Ilika plc (IKA) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Ilika plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company will review your questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Graeme Purdy, CEO. Good afternoon, sir.

Hello, and many thanks to everyone who's taken the time to dial in for this annual results update for the financial year that finished at the end of April 2023. I'm joined today with our CFO, Jason Stewart.

Love to meet you all this afternoon.

We're just going to switch the camera off while we pop through the slides so that we don't distract you and many thanks again for joining. So we're going to talk for the next 30 minutes or so about Ilika and solid-state batteries. As a quick reminder, we have 2 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've got our Goliath large format cells which are designed for EVs and for cordless consumer appliances. I guess the thing that sets apart our Goliath cells is that we use an oxide electrolyte with a silicon anode and this reduces raw material costs and gives us an increased cell life relative to some of our other solid-state battery competitors. We'll go into that in a bit more detail later on in the presentation. We're going to start with a review of where we are with Stereax. We'll then continue with a review of Goliath before wrapping up with an ESG summary and our finances. So there's a bit more information about Jason and myself. I'm not going to go through this now because, actually, you can find the same information on our website, and we've still got the same NEDs supporting us. So Keith Jackson, our Chairman; and Monika and Jeremy has NEDs. So the Ilika business model is an asset-light licensing model, and this sets us apart from other solid-state battery developers who may be aiming to build and operate Gigafactories to supply the EV market. We are a technology developer, and our model is that we develop solid-state batteries. We then demonstrate that they can be manufactured using a scalable process and we do a tech transfer and licensing deal or deals to make sure that they are available in the required quantities for our target markets. The deal that we'll talk about with Cirtec is a really good example of how we've put this strategy into action. And we aim to do exactly the same with our Goliath technology. So 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 are 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've also got enhanced safety relative to normal lithium ion. There's no toxic fluid that could leak out. And they've also got a high-power density, which means that they can supply power pulses to support the 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're interacting with. So we start with neuromodulation. So a good example of that is actually pain relief for lower back pain. We've got some customers that are developing implanted sensors often for blood pressure monitoring. Smart orthopedics, which are used for tracking the physiotherapy that patients undergo when they have had a surgical intervention and are getting used to their new hip or knee implant. Small surgical instruments and examples of these are used in robotic platforms, which are increasingly being deployed for carrying out routine surgery. Smart contact lenses, I guess this is one of the frontiers of technology innovation that's being pioneered in Silicon Valley, this whole interface with the Metaverse, where that's the idea that we can replace video screens, computer screens like the ones that we're looking at now. With a projection from a smart contact lens. And of course, these need ultracompact 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, smart dental applications where you put a powered sensor onto an aligner or a retainer [ resistant ] sometimes called. First of all, actually to ensure compliance to make sure that the retainers are being worn as they've been designed but increasingly also to enable salivary diagnostics because actually, you can harvest a lot of interesting information about the health of a patient by monitoring the chemicals that are in their saliva. A good example of a customer there is Lura Health, our partners in the 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 start-ups. Of course, if you're a U.S.-based startup, you can be very well financed. 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, the ones that we've just been through on the previous slide. Very large addressable markets, a 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 for products will get regulatory approval, but it doesn't take very many of them in order to generate a significant return on the capital that we are deploying to address these markets. So when we aggregate all of this data, we see that actually we've got 24 orders from 21 companies. Over half of the orders are for active implantable medical devices or AIMDs, as they sometimes referred to in the industry. They also cover some of these wearable applications such as smart dental and smart lenses. And about 1/4 of the opportunities relate to industrial IoT applications in aerospace and some industrial condition monitoring. On the right-hand side, though, you can see that over 3/4 of the orders originate from the U.S. And that's why actually we've 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 product and the manufacturing process that we're using. In fact, there's a very good match between the process that we use in our facility here in the U.K. 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're 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've got a larger business development team, where there are very strong synergies between the technology and platforms that they're currently selling and the Stereax offering. So for instance, by combining the Stereax batteries with the power management circuitry and other device platforms, they can offer a more complete bundled solution to the customer. In terms of where we are, the stars had aligned, we might have completed this contract by our annual results. But of course, it's really the case that you can finesse the timing of these discussions perfectly. So we expect to be able to finalize the contract over the next few weeks and then move forward with the tech transfer and then the ramp-up of revenue associated with product sales in 2024. So let's change gear a little bit and talk about Goliath about EV battery technology. So again, this is a solid-state offering. 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 photolithographic and microfabrication techniques with the EV batteries, we use large-scale printing approaches in order to make them. We're offering the consumer further range for their vehicles by using a combination of chemistry that we feel is particularly useful, gives a really good combination of range and weight. Very safe, a solid-state electrolytes that is safer than the liquid electrolyte alternative, which is flammable. A high energy density, so capable of pushing towards that higher theoretical energy density threshold at 500-watt hours per kilo, a reduced cell degradation. So it's not subject to the same sort of risks associated with dendrites. And of course, what's becoming increasingly important is the enhanced recyclability of solid-state cells where you don't need to drain the toxic inflammable 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 sulfide-based alternatives use far more lithium than our 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 U.K., it's 5 years earlier in 2030. And clearly, there's a global trend towards making sure that EVs become the vehicle of choice. There's also a trend towards deploying more and more charging stations, which are making the choice for EV much more straightforward. However, there are still a few reasons why consumers are hesitant to actually buy an EV. One of them is range anxiety and our type of solid-state battery can go a long way towards relieving this by doubling the range that you might see from an EV battery life can be a concern, will my battery still be operating in 10 years' time? Some people keep their vehicles for that length of time. They don't want a short lifespan for the vehicle that they pay for. And actually, battery life is enhanced in solid-state. And also, there are some concerns around 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 are those brands that perhaps have a performance line in their offering. So that's why you see us associated with companies like JLR and McLaren and latterly BMW. It's not because solid-state is intrinsically more expensive. In fact, the opposite is the case. There's been a lot of analysis recently that demonstrates that solid-state will bring down battery costs. It's because in the first instance, when solid-state batteries are manufactured at limited scale, we won't have the same economies of scale that you currently get with the largely commoditized standard lithium-ion cells. So we need to make sure that the initial markets that we're providing batteries to are not too price-sensitive. So in summary, Ilika's technology for EVs has lots of advantages starting at 11:00 here, the #1 choice of materials. We use an oxide electrolyte that's very stable in air, much more stable than the sulfide electrolyzed alternatives that some of our competitors have chosen. We've got a cell chemistry, which has a long cycle life and few degradation mechanisms. We've got a cell architecture that offer improved energy density and driving range. It's also an extremely safe chemistry. We don't have any lithium metal and no flammable liquid electrolyte in there. We've also got a higher thermal capacity. And what that really means actually is that our batteries can operate at some elevated temperature. And that's particularly important. Actually, when you are deploying EVs where there is a high ambient temperature, all EVs have a cooling system associated with their pack typically to keep the pack below 40 degrees C. And if you can allow the pack to operate the higher temperature, in fact, our packs can go up to 80 degrees C, and we've even demonstrated some proof of principal performance at higher temperatures than that. Then you can reduce the amount of cooling that's needed. And that, again, is a reduction in weight and cost, and therefore, it gives you a more compact battery pack and then, of course, recyclability that we've already spoken about. So a quick overview of the competitive landscape. There are more than, whether there's a number of choices that can be made in solid-state batteries, there's not just one type of solid-state battery. You can choose different electrolytes. So we've chosen oxide electrolytes, but sulfide electrolytes are also an alternative. You can choose different types of anode. So you can choose not to have one at all, at least initially when the battery is first assembled or you can have a lithium metal-based anode and actually some analysts even core solid-state lithium metal batteries. But in fact, solid-state can also use structured anodes like silicon anode, and we've chosen that because, it's an approach that gives you a long cycle life and there's also a less expensive choice than using lithium metal. What I would argue is that actually, going forward, we're going to see a diversity of solid-state solutions in the market. In the same way that we see a diversity of normal traditional lithium-ion battery chemistries right now. So your mobile phones and your laptops all use in LCO-based cathode, whereas in vehicles, typically, you see NMC or NCA-based cathodes or if you're in China, an 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 in 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 U.K. a number of years ago. 2 years ago, we raised GBP 25 million to extend our development program and actually to automate that pilot line. We are well through that implementation now. We've already taken delivery of certain equipment items in order to enhance our productivity, and we've got more arriving towards the end of this year and into next year. And we've also carried out a number of feasibility studies to assess how we can work with partners in order to increase the capacity of our production capability to what the automotive industry calls, B samples and C samples. So an A sample is effectively a prototype cell that meets certain performance criteria, but doesn't necessarily have to be manufactured on production intent equipment. But a B sample is the same cell that's manufactured on production-intent equipment, perhaps not in the volume that's needed for a vehicle platform launch. And then a C sample is an enhanced volume production capability as a precursor to a 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 have 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's a summary of where we're getting with our technology and how we're going to scale it up. On the left-hand side, you see us moving through a data point that we call D4, which is actually a lab scale precursor to making a prototype product, P1. So P1 has the same performance as the data point D4. But of course, before the OEMs accept samples in their facilities, they actually want us to have done some preliminary testing of those samples so that we can ensure that we don't cause any difficulties to those OEMs when they're going through the test regime. We basically want a stable production batch so that they get the results that they anticipate. We'll go through energy density, lithium-ion equivalent 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'll be building up an automated pilot line to be able to give us A samples, which will then be a precursory scaling up for B and C samples beyond that. And our business model indicates, of course, that we're going to have our licensing opportunities really from 2025 onwards. So pretty much at the point where we've got our A samples as organizations take an option to use our technology and then deploy it on a larger scale. So one of the highlights that I want to flag that this happened since our half year is that we've been awarded a substantial grant of just over GBP 8 million by the Faraday Battery Challenge to lead a fantastic consortium of companies. One of the partners involved is Nexeon which is a silicon anode manufacturer based in Abingdon, not far from where we are in Southampton on the South Coast of the U.K. They will be providing information and anodes that we can integrate into our prototype cells, And then we're using a really great constellation really of university and lab-based partners in order to enhance the development of these cells under the oversight of a steering committee that involves BMW and also WAE, which used to be known as Williams Advanced Engineering now part of Fortescue. And this is a program that really supports the core development of our Goliath batteries through that road map that you saw before. It's not a different program. It's effectively nondilutive grant support for our endeavors. So at this point, I'm going to hand over to Jason, who's going to talk about some of our ESG initiatives. I know that they're very important to our stakeholders and some of our shareholders in particular. So Jason, over to you.

Thank you, Graeme. So the environmental, social and government 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 time line to try and ensure that everything we do is compliant and we are as aligned as possible with our potential customers so that any transition into licensing is as easy as possible as we then interact with our potential next stage customers. So from an environmental point of view, we're ISO 14001 certified. We have accreditation for both Scope 1 and Scope 2. And we are already working on our product carbon footprint, our net carbon neutral planning and Scope 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 OEMs or 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 with 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 rules, regulations. Health and safety is at the forefront of everything that we do. And we ensure that we continually challenge ourselves to improve and move forward. We have conducted over the last year, first, materiality assessment. So engaging with a whole range of stakeholders, investors, legislative, supplier, customer and employees to ensure that we understand all of the topics that may affect the company, ranking those for importance and then ensuring that we react to those as we go forward. And that's part of the journey for ensuring that we are constantly reflecting on our ESG journey and staying ahead of the challenges that we see coming. Finally, just moving on to the results. We've announced our full audited results. So total income of GBP 0.8 million, as Graeme said, we received GBP 2.8 million was the share of the history funded grants, total GBP 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 we'll continue through into 2024 and into the early part of 2025. Resulting from that, we have had an EBITDA loss, excluding share-based payment of GBP 7 million. So that loss increase from the prior year of GBP 6.4 million. Really, on the back of the scale-up 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 Cirtec, we've already taken steps to mitigate that increasing cost through the expectation and near completion of that contract so that we reduce the ongoing cost of the 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 GBP 16 million at the end of the financial year, which is very much in line with expectations and the sign posting 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, on 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, given our expectation that cash consumption will continue roughly at the same level as we go forward into the next year.

Thanks, Jason. So a 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'll 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'll be hitting some defined technical milestones like the D4 point and the lithium-ion energy density equivalent point as this year progresses. And of course, there's more ground support that we can look forward to receiving. There were some great opportunities actually for collaboration through the automotive transformation fund and the Faraday Battery Challenge here in the U.K. 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.

Graeme, Jason, thank you very much for your presentation. [Operator Instructions]. Graeme and Jason, as you can see we 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's appropriate to do so what I'll do is I'll pick up from you at the end.

Very good. All right. 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 LSC: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 LSC 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 GBP 8.2 million grant-funded project from FBC from the Faraday Battery Challenge involves BMW and WAE in the steering committee. So there are 2 examples of people who are taking an interest in our technology. Next question is one 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 Ilika? 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 road map. And Ilika continues to hold joint patents 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 taking. 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 U.K. 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 CubeWorks and where possible, we'll continue to update you on the types of applications that we are shipping these batteries for. And once the Cirtec deal is finalized, we'll 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'll announce that we'll hit significant development milestones, and we'll 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 the U.K. focus? So the Cirtec deal is our 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 U.K. team will continue to focus on road map 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 reported 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.

Maybe if I take that one. So as we saw within the U.K., especially over the last 12 months, there was a very high inflationary environment. The U.K. particularly still is in that, although energy prices have started to come back down and operating a small-scale fab or manufacturing facility within the U.K. 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 Cirtec licensing is to take advantage of that larger manufacturing capability, the protection that's provided to limit cost runway and also really we recognize 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 a Giga Factory manufacturer or builders. So we recognize 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-based performance of any new technology. So that really is the driver behind the acceleration of the Cirtec tech transfer, MOU agreement that we're pursuing at the moment.

Thanks, Jason. So the next one says the last few years have been a bumpy road to shareholders, what lessons can be learned from the Stereax journey to ensure that Goliath doesn't suffer from similar issues and delays in the path to scale-up and commercialization? So I'd say that the last few years have seen a mixture of factors beyond the company's control such as the macroeconomic situation and one related to the scale-up of the technology that we've chosen for Stereax. I'd say for Goliath, in terms of the things that are in our control, we're spending a lot more time and effort in derisking the scale-up technology that we're using for Goliath. So we flagged in our results, RNS this morning that over the last 6 months or so, we've completed a lot of scale-up studies that involve vendors and also our partners at the U.K. big to ensure that actually the scale of 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.

The next question is how unique is your battery technology through your main competitors in this type of bucket market. I think Graeme answered that in 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.

So the next question is Apple's recently launched VR headset was criticized for its early heavy battery pack. Are you in discussions with consumer electronics companies regarding such applications? Yes. So I think that the smart contact lenses are a potential solution to the unwieldiness of that VR headset. And yes, the ideal solution is that you've got a wafer-thin contact lens with very thin batteries that allow you to have a sort of heads-up display of VR display. So I think in the coming time period, you'll see that those VR headsets get much lighter. And actually, ultimately, they get replaced by microelectronic solutions that can be miniaturized, much further than what we've seen so far. So yes, it's a very exciting opportunity. We've 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's a lot of quite compact solutions for hearing aids and ear buds. 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 the ear buds. 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. Next question is, will Cirtec be the partner of choice to manufacture Stereax batteries that will serve nonmedical markets like aerospace and industrial or will you seek another manufacturing partner? Well, in the first instance, we're going to be very focused on making the Cirtec 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 appetite of Cirtec, 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 and the relationship to be able to address those appropriately. So we've 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?

Yes. 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 you saw 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 Cirtec agreement and move the tech 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've talked about that as being focused around the MedTech 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 Cirtec to bring the price point of the Stereax factories 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 gaps that we would expect to see as items go through the regulatory period for implanted Class II or Class III medical devices.

So there's a 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?

So I'd say that we certainly have more than 11 months of cash runway. The activity that we've already taken and mentioned earlier with the MOU signed and with the soon, hopefully, to be closed contract with Cirtec. We've taken the opportunity to reduce our spend on the Stereax side of the business, and that was very much the cost driven from an operational point of view. As we discussed earlier, the NG intensity of running a small-scale fabrication site in the U.K. 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 cost of the business as we look forward to the next year. But as we say, we are looking to deploy some of the capital that we do have on hand to the production intent equipment that allows us to prove that the Goliath cells are manufacturable on the large-scale equipment that the automotive and their Tier 1 manufacturing partners need to see us demonstrate to validate that those Goliath cells can be manufactured in mass scale.

Very good. So next one is, does your relationship with BMW go beyond their place on the steering committee of the Faraday project? 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. They're a very supportive partner and we're very grateful for that. But any further formalization of that relationship is something perhaps for the future. We've 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've 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'll have seen that there's a trend in those sectors for an increasing use of handheld devices. Clearly, there's 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 development timing compare with the competition? So I would say that 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've been in very limited numbers in sort of motor show vehicles. So I believe that actually we're still in that leading cohort of battery developers. And actually, through our 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 said, most of the competition is still at prototype level.

Next question here is what's the capacity of your Stereax pilot line? What would be the cost of Cirtec line be? And what will its capacity be? So the capacity that we have in our current facility is enough to satisfy the demand that we've demonstrated through the table that we went through earlier 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 Cirtec 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've 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 Cirtec 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 1 or 2 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 plenty of opportunity for maximizing the return from the equipment set that already is deployed and underpinning the business case for Cirtec to put in place further capacity to be able to take advantage of that volume.

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? 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. Next question. Have you actually had paid for sales of Stereax? And how many Stereax can you manufacture by month? So yes, we have had paid for sales of Stereax. So when we looked at that chart, they are backorders of paid for sales for Stereax, for which we receive monetary compensation. And as we've 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 Cirtec, we will be able to manufacture 100,000 batteries per year. So next one here is, can you once again define the specs of your Stereax cells, our M50 and M300 the only 2 standard sizes and how it compares with medical industry, micro battery alternatives such as those from VARTA, how do Zinc-air batteries compare in capacity and density? So first of all, the M50 is a 50 micro Ampower battery. The M300 is a 300 micro Ampower battery which is made by taking 6 M50s and stacking them and connecting them in parallel. They're the 2 sort of MVP building blocks that we have manufactured to date. We expect to be able to increase the capacity of Stereax cells to 1,000 micro Ampowers, which means 1 [ mili-Ampower ]. And we have that as a stated development target with Cirtec. A lot of the existing coin cells, you mentioned VARTA there. They're, 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're chasing. For instance, you couldn't imagine a coin cell being stuck onto a contact lens and that being particularly comfortable. So there are definitely different target markets that we're chasing. In terms of Zinc-air, Zinc-air batteries are not generally recyclable. So again, they're for different applications to the ones that we're choosing for Stereax.

I think we've got probably time for one more question. So last question here is what sales and marketing resource to Cirtec proposed to sign to 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 that has brought clearly some growth potential. And part of the advantage of the Cirtec relationship is they are already suppliers to a number of those customers. So clearly, they are already in that market and had 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've 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 [ support ] initiatives 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 U.K. So that clearly should open up further opportunities while Cirtec are focused around the MedTech 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 MedTech focus to ensure that we have the biggest possible range of new customers that we can identify and work with.

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

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

Perfect. Graeme, Jason, thank you, once again for updating investors today. Could I please ask investors not to close the session. As you know, we automatically redirect to provide your feedback in order that the management team can better understand your views and expectations. So it may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Ilika plc, I would like to thank you for attending today's presentation, and good afternoon to you all.