Dear fellow Shareholders, It is hard to believe this is already our 11th edition of our quarterly Spider Sense newsletter and our 3rd annual year in review issue. Each January we look back to see what has been accomplished, what milestones we have to celebrate, and what opportunities lay ahead for the coming year. We are reinvigorated with a drive and sense of purpose to see this Company and technology excel. 2017 ushered in an exciting new chapter in the Company’s history and a major shift in our development philosophy, insourcing all of our research operations. This decision has already, and will continue to make, lasting impacts on all of the major areas of our operations from research, to production and financing. Domestic production Starting in the first quarter, with the planting of 2,000 mulberry trees at its Texas location, the Company laid the ground work for larger scale domestic production and research operations. This fresh source of mulberry offers the ability to produce more silk locally and to support expanded research with this better silkworm food supply. The capacity increase in mulberry was matched with significant investment in expanding silkworm processing capacity throughout the year. The purchase and installation of several key pieces of production equipment was the next major step taken in 2017 to increase our domestic capacity. Specialized cocoon processing equipment was the first of several pieces of equipment and improvements made to optimize our production efficiency. In October of 2017 we celebrated what could be one of the biggest moments in the Company’s history, the opening of a combined research and production facility in Michigan. Three times the size of the Company’s first production facility, and with the capacity to support onsite research operations, it marks the first time in the Company’s history where all functions of our operations were housed in a single combined location. Key staff from the Company’s Indiana factory were relocated to open the new Michigan office for continuity of operations. As previously announced, we are already seeing significant benefits from this collaborative working environment. The increased testing capacity and reduced feedback loop offered by the consolidated facility has already identified several opportunities to improve our process and product. Research and Development With the support of the US Army, through its exercise of our contract option, the Company took a significant step forward, insourcing technology development and building out our own internal laboratory and staff. In the last quarter of 2017 the Company hired a new lead molecular biologist and challenged him to build out a fully operational lab in less than 30 days, a challenge that was accepted and surpassed. The first tests of our microinjection system and techniques in the new lab were underway within 25 days. New transgenic plasmid designs have been created by our in-house staff and those designs are in process now. The Company hopes to begin microinjections of these new designs in the first quarter of 2018. By insourcing our research operations, the Company has greater control over the development of our recombinant spider silk materials, better administration of our core competency, and closer oversight of intellectual property development. One key example of this increased oversight and control is the recently implemented materials performance testing procedures. While previously impractical, the new facility and expanded staffing now allows us to conduct 100% screening on all silkworms for breeding and strain propagation. We anticipate this will provide a significant boost to our quality control system, drastically reducing the possibility of material performance drift in the future. Beginning in January of 2018 all breeding is now guided by the results of fiber performance test data. The Company has developed a system to collect and conduct destructive fiber sample testing without harm to silk moth pupa. This system was established as a result of an intensive series of fiber performance tests. That testing found an unacceptable level of variance from our performance targets. Variation is inherent within all processes and products, the key is to minimize that variance, tightening the distribution curve, creating a more uniform product. Reducing variance within the silk fiber properties, while ensuring proper genetic diversity, is the focus of this new testing and breeding process. We expect that this increased scrutiny of our silkworm breeding stock will increase the overall strength of our fibers, by selecting for only the best performing silkworms, and also increase the uniformity of performance by eliminating the lowest performers. The major focus here at Kraig Labs has been on executing our $900,000+ optional phase contract with the US Army for the development of new and stronger spider silk materials. With that said, many have asked about the status of the original $99,000 contract which was to provide shootpacks. Under that base effort we scaled up the production of one of our existing transgenic silkworm strains to produce enough silk thread for a set of ballistic test packages called shoot packs. The shootpacks were expected to be completed by December. A review and discussion in late December / early January between Kraig Labs and the textile mill that was scheduled to produce the shootpacks determined that the large scale production looms at their facility were not ideal for working with the small quantity of silk thread for these shootpacks. As a result of discussion with the textile mill, the spider silk thread has been sent to an alternative textile research facility. This new facility has the equipment to produce narrow warp woven fabrics needed for this project and the capacity to take on the work. We look forward to receiving the finished woven fabric in March and plan to share images of these first woven samples of recombinant spider silk with you. International production While the process of securing international production for our recombinant spider silk technology has been a key focus for several years, 2017 was a break out year. At the invitation and request of senior officials in Vietnam, the Company made several trips in 2017 to meet with senior officials at the provincial and central ministry level to secure support and approval for planned production operations. In March of 2017 the Company was honored with an investment award from provincial officials at a major investment conference. Throughout the balance of 2017 the Company; identified and surveyed a 50 hectare production location, toured other potential production facilities, met with central ministry officials to review our proposal and request approval, and reviewed architectural plans for the planned factory. In late 2017 and January of 2018 the Company received two key letters from Vietnamese governmental offices supporting our planned operation. Working with our consultants in Vietnam and with the support of provincial officials, the Company is currently working to update its investment authorization documentation ahead of the TET New Year celebration. While the efforts in Vietnam continue to progress it is not, nor has it ever been, our only focus for international production. In the 4th quarter the Company closely assess the merits of an alternative production location proposal presented to us. The Company expects to make a key decision in the first quarter of 2018 regarding this proposal and will determine the best path forward with this offer. Finance For seven years the Company maintained a financial relationship with Calm Seas Capital. In September of 2017, and in light of a review of potential alternatives for financing the anticipated expansion plans, the Company determined that it had outgrown that financial relationship. The expanded effort with the US Army and the Company’s strategic decision to insource operations have resulted in a reduction in fixed expenses and the flexibility to focus our decisions on the long term potential of the Company. Looking Forward The opportunities and possibilities for spider silk technology show no sign of letting up. We are continually challenged to meet the constant demand and applications for spider silk. With the signing of the expanded contract with the US Army and our decision to insource our operations we are taking greater control over our end products. Kraig Labs is in a stronger position than we have ever been to see this technology scaled to meet that demand. We remain focused on developing our technologies and production capacities to capture the vast opportunities available to us. On behalf of the Kraig Labs team, we want to thank you. We are looking forward to sharing new developments with you in 2018.