Ilika (LSE:IKA) — Investor Update

0:00 Welcome to the ILIKA PLC Investor Update. Throughout today's recorded update, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time just using the Q and A tab situated on the right hand corner of your screen. I'd now like to hand over to the management team from ILIKA. Graham, Jason, good morning. Good morning. Many thanks for the introduction, and many thanks to everybody who's taken the time to listen to this presentation this morning. So we're here to talk about ILIKA and

0:31 its latest capital raise. So first of all, a quick overview of the company. We are, of course, a leading developer of solid state battery technology. That's what we're gonna talk about for the next twenty minutes or so. So we have two product lines. On the one hand, we have our Steriax miniature batteries, which are licensed to Certek, which is a leading medical device manufacturer headquartered in The US. Steriax batteries are miniature cells that are used primarily to power miniature active implantable medical devices or AIMDs as they're often referred to, and also for wireless industrial sensors, so industrial IoT.

1:27 This is a manufacturing partnership that we've got with Certech Medical, and it is designed to deliver on an exciting pipeline of existing orders for applications that we'll come back to you later in the presentation. There's all sorts of advantages of using Stereax batteries that you see listed here. And, we'll come back and recap those later. On the other hand, we've got our Goliath solid state batteries, which are designed for large format applications, particularly for EVs, and cordless consumer appliances. We've got a similarly strong pipeline of evaluation agreements in place with 21 OEMs and tier ones around the world who are evaluating this technology as it moves through its road map through our minimum viable product, which is due in calendar year 2026 of next year.

2:30 Again, a series of advantages, benefits that we will recap as we go through the presentation. So in summary, we we have a company that has two product lines that sell into diversified end markets in very rapidly growing sectors. We've got an asset light business model, and I will explain this in a bit more detail as we go through the presentation, with products actually in particular for the Goliath product, which is already proven on gigascale production equipment. We've got a long track record of innovation and r and d and a strong platform of 62 patents,

3:19 meaning that we're now ready for commercialization. And we're going to build on that strong foundation of over £51,000,000 that's been invested in ILIKA to date by commercial funding and grant support.

3:39 So this is a really exciting time for the company. You see that summarized really in terms of very recent news flow and what you can expect over the next six months. The blue top half of these arrows refers to our Sterex business, and the green bottom half of the arrows refers to our Goliath program. So focusing first of all on Sterex, we've just recently announced that we have completed commissioning of the equipment that we sent across to Certec as part of the tech transfer that we're doing there. We're right in the middle now of a series of engineering lots, which are being manufactured at Certec, and we will announce the completion of that in short order.

4:30 And then we can look forward to the commencement of that product validation program for our minimum viable product, our M300, and the commencement of customer product delivery towards the end of the year. It's been a similarly exciting time for Goliath. Just recently, we announced the scale of validation of the work that we've been doing at the UK Battery Industrialization Centre or UK BIC, which really demonstrates that not only does this technology work in our lab and on our pilot line, but also, actually at gigascale. So that gives potential licensees significant comfort that we can transfer this technology on a significant scale without much technology transfer risk.

5:25 We've also reached a 50 amp hour capacity target for the development of our d eight prototype as part of the end of our history faraday battery challenge program. And this is really the the maximum scale that we need to get to in terms of battery capacity in order to commercialize that product. We've also demonstrated that the cells that we were able to make using materials that were manufactured at UK BIC resulted in an improved performance of our benchmark batteries. And, you know, this is really comforting and demonstrates that once we get to scale, we can look forward to enhanced yield and enhanced power density or ability to charge the batteries.

6:19 We've also just recently announced that our p one prototypes that we released to customers in the summer of last year, 24, have actually done what they say on the TIN. So they've received a third party validation, and that was really exciting for us. We'll come back to that later. And we are currently moving through that test program for our p 1.5 batteries,

6:50 which are one which are five times larger than the prototypes that we shared last year. So they're what we call our P one point fives. We'll be releasing them later in the summer and then moving on to the build and test program for those 50 amp hour p two prototypes, which again, you know, five times larger than the p 1.5. So 25 times larger than the p one prototypes that we released just a year ago, and we will be providing them to customers for their evaluation. And that should give us a really strong platform for potential licensing discussions early in '26.

7:37 Jason, maybe a few words from you, please, to summarize the transaction that we're contemplating today. We're looking to undertake an equity placing of ordinary shares to raise approximately £3,500,000. That is being done in two parts, through an accelerated book build process looking to, achieve in the region of 3,000,000 and a retail offer of in the region of £500,000. We are expecting a director subscription through that, and all of this is being done under the already granted authorities of the company from the AGM. In terms of the use of proceeds for that 3,500,000 in total, we're looking to use that to bolster the working capital as we move through to commercialization for both sides of the business. From the stereotype side of the business, we are looking to utilize up to 1,100,000.

8:33 And that's to support the tech transfer at Surtech, the testing and validation of the first cells coming off the Surtech production line, and then customer support as we hand those over to those first set of customers. On the Goliath side, we're looking to utilize £2,400,000 to support the development of the Goliath technology as we move into the later prototype stages for our p 1.5 and p two product items, purchasing the final pieces of testing equipment to test out all of those cells that we are building up and to execute the test program through to customer support as we hand those across into tier ones and OEMs.

9:20 So overall, that is to deliver enhanced commercial partnerships across both sides of the business, and to derisk the investment by delivering proven cell technology out for Goliath MVP, and really enabling that Goliath option to license. Thank you, Jason. So a few minute a few words on our business model. We are an asset light company. However, we have demonstrated our product on production intense equipment, and we believe that this is a really capital efficient strategy, and supports rapid industry adoption. You can see, on this chart how that is structured with ILIKA in the center providing IP and prototype batteries for evaluation to both manufacturing partners. We often refer to them as tier one partners on the left hand side.

10:22 And also OEM brands on the right hand side who sell their products to consumers. And in a return for providing this IP covering both materials, the products, the batteries and the process for how you make them. We receive licensing fees and royalties on the sale of these. And in the early days, we also receive grant support and engineering fees often from the OEMs to support that product development. So we believe that this is a very efficient and and sensible model because IKA is a specialist in technology development, and we work together with organizations who have a low risk capability to be able to take our technology and implement it in a large scale manufacturing environment.

11:27 Let's talk a bit about Sterex and the market opportunity. This is a very exciting opportunity to really move with the next wave of health care innovation that is sweeping through the industry and the increasing use of smart electronic devices, so these AIMDs that we were talking about, in order to address a series of conditions, and illnesses, without the use of pharmaceuticals. So some people refer to this as the electroceutical revolution where effectively you're using very small electronic devices to, deliver a therapy or stimulate the body, to respond to conditions, in order to get, an improved patient health.

12:24 And these range across a number of different segments. First of all, orthopedics. So these are often smart orthopedics, so hip, knee, shoulder replacements that involve a smart sensor that can capture data often related to the movement of these implants, and it's often to do with the physiotherapy that the patient goes through after the operation. And if you can capture that information and coach the patient through that physiotherapy, it radically improves the chances of a successful recovery from that surgical intervention.

13:12 Then we have neuromodulation, and this is an exciting area where you stimulate the peripheral nervous system in order to address cognitive disorders, chronic pain conditions, in particular lower back pain, stroke rehabilitation, and also psychiatric disorders. And these are really small devices that are connected to specific nerves in the body, often actually the vagus nerve, and deliver nanoamp currents in a specific frequency, and, this can offset some of the conditions that you might expect from these illnesses.

14:01 Also, implanted sensors are becoming, more frequently used in particular, to measure things like, blood pressure and also oxygen

14:13 concentration or partial pressure within blood, to make sure that patients, give a a trend of data rather than just infrequent data capture which can be less successful in diagnosing and treating conditions. Then we have ophthalmic applications and this can include diabetes and glaucoma, monitoring.

14:40 Actually, there are very few batteries, outside of the stereax geometry that are useful for this application because these batteries are embedded into contact lenses, and so you need a very thin battery that doesn't irritate the eyelids. And therefore, you know, there there there's very little competition for this particular application. And then finally, should mention orthodontics. Not really an implantable device because these sensors are placed into braces or retainers as you might call them, often to to measure compliance, make sure that patients who've been diagnosed retainers actually do wear them in order to straighten their teeth, but also to pick up certain markers, certain biomarkers

15:34 such as pH and glucose concentration that you might get in saliva. Very large market, multibillion market growing very rapidly. So what does Sterex technology look like? There you see a picture of it on the bottom right of this slide. This is a very small device. Actually, it is about two and a half by five millimeters, and just over a millimeter thick. So, these are tiny little devices that would fit on the end of your fingertip. And the benefits that these confer are that you get a reduced surgery time because of the reduced size of the devices.

16:24 Clearly, the smaller the surgical intervention, generally, the quicker the the surgery can be and certainly less invasive. We can put these implants close to the point of therapy because they're not large, and you've got far more flexibility about how you deploy them with a patient compared to some of the existing medical devices that may be used as implants. You enjoy a long life from, these devices. They they last a long time and can be recharged over a long period of time. The user can actually recharge them at home using inductive charging, so usually through a collar or a belt, and that that reduces the requirement in order to access other charging methods.

17:20 And the other advantage is that you can use them to power a Bluetooth radio. Bluetooth radios are really important for a lot of these sensors. They send information to a mobile phone, which is then relayed into a database. And, you they're quite power hungry, these chips. So you need a high power battery that will deliver a pulse of power large enough to be able to send this data. And compared to existing medical batteries, are often miniaturized coin cells, they have a lot less packaging associated with them because these batteries are made on a glass wafer and have a very strong and compelling safety profile as well as been able to tolerate some high temperatures that might be necessary for some sterilizing processes that they need to go through prior to deployment.

18:27 So there's a real, momentum that's building with the Certech relationship. You can see on the top left there the commercial pipeline that we've got in place with the end users we were just talking about, the 21 customers that we've lined up who have placed 24 orders with us. Some of those customers obviously have placed multiple orders with us because they've got multiple applications. We sent our first engineering equipment sets across to Certec in order to start manufacturing these batteries at their facilities. That equipment is now cleared as user acceptance tests successfully. We are processing the first lots of batteries, what CertiK called the engineering lots, in order to demonstrate the efficacy of the products that is made using this process.

19:23 And we are starting to produce trial batches of the batteries, for our m 300 launch. And, you know, the next milestone to look out for there is the recommencement of the M300 batch production towards the end of the year. So what that will start doing is generating product related revenue for the company, commercial revenues via wafer processing because we do that as a service to Certec as part of the product manufacturing, and a license agreement initially based on profit share and then reversing at larger volumes to revenue share.

20:09 It's a ten year agreement that we entered into, well, over eighteen months ago now in the summer of twenty twenty three, And we believe that that really validates the technology from an industry perspective. It's also got the advantage actually of giving us access to an organization that has got proven manufacturing ability at scale and has also got a large business development team that can inject pace and breadth to the business development activities that we have planned. There's also a fantastic alignment, of industry focus here. So we've got a company that has got a stated strategic focus on AIMDs, so we couldn't have chosen a better partner in that regard, and we believe that this partnership is really enabling a faster adoption of the product.

21:11 Jason, perhaps a few words from you on how those revenues are expected to build up over the coming period. Thanks, Graham. So the graph that's being presented gives an indicative view of how the cumulative revenues will, grow from the Cerex product line. Number of different layers, that build up as we develop and commercialize that product line, starting really with, as Graham has already mentioned, a wafer processing income that we received. So we've retained, one of the parts of the production process, the cathode deposition process here in The UK, and we will operate that as a subcontractor to Certik and receive a commercial fee for that. So, really, that starts, towards the end of this current year. We would expect to be driving revenue from that, and that builds to substantial, income over the period, to allow us to bring a base income.

22:07 Following that, we would have nonrecurring engineering or NRE, And this is a big theme within the med tech sector. And, really, we've been guided here by our interactions with Certik who drive a substantial revenue themselves from their own development and NRE activities. So this is really around us either certifying our Sterex batteries for existing applications to make sure that they work, properly as the customer wants or where the customer has a specific need in terms of size, shape, power, or deployment of the energy, where they would pay us to develop a variant of the Sterex battery to suit their particular needs and the application that they're looking to deploy or already have deployed. On top of that, Graham mentioned when talking about the contracts, the factory royalty revenue, as he said, profit share in the beginning. And then as volumes ramp up, that flips over into a traditional percentage royalty rate based on revenue.

23:04 And, really, we expect that to grow as those products move through that certification process. And then finally, the contract is designed to ensure that we have protected ourselves as we go forward from either very large opportunities that come still within the med tech sector or opportunities that might come outside in industrial Internet of Things, and allow us to issue additional licenses so that we can ensure that capacity to produce the Sterex batteries grows along with that demand, and isn't limited by the specific needs of maybe Surtech aligned to the med tech sector so that we can ensure we don't miss any really high volume applications that may come to fruition as we get product into people's hands. And that really, as we go out, will give us a substantial revenue for the CEMEX line of products.

23:54 Thank you, Jason. So let's change gear a little bit and talk about Goliath and the large format batteries, which are designed for electric vehicles. Despite the headlines, actually, last year, 2024, was a great year for EV penetration and growth across the world. There was a 24% growth in the number of EVs sold, so very much a growing market opportunity. There are still some reasons though why people choose not to make that transition from an internal combustion engine to an EV. The biggest one actually is a concern regarding recharging time, so how long it takes to recharge the vehicle.

24:44 Driving range, sometimes referred to as range anxiety. And then thirdly, a residual concern about battery fires. And, actually, Goliath batteries can address all of these concerns, and can help the industry drive adoption of EVs. So we've got a series of of benefits, that solid state batteries, confer on OEMs and and suppliers, and this is why most of the OEMs out there, have got solid state batteries on their technology roadmaps. In particular, people are interested, of course, in lower production costs, a longer cell life and enhanced safety, lower pack weight, which actually translates directly into a longer range, and a fasting sorry, a faster charging time, which addresses one of the reasons we were just talking about. We've done a study with a UK pack designer called Balance Batteries, and they've modeled a pack using Goliath batteries with a state of the art electric vehicle, a Hyundai Ioniq five, and they've demonstrated that in that particular example, we would get a very cost effective deployment of our batteries, saving £2,500

26:15 on the bill of materials relating to the battery pack. And that corresponds to a weight saving of 20%, as well as a 33% faster charge time. So reduction in expected charge time from eighteen minutes down to twelve minutes. And all of this is, a result of the choice of architecture and chemistry that has gone into Goliath batteries. And all of these claims have been validated through tier one and OEM engagement. Here's a statement that we've got from the head of battery development at a UK based global tier one electrification company, and they are confirming that we're in that cohort of leading solid state battery developers.

27:10 And in that cohort of leading batteries that they've tested, and they're very much engaged in working with us as we move through our road map. So here we have a video that I'm gonna play shortly that just demonstrates some of the safety benefits of EVs. Actually, EVs are safer than normal vehicles. There's some great data from the Swedish Fire and Rescue Organization in 2023 that demonstrated that EVs actually are 17 times safer on average than an internal combustion engine driven car from a fire risk perspective.

27:56 But that is because there is a lot of engineering that has gone into making EVs safe. There's a lot of, thermal management in the pack design and mechanical protection around the packs. And what we're demonstrating here with some independent data from, University College in London, UCL, is that if you take a standard commercial lithium ion battery that might be used in an EV, that's on the left hand side, and you do a pretty brutal test actually. It's a nail penetration test on that battery when it's charged. It goes off like a firework, and you're gonna see that on the left hand side.

28:41 Whereas on the right hand side, when you do that same test, you actually get a very inert response. And I'm just gonna run that video now. Here we go. You can see the nail dropping into the battery, and off it goes on the left hand side. That's the standard battery. And on the right hand side, that's the most boring video that you are gonna see today. And boring is good in this context. We want our vehicles to be intrinsically safe. So, that gives pack designers a real opportunity, to, take out cost and weight from the vehicle and provide the same safe driving experience that we have today, but actually, in a lighter and less expensive version of the EV.

29:44 So just moving on now with, the presentation. So on top of all of that safety data, we've been able to talk about some of the success that we've had working with UK BIG. And on the bottom left there, you see a couple of images actually from the work that we've been doing there. We've coated composite electrode electrolyte materials at their facility. That image that you see on the bottom left is actually one of the large mixing VATS that they have at UK BIG. The operator there is just checking the impeller of that VATS, so you can see the scale on which that equipment operates. And on the right hand side, you have one of the operators just checking the quality of the coatings that we are making there. What we saw on the basis of that interaction is a higher manufacturing yield and batteries using our benchmark materials that gave a relatively high capacity and that we were able to charge using faster protocols.

31:06 And the impact there is that it's given potential licensees a lot of comfort relating to rollout of this technology in a standard Gigafactory environment with associated reducing manufacturing capital expenditure and a reduced tech transfer risk. And that yield, of course, relates directly to a reduced cost. And therefore, users can expect, an improved performance on the back of these results. So we've had a really strong period of news flow for, Goliath over the last year or so. Going back to the end of twenty twenty three, we had a d four design freeze, for our first generation p one prototypes, rapidly followed actually by a confirmation that we'd achieved energy density parity with lithium ion, which is really important as we power through to higher energy densities.

32:16 We've received significant grant funding. So we led the $8,200,000 history grant funded program for silicon anode integration. That was funding we received from the Faraday Battery Challenge as well as the system grant, which is all about equipment development that we received from the Advanced Propulsion Centre. And that really allowed us to deliver a series of milestones in 2024. So we we delivered that exemplary safety data that we've just been talking about that was associated with that d five milestone. We then sent out a series of p one prototypes. There's two AMPOWER prototypes to customers.

33:04 That's what I was talking about when we had that validated by customer. And, also, we reached our 10 amp power d six development point, and that's now fed into actually our p one point five second generation 10 amp hour customer prototypes. We also were able to announce a collaboration with Aggritas, which is, of course, a sister company to Jaguar Land Rover owned by Tata Sons, and they entered into a twelve month collaboration agreement to, assess, the potential impact and advantages of using solid state batteries in their future planning.

33:52 So this year, in 2025, we've reached that 50 amp hour capacity development point, and we've had some great UK big scale up results, which are now feeding into the p one point five second generation prototypes that we're going to be releasing later in the summer. We'll get customer testing and validation of that as well as the completion of the automation of our pilot line capability, so the deployment of that 1.5 megawatt hour assembly line, followed by then the p two fifty ampere second generation prototypes towards the end of this year, giving us that springboard opening that window really for commercialization with the first option to license with an OEM or tier one.

34:50 And this is what our scale of journey looks like. So, you know, we are currently using our prepilot capabilities. We've been collaborating with these tier one and OEM organizations at what we call pre a sample level. When we implement the last of our automated pilot line, we'll be able to move to an a sample production together with UK BIG and the support of MPAC who are working together with us on some of the automation equipment overseen by AGGRASS. And then we'll flip through into a scale up partnership to give us what the industry calls b and c samples, which are effectively the same types of prototype batteries that we would make at a sample stage, but then made on production intense equipment.

35:48 And actually, the the largest scale equipment that we need for this journey is not going to be an investment that's made by ILIKA, but is actually, through partnership because we feel that it's far better to be able to make these larger volumes of batteries in collaboration with, a scale up partner than doing that ourselves. And that's why we've got this licensing opportunity, this window opening up from this year onwards really through the, 2026 sweet spot and into 2027, before deployment in, Gigafactors. Jason, a few words from you again on how the revenue for Goliath is expected to build.

36:38 Yeah. Very similar to the Sterex product line. We expect there to be a number of different revenue streams that will build up for the Goliath product, starting with grant income. We've obviously had a strong track record in being able to secure grant through The UK's government support and do look to continue to do that with some applications in process at the minute, and we look forward to hearing the result of those in due course and updating all investors in the market once that information is available. But we expect that to carry on as we continue to work with the road map for Goliath and other applications as that spreads out to see where the Goliath cells can be deployed.

37:23 And very similar on the non reoccurring engineering front, we would expect, although we have developed a standard sized pack very similar to The UK big, each of the automotive manufacturers have their own specific needs that suits their platforms. And therefore, we would expect as we enter into that licensing period, we'll get engagement and paid for activity, to look at the sparking our cell design architecture to fit the particular needs of each individual OEM we're interacting with. On the back of that, once into that licensing period, we'd expect battery royalty to ramp up. And we've modeled this based on the premium executive market. So looking at a point of higher price elasticity where new products can really be entered in.

38:13 So we expect good battery royalty revenue to be coming through on the back of that as the timeline develops out there. And then, obviously, the large proportion at the bottom based on our expectations of a number of geographically based licenses would be the license issuance fee. We expect these to probably be deployed along with the a, b, and c samples that Graham just talked about on the previous slide. So perhaps an option for the license and then stage payment license fees with the b and c samples as those are deployed out. And, also, as we move beyond those initial licensing, there's the opportunity there for additional licenses into consumer electronics market, where the perhaps the 10 m power item or the p 1.5 might find a better home, but they're looking for the proven uptake from the automotive sector first. And, really, that is backed up by our interactions with the 21 customers that we have been talking to this point.

39:13 Really strong interaction there, and many of those are looking to take our p 1.5 or p two samples so that they can take them into their own testing facilities and then validate the numbers that we are looking to put out, and that will then further those discussions. Thank you, Jason. So a quick summary of our proposal to have this capital raise to bridge to commercialization. So first of all, maybe, Jason, just a few words from you on some of the commercial sorry, the financial highlights from the first half of this year. Yep. So just to reiterate our financial highlights, that we announced, for the half year ending October 2024, announced in January this year, we had, at that point, revenue of 1,000,000, really being the tail end of the, system and history grant programs that have been running for a number of years.

40:14 So 900,000 of grant income there with a little bit of Goliath commercial income from those initial p one samples that we distributed at the back end of last year. So that reiterates, once again, back to Graham's earlier, comment that we had from one of the tier one OEMs where we were in the leading cohort. That was some paid for cell testing that they undertook and validated. So good initial traction, and we expect that to continue to grow as we move into our p 1.5 and p two going forward into this financial year. Our cash balance at the half year was 10,100,000. And as part of this announcement, we are confirming that at our year end of April 2025, We have an unaudited, at this point, cash balance of just over 7,900,000.

41:09 So once again, continuing our theme of really good management of the capital that we've been, gifted through our investors to make sure that we shepherd that as much as possible to deliver on both the Sterex and Glide programs. And we will continue to have a strong cost management focus to offset the small reduction in turnover that we've had there as we go forward. Okay. Good. And just to wrap up now, some great reasons why you may wish to invest in ILIKA. First of all, we've got a leading solid state battery technology with a growing patent portfolio applied globally.

41:56 We're diversified across two high growth markets with near term routes to commercialization. So we've reduced execution risk at this stage of the company's development. We've got great in house purpose built fabrication facilities so that we can demonstrate that we have a process that can be used to make these batteries on an industrial scale. We've demonstrated that we can roll out that commercial model through the existing licensing and royalty agreement we have in place with Certik, which is set to deliver the economy of scale we need for, an economic product. And regarding our Goliath product development, we've already issued our first batch of prototypes last year.

42:45 We've engaged with a portfolio of interested parties, and we are looking to enter a period of commercially sponsored evaluation trials with a view to forming a platform for licensing that product line too. Many thanks for your continued support and interest in the company. I realize some of you may have questions that you would like to have answered. Because of the regulatory framework that we are operating within, We will need to answer these questions offline, but we will do that in a prompt manner and turn around some responses to help you inform your decisions.

43:31 Thank you very much for your interest and attendance today. Graham, Jason, thank you very much indeed for updating investors. If I could please ask investors not to close the sessions, we're now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. Only take a few moments complete, I'm sure it'll be greatly valued by the company. On behalf of the management team of ILIKA PLC, we'd like to thank you for attending today's presentation. Good morning to you all.