Ilika (LSE:IKA) — Half-year Results

0:01 Good afternoon, and welcome to the ILIKA PLC Half Year Results Investor Presentation. Type your question and press send. Company may not be in a position to answer every question received 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, we would like to submit the following poll. And if you would give that your kind attention, I'm sure the would be most grateful. And I'd now

0:32 like to hand over, if I may, to Steve Boydell, CFO, and Graham Purdy, CEO. Good afternoon. Good afternoon. Thank you for that introduction, Mark. A very warm welcome to all of the people that have chosen to attend this presentation. Delighted to have the opportunity to speak to you again to review our half year results. Mark, I think actually if we switch off the cameras for Steve and myself, it will maximize the amount of screen that the slides can be seen on, and that will make it easier to follow the presentation.

1:16 So this is our half year results. Actually, they cover the period from May 1 through to thirty first of October of last year. And as Mark said, I'm joined on today's call by Steve Bordell, our CFO.

1:38 There are bios for those of you who'd like a quick reminder of who we are. In fact, these bios are also on the website, on the ILIKA website, so I'm not going to labor that story. You can go and look them up at your leisure for some additional information. Thank you. So IKA is one of the few independent global experts in the design and manufacture of solid state batteries. There are two product lines that we've got. First of all, a miniature Steriax batteries that you see being held up by one of our engineers there, a wafer of such cells. And secondly, the Goliath product line, are larger format solid state pouch cells that are designed for consumer appliances and also for EVs.

2:34 So these are the addressable markets. First of all, med tech and industrial IOT for the Steriax product line. In their own right, quite substantial markets, but smaller than the huge markets that are addressable by Goliath. Consumer electronics being currently the biggest addressable market for lithium ion, but expected soon, certainly by 2025, to be overtaken by the market for EV batteries.

3:12 So why are people interested in solid state? Well, first of all, they are ultra compact, so they occupy about half the volume of lithium ion and that enables smaller battery pack design. You can imagine for people who are receiving miniature medical implants, you know, this is a serious advantage. But also actually for motorists who have EVs, you can get a much more attractive design of vehicle and of course less weight to transport if you have a solid state battery pack. The other advantage is that they are tolerant of high temperatures, so they operate at up to a 150 degrees c compared to the 60 degree maximum for a standard lithium ion cell.

4:04 And this has got advantages not only in industrial IoT where such cells might be exposed to high operating temperatures, but also it allows you to shrink the design of a battery pack in a vehicle which otherwise would require quite substantial cooling. Fast charging, also an advantage for medical device implants. If you're a patient that needs one of these implants recharged, you don't want to spend very much time plugged into a machine for that to happen. You'd much rather that it was done rapidly. But also, of course, if you're a motorist, you want the advantage of a rapid recharge of your vehicle rather than having to stop for an extended break on a motorway while that happens.

5:00 One of the things that we're increasingly asked about is how easy it is to recycle solid state batteries because actually it's a significant challenge for standard lithium ion. Currently, only about 5% of standard lithium ion cells are recycled. One of the reasons is actually it's quite a challenge to do it. They are environmentally harmful due to the toxicity of the material that the liquid electrolyte is made of. And because that electrolyte is flammable, there's of course a risk of fire, so they can't be put into a landfill or incinerated. For the oxide solid state batteries that we make, there's no risk of explosion, they're non flammable.

5:47 And also, once you've stripped off the outer packaging, you can actually use processes that are commonly available, typically from the mining industry, to extract the metals from those materials and return them to the supply chain. So how do we make money out of this? So the the model that we've got for Stereax is a very straightforward business model. We are a manufacturer. So we have a new facility that we have installed in Southampton here in The UK, which I'll talk about a bit more in a few moments, where we make cells on wafers and then we outsource the dicing and thinning and stacking of those cells.

6:36 We bring them back in for forming the batteries and then testing them before dispatching them to customers for their use. There are some companies in our portfolio of commercial interactions that have addressable markets that exceed the capacity of our fab, and that actually presents a licensing opportunity. So when we have discussions with them, there's an understanding that we will support their product development and their commercial launch. And when volumes ramp up to meet the total addressable market, that actually at that point they have the option of taking a license, which they would then use to either manufacture the cells themselves.

7:27 So some of the larger IoT and med tech companies have their own integrated cell manufacturing companies right now, part of their own internal supply chain, or they can have them manufactured by an outsourced partner. So in terms of our fab implementation, you'll recall that in 2020, we raised a £15,000,000 round in order to establish facility. We secured a lease on the location and actually completed the design installation and commissioning of a clean room. So that's a clean room within that facility that allows us to control humidity, temperature, and particle count within the facility to give us quality control over the wafers.

8:28 Actually, back in 2020, after we secured the funding, we placed orders for the long lead items, the pieces of equipment that are used in order to manufacture ourselves. They arrived at our facility once we had completed the clean room last year, and those bits of equipment were installed on time and on budget despite global disruptions to the supply chain that have affected so many industries globally over the last twelve months or so. We've now commenced the qualification of our manufacturing process. And in fact, we've opened the facility with some local dignitaries in December.

9:20 And many of you actually took advantage and attended our corporate open day, our capital markets day, when we had both institutional investors and private investors who came and had tours of the facility and and saw it operating. During this period, we've continued with engagement of a portfolio of Sterex customers in the markets that we address. We've continued to operate our pilot line and that's allowed us to provide samples to customers who have used that to progress the engineering programs within their companies.

10:11 And as the volumes of cells that they require ramp up in the course of 2022, we'll be able to satisfy that demand as the volume of supply from our new facility, which has got about a 70 fold capacity increase relative to the existing pilot line, and then ramp up for the main markets in subsequent years.

10:41 So perhaps a few moments and words on the applications that we're addressing. You know, in medical devices, these are fascinating markets with very high growth rates, smart orthopedics being one of the more interesting ones. So actually at the moment, you know, the the market is is met by the supply of pretty passive, mechanical implants and, there is a need really to, to try and improve the functionality and also surgical outcomes from these devices. So in The US, there's currently about a million knee and hip replacements, every year, and this is expected, unfortunately, to rise quite substantially by 2040, largely driven by an aging population demographic and also increasing levels of obesity, which leads to joint failure.

11:49 The cost of an explant, so when an implant fails and surgical intervention is required in order to replace the joint again, is about three times that of an implant. And so the insurance companies in particular really want to avoid this type of incident. So in order to provide a solution, you get a sensor that's implanted into the joint. That then sends information about the movement of the joint and the patient can be coached by the physiotherapist to ensure that the right post operative activity is undertaken by the patient to ensure the best outcome from the surgical intervention.

12:35 And of course, this requires batteries and a totally safe miniature solid state battery is the best solution for this application. Another very large market is nerve stimulation. This is really actually partly a solution to the opioid crisis in The US which is triggered by the need to solve, in particular, back pain problems. The vagus nerve is a potential area of the peripheral nervous system where solutions to pain relief can be implemented very effectively.

13:23 There are a number of key nerves that connect the brain to the body and the vagus nerve is perhaps the most important one. It's connected to all sorts of organs within the body and therapies have been developed really over the past thirty years to treat a number of different conditions ranging from involuntary muscle spasms like epilepsy and Parkinson's, all the way through to arthritis. So a Sterex device is small enough to fit close to the nerve. It's got, you know, lower risk implantation processes associated with it and is of course much lower cost than trying to fit large primary batteries into a different location in the body. There are relatively few locations in the body where such large primary batteries can be safely fitted.

14:26 At our Capital Markets Day, we actually had videos from four of our partners who presented. And I'm not actually gonna play these videos right now because they take about seven minutes to run. I think it's probably a better use of our time. If you're interested, you can take the opportunity to look at these videos on our YouTube channel. But the companies are very diverse, so we've got VitroVenz, which is a French technology platform company for medical devices where they are creating the electronics together with ilecosterex cells to be able to provide an energy solution to some of these different applications.

15:17 We were lucky enough to have Krishnan from NXT Stim present and talk about the usefulness of Sterex cells for his nerve stim applications. We've just come back from the NANS neurostimulation event in The US, in Florida, where Krishnan was a keynote speaker and he's a very influential player in this field. Then we also had a a presentation from Blink, which is an Israeli company, actually focused on the harvesting of energy from the Blink reflex for use in smart contact lenses.

16:04 This is an area that's not only relevant to medical devices, but also to ARVR deployments. And, you know, if you go to Silicon Valley and speak to some of the tech development companies there, it's a glimpse into the future really. And these companies are developing solutions to replace computer screens like the one I'm looking at now with actually smart lenses, which can project an image and prevent the need for you to carry around a large screen. I know it sounds like science fiction, but actually it's a glimpse of the future. And then the fourth video was from a company called Windtac, which is a wind turbine solution provider, Polish company, and this is one of the condition monitoring applications that we've talked about previously where Stereax can survive the hostile conditions that you often get in infrastructure and energy generation environments.

17:11 It can survive the temperatures that you get in direct sunlight. And here, of course, the idea is that you harvest energy from the vibration of the turbine blades, store it in the cell, and then use that to send data about the condition of the blade and basically predict if it's starting to crack.

17:35 So let's change gear and talk a little about, Goliath. Well, I don't think anybody could have failed to have noticed that, the EV revolution is underway. Strong customer demand, and, if anything, you know, a shortage of supply of technology to meet that demand. We've got a forecast here from Bloomberg, on the bottom left, showing that solid state technology is expected to dominate, the battery supply, in Europe and The US in the next decade. So the light blue parts of the columns are solid state and the purple is, existing battery technology.

18:23 So, I think most analysts are now convinced that the benefits of solid state will in time come to dominate the market. So, of course, the reason that they're not deployed right now is that they're still in development. And here's a technology s curve to explain what Goliath needs to do in order to become competitive for this application. So on the top right, you've got a diagram which shows the s curve of existing

19:00 technology. So that's the the dark blue line. You can see that starting to max out as it enters that maximum theoretical energy density zone between three hundred and three hundred and fifty watt hours per kilo dependent on chemistry that's used. And then the the green curve associated with Goliath, and then you can see their different data points and product points as we move through, get lithium ion equivalents by the end of twenty two, beginning of twenty three, and then surpass the energy density of traditional incumbent technology and and move into higher areas of maximum theoretical energy density.

19:51 But it's not just about cell energy density, and this comes back to actually the issue that solid state can tolerate higher temperatures in the context of a pack. So what people in the industry talk about is the gravimetric cell to pack ratio or GCTP. So in the state of the art battery pack at the minute, you might get 65% GCTP, which is basically the weight of the pack that's taken up by the cells themselves, and the rest of it is actually the structure of the module, the BMS, and the cooling system.

20:37 And because solid state needs a smaller cooling system, because you can run it at higher temperatures, you end up with, not only less packaging, but also less cooling from in terms of pumps, fluid, and heat exchanges. And therefore, you can get to a GCTP that's closer to 75 to 85%, and therefore, weight reductions at the pack level. So in terms of the the technical progress that Goliath has made over the last six months or so, it's been a very rapid

21:21 and pleasing journey actually to be part of. You know, we were generating more than 500 cycles without cell failure from Goliath in q two of last year. We then succeeded in bringing down the operating temperature of Goliath, and that's actually one of the the challenges with solid state in general. You get higher lithium ion conductivity, at elevated temperatures. But, of course, you know, we need these cells to work at room temperature and even colder than that. So therefore, getting adequate lithium ion conductivity at lower temperatures is a key objective. And then we increased cathode utilization and capacity in the last quarter. This is key really to getting larger capacity pouch cells of the size that are relevant to the automotive industry.

22:16 And also, of course, we need to demonstrate batch reproducibility and and baseline cell performance, which we were able to do. So the diagram on the bottom right gives you some insights into a dataset where we reproducibly were able to take three different batches of cells, cycle them, and get the same result in terms of their performance. We've also started our mechanical robustness testing. And at this point, I've got a little video actually for a bit of light relief.

22:52 So let's move to that now. Here we go. So hopefully you can see that. There's one of our scientists. He's folding one of our goliath benchmark m zero cells and now he's rolling it. You know, some people have said in the past, well, if you do that to a solid state cell, particularly one with an oxide electrolyte, it's gonna crack and fail. That one didn't. The light was still on. And here's the second test, one of our scientists using a pair of scissors to cut open a Goliath pouch. If you did this with a normal cell, please don't try that at home. It would catch fire and it would spill toxic liquid. No liquid here, totally solid, and there's part of the electrode that's just been cut off. And you can see that it's still lighting that LED.

23:40 So a very robust technology that delivers on expectations on how useful it is and how safe it is.

23:49 So let's go back to the presentation. That's fantastic. So which segments are we going to sell Goliath into? Well, actually, the segment for us that is going to be the early adoption segment is is hypercars and supercars. These are quite large pack sizes, but they are actually more tolerant of higher prices than the mass market will be. And when we first start to ramp up production volume of ourselves, like the ones pictured at the top of the slide, we wanna make sure that we're not selling into a price sensitive market.

24:37 And, of course, if you're buying a hypercar, then you're not really worried whether the pack price is $10,000 or $20,000 because actually you've paid maybe a million dollars for the vehicle.

24:49 And actually, it's an advantage being based here in Europe because a lot of the supercar manufacturers are based here too. So obviously in Italy with some of the classic brands there, but also in The UK and Germany. And although this isn't, you know, the mass market when you think about the the types of passenger vehicles that are sold in the largest volumes, it's still a significant volume in the context of the commercialization of IKA's solid state batteries. And of course, in in time as the manufacturing price and volume well, as the price comes down and the volume increases, we'll be able to move out from the segment and address the larger mass transport markets.

25:43 Also, actually, a slightly smaller format version of Goliath outside of automotive, which should give us our first opportunities to get to market early with the technology. So a a replacement for the eighteen six fifty format. So instead of two cylindrical cells, you have a a rectangular format that's half the thickness.

26:11 And this is also really for luxury products, luxury beauty products, as well as auxiliary power. And in these sectors, you can expect to get actually much higher prices than automotive, even less price sensitive, and therefore, it's an attractive early rollout for our technology.

26:42 So in terms of the timelines that we're looking at, you see the timelines across the top there. Got another couple of years of process development and tech development in parallel that will get us to module and and pack design. And then for automotive, allow us to put our products into what the industry calls mules, which are preproduction vehicles where the the performance of components is tested. And then we get through to pack validation prior to gigafactory scale up and mass commercialization. And on that route, you can see

27:22 a number of cells that are different generations with steadily increasing energy density and power performance or c rate as the industry calls it.

27:35 So in terms of our physical facilities, we are currently operating in a development facility that we call our pre pilot plant. We have just this year completed the initial engagements with Honda, McLaren, and Jaguar Land Rover where we've worked together with them to define specifications and develop our first prototypes. Last year, we did a a successful placing for 25,000,000, which is in preparation for our scale up to the ILIKA pilot level that you see there, which will be on the same footprint that we currently occupy here in The UK.

28:22 We're working together with Coma, which is the factory automation arm of Fiat, part of the Stellantis Group.

28:31 And that will also fund our development through to manufacturing readiness that you see in mid twenty twenty four when we'll move to a mega facility similar in scale to the UK Battery industrialization center or UK BIC with which we have a framework agreement.

28:53 And that's come our collaboration will allow us to prepare for that transition. And then beyond that, we're likely to license or form a JV for Gigafactory production.

29:10 So, Steve, at this point, I think I'll let you just summarize our financial results, please. Yeah. Thank you, Grant. So we released this morning our half year results for the period to 10/31/2021. They're exactly in line with the, the trading update that we put out back in November, particularly on these three key lines. So turnover was was down relative to the same period last year. That's because last year's included a full period of grant revenues associated with the the three initial r and d programs that we had. Those have now completed. There's there's a bit of gap in in funding. We're anticipating additional funding to be further from the Faraday battery challenge later this calendar year, but that's the rationale for that that reduction relative to last year.

30:04 That turnover or grant reduction has resulted in a widened EBITDA loss, but we have also incurred some increased operational costs as we've been commissioning Sterex facility. And we've also been intensifying our Goliath development efforts on the back of the fundraise that we completed in July that gave us the certainty to press ahead with that. The fundraise, obviously, bolstered the cash balance at the period end. It was just under $28,000,000 relative to $12,400,000 for the prior period. On the next slide, I've just outlined the summary of that raise. There was an institutional placing of about 18,000,000. Then there was an open offer, which I know a number of you may well have participated in as well as the retail offer, which supplements that such that after fees, we raised, just under 24,000,000.

31:02 Now the specified uses for those funds were, 10,000,000 to accelerate the Goliath development. That's primarily by bringing on, more more staff to accelerate that development, but it's also 5,000,000 has been earmarked for the, the increase in the Goliath prepilot facility, so to make that tenfold increase in productivity. The, the other development in the period is that, we've upgraded from the, the pink sheets, which is basically, sort of relatively unregulated market in The US, which was not within our control to, an OTCQX best market where we actually control the listing. We're able to issue RNSs in The US at the same time as they're released to the the market in The UK.

31:49 We've done that because we had an increasing interest from The US, and actually US retail shareholders now make up just over 15% of our register. There was a there was a clamor from them. We were getting a lot of direct requests for, you know, how to how to trade in our shares. This OTCQX best market allows them to trade on most of the online dealing platforms in The US, and they can trade in in US Dollars and in US working hours. So that's that's helped improve the the liquidity of our of our stock over the last few months.

32:26 I'll pass you back to Graham to summarize. Thank you, Steve. So I think from what you've heard, in summary, we're strongly positioned to progress the scale up of Sterex technology through this fab implementation, complete the process and product qualification, and commence commercial sales later on this calendar year, which will be in our next financial year given that it starts on the May 1. And the Goliath story is more about technology advancement

33:05 and also actually the partnerships that we've started to create and will mature through these defined technical milestones. And of course, both of these technology platforms position us for significant revenue growth opportunities going forward. Thank you. That's great. Graham, Steve, thank you very much indeed for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. Dashboard. Graham, Steve, we we did receive a a number of questions throughout today's presentation, and I think there are a number of common things within the questions that have been submitted during the live event. So what I propose to do is maybe just ask you a few of these pre submitted questions and then ask if you would be so kind as to look at the live q and a.

34:01 One of the questions that we received ahead of today's event is if ILOCA three three d prints its batteries, couldn't it scale up at a lot less cost and money? Maybe you could just give a little bit of color on that. Yeah. Thank you. Yeah. Three d printing is actually a a really useful technology and is is used very broadly, actually, by a number of industries. In fact, actually, it was originally called rapid prototyping, and that's really what it's used for. It's it's useful for rapid prototyping of a wide range of items. So it's generally used for evaluating early product designs or carrying out short production runs rather than for mass production.

34:53 So I think, you know, most analysts would wonder if three d printed batteries could really be manufactured at an affordable price. Yeah. Thank you.

35:09 Thanks, Graham. Just moving on to the next question. I understand that margins from Sterex sales will differ across customer and segments. However, what average gross profit margin do you currently expect to be generating from the newly opened facility?

35:23 Are you forecasting positive bottom line results from Sterak's division since twenty twenty two, twenty three?

35:32 Steve, do you wanna take that one?

35:35 We expect an average gross margin of about 50%. I think it's probably gonna be slightly less in the industrial Internet of Things applications, and there are applications in the medical devices sector where it could be be higher than that. The initial revenues from Sterex will offset the the Sterex increased spend next financial year. And thereafter, we expect the Sterex business to make a a net contribution to group overheads and help help actually contribute towards the the Goliath development program. Thank you very much indeed, Steve. And perhaps a a final pre submitted question, a fairly open one, but what are the company's ambitions over the next two to five years in terms of products and profits?

36:20 Yeah. So, you know, regarding Sterex, we built a fab to to manufacture our m 300 product. That's gonna be a a 300 micro amp hour product, specifically for the the market segments that we've talked about today. You know, and the process for that is currently being qualified. Commercial sales of that product will commence in the next financial year. And our roadmap for Stereax includes a a high temperature battery that we call our AP battery, and that's really for Internet of Things, industrial Internet of Things in particular. And actually a larger capacity battery, which we call our c one, which has got the same format as an m 300, but it's got a higher energy density for for medical implants. They're both due actually to be launched next year, '20 so '23.

37:18 And they'll be followed by an even larger capacity SteraX medical implant battery, our c two, which has got a thousand micron powers later on actually in in 2023. We'll have a product for those smart contact lens applications scheduled in 2024. So you can see there's actually a nice runway of different products as we go forward for Sterex. For Goliath, the p one is early product release, and that's gonna be sent to development partners. And then we'll have increasingly energy dense cells, in particular for EV deployment, which will include the p two at three twenty watt hours per kilo, and then the p four at even higher energy density levels by 2024.

38:13 So, you know, in in terms of revenue generation and and profit, the Steriax product line will allow us to fully maximize our fab capacity. And, you know, we've previously given guidance that that fab should generate revenues at capacity of between 12 13,000,000 when fully utilized within the next few years. The Goliath product opportunity is a larger commercial one. The markets are bigger and, you know, that will be ready for transfer into mega scale manufacturing by 2024, 2025, and we'll we'll build up revenue from that point onwards, driven largely by the scale of the the factory deployment that we land on for Goliath. At the moment, it's looking like we want to build a a mega factory as opposed to a gigafactory for the initial commercialization, and we'll be moving forward on that basis.

39:20 That's great. Thank you very much indeed, Graham. And, of course, there were a number of other pre submitted questions. I got a little bit more technical in nature, which obviously we'll we'll we'll review post today's presentation. You have received a considerable number of questions throughout today's meeting. And and perhaps if I may, Graham and Steve, if I could just ask you to open up that q and a tab and then just read through perhaps ones where we haven't touched on or perhaps areas of interest, and then I'll pick up from you towards the end. Fantastic. Alright. So maybe the the first one that has had a couple of votes is from JB. What are the the relative merits and demerits of sulfide electrolyte solid state batteries as used by Toyota in solid power versus oxide electrolytes as ILIKA uses. So this is an interesting technical discussion, a live debate really.

40:15 So, you know, sulfide electrolytes were one of the first types of electrolytes that were invented and demonstrated to work in the solid state battery. And they were picked up by Toyota through an academic collaboration that they had in the University of Tokyo. The the advantage is that they've got high electronic sorry, a high ionic conductivity and are electronically insulating, so they function as a solid state electrolyte. They're also quite malleable, so it means that you can get a reasonable contact between the positive and negative electrodes when you make the cell and of course that reduces the transfer resistance of the lithium ions as they move backwards and forwards through the cell.

41:15 The the sulfides though are a little bit tricky to to handle in a factory environment because they do give off toxic gases. So hydrogen sulfide and s o two and and the those gases need to be managed at very low levels. Otherwise, they pose a a risk to the workforce. And also, actually, my latest intel from our suppliers are that, actually, the sulfide electrolytes are selling at a substantial premium to the types of materials we use in the oxide electrolytes of ILIKA. So actually, tenfold increase in price relative to oxide electrolytes.

42:03 So the the oxide electrolytes that we use technically are are more challenging to get to work. They typically have got a lower intrinsic ionic conductivity, which leads to higher resistances in the cells, so it's important to use the right type of additives, and form the interfaces as effectively as possible between the electrolytes and the electrodes. And that's really part of the technical development that we're doing here at ILIKA. Should I take the next one? Yeah. So the one from JB, which says, can you confirm that you'll be selling Steriact's product made in fab one from financial year 2023, which starts in May 2022?

42:51 So, yeah, I think the answer to that is is yes. We can. We we're still going through the the process and product qualification of the fab, which we anticipate to be complete in the first half of this calendar year. So the second half of this calendar year, we'll we'll see Sterex product actually being sold to our customers, and we've got a a number of preorders that we'll be looking to fulfill in that period. Okay. And now we've got another one here. This is from Paul. He says, after trials with ILIKA, Honda has now entered into a strategic partnership and invested in SES, which is solid energy. What should investors read into that? And does ILIKA have OEM EV partners?

43:38 So, yeah, if you were an automotive company like Honda, you would have a number of partnerships around the globe. And, of course, a lot of these automotive OEMs are backing a number of forces and are making multiple investments. Honda are no exception, and, you know, we don't have an exclusive relationship by any means with Honda. We still have an open and regular dialogue with them, and they're part of the portfolio of OEMs and supply chain partners that we interact with. So I would say in terms of what investors should read into it is that they should probably congratulate Honda on spreading their bets and keeping an open mind for open collaboration.

44:35 Let's have a look to see if there's some other stuff that's different. Yeah. There's a question from Adrian here. Do solid state batteries perform well in very cold temperatures as well as high temperatures, or is there a cutoff temperature below which performance noticeably deteriorates? So unfortunately, as one of our favorite Star Trek characters said, you can't beat the laws of physics. Unfortunately, for all batteries, ion mobility reduces at lower temperatures. So normal lithium ion batteries actually don't perform particularly well in very cold temperatures. And and that is a challenge actually for pack design, but that can be overcome by having some pack heating to start cell cycling when you get particularly low temperatures.

45:36 And that's actually incorporated into traditional lithium ion pack design right at the minute. So actually, there's no hard cutoff below which, you know, you you can't get any of these cells to work, but it does deteriorate gradually. Once the cells actually start cycling, they they generate their own heat. So actually, you know, once you've started the vehicle and have driven it down the road, there's no need for sustained heating. Actually, the the intrinsic warmth of the pack keeps the the cells in the the sweet spot in terms of the operating zone. Let's have another question here. So from Simon, it says, do you have enough customer commitment to fill your in house fab, or are they still evaluating samples?

46:32 So, yeah, actually, we will need to continue to debottleneck an increased capacity in our in house fab to meet customer demand. We've got early commitment from a portfolio of customers that will take initial production from the fab. And over the next few years, we expect that to ramp up until the fab is fully utilized. So, yeah, we we have patiently waiting customers, and actually the pressure is on the operations team to deliver those samples. So one from Adrian here. So how much more technical progress is there still to be made with solid state batteries?

47:25 Will it be incremental or are there possible? So I think, you know, with Goliath in particular, this is a classic technology s curve where, you know, the incumbent technology is still, in practical terms, performing better than the the solid state next generation cells that are being developed, not only by ILIKA, but actually, you know, by our competitors as well. And you're gonna get that parity point, which most people expect next year when actually the advantages of solid state can be combined with higher energy density, and then you will get an improved outcome.

48:17 I think, you know, the the theoretical justification for that is very clear. The initial data that's coming out of prototypes is also extremely encouraging. So I don't think there are any, you know, big breakthroughs that are waiting to happen. It's more of a case of the classic Japanese continuous improvement that comes from and, you know, the the relentless pursuit of excellence in order to deliver those outcomes. So got a question from Christopher here. So what yields are you achieving on the Sterex line? So, you know, on our pilot line, we were regularly seeing yields in the order of 85 to 90%.

49:11 With the Steriax manufacturing line, we're still qualifying the process as we were discussing earlier. So we are lower than that at present, and that's really the objective of carrying out that process optimization to make sure that we've got commercially competitive yields that are, you know, in the nineties and above. So another one from Christopher. Have you continued to see improvements in the performance of Goliath cells? And are you still on track for a commercial device? So, yeah, I think, you know, as we've gone through the presentation, we've demonstrated some of the improvements that we've seen in 2021.

49:59 We're continuing to see that actually in this year, we've got a very steep s curve to climb and we are definitely still on track for that commercial device. So here's another one from Adrian, actually. Some quite good ones from Adrian today. So besides lithium, what other metals and minerals are commonly used in solid state batteries? So, you know, actually, they they often use fairly well understood cathodes. So for the automotive industry, the cathode of choice is NMC, which is lithium, nickel, manganese, cobalt oxide.

50:47 So, you know, there's always a lot of discussion in the industry about the price of cobalt in particular and the ethics of cobalt mining. And, you know, that is that's just as important for solid state cells. There are other different types of cathodes that can be used like NCA, LFP. You know, the the big attraction for LFP is that actually there's plenty of iron in the world. So LFP stands for lithium iron phosphate. It's a relatively inexpensive, albeit lower energy density solution, which has been heavily commercialized in China and, you know, perhaps can be used increasingly in the mass market.

51:40 Even Tesla actually have talked about using LFP based chemistries. Other, you know, metals that are important are, of course, copper for for current collectors and aluminum as well. So another question here from Adrian. Is the outer casing for Goliath some sort of plastic? Actually, it is a it is a foil. It's a metal foil that we use for that, which has temperature resistant polymer associated with it. So let's have a look. From Malcolm, we got you state that Goliath is now capable of operating at room temperature, but my car was sitting at minus five. Yeah. Mine too.

52:32 Actually, I had to scrape the the frost off the windscreen this morning. How will you cope with this? Yes. So the way that actually you generally do this is that you you warm the battery pack for starting. There are technologies that already exist for that. And then once the battery pack starts to cycle, you can deal with those lower environmental temperatures. One from Paul here. What's stopping more rapid acceleration of Goliath's capital skills or ambition? So actually, last year, in the summer, we raised 25,000,000, which Steve was outlining before, for the additional capital that we need in order to debottleneck the facility that we've got and turn our pre pilot line into a pilot line.

53:25 Of course, there is the the needs to hire a skilled workforce. And actually, the market for, you know, battery scientists and engineers is pretty tight because, you know, there are lots of organizations, not only solid state, but also traditional lithium ion batteries that are hiring quite aggressively. And so, you know, that capital that we raised allows us to be able to attract some of the key skills that we need in order to, you know, continue to scale our business. We've certainly got the ambition and, you know, I believe that IKA is in that leading cohort of cell designers that's well positioned for for growth and market expansion going forward.

54:16 Shall I jump in? Give you a break. Yeah. Julian s has asked why no interest in computing devices, watch, phone, tablet, laptop, is it temperature or price? I think fundamentally, it's it's the fact that the the batteries for those devices are produced on such a scale that it would be priced, that would be the initial barrier. The scale that we're at, we're looking at devices where we can demonstrate a a performance benefit, be that at the ability to operate in harsh environments and temperature, be longer lasting, not easily replaceable, low cost applications.

55:02 I mean, ultimately, once we're we're at mass market scale ourselves, you know, making on the gigascale factory size. There's no reason why we wouldn't be cost competitive, but it it doesn't seem to make sense to try and go head to head with these, these devices currently, which are well served by, the mass market applications. Yeah. Another one from Adrian. We've got, what are you most concerned about that might disrupt your overall plans? Actually, one one thing that I think investors in this sector should take some comfort from is that most analysts don't think that the sector is tending towards a monopoly.

55:49 There's plenty of evidence from the existing lithium ion industry that actually multiple solutions have been adopted. We were talking about some of the the different chemistries that are used in lithium ion earlier. And actually, I think, you know, these different solid state solutions will find different niches. So it's not really competitive disruption. You know, obviously, the pandemic hasn't helped, but, you know, fingers crossed the supply chain will start to recover from that disruption. And, you know, I I also don't think that it really relates to raw material shortages because the materials that we use in our solid state cells are generally very available. I mean, we've seen some volatility in commodity prices recently, but I think that's more related actually to short term supply issues rather than, you know, deposits available in the ground.

57:04 Let's have one from Ben here, actually. So as a long term holder, the time scales to gigafactory seem very long, especially given the competitive landscape. What would it take to massively accelerate this and how much would you need to raise and why haven't you asked us if we would support this? Okay. So actually, when you compare our time scales to gigafactories, I think when you put our plans alongside other organizations, they appear just as aggressive. And, you know, I I think that they are, you know, they're they're they're pretty sensible and rational plans. What would it take to to do it ourselves?

57:52 Well, you know, my rule of thumb is that for every gigawatt hour per year of capacity, you need to invest about 500,000,000 US. So that is quite a substantial sum. I know that some of our competitors have raised capital to that effect, but I don't think that actually it would give our shareholders the best return on capital to build their own gigafactories. And actually, I'd I'd much rather manage the risk of that large scale manufacturing implementation by forming a JV with a manufacturing partner that would allow us to deploy our technology and contribute it as a an in kind contribution to the the JV.

58:44 And I believe that that would be actually the best outcome for ILIKA's investors. Question from Mike. How confident are you of achieving the forecast increases in Goliath kilowatt hours per kilo? So, yeah, actually, you know, I'm pretty confident. I think we've got a a best in class team that has been working on this technology for a number of years now. And, you know, we're making sustained progress. I think that there is always a bit of a technology risk with with with new solutions like this, but we are in as good a position as anybody out there to come up with the solution that the industry needs.

59:43 There are a few questions lower down that are talking about competition. I think it's a theme a bit lower down. Maybe we should address some of those. I'm just think so. One from Douglas k. How competitive is the solid state battery market? I think we'd we'd have to look at the Sterex product and the Goliath products in different ways. There's there's not actually that much competition for our Sterex sales. There's a a couple of US based companies that are relatively modest scale that are sort of competing in that market and and solid state battery sense. One's called Symbit, spelled c y m b e t. They're possibly one of the closest to us. I think the market for EV batteries is is much the competition is much broader.

1:00:34 There's a significant number of battery developers, the likes of QuantumScape, who we've mentioned previously, Solid Power, both relatively well funded companies that have performed SPACs, and they're looking to create their own gigafactory. So they're looking at a different market entry, But there are a number of other players with different chemistries, so we're approaching in that area. Do wanna expand on that, Graham? You've probably got a broader perspective. No. No. I think that's that's a good overview, actually. You know, there's I would say, you know, in terms of competition, you've got the technology development activities of the incumbent battery manufacturers, you know, the the current lithium ion battery manufacturers that have got substantial resources that they're deploying in the field. So, you know, you you look at Panasonic in Japan.

1:01:36 In Korea, you would include SK, LG, and Samsung in that. And then in in China, of course, the big companies like CATL and BYD. So, you know, those big companies don't really have a need to publicize what they're doing because, you know, they're not really trying to attract investors. You know, they've got their own free cash flow that they're deploying in r and d. So sometimes it's a bit tricky to follow exactly what they're doing unless you look closely at the patent literature. And then, of course, you got the technology developers like Steve was just listing. A lot of them are in The US, but also some in in Asia as well.

1:02:23 I think it would probably include Prologium in that stable. And, you know, you you've got to make sure you're in that leading cohort and innovating in a competitive manner to attract customers and and investors. But, yeah, I I think that IKA is is well positioned within that competitive landscape. That's a question from Douglas k about how sensitive are our financial assumptions to the changing prices of the various elements of the products. This is something that's been raised a couple of times today or actually in other investor meetings. From the Sterex side, the the bill of materials of the the elements is is is modest compared to the actual processing costs. So the increase in lithium price there has has little impact on our on our offering.

1:03:21 I think, clearly, it's gonna make more of an impact on on the Goliath sales when they come to market given the the bill of materials there is represents about 8085% of the total cost of the battery. So we will be exposed in the same way as all other battery developers will be to increasing raw material prices. Graham, Steve, I might just jump in. Just mindful of every question that you seem to answer. There's another one on the as well as it quite shortly afterwards. And, obviously, just just mindful of time as well, and you've been pretty generous so far. We can make all these questions available to post the meeting. So if there's anything perhaps that flags up that's a that, you know, you'd like to give an additional response, we can publish those to investors on the call post.

1:04:07 I don't know if you'd want to have a a quick final scan through and maybe pick up a a question to wrap up with. And then what I'd like to do is just ask you for a few closing comments, and then I'll redirect investors to give you their feedback, if I may. Fantastic. Well, why don't we take the one that's had the most votes? Actually, JB's right at the top there. Will you be licensing Sterex IP to your larger clients in coming years? So, yeah, the answer is definitely yes. You know, that's really our business model for Sterex is that we aim to fill the facility that we've currently got. And, you know, there there are customers within the current portfolio that we are speaking to who have, an addressable market, is by their own estimates larger than the entire capacity of our fab.

1:05:03 And, you know, what we will be doing is saying to them once we've supported their development and initial commercialization activities, you can take a license and you can either, you know, build your own facility or use a third party fab and manufacture under license from ourselves. So that's a key part of our growth strategy. It's perfect. Thank you very much indeed, Graham and Steve, for updating investors today. Look, I will shortly redirect investors to give you their thoughts, expectations, and their feedback. I But guess before doing so, Graham, if I could just ask you for a few closing comments just to wrap up with, and then I'll redirect investors. Yeah. I'd like to thank everybody actually who's taken the time to participate in today's broadcast and especially those that have gone to the effort of submitting questions.

1:05:56 It's been a very lively and well informed q and a session. I think Steve and I have really enjoyed participating in that. And, I look forward to interacting with you all, in the future. Thank you. That's great, Graham, Steve. Thank you very much indeed for updating investors this afternoon. Can I please ask investors not to close this session as we'll now automatically redirect you in order that can provide feedback so the management team can really better understand your thoughts and expectations? It may take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of ILIKA PLC, we'd like to thank you for attending this evening's presentation, and good afternoon, or should I say good evening to you all.