Ensurge Micropower (Oslo:ENSU) Q3 2026 Earnings Call

0:00 Bryce Dille. This is his first full quarter as our CFO. And I have to say how much it is to have such a benefit to have such a proven, strategically minded CFO with me as we as we present these materials and as we rebuild the business. So wonderful to have it have Bryce here with me today. And I'll pass it to Bryce to walk you through the forward looking statement.

0:24 Thank you, Shauna. Before we begin, please note that today's presentation includes forward-looking statements including projections and expectations regarding NSURGE and its subsidiaries, its future financial position, business strategy, and plans. These statements are based on information available to the group as of today's date. They are not guarantees of future performance, and they involve known and unknown risks, uncertainties, and assumptions. Actual results may differ materially, and we caution investors not to place undue reliance upon them. And with that, I will turn it back to you, Shauna.

1:00 Great, thanks so much. All right, well, let's get into it. So this quarter, it comes down to a simple message, a paid customer, a focused technology path, and a leaner cost base. On the commercial side, in October, we signed a paid multi-phase development agreement with a top-tier commercial partner. It is our first paid commercial program. Payments are tied to milestones. The first major deliverable is targeted toward the end of Q1 2027 or early Q2 2027, and project kicks off this month. On technology, we're prioritizing the Corning Ribbon Ceramic Platform to meet our customers' energy density requirements. A single platform focus accelerates development for additional paid programs, and we're applying what we learned from our stainless steel program in component design Assembly, Stacking, Test, and Validation.

1:53 On operations, our relocation of Baytek has been underway since the beginning of October with a certain process area that's being retained at Junction Avenue through year end to ensure consistency. The Baytek showcase facility substantially upgrades our technology development while removing approximately 3.5 million US dollars in annual operating costs. We are designing a purpose-built R&D line qualified for customer collaborations with operations targeted to be underway in the Q1 of 2027. And now let me pass it over to Bryce to provide a financial overview.

2:30 Thank you, Shauna. Just to quickly cover the quarter's operating results and actions we have taken to reduce future costs and an update on the recent funding and how the new customer agreement will impact our reporting. On the cost side, operating expenditures in the quarter were $4 million, a decrease of approximately 10% from $4.5 million in the prior year period. And we are targeting total company burn to fall to approximately $1.2 million per month in 2027. At period end, the company's cash and restricted cash was $1.8 million as of September 30th. And turning towards our recent funding activities and subsequent to the quarter end, We secured convertible loan financing of approximately 1.8 million U.S. dollars. And as we announced today, we are also conducting a private placement of up to approximately 10 million U.S.

3:23 dollars, of which approximately 6.5 million is already underwritten by current shareholders. On the customer agreement that Shauna just highlighted, we expect the first milestone payment to be recognized in the Q4 2026 period. We plan to book those revenues as deferred revenue until the next stage of development is formally accepted. These payments will partially offset our internal funding program costs, but do not cover them in full. To summarize the financial picture, we continue to optimize towards lower spending, and we now have a strong backing to execute against our next milestones. And with that, I'll pass it back to Shauna.

4:02 Great. Thanks so much, Bryce. All right. Well, let's turn to the customer side. This marks a turning point for Insurge because we've moved from exploratory evaluations to paid co-development with the global wearables technology leader. What is this? So under the agreement, Insurge designs, validates, and delivers a customized solid state micro battery to our partner's product requirements aligned with its internal product roadmap. Why is this important? It's our first paid development program with a top tier customer. Its milestones are aligned with the ongoing Corning Joint Development Agreement, and its requirements will guide our technology priorities. Upon successful completion, it's intended to establish a path toward high-volume manufacturing and long-term supply. Payments are tied to development milestones that partially offset our program costs, and the first deliverable is targeted in the early part of 2027.

5:00 The path ahead flows through four stages in terms of development, Technology Validation, Application Development, Qualification, and Compliance. And all of this is focused toward this customer's requirements, which then is a benchmark, a beachhead for the rest of the industry. The market is large, and this is the opportunity that we're here to solve. We have an opportunity to serve a rapidly growing, massive market with an inherently scalable technology built on semiconductor manufacturing principles. We have validated the commercial opportunity with this commercial traction, and we have this top tier or tier one demand that validates the technology in the pool.

5:48 And we approach it with a disciplined process with experienced world leading talent to achieve this opportunity ahead of us. Today's devices are being held back by their battery. We're here to free future devices from the battery constraints that it has today. As AI comes to the edge and brings new functionality and new features to users and patients around the world, these devices need to perform better. They need to have greater capacity, greater energy within the same form factor. Today's battery designers, excuse me, device designers face a trade off. They either can have the functionality, but they have to have a bigger device or they can have a small device or today's device, but at lower functionality.

6:41 So we come as the answer to that problem. There's no longer a trade off within surge. We free today's battery, today's devices with a better, safer battery. We unlock this bottleneck that's currently in the industry. The essential products that are around the world that touch humans from the ear to the eyes to the implantables to drones to industrial applications. The opportunity is quite endless, especially with the onset of robotics, the desire to miniaturize, the desire to put energy at the edge. All of these are vectors in our direction, as well as features that are enabling, say, chips and being close to the chip with our SMT Thank you for joining us.

7:58 to Insurge. We have been on a path to restate the company to go from a company that was a thin film electronics company that pivoted to micro batteries in 2020 to a commercial micro battery company built around customer needs. The partners we have, both Corning supplying us and being a technology partner to this blue chip wearables device company as our customer, as our line of sight toward the market. This focus is critical to success. It is how new battery devices, new products, new hardware products succeed is when they have focused development, focused and supportive partners, and lean execution. Speaking of lean, speaking of execution, our new site is more than just a new address.

8:47 It is a new chapter for Insurge built around a showcase facility that we can show off our great technology in a state-of-the-art facility to our customers. It enables a battery-centric design for our R&D line and our pilot capabilities. And lastly, and certainly not least, this product-centric, customer-focused approach to ensure that we deliver the battery that the customers require. So we're addressing this as a lean, focused company that's built on the commercial opportunity ahead of us. But this battery technology, is really not new. We are not inventing a new chemistry. We're building on one with a 20-year track record. The base platform pairs a lipon solid-state electrolyte with a lycocathode.

9:36 It was developed at Oak Ridge National Lab in the 1990s and is one of the solid-state battery's most established chemistry pairs. And in fact, embedded within Insurge, as an advisor, is a distinguished scientist from Oak Ridge National Lab. So we again have the best of breed here at Insurge. The Lyco technology, Lipon on Lyco technology has demonstrated cycle life exceeding 10,000 cycles and has proven in medical and IoT applications. Companies with this chemistry have followed established commercialization paths, including Infinite Power Solutions that was acquired by Apple and Front Edge Technology that was acquired by KLA. Our platform builds on the space with an anode-free design placed in situ.

10:21 The cell itself is simple. and it builds on semiconductor level process in six steps. So as we look here, as we focus in on the next technology, the platform that we're focused on, this cathode enabled by Corning or supplied by Corning, there are six major steps. So at the end of the day, it's not a complex, it's not a complicated substantial amount of steps. Each step is highly technical and quality is required. but they're not a lot of steps. So there's six major steps that are required to bring this together that leverage semiconductor level manufacturing that enable an inherent economy of scale. Here we have our corning supplied cathode material, lipon solid state electrolyte that's deposited by high precision sputtering. Then we have a high resolution patterning by laser etching, singulation of unit cells to any length or width that the customer needs, Stacking of same-sized cells to the height and the capacity required, and finally encapsulation, sealed, metallized, and shipped. The result is a proprietary end-surge cell.

11:38 As I mentioned, this market is massive, and it's not addressed with a lot of volume suppliers today. In fact, there is no material volume supplier today in a massive market. And we break this market into two pieces. One is this $4 billion market that's here today and growing quickly. Over 20% CAGR annually through 2032. These are wearables. These are medical products. These are products, again, AI at the edge. These device manufacturers need a better battery. And those products are here now. and they're facing that competition. And that's why we've been able to sign up the category leader to work with us. This emerging opportunity is equally fascinating and it's even larger and it's growing quite fast as well.

12:31 AI enabled devices being offering a latency reduction or energy efficiency at the chip level. the industrial and defense space with on device on human sensors or battery enabled devices such as personal air conditioning if the warriors are out in hot desert or these micro robotics these tiny little drones warfare is becoming decentralized just like the industrial space and other sectors and these small micro robots are a rapidly growing market and we are perfectly situated to go address it. Our path to commercialization, as I mentioned earlier, is disciplined, and it follows five basic processes. One is the technology validation, which is where we are now. The application development, which is what we're approaching here with our new customer, is a partner-based co-development process.

13:34 Together, as we work together, With our battery now integrated into their tech stack, essentially, rather than a commodity, as has been seen before, we then go and we qualify and achieve the compliance we need. Once there is that compliance, then during that time, you are scaling your manufacturing. When manufacturing scales, you want to make sure your design is locked and it's already ruggedized, robust, and cost-effective. and then you have your customer adoption. These aren't discrete, these are overlapping in a certain way, but these are the five major phases of taking a product to market. The opportunity here is something that is really quite unique and it's exciting to be part of. The opportunity to Three devices from the constraints of today's batteries to have smaller discrete form factors enabling AI.

14:34 We have the potential to unlock AI in these devices. It's a fantastic place to be. Our solid state micro batteries address these requirements that the market is requiring now. And the pathway we have ahead of ourselves, again, as I mentioned before, is disciplined and it's clear. and we are focused, we are lean, we are world-class and we are going after this market. To sum it all up, we're building an excellent business. We're building a business that is going to take the market. We are addressing a massive market. We have the product that unlocks it. We have the energy density potential. We have inherent safety by design. The form factor flexibility comes with our semiconductor-like process.

15:23 that the customization happens later in the process. The integration, all of the benefits coming from this process in terms of the temperature capability, enabling SNT compatibility, not requiring these bulky brackets, et cetera, that actually adds more to the energy density in the overall device. Our industry leaders, where we have our joint development agreement with Corning, we have our global wearable health company that we've announced previously with Corning at our back and this customer in front of us we are nested here ready to execute and we're developing results already building credibility and that's what's required of our customers and that's required in the market is that credibility we are developing what we call a manufacturing moat this is a competitive advantage for us that's sustainable and this again is based on our technology and our inherent manufacturability This cathode integration and the ability to integrate, the only company in the world to be able to do this, is integrating this breakthrough cathode to maximize volumetric energy density, to reset what's possible when it comes to energy density.

16:36 And lastly, this commercial validation allows us to be focused, focused on what matters, focused on the customer, focused on delivery. And that's what matters and we're excited to be doing that for you. With that, I would like to wrap up the prepared remarks. Appreciate your time. I'll pass it to Bryce, who I believe might be able to take some questions from the audience.

17:06 Thank you, Shauna. If anyone would like to ask questions, please submit your questions to the team's meeting and we'll answer them as they come in. The first one here, Shauna, is on this development program that you have, how does that help guide your internal research program?

17:29 Sure. So having a customer focus us on the requirements. A battery has a number of different requirements it has to satisfy, not just the total capacity of the battery, and certainly you would see that in today's batteries, the size of the battery, but also how long it would last in terms of cycles, what's the discharge rate in terms of how fast it can dispense energy. So when powering lights, there are a number of different requirements on a battery. And so by going after a major market like this with a category leader that has a breadth of products across this sector, this is an opportunity for us to be able to focus our development Thank you for joining us today.

18:46 to tangential markets as well. And then that allows us to go to market and expand our customer base, see where as we develop this battery and we validate the core chemistry and the capabilities of it, we can then look and see other markets. What are the other markets that the same battery can apply to? So by having that customer, it's really, it forces a company to not have a build it, they will come mindset. It is the reverse of that. It's focused on the customer, focused on serving. The other thing it does is really focuses the company from a cultural perspective on serving, serving customers, being positively displaced toward customers and delivering.

19:35 Rather than just research for research's sake, that can take however long you want. This is a customer timeline. This is a focused development effort. So it helps us get focused. It helps our partners get focused. It's our vector. It's the point to the sphere and we're ready to go after it. So focus is the name of the game and that is how we're gonna be successful.

19:59 Great. You mentioned that Insurge is now prioritizing the Hummingbird platform using Corning's ceramic cathode. Does this mean the technology has already demonstrated superior performance or is that still the main objective of the development program?

20:17 So as we showed in our Q1 report where we showed the two different platforms, we showed the cycle life of our stainless steel or our baseline platform and already that was showing some interesting and I would say quite encouraging cycle life for an early stage technology. When you see the corning ribbon ceramic, the early stage data that we got from that cathode, that was quite stable and already quite interesting from an energy density perspective. and that is an opportunity to be unbeatable in this market, to have a product that has an energy density that is not even close to today's batteries. So it enables a redefinition, a new ability for these device manufacturers to design better devices that have our battery as the core enabler.

21:16 So it's an important thing as well as then continuing the theme of focus Small team will be successful, has a much greater chance of being successful if it focuses, focuses on one thing. And we've had great learnings from the stainless steel platform. And we're continuing to be open as to what cathode we have not completely stopped the stainless steel, but we've prioritized the corning ribbon ceramic. And we will continue to have that opportunity, that optionality of cathode. as a long-term strategy. Right now, for a company to be successful, it has to focus.

22:00 Great. I think this one is on the recent development agreement as well. Regarding the recently signed paid development agreement, what is the first major technical milestone you're working toward? And should investors expect that milestone to be achieved during Q4 2026 or in 2027.

22:22 Yeah, as we've said, the first major milestone will be toward the end of Q1 or into Q2 2027. And so we will stand by that statement. But we're already getting off to start with this company, and all the details of the agreement are confidential. but this is a multi-phased effort and so we will update the market as things develop. Okay.

22:58 Looking ahead over the next six to 12 months, what are the two to three most important technical and commercial milestones that you believe could fundamentally change in Surge's position and bring the company closer to commercial scale production.

23:15 Yeah, I think it's getting back to the quality and the repeatability of each of those process steps. And at the end of the day, we have six and really three are mechanical in nature. So really it's three core process steps to have that quality and consistency across those process steps. Recall in the Q2 report, we talked about the improvements we've made to Lipon. and that is a core process for any solid state battery to have that solid electrolyte, to have the quality of that solid state electrolyte, the minimal variability, the consistency across that layer. That's critically important because then that provides that predictability of that so each of those are going to get diced up into little batteries or little layers and so the knowledge of what that process consists of and the predictability of that process such that when you do layer those batteries the final battery is one that performs to expectation so having that repeatability of process is critically important I think for 2027, a major milestone for us is moving into VATEC and getting VATEC, our new facility, up and running. We have substantial cost reduction as a result, and we have the opportunity to set up

24:46 a showcase facility with capital equipment that is purpose-built for batteries and not retrofitted from another application and doing its best job at trying to be a battery. This is an opportunity now that we are focusing on to make sure that our equipment design is also aligned with our vision. And we're excited about what those options exist out on the market. And so that is a core focus for us in the immediate term. So moving in and establishing Baytech, and as we disclosed, having that in the Q1 timeframe is an important step for us.

25:32 So these are major, these are the building blocks that we're doing, we're building through the company, I would say across the cost basis and wrapping up that movement of Baytech, making sure that we establish that facility as we have the opportunity to show it to customers. We have the performance of the battery to show what the battery can do and the repeatability. Those are the three main vectors I would say that we are very much focused on to bring this product to market.

26:13 Great. I could probably take part of this question, Shauna, first. The first paid milestone in the recent JDA is projected to hit late Q1 2027. Does this mean POC is expected at this point? So I think on the first paid milestone with the recent agreement that we announced, we believe it'll occur in Q4 of 2026. The kickoff project plan and meeting is upcoming very soon and so we anticipate that that deferred revenue should be able to be recognized in the Q4 period and subsequent funded funding against the agreement occurring in the JDA will happen in future periods that are not determined at this point. but maybe Shauna, if you would like to take the POC question in regard to the JDA.

27:17 Yeah, so, and it's a development agreement with this customer. So from an IP perspective, certainly there's the joint IP really is not a factor. So when it comes to the POC, that is a standard product development agreement and that will be achieved during the course of this project agreement. There are some stages for them to focus and for us to demonstrate some performance and we'll update the market as to when POC is achieved. POC or proof of concept is really just showing that it works and that it can work in a repeatable form.

28:07 and so we're pushing toward that and I would say we're showing great improvements every day and the actual POC is something that is now embedded within that development agreement. So we will be updating the market shortly but that would be one of the early stages I would say of that development agreement.

28:34 Another question in regard to the paid development agreement. Have you noticed increased interest from potential customers or strategic partners since announcing the agreement? Has securing this agreement made it easier to advance other commercial discussions?

28:53 I would say that it is certainly an opportunity to get in front of customers, that it's certainly a step in the right direction. When we're able to get in front of A customer that has a very similar form factor, different market, not competitive, but a similar form factor, that's an easy step up to say, we already are developing this with one customer. Why don't we start working with you on your needs? So it's a shorter distance for us to then convince that customer. So we've just announced this agreement, so a little too early to tell, but certainly that pipeline that we've shared in the past is robust. And I would say this further strengthens the opportunity to be bringing in new customers.

29:44 I'll combine these two questions here. It's in regard to the funding announcement that we've made today. Are you happy with the terms in the private placement announced today? and can you confirm the anti-dilution terms in the convertible loans? And then a second question, similar, assuming the full NUC 100 million private placement is completed together with the plan cost reductions, how far into 2027 do you expect Insurge's cash runway to extend?

30:27 Okay, so I think that last one I'll just answer quickly, and that is it's a confidential. It was announced this morning, and so it's not something we can disclose now, but it is a wonderful vote of confidence by our investors. And if there is something that I appreciate so very much about what we are doing here at Insurge is the collaboration with the board and our investors. And The drive, the determination that this is an opportunity, a massive opportunity is felt every day. And so very pleased with the outcome here.