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Versarien PLC (VRSRF) CEO Neill Ricketts on Q4 2021 Results - Earnings Call Transcript

May 14, 2022

Versarien PLC (OTCPK:VRSRF) Q4 2021 Earnings Conference Call May 13, 2022 8:00 PM ET

Company Participants

Neill Ricketts – Chief Executive Officer

Stephen Hodge – Chief Technology Officer

Christopher Leigh – Chief Finance Officer

Conference Call Participants

Operator

Good afternoon, ladies and gentlemen, and welcome to the Versarien PLC Interim Results, Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and could be submitted at any time via the QA tab, which is situated on the right-hand corner of your screen, please simply type in your questions and press "Send ". The company may not be in a position to answer every question it receives during the meeting itself. The Company will review all of the questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet Company dashboard, and we will notify you by email when these are ready for your review. Before we begin, I would like to submit the following call and if you could give that your kind attention, I'm sure the company would be most grateful. I'd now like to hand you over to the CEO, Neill Ricketts. Good afternoon, sir.

Neill Ricketts

Good afternoon, everybody. Thanks very much, Jake. I appreciate the introduction there. We're here today to talk about the 12-month interim period, which we announced yesterday. I'm joined here today by Steve -- Dr Steve Hodge, who is our CTO, and Chris Leigh, who is our CFO. My background, I'm a graduate engineer -- mechanical engineer, I've got 20 years’ experience in manufacturing and engineering companies. And as I said, I'm joined here today by Steve. Do you want to give a quick introduction, Steve?

Stephen Hodge

Yeah. Hi, all. Great pleasure to be here. So I have been with Versarien now for about four years. I'll give a bit of a talk later on about some of the activities we've recently been putting out in the press in terms of textiles. So, yeah, thank you.

Neill Ricketts

And our last member of the team is Chris. Chris can you do a bit of a quick introduction.

Christopher Leigh

Sure. Good afternoon to everybody. Pleasure to be here and talk to you again. I'm Chris Leigh, I'm the Chief Financial Officer, and I’m [Indiscernible]. I joined Versarien back in 2013, just after it did IPOed. And I've been a CFO with finance director for industry companies for some 30 years.

Neill Ricketts

Thank you very much. Firstly, I know we've got a lot of investors who have invested in Versarien but we've also got some E-people on the line as well. So the first question we should ask is, what does Versarien do and what it is involved in. Well, we're a material company and we're exploiting a number of technologies at which the one that we're going to talk most about today is Graphene. Graphene was oscillated in 2004, it's been talked about since the early 1920s, and it is a miracle material that what -- has some unique properties. What we know is when we put it into other materials, it fundamentally alters their mechanical properties. It's a very strong material. It's a very dense material in terms of its structure.

It's incredibly thin in its purest form. It's one layer of carbon atom's thick. So we're talking about Quantum Science here. It has the ability to be able to transform things like electronics in the electronics industry, as well as being extremely thermally conducted as well. With all of those properties, we're able to use Graphene in a variety of different ways to be able to improve some of the materials that we use on a day-to-day basis. So Graphene itself is the first of many new materials that came about as the discovery in the University of Massachusetts in 2014.

We've been involved in the graphene industry since 2014 when we bought a spin-off from the University of Manchester. And then as Steve said, he came along with an acquisition in 2017 from the University of Cambridge. So in terms of connections, we have a unique relationship between the University of Manchester and the University of Cambridge, and a number of other great universities within the UK. But having everything together is the cement from the UK government, who have made all of this possible. The University of Manchester has about a billion [Indiscernible] with the facilities out there. The National Institutes, National Graphene Institute, the Graphene Engineering Innovation Center, the ROTCE facility. So they're well-placed and have all of the facilities to help us exploit this graphene material.

In terms of ourselves, we have over a 120 patterns there in this graphene space, the largest UK portfolio. And we've also recently moved into a dedicated facility in Longhope in Gloucestershire, where we've now got the largest production [Indiscernible]. In order to really make that happen, we also have a -- have to have a very great team as well as the team we have on the call today. We have a great senior management team, and Diane Savory is our Chair and she is on the line listening in. Hopefully, we have her take part in the next presentation as well.

All of that's okay, but you also need to be able to stick to the regulation and the regulation that controls all of this, both in the UK and in Europe, as well as other areas, is ceasing legislation called reach. And at the moment we're accredited to use up to 10 tons, and the plan is to get to 100 tons. There are only a handful of companies that are involved by level, and it's a differentiator, as well as [Indiscernible] founders. And then currently being finalized.

In terms of where we are, we have a global footprint now. Main facilities are here in the UK. We have three factories, Longhope, as I mentioned before, which is our graphene facility. We also have a facility in Vista [Indiscernible], which is several [Indiscernible], which makes seem to hardware products. But also, we have a kind of prospects polymer business in Bhambri, that's in AAC Cyroma. We have a number of Navarro trees in the UK as well. So as having or building our running facility in Longhope, we also have facilities that [Indiscernible] University of Cambridge and University of [Indiscernible]. We are the only company that has been able to pass in, be sent [Indiscernible] graphene producer by the graphene counselor. And this is a great thing for us to be able to -- for our customers to buy -- actually being able to invalidate and verify the processes by which to make graphene properties. [Indiscernible] last [Indiscernible] portfolio for manufacturing graphene.

The one end of the scale is the CVD, as single layer materials, on the other end of the spectrum of the industrial processes that we brought in Spain [Indiscernible]. It's our intention to launch at least 12 products over the next year. Those have all been born through the reset and then during the pandemic. [Indiscernible] more about that later on. Chris, just to hand over to you now, to talk about our financial highlights, which is the main part of this presentation.

Christopher Leigh

Thank you very much. Neill, for that vocal introduction. And as I'm sure you're aware, we realized our interim results yesterday, they are for 12-month period ended 31st of March 2022. For those of you who may not be aware, we extended our accounting [Indiscernible] to the 30 of September, so this is -- these results are for 12 months as opposed to 18, which is why they're referred to as interim results. Group revenues from continuing operations in that 12-month period were up 34% to £7.6 million from £5.7 million the year before. And we refer to continuing operations here because some of you, I'm sure, will recall that we closed our Aluminum business in Cheltenham, and moved the graphene production, which is also co-located there to a new dedicated graphene production site in Longhope.

So where we're referring to continuing operations, it's the results of the operations going forward, which are the technology operations, principally graphene and those of the mature businesses. [Indiscernible] revenue, the graphene revenues were up a 170% to £1.9 million, compared to £0.70 million in the previous year. And the adjusted loss before interest tax depreciation and amortization for those continuing operations reduced by 45% to £1 million, compared to £1.9 in the previous year. Some of you might wonder why we refer to LBITDA, we use that as our [Indiscernible] financial indicator that's our operating loss, and our reported loss was £5.1 million.

The difference between those two figures is simply some finance charges, which were £0.4 million in the period. And then we have a bunch of non-cash movements, which include depreciation and amortization, which was £1.4 million in the period. Share-based payment charge, £1.2 million. And every reporting period we have to revalue the Lanstead instruments, the sharing agreements, and that was a loss of £1.1 million in the period. So [Indiscernible] total reported loss is £5.1 million profit losses of $5.1 million in the actual invert e-commerce cash strike operating loss for peer, which was £1 million. The cash at the end of the period was £3.1 million, and -- compared to £2.4 million in the previous period. If you can just flip onto the next slide for me please, Neill. If we look at the total revenue increase for the year, £1.9 million, £0.7 million of that comes from recovery in the two mature businesses, which are [Indiscernible] and [Indiscernible], and £1.2 million increase in revenues comes from the graphene businesses. Now the total graphene revenues were £1.9 million in the period, of which £1.5 million related to the DSTL contracts, which is announced a couple of years ago, for development of specific products, and £1.4 million refer to product revenues. A substantial of that was to do with the DSTL contract.

If we look at some -- at all this means in terms of cash flow and balance sheet. If you look at the historic figures for the year, workout the average net monthly burn rate, it comes to about £0.4 million. Unless the operating losses or cash used in operations, plus the amount we spent on acquiring pumped machinery, plus the amount that we spent on development costs, plus the amount we spend on paying of various leasing's and the rentals. So the average of that comes to £0.4 million. The end of the period, we had cash stroke headroom on our facilities at £4.2 million. Now, £3.1 million of that was cash. £0.4 million was headroom on the invoice financed facilities, which we have traditionally used from that working capital requirements and £0.6 million was the remaining amount that can be drawn out of the Innovate UK loan facility. On top of that, there's a few more proceeds to come from Lanstead. This is my recall, there were two instruments here.

The first of those instruments ends this month and the second one closes out in July and then that will see the end of the proceeds from those particular instruments. And we've expended 1.4 million in the period on Skylark and part of that is on our dormitory to be moved to the new factory in Longhope. We'll now spent money in creating significant capacity going forward. And for those who may not know the Innovate UK loan of £5 million doesn't start to become repayable until 2024. So we're still coming use way that repayment sales. So this period next two years is going to be very much about commercializing, monetizing everything that we've developed using that Innovate UK loan money. And in terms of highlights, I'll just concentrate on one particular highlight here, which was at the beginning of the year, back in April, where we took in a strategic investment from a company in South Korea called Graphene Lab Limited. In as well as getting that, we have brought in trademark agreements in place with them. And this is a model, which I think is something that we will very much look at going forward. Finding right partners to take us into next stages of our commercialization and getting right model for that is a very good way of us funding ourselves. And I think the VKL at GrapheneLab investment was a very good example of that that shows how we can work together with other organizations to actually move the business forward.

Neill Ricketts

Okay. Back to me. We -- during this period as well, we acquired very [Indiscernible] in the middle of a global pandemic, some assets from one of our competitors who unfortunately didn't make it through the pandemic. And we've moved -- successfully moved that factory from where it was into our facility at Longhope. It's one of the reasons why we moved that. So that equipment now is commissioned, it's setup. We're making some alterations to it. We've still got some changes to make. One of the biggest issues is an onsite problem with the electricity supply. But that won't stop us. We've got plans to be able to get around that. So that capacity is starting to be coming really -- coming to fruition really. In terms of other things, we've placed orders and we've successfully noncommissioned the scale of equipment for the ink process as well.

This is the process that provides us with the material for a lot of our construction and textiles opportunities. Now we're able to produce up to about 12,000 liters of ink. I was in the factory this morning looking at the machines and seeing the quality of the product that's being produced there. So we said we were going to order it. We've ordered it, we've now got it, we've commissioned it, and it's actually up and running. That's all we've [Indiscernible] in the facility that some of you are lucky enough to have been and seen [Indiscernible] in Longhope.

Currently, we have about 18,000 square feet, and there's a further 10,000 square feet as part of an innovation center and laboratory. [Indiscernible] completed construction. And again, we're waiting for it to be connecting onto the electricity network. We're quite a large user of electricity, and so the standard warehousing supplies normally 50 [Indiscernible] appropriate for our use. So we work very closely with not only the landlord, but also with the various departments that are required to get that supply on place. Most of what we've been doing, although we're working on the GSCALE project and we've been focusing on the DSTL and GSCALE projects, the two that are coming to market [Indiscernible] and textiles. And we announced couple of days ago our tie-up with Umbro.

We've already talked about our tie-up with Superdry, and we're starting to see lots and lots of textile companies now coming to us as we move further up the supply chains. Not only supplying the graphene inks that Steve will talk about later on, but also the fabrics, and some great videos Steve got show us. We'll continue to bring those customers onboard. It's a bit like a sausage machine now. We've got a product, we [Indiscernible] to get to more and more people, so that means expanding ourselves and marketing teams, getting further reach. And GoToGym is a South American company that supplies North America, and we're working with those guys to bring products to market as well. Another area that's seeing quite a lot of interest is the packaging. And we're pleased [Indiscernible] in the set of interims.

Again, we're working with another South American-based company who are a global leader in packaging, around developing a specific product for them using graphene and Lab production, so another string to our bow. In terms of DSTL, I'm just going to ask Steve to update us on the DSTL project, obviously, during the pandemic, it was a difficult time for all businesses. We've decided to concentrate on the G SCALE and the DSTL projects. The DSTL one is slightly different and that it's a commercial contract and that means that it's true revenue. We were asked to supply demonstrators. And Steve will tell you a little bit about how that project went. Steve.

Stephen Hodge

Thanks, Neill. So just to give an overview, the projects we have just finished with DSTL has been successfully completed on time and to budgets. Initially, we had two work-streams and we were not -- due to the sensitivity of the projects, we were unable to disclose any information. But for now, we're able to open up a bit more about one of the work streams, which was focused on military bridging. And so during the projects and in both work streams, we set about and did a very wise and base lining exercise, exploring graphene in a number of carbon fiber reinforce polymer composites, and looking at the interaction and fundamental properties and enhancements like graphene can bring to a whole host of properties.

We're not allowed to talk about any of the specific data. But what was achieved in the final phase of the projects has been taking our optimized graphene materials, incorporating them into a carbon fiber composite system, designing, modeling with Finite Element analysis, a computation on modeling of a bridge under the necessary weights, and loads. And then we took that to full-scale testing and actually validated the model. So everything was actually successful. And now we've reported back to DSTL, where we're now entering an exploitation phase. So how can we now take this forward and engage with other defense sector partners to commercialize and scale-up the manufacturer of these types of components? Thanks, Neill. I don't know if you had anything else to ask on that, Neill?

Neill Ricketts

Only that we've tested that to disruption. We've got a very good understanding now, of how we model, as you say, using some of these new stimulation techniques. Graphene is a new science, and so there is a BlackBook you can go through from [Indiscernible] perspective. The most important thing is that, these are very, very good demonstrators that will be both used by DSTL and ourselves in future [Indiscernible] shows to show our capability not only at being able to deliver great projects, but also to be able to deliver products. So for me, that's a really good outcome for this particular project. Okay. If we can [Indiscernible] the videos. [Indiscernible] [Video Presentation] So quick update there. Steve’s going to walk you through what's been happen in textiles. Obviously, as we mentioned previously, we're seeing huge amounts of interest in using our technology in a wide variety of different operations, a wide variety of different sports. And Steve, just walk us through what's happening in that field.

Stephen Hodge

Yeah, absolutely. I'm not sure how [Indiscernible] the video tape, but moving onto the next slide. So we said last time in the Investor Meet presentation, we'll just focus on one particular area at a time. So in the textile sector, obviously it's a huge market. There are several issues, several problems in taking -- regarding climate change that we're looking to solve using graphene or other advanced materials solutions. In particular, what we're focused on is, can we reduce fossil fuel base polymers? Can we improve performance? Can we extend the last time of clothing? Can we add functionality? Can we improve recyclability? And so graphene, as part of our [Indiscernible] system or actually blended as part of a polymer young or filament, we can empower a range of properties that Neill talked about earlier.

So enhancing thermal properties, enhancing electrical properties, adding chemical stability, reducing weights from materials if we can improve the mechanical strength. Graphene also offers UV protection properties. And in some cases, we can look to -- look at technical textiles, where we can incorporates anti-microbial activity that we've again discussed before and had some developments during COVID. And also fire-retardant potential can be imparted depending on the design and optimization of these materials.

So a whole plaster of potential technologies, and we're currently focused on a graphene coating system, which is showing incredible improvements in the moisture and thermal transports through sportswear. So going onto the next slide, and this is very nice road map which is been developed by WRAP, who are a climate change NGO. Textiles 2030, this is the expert-led initiative encompassing a range of experts in the UK, so looking at how we can accelerate the whole fashion and textile industry and move towards circularity. The main targets there are focused on a 50% reduction of greenhouse gases and also reducing the water footprint. A lot of water goes into, if it's natural materials actually growing crop and plants all the way through processes such as dying, which can be quite wasteful. And obviously, there's lots of water effluent that comes from textile plants. So the whole set of actions that they've highlighted, improving the actual fiber materials, looking at reducing the impacts of production processes, lowering carbon energy throughout the supply chain, producing materials that last longer and recyclable, and also looking at reuse and recycling of fibers.

Potentially, reusing as textile materials or using in other applications. So our road map that I'll talk about later, will kind of follow in the same areas as the textiles 2030 initiative. So recently, we've put out a white paper, going through all of the advancements that we've made in the textiles arena, easing our graphene -based ink materials. And so this technology we started developing in around 2017, through an Innovate UK project, where we looked to scale up the technology. At that time, it was part of Cambridge Graphene Limited. And developing those in partnership with Twinery, which is a part of MAS Holdings in Sri Lanka. So that collaboration over a number of years looked to taking our graphene formulations and mixing them with different polymer systems to make something that can bind very well to different textiles. And so working hand-in-hand with MAS, providing samples, getting feedback from there and print trials, and our own print trials, we developed a formulation that seem to give very good improvements in mechanical, in thermal and moisture working performance in the lab scale studies.

So we took that forward, starting from completely diet fabrics, where you see the picture on the left is a panel, which is being coated on one side with a graphene-based formulation. The image in the middle was the second-generation where we look to print, say, connected graphene circuits, hectagonal circuit just in selected areas. So again, going towards a more printing process, you can control that position of the ink in areas where you want it. So obviously you may not want graphene all over the garment, you may want to put it in selected areas where, for example, you might be sweating more or you want to dissipate heat away from more. And that's really led into lots of trials with University of Manchester at the [Indiscernible]. Our own trials and formulation work. And the Cambridge Graphene Center, the University of Cambridge. And then more recently, we've just finished on a project working with The Royal College of Art in London.

And that's been working with their designers and also the textile specialists to actually take our graphene inks, play with the formulation, and develop new generation inks. But also work on different styles and patterns, not just aesthetically pleasing, but functional patterns that can help us to control the direction of moisture working and some management. So that was a real good collaboration, which allowed us to also create a matrix of different types of material that we can use our graphene inks on. So now we've got around 30 different types of fabric combinations of organic materials, synthetic polymers, and blends with things like polyester and spandex or elasting.

Printing onto a fabric is not straightforward, it's a very traditional technology. But once you get to garments which have a lot of stretch and flexibility, then naturally printing can be quite challenging. So we've been developing that confidence in knowhow. But also not just putting graphene into the garment and then commercializing it, we're a very science-driven company. We want to understand the full benefits that graphene is bringing. So following those very promising lab tests, we've now taken those to actual wearer trials. And again, managing this during the COVID pandemic was -- we were quite successful. Working with the University of Gloucestershire, so local to this area in [Indiscernible], we were able to recruit a number of athletes and put them through different tests in different garments. So we were trying to compare our graphene ware coated garments with two market-leading garments. So glad to the whole host of data that we've published most of in our recent white paper.

So we've collected information on body mass, garment mass before and after the exercise was performed year-end osmorlality levels looked at heart rate, blood samples were collected and also internal core temperature was measured during exercise and samples collected every 10 minutes. After looking at the data analysis, one of the key areas where we compete well with or exceeds market-leading garments, is in the cold body temperature. So at the start and during exercise, we would monitor the body temperature. And actually, by the end of the exercise, the increase in temperature for graphene wear is much lower than other garments. We also compare well in and performed well in moisture management.

The less selling perception and we think that's a number of factors it can be down to the feel of the fabric, maybe the feel of the graphene pattern, which is against the skin. People have a different sensation when they are wearing one of our garment. But also comparing against market-leading brands when people see different brands and logos, they feel like they will perform better. And so that's something that we do need to work on. And again, working with other partners and completing, incorporating our graphene wear formulations into their textiles could bring great, great benefits. So now again, moving out of the labs, but also gaining confidence in large-scale Clinttrials. We've done our own trials in the UK and also supply the inks to a number of manufacturers and print houses globally. So we've got trials that's taken place recently with a company called [Indiscernible] in Brazil. But we're offering ready to print formulations.

These are all water-based Graphene formulations. Can be supplied and directly printed to garments. We will also be in a position to supply printed fabrics ourselves using -- again, printed in the UK or we can print these using global -- Global Partners. Obviously, the textile industry is very broad and complex and highly global.

And so there are many challenges that are going along with supply chains and where we have to manufacture some materials to -- can be different for every customer. But what you see here, a couple of pictures from a recent large-scale trial we did for a customer, where we're printing, and as a video coming up shortly. Once we've optimized the print promises, we're printing at speeds of around 18 to 20 meters per minute. We can go faster, which means we can produce a lot of these printed materials. So if we could play video two, which just goes through -- [Indiscernible] as well.

Thank you. So hopefully, you have a sense now of different textiles. This particular [Indiscernible], we actually worked with three different fabrics with no issues. Each, we've different combinations of nylon polyester and elastane. So different amounts of stretch in there as well. We can handle pretty much everything. So again, going back to the roadmap and aligning with Textile 2030. At the moment, we're quite focused on performance and durability. Getting the most out of the garments that we already have. But in parallel, we're running trials where we are also -- you may have seen in previous presentations that we've done -- making our own graphene polyester compounds and master batches. We'll be looking at recycled feedstocks, bio materials. The last year has seen an explosion of everyone wants to work on sustainability and reducing CO2 footprints, reducing the amount of fossil polymers that people are buying. And now recycled feedstock seem to be increasing in supply.

I think a few years ago, it was very difficult to get certain materials, but that seems to be improving. Wearables is something that again we've shown clips of before where we've worked with companies developing different kinds of wearable sensor. That's something is still relatively low TRO, but we are -- has lots of promise to use graphene as a conductive, but also sensor platform. We've got projects ongoing at the moment in bio-sensing for health and well-being. Wastewater remediation -- another massive area where we think graphene could have huge potential and particularly relevant for the textile sector. So we've seen work with graphene membrane filtration, but not just graphene; other two - dimensional materials due to their shape and their chemistry. Quite good candidates for filtering pollution and bacteria from wastewater. So just again, we've got a few partners listed here. [Indiscernible], again, a key partner for us. They're making -- manufacturing garments for some of the world's biggest companies. Superdry and Umbro, closer to home.

We've several discussions on products being discussed as textiles is obviously very seasonal industry, so plans have to be made for upcoming quarters, and arranging the manufacturing and distribution and the whole process needs to be sorted first. GoToGym, I think we've mentioned it before. And [Indiscernible] is another huge player in the industry, we're working closely to develop graphene in hubs, yarns, and filaments. Neill, do you want to take over while I take a drink.

Question-And-Answer Session

A - Neill Ricketts

Yeah, sure. I can see you're struggling there Steve. So it's interesting that when we talk about a customer. I've never been involved in the textile industry before this. My background has been more in automated and aerospace. But the textile companies, they have their launches, normally, two or three times a year. Spring and summer, autumn, winter, and there's some outliers there. But when they say they're going to put that into the shops is, actually, and we can talk more generally here. They'll probably be launched in the fall of the previous year, which means that actually, they need to have clothing ready towards the summer of that year.

You can see how the common timeline plays out. So we've got a build-back capacity in order to be able to supply these companies to the kind of volumes that they want, far in advance of when they actually need it. Which is why we pushed ahead with getting the increased capacity that we've talked about in this presentation. But just to highlight that, actually, being in the shops in the first part of next year is actually probably six months beyond where the work actually happened. Okay. Right. Obviously, as part of this program, Steve talked about the white paper, which is up on our website. It's very, very important for us to be able to talk to our customers with facts and figures and make sure that this is a scientific proposition with some real evidence behind it, rather than just a marketing play in order to get our sustainability. We've obviously launched our new website, which is dedicated purely to this area. And that'll be more news on that platform as it develops.

Little bit just to say that pretty much everything we're connected with has an environmental aspect to it. We've talked about concrete in the last presentation, we're seeing quite a lot of uptake from big global companies around having to reduce that CO2 emissions, getting taxed, and having increased regulation around generating all of this CO2 and graphene has an important part to play there. But not only in there, it's also in the aerospace and automotive industry where we're looking at light-weighting structures being an enabling technology for electrification. And we've talked about the recyclability of plastics and polymers, but also the introduction of new biopolymers, which -- bio plastics, which are starting to become very widely talked about if not used. And so we're in a great position to be able to help our in that area.

That's the end of our presentation as it stands at the moment. Thank you very much for listening. I'll try to answer some of the questions that we've received either on the pre -select basis or the come in during the presentation. One that came in from Gareth was about the capital expenditure over the next 12 months. Well, Chris keeps a very tight line on expenditure. I think we've got enough capital equipment as it stands.

At the moment we're not anticipating huge amounts of additional capital expenditure, except where it's a requirement of a contract or ongoing work, maybe part of much bigger research project. If we look at some of the pre -submitted questions, I will just move them on to the other screen. One second. In terms of -- we're never going to be able to make forward-looking statements. So we can't talk about where we anticipate the share price to be in the future.

That's unfortunately out of our control, especially in the current conditions where we're seeing lots and lots of volatility. There was a specific question which was asked around the Ukraine. And if the Ukraine conflict was affecting the company. My answer is, which will be published onto the platform after this presentation, we're not currently being affected directly. Although, I mean is obviously having a massive impact on the volatility of the markets. A question was submitted about our business model. Well, our business models never really changed. It's about working with large global companies looking to develop products which are then going to be sold globally.

During the pandemic, we were far more focused on the G SCALE and the DSTL projects, which obviously came about as we went into the lockdowns. And that's been keeping the team very, very active. And Steve has been able to get a lot of outcomes as a result of that. We mentioned in the presentation that we're looking at introducing a number of new products. Those products will either be products that contain graphene, products that are enhanced through the use of graphene, or products that have come out of some of the research that we've done. In terms of what we see success looking like.

Well, that's getting these products to market and producing revenues and profitability on the back of those. So we're very focused on taking that technology that we've developed as part of these research projects. And Steve has a number of projects currently underway, as well as the GSCALE and the DSTL project, they're involved in big multi-million pound graphene flagship project in Europe with Airbus. And so his team is always looking at new opportunities to find funding, and to offset some of our development costs that way in activities where we're already going to commit to [Indiscernible]. So in terms of -- we're going through a quite challenging time. This has been a very difficult period for any business, let alone a new technology business. We've seen Brexit and we've seen COVID. They say what doesn't kill you makes you stronger. Well, in which case we should be really strong. Now we've got issues around inflation and around supply chain costs. Those costs are passed on to our customers where we can and we'll continue to balance our costs against the sales that we bring in our more traditional businesses.

It's not quite the same problem in our research businesses. In terms of Gnanomat, that's progressing well and we would hope that we'll be able to get Roberto onto a presentation at the next meeting. We can talk about all the good stuff that Gnanomat's doing. They're obviously working with some very large customers in Europe. They are actively involved in a lot of research projects. And it's been kind of head down getting on with work. In terms of our relationship with DSTL. Yes, our contract has concluded successfully, and we're continuing to talk to DSTL about future opportunities. They're very keen to use our [Indiscernible] to the bridge that Steve spoke about in the presentation; a number of different exhibitions. And so the relationship with DSTL is very good. And we would look for other opportunities for us to be able to fund the business through some of that work. In terms of South Korea, again, Steve updated investors on the progress in South Korea.

We don't make any other products in South Korea except for the CVD. There's been some developments over there in terms of some new capacity for clean rooms and things like that. And unfortunately, South Korea is -- has been struggling the last few months in my conversations with them around the COVID Omicron type pandemic that's going on out there, which is also affecting China. In terms -- it was a question later on in the pre -submitted questions about what's our relationship like with Hanwha. Well, I'm hoping to go out to South Korea at some point in the future to be able to have a conversation with Hanwha, not only on a commercial basis, but also in terms of being able to demonstrate the progresses made through these interim statements. Steve mentioned about MAS, and about what we're doing there. MAS is still a key partner for us. They've also been unfortunately dramatically affected by local events there, but also through the pandemic. They're not involved in our other activities with Umbro or with Superdry, but they are a part obviously of the global supply chain.

So whether Umbro get their parts eventually from Superdry will be a decision made by those guys. But we're still working with them, and we're still looking at opportunities that they have. It's obviously, the momentum building around some of these deals, the more deals we do, the more deals they get introduced to. Being able to announce, that actually dry our [Indiscernible] along. Just one of our competitors have also [Indiscernible] success, which is great for us because it means that we can validate our proposition as well. In terms of how our revenues are growing. That will be down unfortunately to activities with the customers. We don't have much control over what the customers choose to do. But we obviously support them and make sure that we have enough capacity.

We've talked about the largest portfolio of patents in the UK. And this is quite substantially bigger than most other companies, which are on the market or who are operating on the field. In terms of the G SCALE loan, we're obviously pursuing that. We're quite a way into that project now. But all the machinery has been ordered and it's all delivered. And in Longhope, most of it is commissioned and running. There's a few bits that are still requiring a little bit of work and modifying, some bits and pieces to our applications, especially the Spanish assets. Trying to move a factory in the middle of the pandemic is never an easy thing today. But we were able to successfully do that, get out sets up, and give that installed. In fact, some of our investors may have actually seen that facility when they came to the see the 3D graphene concrete printing demonstration.

Quite a few questions I've received around what's happening with 17. Well, there are two different processes currently in the way. The first one is a standard called BSCM934-2, which is around the [Indiscernible] mixes in concrete. And that only takes about three to six months, where in that process of the moment, it does depend on external testing capability and the testing has this. But the team are looking to complete that quickly. The slightly bigger challenge for us is BSEM 8500. And that process can take up to two years because fundamentally, it's about challenging the concrete standards and getting graphene, which is a brand new technology into that whole landscape. So that's quite a challenge, but one that we're getting quite a bit of assistance from our customers. We talked about the Innovation Center at Longhope. That's where I was this morning. That's now complete. We are filling that out. We're hoping to do some more investor events so you can come and see it. But it's a great facility which clearly demonstrates to our customers that we are building scale on a big picture type scenario.

And our customers can get comfort in the fact that we can supply them if they're able to give us all the coverage. In terms of the Innovation Center, I've already said that that's structurally complete. We're just waiting for the electricity to be connected. And then will house a laboratory plus an innovation cell for concrete and probably an innovation cell for textiles, although it's a bit of a competition with potentially defense. We have plenty of spaces as it stand at the moment. And as I said before, we're not anticipating a huge amounts of CapEx and this is a really good reason. In terms of expenditure, we're on the capital market, we're on an aim in order to raise cash, that cash is normally used for acquisitions or it's used to support working cap increases and stock or our CapEx. But we've already said that we spend quite a lot of money on CapEx this year anyway. We're continuing to develop the workforce at Longhope.

We have expanded it and we're continuing to expand our sales force as well and we've got some new status since the beginning of this period. And so we're hoping that that's enough for the time being. We have the option of the flexibility as we have done this year to shifts where there are peaks in the demand. One of those peaks was getting enough material ready in a short period of time for the foundation we pulled in the Innovation Center. So we had to use multiple shifts at time.

There are been other times when we've also had to use the flexibility of our workforce. I'd like to thank them. It's been a very challenging couple of years for everybody connected with the company as we've gone through this global pandemic and have lots and lots of challenges thrown at us including relocation. I believe we coped with that very, very well. Last question which came in quite late last night after the cut-off was about our RD costs, and during -- or actually illustrated in the 2021 annual report, for that period, 33% of our sales was spent on RD, and the reason for that is we were paid to do that by both DSTL and Innovate UK. And that was good timing for us because it enabled to make sure that all of the workforce were kept active and that we got some really significant outcomes in terms of these new products and opportunities that have come about.

If we refer to some of the questions that have come in during the presentation; I'm just going to scroll through here. I apologize if it looks like I'm not concentrating. I'm looking at the questions. There seems to be -- or there was -- quite a lot of unease about graphene. Steve, do you just want to update us on your work with reach and toxicology and the certification up to both [Indiscernible].

Stephen Hodge

I think the question is about, on social media, the view that graphene is harmful to humans. I think that's a complete misnomer. I think every material, every chemical is potentially harmful to humans. It's about the exposure of those materials and the dose that one receives. So graphene is a family of varying, different types of number of layer, different shape size, thickness. And so we really need to understand. We're working with our other competitors as part of reach consulting. Working to understand the toxicological properties and environmental toxicology of graphene, and so we're doing a host of studies.

As Neill mentioned earlier, we have registration for up to ten tonnes per year. So in Europe and UK and some other regions, to get to the next boundary, which will be 100 tonnes per year, you need to achieve and supply data on further toxicology or longer-term toxicology testing. And so because graphene is a relatively young material, a lot of these studies have not past the right amount of time or actually labs globally have not the experience working with graphene and other nanomaterials. So often it takes a bit of touring, inferring and optimizing just to get the actual sampling and data analysis correct. So these things will take time. But at the moment, there's no evidence that graphene is harmful. And to think every application that we put graphene into it, these studies will need to be done in terms of exposure. And again, that's something we're doing with this Airbus project. In the graphene flagship, we're working with another project called safe graph that takes our graphene and looks at the exposure or every part of the manufacturing process. These days, things will be critical going forward.

Neill Ricketts

We've got a couple of questions here of the textiles and about how we get paid. So we have a variety of different models depending on the customer. Sometimes what you'll have seen in both Umbro and Superdry is that we've insisted that our logos are put on the products such as Flux, for instance. That enables us to build a GORE-TEX or a Lycra -type brand. And then we get paid a royalty based on using that logo. Some customers want us just to supply graphene. We kind of don't think that's the way forward.

A lot of our customers want us to supply fabrics and we're becoming more involved in the application of graphene onto a variety of different fabrics; I think somewhere in the region of about 35 different fabrics now. In that case, obviously, we supply the fabric plus a royalty. But it does really depend on the customer. What -- it would've been much easier for us to have looked at justifying the graphene as a commodity material, but we don't think that there's a lot of future in that. Very easy to get replaced. We want to have a much closer relationship with our customers, so we've had to work quite hard to insist that our logos were recognized by the end customer.

We're talking about -- there's a few questions here by Enzo. Obviously Enzo is one of our collaboration partners at the moment, looking at tyres. We're in the process optimizing the graphene that's used in that application in a testing regime. This is pretty common with all of our customers that we have to optimize the production process where we're using graphene. So we work hand-in-hand with those clients. There's no real delay. It's purely that we're in a testing routine, I think. Mostly [Indiscernible] Steve, we don't have to make graphene the wrong way 100 times or something. But there's a lot of knowledge and it acts as quite a barrier to the exploitation in graphene in terms of developing that IP about not only making the graphene, which was the first few years of our development, but then using that graphene in a variety of different applications. I think we're just about done there.

We've got a couple of -- we have probably a couple of minutes before we're due to finish. But I just wanted to thank everybody for their continued support. We're hoping that we'll continue to do a variety of shareholder events and shareholder briefings as and when they are appropriate, we'll continue with our development of our PR channels and we've been very successful more recently and getting quite a lot of trade publications. The guys have just come back from the construction week, where we had our very last stand that was provided by the organizers. And the guys will come back probably with some [Indiscernible] reason about 450 inquiries that they need to [Indiscernible] through. So it's still a relatively small team and we're under quite a lot of pressure from our clients and customers to be able to service those. So we will continue to expand our sales and marketing teams as it's appropriate. Anything you'd like to finish with, Chris?

Christopher Leigh

No, not for me. Thank you very much Neill.

Neill Ricketts

Anything, Steve?

Stephen Hodge

Very happy just to say again, [Indiscernible], it's a pleasure to do this presentation.

Neill Ricketts

Okay. Thank you very much. And I will just turn it back to [Indiscernible].

Operator

Neill, Christopher, Stephen, thank you very much indeed for your presentation this afternoon and for addressing all of those questions that were both pre -submitted as well as the ones that came through during today's meeting. And of course, we will give these questions back to you immediately after presentation is ended for your review, and then we'll publish those responses where it's appropriate to do, so on the Investor Meet Company platform. And Neill, I know you just have briefly, but perhaps we'll redirect the investors on the call to give you their feedback, their full scenario expectations. If I could please ask you for few closing comments struck up with that would be great. Thank you.

Neill Ricketts

Thanks, Steve. As Steve said, it's a pleasure to do these presentations. We'd like to help bring everybody up to speed where we can. We believe that we're showing significant progress in this new industry, this new industrial revolution. We're very happy to be supported by the people that we're supported with the University of Manchester, the University of Cambridge [Indiscernible] various departments within government. Look forward to talking to you soon. If you could provide any feedback after this finishes that will be fantastic. Thank you.

Operator

That's great. Neill, Christopher, Stephen, thank you very much indeed for taking the time to update investors this afternoon. Can I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback, and all of the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Versarien PLC, we'd like to thank you for attending today's presentation. That now concludes today's session, so good afternoon to you all.

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