August 5, 2012
Dear fellow Kraig Biocraft Laboratories shareholders,
I am writing to update you on the significant progress the Company has made in executing its business plan in 2012, and to share with you our vision of the road ahead. The Company has achieved a number of milestones in late 2011 and during the first two quarters of 2012, starting with the publication of our work on the creation of spider silk based polymers by the Proceedings of the National Academy of Sciences. That was closely followed-up by Textile World, the prestigious industry publication, featuring our spider silk based polymer, Monster Silk™, as its “technical textile of the month”.
The aforementioned publications, as well as many other articles, were important catalysts that focused the spotlight on our work. Following which a number of companies approached us wanting to know if our spider silk based fibers would work in their existing product lines, or to explore the possibility of using our Monster Silk™ to enter into new markets. As discussions with these companies about the potential opportunities progressed, we decided that the best approach to commercializing our Monster Silk™ would be to work cooperatively and collaboratively, possibly on an exclusive basis, with one or two companies with existing market share in our target markets. We currently define those target markets as: military, police and DHS related applications; sportswear; other industrial and consumer applications, clothing and fashion wear; and finally, existing silk product markets.
Initially, our strategy was geared toward identifying potential Monster Silk™ commercialization partners and we’ve been in discussions with a number of interested companies about incorporating Monster Silk™ into their products. We then exhibited to the technical textile industry at the TechTextil trade show in late April, where Monster Silk™ sparked tremendous interest at the show.
Even though the exhibition exceeded our expectations in terms of the generation of interest and numerous contacts with new potential commercialization partners, which resulted in ongoing negotiations, some may have interpreted the lack of public comment by the Company as an indication that we stopped moving our business plan forward. Nothing could be further from the truth, as we are actually accelerating on all fronts.
The nature of the negotiations we’ve entered into require extreme discretion due to non-disclosure and confidentiality agreements. While we cannot comment about specific discussions, I can state my personal belief, which is that the first commercial Monster Silk™ agreements will be with military and sportswear producers.
I believe that we are currently on track to enter into memorandums of understanding and letters of intent in the near term, although we continue to receive additional inquiries and we’re even in the midst of the negotiating another non-disclosure agreement as I write this letter. We are likely to select one or two defense contractors (or companies that supply defense contractors) and one or two sportswear companies, to receive some degree of partial exclusivity for the commercial development of Monster Silk™ in their respective markets.
We have a once-in-a-lifetime technology. We have taken the first two quarters of 2012 to lay the foundation of our commercialization strategy to ensure that the commercialization agreements we enter into maximize long-term shareholder value. Some of the companies that we’ve been talking with include household names and well-known brands.
The current negotiations approach is not unlike our bold move to secure the use of zinc finger nuclease (ZFN) technology. Although the ZFN technology negotiations with Sigma-Aldrich took time, they yielded impressive results. Because of these actions and others like it, Kraig Biocraft Laboratories was able to accelerate research and development and is now positioned for greater success.
As those of you who closely follow the Company know, we have been working with Sigma –Aldrich’s ZFN technology to increase the power of our own technology. In the first half of this year we experimented with the combination of our technology with ZFN. The ZFN has proven to be so powerful that it requires an adjustment in our genetic packets. Our analysis of the data has given us increased confidence that we are on the right track for the development of fibers that are even more advanced than Monster Silk™. While that work is continuing we are also in the later stages of producing more exciting new genetic configurations for use in combination with ZFN.
Until recently all of the Company’s laboratory work took place entirely within university laboratories, pursuant to collaborative research agreements, which we renewed with the University of Notre Dame. Even though we increased our financing of the collaborative research project and we are now accelerating our research at Notre Dame, in the second quarter we signed a lease for a laboratory near the university. That was a big step forward in our growth and indicates our commitment to accelerate the development of new spider silk based fibers; because we believe that we are closer to the development of our pure spider silk platform. Our new private laboratory at Innovation Park, a state of the art facility near Notre Dame, is equipped with top of the line security, including bio-sensors, which we feel is more appropriate for our technology at its current state of development.
Kraig Biocraft Laboratories has made great strides and achieved several milestones in the first two and a half quarters of 2012, plus we laid down a very solid foundation for both our commercialization program and for advanced R&D. Laying down that foundation has been grueling work, but, now that the foundation is in place, the next stages of development should be more exciting and tangible.
Our plan is to continue to build on our research knowledge to develop more advanced polymers in the near term. On the Monster Silk™ commercialization front, we are currently in privileged discussions with potential commercialization partners including some medium sized and larger companies. We anticipate that those discussions will bear fruit in the near term.
In short, I am determined to unlock the maximum value for our shareholders. We are delighted with the current positioning of our commercialization opportunities, which we’re building on the foundation we laid out in the first half of the year in order to seize those opportunities. I know that this comprehensive approach takes more time, but I’m convinced that we control our own destiny and this will enable us to create far more long-term shareholder value.
Thank you for supporting the Company and taking the time to read this letter. I am very proud of our innovative Company and the ingenious technology we’ve developed, but I am more confident than ever that Kraig is favorably positioned to become a leading technical materials firm and I am even more intensely excited about the big future that lies ahead for Kraig Biocraft Laboratories.
Kim Thompson, CEO
This document includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements included in this press release, other than statements of historical facts, address matters that the company reasonably expects, believes or anticipates will or may occur in the future. 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. Such statements are subject to various assumptions, risks and uncertainties. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those described in the forward-looking statements.