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KULR TECHNOLOGY GROUP 4Q 2020 SHAREHOLDER UPDATE CALL

By March 29, 2021 No Comments

Stuart Smith:

Thank you for joining us today on the KULR, that’s the ticker symbol KULR Technology Group, shareholder and investor conference call. Now, before we get started and I introduce the guests, let me go ahead and give you an abbreviated, safe harbor statement for this call. I do want to point out you can get the entire safe harbor statement and any filing with the Securities and Exchange Commission and on the bottom of any press release.

Stuart Smith:

This call may contain certain forward-looking statements based on KULR Technology Groups, current expectations, forecasts, and assumptions that involve risks and uncertainties. Forward-looking statements in this call are based on the information available to the guests as of the date hereof. The company’s actual results may differ materially from those stated or implied in such forward-looking statements due to risks and uncertainties associated with KULR Technology Groups business, which include risk factors disclosed in the form 10-K filed with the Securities and Exchange Commission on March 19th, 2021. Forward-looking statements include statements regarding the company’s expectations, beliefs, intentions, or strategies regarding the future, and can be identified by forward-looking words such as anticipate, believe, could estimate, expect, intend, may, should and would, or similar words.

Stuart Smith:

All forecasts provided by management on this call are based on the information available at this time. Management expects that internal projections and expectations may change over time. On the call with me today, our KULR Technology Groups CEO Michael Mo, Keith Cochran, the newly appointed President and Chief Operating Officer and Simon Westbrook, the Chief Financial Officer for the company. With that, I will turn the call over to Michael Mo. Michael, the call is yours.

Michael Mo:

Well, thank you so much, Stuart. This is Michael Mo. I’m the CEO of KULR Technology Group. Thanks to everyone that took time today to join our Q4 2020 investor update call. For today’s call, I would first like to talk about our Q4 operational highlights, then provide some updates on recent developments in Q1 2021. Simon Westbrook, our CFO, will then talk about the financial highlights for Q4 2020, and then we’ll a have Q&A session to conclude our call today. I’m very pleased to report that KULR closed out 2020 with a strong revenue growth of 290% year-over-year in the fourth quarter. Our team has worked very hard throughout 2020 where the world experienced an unprecedented worldwide pandemic. I believe that we have persevered as a team, and now we are well positioned for growth in 2021 and beyond. During the fourth quarter of 2020, KULR supplied NASA with safe storage solutions for the Microsoft Surface Pro to be used on board the international space station.

Michael Mo:

This is an extension of the technology we have provided to NASA to keep astronaut’s laptop batteries safe on board ISS since 2019. KULR partnered with Airbus to provide our PPR, passive propagation resistant, battery design solution for ongoing research into lithium-ion battery testing and safety for flight applications. KULR provided battery safety research and testing devices to the Federal Aviation Administration (FAA). The internal short circuit technology will be used in evaluating problems leading to passenger lithium-ion battery malfunctions that can cause smoke and fire incidents aboard aircraft. The Consumer Product Safety Commission reported that KULR’s design solutions can stop fires and explosions in lithium-ion battery packs, and provide additional insights in the future of safe battery technology. The report, which was conducted by the Naval Surface Warfare Center in Carderock, showed that KULR’s battery safety technology is confirmed to prevent cell to cell propagation very effectively. The report is available on our website.

Michael Mo:

These are just a few of the examples of how we continue to execute our strategy of working with aerospace and DOD (Department of Defense) customers to develop cutting edge technologies, participate in regulatory and standard body discussions, and then take these technologies to mass market applications. KULR’s business model continues to evolve from being a component supplier to providing more design and testing services to our customers. KULR continues to establish itself as a trusted partner for both government agencies, and also private sectors. The next step of our evolution is to provide total systems solutions to address market needs, to scale up the system provider solution more effectively and efficiently in the energy storage, UV transportation, hypersonic vehicles, thermal management markets. KULR will actively seek partners for joint venture technology licensing and other strategic partnership models. The goal is to leverage our thermal design technology expertise, and create market leading products, which KULR would take to market directly and capture more value for shareholders.

Michael Mo:

Here are some additional highlights for recent development in 2021. We’re proud to be part of the Mars Rover Perseverance Program, which successfully landed on the red planet on February 18th. Our solution is used in the SHERLOC instrument to keep the electronics in optimal operating temperatures.

Michael Mo:

Keith Cochran, who is on the call today, joined KULR as the president and CEO. Keith was previously the senior vice president of the Global Business unit at Jabil, where he was responsible for the $3.7 billion smartphone business and managing over 65,000 employees in the U.S. and Asia. Keith brings over 25 years of experience in business operations, supply chain management, and large scale manufacturing automation. Keith was recently interviewed by Proactive Investors, an international financial media company, to discuss his background and his vision for KULR. We welcome our shareholders to watch the interview video on KULR’s website. We recently announced that KULR became the official thermal management and battery safety technology partner for Andretti Technologies (ATEC), the advanced technology arm of Andretti Autosport, founded by Michael Andretti.

Michael Mo:

As part of the alliance, KULR will establish a thermal management testing and design platform for high performance battery solutions with the highest safety rating specifically opted for rigorous technical requirements of the Andretti’s global racing enterprise. We’ll also focus on co-developing and co-marketing battery safety and high performance thermal management technologies to serve motor sports as well as mass marketed applications. We recently strengthened our board of directors with the appointment of Dr. Joanna D. Massey and Morio Kurosaki, as our independent directors, contingent upon the Company’s common stock being approved for uplisting to a senior national exchange. Dr. Massey was previously senior vice president of corporate communications as CBS Corporation and also Lions Gate Entertainment. She brings in decades of experience in corporate management and strategic communications. Morio Kurosaki is the president of IT-Farm Corporation in Japan. He has been a successful early-stage venture capital technology investor for companies like Zoom“ video communications, and ContextLogic which is Wish.com among many others.

Michael Mo:

We expect their addition to KULR’s board to strengthen our corporate governance and strategic direction on our path to be more ESG compliant. Next, we’ll have Simon Westbrook to discuss the financial highlights for Q4 2020, Simon.

Simon Westbrook:

Thanks, Michael. This is Simon Westbrook, the CFO. We had a very good quarter. To give you the highlights, we increased our revenue by almost 300%, compared to the prior corresponding quarter. This mainly reflects increased aerospace and government business, which tends to be larger projects than with other customers. At the same time, we managed to improve our gross margins from 48% in the prior quarter, to 80% in the quarter ending December 31st, 2020. We also saw an increase in our shareholder equity from a deficiency of just over half a million dollars at the end of last quarter, September 30th, to a surplus of $6 million at the end of the latest quarter, ending December 31st this year.

Simon Westbrook:

On December 31st, we closed the registered direct offering for the purchase and sale of a total of 6.4 million investment units. Each unit consists of one share of common stock and one warrant to purchase a share of common stock, all for a combined purchase price of $1.25 per share and warrants. The aggregate gross proceeds from this exercise was approximately $8 million. As a result, we reported cash balances of $8.9 million at December 31st this year, compared to a year ago of just over $100,000. This funding exercise leaves us very well positioned to expand our business operations, support new business, and fund ongoing product development. In spite of the difficult COVID inspired trading conditions that we experienced through the last quarter. That’s my summary. Thank you very much.

Michael Mo:

Thank you, Simon. We ended 2020 with a very strong year-over-year growth in Q4, and we see the momentum to carry into 2021. We expect strong growth to continue in 2021 as we prepare to UpList to the Senior National Exchange, which we believe will be a bigger platform for KULR to grow and increase our shareholder value. Stuart, that concludes our prepared remarks. We are open for questions.

Stuart Smith:

All right as always investors, you are such a big part of this call by submitting your questions to us. I do want to give a big thank you out to everyone that submitted a question for today’s call, and encourage you to keep sending those questions to me because I do compile them throughout the quarter and present them all to the company for these calls. Let’s go with the first question. Michael, I trust that you’ll let us know who’s answering each question. The first question here is a large DOD, that’s Department of Defense, contract in 2019 was not repeated in 2020, but was expected to be accretive to 2021 revenue. Is this still expected to ship in 2021?

Michael Mo:

Yes, Stuart, we have received updates on this DOD contract with 2021. As a matter of fact, we expect to ship that in Q2 of 2021. The current forecast from the customer is that this program is scheduled, or is forecasted, to continue for the next three years. We’re certainly happy to see the customer continuing this program.

Stuart Smith:

Very good. Here’s the next question, and it’s about Keith Cochran. It says, with the hiring of Keith Cochran as president and COO, and given his experience in electronic manufacturing and operations, is it reasonable to assume KULR is gearing up for commercialization, at least in some capacity of note for 2021?

Michael Mo:

Good question. This is the perfect question for Keith. So I’ll let him share his insight and vision for KULR.

Keith Cochran:

Sure Michael, thanks for that. Well, the short answer is yes, we have line of sight on business that will require large scale automation, sophisticated material handling, and superior logistics. So our intentions are to have these capabilities in place and functioning within 2021, and full volume processing happening probably in 2022.

Stuart Smith:

Very good. Moving on to the next question. It says, I’m an investor in your stock and I’ve read prism batteries are preferred over pouch type batteries. Is your solution and design technology applicable to either of these, or both?

Michael Mo:

Yes, by prism batteries I assume the shareholder meant prismatic cells. Yes, we see prismatic cells. Since you have the interaction in both energy storage and the UV markets, we see our battery CP testing technology playing a very important role in both of these cell configurations. As a matter of fact, we’ve worked with customers on both of these cell configurations in addition to cylindrical cells. For our PPR design, the prismatic cells are typically much larger, which means that the pack a lot more energy. The safety aspect of it is more important, and we certainly see ourselves playing an important role in all of these different configurations.

Stuart Smith:

Very good. This next question touches on some very recent news from the company out here in the month of March, how is the partnership with Andretti technologies going to increase KULR activity in the consumer EV space?

Michael Mo:

That’s a very timely question. Keith was very instrumental in the strategy and negotiation process with the Andretti team. I think I’ll have him get into that in a lot more detail for us.

Michael Mo:

Go ahead, Keith.

Keith Cochran:

Thanks, Stuart. Appreciate that. Thanks, Michael. Well, our thought was to prove ourselves once again, in the most demanding environments, and this time it’s with the most accomplished team in racing. Andretti’s technology partnership we just announced, it’s a perfect platform to showcase our products and capabilities. We believe that the initial partnership will open up many doors in the EV and automotive markets. Now that our product is proven in the extreme racing environment, it should give large-scale EV and automakers a lot of confidence that KULR can handle their stringent demands. We are fortunate that the Andretti’s Technologies shares our same vision and passion to deliver superior battery safety products into motor sports. Like I said recently, they’re an amazing group of people to work with, and we’re just thrilled to be their partner.

Stuart Smith:

Absolutely, thank you for that Keith. Let’s move on to the next question then, in which markets does KULR see as having the best potential for commercialization and mass market adoption of its technologies?

Michael Mo:

See, we see our suite of products around battery safety and efficiency to have the best potential for mass market commercialization. As Keith spoke to earlier, he is using his expertise to gear up for mass production internally. For these products, because battery is in virtually every product now in our lives on a patch identification of everything. Mark is like energy storage, ESS, batteries for products like drones, power tones, EVs. We certainly see that as the critical driver of growth going forward.

Stuart Smith:

Michael, that response moves me easily into this next question. It says, in the past KULR has reported working on a number of different perspective customer engagements for product development, from power tools, as you just mentioned, to 5G, and e-mobility applications. Can you provide some insight into how some of these engagements are progressing along? Are there any product engagements you anticipate will result in full commercialization for 2021?

Michael Mo:

Absolutely. In 2020, as we communicated earlier in our quarterly calls, we had delays from the customer side working on some of these programs due to the pandemic and physical limitations both by us and the customer. In 2021, we’re going to take more control of the process. We’re going to take more of an initiative, developing a total solution based on our technology. This is really part of our evolution of the business model as we thought about transitioning from component supplier to system provider. This will certainly require more resources from KULR to develop a total solution, both internally and also through our partnerships. At the end of the day, we will take control of the technology and the supply chain, and ultimately realize more value for our shareholders.

Stuart Smith:

All right, Michael, next question. Military and aerospace orders were the main drivers of revenue in Q4 2020. What do you see as the primary drivers of revenue in 2021 and beyond?

Michael Mo:

We actually see the aerospace and DoD applications continue to grow very strongly in 2021. In addition, the battery safety suite of products, some of the vertical applications, energy storage batteries for the drone’s power tool, and the EV market. We see that to be the big driver on the commercial side for 2021 and beyond

Stuart Smith:

Strong growth is projected for electric vehicles and 5G markets. Could you talk a little bit about your products for these markets and what your prospects are going forward?

Michael Mo:

These are certainly very, very exciting markets for KULR. We participate in these markets from a kind of a top-down model in the EV space, through a top-down approach as the Andretti example. In a couple of high performance cars, for example, that we showed last year, that we worked through the high performance platform, such as auto racing side from the top down and then propagate that technology into more mass market applications once it’s proven out in those markets. On the 5G and the cloud computing side, the market just starting out, a lot more development and deployment on both infrastructure and other device sites. As we commercialize our thermal products in large scale, we see many exciting markets ahead on those.

Stuart Smith:

Excellent. Well, this is our final question, Michael, what is going on with Drako currently? That’s Drako Motors, and can we get an update on your engagement with them?

Michael Mo:

Great, great question. We think Drako is one of the more exciting EV companies in the market. They’re doing some tremendously innovative things with their technology. Have you followed them on social media, on LinkedIn? They’re just unbelievable, what they can do with the car. For every other customer, we’ll continue to work with them, fine tuning our products to meet their demands for high performance insight highest safety rating, and then we will be able to share those details with them as soon as customers make their products public. We’re very excited about the prospect of not just Drako, but many of these customers.

Stuart Smith:

Excellent. Well, Michael, as I pointed out before that question, that was our final question. I’m going to turn the call back over to you for any closing thoughts or comments for the listeners.

Michael Mo:

Great. Thank you, Stuart, for the call today. Thanks to everybody for participating and spending time with us. We see strong growth for the year ahead. For 2021, our year term objective is continued growth and continuing our path to be UpList on the National Senior Exchange. I look forward to updating you and everybody in the coming weeks when we close the new quarter. Thank you so much.

Stuart Smith:

Very good, well for the leadership team at KULR Technology Group, this is Stuart Smith saying, thanks so much for joining us on this shareholder update call for the fourth quarter results for KULR Technology Group. Please continue to send in those questions and have a wonderful week.