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.