Welcome to this Q1 presentation of Ensurge Micropower. Today we have with us Chairman of the Board, Terje Rogne, and we have with us CEO, Lars Eikeland. Thank you.
Okay, welcome to this company update. This is actually the first quarterly company presentation, and it marks a new era for this company after six very heavy, tough, grueling R&D efforts, strong testing period, moving very sturdy towards where we are. And having spent some $400 million financed through equity by our shoulders and bear notice to that, not a single penny from public funding, different to most other battery technology adventures, we are now ready to bring our technology to customers, to the market. Starting bringing you back to February 2024, that was the first time we managed to have a well-functioning battery cell.
Since that time, as I said, it's been a very disciplined progress towards April of this year when we were able to stack, encapsulate, and cycle up to a reasonable number of charging cycles, a battery that we were comfortable with, that we could demonstrate and leave at a customer premise. When you saw the enthusiasm and the joy, the energy from our customer looking and playing with this battery, then yes, it's a confirmation that we are truly doing something game-changing. It's a battery that has an extremely fast charging time. It's a battery that is safe, and it has a number of features and functionalities that you don't find in any other battery technology. We have steadily been improving yield and our capacity.
Since that presentation demonstration, we've also seen a very solid activity increase from customers, from partners, and internally driving our focus, not at the expense of, but in addition to continuous technology product development. Now we're also putting much higher emphasis on the commercial side of our business. We want to capitalize on the investments that our shareholders and all the hard efforts that have been put into this over a period of six years. We're also seeing a new type of customers, medtech customers, and it's almost like looking, rather than looking into the mirror, driving a car where you propose this battery technology to existing users of battery technology into the medtech field where customers, they are not allowed to bring their gadgets into the market due to lack limitations of current battery technology.
Now being increasingly so part of the medtech industry and opening up for all these new electronic gadgets that are either on you or inside you, that is a very rewarding and enticing new dimension to our company. Yes, we have increased our focus now as we are ready with the 11-layer battery. We are now increasing our focus on joint development agreements. In terms of strategic partnerships, yes, we have a few partners that are increasingly so knocking on our door, and we have advanced quite considerably with particularly one. We have stated what we want, where we are, and what we are prepared to do. Now it is up to them to continue. In the meantime, we are accelerating our joint development agreement activities with alternatives and other customers and potential partners.
At the same time, we are accelerating our technology roadmap through these partnerships, both in terms of energy density and form factor. At the end of these customer relationships, it's natural that this moves into some sort of a licensing royalty agreement because we will never be a large volume producer. With this battery technology that will open up for high volume IoT-related electronic gadgets, it's natural for us to license out our IP and ensure that customers' preferred volume producers are able to apply our IP and produce according to the specifications. Our focus now, it's to continue to drive this battery technology towards higher layer batteries. First and foremost is our 28-layer battery and second to that, a 43-layer battery. Those are the specified targeted type of standardized batteries that we are moving towards.
In order to do so, we need to increase the number of battery cells, and we're doing so quite aggressively, and we are moving that into a new production line that allows us to do so. Towards the end of the year, in the second half, yes, we ambition to start delivering on our first customer account, some 150,000 batteries. That would be a quick summary of the process progress and state for Lars.
Okay.
Do you want to take it into where are we in terms of technology and the capacity and the features?
Yes, I can do so. Thank you. Good afternoon, everybody. Good morning, wherever you are. I'm going to go through a couple of slides where we show a bit more, maybe a bit more details about what Terje summarized in the opening session. One of the things that we have been talking about is the fast charging and also the post-discharge. We had an ambition to, starting with an ambition that we should be twice as fast as the incumbent batteries. In fact, throughout our sort of production and testing and everything, we are in fact more or less five times as fast now. We can charge the battery using eight minutes to get it up to 80% and a fully charged battery at 24 minutes, which is significantly five times faster than incumbent batteries. If you take the move on.
And then we have a 12.5 C pulse discharge. This specific customer said that we need, we probably need 5 C of pulse discharge. We think it's driving a 20 milliamp pulse, but it turned out that in fact it was requiring 50 milliamp. So our 4 milliamp battery could do that over 30 seconds where we have 250 microsecond pulses going back and forth to measure blood oxygen, for instance. We measured then 12.5 C, which is quite unique, to be honest. In terms of commercial customers, we have a pipeline which has been steadily growing and sort of probably accelerating a bit after we did our demo, 120 plus. And you see it's a good mix of wearables, hearables, medical, and IoT sensors and a bit of defense. The biggest one is medical, in fact.
As Terje said in the opening, there's a lot of activity there, and it's quite exciting to listen to the customer to learn what they want to do and what they need the batteries for. It's mind-boggling, to be honest, and things that can't be done with current battery technology. Out of that pipeline, we have currently 13 evaluation agreements, and that has been kept stable at 13 for quite some time now because we have been concentrating on sort of getting the technology ready and so on.
Yes. I think it's fair that the opportunity to expand that is vast. It's just an internal limitation to our capacity to effectively deal with all these opportunities. For each one of these evaluation agreements, we want to make sure that it is a proper handover of the agreements that we have, the batteries that are to be delivered, and that that is followed up by a structured arrangement where we bring this to the end product, the battery with the specific functionality, the specific design that our customer wants. That naturally moves into a volume production agreement with their preferred volume producer. We want to make sure that we get effective use of each opportunity and that we don't waste any time or resource on activities that do not lead up to a return on our investment.
We want to capitalize, as I said, on our investment and where we are. Yes.
Yeah, if I can cover this one.
Yeah.
This is our business model, and that stands as it is and has been sort of for a couple of years now. We are going to pursue three different ways to capitalize on our technology. We will do battery production bespoke. We will do that ourselves in our in-house fab in California, Silicon Valley. That will be limited up to a certain amount of volume, and we will focus on the premium customers that will, and premium applications that will sort of pay for the privilege almost of using our batteries. We will, as part of our development of generation two and further generations, we may go into partnership with certain suppliers of material, and they will do part of that manufacturing themselves, and we will do the final assembly of the and stacking of the battery.
We also have the licensing route that I talked about, that when the volumes are so big and also will require probably a cost that we can't deal with, then we will license the battery technology, not only that, but also the battery manufacturing process IP that we have built up over the years. Right. Yeah. In very simple ways, our manufacturing process, we call it roll-to-roll manufacturing line, and we have the front end where we start with a roll-to-roll stainless steel. We put on the cathode, we go through a furnace, we put on the electrolyte, and then coming towards sort of where you see the patterning happens, that's where you do the customization. This is now for what we call flat stacked batteries, rectangular batteries.
And then it goes to test and inspection, and then it goes into the backend where you do quite a lot of sort of packing exercises, and then you start the stacking and final encapsulation, and it goes onto the print board.
Yeah. This is probably where we've had the greatest change over the recent, the last six to eight weeks. On April, when we finally got our first 11-layer battery, proving that we could stack, encapsulate and cycle, what that gave us was the confidence to move on. By that time, we knew what works and what doesn't work. Even more important than that, we knew what worked and why it worked, and we knew what didn't work and why it didn't work. Having that type of knowledge, we had resolved what we saw as all manufacturing limitations, allowing us to move from what we had. What you see now is where we want to be. What we had was a test batch-based front end with a lot of manual handling, gave us the necessary flexibility to change rapidly anything that didn't work.
By April, then knowing that we had full control, that gave us the comfort to move our manufacturing now to a newer manufacturing line, higher precision, where we can control things like the temperature, the moisture, much better than what we could with the previous batch test line that we made use of. When we now see the visual inspection of that, it's a different world. It's a totally different type of uniformity. Getting now also the test of these battery cells, we see that that will provide the lift up in parameters like the yield, or saying that we have north of 90% stack yield, that will increase with this kind of uniformity. We see that it has a higher capacity, so the volume energy density will increase. With that, we also know that it will dramatically improve the charging cycle capacity.
All of this is absolutely necessary. Together then with a dramatic volume expansion, maybe as much as 10 times for battery cells, just going from 11-layer battery to a 28-layer battery to have the same number of batteries to test and to create the necessary comfort for us to start shipping these batteries to customers and partners, we need at least three times as many battery cells and the same then going to 43- layers. Obviously, this is a very important step forward for us to bring this into a much more attractive and game-changing type of battery.
Yes?
If I can just add something there, when we are ramping up and introducing new machines, we are doing, say, a roll-to-roll, a Heil furnace, that is in fact something we already have in our inventory of machines. We have decided now we are ready to go for that. This is not a big investment. The investment was made back in 2017 when we took over a park of a lot of high-tech roll-to-roll equipment. Now we feel we are ready to start doing this.
Okay. Before we go into Q&A, let me try to summarize. I want to draw a parallel. What we're doing, that's precisely the same thing that we did at Tandburg that I had to be a part of and what Nordic Semiconductor have done. That has been the core for their success. That is a very steady grinding on the core technology platform, a technology platform that allowed Tandburg to bulldoze down competitive efforts, that allowed them to bulldoze into customer accounts, and that were transformed into a financial excellence. The same thing takes place for Nordic Semiconductor. That's what we're doing. We are very steadily building a powerful technology platform that will allow us to bring this out to customers and transform that to financial excellence. We know that we have a unique product.
It has features, functionalities, and qualities that existing battery technology cannot match. We know that we have the infrastructure to grow the current generation of batteries, and we have the infrastructure to pursue the technology roadmap that we have defined. The market obviously is big. Yes, you do have the existing market, existing market with existing battery technology, but we also have the future, the future market opportunity that this battery technology will pave the way for. Yes, we've spent more than, actually closer to $400 million. The money is one thing, but it is that continuous learning process that has been taking place.
I said the last six years, over the last six years, it's been very focused on battery technology, but also the foundation for our competence and our knowledge than the previous history of this company that was its legacy business with thin film, but it all were made possible on the same substrate that we're applying today, stainless steel. Knowing the characteristics of that substrate has allowed us to convert that into, yes, I say, some of the first solid-state battery technologies being presented to the market, and definitely so in the micro battery space. Being the first, being in the front allows us to build up a very powerful, extensive IP portfolio. We see, yes, there is competition, and typically we see two different types of competitors. We see that we have the companies like ourselves that don't have much of a history in the battery space.
We know them quite well. A lot of them are based in the same region, Americas, that we are. We also see existing battery technology companies applying what they know, and what they know is based on different substrates, ceramic substrate, and that has some limitations. Yes, they know the substrate, and they are able to apply that into a solid-state battery, but it's a fragile substrate that cannot match stainless steel in terms of thickness or thinness, doesn't have any flexibility. From a technology point of view, we know that the capacity of converting a stainless steel substrate into a solid-state battery is far superior to any ceramic substrate. That is where I want to leave this presentation, and I welcome you all to raise questions and then take it from there. Yes?
Thank you very much, Terje, and thank you, Lars. As I mentioned, if you have any questions, feel free to write them in the chat. We have received a couple of questions. We can start with the first one. Following the private placement, you have indicated earlier that a strong balance sheet provides higher standing towards the potential partners. Have you seen this materialize?
Yes, definitely. It's an important aspect of any customer discussion. Not being at sort of at the edge of any financial situation allows us to, like what we've done now, we have one particular joint development opportunity, and that's a much, much larger company than ourselves. They have their internal things. They have their own internal agenda. Being a small company, we cannot afford to sort of be lured into their agenda. We have parked that and basically said that, hey, this is it. This is what we can do. This is what we need. Come back when you're ready. We are allowed to continue to work with alternatives. Yes, that has allowed us a bit of flexibility, I would say.
Thank you. Have you noticed any changes with your customers or decision-makers of your customers in regards to the increased trade tariffs?
To be honest, no, not yet. The situation is quite unpredictable as well. Obviously, we have looked into it. On the supply side, the import duties, we may have to pay on things that we are importing from abroad. A lot of the materials, the specific materials, are coming from Europe, some from Asia, but also machinery that we are ordering. We expect that there will be an increase and could be up to 10-15%. As I said, this is almost changing by the day as the countries are negotiating and dropping tariffs. We keep on it. We also see where we can maybe shift to an American supplier if they are available. We have a long-term relationship with our suppliers, and this is specialized equipment, specialized materials.
You're not hundreds to choose from.
In regards to potential sales, regardless, it's an advantage, of course, to be.
Yeah. You can say most of our customers, if you look at our pipeline, 60% are Americans. That is an advantage.
Yeah. Very good. Yeah. You touched upon this, of course, but how many batteries are you producing now, and how many partners have you received from the batteries? I mean.
As I said, moving to a higher volume because it's not a sort of a high-volume manufacturing line like what you would expect to see from contract manufacturers. To us, it's a much higher volume manufacturing process that we are now entering into. That provides at least 10 times as many battery cells where we are right now. There's a further potential on that.
There is a reason why we went to 24/7 operation. That is to deal with, I would not say demand, because we are still getting, it is our internal demand in order to have enough numbers to get into stacks and so on. We need 24/7 operation, and that also increases the learning cycle. We learn faster. We can solve problems faster if we encounter problems.
Good. From the Q1 report, it says that three out of thirteen evaluation customers have specified the 28-layer variant. The question is, can you explain what it means to specify a variant?
Yeah. This is for evaluation agreements. So then we have basically three alternatives. It is the 11, 28, and 43. You can say that's our standards. They will say, all right, my application will require, say, 10.
I don't know what happened. Yeah. Okay.
10 milliamp hour, enough space for two batteries, you could fit two 43-layer. They are about 4.5 milliamp each. Another customer with, sorry, 28-layer, they are 4.5 each. 43 is 6.5 milliamp. That kind of determines it. Some of the customers may not have, they may have a different need altogether. They just want to test that the battery technology is working, that in fact it does what we say on the tin.
Yeah. Typically that will, because as Lars says, I suspect very few of them want exactly that form. They have different needs, but they want to feel the comfort that we are able to do the basics. That then naturally transforms into a joint development agreement that, hey, you know what? This is what we need. We need a rounded battery. We need a different shape. We need a different size. By proving that, okay, we can transform this baseline technology into the specific form, the specific size, the specific character of your needs. As that then matures, that evolves into, okay, we're not your manufacturing partner. We're not the typical high-volume manufacturer. Who do you prefer? That is being taken then into a license agreement with their preferred volume producer. That's sort of the roadmap.
Steps. Yeah.
Thank you. In regards to the competitors, you touched upon this in the presentation, so it's a follow-up question to that. Will you still have the same technological advantages by the time your batteries are actually ready to ship in volume?
Yeah.
Yeah. Good.
Definitely. It's when your technology strategy is based on one type of a substrate, you are fairly limited to how far you can bring that in terms of functionality, features, and qualities. It has so defined limitations. So that is, yeah.
Yeah. Good. It was reported that two people from the nomination committee resigned. Do you have any color on that?
Yes. We have had an AGM today where the proposal was to cancel all the proposals from the nomination committee as was stated, and which is correct, that the nomination committee was not according to the statutes, having two of three resigning. There will be a new AGM with the nomination committee that has been proposed.
Good. Yeah, when can we expect a cooperation with a development company?
Again, it takes two for a dance. We are ready to dance, and that may happen sooner or later. As I say, they have their internal processes. They have their own internal agendas. I do not want to speculate in that. What typically, or what most likely will always be the case, is that we are a small company compared to the JDA partners. Now, what can we do in order to leverage some kind of a bargaining power? The only way we can bring bargaining power in our favor is to create competition. That is what we are doing. We are leveraging a unique battery technology, driving up alternative joint development agreement partners so that we have alternatives. That is what we do.
Yeah, some of the questions are a little bit of the same. I can just follow up on that. Which specific milestones or similar are the customers' partners awaiting before they're ready to put a signature on the JDA?
Specific, I think for the current discussions that we have, it's their internal process. Yeah. It doesn't have anything to do with us any longer.
Several other questions are, of course, also related to.
Let me add to that. Then you have alternative JDA partners where 28-layer will definitely be an important aspect to the decision-making process. Moving from 11-layer to 28-layer will dramatically increase our confidence, our stated volume energy density level. We said that the 11-layer, yes, it is at north of 200 watt-hours per liter. Moving to 28 and then finally to 43, we know that we will approach 750 watt-hours per liter. You are so far above what competing battery technology can provide. Obviously, the development here will be and pay importance into further and additional JDA agreements. It is not limited to that progress. We are seeing based on what we achieved with the 11-layer where we demonstrated that we can stack, we are able to encapsulate it, and we are able to have a decent amount of charge cycles. Just that.
No one else has been able to prove this. So just by doing so, that in itself has opened up for these additional discussions and JDA opportunities.
Good. In relation to the production process, this is more of a detailed question, but in the Q1 report, there are mentioned two different processes. One is the introduction of a new carrier transition process to further improve yield and simplicity backend processing. Also, then it's automated testing to replace the visual inspections, decreasing liability, etc. Can you explain what this means and what's the difference between these two processes? Just.
Yeah. They are complementing processes. If we go to the backend, then we have, it is still, you see, it's a lot of steps there. We are working with quads and a lot of different elements where we put in insulation and so on and so forth. We do laser cutting. With a new carrier, we are having a more steady stream. It takes out manual handling of moving these batteries along, which creates better uniformity and a smoother process. It will also simplify the number of laser steps needed. That will also then, as a side effect, increase our throughput in the factory.
It will increase volume, reduce the number of manual handling steps. Through that, reduce the potential failure sources. It will improve quality. It is a natural, logical step forward to us. It is a much more automated manufacturing process, but one that we could not move into before we knew what I said. We need to know what works, what does not work, why it works, and why it does not work. Knowing that, now we have paved the way. We have taken away all the manufacturing issues, questions that we had. For that reason, we are able to move to a much more automated manufacturing line that allows us to bring this company, as I said, to the next level, producing 28-layer, producing 43-layer, engaging with new and additional customers, and expand the commercial activity level.
There will be more automation added later.
Yes, as we progress. The inspection tool, that is at the end when you have the stacks there. Right now, or let's say before, we were looking at basically visual inspection with your eyes on, that doesn't look right. It's a bit bad. It's peeling on the side. You basically spot check, and you can't do 100%. Now with a tool, you do 100%. I mean, you look inside the stack. It's not just visual inspection. That will help us. That will also, I think, again, talking about artificial intelligence, that will give us plenty of sort of needs to work with in order to learn from it and then transfer that knowledge to earlier in the manufacturing process.
Our customer that has placed a 150,000 unit order, their end product is much more expensive than our battery.
They don't want to have to recall. When we today say that we have a 90% stack yield, that's not good enough. We need to approach 100%. An automatic inspection tool that inspects 100% of our batteries will be a dramatic improvement in that stack yield.
That was also a question. Just to confirm, that order is, of course, still active.
Yes.
It was just a question of.
It is. As I said, when we demonstrated the 11-layer, if you would have been in the room and seen the joy, the enthusiasm, the energy from our customer, you wouldn't ask the question.
Yeah. And in regards to financing, this is just an assumption, but from the client that asked the questions, it seems that indicates that you have financing through Q3. Are you looking at other financing options like traditional loans, etc., going forward? It's just in general.
Yeah, looking at it, but our balance sheet is not strong enough to get traditional loans. So we haven't pursued that. We do look at, of course, financing through the joint development agreements. That is an avenue we are pursuing.
We want to capitalize.
We want to capitalize on what we're now able to demonstrate and to start ship to customers. That technology leadership, we want to transform and make use of that to fund the company as we move forward.
Are you able to start commercial production as soon as the 28-layer battery has been validated by customers?
Well.
In smaller volumes?
In theoretically, yes. In still smaller volumes. Also, let's say when we are ready and it's all good, there is a product qualification and certification process that sort of needs to go through because at the end of the day, these batteries will be approved by the EU, by U.S. sort of standards committees. We have to go through that process. That would be probably three months. We can do things in parallel. A lot of, let's say, the, let's call it the lead customer with 150,000, they can do a lot of their own sort of characterization for the product whilst we are working on it.
Yeah, several clients have asked the same question, but when is the expected time span then until the 28-layer battery is finalized approximately?
I would say.
If you would guide on that.
I would say, let me start in a different end. The time lapse between the 43-layer and the 28-layer will be shorter. Will definitely be shorter than the time lapse between the 28-layer and the 11-layer. Because now, as I said, now we're moving our manufacturing of the battery cells to a newer, higher volume and manufacturing line with higher precision. And with that, I would say this summer and where we target sooner rather than later. That's how I would answer, or yeah.
Do you see any commercial interest for the 11-layer battery? Or is it more?
It's a door opener. Yeah, it's a door opener.
There will be commercial interest for it.
Yes. Particularly within the field of the medtech field, they are not necessarily looking at these higher resource batteries. They are looking at smaller devices.
We can go below 11 as well.
Exactly. Exactly.
You touched upon this also, but in April, on the press release, it was, of course, focusing on the cycle rate of 50plus cycles for the 11-layer battery. Was the number of 50 cycles a threshold that the battery was validated to? Or is it.
It was our confidence. Our internal own confidence.
Okay. But how long is the potential cycle life of the 11-layer battery?
I mean, it doesn't matter whether it's 11, 28, or 43. It's just the inherent qualities of the battery so that you get the full capacity out of each cell, which you have 11 of in a stack of 11. Also, the right level of impedance. Both those will have a positive influence on the cycling. I would say the cycling, when we say 50-plus, it's a kind of a milestone on the way to higher cycling. It will be uniform for all batteries. It's the inherent quality in the battery itself, not the size of it, that determines the cycle.
We know that the theoretical number of charge cycles that this material may be able to handle is up towards 3,000 charge cycles. We do have discussions within the field of medtech applications requiring some 1,800 charge cycles.
Which is five years if you charge every night, for instance.
Obviously, when you talk about medtech, yeah, you do have devices that go inside your body and you want it to last for some time. It is natural that you require a certain amount of charge cycles. If you look at our current production order, then you are talking about some 200-plus charge cycles. Remember that compared to normal battery, today's battery technology, liquid lithium battery technology, we are talking about each charge cycle lasts with the same performance some three times longer.
Fantastic. I think we'll take three more questions. In general, what kind of products does the partner want to make with your technology? If you can just.
Today's smaller. Today's space constrained. Looking at our technology roadmap, being able to increase our volume energy density north of 750 watt-hours per liter, way beyond that, then suddenly you expand the footprint of our technology into a wider array of electronic gadgets. In theory, you could basically talk about all electronics.
Of course they want smaller, smaller, but be able to power more functions. So the 12.5 C, it's an important criteria in that sense.
The quality of the batteries, it seems, depends very much on the manufacturing process, of course. Is your preferred manufacturing strategy to license manufacturing of tailor-made batteries or to have one partner for manufacturing?
No. We will have multiple. Each of our customers, then you're talking larger, high-volume customer applications. They have their own preferred manufacturer, volume manufacturer. We will team up with each one of these, enable them to manufacture batteries according to our customer's specifications using our IP, paying the license, and paying the royalty for each battery. Yes, we will have a certain manufacturing capacity, but that's for targeted customers, high-value, challenging customers driving our technology roadmap higher and higher.
Thank you very much. I think, I mean, many of the questions are fulfilled and are answering each other. So I wish to say thank you very much, Terje. Thank you very much, Lars.
Thank you.
If you have any more follow-up questions, you can feel free to reach out to your Arctic broker or reach out to Terje or Lars on email. Thank you very much for your time.
Thank you.
Thank you.