of our litigation against Samsung, pleased that a trial date has been set for October 2021. And just like to point out that that's around 18 months since we originally filed the suit. That's a good result because that we're aware of suits that have been going 3, 4 years and still don't have a trial date. So 18 months to a trial date, that's a good position for us to be in. And I'll say more about the litigation as we move on. And then finally, it was also noteworthy in the period that we won a significant grant from Innovate UK, the U.K.'s innovation agency. And that's looking at rapid diagnostic testing for pathogens. In the early days, there's a focus on COVID-19. But just to emphasize, it is transferable -- or what we're trying to build is transferable to other pathogens. Very quick overview of the highlights. And again, Liam will go into these in more detail through the slide deck. Because we delivered all of those milestones, commercial and technical milestones in that important JDA, we therefore earned all of the JDA income that was available to be earned in the period. We also carried out some small-scale restructuring during the period, building on restructuring that was carried out last year. And that has led to in-period savings of GBP 1.6 million compared to the same 6 months of last year. The benefit of those savings has largely indicated -- or largely mitigated the fall in revenue that we saw in the period, but not completely. And finally, on important cash, we've maintained our cash runway through to 2022, and we do have contingency plans in place if we're not successful in landing any of those active commercial negotiations that I've just mentioned. So turn over the page and go into a little bit more detail. So just looking at our capabilities and cost base following the restructuring. In any restructuring, you're always worried about cutting too close to the bone or taking muscle out of the organization. I can say where Nanoco is today, we've actually managed to maintain all of our core R&D capabilities, so whether that's for sensing, whether it's for display and also for the life sciences work. And again, it's encouraging that we have active paid-for work underway in all 3 of those aspects of the business. And a number of those opportunities that are currently generating revenue also have the potential to move through to a scale-up phase and then into commercial production in the medium term. Then look at our actual production revenue capacity. So if we do successfully take a development program through to production, you can see from the figures on there that we do have the capacity to generate significant levels of revenue if those plants are fully operated. And just to be clear, those are the sorts of revenue figures you would see if those facilities were running on a 24/7 shift pattern. If you look at the bottom left corner of that slide, what you'll see is the evolution of our cost base over the last 3 or 4 years. The figure on the right is an annualized number based on current run rate. It's not a forecast for this year, but it tells you where we are today in terms of our cost base. And you can see that basically in the last 2 years, our cost base has more than halved since 2019. And as a result of that, while still keeping the capabilities as described above in R&D and also in production, we now estimate that our break-even revenue figure is around GBP 6 million a year. And it is worth noting that certainly 1 year in the last 3 years, we've exceeded that level of revenue. So it's encouraging that we still got the same revenue-generating capacity, but the amount of revenue to get to a break-even position is now lower. And importantly, that then maintains our road map to financial self-sufficiency. If we then go over the page to Slide #5. This is just a graphic to emphasize and draw out the different sources of potential value that we have in Nanoco. In the past, I sometimes used the metaphor of baking a cake, and I'll use that again today. Our management team today is focused on baking an organic cake. And what I mean by organic cake is a cake that's built on our R&D capabilities, our scale-up capabilities, our production capabilities. In the short to medium term, we have very strong opportunities in sensing. And all of these opportunities for material sales are built around a very strong core IP portfolio. So we have sensing, where I've already talked about the work that's ongoing. In display, we also have work ongoing there and active customers there. And then hanging off of the side of display, there are some adjacent sectors. And again, I've drawn out life sciences here. One of the reasons that I emphasize life sciences, not just because of the grant, but because of our quantum dots are nontoxic. And they've had -- we've had toxicity work done on them in the past. They are fit for use in vivo or in living creatures. And then finally, coming out of display, we also have the opportunity for licensing of our technology. And the reason we've overlapped that into litigation is, clearly, if we're successful in our lawsuit against Samsung, Samsung will have to take out a license on our technology. And that then opens the door for other players around the world either having the opportunity or being obliged to take out licenses over Nanoco's technology. And then lastly -- and don't read much into the size of these circles, there's only so much space on a page. We very much treat the litigation against Samsung as the cherry on the cake, if I can go back to that metaphor. We would like it to be a big cherry. But as I say, our focus today is on baking that cake that's built on a bedrock of an organic business with an extensive IP portfolio. And as I say, if we can get that cherry on the cake, then that would be great. Then moving over the page to Slide 6 and 7 on -- just going to say a little bit more about the nature of the opportunity in our sensing business and then our display business. So when it comes to sensing, I think many listeners will be aware of the -- what's known as mega trends that people are seeing in a number of sectors. Whether that's electronics, personal electronics, automotive, Internet of Things, there was a huge increase in the second half of last year. And the growth in those sectors has actually accelerated into this year, so you're now seeing in some sectors actual shortages of components in supply chains. So that's a very attractive background. And many of those sectors, the growth in those sectors is actually then fueling a demand for more sensors. If you think of the Internet of Things and machine sight, devices need to be able to "see", which is why you're seeing a rapid growth in demand for sensors. And a key attribute then for Nanoco in all of that, so attractive markets, more demand for sensors, our product is actually a value-add component in the sensors. It's not targeted at a cost line. It's actually enhancing the experience, it's enhancing the capability. And it's a much stronger place to be when you're adding value to a component of the supply chain. So you then get into the question of, well, why quantum dots? And what does Nanoco bring to the party? Well, quantum dots, if you take a silicon sensor, they actually expand the detection range for a silicon sensor. Silicon sensors cannot see very far into the infrared. If you apply quantum dots to them, you can go up 900, 940, 1,400, 1,550, 1,800 nanometers. So you're actually allowing the device to see much further into the infrared. And that's useful because there are different applications that want to operate at different wavelengths. And the further out you go, you then start overcoming interference from things like sunlight. Those longer wavelengths actually allow the device to see further, so further away from where the sensor actually is. And those sorts of applications, you start to get into world-facing sensors or world-facing cameras rather than cameras that are facing you, the user, for example, if it was on a tablet or a laptop or on a mobile phone. And because Nanoco's quantum dots increase the efficiency of those sensors, they actually reduce the power needs of those sensors. So you're getting a plethora of benefits from the quantum dots. You're able to go further right into the infrared. You can see further. You can capture more data and doing all of that while reducing the power needs of the device, which in a mobile device is incredibly useful. And there are some statistics on there about what Nanoco's dots actually do. And besides that range extension, we estimate that the data efficiency capture or the efficiency of capturing data improves by around tenfold. And as I mentioned in my introductory comments, we are active with a number of customers on different materials at different wavelengths, but those customers are our major players in electronic supply chains. And therefore, those JDAs, if successful, can move through to the next stage of scale-up. And if that is successful and the customers or end customers adopt the technology in their final product, then we can get into commercial production. So it's an encouraging position for us to be in with regard to sensing. If I go over the page to Page 9, now we're looking at display opportunities. Truth is the display market for quantum dot TV is still very much dominated by Samsung. Samsung have, in our estimates, over 90% to the QD TV market. And that's any type of QD TV, whether it's cadmium-free or cadmium-based. However, you are starting to see a broader adoption for film-based systems. So that's generation 1 TVs. And while it's less than 10% of the market, it is starting to grow. And there are 3 or 4 other players coming in, in there. It's also well-publicized that the display and panel makers are looking at the second generation of displays, and whether that's a full-scale display for a TV or actually for a small wearable device, intelligent goggles for VR/AR, et cetera, et cetera, where you'd be potentially printing quantum dots directly on to a micro LED. So that's still a development stage, but it is moving in the market. So we are active with a number of customers, which again creates the potential for meaningful revenue, i.e., production-level revenue. It's slightly further out than on the sensing case. So as I said on sensing, it'll be at the short end of medium term. For display, it may be the middle or slightly longer than medium term, again depending on the success of those other companies capturing market share from Samsung. In terms of why quantum dots and why Nanoco's quantum dots, already highlighted that they're nontoxic, so they're cadmium-free. But fundamentally, they significantly enhance the viewing experience because of the quality of the display, whether it's the depth of color, the saturation of color or the color gamut that you're actually able to see. And importantly, because the quantum dots are being inserted as into a current LCD film stack, there isn't a lot of disruption required to the supply chain in order to penetrate that market. I've already mentioned Nanoco's differentiation and what our quantum dots can do. And you can see from the slide on the right that demand for quantum dot TV is still growing and growing significantly. So as other parties capture parts of the market and move into that, then the absolute number of units in a potentially addressable market for Nanoco dose increase. So that's it on display. If we then go over the page to Page 8, and here, just a couple of comments on some adjacent applications. And again, as I said earlier, these are adjacent to our display business. And the reason for that is they're built on cadmium-free quantum dots. Our nanomaterials for sensing are a completely different material set. So those cadmium-free quantum dots can be used, transferred with a very low cost to transfer into either life sciences or lighting, particularly for horticultural uses. I've already mentioned the Innovate grant that we've won in the U.K. In terms of progress on that, we've actually proved the concept. So we know that if you conjugate antibodies to a quantum dot and then expose it to COVID-19, you do get a reaction. What we're now looking at is the sensitivity and the detection levels of the quantum dots. Once we get that in line with health authority targets, then we can think about how we would look at putting that into a device. And ultimately, we will need to engage with supply chain partners who've got significant experience in the application of quantum dots, whether it's in devices or the whole distribution channel scenario. Just very quickly touching on lighting. We don't spend a lot of time on lighting or the horticultural side of lighting. But we do have 1 or 2 live opportunities, not just for vertical farming, which is what we've talked about in the past, where you have a fully enclosed growing environment with no natural light. You can actually enhance a "normal" greenhouse, you are relying on natural sunlight and you can actually apply either curtains or veils or possibly even apply a film to the actual structure itself, whether it's on the glass structure or the polycarbonate, whatever is encasing the greenhouse. So those, as I say, we don't spend a lot of time and effort on it, but they are -- it's still there as an opportunity, and there's still some live interest in it. If we then go over to Page 9, and I'll spend a few minutes on this slide because I know this slide and the next slide, I know there's a lot of interest in our lawsuit with Samsung. The American IP legal system is not fully transparent to anyone who's not involved in it on a regular basis, so I will spend a little bit of time here. What you have in the 2 sort of mauve-colored arrows is 2 parallel processes. I say parallel, but they're not fully independent. They can interact with each other. The simple example of that would be that it is up to a court and a judge in a particular district. If it wants to, it can pause the trial process while the patent office process is continuing. Not all judges do that, not all districts do that, not all states do that, but they can do that if they want to. Some listeners will be aware that Samsung actually asked the judge in Texas to delay the trial process for the patent process to run its course, and the judge declined. However, he did say that they could come back if the patent process actually started. So there's still capability for those 2 to interact, but they don't have to interact. So looking at the trial process and just drawing out some key dates. On Friday just past, we had a Markman hearing. It's also -- or that's what it's known as. It's actually a claim construction hearing. And what that is, is the judge is asked to give an opinion on the definition of 5 words or phrases. And for us, it was just 5 words or phrases. Those are important because if a term is interpreted in one way, it could make it difficult for one side to make their case. Equally, one side may be indifferent to the definition given because they can actually defend or prosecute their case on either definition, whether it's our definition or Samsung's definition. So we are quite happy with the early indications coming out of that Markman, and we expect a formal written report sometime in the next 2 months. It could be sooner than that, but we're indicating that we're expecting it at least by May. And as I said, we're happy with the early indications coming out of the hearing itself. Between now and October, the formal discovery process has to be completed. Experts on both sides finalize their reports and then they exchange them. And there are some other process matters of less importance. But they do have to be formally gone through between now and September. We then have the trial in October. To emphasize, we're pleased that it's only 18 months from the day we filed. Into the trial, it will last 1 week. It is not a 3-, 4-month thing that goes on forever because it's so technical. The jury at the end of that week will give a verdict on whether or not they believe Samsung has infringed Nanoco's IP. And there will be a damages number announced that week. That damages number only relates though to historical damages, so for TV sets they sold up to the date of the trial. It doesn't cover the future. So it doesn't necessarily deal with the royalty. And equally, it also just focuses on the United States. The trial verdict can be appealed. No, it can't be appealed until the judge has issued their formal opinion. In some cases, formal opinions have taken 10, 12 months to be written and published. In other cases, it can be done in a couple of months. It really depends how complex it is and how busy the judge is with his workload. But once the judge has issued their opinion, if Samsung lose, they can appeal. If Nanoco lose, we can appeal. And those appeals processes can add anywhere up to, on average, around 2 years to the process. It's also possible that in that formal opinion that the judge will decide on a future royalty rate, so you would have covered historical TVs and future TVs. So that's it on the trial process. So then looking at the patent office process. In February, Samsung requested inter partes reviews, IPRs they're called, of all 5 Nanoco's patents in this suit. The official deadline for PTAB or the appeal board to decide whether or not they're going to allow the challenges is in May 21. It's possible that PTAB will allow all 5 challenges to go ahead. It's possible that they will reject all 5 or somewhere in between. The important point there is any that are rejected, the rejection decision cannot be appealed. And therefore, that would be one less thing that Nanoco need to worry about in the litigation. Because as we said elsewhere, we need to win both in the patent process and in the trial. Well, if one IPR or one patent has already been excluded from the patent process, then effectively it's won the away league -- or the away fixture, if you want to use a football analogy. PTAB is scheduled or supposed to take less than 12 months. But you can see that any IPRs that are instituted, if it takes 12 months, that will actually go past the trial. So you could have a trial verdict in which you're successful but then get a PTAB result that is unsuccessful, which would then undo the trial verdict. And again, once the PTAB decision has been announced, that can be appealed. So apologies if that went on for a little while. But I thought it was important to draw out the nature of those 2 parallel processes, what's in them and how they interact. So if we go over the page to Page 10, I think a number of these points I've already made, so I won't repeat everything. It is also worth noting, when you claim under a patent, you then -- each patent has got a certain number of claims in it, i.e., things that you think are unique. It's possible for a patent to have one claim. It's possible for a patent to have 30 claims. So again, if you lose at PTAB on a patent, you actually need to dig deeper to find out, well, is it a claim with -- is it a patent with lots of claims? Or is it a patent with the only one claim? Because again, it's claims that you're in court, not patents, you're in court on a claim. Again, people ask about the quantum of the lawsuit. We just gave some indicative values around the market that's been created. We estimate that by the end of this year, Samsung will have sold 14 million TVs in the United States. United States is around 1/3 of global sales. We believe that those sales have been facilitated by our technology and that, therefore, we should be entitled to a share of the value that has been created by that new market using quantum dots in TVs. That's not the only way to evaluate a patent case. There are other ways. But that's the one that we think most closely fits the bill of the fact pattern here. I already mentioned the judge may award a future royalty stream. If the judge doesn't, you actually then need a second lawsuit to ask for future royalties potentially. And the last point about an award, and again using the word what we had described as any reasonable outcome, we will retain the majority of that award, with the balance going to advisers and the funder. And as the award gets bigger, our relative share, i.e., the percentage we keep and therefore, obviously, the absolute number as well increases as the award gets bigger. So just to reiterate, there's a trial scheduled for October 21. But with the option for appeals and the potential for a PTAB or patent office process going on past that date, October 21 is unlikely to be the end of the process. Again, people have asked who can make decisions whether to accept a settlement if one was offered, that is very much in Nanoco's hands. Nanoco retains decision-making authority on the prosecution of the suit. And to summarize, we're pleased with where we are. We're pleased with the speed of the process so far. 18 months to trial is a good outcome. We're pleased with the initial indications from Markman. And we look forward to the next 2 or 3 months and seeing what comes out of the final Markman opinion and also a decision from PTAB on whether or not to institute those IPRs. So at the end of all this, what we're targeting is a successful outcome that we believe is potentially transformative for shareholder value. And I'll now hand you over to Liam, who's going to take you through the financial review for the 6 months.

Thank you, Brian, and good morning, everyone. Moving on to the first slide, which are our financial highlights, Slide 12. Our adjusted LBITDA increased by 36% despite a 66% fall in revenue and loss in operating income. In absolute terms, this is a GBP 1.8 million fall in revenue contributing to a GBP 0.4 million increase in the adjusted LBITDA. This reflects the cost cut we've made over the past couple of years. If we look at our cost base, a significant portion of the savings, which have been realized in relation to our headcount, which is reduced from around 95 full-time equivalents in 2018 to our current team, which is around 40 FTEs. That reduction includes a small number of redundancies in the current financial year. Although the team is much reduced, we do retain all our expertise and capabilities in R&D, scale-up and production with an ongoing operational cash burn rate of around GBP 0.4 million per month. If we move on to cash, at the period end, we had GBP 2.9 million. We've maintained our cash runway to 2022 with contingency plans in place if none of the commercial discussions come to fruition for any of the new commercial wins will provide further upside to our operational cash runway. If we move on to the next slide, so this here is our summary income statement. As mentioned previously, revenue and other operating income in comparison to the same period in the prior year has fallen by GBP 1.8 million. In the current year, we have the benefits of the revenue and from the JDA, which completed in December '20, whereas in the prior year, has a benefit of the completion of the contract with the U.S. customer. The GBP 1.5 million reduction in operating costs reflects the work completed on reducing our cost base, including reducing our headcount and closely monitoring any ad hoc spend. And to move a bit further down the table, depreciation in both years is now under IFRS 16. And so it includes depreciation of right-of-use assets, which is our operating leases for both Manchester sites and Runcorn. If we move on to the next slide, our revenue and billing slide, Slide 14. These charts show our revenue and billings in the current period and prior period. So that's our fire alarm test going off. So as you can see on this slide, revenue and billings in both periods are largely driven by our sensing customers for the period ending 31st January '21, related mainly to the completion of the aforementioned JDA. Display continues to provide some value but on a smaller scale. And what as you might know from these graphs is that there's a bit of a disparity in both periods between revenue and billings. And that's the result of us invoicing customers in advance in both periods. If we move on to the next slide, which is our movement in net loss, Slide 15. So this chart bridges the movement in net loss between the current period and the same period in the prior year. There's not a huge amount going on here. You can see the majority of the movement is a result of our fall in revenue. And this has been largely offset by the reduction in our R&D costs and administrative costs. Just to emphasize a point, cash burn rate is now GBP 0.4 million before revenue and any tax R&D credits, which is a 45% reduction on the prior year period. So moving on to the next slide, movements in cash. So here, we show on how we bridge our year-end closing position of GBP 5.2 million to the period-end balance of GBP 2.9 million, which is a net outflow of GBP 2.3 million. Our adjusted LBITDA accounted for GBP 1.5 million of this. And we then had some adverse working capital movements with large reduction in creditors and a fall in deferred income as a result of invoicing customers in advance, as mentioned previously. This amounted to a cash outflow of GBP 1.1 million. It's important to note that we don't anticipate this adverse wind capital outflow recurring to the same extent in H2. As shown from the graph, we continue to invest in our IP portfolio with GBP 0.2 million of CapEx. And we received our R&D tax credits of GBP 0.9 million in January '21. So just move on the financial summary slide, Slide 17. The guidance, we have contracted orders for H2 amounting to around GBP 0.4 million. In addition, we do have a number of commercial contracts in active negotiation, which will deliver additional revenues for H2 if they came to fruition. And just to clarify, these are both in sensing and display markets. In regards to capabilities, we've retained our expertise in R&D scaleup and production with a particular emphasis on cross-training our staff to allow smaller teams to serve different customers and applications. We retain both production sites, although the display facility is currently mothballed to reduce costs. As mentioned in the slide deck, this can be restarted relatively quickly. And cash at the period end is GBP 2.9 million with monthly cash burn rate of GBP 0.4 million before revenue and R&D tax credits. Any commercial negotiations, which are subsequently signed, will improve this position. But we do have contingency plans in place to preserve our cash runway to 2022 in the event of no further commercial contracts. And now I'll pass it back to Brian to provide a summary.

Thanks, Liam. So just turning to Slide 19 in the deck, just to summarize the performance in the 6-month period and where we see things today. So the opportunity for us is that we are actively participating in markets that have got very strong macro growth drivers, whether that's in sensing, Internet of Things, automotive, electronics or in displays. And obviously, you see both of those coming together if you're talking about some wearable devices, augmented reality, things where glasses or a visor, where you actually have a display and you've got multiple sensors in that. So that's an interesting combination of those 2 technologies. Again, the opportunity, which we've managed to retain despite having to make significant reductions in our headcount and our cost base, is that we retain our core R&D skills. We retain our scale-up skills. So the ability to move material from manufactured at a lab scale up to production. And we still retain our 2 production facilities in Runcorn for sensing materials and also for display materials. And as I've mentioned a couple of times, we are currently engaged, in some cases in advanced negotiations, on commercial opportunities in both sensing and in display. Liam has talked at some length about the reductions in our cost base, which has been significantly reduced and it's still being very carefully managed with our monthly cash cost now stabilized at around GBP 400,000 per month. That allows us to have our cash runway continuing until the second half of 2022, which is what we talked about at the time of our equity fund raise last summer. So then in terms of the value and the value opportunity, pulling all that together, as I said in my opening comments, our objective, the team today is focused on generating significant value from our organic business. So whether that's from sensing, whether that's from display and then those smaller adjacent areas that I mentioned. It's also worth noting that the opportunities and the partners that we're currently working with in sensing and display are of a sufficient size and scale that if they successfully move through the phases of product development, so from R&D into scale-up and production, they are all of a size that can get us to our medium-term goal of being self-financing as a minimum and then significantly growing from that to actually generate significant returns for shareholders. And then as I've spent a little bit of time on as well, we also have the potentially transformative value in the Samsung litigation, which, as I said, if it runs its full course, could have a couple of years to go. The outcomes can be by no means certain. There will be twists and turns in the road. We may have good news on some Markman items. We may have less good news on others. It may impact our patents and claims differently, et cetera. But as I say, the potentially transformative value in that Samsung litigation being the cherry on that what we hope is a very large organic cake of our sensing and display businesses. And that's it for the summary. We'll be moving on to questions and answers. I think it's over to Holly.

[Operator Instructions] There are no telephone questions. So I'd like to hand the call back to Brian Tenner for any web questions.

Okay. Thanks again, Holly. So we have four questions on the screen in front of us. I will quickly read them out and then give you an answer. So question one was with regard to sensing material and commercial production thereof, if works based on our business plan, what sales -- if it works, what sales can we expect from 2023 from this product alone? So I think I've already mentioned that the opportunities we're working on are more than big enough to get us comfortably past a break-even point in the medium term. Unfortunately, we do not have a huge amount of visibility on actual volumes. Because it is worth noting, where we sit in the supply chain, we do not know the end user for our products. We don't actually or can't actually be certain of the end application for our products. Because the quantum dots can work in so many different sensors that can go into many different applications, we can't tell if that will be a mid-volume application or a really high-volume application. And we won't know for certain until we actually get purchase orders or demand signals from our customers. What we do know is that our customers participate in the semiconductor supply chain and our customers have got multiple customers of their own. So they may be aiming to make this part of a broad catalog launch or they could be targeting one customer of their own. I think the thing to bear in mind is on those markets that we're talking about, electronics, Internet of Things, automotive, et cetera, there are very, very high volumes of devices and sensors. So it should be encouraging and people can take that as evidence that if we manage to get our quantum dots into a final commercialized product, that the volumes will be relatively significant. But as I say, at this stage, we have very limited visibility on production schedules, if at all, or production volumes. So that's, that question. Then the next question has got two embedded in it. So one is please provide some more color on how sensing materials can be used in Internet of Things applications. And then also, are the display projects for Gen 1 or Gen 2 displays, do they need to be put into a resin or some other format? Sensors, Internet of Things, basically a device's ability or requirement to be able to see something else, so that could be a stationary device in a factory that is measuring, let's say, products going past it. It could be a mobile device that's moving around and it needs to avoid other objects or it needs to be able to interact with other things or even just recognize other things. 3D sensing can actually be used to recognize a product in amongst other products, so you could use it in a picking tool. So there's -- effectively, if you think of where you can use your eyes as a person, in theory, you could use a sensor attached to a machine that you're asking to do the same job. So there's a huge number of possible applications. And one's actively being talked about in market reports are about augmented reality, wearables, whether it's a headset or a visor, et cetera. The display question is a good question. The point about our quantum dots is they then do have to go into a system. So if it was for Generation 1, quantum dots have to go into a resin system. The resin system, if you like, is the jam that's spread between a sandwich. And that sandwich layer is typically 2 layers of barrier film. That then sandwich film goes into the stack sitting in the LCD TV. If it was Generation 2, the quantum dots, instead of going into a resin, they actually have to be formulated to go into an ink. Because the preferred application method for the quantum dot is to inkjet print them onto the micro LEDs. So again, the quantum dots are just one part of the process. We could have the best-performing quantum dots in the world. But if you can't get them to work in an ink or the ink producer can't get them to work in a printer, then it will stymie the commercialization of that product. So both of those do depend on what happens next in the supply chain. Say, for Generation 1 film, there are already a number of companies who are able to put quantum dots into resin, into films and then incorporate it into devices. And we know a number of companies, because we're working with them, are looking at how to incorporate quantum dots into inks for inkjet printing for micro LEDs. Question three is about one of our competitors, Nanosys. Nanosys appear to be doing very well in display across many customers. Do you believe your materials can compete effectively against those of Nanosys, allowing you to pick up business in the medium term? So Nanosys have done well. Their portfolio was obviously built on cadmium-containing dots. Nanosys now say they have some cadmium-free material. We don't think that we've actually seen it in commercial products yet, so we think the vast majority of their commercial revenues are still coming from cadmium. For a number of years, our focus was getting our cadmium-free quantum dots up to the same performance levels as cadmium. We have achieved that across a number of the performance parameters of the quantum dot. So simple answer is yes, we think we can compete. If I add to that, the European Commission has now received a RoHS recommendation. It hasn't yet adopted it. But the panel, if you like, has concluded that cadmium should be banned from films and TVs. That will help the, if you like, market conditions and background for Nanoco's cadmium-free quantum dots. So while as already said earlier the number of TVs being sold that are not made by Samsung might only be 7% or 8%, to the extent that those contain cadmium in any of the European nations, those sales will have to stop. And those companies, if they're making those displays for sale in Europe, will need to use cadmium-free quantum dots or get the amount of cadmium down to a sufficiently low level that it doesn't break RoHS. But we think the much easier route is to go for cadmium-free quantum dots. It's also obviously environmentally much more friendly. So that, if you like, is creating a fertile ground for us. But I can't say that the seeds or the crops are growing yet. But certainly, we think our cadmium-free quantum dots can compete with Nanosys. The next question is are you able to say whether other players besides Samsung may have infringed your IP within display and whether you would take steps against such players, should you win the Samsung case? So the simple answer is that we believe anyone who's making cadmium-free quantum dots at larger than university lab scale is using a seeding method. And if they're using a seeding method, then they're actually using Nanoco's IP. So that probably sounds bold to say we believe anybody who's making quantum dots could be in breach of our IP. But that's the position that we're in. Now obviously, Samsung, with 90 -- over 90% of the TV market is the biggest infringer because it's actually selling the final product. And it's normal that you would pursue the person at that end of the supply chain. By implication though, it does mean that if Samsung are infringing our IP, anyone in their supply chain producing cadmium-free quantum dots who doesn't have a Nanoco license over that IP is also in breach. Some people in the supply chain may be worth pursuing. Some people may not. It really depends on their size and their ability to pay meaningful damages. So the simple answer is yes, we believe that anyone who's making cadmium-free quantum dots in any sort of volume is in breach of our IP. Clearly, if we're successful with Samsung, we'll obviously have the financial wherewithal to be able to pursue those other infringers or we could use a similar model to the one we're using with Samsung, where we've got third-party funding for the lawsuit. And our legal advisers also have some skin in the game in terms of discounted fees, et cetera. So -- and yes, we have said, once the Samsung case is out of the way, we will then review and pursue anyone else who we believe is infringing our IP that we spent too many years and a lot of money building up. The next question, can you speak directly to the STM relationship and how work with them is progressing? We will always respect the confidentiality of our customers. And if any of our customers ask not to be named, and people will be aware that for the last 2 or 3 years, when we were working with the U.S. customer, they asked not to be named, so on this call, we're not naming any of the customers that we are working with, except to say that our customers are participants in the semiconductor supply chain. And there are a limited number of players in those supply chains. Actually, Samsung is 1 of the 5 biggest semiconductor companies in the world. But yes, so we won't comment on specific customers. But we can say that the work that we're doing is with large customers with potentially attractive opportunities downstream. Next question is could Merck still be a potential business partner? People again are aware that the formal collaboration with Merck ended in June 2020. We have had on-and-off conversations with them. So to the extent that they want to incorporate cadmium-free quantum dots into inks and Merck certainly have made their own announcements talking about their interest in these areas, so yes, there is the potential. But at the moment, there is nothing active with that since the license agreement ended in June 2020. That is currently all of the questions that we've got via the web. And two of those came while I was speaking. So we can give it a few moments, see if anything else comes in on the web. I'll give it another 5, 10 seconds. So that appears to be it. So I'll now say thank you for listening. Thank you for your questions. I hope people can see that in the level of disclosures that we've made, both in the Monday morning announcement on the Markman hearing, on today's interim results and in today's shareholder presentation, that we're trying to be as fulsome so that people can understand what our relatively complex issues and matters. But as I say, for us, the significant opportunity remains to bake that organic cake built certainly, firstly, around our sensing business because that's where the biggest and largest and shortest-term opportunities are at the near end of the medium term. But also, we still have the display opportunities and with the Samsung litigation hopefully being that large cherry on the cake. Thank you very much.

Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.