Earnings Call: Q2 2021

Aug 24, 2021

Greetings and welcome to the Coolard Technology Group's Q2 2021 Investor Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Conference. As a reminder, this conference is being recorded. This shareholder update call does not constitute an offer to sell or a solicitation of offers to buy any securities of any entity. This shareholder update call contains certain forward looking statements based on our current expectations, forecasts and assumptions that involve risks and uncertainties. Forward looking statements in this shareholder update call are based on information available to us as of the date hereof. Our actual results may differ materially from those stated or implied in such forward looking statements due to risks and uncertainties associated with our business, which include the risk factors disclosed in our Form 10 ks filed with the Securities and Exchange Commission on March 19, 2021. Forward looking statements include statements regarding our 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 are provided by management in this release and 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 our future financial performance given our current contracts, current backlog of opportunities and conversations with new and existing customers about our products and services. We assume no obligation to update the information included in the shareholder update call, whether as a result of new information, future events or otherwise. I would now like to turn the conference over to your host, Michael Moe, CEO and Co Founder of Cooler Technology Group. Thank you, Joe. This is Michael Moe. I'm the CEO of Cooler Technology Group. Thanks for everybody's time today to join our Q2 2021 investor update call. For today's call, I will first talk about our Q2 operational highlights and provide updates on some recent developments. And then Keith Cochran, our President and COO, will provide operational updates. Simon Westbrook will then talk about the financial highlights for Q2 2021, and then we will have Q and A session to conclude our call today. Koolearn's Q2 revenue increased by over 200% year over year as we continue to make significant investments in all areas of our business to sustain and expand The growth in 2021 and beyond. We raised over we raised $6,500,000 in Equity Capital on May 20, which strengthened the balance sheet and helped facilitate our uplisting to New York American Exchange on June 7. Trading on the New York Stock Exchange provides the company more visibility to a much broader pool of institutional and retail investors and then to increase our liquidity. In addition, we received approximately $3,700,000 in Q2 From exercise of warrants to purchase in aggregate 3,000,000 shares of common stocks and also approximately $1,500,000 from exercise warrants to purchase a total of 1,200,000 shares of common stocks in July. With over $12,000,000 in cash at the end of June, Kooler is in the strongest financial position in its history. Since inception, our long term strategy has been to co develop cutting edge thermal management technologies alongside NASA, The U. S. Department of Energy and the U. S. DoD, while working in close collaboration with regulatory agencies and international testing organizations, and our intent is to incorporate these technologies into mass market applications. And in the Q2, this strategy materialized into encouraging initial results with meaningful upside potentials in 2 key markets: in the battery transportation market and also the energy storage product market. We received 3 U. S. Department of Transportation special permits to allow for safe transportation of recycled, prototype and damage defective and recall lithium ion batteries, respectively. These special permits allow for up to 2.1 kilowatt hour of energy capacity, which retains 7 times the energy capacity compared to our competition. As we accelerate our investments in new technology developments in smart battery platforms, battery cell screening and testing automation and also fast charging battery architecture, we continue to grow our sales in Aerospace and Defense Business. Our business model continues to evolve as we focus on near term commercialization opportunities for our technology in the battery transportation and energy storage markets. Our goal is to provide total battery safety solutions for more efficient battery systems, Increased sustainability and end of life battery management, making Cooler a key technology solutions provider in the migration to Global Circular Economy. During the Q2, we're also very honored To add retired 3 star Lieutenant General, Ms. Stacy Harris, is our new independent Director to our Board. General Harris also served as our Chairperson for the Cooler's Compensation Committee, was the United States Air Force Reserve Lieutenant General, and she served as the Inspector General of the Air Force. She is a retired experienced pilot with over 10,000 flight hours at the United Airlines and as a pilot for nearly 30 years before retirement. Stacy Also served as a Director for the Boeing Company, and she's an independent Director and Trustee of the BlackRock Fixed Income Mutual Funds and is a member of the Board of Directors of Direct Relief. Next, Keith Cochran will provide updates on our Q2 operational highlights. Keith? Thanks, Michael, and thanks, everyone, for your time today. I will now provide some operational highlights. During Q2, Cooler has completed the process flow and design of our proprietary automated battery cell The line will serialize, test and visually inspect each battery cell to ensure that they meet 100% of their stated sales specifications. Our initial launch will be with our Department of Defense and Aerospace customers to serve their strategic battery reserve initiatives. The company has sourced critical test and automation equipment with 3 world class development partners. Cooler anticipates this system to be capable of processing up to 1,200,000 cells per year for 18,650 and 20 1,700 cylindrical battery cells. We anticipate the system to be in full operation during the first half of twenty twenty two in our new facility in San Diego. As previously shared, the company is developing a smart battery system, which includes both hardware and software platforms to monitor the health of battery cells. We believe integrating software and services With hardware, we'll enable better control over data intelligence. Koolearn's long term vision is to provide a completely integrated hardware and software platform to manage battery safety and thermal stability. Our first battery pack was delivered this quarter and we are currently and the execution of our test and validation process. Also with our battery cells, Koolearn believes fast Charging is the killer half of battery energy systems. Cooler is developing a carbon fiber based architecture for thicker cathode and advanced anode materials to enable faster charging and safer battery cells. The company expects to show preliminary test results on September 21, 2021, at Battery Solutions Day. We certainly hope everybody will join us for that. On the personnel side in June of 2021, Greg Protonizano joined Cooler as Vice President of Sales and Marketing. Greg joins Koolearn with over 35 years of leadership and worldwide sales experience in electronic components, design services and system solutions across a variety of industries, most notably at Aero Electronics and Advanced Energy. At Kooler, he will play a crucial role in developing the company's sales channel strategy as it pivots into large volume applications in products supporting strategic growth goals. Also during the quarter, the company added a new Vice President of Operations And Antonio Martinez. Antonio joins Cooler with over 37 years of leadership and worldwide manufacturing experience in Electronics Manufacturing and Operations. He spent most of his career at Pulse Electronics Corporations in the electronics manufacturing service industry and most recently served as Principal Program Manager of Jabil since 20, 2015. Next, Simon Westbrook will provide Q2 financial highlights. Thanks, Keith. Following the successful fundraising and our New York Stock Exchange up listing in 2021, The company is building the foundations for a business expansion plan, including hiring additional engineering staff, Senior management, expanded facilities, new and automated test and production equipment, advertising and marketing expenses as well as Investor Relations activities. While this investment impacts short term profitability, Kugler believes this will pave the way for longer term growth and improved shareholder value. On revenues, We generated $600,000 of sales in the Q2 ended June 30, 2021, which was an increase of over 200% compared to the revenue reported in the same period last year. The increase in revenue was mainly due to increased sales of Cooler products as opposed to services. Selling and general and admin expenses increased to $2,800,000 in the recent quarter from $400,000 in the corresponding period last year. The over 500% increase in SG and A expenses This is due to additional marketing and advertising expenses, consulting fees and non cash Stock based compensation paid to employees and consultants. For R and D, our expenses in the 2nd quarter of this year increased by over 400% to $300,000 compared to 60,000 dollars in the same period last year. This reflected a combination of headcount and process improvements implemented in the Q1 of this year. Overall, our loss from operations was $2,900,000 in the recent quarter compared to 300,000 for the comparable quarter of the preceding year. The increase in operating loss included the $1,000,000 increase in noncash Stock based compensation expense, dollars 700,000 increase in advertising and marketing expense, $300,000 increase in payroll costs and other expenses in professional fees and research and development projects. The net loss for the quarter increased to $3,000,000 compared with a net loss of $400,000 for the same period last year. On June 30 this year, the company reported cash balances of $12,200,000 compared with $8,900,000 at December 30, 2020. This funding Leave us well positioned to expand operations, support new business and fund ongoing product developments despite the difficult COVID inspired trading conditions experienced through recent quarters. Now I will turn to Joe to open up the Q and A. Thank you. We will now be conducting a question and answer session. Our first question, With the current cash position, can you fund your near term plans or will you need to raise additional capital through offerings or upcoming partnerships? Yes. Hey, John, I'll go ahead and take that. This is Keith Cochran. With our current cash position, we're fully funded to execute our product development And business plans that we're discussing today with our shareholders. Our next question, Can you walk us through the recycling arm of your business and how that impacts everyday life? Yes, John, Joe, sorry, I'll take that. This is Michael Moe. Yes, I believe our battery safety case will play a very important role In the battery recycling ecosystem, we received recently the DOT special permit for recycling prototype in DDR batteries up to 2.1 kilowatt hours. We're now working on expanding that energy capability to accommodate even larger battery Pax, we're also working with battery recycling companies, eMobility and Power2 OEMs to customize For the battery recycling needs, just remember that we just received these special permits in Q2. Now the real work has started to get customer engaged, get them on board to these solutions and make them de facto safety standards for the industry. And so there's a lot of work ahead and we're looking forward to that. Our next question. What problems in the EV battery space do your products currently solve? And a follow-up, 5 to 10 years down the line, what problems would you like to address? Yes, Joe, this is Michael Mohr again. Our technology portfolio In the suite of products and services that we're building is to address the battery thermal stability and safety issues. We're addressing these Problems with our carbon fiber material, we're developing new hardware and software platforms to actively monitor and manage the systems and its data. And eventually, as you get into the next generation batteries with a material that's for faster charge and safer batteries, We believe that these are key technology issues that the industry would need to resolve over the next 5 to 10 years. Our goal is to position Kooler As a leading solutions provider in the industry and therefore maximize the shareholder return in the process. And our next question, how will the price of materials affect their profit margins? Yes. Michael, I'll take this one. Well, we are certainly seeing some price increases in materials and transportation costs, pretty much like everybody else. Additionally, we're also seeing some longer lead times on certain equipment and components. However, these factors Had minimal impact on our business, but it's not, like I said, very significant in any way. We're able to adjust our pricing should the impacts become material. So We think it will be negligible at least for the foreseeable future. Our next question. Are you planning on using your partnership with Andretti to work with other racing teams? Or are you an exclusive provider in the auto sports space? Yes. Andretti Technologies, our partnership with them has been great. They've been a great partner with us so far. We're in the early stage of our technology partnership to develop a lot of killer products for that industry. So there's a lot to do for both of us to fully realize the synergy of our partnership. So that's early stages for us. And for our next question, there was a post the other day about creating a safety guide for NASA. Can you explain what that entailed and if it's still in use today? I'm not really sure which person you're referring to. We do work really closely with NASA on their battery safety and self testing technologies. But, yes, I'm not sure what those guys would be referring to. I would suggest if they'd like to ask that question independently, they could write into our Investor Relations group and we'll track it down and Maybe give back some more information on that. And our next question, Will Cooler products ever be available directly to consumers? Well, we certainly hope so with our smart In Tape Battery Pack, we think there will be an opportunity to market this product directly to customers through online or direct channels. And in support of that, we hired Greg Pravanzano this past quarter to build out our sales channels in anticipation of delivering products that will have That's market consumption. So the short answer is we're setting systems in place to deliver to consumers in the first half of twenty twenty two. And our last question, what is Koolearn doing with Mollisso? A handful of purchase orders between the 2 of you are on the Internet. Yes. We have been working with a number of cell makers to produce ISE trigger cells. So I think the question may be referring to some of the government contracts posted online that involve Body Energy battery cells. And they've been a great partner. They're one of the battery cell makers that we were working with and to serve our aerospace and defense customers. There are no further questions at this time. I would like to turn the call back to Michael and management for any closing remarks. Well, great, Joe. Thank you for that. And so we're at Koolearn, we're diligently Building a suite of products and services to provide a total solution for battery thermal management and safety, We believe this is going to be a critical technology building block for the whole electrification revolution. As industries and regulations demand more sustainable solutions for recycling clean energy for the circular economy. We believe we are well positioned to enjoy the tailwind The shift to ESG Investment Initiatives, we have an attractive and scalable business model with multiple product lines and revenue streams to serve the life cycle of battery circular economy. We have Tier 1 customers and partners based in government, aerospace, defense And commercial sectors, and we have a very strong growing patent portfolio. Our space proven battery saving technology is a critical platform play for multiple $1,000,000,000 growth markets. And last not least, our experienced management team is very dedicated for the long term growth of the company and increase shareholder value. So I'd like to thank everybody for spending time with us, and we will see you all on Battery Solutions Day on September 21, 2021. Thank you so much. This concludes today's conference. You may disconnect your lines at this time.