Ilika Plc (ILIKF) Q4 2023 Earnings Call Transcript

Ilika Plc (OTCQX:ILIKF) Q4 2023 Earnings Conference Call July 13, 2023 11:30 AM ET

Company Participants

Graeme Purdy - Chief Executive Officer

Jason Stewart - Chief Financial Officer

Operator

[Abrupt Start] the presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted any time by the Q&A tab situated in the right hand corner of your screen, just simply type in your questions and press send. The company may not be in a position to answer every question that received in the meeting itself, however, the company will review questions submitted today and publish responses when it’s appropriate to do so. Before we begin, I’d like to submit the following poll.

I’d now like to hand you over to Graeme Purdy, CEO. Good afternoon, sir.

Graeme Purdy

Hello and many thanks to everyone who has taken the time to dial-in for this annual results update for the financial year that finished at the end of April 2023. I am joined today with our CFO, Jason Stewart. Lovely to meet you all this afternoon. We are just going to switch the camera off while we pop through the slides so that we don’t distract you. And many thanks again for joining.

So, we are going to talk for the next 30 minutes or so about Ilika and solid state batteries. As a quick reminder, we have two product lines, first of all, the Stereax miniature cells, which we’ve designed primarily for miniature medical devices and also for industrial IoT applications. And then on the other hand, we have got our Goliath large format cells, which are designed for EVs and for cordless consumer appliances. I guess the thing that sets apart our Goliath cells is that we use an oxide electrolyte with a silicon anode. And this reduces raw material costs and gives us an increased cell life relative to some of our other solid state battery competitors. We will go into that in a bit more detail later on in the presentation.

We are going to start with a review of where we are with Stereax. We will then continue with a review of Goliath before wrapping up with an ESG summary and our finances. So, there is bit more information about Jason and myself, I am not going to go through this now, because actually, you can find the same information on our website. And we have still got the same NEDs supporting us, so Keith Jackson, our Chairman and Monika and Jeremy as NEDs.

So, the Ilika business model is an asset-light licensing model. And this sets us apart from other solid state battery developers, who maybe aiming to build and operate giga factories to supply the EV market. We are a technology developer and our model is that we develop our solid state batteries. We then demonstrate that they can be manufactured using a scalable process. And we do a tech transfer and licensing deal or deals to make sure that they are available in the required quantities for our target markets. The deal that we will talk about with Cirtec is a really good example of how we have put this strategy into action. And we aim to do exactly the same with our Goliath technology.

So Stereax, these are our miniature batteries. And really, these are the engine that’s powering the revolution that is overtaking the medical implant industry as we move from pharmaceuticals to electroceuticals. You can see some of the M300s in that central picture, put alongside some standard paracetamol and aspirin tablets, very small batteries, they would fit comfortably on your fingertip. And they get integrated into small devices that are then surgically implanted. So if you were unlucky enough to need such a surgical intervention, you clearly want a battery that was as compact as possible. So these have got very high energy density and they enable small device designs. They have also got enhanced safety relative to normal lithium ion. There is no toxic fluid that could leak out. And they have also got a high power density, which means that they can supply power pulses to support the electroceutical therapy or indeed to drive communication chips such as small Bluetooth chips which might be used to share data from the implant to the clinician.

In terms of the applications, we have a really interesting portfolio of targets that will then reinforce by going through our list of customers that we are interacting with. So we start with neuromodulation. So a good example of that is actually pain relief, lower back pain. We have got some customers that are developing implanted sensors, often for blood pressure monitoring, smart orthopedics, which are used for tracking the physiotherapy that patients undergo when they have had a surgical intervention and are getting used to their new hip or knee implant. Small surgical instruments, an example of these are used in robotic platforms which are increasingly being deployed for carrying out routine surgery. Smart contact lenses, I guess this is one of the frontiers of technology innovation that’s being pioneered in Silicon Valley. This whole interface with the metaverse where there is the idea that we can replace video screens, computer screens, like the ones that we are looking at now, with a projection from a smart contact lens. And of course, these need ultra compacts energy sources in order to power the projection of that information.

A good example, there actually is our partner in Israel blink energy that’s talked about some of their applications as they harvest energy from the blink reflex to be able to power devices like these. And then finally, on the right hand side of this slide, smart orthodontic applications of smart dental applications, where you put a powered sensor on to an aligner or a retainer as they are sometimes called, first of all, actually, to ensure compliance to make sure that the retainers are being worn, as they have been designed, but increasingly also to enable salivary diagnostics, because actually, you can harvest a lot of interesting information about the health of a patient by monitoring the chemicals that are in their saliva. A good example of a customer there is Lura Health, our partners in the U.S. who have designed an innovative technology platform for just these types of applications.

So, we are under an obligation to retain the names of a lot of our customers as confidential, simply because they see our technology as being an enabler for their competitive positioning. But what we can say is that we are interacting with a range of companies that vary in size from being smaller startups. Of course, if you are a U.S. based startup, you can be very well financed. So, some of these companies are large in their own rights, even though perhaps they are still developing the technology. And we start with them and go all the way through to publicly listed multinationals that are already substantial enterprises and have substantial commercial momentum.

You can see that many of them are actually U.S. headquartered in terms of the application areas they are the ones that we have just been through on the previous slide. Very large addressable markets, multibillion dollar addressable markets and we do this analysis to work out the obtainable, the serviceable obtainable market for our products and that allows us to build our forecasts and actually interact with some of the analysts who cover Ilika to give them guidance on what levels of revenue these different applications may well enable.

And what’s clear is that actually, not all of these different ideas or products will get regulatory approval, but it doesn’t take very many of them in order to generate a significant return on the capital that we are deploying to address these markets. So when we aggregate all of this data, we see that actually we have got 24 orders from 21 companies. Over half of the orders are for active implantable medical devices or AIMDs as they are sometimes referred to in the industry. They also cover some of these wearable applications such as smart dental and smart lenses. And about a quarter of the opportunities relates to industrial IoT applications in aerospace and some industrial condition monitoring.

On the right hand side though, that you can see that over three quarters of the orders originate from the U.S. And that’s why actually we have worked very hard to partner with a U.S. based organization to complete the commercialization of our Stereax technology. So in January, we entered into a memorandum of understanding with Cirtec Medical, which is a large Tier 1 manufacturer of medical device technology platforms, devices and components. I think in terms of what the benefits are to Ilika, they include the validation of our Stereax products and the manufacturing process that we are using. In fact, there is very good match between the process that we use in our facility here in the UK and the thin film processes that Cirtec has at its disposal in Lowell in Massachusetts. It’s also a scalable manufacturing platform. So they have an economy of scale, because they are already manufacturing for large OEMs, particularly in the U.S. and they have a space and the ambition to increase the scope of their activities and ramp production. And also of course, they have got a larger business development team, where there are very strong synergies between the technology and platforms that they are currently selling and the Stereax offering. So, for instance, by combining the Stereax batteries, with the power management, circuitry, and other device platforms, they can offer a more complete bundled solution to the customer.

In terms of where we are the stars had aligned, we might have completed this contract by our annual results, but of course, it’s rarely the case that you can finesse the timing of these discussions perfectly. So we expect to be able to finalize the contract over the next few weeks and then move forward with the tech transfer and then the ramp of revenue associated with product sales in 2024.

So let us change gears a little bit and talk about Goliath about EV batteries technology. So that again, this is a solid state offering you know the materials are different but not totally dissimilar to what we use in Stereax, but we use a much larger scale manufacturing platform for making EV batteries. Whereas, the Stereax cells are miniaturized as far as possible and made compact using photo lithographic and, and micro fabrication techniques. With EV batteries, we use large scale printing approaches in order to make them. We are offering the consumer further range for their vehicles by using a combination of chemistry that we feel is particularly useful gives a really good combination of range and weight, very safe, a solid state electrolyte that is safer than the liquid electrolytes alternative which is flammable. A high energy density so capable of pushing towards that higher theoretical energy density threshold at 500 Watt hours per kilo, a reduced cell degradation so it’s not subject to the same sorts of risks associated with dendrites.

And of course what’s becoming increasingly important is the enhanced recyclability of solid state cells where you don’t need to drain the toxic and flammable liquid electrolyte you basically just strip off the encapsulation. And then you can put the ceramic into a granulating process and extract the metals and put them back into the supply chain. And then finally, I should mention lithium efficiency. So, over the last couple of years, actually the price of lithium has soared. And now actually, lowering the lithium content in batteries is really important. And actually, some of the other solid state battery alternatives such as sulphide based alternatives use far more lithium than oxide and silicon based alternative.

So I probably don’t need to convince you that we are in the middle of an EV revolution. But the data certainly supports that conclusion. In the EU, of course, there is a target of adopting EVs for all new vehicle sales by 2035. Here in the UK, it’s 5 years earlier in 2030. And clearly, there is a global trend towards making sure that EVs become the vehicle of choice. There is also a trend towards deploying more-and-more charging stations, which are making the choice for EV much more straightforward.

However, there are still a few reasons why consumers are hesitant to actually buy an EV. One of them is range anxiety, and our type of solid state battery can go a long way towards relieving this by doubling the range that you might see from an EV. Battery life can be a concern, will my battery still be operating in 10 years time, some people keep their vehicles for that length of time they don’t want a short lifespan for the vehicle that they pay for. And actually battery life is enhanced in solid state. And also there are some concerns around batteries. Now batteries that go into EVs are typically very safe. EV vehicles, in general have a fantastic safety profile. But that comes through enhanced engineering, and safety engineering, and therefore weight and cost associated with packaging the cells into a battery pack. And when you have a solid state battery that is intrinsically safe, it means that the engineering and the costs associated with carrying out those activities is reduced.

In terms of the target markets, we will initially be working with high performance vehicle manufacturers, others brands that perhaps have a performance line in their offering. So that’s why you see us associated with companies like JLR and McLaren and latterly BMW, it’s not because solid state is intrinsically more expensive. In fact, the opposite is the case, there has been a lot of analysis recently that demonstrates that solid state will bring down battery costs is because in the first instance, when solid state batteries are manufactured at limited scale, we won’t have the same economies of scale that you currently get with the largely commoditized standard lithium-ion cells. So we need to make sure that the initial markets that we are providing batteries to, are not too price sensitive.

So in summary, our Ilika’s technology for EVs has lots of advantages starting at 11 o’clock here. The number one, our choice of materials we use an oxide electrolyte that’s very stable in air, much more stable than the sulphide electrolyte alternatives that some of our competitors have chosen. We have got a cell chemistry, which has a long cycle life and few degradation mechanisms. We have got a cell architecture that offers improved energy density and driving range. It’s also an extremely safe chemistry. We don’t have any lithium metal and no flammable liquid electrolyte in there. We have also got a higher thermal capacity. And what that really means actually is that our batteries can operate at an elevated temperature. And that’s particularly important actually when you are deploying EVs, whether as a high ambient temperature. All EVs have a cooling system associated with their pack, typically, to keep the pack below 40 degrees C. And if you can allow the pack to operate at a higher temperature, in fact, our packs can go up to 80 degrees C, and we have even demonstrated some proof of principle performance at higher temperatures than that, then you can reduce the amount of cooling that’s needed. And that, again, is a reduction in weight and cost. And therefore it gives you a more compact battery pack and then of course, recyclability that we have already spoken about.

So a quick overview of the competitive landscape, that there are more than whether there is a number of choices that can be made in solid state batteries. There’s not just one type of solid state battery, you can choose different electrolytes. So we have chosen oxide electrolytes, but sulphide electrolytes are also an alternative, you can choose different types of anode. So you can choose not to have one at all, at least initially when the battery is first assembled, or you can have a lithium metal based anode. And actually, some analysts even call solid state, lithium metal batteries. But in fact, solid states can also use structured anodes like silicon anode. And we have chosen that because it is an approach that gives you a long cycle life and is also a less expensive choice than using lithium metal.

What I would argue is that actually going forward; we are going to see a diversity of solid state solutions in the market. In the same way that we see a diversity of normal traditional lithium-ion battery chemistries, right now. So your mobile phones and your laptops all use an LCO based cathode, whereas in vehicles, typically you see NMC or NCA based cathodes, or if you are in China and LFP based approach. So these are all acronyms that relates to the chemistry of the cathode. And when you look at solid state, there are different choices both actually for those cathodes, but also for the electrolytes and the anodes. And I think that solid state for EV will be developed depending on the imperatives. Is it done for cost? Is it done for performance? Is it done for specific ambient conditions? And therefore, there will be more than one solution that is used for that deployment.

So where are we with manufacturing? Well, we built our first pre-pilot line here in the UK a number of years ago, 2 years ago we raised £25 million to extend that development program and actually to automate that pilot line. We are well through that implementation. Now, we’ve already taken delivery of certain equipment items in order to enhance our productivity. And we’ve got more arriving towards the end of this year and into next year. And we’ve also carried out a number of feasibility studies to assess how we can work with partners in order to increase the capacity of our production capability to what the automotive industry calls, B samples and C samples. So an A sample is effectively a prototype cell that meets certain performance criteria, but doesn’t necessarily have to be manufactured on production, intense equipment. But a B sample is the same cell that’s manufactured on production, intense equipment, perhaps not in the volume that’s needed for a vehicle platform launch. And then a C sample is an enhanced volume production capability as a precursor to a giga factory deployment. What we won’t be doing is going beyond A sample. In fact, we’ve already interacted with a number of OEMs, who’ve made it clear to us that actually A samples as far as they would expect us to go. And if we work with companies to go beyond that, then that will be on a collaborative basis and it won’t be Ilika that is building the giga factory in order to supply those larger volumes of batteries.

So here is a summary of where we’re going with our technology and how we are going to scale it up. On the left hand side, you see us moving through a data point that we call D4, which is actually a lab scale precursor to making a prototype product P1, so P1 has the same performance as the data points D4. But of course, before the OEMs accept samples in their facilities, they actually want us to have done some preliminary testing of those samples. So that we can ensure that we don’t cause any difficulties to those OEMs. When they are going through the test regime, we basically want a stable production batch so that they get the results that they anticipate. We will go through energy density lithium-ion equivalents towards the end of the year, and then push through to our MVP, a minimum viable product, which actually correlates to A samples that you see plotted on the bottom right. So we will be building up an automated pilot line to be able to give us A samples, which will then be a precursor to scaling up for B and C samples beyond that. And our business model indicates, of course, that we’re going to have our licensing opportunities really from 2025 onwards. So pretty much to the point where we’ve got our A samples as organizations take an option to use our technology and then deploy it on a larger scale.

So, one of the highlights that I want to flag that has happened since half year is that we’ve been awarded a substantial grant of just over £8 million by the Faraday battery challenge to lead a fantastic consortium of companies. One of the partners involved as Nexeon which is a silicon anode manufacturer. Based in Abingdon, not far from where we are in Southampton on the south coast of the UK, they will be providing information and an anode that we can integrate into a prototype cells. And then we’re using a really great constellation really, of university and lab based partners in order to enhance the development of these cells under the oversight of a steering committee that involves BMW, and also WAE, which used to be known as Williams Advanced Engineering, now part of Fortescue, and this is a program that really supports the core development of our Goliath batteries through that roadmap that you saw before, it’s not a different program, it’s effectively non-dilutive grant support for our endeavors.

So at this point, I’m going to hand over to Jason who’s going to talk about some of ESG initiatives. I know that they’re very important to our stakeholders and some of our shareholders in particular. So Jason, over to you.

Jason Stewart

Thanks, Graeme. So the environmental, social and governance aspect is very close to the heart of the company as a whole. But as Graeme said, increasingly so across the stakeholder base, whether that is investors on a retail basis or institutional basis, governments, but also the supply chain that we buy from and interact with, and our potential customers in the OEM arena. So it’s very important that we are fully compliant with all our requirements, but also from which we are, but also our perspective is we want to be ahead of the requirements for a small company. So we are continuing to work ahead of the timeline to try and ensure that everything we do is compliant, and we are as aligned as possible with our potential customers so that any transition into licensing is as easy as possible as we then interact with our potential next stage customers. So, from an environmental point of view, we are ISO 14001 certified. We have carbon footprint accreditation for both Scope 1 and Scope 2. And we are already working on our products carbon footprint, net carbon neutral planning and Scope 3 emission data collection, which will be required in the future, but we’re working ahead of that already. From a social point of view, obviously, many people will have heard in the news some of the challenges around the supply chain of some of the minerals that are used in manufacturing. So we are fully compliant and with full transparency from a cobalt supplier point of view, and to ensure there’s no conflict mineral. And that is very much important to us. We want to ease as much as possible when we do engage, as Graeme said with the OEM. So Tier 1 suppliers that we’re already handing to them a product that can be sourced easily from the existing supply chain network.

We focus very much on equality, diversity within our own organization and are proud that we have both a good spread of gender but also a wide range of nationalities participating in the scientific development. And from a government’s point of view, obviously, we are fully compliant with all rules, regulations, health and safety is at the forefront of everything that we do. And we ensure that we continually challenge ourselves to improve and move forward.

We have conducted over the last year first materiality assessment, so engaging with a whole range of stakeholders, invested legislative, supplier, customer, and employees to ensure that we understand all of the topics that may affect the company, ranking those for importance, and then ensuring that we react to those as we go forward. And that’s part of the journey for ensuring that we are constantly reflecting on our ESG journey and staying ahead of the challenges that we see coming.

Finally, just moving on to the results, we have announced our full audited results. So total income of £0.8 million, as Graeme said, we received £2.8 million was the share of the history funded grant total £8 million as Graeme said, so that’s a 2-year program. So the start of that funding has come through in the income that we’ve seen this year, and will continue through into 2024 and into the early part of 2025. Resulting from that, we have had an EBITDA loss excluding share-based payments of £7 million. So that loss increase from the prior 6-months for really on the back of the scale of the Stereax activity, as we built through our small scale fab plant to prove out that technology and the development of the Goliath program, but as Graeme said, when talking about the MOU with SIR tech, we’ve already taken steps to mitigate that increase in cost, through the expectation and near completion of that contract, so that we reduce the ongoing cost of the Stereax side of the business. And then we can redeploy the capital that we do have across to the development of the Goliath side as then the manufacturing base for Stereax transfers over. And that leads us to a cash balance of just under £16 million at the end of the financial year, which is very much in line with expectations and signposting that we gave in earlier RNS and demonstrates our reasonable cash management as we go forward.

And we look out into the future we expect cash consumption from operational activities to reduce slightly. As I said, I’m part of that restructuring of activity between Stereax and Goliath. But as we deploy, as Graeme said, some of the capital that we have towards the more manufacturing intent equipment for the Goliath side of the business, we will see our capital spend increased slightly, ultimately giving our expectation that cash consumption will continue at roughly at same level as we go forward into the next year.

Graeme Purdy

Thanks, Jason. So bit of a sort of forward looking statement to wrap up with. Well, what can we look forward to? Cirtec relationship has kicked off nicely with some joint marketing you may have seen some of that through our marketing channels. But we are now close to a contract completion. And that will fire the starting pistol for our technology transfer, which we will be doing through the remainder of 2023 with a view to being ready for revenue generation in 2024. We will continue to mature our Goliath technology with some of the partners that we’ve talked about in the course of this presentation. And we will be hitting some defined technical milestones like the D4 point and the lithium-ion energy density equivalence point as this year progresses. And of course, there’s more grant support that we can look forward to receiving there are some great opportunities actually for collaboration through the automotive transformation fund and the Faraday battery challenge here in the UK. And we’ll be maximizing the benefit of those, as well as attracting commercial revenue through partnering.

Many thanks for your time today, guys. We’re now going to move across into the Q&A part of the presentation.

Question-and-Answer Session

Operator

Graeme and Jason, thanks very much for your presentation. [Operator Instructions] But just both Graeme and Jason take a few minutes to view those questions that have been submitted today. I’d like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Graeme and Jason, as you can see, received a number of questions throughout today’s presentation. And if I could just ask you to read out those questions and give responses where it is appropriate to do so. What I’ll do is I’ll pick up from you at the end.

Graeme Purdy

Very good. Alright. Well, let’s take it from the top and see how many we can get through. So the first question I’ve got here is when will Ilika go on a major stock exchange like the NASDAQ. So I think our view on this is for the moment, we believe that LSE aim is the appropriate stock exchange for the size of the company. But as we continue to grow, we will consider other options such as the LSE main list, and also NASDAQ.

So the next question is which car companies are seriously considering using your battery? So we’re in communication with most of the world’s automotive OEMs. So our recent £8.2 million grant funded project from FBC from the Faraday battery challenge involves BMW and WAE in the steering committee. So there are two examples of people who are taking an interest in our technology.

The next question is, what about Toyota? So can you provide some commentary on the recent news that Toyota has claimed a battery breakthrough around its solid state batteries and how it might affect a look at?

Well, most of the automotive OEMs have a stated interest in solid state battery now. It’s definitely become accepted mainstream next generation technology. I think Toyota’s latest statement confirms that SSBs are firmly on their roadmap. And Ilika continues to hold joint patterns with Toyota covering some key materials for SSBs. So we see that as a very positive validation of the solid state battery approach that we’re taping.

So the next question I’ve got here, are you expecting any further sample shipments of your M50 or M300s? And will you announce these to market?

So we continue to make small shipments of M50, M300s from our UK facility. We will announce those shipments which our customers allow us to publicize. So you’ll have seen for instance, that we have announced shipments through to Blink Energy and Lura Health and also Cube Works. And where possible, we will continue to update you on the types of applications that we are shipping these batteries for. And once the Cirtec deal is finalized, we will support technology transfer through to the U.S. and provide information on shipment volumes as they ramp up next year.

The next question we’ve got here is what kind of news flow can we expect in the next 12 months? So on the Stereax front, we can expect news relating to the completion of the Cirtec deal and commencement of tech transfer. And, regarding Goliath, we will announce that, we will hit significant development milestones and we will also publicize any further grant support and commercial partnerships as they mature.

Next question is how would the Cirtec deal impacts production capabilities and would we see a shift in UK focus? So the Cirtec deal will see joint production capacity increased to about 100,000 batteries per year on the completion of that tech transfer and process validation with the ability to ramp up further as required. The UK team will continue to focus on roadmap development and custom battery programs.

Right, let’s have a look at some of the other ones that are coming in. There’s another question here on Toyota’s announced breakthrough. So I think we’ve answered that one. There’s a question here on the agreement with Cirtec medical, and reports a transfer of equipment seems to indicate a reversal of strategy for Stereax manufacturer, have you abandoned your own manufacturing intent, please give a more detailed information?

Jason Stewart

Maybe if I take that one. So as we saw within the UK, especially over the last 12 months, there was a very high inflationary environment. The UK particularly still is in that although energy prices have started to come back down, and operating a small scale, fab or manufacturing facility within UK is very difficult to be cost effective, it’s very easy for cost to increase exponentially. Unfortunately, we don’t have some of the same support that you would see in the U.S. with the IRA Legislation, the Inflation Reduction Acts that limit the cost that some of the manufacturing base in the U.S. has been so really our activity in speeding up the licensing model, and it is a speeding up of that activity. So the plan was always to license the technology. But we had to prove out that we were capable, it was capable of being produced on production intent equipment. So, very much the rationale for accelerating the Stereax licensing is to take advantage of that larger manufacturing capability, the protection that’s provided to limit cost runaway. And also really, we have recognized that we are experts in the development of the technology, but we are on the Stereax side, not a mass market manufacturer and on the Goliath side, nor are we are giga factory manufacturer or builder. So, we have recognized where our strengths are. But we also see that there are strengths to be able to do that ever so regular reduction in cost that’s needed in the manufacturing to really drive the cost base performance of any new technology. So, that really is the driver behind the acceleration of the Stereax tech transfer MOU agreement that we are pursuing at the moment.

Graeme Purdy

Thanks Jason. So, the next one says the last few years have been a bumpy road for shareholders. What lessons can be learned from the Stereax journey to ensure that Goliath doesn’t suffer from similar issues and delays on the path to scale up and commercialization. So, I would say that the last few years have seen a mixture of factors beyond the company’s control, such as the macroeconomic situation. And ones related to the scale up of the technology that we have chosen for Stereax, I would say for Goliath in terms of the things that are in our control, we are spending a lot more time and effort in de-risking the scale-up technology that we are using for Goliath. So, we flagged in our results RNS this morning, that over the last six months or so, we have completed a lot of scale-up studies that involve vendors, and also our partners at the UKBIC to ensure that actually, the scale-up route is as risk free as possible. And when we choose technology platforms for process scale up, that we have done as much validation of those platforms as possible. Next question here is when do you think the optimal time is to bring in a large OEM partner to do the heavy lifting on Goliath? Yes. I think this is a good question. And we are partnered with OEMs at the moment. So, one that’s in the public domain is the steering committee role that BMW has generously filled on the Goliath history program that we were just talking about. We will be sharing samples with OEM partners next year when our P1 product is ready. And so you might expect a closer collaboration to be catalyzed by that interaction.

Operator

The next question is how unique is your battery technology? Who are your main competitors in this type of battery market?

Jason Stewart

I think Graeme answered that in a reasonable detail on the Goliath side in the slides earlier. But to close that out on the Stereax side, there are no particularly comparable competitors in the solid state side, although obviously, there are a number of incumbents, small cell manufacturers who are currently feeding into that market. So, it is a much wider opportunity with less competitors in the market, although there are still obviously people supplying into that market already, so less competition and potentially an easier route to entry.

Operator

So, the next question is, Apple’s recently launched VR Headset was criticized for its ugly heavy battery pack? Are you in discussions with consumer electronics companies regarding such applications?

Graeme Purdy

Yes. So, I think that the smart contact lenses are a potential solution to the unwillingness of that VR headset. And the ideal solution is that you have got a wafer thin contact lens with very thin batteries that allow you to have a sort of heads up display, a VR display. So, I think in the coming time period, you will see that those VR headsets get much lighter, and actually, ultimately, that they get replaced by micro electronics solutions that can be miniaturized much further than what we have seen so far. So, yes, it’s a very exciting opportunity. We have got another question here on whether hearing aids might be another potential market. So, we have looked at hearing aids, although the key question that we have to ask ourselves is, can solid state batteries really offer a differentiated solution? And there is a lot of quite compact solutions for hearing aids and earbuds. It may well be that when the cost point for Stereax starts to come down as volumes of manufacturing increase, that that opens up an opportunity for hearing aids and earbuds. But at the moment, that’s not a priority market, simply because actually in terms of the cost benefit is probably not as strong as it is for implanted medical solutions.

Operator

Next question is, will Stereax be the partner of choice to manufacture Stereax batteries that will serve non-medical markets like aerospace and industrial or will you seek another manufacturing partner?

Graeme Purdy

Well, in the first instance, we are going to be very focused on making the Stereax relationship success. And the batteries that are manufactured through that relationship will be available for sale into industrial IoT applications. If the volume of manufacturing of the applications gets to the point where actually it’s beyond the appetites of Stereax then we will look at other manufacturing alternatives. Some of the large scale markets that require extremely low cost points may be better suited to other manufacturing environments. And we expect to have the flexibility in the relationship to be able to address those appropriately.

Operator

So, we have got a question here referring to Stereax sales, can you indicate volume and value and are all sales currently for development prototypes, or are there any commercial products yet?

Graeme Purdy

So, the – as we went through earlier, we have a wide range of different products that our batteries have been requested in relation to and we hold orders from those customers as we said earlier. At the moment, all of those are in early developmental stages. So, none of those are moving through into the later trials very much, we need to conclude the Stereax agreement and move the – transfer at pace so that we can then increase the supply at volume to then satisfy those as they move through the regulatory approvals. Very much we have talked about that as being focused around the med-tech sector. But as we move out to that higher volume of throughput, obviously, there is the wider opportunity of the industrial Internet of Things applications, which may reopen up as we work with Stereax to bring the price point of the Stereax batteries down and open up that secondary market, which as they are not implanted devices may come with a shorter approval time or time to market to be able to fill some of the gap that we would expect to see as items go through the regulatory period for implanted class two or class three medical devices.

Operator

So, there is question here on cash burn, so the cash burn is very high. Cash runway is about 11 months? And are you looking at reducing it, especially with progression of Goliath project? Jason, do you want to comment on that?

Jason Stewart

So, I would say that we certainly have more than 11 months of cash runway. The activity that we have already taken and mentioned earlier with the MOU signed, and with the soon hopefully to be closed contract with Stereax, we have taken the opportunity to reduce our spend on the Stereax side of the business. And that was very much being cost driver from an operational point of view. As we discussed earlier, the energy intensity of running a small scale fabrication site in the UK is quite painful. So, we have taken action to limit that. And through doing so that has allowed us to reduce the spend overall and redeploy personnel where we need to, thus avoiding recruitment and taking on additional cost across to the Goliath side of the business to make sure that we are supporting the speed of development of that activity. So, we actually expect that we will have reduced the operational costs of the business as we look forward to the next year. But as we say, we are looking to deploy the some of the capital that we do have on hand to the production equipment that allows us to prove that the Goliath cells are manufacturable on the large scale equipment that the automotives and their Tier 1 manufacturing partners need to see us demonstrate to validate that those Goliath cells can’t be manufactured in mass scale.

Operator

Very good. So, the next one is does your relationship with BMW go beyond that place on the steering committee at the Faraday project?

Graeme Purdy

Well, look, formally, the relationship with BMW is documented as being a member of the steering committee of that history program. We get a lot of informal support from BMW. There, they are a very supportive partner. And we are very grateful for that. But any further formalization of that relationship is something perhaps for the future. We got another one here. In terms of Goliath opportunities in the consumer products, markets, do you have any active relationships or opportunities? Yes. So, we have talked about using Goliath for cordless consumer appliances. So, we have a number of discussions that are ongoing to firm up the usefulness and utility of Goliath for applications such as handheld vacuum cleaners, and beauty products, and other household devices. You will have seen that there is a trend in those sectors for an increasing use of handheld devices. Clearly, there is nothing formal at the moment, but we expect that that is an interesting market segment that we may pick up along the way as the Goliath technology matures. Next question is how does your SSB developments timing compared with the competition? So, I would say that’s actually, all of our competition is developing prototype cells. There are no solid state batteries that are currently on the market and available in mass production vehicles. Where we have seen solid state battery packs used. Typically, they have been in very limited numbers in sort of motor show vehicles. So, I believe that actually we are still in that leading cohort of battery developers. And actually through Stereax cells, we are one of the early commercialization pioneers. And in that case, actually, we are ahead of the field. But I think your question mainly relates to automotive SSBs. And I think as I have said, most of the competition is still at prototype level.

Operator

And our next question here is what’s the capacity of your Stereax product line? What will be the cost of Stereax line B, and what will its capacity be?

Jason Stewart

So, the capacity that we have in our current facility is enough to satisfy the demand that we have demonstrated through the table that we went through earlier. And because as we talked about the volumes through the regulatory approval process are relatively low, also envisaged within the MOU and tech transfer. We will be transferring a large proportion of that manufacturing line over to Stereax in America so that we can short circuit and speed the process of them getting up to full manufacturing. So, by using the equipment that we have already certified as being capable of producing the Stereax batteries, that shortens the amount of time to get back up to higher volume. The reason for going with someone like Stereax is that as a $500 million, U.S. based company with expertise in this arena, they are best placed to deploy additional capital when needed to scale up that line to cope with the additional demand as those products move through towards full regulation and to the market. But to give context, if one or two of those opportunities were to move through to full certification, they would potentially be enough to take up the full capacity that we currently have. So, clearly there is a plenty of opportunity for maximizing the return from the equipment set that already is deployed and underpinning the business case for Stereax to put in place further capacity to be able to take advantage of that volume.

Operator

Very good. So, next question is, is the 500 watt-hour per kilo energy density a hard limit or will you be working on improving it further?

Graeme Purdy

So, actually, that is a theoretical energy density limit based on the combination of materials that we have at our disposal. It’s possible that new materials will be developed that will enable that to be increased further. But at the moment with – to the best of our knowledge, that is a theoretical limit.

Operator

Next question, have you actually had paid for sales of Stereax and how many Stereax can you manufacture by month?

Jason Stewart

So, yes, we have had paid for sales of Stereax. So, when we looked at that chart, they are back orders, paid for sales for Stereax, for which we receive monetary compensation and as we have made some deliveries in the early part of this year, that has started to fulfill that order book. And the plan is that once we transfer the technology to Stereax, we will be able to manufacture 100,000 batteries per year. So, the next one here is can you once again define the specs of your Stereax cells, are M50 and M300, the only two standard sizes and how it compares with medical industry micro battery alternatives such as those from Vata? How does zinc air batteries compare in capacity and density. So, first of all, the M50 is a 50 micro-Amp hour battery. The M300 is a 300 micro-Amp hour battery, which is made by taking six M50s and stacking them and connecting them in parallel. They are the two sort of MVP building blocks that we have manufactured to-date. We expect to be able to increase the capacity of our Stereax cells to 1000 micro-Amp hours, which means a one milli-amp hour. And we have that as the state of development target with Stereax. A lot of the existing coin cells, you mentioned Vata there. They are of course larger than the Stereax cells. But some of them have got larger capacities as well. So, sometimes they are actually more suitable for different applications rather than the ones that we are chasing. For instance, you couldn’t imagine a coin cell being stuck on to a contact lens, and that being particularly comfortable. So, there are definitely different target markets that we are chasing. In terms of zinc air, zinc air batteries are not generally recyclable. So again, they are for different applications to the ones that we are choosing for Stereax.

Graeme Purdy

I think we have got probably time for one more question. So, last question here is what sales and marketing resource do Cirtec proposed to sign for selling Stereax, are they focused only on the medical devices market? So, I think just to take a step back, the order book of customers and orders that we talked about earlier, have been developed with a very, very small team at Ilika. And that has brought clearly some great potential. And part of the advantage of the Stereax relationship is they are already suppliers to a number of those customers. So, clearly they are already in that market, and have a much larger commercial team looking to develop sales activity. So, that will hopefully open up a much broader range of opportunities for us. In addition to that, we have seen over the last couple of years really since the pandemic that companies have been recognizing that having a long extended supply chain is really opening them up to potential disruption. If there is a problem within that supply chain as the pandemic and then the supply chain issues we saw after that demonstrated. So, having the manufacturing base within the U.S. where the major market currently appears to be, should be a real advantage for helping to bring in new potential orders and people interested where they may not have been so enamored with looking at a smaller company based over in the UK. So, that clearly should open up further opportunities. While Stereax are focused around the med-tech sector, they are open to sell into any forum and we will continue to operate our own commercial team to look for other opportunities and ensure that we don’t miss out on anything that is not med-tech focus to ensure that we have the biggest possible range of new customers that we can identify and work with.

Operator

Graeme and Jason, thank you very much for having been very generous with your time. We have actually gone over the hour and I think you have addressed all those questions you had from investors. And of course the company will review all the questions submitted today. And we will publish those responses on the Investor Meet Company platform. But just before redirecting investors to provide with their feedback, which was particularly important to you both. Graeme, can I just ask you for a few closing comments?

Graeme Purdy

Well, I would just like to thank everyone for taking their time to dial-in today. It’s been a very vibrant Q&A session. And I wanted to just confirm that Jason and I will take the time to work through the remaining questions, and we will provide the answers as appropriate. So, once again, many thanks guys.

Operator

Perfect. Graeme and Jason, thank you once again for updating investors today. Could I please ask investors not to close the session, as you know, will be automatically redirected to provide your feedback in order that the team can better understand your views and expectations, so it may take a few minutes to complete, which will be greatly valued by the company. On behalf of the management team of Ilika plc, we would like to thank you for attending today’s presentation and good afternoon to you all.