Cymat Corp. (CYM)
Interview with:
Michael M. Liik, Chairman and CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
exclusive rights to manufacture and sell a proprietary Stabilized Aluminum Foam (SAF) in most industrialized countries.

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Cymat Corp.’s aluminum foam technology is branded Alusion™ and SmartMetal™. The characteristics of this technology span both the design and technology markets due to its wide array of attributes including light weight and high strength, impact energy absorption, acoustic properties, electromagnetic shielding, fire retardation,  recyclability and low cost of production

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Industrial Products
Materials Technology
(CYM - TSX)

Cymat Corp.

Unit 2, 6320 Danville Rd.
Mississauga, ON, Canada L5T 2L7
Phone: 905-696-9900


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Michael M. Liik
Chairman and
Chief Executive Officer

Interview conducted by:
Lynn Fosse
Senior Editor

CEOCFOinterviews.com
May 2003

BIO:
Michael Liik, P.Eng., Chairman and CEO, Cymat Corp.

Mr. Liik joined Cymat in spring 2000, after serving on the Board as Chairman for six months. He brings a strong understanding of partnering with the auto industry, with his previous role as Vice-President, at Slater Steel, a multi-divisional, publicly traded specialty steel producer. At Slater Steel, he was responsible for all day-to-day operations of the company as the Vice President of Corporate Development. Michael has also held senior management positions at Horsham Inc. (predecessor to Trizek Hahn), Bramalea Ltd., and National Bank. Michael is a Professional Engineer, and holds a Bachelor of Science in Engineering, as well as an MBA, from the University of Toronto

Company Profile:

Cymat Corp. (CYM - TSX) is a materials technology company that has the exclusive rights to manufacture and sell a proprietary Stabilized Aluminum Foam (SAF) in most industrialized countries. Cymat SAF’s benefits include a high strength-to-weight ratio, mechanical energy absorption, thermal and acoustic insulation, 100% recyclability and low cost of production. Cymat’s research and development group is collaborating with a number of partners spanning the automotive, rail, oil and gas, marine and defense industries to develop applications for SAF.

The company has exclusive worldwide rights, through patents and licenses, for producing Cymat SmartMetal™. The proprietary, versatile process combines alloyed aluminum with a metal matrix composite to create strong, lightweight panels and shapes or fill cavities. The company's principal focus is on automotive, where aluminum foam is ideally suited to the industry's objectives to make vehicles lighter, safer and better for the environment. In testing by the MIT Crashworthiness Consortium (members include MIT, Ford, GM, Volvo, BMW and Alcan), aluminum foam improved the impact absorbing qualities of automotive components by up to 600%. Computer simulation testing of NASCAR crashes by the University of Windsor with and without SAF showed a 30-40% reduction in G-force by strengthening the race car with SAF.

In addition, the company is targeting the architectural and design industry to build a shorter-term revenue stream based on SAF’s aesthetic appeal. This industry has been targeted as it will require minimal product development. Alusion™, a division of Cymat, markets aluminum foam to the global architectural and design industries. As the result of extensive research and development and an advanced understanding of manufacturers' needs, Cymat's foam products offer a compelling range of innovative materials solutions.

CEOCFOinterviews: Mr. Liik, where was Cymat when you became its CEO and what changes have taken place?

Mr. Liik: “When I got involved three years ago, this was a relatively small company. The founders of the company had just received a North American license for this technology from one of the co-inventors , Alcan Inc (NYSE:AL), but had not yet proven out the technology. During my tenure, we have expanded that license to worldwide exclusive rights to produce our technology. We did this by acquiring the balance of the patents from Norsk Hydro ASA (NYSE:NHY), which is the other co-inventor of the technology.  Norsk Hydro is the third largest aluminum company in the world, based in Norway. We consolidated the technology and scaled up the production capability. We have entered into a number of strategic partnerships in numerous industries including: automotive, the door industry, the mining industry and the architectural industry. We also raised about  thirty-five million dollars in that period to help us commercialize the technology.”

CEOCFOinterviews: What is the technology and what do you do with it?

Mr. Liik: “Visually, Cymat’s SmartMetal ressembles a rigid aluminum sponge. The material is produced by combing molten aluminum with ceramic particles and injecting gases into the mix causing it to foam up. The resulting material is very interesting because of its unique array of attributes. The primary characteristic of SmartMetal is its high strength to weight ratio. When injected into the frame of a car, it reinforces the structure without adding much weight. Another important element of the material is its impact energy absorption characteristic. Because of its cellular structure, during a crushing motion, all of the cells have to collapse before the material behaves like a solid. This in turn dissipates a significant amount of kinetic energy. Many of our early automotive applications are in the bumper area. By incorporating foam into the system, much of the energy in collisions that would ordinarily be transferred to the occupant, is dissipated by the foam. Other attributes of the material include sound attenuation, electromagnetic shielding, fire retardency and the fact that if is completely recyclable.”

CEOCFOinterviews: Where are you in getting the technology utilized?

Mr. Liik: “We are pursuing three main market sectors; our strategic market and largest opportunity would be automotive where we are pursuing partnerships to commercialize the material. We currently have three partnerships; two in Europe and one in North America. The two in Europe are with Valeo, the largest European primary supplier to the auto industry and PSA Peugeot CitroŽn in France. Here in North America, we have a pertnership with one of the Magna subsidiaries (Decoma International). These are longer term propositions because it takes a while to get new technologies introduced into the automotive industry. For the mid-term, we have an industrial products group that focuses on opportunities that range from lead times of six to twelve months  to get our material into industrial applications. So far, we have two main partnerships, one in the mining industry and one in the door industry. Finally, for short-term or immediate revenue, we have an architectural products division that utilizes the aesthetic aspects of the material for use in furniture, wall panels, ceiling panels and the like. We already have a number of very high profile installations with Alusion. In the New York area, our material was used throughout the LIMELIGHT CLUB when it was recently retrofitted and the 9/11 monument, down by ground-zero, used our materials.”

CEOCFOinterviews: How does your material stack up cost wise against what it is replacing?

Mr. Liik: “You have to look at it on an application-by-application basis. In the automotive industry, we loosely compete with plastic foams, and I would say that the cost is comparable. Where we would have an edge is that plastic foams are not very strong.. If you are looking at the aerospace industry, we would compete with aluminum honeycombs, and the price again is comparable. We have some attributes that they do not have, so there is a value proposition as well. In many applications we are looking at, it is an entirely new concept that is being introduced, so we would not necessarily be replacing an incumbent material. That is certainly the case in the bumper applications that we are working on right now.”

CEOCFOinterviews: How do you get people in the various industries to sit up and take notice?

Mr. Liik: “We have affiliations with a lot of the key universities around the world such as Harvard and MIT; in Europe, NTNU;(Norwegian University of Science and Technology) and Cambridge; in Canada, The University of Toronto and The University of Windsor, which is a highly regarded automotive university. There is already a large body of knowledge that exists concerning aluminum foams and a lot of academic work is still being done in this field.  We also get the word out through workshops and presentations at various symposiums around the world. A lot of it is missionary work though.. We started with the automotive industry knocking on doors and showing them our product, which led to interest in the product and finally to the partnerships that we are involved with today. The same is true for our industrial products group. We look at areas where we think our material would have relevance. We have a number of market development  and sales people both here and in Europe who are out knocking on doors and talking to people, whether it is in the military, aerospace industry or mining industry.”

CEOCFOinterviews: Will you please tell us about the financial position of the company?

Mr. Liik: “We have about eleven million dollars in the bank right now. We are starting to generate revenues from our architectural division, not at a point where we can cover our costs from that, but our objective is to grow those revenues as quickly as we can to cover our costs. We burn somewhere between six hundred and seven hundred thousand dollars a month, so we likely have sufficient cash to see us through to break-even.”

CEOCFOinterviews: Do you feel the exposure in the design area will help you in the other area?

Mr. Liik: “They are entirely different industries; we have even branded them differently. Our material in the design areas has been branded under “Alusion™” and in the technical area it is being branded under “SmartMetal™.” There is very little synergy between the two markets because in the one market we are selling to designers, purely the aesthetic properties of the material, whereas in the industrial market, we are selling the engineering properties of the material. What it does do for us aside from generating early revenues, is  give us manufacturing experience.  We find ourselves in a “catch 22” situation with our auto partners in that with the automotive partners they want us to demonstrate robust manufacturing capability. But we cannot do that until we actually have substantial orders and are running on a regular basis. That is the principal reason we got into the architectural area, because it was a very easy product to produce and it got us up the learning curve with regard to manufacturing capability.”

CEOCFOinterviews: Do you manufacture the products yourself?

Mr. Liik: “Our model is to be a tech company and in that regard we have little desire to build up any major manufacturing capacity. Instead, we would like to manufacture in joint venture with established manufacturers or license the technology to our partners. However, we found that we have to do a certain amount of  manufacturing ourselves ( for which we have the capability here in Toronto) to prove out the process and to be able to develop a credible turn-key package for our partners.”

CEOCFOinterviews: Is there much or any competition from competing technologies that would fit into your category?

Mr. Liik: “ There are other foaming technologies available in Europe. The reason that we have a much stronger commercial proposition is because we are able to produce the foam at about one fifth of the cost at which our European counterparts can. As such, we do not see them as viable competition. A couple of these competitors already have parts in higher-end exotic automobiles but it is unlikely that they would ever be able to penetrate the mainstream auto market. In the design area, we don’t really have any direct comparables although we have positioned the product at a granite/marble price point.”

CEOCFOinterviews: What are the main challenges you are facing and how are you ready?

Mr. Liik: “The main challenge for us is that the public markets have changed. We are a public company. When I first came on board and we came up with this tech company business model, the idea was to concentrate only on our strategic markets and technology development and fund ourselves through on going access to robust capital markets. Our challenge has been to adapt to an environment where development stage companies have had to demonstrate self sufficiency much earlier than in times of robust capital markets. As such, we have had to change our strategy to focus some of our efforts on shorter-term revenue opportunities. Another challenge lies in the fact that the main strategic  industry that we are trying to penetrate,  the automotive industry, is traditionally very conservative.  When they are considering new technologies, they tend to be very cautious. I only need to remind you of the Ford Explorer incident when they had the problems with the tires. It nearly bankrupted Ford with a recall. So you can image how careful the industry is when they are considering critical safety components in the areas that we are dealing with. The automotive opportunity for us, however, could be up to forty billion dollars annually as there is potential for about 150 lbs. per car for our material . As such, I believe that the effort we are applying to this industry is certainly warranted.”

CEOCFOinterviews: What should investors and shareholders know that may not be apparent on the surface?

Mr. Liik: “I think that the fact that we have a full pipeline of partnership opportunities that we have been working on would be very important to investors. These partnerships opportunities typically have a long gestation period as they require up to six months of testing and prototyping work in advance of any formal relationship. I think that investors can expect to see a number of additional partnerships covering various new applications on the car. Furthermore, investors can expect to see revenues beginning to ramp up in both our industrial products group and from Alusion, our architectural and design group.”

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