All right. Thank you for joining us today for the KULR Technology Group First Quarter 2024 Earnings Call. I will be joined on the call today by the CEO of KULR Technology Group, Michael Mo; and the Chief Financial Officer for the company, Shawn Canter. But before we begin the call, please listen closely to the following statements. This call does not constitute an offer to sell or a solicitation of offers to buy any securities of any entity. This call contains certain forward-looking statements based on the company's current expectations, forecasts and assumptions that involve risks and uncertainties. Forward-looking statements made on this call are based on information available to the company 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 their business, which include risk factors disclosed in KULR Technology Group's Form 10-K filed with the Securities and Exchange Commission on April 12, 2024, as may be amended or supplanted by other reports the company files with the Securities and Exchange Commission from time to time. Forward-looking statements include statements regarding their expectations, beliefs, intentions or strategy 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. All forecasts are provided by management on this call are based on information available at this time, and management expects that internal projections and expectations may change over time. In addition, the forecasts are entirely on management's best estimate of KULR Technology Group's future financial performance given their current contracts, current backlog of opportunities and conversations with new and existing customers about their products and services. KULR Technology Group assumes no obligation to update the information included on this call, whether as a result of new information, future events or otherwise. I will now turn the call over to the Chief Executive Officer of KULR Technology Group, Michael Mo. Michael, the call is yours.

Thank you, Stuart. This is Michael Mo. Thanks to everybody for joining us today. I'd like to go over some of the financial and operational highlights with you today. I will discuss how we achieved over 760% year-over-year growth in our KULR ONE design solutions business, which is our engineering services business in Q1 of 2024 compared to Q1 of 2023, and how this tremendous growth in service business drives the growth in our overall product sales business, especially in the KULR ONE Space and the KULR ONE Guardian product lines. While we're experiencing this big growth, we have reduced our cash used in operating and investment activities by 23% and total operating expenses by 25% year-over-year for the first quarter in 2024 compared to 2023. I will also give an update on our new KULR Texas facility and how we're strategically positioning it to be the standard of excellence for battery design and testing and also foster innovations together with our customers. Market is changing very quickly. Our customers are very demanding. They want the best and they want it yesterday. With the ever-changing regulations around safety of lithium-ion battery usage, customers demand fast turnaround time in addition to their requirements on quality, performance and customization to fit perfectly to their applications. At KULR, we're winning customer engagements by offering a one-stop shop solution to all their battery needs. We start with a holistic design methodology to come up with a marginal design that is easy to customize for our customers' needs. Our dedicated and experienced engineering team is very focused on safety, and we can turn around very quickly with our in-house testing, machine shop tooling and manufacturing capabilities. This has enabled us to achieve over 760% year-over-year growth in our KULR ONE design solutions business. Furthermore, through…

Thanks, Mike. KULR's financial position is the strongest it's been in over a year. Today, KULR has over $3 million in the bank and the prepaid advance note has been fully repaid. You can see the financial results from our first quarter 2024 and our Form 10-Q, which is now online. I'll touch on a few highlights. Total revenue in the first quarter of 2024 was $1.8 million. Product revenue was approximately $615,000, down from about $1.6 million. As Mike mentioned, this decrease was substantially due to delayed orders from a customer who placed a large order in the first quarter of 2023 and didn't order in the first quarter of 2024. Further emphasizing Mike's earlier point, due to the sticky nature of our products as certified into our customers' products, management expects this customer to continue purchasing from KULR this year and going forward. Due to the nature of our customer base and the end markets we serve, quarter-over-quarter comparisons may not always capture the larger trends in the business. As KULR grows and continues to expand its customer base, any one customer's purchase order timing is likely to have less of an effect on interim, annual and longer trends. Additionally, some unanticipated delays at government agencies in issuing particular licenses for our SafeCASE products impacted revenue in the first quarter. These licenses have been issued to KULR and KULR sales team is now in market with these products. KULR services revenue was up 769% in the first quarter over the same quarter last year. As we have previously discussed, service revenue may be seen as a predictor of future product revenue. Gross margin for the first quarter was 29% versus 37% in the same period last year. The decrease primarily stemmed from expenses related to a major project…

Okay. Thank you for that, Shawn. Now we are going to transition into our question-and-answer phase of the call. I want to thank everyone who sent in their questions. We did have a deadline. So unfortunately, if you submitted your questions after 12:00 p.m. Eastern yesterday, more than likely, we were not able to include them, but we did try to grab as many as we could. Without further ado, let's jump into the first question. Here we go. Can we expect major partners to come in and put this company on the map?

Yes. Sure, I'll take that. I actually think that we are already on the map with a lot of customers. Many of them are very large name-brand Tier 1 customers and partners. Some of them we can publicly talk about. But some of them were on the NDA, we can't really talk about it. But if what you mean by putting KULR on the map is from a name-brand recognition perspective, like say, for example, when our SafeCASE is going to be used by let's say, for example, Apple in their retail store for the AppleCare product where people can put their iPhone, iPads in there for recycling; or like the Amazon Prime shipment for batteries, so where SafeCASE is in the trucks, where every fire department in the country is going to use our SafeCASE to solve their battery problems. These things will take time, but they could happen over time. But most of our products is -- they are built into the customers and products, so they're not so visible from a brand-name recognition perspective to the average consumer.

All right. Great. Could you provide any insights or updates regarding the status of the partnerships with SpaceX, Blue Origin, Archer Aviation, BETA Technologies and Wisk Aero? As mentioned by Mr. Mo earlier this year, understanding the constraints of confidentiality, I should say, and strategic timing, any additional information would be greatly appreciated by shareholders like myself who are keen to see KULR's continued growth in collaboration within the aerospace industry.

Well, Stuart, in my prepared remarks, I talked about how the KULR Texas facility is very close to all these space industry giants and also the new upcoming private space companies. And so we are serving many of them already with our engineering service. For the eVTOL customers that the questions addressed, they're a little bit more spread out geographically. We're working with many of them because we often care about the same things: battery data, high-energy, high-power battery cells and let's say this battery possible to pass FAA certification. So our products and services are ideally suited for those industries.

So which leading electrical vehicle and leading "electrical vehicle manufacturer" did KULR make a deal with a couple of weeks ago? If you can't answer, why is it kept secret?

Well, we have announced a number of PRs about working with automotive OEMs over the last few months. For example, our SafeCASE used by a leading automotive OEM, FTRC test for our world's largest automotive OEM as well as EV truck and SUV OEM. We can't disclose the name because we're under NDA with these large customers. So you may ask, maybe because the question is that if you can't say the name and the [ dollar amount], why put on a PR? The answer is simple. We use PR as a very cost-effective way to do product marketing. It cost us a couple of hundred bucks to put on the GlobeNewswire and it gets thousands of views from both the Newswire distribution, also our social media channels, which have thousands of following through our multiple channels. And sometimes we get picked up by trade media as a story. And so we found these PRs to be a great way to get new customers. You'd be surprised how many times we put a PR, the story is written and we got inbound [indiscernible] from customers and partners. And in addition to get these new customers, we're also keeping our shareholders informed on our progress. So we found this to be super cost-effective. And by the way, these large customers -- well, the larger the customer, the least likely they will allow us to disclose their name. And then when we put it out there, and then we also want to attract other large customers in the market to contact us. And so that's a great way and a very cost-effective way for us to do product marketing.

You recently announced that you're moving to a larger facility that's 3x bigger than your previous Texas location. Is the previous location being decommissioned? Do you still plan on keeping the California facility? Or is that being consolidated into a single location down in Texas? Will there be a need for another facility?

Yes. We have decommissioned the previous locations in Texas, and we have consolidated all under one roof in the new Webster facility. We still have our San Diego location that's doing a lot of our thermal work. Some of our corporate organization is running out of there, and also a battery cell screening line is still in San Diego. So those are the 2 facilities, and we don't have a need for another facility right now.

Can you break down KULR ONE, the number of contracts and stages that they are in? We know that most revenue comes in later stages, but it's unclear how many clients are in the pipeline and at what stage they might be in.

Yes. We haven't broken down the different customers in stages in the kind of detail that the question is asking for. But we actually -- we do look at engineering service customer growth and revenue growth as an indication of future product sales growth. So we're focused on customers that have big product sales upside potentials, recurring revenue potentials and also diversify our product portfolio or our product and our customer portfolio to reduce our risk on customer concentration. So when you look at our Q1 performance, we grew our service revenue both in customer size and also in revenue numbers, and our new customers for product sales in both the size and the revenue numbers. So I think our strategy is working, and we need to continue to execute on those.

You've recently authorized a reverse split, but you haven't announced anything yet. With the recent stock price improvement, do you feel like a reverse split is still needed?

Thanks, Stuart. It's Shawn. Maybe I'll take that one. Good question. We recently announced that the New York Stock Exchange informed us that we have regained compliance with regards to the level of our share price. As a result, we're under no obligation to do a reverse split. And I guess I'll leave it with what we have and we'll continue to work towards our shareholders' best interest. Thanks.

Okay. What part of the business are they most excited about, they being you internally at KULR, regarding growth and potential?

Yes. I'm very excited about the -- actually, the overall strategy is working. In the different parts of technology, portfolio is driving each other for growth. Obviously, the FTRC test is growing leaps and bounds. That's driving customer engagement in battery design contracts with larger customers, and that's driving product sales business for us in both the number of customers and revenue growth. Underlying it all is the data that we generate throughout the process, and that is the glue and the fuel to the flywheel of our business. Everybody talk about proprietary data now and how it can be used for AI applications. So we are building up our treasure trove of proprietary data, and we will explore that further with potential AI opportunities in the near future.

With KULR being the only company bringing FTRC to the table, would it be safe to say that all independent companies such as Intuitive Machines, Lunar Outpost and Venturi Astrolab that are working on NASA projects are in turn on the books as unnamed KULR clients for at-minimum battery testing purposes?

Well, yes. We have the exclusive license on the large-format FTRC test, which that most of the EV, energy storage and industrial applications, companies that are using this large format. And also, we have made significant improvements on the FTRC device in general. And more importantly is the algorithm of the data collection and the analysis based on the original NASA software. Will Walker, our CTO, is the inventor of the FTRC technology. So I think it's safe to say that KULR will be in a leading position to service all these space-related customers for our FTRC setup. Inefficient for these customers to meet the NASA battery pack safety standard, you need your battery cell to be screened by the Work Instruction 37, which we have the only automated cell screening line in the world to perform that at scale and also reliably providing the cell screening data. And also then you need to build a battery pack to meet the JSC-20793 specification, which can be served by our KULR ONE Space architecture like I talked about in the presentation. So this is where we can start engagement with a customer with the FTRC cell testing, and that we can end up with a customer by building them a total solution using our KULR ONE Space battery platform with screen cells. This will save customer money and time. It is a win-win partnership for both of us.

All right. Does the company believe its competitive advantage is strengthening? If so, what key factors contribute to this?

I believe it's definitely strengthening. The key contributing factors are data, safety and speed. I think I'll repeat again, again, we are providing our customers with battery cell performance and safety data that they can't get anywhere else consistently in a broad-based type of data, proprietary data, and that we're a safety-focused organization. So our team is really focused on doing that, and all the design decisions are made around thermal performance and safety. That is a critical decision factor for our customers. And now we have the one-stop shop total solution package all under one roof in our Texas facility, and they can get their battery designed, tested sort of in record time. I definitely believe our competitors -- competitive advantage is strengthening.

Great. All right. Next question, how is the company ensuring timely order deliveries amidst increased volumes to prevent backlogs? Is backlog issues affecting revenue recognition?

Stuart, it's Shawn. I think maybe that was a good one for me to take. With respect to revenue recognition, we followed the established accounting rules. Having increasing customer demand is certainly a nice problem to have. Meeting customer timing requests is always critical and something we're very focused on. We're always trying to gain additional efficiencies to do more with the resources we have. For example, responding to customer demand, growing customer demand as a result of being booked out for the next -- for almost the next couple of quarters, we're bringing on 2 additional FTRC testing machines online. We're also evaluating different programs, for example, where we would offer premium subscriptions or subscription-type programs for customers who have particularly time-sensitive requirements. Thanks.

So what's the company's future patent application strategy? Any specific areas or technologies targeted for patent protection?

Yes. Stuart, so our patent strategy has been very consistent from day 1, is that we look to patent core technology and its applications around our core technology. So for example, our TRS technology, the patent is on how to build it, the internal configurations of it and variations of that and how to use in a system. So I think that creates the defensive mode around our technology and around our patent. So as we build out the different pieces of our KULR ONE platform, we'll continue to patent new innovations in materials, in configurations of these materials and also how these new pieces are used in the application of these technologies. That's our patent strategy.

Okay. Well, how does this quarter differ from the previous one in terms of strategic changes and performance goals?

Yes. Our strategy has been fairly consistent throughout. So what might be a little bit different this quarter compared to the previous quarter is that we see the acceleration of growth in our KULR ONE design solutions business in both the number of customers and also revenue growth. So we are seeing the flywheel of testing services contracts, [ strengthening ] to design contracts and then driving product sales, new product sales revenue and so forth. So we're going to continue to monitor the new customer numbers, focus on customers that have large contracts, recurring revenue and large product sales opportunities going forward.

Regarding the online store, any plans to expand its availability internationally?

Yes. We just launched our online store, I think, within the month. Frankly, we're just getting our feet wet and see how we can serve the fire department, has met groups and other government agencies directly and also directly to consumers as well. So there's plenty of business for us when we become successful at doing that, then we'll be looking at international opportunities online. Now there -- if there are companies interested in doing distribution for us internationally and they see local opportunities, yes, definitely, please contact me our sales at kulrtechnology.com, we can definitely have a conversation about how to work together in some of these international markets.

Very good. Final question here. Any plans for future share offerings or sales, especially regarding the debt cancellation with Yorkville? How does this impact the company's financial strategy?

Stuart, it's Shawn again. I'll take that one. KULR has a standing company policy of not talking about potential or future strategic activities. I can say that management thinks the repayment of the Yorkville prepaid advance note strengthened our balance sheet substantially. Regarding our strategy, I'm not sure anything has really changed. The principles we're focused on are keep working to meet the growing customer demands in a growing market, and that should address revenue trajectory; keep a watchful eye out to thoughtfully reduce costs and gain efficiencies where we can; don't be wasteful; don't be penny-wise and pound-foolish; and always be ready to take advantage of opportunities when they present themselves. They will present themselves. It's just hard to predict exactly when, so we need to be ready. Strengthening our balance sheet, for example, moves us in that direction and I'd like to think makes KULR more attractive for opportunities to present themselves more often to us. Thanks.

All right. As mentioned, that was our final question, and that does conclude the call today. I will now turn the call back over to our operator, Thomas, to finish up the call. Thank you.

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation. p