Season’s Greetings from Kraig Labs’ CEO, Kim Thompson

The holiday season is here, and with it, the opportunity to reflect on the past year’s accomplishments and challenges.

We started 2023 with a concentrated program to strengthen our production silkworm strains with the goal of increasing their robustness and tolerance for the commercial production environment. We undertook this program because our study of our previous attempts to ramp up production indicated that our laboratory strains may have been overly inbred or otherwise lacked the necessary robustness to carry out our production objectives.

This process involved selective breeding over many generations and isolating target traits while crossbreeding with more robust specimens. The ultimate goal was to create two, and ultimately four, separate strains of our silkworm, which, when crossed with each other, would produce significant hybrid vigor. This program has been very successful.

That success, along with the items described below, has positioned us well for 2024. Over the past year, we have created nine new silkworm strains to improve robustness. We are now concentrating on six of those strains, half of which are ready or nearly ready for field trials. One of those strains is already homozygous for the spider silk transgene, and we expect two more strains to be homozygous within two more generations.

We performed an early field test with two of these strains, as described in a recent press release. The results greatly exceeded our expectations. This testing with a two-strain hybrid created the largest caterpillars and cocoons Kraig Labs has ever produced. As we look to the 2024 silk-producing season, these new lines will become the bedrock upon which future production is built. We have additional strains in earlier stages of development that we hope to roll out in the third or fourth quarter of 2024 for double hybrid production.

While our core focus remains on the immediate commercialization of existing spider silk technologies, our molecular biology team continues to work on the next generation of materials. This work continues to advance forward but is moving more slowly than we had hoped. This delay is primarily related to our transition to more advanced technology platforms. Our work is now focused on larger, more complex silk protein designs as well as newer splicing technologies that have challenged our team. We had hoped to announce the creation of a new transgenic in November, but we have not hit that mark. We will add additional resources to our molecular biology team in early 2024 to speed up this process. We remain confident in our ability to further improve our spider silks and obtain goals which we have not yet publicly announced. As new transgenics are produced and verified, we will continue to share those updates with you.

As I sit down to write this year in review update, I have just returned from a very successful trip to Vietnam. I come to you today re-invigorated by the exciting opportunities ahead for Kraig Labs, our shareholders, and spider silk. A recent small-scale test of changes in our production system was successful. In the process of that test, we also learned how we can improve our procedures and business model beyond mere silkworm robustness to achieve our production objectives. We have active negotiations in process with public and private sector actors, which would have been unimaginable six months ago.

I founded Kraig Labs with the vision of becoming a world leader in the bio-engineering of spider silk. Our team met that challenge by creating our silkworm-based spider silk production platform, by creating Dragon SilkTM, and now the six new production strains we created in 2023. Our core competency has been molecular biology. Our shortfall has been translating our successes in the laboratory to sericulture and production success outside of that environment.

Through our work at our subsidiary, Prodigy Textiles, we have come to better understand the global silk industrial base and the narrow pinch-points in silk manufacturing. Nearly all global silk production results from silkworm eggs produced in either India or China and then shipped worldwide. This is a matter of critical importance which directly affects the nature of sericulture as practiced in virtually all other countries. The breeding of silkworms and the production of eggs is a highly specialized and narrowly concentrated skill set that goes beyond hatching silkworms and rearing them for production.

In Vietnam, there has traditionally been little to no silkworm egg production for mass commercialization. The importance of mastering egg production cannot be overstated, and it is an area where our efforts were falling short. We are investing considerable resources to become world leaders in this field as well. While we have always done breeding and egg production in our laboratories, we found, through the school of hard knocks, that our skill sets in this area did not translate outside of the environmentally controlled lab.

Kraig Labs has now engaged leading experts from India to assess, train, and revamp our domestic and international operations to meet the exacting standards used in India’s commercial silk operations. These leaders in their field, from the fastest-growing silk producer in the world, are now advising us on all aspects of our sericulture operations, from breeding and strain development to disease screening and management. We expect to bring them to our overseas operations in early 2024 to work hand in hand with our team as we drive toward our target of metric-ton spider silk production.

These experts have already brought much clarity to the hows and whys of past production shortcomings. While the robustness of our silkworms was a factor, it was not the only factor. With their help, we are now establishing control over those variables. My commitment to making Kraig Labs a world-class organization means having the absolute best people. Our team of consultants from India represents the out-and-out best of the best when it comes to metric-ton scale silk production.

With our new friends from India and the opportunities that lie before us, we plan to make 2024 the greatest year yet for Kraig Labs and the commercialization of spider silk. We are very excited to get to work in 2024, unlocking the potential of this enterprise. It is from that perspective that we look forward to the New Year and new horizons.

From our team at Kraig Labs, we hope your holiday season is spent with loved ones and filled with joy. We thank you for your continued support as we work to revolutionize the textile industry and deliver the incredible opportunities that await our spider silk.

Season’s Greetings, Happy New Year, Merry Christmas, and Happy Hanukkah to all our shareholders and the world.

Kim Thompson and the entire Kraig Labs’ family

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