Conference Call Transcript March 30, 2012


Ben Hansel: Hi, this is Ben Hansel and I would like to start today’s call by extending a warm welcome to everybody listening in, as well as by introducing Kim Thompson, Kraig Biocraft Laboratories’ CEO and founder. Hello Kim.

Kim Thompson: Thank you Ben and thank you to our shareholders and other call participants for joining us.

BH: Kim, I know a lot of exciting things have happened since our last call, including the “Proceedings of the National Academy of Sciences” publishing the scientific article about the Company’s work, as well as Monster Silk being featured as Textile World’s “Quality Fabric of the Month.”

So, before I go to the commercialization and the R & D pipeline questions, from the shareholders to you, can you give us a brief update?

KT: Yes, thank you Ben. I am happy to announce that this week the Company just signed the lease on a new genetic engineering laboratory. We are currently in the process of moving into the lab and expanding our R&D and Monster Silk production in our new laboratory. This is a milestone, as up until now, as our shareholders know, our work has been performed within university laboratories pursuant to collaborative research agreements. We still plan on working with the university laboratories, so this is not so much a move of our R&D as it is an expansion and the creation of some new capabilities. The physical expansion also made sense in terms of our continued expansion of our Monster Silk production.

The new laboratory is absolute beautiful in a state of the art facility.

And, to touch on what you said, Ben, about the National Academy of Sciences. The article, published by the Academy, about our work with spider silk and the subsequent featuring of Monster Silk products, by Textile World magazine, has turned out to be a significant event for the Company. The publication of those two article has significantly level of commercial interest in our Monster Silk fiber during the first quarter

BH: Excellent, so the Company just cleared a couple of important milestones.

Kim, please allow me to follow those announcements with the shareholders’ questions.

Did the previous lab arrangement allow the Company to successfully increase the transgenic silkworm population and is there anything else you can tell us about the monster silkworms?

KT: yes, before I do that Ben, I’m getting a little bit of a noise, possibly from your end. I don’t know if you have a loose wire over there. You might want to check that out.

But to get back to your question; yes, we have been able to ramp up the monster silk caterpillar population, along with a ramping up of the production of transgenic silkworm eggs and fiber.

In regard to the Monster silkworm strain, I should let you know that we have long since achieved Homozigosity and the silkworms are most definitively producing monster silk.

The National Academy of Sciences article described one of our transgenic strains. That was not the strain that we ultimately chose as the Monster Silk designated fiber. Our current Monster Silk caterpillars are producing a fiber that is stronger than the fiber described in the National Academy of Sciences’ article.

BH: Do you see further laboratory progress this year?

KT: Well, I do anticipate that. Yes. To bring everyone up to date, following the development of monster silk we added Zinc Finger Nuclease to our arsenal, as many of our shareholders know. With Zinc Finger Nuclease we have created more than one knock out strain. We are currently working on a knock in. We anticipate that one or more of our more promising knock outs will become the basis for a new platform technology.

And then on to generation two, I would characterize our development of the generation II pure spider silk fiber as being in an advanced state of development. It is the primary, but not exclusive, area of our R & D focus during the second quarter. We are applying some very powerful technology and, of course, our own insight to bear on this, and, certainly Zinc Finger Nuclease plays an important roll here.

The generation three technology, which we define as including customizable fibers and fibers which incorporate unique attributes, such as antibiotics, is next in the R & D rotation after the development of Gen 2.

BH: Kim, I’d like to change the focus the call for basically the remainder of the call, for the most part, to the business model. Please take a moment to update us on where you think the business model is headed.

KT: Our model is to partner with larger established companies in our target markets for product development, manufacturing and distribution. The first step has been to identify and begin discussions with appropriate potential partners. The pace of contact with potential partners has increased significantly, since the publication of the national academy of sciences article in January and also after the Textile World magazine article, also in the first quarter. Since those publications came out there has been a lot of interest in Monster Silk and we have been approached by a number of companies concerning the potential to use monster silk in their product lines, or to develop new products using monster silk.

During the first quarter we’ve entered into non disclosure and confidentiality agreements with a number of those companies. Those companies operate in markets ranging from sportswear and fashion to military and defense applications. These are primarily large companies. The largest has sales in the billions of dollars; the smallest has sales between 20 to 50 million dollars. We are exploring the potential of our products for their markets and how our monster silk can be integrated into their product lines. It is very exciting, but we are also at a relatively early stage in that process with each of these companies. We are continuing to make contact with companies that we feel will be suitable market development partners and we have a specific plan for that outreach.

And of course, from there perspective, I am sure it is not lost on them that not only do we have Monster Silk, we are in development of even more advanced materials, and the partners we chose to move forward with on monster silk are likely to have an inside track on our product pipeline.

BH: Do you believe that K BLB will remain a single entity, or will there be spinoffs?

KT: I am open to a spin off it if would be in the best interests of the shareholders, but I do not envision that happening in the immediately foreseeable future. We are still a small company, and we are stronger together than we would be broken apart.

BH: Kim, here’s a three part question for you? What is the extent of input from the advisory board? How often do they meet? Are the members actively working on a day-to-day basis to help establish the best commercialization scenario for KBLB products?

KT: Every member of our advisory board has been selected because of some particular area of expertise. The advisory board does not meet as a group. Individual members have different areas of expertise that we call them on. When we need input or feedback, or constructive criticism, or when we are drawing up plans or implementing our strategy, I reach out to members of the board who have expertise in that particular area. Each of these persons are people with very significant lifetimes of accomplishment and they are engaged in other activities and other businesses, so they are most definitively not involved on a day-to-day basis.

I am very respectful of their time and I do take their advice and input very seriously. Just, frankly, within the last two weeks, we’ve had significant input from members of the advisory board, which have caused us to make adjustments, I think very positive adjustments to our business plan.

BH: What are the steps to commercialization?

KT: We talked about this a little bit earlier. To elaborate on what I said, the steps to commercialization establish commercial relationships with companies who have significant market share in our target markets and who see the value of integrating our technology with their product lines. We have entered into a number of non disclosures agreements, as I’ve mentioned, with such perspective companies and we are moving forward with all due diligence.

We only get once chance to do this right. It’s more important that we form relationships with the right partners, from my perspective; than it is for us to sign deals so that we can announce that we have deals. We only get one chance to choose these partners, and we’re going to be married to these partners for the foreseeable future. We have developed and are implementing an outreach plan for bringing additional potential market development partners to the table.

We are only looking for a small number of companies to work with us on commercialization, market and product development; each such perspective partner operating in separate niche. For example, of our thinking here, one Company might work with us on developing the market for a specific sportswear application where another company which weaves fabric for the defense industry might work with us on integrating Monster Silk into one or more of their product lines.

Frankly, we are already talking with more companies than we actually need or want, as marketing partners, according to our commercialization plan, but we are looking to form long term relationships, not one off sales. So the selection of the right partners is critical. We want to make sure that any prospective company that we would enter into a relationship with has; one, an ability to move significant volumes of product into the marketplace; two, has the necessary product and market expertise to work with us on successfully integrating monster silk and eventually generation 2 product into their product lines; and, three, that they also share our vision and, to some extent, passion for this breakthrough fiber.

Now, at the same time that we’re doing this, we are going to significantly increase our recombinant spider silk production through our Monster Silk brand. The initial part of that ramp up has already taken place in the laboratory. We have significantly increased the number of monster silkworms and we have been successfully implementing a plan for accumulating, and essentially stockpiling, monster silkworm eggs in preparation for a significant expansion of production capacity. We will be increasing the pace of that ramp up in our new laboratory. All of this is being done as part of the necessary preparation for industrial scale production.

BH: Is Sigma-Aldrich going to be more deeply involved in production and/or distribution?

KT: I do not envision that at this time. They are working with us in terms of assisting us with Zinc Finger Nuclease fabrication and expertise, but, at this time, I really don’t see their involvement in distribution and production.

BH: Kim, it’s easy to get lost in all the sexiness of all the potential future spider silk uses, but aren’t the initial agreements going to cover mundane silk uses, like sports apparel or s ilk ties and suits?

KT: Well, that is what we initially thought when we saw this material for the first time, but, since that time, we have been talking with companies, including defense contractors, who have approached us about applications for Monster Silk. In some cases, the companies who are contacting us have been educating us about the potential of Monster Silk for their particular applications; applications that that company knows about because of their particular product line. So, in short, the market for Monster silk may be broader than we first realized when the product was developed in the laboratory.

BH: Thanks Kim. Before we say our farewells, is there anything else you would like to add?

Yes, thank you Ben.

As the company grows and we increasingly interact with larger established companies in our target markets we need to grow internally as well as externally. I believe that we are on such a path of growth. We anticipate adding significant new corporate communications and investor relations support as part of our increasing public profile. Ben, over at Hansel Capital who is on the call with me, has been doing a great job of spearheading communications for us, but as we grow he can not be expected to shoulder that burden alone.

So, the message, in short, is one of growth. Our laboratory is physically growing as we move part of our R & D and production ramp up into a new lab. We are also accelerating our R&D on our next generation technology, the gen two technology. We are ramping up production of our Monster Silk product and we are reaching out to form new partnerships with the companies who have existing sales in our target markets. This is a very exciting time at Kraig Biocraft Laboratories. It is also a hectic time.

I want to thank the shareholders for supporting the company. Together we have accomplished what many thought was impossible. As we grow we will continue build on those accomplishments.

BH: Thank you Kim. Well, that wraps up today’s call and I’d like to thank you, again, for listening in.

KT: Thank you, again, Ben, and thank you, again, to our shareholders.


About Kraig Biocraft Laboratories, Inc.

Kraig Biocraft Laboratories, Inc. ( ) is a fully reporting biotechnology company that has achieved a series of scientific breakthroughs with implications for the global textile industry.

Cautionary Statement Regarding Forward Looking Information

Statements in this press release about the Company’s future and expectations other than historical facts are “forward-looking statements.” These statements are made on the basis of management’s current views and assumptions. As a result, there can be no assurance that management’s expectations will necessarily come to pass. These forward-looking statements generally can be identified by phrases such as “believes,” “plans,” “expects,” “anticipates,” “foresees,” “estimated,” “hopes,” “develops,” “model,” “researching,” “research,” “potential,” “could” or other words or phrases of similar import. Similarly, statements in this release that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals should all be considered forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements. Management cautions that its ability to further its research, and create commercially-viable products may be affected by the competitive environment, the Company’s financial condition and its ability to raise sufficient capital to meet the financial obligations of its business plan and to fund its continuing operations.

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