Ilika plc

Presentation investors will be in listen-only mode. Questions are encouraged and can be submitted at any time by the Q&A tab situated in the right-hand corner of your screen. Just simply type in your questions and press send. The company may end up in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Graham Purdy, CEO. Good afternoon, sir.

Hello and many thanks to everyone who's taken the time to dial in for this annual results update for the financial year that finished at the end of April 2023. I'm joined today with our CFO, Jason Stewart. Lovely to meet you all this afternoon. We're just going to switch the camera off while we pop through the slides so that we don't distract you. And many thanks again for joining. So, we're going to talk for the next 30 minutes or so about ILICA and solid-state batteries. As a quick reminder, we have two product lines. First of all, the STERIACS miniature cells, which we've designed primarily for miniature medical devices and also for industrial IoT applications. And then on the other hand, we've got our Goliath large format cells, which are designed for EVs and for cordless consumer appliances. I guess the thing that sets apart our Goliath cells is that we use an oxide electrolyte with a silicon anode, and this reduces raw material costs and gives us an increased cell life relative to some of our other solid state battery competitors. We'll go into that in a bit more detail later on in the presentation. We're going to start with a review of where we are with Stereax. We'll then continue with a review of Goliath before wrapping up with an ESG summary and our finances. So there's a bit more information about Jason and myself. I'm not going to go through this now because actually you can find the same information on our website. And we've still got the same NEDs supporting us. So Keith Jackson, our chairman, and Monica and Jeremy as NEDs. So the ILICA business model is an asset light licensing model and this sets us apart from other solid-state battery developers who may be aiming to build and operate gigafactories to supply the EV market. We are a technology developer and our model is that we develop our solid state batteries. We then demonstrate that they can be manufactured using a scalable process and we do a tech transfer and licensing deal or deals to make sure that they are available in the required quantities for our target markets. The deal that we'll talk about with Certec is a really good example of how we've put this strategy into action. And we aim to do exactly the same with our Goliath technology. So, Steriax. These are our miniature batteries. And really, these are the engine that's powering the revolution that is overtaking the medical implant industry as we move from pharmaceuticals to electrocyticals. You can see some of the M300s in that central picture, put alongside some standard paracetamol and aspirin tablets, very small batteries. They would fit comfortably on your fingertip. And they get integrated into small devices that are then surgically implanted. So if you were unlucky enough to need such a surgical intervention, you'd clearly want a battery that was as compact as possible. So these have got very high energy density. and they enable small device designs they've also got enhanced safety relative to normal lithium ion there's no toxic fluid that could leak out and they've also got a high power density which means that they can supply power pulses to support the electrostatical therapy or indeed to drive communication chips such as small bluetooth chips which might be used to share data from the implant to the clinician. In terms of the applications, we have a really interesting portfolio of targets that we'll then reinforce by going through our list of customers that we're interacting with. So we start with neuromodulation. So a good example of that is actually pain relief, lower back pain. We've got some customers that are developing implanted sensors, often for blood pressure monitoring. Smart orthopedics, which are used for tracking the physiotherapy that patients undergo when they have had a surgical intervention and are getting used to their new hip or knee implant. Small surgical instruments and examples of these are used in robotic platforms which are increasingly being deployed for carrying out routine surgery. Smart contact lenses, I guess this is one of the frontiers of technology innovation. that's being pioneered in Silicon Valley, this whole interface with the metaverse, where there's the idea that we can replace video screens, computer screens like the ones that we're looking at now, with a projection from a smart contact lens. And of course, these need ultra compact energy sources in order to power the projection of that information. A good example there actually is our partner in Israel, Blink Energy, that's talked about some of their applications as they harvest energy from the Blink reflex to be able to power devices like these. And then finally, on the right-hand side of this slide, smart orthodontic applications, so smart dental applications, where you put a powered sensor onto an aligner or a retainer, as they're sometimes called. First of all, actually, to ensure compliance, to make sure that the retainers are being worn as they've been designed, but increasingly also to enable salivary diagnostics, because actually you can harvest a lot of interesting information about the health of a patient by monitoring the chemicals that are in their saliva. A good example of a customer there is Lura Health, our partners in the US who have designed an innovative technology platform for just these types of applications. So we are under an obligation to retain the names of a lot of our customers as confidential, simply because they see our technology as being an enabler for their competitive positioning. But what we can say is that we are interacting with a range of companies that vary in size from being smaller startups. Of course, if you're a US-based startup, you can be very well financed. So some of these companies are large in their own rights, even though perhaps they are still developing the technology. And we start with them and go all the way through to publicly listed multinationals that are already substantial enterprises and have substantial commercial momentum. You can see that many of them are actually U.S. headquartered. In terms of the application areas, they're the ones that we've just been through on the previous slide. very large addressable markets, multi-billion dollar addressable markets. And we do this analysis to work out the obtainable, the serviceable, obtainable market for our products. And that allows us to build our forecasts and actually interact with some of the analysts who cover Illica to give them guidance on what levels of revenue these different applications may well enable And what's clear is that actually not all of these different ideas for products will get regulatory approval, but it doesn't take very many of them in order to generate a significant return on the capital that we are deploying to address these markets. So when we aggregate all of this data, we see that actually we've got 24 orders from 21 companies. Over half of the orders are for active implantable medical devices or AIMDs, as they're sometimes referred to in the industry. They also cover some of these wearable applications, such as smart dental and smart lenses. And about a quarter of the opportunities relates to industrial IoT applications in aerospace and some industrial condition monitoring. On the right hand side, though, you can see that over three quarters of the orders originate from the US. And that's why actually we've worked very hard to partner with a US based organization to complete the commercialization of our Stereax technology. So in January, we entered into a memorandum of understanding with Certec Medical, which is a large tier one manufacturer of medical device technology platforms, devices and components. I think in terms of what the benefits are to Illica, they include the validation of our Steriax products and the manufacturing process that we're using. In fact, there's a very good match between the process that we use in our facility here in the UK and the thin film processes that Certec has at its disposal in Lowell in Massachusetts. um it's also a scalable manufacturing uh platform so they have an economy of scale because they're already manufacturing for large oems particularly in the us and they have uh space and and the ambition to increase the scope of their activities and ramp production and also of course they've got a larger business development team where there are very strong synergies between the technology and platforms that they're currently selling and the Stereax offering. So, for instance, by combining the Stereax batteries with the power management circuitry and other device platforms, they can offer a more complete bundled solution to the customer. In terms of where we are, if the stars had aligned, we might have completed this contract by our annual results. But of course, it's rarely the case that you can finesse the timing of these discussions perfectly. So we expect to be able to finalize the contract over the next few weeks and then move forward with the tech transfer and then the ramp up of revenue associated with product sales in 2024. so let's change gear a little bit and talk about goliath about uh ev battery technology um so that again this is a solid state offering um you know the materials are different but not totally dissimilar to what we use in stereax but we use a much larger scale manufacturing platform for making ev batteries whereas the STERIAC cells are miniaturized as far as possible and made compact using photolithographic and micro fabrication techniques. With the EV batteries, we use large-scale printing approaches in order to make them. We're offering the consumer further range for their vehicles by using a combination of chemistry that we feel is particularly useful. It gives a really good combination of range and weight. Very safe, a solid-state electrolyte that is safer than the liquid electrolyte alternative, which is flammable. A high energy density, so capable of pushing towards that higher theoretical energy density threshold at 500 watt hours per kilo. A reduced cell degradation, so it's not subject to the same sort of risks associated with dendrites. And of course, what's becoming increasingly important, is the enhanced recyclability of solid state cells where you don't need to drain the toxic and flammable liquid electrolytes. You basically just strip off the encapsulation and then you can put the ceramic into a granulating process and extract the metals and put them back into the supply chain. And then finally I should mention lithium efficiency. So over the last couple of years actually the price of lithium has soared and now actually lowering the lithium content in batteries is really important. And actually, some of the other solid state battery alternatives, such as sulfide-based alternatives, use far more lithium than are oxide and silicon-based alternatives. So I probably don't need to convince you that we are in the middle of an EV revolution, but the data certainly supports that conclusion. In the EU, of course, there is a target of adopting EVs for all new vehicle sales by 2035. Here in the UK, it's five years earlier in 2030. And clearly, there's a global trend towards making sure that EVs become the vehicle of choice. There's also a trend towards deploying more and more charging stations, which are making the choice for EV much more straightforward. However, there are still a few reasons why consumers are hesitant to actually buy an EV. One of them is range anxiety and our type of solid state battery can go a long way towards relieving this by doubling the range that you might see from an EV. Battery life can be a concern. Will my battery still be operating in 10 years time? Some people keep their vehicles for that length of time. They don't want a short lifespan for the vehicle that they pay for. And actually battery life is enhanced in solid state. And also there are some concerns around around batteries. Batteries that go into EVs are typically very safe. EV vehicles in general have a fantastic safety profile, but that comes through enhanced engineering and safety engineering and therefore weight and cost associated with packaging the cells into a battery pack. And when you have a solid-state battery that is intrinsically safe, it means that the engineering and the cost associated with carrying out those activities is reduced. In terms of the target market, we will initially be working with high performance vehicle manufacturers or those brands that perhaps have a performance line in their offering. So that's why you see us associated with companies like JLR and McLaren and latterly BMW. It's not because solid-state is intrinsically more expensive. In fact, the opposite is the case. There's been a lot of analysis recently that demonstrates that solid-state will bring down battery costs. It's because in the first instance when solid-state batteries are manufactured at limited scale, we won't have the same economies of scale that you currently get with the largely commoditized standard lithium-ion cells. So we need to make sure that the initial markets that were providing batteries to are not too price sensitive. So in summary, ILICA's technology for EVs has lots of advantages, starting at 11 o'clock here. The number one, our choice of materials, we use an oxide electrolyte that's very stable in air, much more stable than the sulfide electrolyte alternatives that some of our competitors have chosen. We've got a cell chemistry which has a long cycle life and few degradation mechanisms. We've got a cell architecture that offer improved energy density and driving range. It's also an extremely safe chemistry. We don't have any lithium metal and no flammable liquid electrolyte in there. We've also got a higher thermal capacity and what that really means actually is that our batteries can operate at an elevated temperature and that's particularly important actually when you are deploying EVs where there is a high ambient temperature, all EVs have a cooling system associated with their pack, typically to keep the pack below 40 degrees C. And if you can allow the pack to operate at a higher temperature, in fact, our packs can go up to 80 degrees C, and we've even demonstrated some proof of efficiency principal performance at higher temperatures than that then you can reduce the amount of cooling that's needed and that again is a reduction in weight and cost and therefore it gives you a more compact battery pack and then of course recyclability that we've already spoken about So a quick overview of the competitive landscape. You know that there are more than whether there's a number of choices that can be made in solid state batteries. There's not just one type of solid state battery. You can choose different electrolytes. So we've chosen oxide electrolytes, but sulfide electrolytes are also an alternative. You can choose different types of anode. So you can choose not to have one at all. at least initially when the battery is first assembled, or you can have a lithium metal based anode. And actually, some analysts even call solid state, you know, lithium metal batteries. But in fact, solid states can also use structured anodes like silicon anodes. And we've chosen that because it's an approach that gives you a long cycle life and is also a less expensive choice than using lithium metal batteries. What I would argue is that actually going forward, we're going to see a diversity of solid state solutions in the market in the same way that we see a diversity of normal traditional lithium ion battery chemistries right now. So your mobile phones and your laptops all use an LCO-based cathode, whereas in vehicles, typically you see NMC or NCA-based cathodes, or if you're in China, an LFP cathode. based approach. So these are all acronyms that relates to the chemistry of the cathode. And when you look at solid state, there are different choices, both actually for those cathodes, but also for the electrolytes and the anodes. And I think that solid state for EV will be developed depending on the imperatives. Is it done for cost? Is it done for performance? Is it done for specific ambient conditions? And therefore there will be more than one solution that is used for that deployment. So where are we with manufacturing? Well, we built our first pre-pilot line here in the UK a number of years ago. Two years ago, we raised 25 million to extend our development program. and actually to automate that pilot line. We are well through that implementation now. We've already taken delivery of certain equipment items in order to enhance our productivity, and we've got more arriving towards the end of this year and into next year. And we've also carried out a number of feasibility studies to assess how we can work with partners in order to increase the capacity of our production capability to what the automotive industry calls B samples and C samples. So an A sample is effectively a prototype cell that meets certain performance criteria, but doesn't necessarily have to be manufactured on production intent equipment. But a B sample is the same cell that's manufactured on production intent equipment, perhaps not in the volume that's needed for a vehicle platform launch. And then a C sample is an enhanced volume production capability as a precursor to a gigafactory deployment. what we won't be doing is going beyond a sample in fact we've already interacted with a number of oems who've made it clear to us that actually a samples as far as they would expect us to go and if we work with companies to go beyond that then that will be on a collaborative basis and it won't be illica that is building the gigafactory in order to supply those larger volumes of batteries for So here's a summary of where we're going with our technology and how we're going to scale it up. On the left hand side, you see us moving through a data point that we call D4, which is actually a lab scale precursor to making a prototype product P1. So P1 has the same performance as the data point D4. But of course, before the OEMs accept samples in their facilities, they actually want us to have done some preliminary testing of those samples so that we can ensure that we don't cause any difficulties to those OEMs when they're going through the test regime. We basically want a stable production batch so that they get the results that they anticipate. We'll go through energy density lithium-ion equivalents towards the end of the year and then push through to our MVP, our minimum viable product, which actually correlates to A samples that you see plotted on the bottom right. So we'll be building up an automated pilot line to be able to give us A samples which will then be a precursor to scaling up for B and C samples beyond that. And our business model indicates, of course, that we're going to have our licensing opportunities really from 2025 onwards. So pretty much at the point where we've got our A samples as organizations take an option to use our technology and then deploy it on a larger scale. So one of the highlights that I want to flag that has happened since our half year is that we've been awarded a substantial grant of just over £8 million by the Faraday Battery Challenge to lead a fantastic consortium of companies. One of the partners involved is Nexion, which is a silicon anode manufacturer. based in Abingdon, not far from where we are in Southampton on the south coast of the UK. They will be providing information and anode that we can integrate into our prototype cells. And then we're using a really great constellation, really, of university and lab-based partners in order to enhance the development of these cells under the oversight of a steering committee that involves BMW and also WAE, which used to be known as Williams Advanced Engineering, now part of Fortescue. And this is a program that really supports the core development of our Goliath batteries through that roadmap that you saw before. It's not a different program, it's effectively non-dilutive grant support for our endeavors. So at this point, I'm going to hand over to Jason, who's going to talk about some of our ESG initiatives. I know that they're very important to our stakeholders and some of our shareholders in particular. So Jason, over to you.

Thank you, Graham. So the environmental, social and governance aspect is very close to the heart of the company as a whole. But as Graham said, increasingly so across the stakeholder base, whether that is investors on a retail basis or institutional basis, governments, but also the supply chain that we buy from and interact with and our potential customers in the OEM arena. So it's very important that we are fully compliant with all our requirements but also from which we are but also our perspective is we want to be ahead of the requirements for a small company so we are continuing to work ahead of the timeline to try and ensure that everything we do is compliant and we are as aligned as possible with our potential customers so that any transition into licensing is as easy as possible as we then interact with our potential next-stage customers. So from an environmental point of view, we're ISO 14001 certified. We have carbon footprint accreditation for both Scope 1 and Scope 2. And we are already working on our product carbon footprint. our net carbon neutral planning and scope three emission data collection, which will be required in the future, but we're working ahead of that already. From a social point of view, obviously many people will have heard in the news some of the challenges around the supply chain of some of the minerals that are used in manufacturing. So we are fully compliant and with full transparency from a cobalt supplier point of view. and to ensure there's no conflict mineral. And that is very much important to us. We want to ease as much as possible when we do engage, as Graham said, with the OEM tier one suppliers, that we're already handing to them a product that can be sourced easily from the existing supply chain network. We focus very much on equality, diversity within our own organisation and are proud that we have both a good spread of gender, but also a wide range of nationalities participating in the scientific development. And from a government's point of view, obviously, we are fully compliant with all rules, regulations, health and safety is at the forefront of everything that we do. and we ensure that we continually challenge ourselves to improve and move forward. We have conducted over the last year first materiality assessment, so engaging with a whole range of stakeholders, investors, legislative, supplier, customer and employees to ensure that we understand all of the topics that may affect the company, ranking those for importance and then ensuring that we react to those as we go forward. And that's part of the journey for ensuring that we are constantly reflecting on our ESG journey and staying ahead of the challenges that we see coming. Finally, just moving on to the results, we've announced our full audited results. So total income of 0.8 million pounds. As Graham said, we received 2.8 million was the share of the history. funded grant, total eight million as Graham said. So that's a two year programme. So the start of that funding has come through in the income that we've seen this year and will continue through into 2024 and into the early part of 2025. Resulting from that, we have had an EBITDA loss excluding share based payment of seven million. So that loss increase from the prior year of 6.4, really on the back of the scale up of the STERIACS activity as we built through our small scale fab plant to prove out that technology and the development of the Goliath program. But as Graham said, when talking about the MOU with Certec, We've already taken steps to mitigate that increasing cost through the expectation and near completion of that contract so that we reduce the ongoing cost of the Steriax side of the business. And then we can redeploy the capital that we do have across to the development of the Goliath side as then the manufacturing base for Steriax transfers over. And that leads us to a cash balance of just under £16 million at the end of the financial year, which is very much in line with expectations and signposting that we gave in earlier R&S and demonstrates our reasonable cash management as we go forward. And we look out into the future. We expect cash consumption from operational activities to reduce slightly. As I said, I'm part of that restructuring of activity between Steriax and Goliath. But as we deploy, as Graham said, some of the capital that we have towards the more manufacturing intent equipment for the Goliath side of the business, we will see our capital spend increase slightly, ultimately giving our expectation that cash consumption will continue at roughly at same level as we go forward into the next year.