KULR Technology Group, Inc.

call. Joining me on the call today will be Michael Moe, the Chief Executive Officer of the company, as well as Sean Cantor, the Chief Financial Officer of the company. I am Stuart Smith, and I will be your moderator for the call today. After we receive opening statements from both Michael and Sean, we will dive into a question and answer portion of the call, which will be the answering of questions submitted by you via email and social media. But before we begin the call, please listen to the following Safe Harbor statement. 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 or due to risk and uncertainties associated with Cooler Technology Group's business, which include the risk factors disclosed in their Form 10-K filed with the Securities and Exchange Commission on April 12, 2024, as may be amended or supplemented by other reports Cooler files with the Securities and Exchange Commission from time to time. Forward-looking statements include statements regarding their 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. All forecasts provided by management on this call are based on information that is available at this time and management expects that internal projections and expectations may change over time. In addition, the forecasts are entirely based on management's best estimate of their future financial performance given their current contracts, current backlog of opportunities, and conversations with new and existing customers about their products and services. Cooler Technology Group assumes no obligation to update the information included on this call, whether as a result of new information, future events, or otherwise. With that, I will now turn the call over to Michael Moe, CEO of Cooler Technology Group. Michael, the call is yours.

Thank you, Stuart. This is Michael Moe. Thanks to everyone for joining us today. Cooler closed out 2024 with a record quarter in Q4. Revenue increased to $3.37 million, up 44% from Q4 2023, while our operating loss decreased by 29% year-over-year. Gross margin was 64% in Q4 2024 compared to 29% in the same quarter, 2023. Product sale customers increased 35% to 53% in 2024 compared to 39% in 2023. Service revenue customers increased 100% to 34% in 2024 from 17% in 2023. By the end of 2024, Quoter had approximately $30 million in cash and $20 million in Bitcoin holdings. As of March 26, 2025, we have over $80 million in cash and Bitcoin holdings and no debt. Quoter is in its strongest financial position ever, with a rock-solid balance sheet, and 2025 will be a transformational year for us. Energy consumption and thermal management are the key bottlenecks for artificial intelligence, AI infrastructure, and applications. At Cooler, we will leverage our energy management expertise to serve multiple fast-growing markets in space exploration, robotics, physical AI at the edge, and AI infrastructure platforms. We expect to at least double our revenue in 2025 as we grow our energy management business and expand into new applications. To accommodate our growth, we're expanding our Webster, Texas headquarter. We've signed a lease for over 13,000 square feet of additional office space next door to our current facility, making the total size to over 31,000 square feet of manufacturing and office space. Our headquarter facility has received AS9100 certification, which is a significant milestone reflecting Cooler's dedication to producing the highest quality products within the aerospace and defense industries. AS9100 is the globally recognized quality management standard for organizations that design, develop, and provide aerospace, defense, and aviation products and services. We're now well positioned as the one-stop shop total solution provider to design, test, manufacture, and certified battery products of the highest quality in the United States. As you all know, we've been investing in our CoolerOne battery platform. We're now reaping the benefits of that investment. For our CoolerOne space product, we now have multiple customer engagements to design their 20793 compliant batteries. We're going through 20793 certification process now with NASA for one of our customers. We have quarter one space reference platform for 100, 200 and 400 watt hour batteries. We have our own battery management system, BMS, for both terrestrial and space applications that are radiation tolerant. We're entering production stage for both our quarter one space and Guardian customers in 2025. In addition to CoolerOne Space and Guardian products, we're seeing growing demand for battery-packed design and manufacturing services from U.S. companies developing drones and robotics. Defense tech and warehouse automation are two areas of particular interest. The new generation of defense tech companies are focused on innovating rapidly and delivering cost-effective systems to the battlefield. Bomb costs and performance are more important than ever. And Quota is focused on delivering cost-effective solutions for these companies by leveraging our supply chain and advanced technology portfolio across multiple projects. Robots for warehouse operations is another rapidly growing area, and these solutions are all battery operated. Safety is paramount in these applications, and Quota is able to offer companies in this space a range of solutions to improve safety profile and performance for their battery packs. NVIDIA CEO Jensen Huang has highlighted the emergence of physical AI, AI systems capable of understanding, interacting with the physical world as a significant rapidly growing market opportunity. He has referred to this sector as a multi-trillion dollar opportunity, particularly emphasizing the potential in robotics and autonomous machines. At Cooler, our exposure to this market began through our battery customer interactions. But we quickly realized that this is a massive market opportunity that we must participate in with more than just batteries. We will announce our strategic partnership to enter the robotics and physical AI market in the next few weeks. We announced on Tuesday that we now have 668 Bitcoins, which is more than two-thirds way towards our near-term goal of 1,000 Bitcoins. I get asked a lot about how we stomach the volatility in Bitcoin. Michael Saylor said it best, volatility is vitality. In this age of AI where things are transforming at a crazy rate overnight, someone may call it the deep sink moment, we better get used to volatility. I believe that to survive and to thrive in this new era of AI, Cooler needs to build a culture that embraces volatility so it can reduce the risk of our own deep-seek moments. Bitcoin's treasury strategy serves two objectives for us. One, we believe that Bitcoin is a long-term store of value that beats inflation and gains in value. Number two, it's a training ground for building dynamic corporate culture and execution cadence that positions Cooler to succeed in the new AI era. We're doubling down our commitment to BTC with BTC mining. We're actively exploring partnerships opportunities. As we roll out our AI products and energy management technology applied to AI data centers, we expect to apply them to BTC mining as well to reduce energy costs. Cathie Wood has predicted Bitcoin to reach $1.5 million by 2030. Michael Saylor is projecting Bitcoin to reach $20 trillion in market capitalization within the next four to eight years from the $2 trillion market cap right now. I hope they're both right. Speaking of Cathie Wood, I'd like to wrap up my portion of the presentation with her big ideas for 2025. AI, robotics, energy storage, and blockchain Bitcoin. These ideas are not isolated. Their convergence accelerates innovation, leading to potential growth or exponential growth to profound social impact that are fundamentally and structurally changing our financial systems. At Cooler, although we're a small company with limited resources, but we view this convergence as a generational opportunity for us to participate in. because we are all at the very early stage of AI, and we have not even yet start the physical AI and the robotics age yet. There'll be many deep-seeked moments to come, and we wanna be ready to take advantage of those moments. We'll focus on applications where we can add our expertise, and the existing business is disrupted by AI, and we can pivot to these businesses that could be accretive to cooler quickly. To give some context around our thinking and strategy, I'd like to share with you a couple of data points. In a recent interview at the Tokyo University in Japan, Sam Ellman, CEO of OpenAI, predicted that OpenAI's software programming AI agent will be the top one program in the world by the end of 2025. SoftBank CEO Matsuzawa expects AI intelligence to advance 1,000 times every technology cycle which lasts about two to three years. At that rate, we can expect AI intelligence to be 1 million times more intelligent than what they are today by the end of this decade. As these predictions become realities over the coming months and years, every company in the world will become an AI and software company. Cooler needs to get there as fast as possible. Now, before I hand the call over to Sean, I'd like to encourage you to check out our new website at www.cooler.ai. It's a fresh new look to showcase all of our products and services. Thank you very much. Next, Sean will discuss financial details.

Thank you, Mike. Let's cover some key highlights now for both the fourth quarter and the full year 2024. Topics worth noting include revenue, a record revenue quarter, and record revenue year for Cooler. Gross margin? Gross margin was up 100% fourth quarter 2024 over fourth quarter 2023. Operating expenses were down. We continued the trend of expanding our paying customer base and reduced our customer concentration. Cooler's balance sheet is strong. We have a meaningful net cash position with no material debt obligations. Our cash and Bitcoin holdings are worth over $80 million as of the close on March 25th. We established our Bitcoin treasury position in 2024 and now own 667 Bitcoin. Let's start with our income statement. In the fourth quarter, Cooler set a new revenue record. Revenue was approximately $3.4 million, and this is about 44% higher than the same period last year and 6% higher than the third quarter of 2024, which was then itself another revenue record quarter. In 2024, Cooler delivered $10.7 million of revenue, another revenue record for Cooler. This was up 9% from 2023, which was itself also a revenue record year. In 2024, product revenue was approximately $3.6 million, down 47% year over year, and service revenue was approximately $4.4 million in 2024, up 51% from the same period last year. In 2024, Cooler signed its first two revenue generating license agreements and recorded $2.7 million in revenue. We are excited about this business model and hope to be able to announce similar type deals in the coming quarters. Gross margin for the fourth quarter was 64% versus 29% in the same period last year. For the full year 2024, gross margin was 51% versus 37% in 2023 a 37 percent increase year over year. 2024 versus 2023 full-year R&D expenses were down 34 percent, and SG&A was down 16 percent. 2024 earnings per share improved 55 percent over 2023. Now let's spend a moment on customers. In 2024, Cooler had 71 paying customers, up from 53 in 2023. Paying product customers were up 36% from 39 in 2023 to 53 in 2024. Service customers were up 100% to 34 in 2024. In addition to expanding our customer base, we are reducing our paying customer concentrations. Now a few points on our balance sheet. Compared to the end of 2023, our balance sheet has improved materially. At the end of 2024, our cash balance sheet was $30 million. Our cash on hand was $30 million. Our current accounts receivable was $2.6 million. And we held $20 million in Bitcoin. Total assets were $63 million at 12-31-2024 versus $11 million at the end of 2023, up 479%. And we had no material financial debts. Total liabilities were down 2%. 58% to $5.5 million. Before moving on, as a reminder, we currently hold about 667 Bitcoin. Cooler has decided to early adopt the new FASB rule for marketing to market our Bitcoin holdings. So you'll see on our 2024 income statement, a line item called, quote, change in fair value of digital assets, unquote. At the end of 2024, this line item, was a $719,000 charge. This is a non-cash item. It just reflects the change in value from the purchase date to the mark date, in this case, 12-31-2024. It does not reflect that we sold any Bitcoin. Going forward, our Bitcoin holdings will be marked on a monthly basis. Back to you, Stuart.

Thank you, Sean. Well, let's jump right into the questions now. And this first question is for you, Michael. Here it goes. I saw the news. on Thursday, March 12th, about the deal with space agency or a space agency to provide M35A batteries. How prevalent do you think space travel becomes over the next 10 years? Will there be applications on Earth as well?

Yeah, thanks, Stuart. Yeah, space travel will definitely become more affordable and prevalent over the next 10 years. But we believe that the bigger market opportunity is privatized space exploration with new satellites, equipment into space, that they're all going to require batteries to power them. And also as the volume go up, the cost will go down. As that happens, we expect some of these more higher-end technology to be available for applications on Earth.

All right, excellent. Next question is for you, Sean. Here it is. Are there plans to diversify crypto or buy more?

Thanks, Stuart. Sure. As we've indicated before several times, from a crypto point of view, we are focused on our BTC or Bitcoin treasury program.

Okay, thank you for that. Okay, here's the next question, and it's for you again, Michael. There is a rumor circulating on Twitter, aka X, that Cooler is providing materials to Rocket Lab Archimedes' engine. specifically a carbon composite material to be used in a rocket called Neutron. One, can Cooler please confirm or deny that they are providing any materials to Rocket Lab? Two, if they are providing any materials to Rocket Lab, can Cooler confirm or deny if the materials provided would be sufficient for the two companies to announce a partnership? And three, if the partnership will be announced, Can Cooler please give details of any further opportunities that may arise from working together with Rocket Lab and how much money Cooler expects to realize from the partnership and how often they would be providing materials? I'm pretty sure he slipped about seven questions in there, Michael. I'll leave it to you.

No, thanks, Stuart. Um, yeah, I'm, I'm, I'm glad that this investor really did a lot of homework on both Cooler and, and Rocket Lab sounds like, but, um, I really can't comment on any rumors that we have not officially announced that we have any relationship with. So I'm just going to leave it to that.

Understood. So the next question, Sean, is for you. Why is such a large portion of cash being invested into Bitcoin? And could this money be better allocated to focus on the growth of the cooler brand at this clearly pivotal time for the company? Also, I would like to know what the company plans to do with their Bitcoin reserves if the company comes on financial hardship? More than that, would they rather dilute investors or sell a portion of the Bitcoin holdings?

Thanks, Stuart. Good topic. Our treasury strategy is to retain liquidity and significant cash reserves in addition to building our BTC treasury position, as I've said before. Given the economic context in today's world, and the fundamentals of Bitcoin. And what I mean by that is sort of the growing demand across several dimensions, individuals, institutions, state organizations, government bodies, and the fixed supply of Bitcoin that they'll only be 21 million ever created. We consider BTC a good store of value over time and therefore a positive for cooler shareholders. We consider our liquidity and our cash on hand to fund operations As we go through our internal decision making processes, all of our decisions get analyzed through a lens of what we think is in the overall best interests of the cooler shareholder base. And decisions around cash management and our BTC treasury program are no different than that. So our strategy is to be a long term holder of BTC Bitcoin. And we do not see a scenario today that would cause us to change that strategy.

Okay, Sean, let's stay on this topic and let's stay with you. Here's the question. Why invest in Bitcoin and not invest in your company? I would imagine you need to improve product and facilities to create revenue.

Sure. You know, excellent question. We don't really see the two. We don't see that we have to make a decision between the two, though, that we'd have to make a choice between the two today. We're investing in our company. And we consider our BTC treasury program a very valuable asset to Cooler and its shareholders. We're also investing in our people, our facilities, and our product development.

Excellent. All right, next question. This is for you, Michael. During the last earnings call, you were asked if Cooler could deliver slash produce if any large battery contract was awarded, you said yes. And that cooler had a partner that was also ready to go. If that big volume contract came along, what do you consider to be a quote unquote big contract? What is the name of the company slash partner? You mentioned you would be ready to help take on the production of a big contract.

Yeah. Um, I mean, we, we do have a number of customers with contracts over $1 million and And we do have customers ready on production. As I talked earlier, we have expanded our facility in Webster, Texas to over 31,000 square feet. And so now we're actually ready to take on some of these bigger contracts. And I think that in our new facility, we can manage, you know, we can manufacture thousands of batteries per year without blank given eyes. So, yeah, we're ready for these big contracts.

All right. Well, during the last two earnings calls, you've mentioned that revenues were down in part because Cooler's biggest customer had not re-signed a contract slash agreement. However, you said they were expected to do so in 2024. Did that transpire?

Yeah. In 2024, that particular customer did not order any products. But we were still able to make up the difference with new customers and finish the year on a record quarter. So as you've seen in the general battery market in the United States, it's been a very challenging time for a lot of people, a lot of our customers. So we won't make any prediction right now on when and how much this customer will order for 2025. But without any forecast from this one particular customer, we still expect our revenue to at least double in 2025.

Okay, here's another question on a different topic, though. This is for you, Michael. Has Cooler considered pursuing a service contract providing a service technician on every U.S. military airbase with helicopters to utilize Cooler Zero Vibe?

That's a great idea, but it's really up to the U.S. military to grant such contracts. So, so far, we haven't received any indication of such contract or arrangement is welcomed by the U.S. military at this moment.

Okay. So, Michael, next question. Are there any data centers that have a cooler product at this time?

Yep. So, our Japanese licensed customer is testing the quarter zero by product and I believe some of the engagement is for data center customers.

Okay, Michael, this is about the sales team. How big is Cooler's sales team and do you contract third-party sales agents as well?

Yes, we are growing our sales team, our sales and marketing team together. Yes, we do have third-party sales agents for our safe case and other products. We've just added a new VP of Business Development, John Song. He was at Eagle Pitcher and Novix, and he's helping developing new battery customers. Josh Steinman also just joined us as VP of AI and Robotics. Josh started his career at Qualcomm, where he developed the CDMA footprint for Southeast Asian markets, and he has a lot of experience in IoT as well as AI software. So, and our whole team is about 10 people.

Okay, another question for you then, Michael. What has the partnership or collaboration with the United States Postal Service produced?

Yeah, we are working on final approval for a couple of very large size safe case configurations. I believe it's over three kilowatt hours to have UPS permits. Once that's granted, then we have the power tools available and EV customers ready to ship their recycled batteries on the UPS network.

All right, very good. Let's change gears and talk to you again, Sean, with another question. How much revenue in Q4 came from licensing deals?

Sure. So in the fourth quarter of 2024, Cooler generated $1.7 million in revenue from licensing. And while we're on the topic, for the full year 2024, we generated $2.7 million from licensing.

All right. Thank you, Sean. Michael, here's another question. What new products or customers is Cooler pursuing to utilize its TRS to potentially gain new business?

TRS will be utilized across all of our products for the Cooler One battery for space, for DOD, for the robotics. So it's across all of our new battery initiatives.

Okay, another question for you here, Michael. Can you provide an update on Cooler's current and future endeavors with private space stations, particularly with Axiom Station and Starlab? Given your partnerships with Axiom Space and Voyager Space, what growth opportunities do private space stations present for the company?

Yeah, we can't comment on individual customer activities, but we feel very strongly the quarter one space platform is gaining traction with private space companies, especially with the 20793 certification. And then also our off the shelf products off the shelf, you know, you know, the customizable quarter one space platforms, the 100 watt hour 200 and 400 watt hour configurations. These are very competitive products for satellites and other private space missions.

Okay, Sean, let's talk to you. Here's another question. The January 25th, 2024 lease amendment extended the San Diego facility lease at 4863 Shawline Street to November 30th, 2025, known as the first renewal. What are Cooler's plans for its California operations after this date? Does management anticipate extending this lease again?

Thanks, Stuart. Sure, as you know, We have moved our official headquarters to our Webster, Texas facility. Our California activity continues to be an important part of our company. Whether we stay in this particular facility in California long-term or identify a different facility for our California-based activities is simply an optimized operating decision that we will make based on the long-term best interests of Cooler, its customers, and its shareholders. And once that decision's made and it's appropriate to share it, we'll certainly share that with everyone.

All right, very good. Michael, a March 2025 announcement stated that Cooler One space battery incorporating the MOLLE cell M35A cells is set for completion this month, followed by NASA Safety Board review. Can you share the key progress made in March towards this completion?

Yes, we are going through the NASA JSC 20793 certification testing right now. I believe the customer will be ready for NASA mission in 2025.

Okay, Michael, the next question is for you. With Archer Aviation and Vertical Aerospace disclosing their use of the MOLLE cell battery cells, what opportunities exist for Cooler to integrate its patented thermal runway shield as a thermal management solution in their aircraft, given Cooler's partnership with MOLLE cell to enhance battery safety?

Great question. MOLLE cell is very well respected in the industry. So you see industry leaders like Archer and Vertical use them. We have a very close relationship with MOLLE. We have done FTRC and IZM testing on the M35A cells. and also their new power cells, such as the P50, and they have actually a new version, more powerful cell coming as well. So we've gained a lot of knowledge about that, and we're building our Kula One Air reference platform with the Mali cell for electric aviation and drone markets. So TRS will play an integral role for that, and we're looking forward to really leverage that relationship and grow business for both us and Molly.

Okay. The next question is also for you, Michael. A September 2024 announcement stated that Cooler completed its initial engagement with the U.S. Army under the expanded $2.4 million battery contract focusing on silicone anode lithium ion battery prototypes with plans for Cooler One Guardian battery production in 2025. Can you provide an update on the progress of this project since Q3 2024, including any developments in testing, production timelines, or expanded applications for the Army?

Sure. We actually received another development and testing order from the Army. We believe we're doing cell screening testing for them to show the value of cell screening for qualified cells to find defective cells before they're built into the battery pack. And so, therefore, we can build the most reliable battery pack for the Army. We will go to production with them, pilot production with them in fall of 2025.

Okay, here's the next question, Michael. After the Japanese deal regarding cathode applications, what are your involvement in nuclear energy? Is there any upcoming project about that?

Yes. The nuclear energy is a long-term investment for our customers. It's going to take some time. I actually met with Charlie Oppenheimer, the grandson of Mr. Oppenheimer, which the movie was based on. We had dinner together and we talked about his new company, Oppenheimer Energy. I learned a lot about how long it takes and how much money it takes to build a new nuclear power plant. And it's, it's kind of mind boggling. So we're just, you know, getting, getting started, start engaging with these customers, but it's going to be a long, long time for, you know, some of them to get to fruition.

Understood. Michael, here's the next question. You announced the first sale of your M35A battery cells. Is there only one customer so far? Did that customer just make a one-time purchase or are there ongoing sales expected?

Yes, I think this question is about the M35A golden lot or what we call the golden lot cell that has gone through the NASA work instruction 37. And then we have other customers. for those cells, as well as we're using those cells to build cooler one space batteries for customers that need to meet the JSC20793 certification.

Okay, Michael, what is the current status of your Guardian One contract with the Army?

I think this is probably similar to the previous question. We're going through more testing, self-screening with the customer right now and targeting prototype production in fall of 2025.

All right. And another topic here for you, Michael. Has your fan customer started selling fans? How far off might sales be that are larger than the minimum? Are there any other vibe customers since then?

Yes, they have not gone into volume production yet. We're working on faster throughput on the balancing system to lower the cost. We're also developing acoustic energy elimination technology to combine that with vibration elimination. It actually turns out that acoustic energy is as important to eliminate as vibration energy in server environments. So we're working with the customer pretty hard on that. And then hopefully later this year, we will be announcing those kind of products into the market.

All right, excellent. Thank you for that, Michael. Sean, as you deplete your cash, is this next question, will you sell Bitcoin to support the company's operations?

Thanks, Stuart. We believe our Bitcoin holdings will account for meaningful shareholder value over the long term. We don't anticipate using our BTC holdings to meet normal course working capital funding and think we'll have available cash on hand to meet those needs.

Sean, the final question is for you. Here we go. Given the growing interest in cryptocurrency adoption and electrification driven by policies such as the Bitcoin Strategic Reserve announced by President Trump, how does Cooler Technology Group plan to leverage its thermal management and battery solutions to support Bitcoin mining and energy storage infrastructure in the United States? And what impact does the company expect this to have on the revenue and margins over the next 12 to 18 months?

Sure. Good question. We think the announcement of the strategic Bitcoin reserve is a strong positive for Bitcoin and therefore for Cooler and its shareholders. We're one of the largest corporate owners of Bitcoin. And we are always looking to leverage our knowledge, resources, and asset base to explore potential sources of shareholder value. As you know, we've already signed a license for our cooler zero vibe cooling solutions. And as we continue to explore these opportunities, we'll look to execute on those that drive material revenue growth and positive margin contributions.

All right, thank you for that, Sean. As mentioned, that was our final question, which concludes the question and answer portion of this call. I'd like to thank both of our guests, Sean Cantor, CFO of the company, as well as, of course, Michael Moe, the CEO of Cooler Technology Group. But most of all, I know Michael and Sean want to extend their deepest gratitude to all of you shareholders who have tuned in and those that have submitted their questions. With that, that concludes our call, and I'll turn the call back over to our operator, Thomas.

This does conclude today's conference call and webcast. You may disconnect at this time and have a wonderful day. Thank you for your participation.