Update on Stereax Manufacturing Implementation

Ilika plc

("Ilika" or the "Company")

Update on Stereax Manufacturing Implementation

Ilika (AIM: IKA), a pioneer in solid-state battery technology, provides an update on its plans to implement production of its miniature Stereax^Ò batteries. Ilika's Stereax cells are designed for industrial wireless sensors in hostile environments and miniature medical devices.

Following the successful conclusion of the Company's oversubscribed £15m ($20m) equity placing in April 2020, the Company is now implementing its planned manufacturing scale-up for Stereax.  In planning its manufacturing strategy, the Board considered all potential options available.

The Company has concluded its assessment of various options, which included the transfer of manufacturing wafers of Stereax batteries into 3^rd party facilities and the establishment of its own manufacturing operations.  Having fully compared the benefits and risks of installing the key equipment needed for Stereax production in different locations around the world, the Company has demonstrated that the most efficient and cost effective solution will be to establish its own manufacturing operation.

After detailed negotiations and analysis, Ilika's management and Board have demonstrated that the option of outfitting an Ilika-operated facility offers the lowest implementation risk and best financial return. Ilika's management and Board believe that establishing its own manufacturing facility close to Ilika's current operating base in the UK will have the following advantages:

·    Quickest route to product launch

·    Control of implementation timelines and operations without being subject to 3^rd party-imposed restrictions

·    Improved operating margin at volume production

·    Broader access to expertise of Ilika technical team

·    Reduced risk of COVID-related travel restrictions delaying implementation

Our detailed analysis demonstrated that the apparent advantages offered by implementation in an existing 3^rd party facility, such as access to trained operators and reduced infrastructure capital cost, will be more than compensated by our own lower operating costs and our proven ability to rapidly implement facility development plans. Facility lease negotiations are in progress and the Company expects to commence facility fit-out in January 2021. As confirmed in the Company's recent Trading Update issued on 11 November 2020, key tools, which have already been ordered, are expected to be installed in the first half of financial year ending 30 April 2022 ("FY22") with manufacturing commencing by the second half of that financial year. This will result in a 70x increase in Stereax production capacity by the end of the 2021 calendar year.

The Company's expectations for the financial year ending 30 April 2022 are not impacted by the selection of this option.

Ilika's CEO Graeme Purdy, stated, "This decision to implement our own manufacturing capability allows Ilika to fully control Stereax initial scale-up activities and to maintain the on-schedule implementation of our plans.

"We are excited by the opportunity to scale up Stereax production by 70x in our own facilities. Furthermore, we will continue discussions with potential 3^rd party manufacturing partners and customers as we continue to evaluate options for the longer term."