9 questions for Smoltek’s CEO

It’s no secret that I lurk on the Dis­cord serv­er for all who fol­low or own shares in Smoltek. The oth­er day, I saw that Emma200 had a valid point about the bid­ding process announced in a press release dat­ed May 22, 2024:

It has been about 4.5 months so far, but no updates have been com­mu­ni­cat­ed to the mar­ket regard­ing the progress of the bid­ding process… Although Smol wrote that the updates would be com­mu­ni­cat­ed to the mar­ket to the extent possible…

Emma200 is right. It is time for share­hold­ers and oth­er stake­hold­ers to get an update on the bid­ding process and how the com­pa­ny is doing.

So, I moved from thought to action: Read what has been dis­cussed on the Dis­cord serv­er late­ly. For­mu­lat­ed nine ques­tions. Made an appoint­ment with Håkan Pers­son, CEO of Smoltek, and fired off the questions.

Here are his answers.

How long will the company’s funds last?

Smoltek’s share­hold­ers are con­cerned about the company’s liq­uid­i­ty and want to know how long the funds can cov­er cur­rent costs. They want a clear assess­ment of the run­way based on the cur­rent burn rate and avail­able funds.

We expect the funds to last into the first quar­ter of next year.

In the past, we have cap­i­tal­ized the com­pa­ny through fre­quent new share issues, but it is not sus­tain­able to con­tin­ue in this way. We need to find a more long-term financ­ing strat­e­gy. This is high on my and the Board’s agenda.

We look at it from two per­spec­tives: the short-term need to meet our devel­op­ment goals and the long-term need for a sus­tain­able fund­ing mod­el. We are active­ly work­ing to secure both short-term and long-term fund­ing that will allow us to real­ize the enor­mous poten­tial we see ahead of us.

It’s also a pos­i­tive devel­op­ment that our tech­no­log­i­cal progress makes us more attrac­tive to poten­tial part­ners and investors. It is, there­fore, vital that we con­tin­ue to build con­fi­dence in our tech­nol­o­gy, as the fur­ther we progress in our devel­op­ment plan, the more attrac­tive we become to the cap­i­tal markets.

What is the current burn rate?

Giv­en the staff reduc­tions and busi­ness changes imple­ment­ed over the past year, Smoltek’s cur­rent cost lev­els need to be clar­i­fied. What is the cur­rent burn rate?

Our cur­rent burn rate is around SEK 3.4 mil­lion per month. This is a sig­nif­i­cant reduc­tion from pre­vi­ous lev­els, where two years ago we were at around SEK 4.8 mil­lion per month. This has been achieved through head­count reduc­tions and oth­er effi­cien­cies that have helped us reduce costs with­out jeop­ar­diz­ing our ongo­ing projects. We now have a small­er but extreme­ly com­pe­tent work­force. This is the min­i­mum nec­es­sary to exe­cute our cur­rent strategy.

As a pub­lic com­pa­ny, we also have some fixed costs relat­ed to com­pli­ance and report­ing, which are non-negotiable.

How­ev­er, we con­tin­u­al­ly seek ways to opti­mize our spend­ing to ensure that every kro­na is used to its best. This gives us a more sus­tain­able finan­cial foot­ing for the quar­ters ahead as we con­tin­ue to devel­op and com­mer­cial­ize our technology.

Plans for additional funding?

Share­hold­ers are con­cerned about fur­ther dilu­tion of their hold­ings and want to know if Smoltek plans to raise new cap­i­tal and how this will affect the com­pa­ny and its share price.

We are con­stant­ly explor­ing var­i­ous financ­ing options to ensure the con­tin­ued growth and suc­cess of the com­pa­ny. One option is to raise cap­i­tal through the mar­ket by issu­ing new shares. Anoth­er may be to bring in a larg­er investor or indus­tri­al part­ner who can con­tribute both cap­i­tal and strate­gic value.

We aim to bring in part­ners who add more than just cap­i­tal; we want strate­gic investors who can help accel­er­ate our path to mar­ket and strength­en our posi­tion­ing in key segments.

We are work­ing hard to find financ­ing solu­tions that bal­ance short-term cap­i­tal needs with long-term val­ue cre­ation. Our aim is to cre­ate con­di­tions that will allow Smoltek to ful­ly real­ize the poten­tial of our tech­nol­o­gy, which can lead to sig­nif­i­cant increas­es in val­ue for our shareholders.

Status of ongoing projects?

Share­hold­ers are nat­u­ral­ly inter­est­ed in the progress of our key devel­op­ment projects. How is the devel­op­ment of elec­trolyz­er mate­ri­als and CNF-MIM capac­i­tors pro­gress­ing? Are there any con­crete break­throughs or mile­stones that can be achieved soon?

On the semi­con­duc­tor side (Smoltek Semi), we have already achieved sev­er­al tech­ni­cal mile­stones in opti­miz­ing CNF-MIM tech­nol­o­gy, includ­ing improve­ments in capac­i­tance den­si­ty and elec­tri­cal per­for­mance. These achieve­ments have strength­ened our posi­tion as we con­tin­ue to exe­cute on the plan we estab­lished with Yageo.

Our cur­rent focus is on achiev­ing full elec­tri­cal reli­a­bil­i­ty for key para­me­ters to meet strin­gent require­ments for pro­duc­ti­za­tion. This is a crit­i­cal step that will open more doors to play­ers in the semi­con­duc­tor indus­try as we move towards com­mer­cial­iz­ing our tech­nol­o­gy with partners.

We have made sig­nif­i­cant progress on the hydro­gen side (Smoltek Hydro­gen). We have now demon­strat­ed that we can make our prod­uct cor­ro­sion-resis­tant and coat irid­i­um at mar­ket-lead­ing low levels.

Exter­nal eval­u­a­tion by a well-known author­i­ty in the hydro­gen indus­try has con­firmed that our tech­nol­o­gy is excit­ing and address­es a sig­nif­i­cant bot­tle­neck for elec­trolyz­er sys­tems. This assess­ment strength­ens our con­fi­dence as we con­tin­ue to approach new part­ners in both the elec­trolyz­er and fuel cell segments.

Potential partners and customers?

There is great inter­est among share­hold­ers in under­stand­ing which poten­tial cus­tomers or part­ners Smoltek is talk­ing to. Can you give an indi­ca­tion of the types of com­pa­nies you are in con­tact with?

For com­pet­i­tive and non-dis­clo­sure rea­sons, we can­not name spe­cif­ic com­pa­nies, but I can give you an overview of the types of play­ers we are talk­ing to.

On the semi­con­duc­tor side, we are pur­su­ing sev­er­al par­al­lel tracks. While we con­tin­ue our dis­cus­sions with Yageo, one of the world’s largest pas­sive com­po­nent man­u­fac­tur­ers, we are also in dia­log with oth­er lead­ing play­ers in the semi­con­duc­tor indus­try. These inter­ac­tions give us valu­able insight into mar­ket needs and strength­en our rela­tion­ships with some of the world’s largest tech­nol­o­gy companies.

On the hydro­gen side, we work with a wide range of play­ers. These include large indus­tri­al com­pa­nies that man­u­fac­ture elec­trolyz­ers, niche play­ers that devel­op mod­u­lar solu­tions, and com­pa­nies in the fuel cell seg­ment. We are also in con­tact with sup­pli­ers of crit­i­cal com­po­nents such as mem­branes and cat­a­lyst mate­ri­als. Our col­lab­o­ra­tion with Spark­Nano, which has received invest­ment from Air Liq­uide Ven­ture Cap­i­tal, is a great exam­ple of how we are strate­gi­cal­ly part­ner­ing with key play­ers in the ecosystem.

Strategy on technology and IP?

There has been spec­u­la­tion about Smoltek poten­tial­ly sell­ing parts or all of its tech­nol­o­gy and IP to strength­en liq­uid­i­ty. What is the company’s view on divest­ing its tech­nol­o­gy or intel­lec­tu­al prop­er­ty assets?

Our approach to tech­nol­o­gy and IP is care­ful­ly con­sid­ered and long-term. We are open to strate­gic part­ner­ships and licens­ing agree­ments, but out­right sales of our core tech­nol­o­gy or intel­lec­tu­al prop­er­ty assets are not in line with our strat­e­gy at this time.

Rather than focus­ing sole­ly on divest­ing assets or entire sub­sidiaries, as announced in the 22 May press release, we are focus­ing on form­ing strate­gic part­ner­ships – whether finan­cial or indus­tri­al – that will allow us to con­tin­ue to devel­op and com­mer­cial­ize our busi­ness­es. Through licens­ing agree­ments or equi­ty part­ner­ships, we can lever­age exter­nal exper­tise while main­tain­ing con­trol over the direc­tion of our tech­nol­o­gy. The goal of our cur­rent process is to ensure a fair val­u­a­tion of our sub­sidiaries based on their poten­tial, both short and long term, as out­lined in our busi­ness cas­es. Our plan is not to give up our busi­ness­es, IP, know-how or peo­ple, but rather to unlock their full value.

Improving communication and transparency?

The com­pa­ny has been crit­i­cized for lack of com­mu­ni­ca­tion. How does Smoltek plan to improve trans­paren­cy and pro­vide reg­u­lar updates on progress and any obstacles?

We under­stand that reg­u­lar and trans­par­ent com­mu­ni­ca­tion is essen­tial to main­tain­ing share­hold­er trust. We are also plan­ning a Cap­i­tal Mar­kets Day to pro­vide deep­er insight into our strat­e­gy and future plans. In addi­tion, we are refin­ing our IR com­mu­ni­ca­tions to bet­ter reach exist­ing and poten­tial investors, includ­ing insti­tu­tion­al play­ers. Our goal is to cre­ate a com­mu­ni­ca­tions frame­work that keeps all stake­hold­ers informed with­out com­pro­mis­ing busi­ness con­fi­den­tial­i­ty or ongo­ing negotiations.

Concluding thoughts

Giv­en the chal­lenges and oppor­tu­ni­ties Smoltek faces, how do you see the company’s future, and what do you want to com­mu­ni­cate to shareholders?

The invest­ment cli­mate has changed sig­nif­i­cant­ly over the past few years. The cap­i­tal mar­kets are now heav­i­ly focused on “de-risk­ing,” which means that finan­cial insti­tu­tions are increas­ing­ly look­ing to avoid risks, rather than active­ly man­age them.

Glob­al events such as the COVID-19 pan­dem­ic, ris­ing inter­est rates, geopo­lit­i­cal uncer­tain­ty, and the cool­ing of the tech­nol­o­gy sec­tor are dri­ving this shift. As a result, investors are demand­ing clear­er evi­dence of the path to mar­ket for ear­ly-stage tech­nolo­gies. We are address­ing this need by pur­su­ing strate­gic part­ner­ships to demon­strate our path to com­mer­cial­iza­tion, while focus­ing on investors who can rec­og­nize the strength of our strate­gic direction.

This has raised the bar for Smoltek. Investors today want to see con­crete proof that our tech­nol­o­gy works and has a clear route to com­mer­cial­iza­tion before they com­mit cap­i­tal. They demand a short­er “time-to-rev­enue,” mean­ing we need to show that we can get from devel­op­ment to mar­ket faster than ever before.

This makes the role of indus­tri­al part­ners who val­i­date our tech­nol­o­gy absolute­ly cru­cial. A cred­i­ble endorse­ment from a large play­er in the indus­try demon­strates our solution’s via­bil­i­ty. It sig­nif­i­cant­ly low­ers the per­ceived risk for finan­cial investors. This val­i­da­tion opens the door to the fund­ing need­ed to take our projects to the next level.

Despite the chal­lenges, I am con­fi­dent in our strat­e­gy. The finan­cial land­scape is more demand­ing now, forc­ing us to focus and sharp­en our approach. Our cur­rent dis­cus­sions with some of the world’s lead­ing com­pa­nies, both in the semi­con­duc­tor and hydro­gen sec­tors, show that there is strong inter­est in our tech­nol­o­gy. This inter­est con­firms that we are on the right track and that our solu­tions address real and press­ing indus­try problems.

To our share­hold­ers, I want to empha­size that our focus is on build­ing long-term val­ue for the com­pa­ny. Our goal remains to posi­tion Smoltek as a leader in its field and to ensure that each share­hold­er ben­e­fits from the growth and suc­cess we are work­ing towards.

Over to you

Those were my nine ques­tions and Håkan’s answers. What’s your take? Do you feel more informed and share the same opti­mism as Håkan and the rest of the com­pa­ny? Or is there a ques­tion you think should have been asked? Share your thoughts and con­tin­ue the con­ver­sa­tion in the com­ments sec­tion of the LinkedIn post for this article.