Depreciation and amortization expense for the three and six months ended June 30, 2014 was $1,565 and $3,113, respectively.
Depreciation and amortization expense for the three and six months ended June 30, 2013 was $1,392 and $2,769, respectively.
NOTE 5
CONVERTIBLE DEBT, DEBT DISCOUNT AND FAIR VALUE MEASUREMENT OF DERIVATIVE FINANCIAL INSTRUMENTS
On July 17, 2009, the Company entered into an agreement with an investor group where the Company will issue up to $120,000 in convertible units. The debentures will be in the face amount of $10,000 each, mature on December 31, 2010, bear interest at the rate of 5% simple interest per annum, payable at maturity or convertible with the principal, and the principal and interest shall be convertible at the option of the holder at a fixed price of $0.018 per share. Each debenture shall have a warrant attached exercisable for the purchase of 500,000 shares of common stock. The warrants shall expired on December 31, 2011, have a cashless exercise provision, and be exercisable at a fixed price of $0.02. The agreement also requires the investment group to purchase up to $1,000,000 of common stock monthly at the lesser of $75,000 or 200% of the average daily volume multiplied by the average of the daily closing prices for the ten days immediately preceding the exercise date. Each investment by the investment group is priced at the lowest closing “bid” price of the common stock during the five days immediately before the investment. The term of the funding shall be the earlier of (a) the drawing down of the entire $1,000,000 or (b) 24 months after the Effective Date, July 17, 2011. In addition, the Company is required to file and maintain an effective registration statement covering the convertible units, cannot issue more than 5% of its common stock outstanding without the investor group’s consent and must maintain a contractual relationship with a public relations firm, which is related to the investor group. The Company has issued $120,000 of convertible debt to date. On July 21, 2010, the issuance of 1,799,434 shares was approved by the board of directors in exchange for the $15,000 specified in the put notice.
The $120,000 convertible debt instrument was determined to have a separate derivative liability instrument requiring bifurcation and the computation of fair value. The conversion price per share equals to the lower of the conversion price and the average closing bid price of the common stock during the 20 trading days prior to and including the date on which the conversion notice is delivered to the holder, however, the mandatory Conversion price shall not be less than $0.005. The Company calculated the estimated fair values of the liabilities for warrant derivative instruments and embedded conversion option derivative instruments with the Black-Scholes option pricing model.
The fair value of the embedded conversion options at the commitment date was $251,919. Of the total, $120,000 was assigned to debt discount and $131,919 was recorded as a derivative expense.
On February 11, 2010 the Company authorized the issuance of 5,694,451 shares of Common Stock for the exercise price of $0.02/share in exchange for $100,000 in convertible note payable and on April 6, 2010 the Company authorized the issuance of 854,169 shares of Common Stock for the exercise price of $0.02/share in exchange for $15,000 in convertible note payable.
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF JUNE 30, 2014
(UNAUDITED)
At December 31, 2010, pursuant to the agreement, all outstanding principal and accrued interest on the convertible debt was due, and the conversion rights of the holder terminated. Accordingly, at December 31, 2010, the Company determined that no derivative liability existed in connection to the outstanding remaining debt of $5,000. For the year ended December 31, 2013, the note holder forgave the remaining balance and the $5,000 convertible note balance along with accrued interest of $1,775 was recorded as a gain on forgiveness of debt. As of December 31, 2013 the remaining convertible note balance was $0.
In addition, on October 4, 2010, the Company issued 5,177,801 shares in connection with the cashless exercise of the 6,000,000 warrants.
At June 30, 2011 the Company recorded interest expense and related accrued interest payable of $2,466. The Company also recorded $92,600 for the amortization of debt discount in interest expense on the statement of operations. The debt discount is being amortized over the life of the convertible debt.
NOTE 6
LOAN PAYABLE
On December 8, 2010 the Company entered into a five year loan agreement with the principal loan amount of $15,828. The loan carries an interest rate of 6.94%, and is secured by an automobile. The remaining balance of $2,185 fully matures during the year ending December 31, 2014.
NOTE 7
LOAN PAYABLE – RELATED PARTY
On February 25, 2013 the Company received $150,000 from a principal stockholder. Pursuant to the terms of the loan, the advance bears interest at 3%, is unsecured and due on demand. At December 31, 2013 the loan balance was repaid. The Company recorded accrued interest payable of $2,001.
NOTE 8
STOCKHOLDERS’ DEFICIT
(A)
Common Stock Issued for Cash
On April 28, 2006, the Company issued 8,000 shares of common stock for cash of $400 ($0.05 per share).
On January 8, 2007 the Company issued 1,750,000 shares of common stock for $15,000 ($0.01/share). This agreement was subsequently terminated effective May 23, 2007.
On January 22, 2007 the Company issued 12,000,000 shares of common stock for $103,000 ($0.01/share). In addition, 9,000,000 shares were issued for $3,000 ($0.0003/share).
On April 4, 2007, the Company issued 1,875,000 shares of common stock for cash of $15,000 ($0.01 per share).
On April 20, 2007, the Company issued 1,875,000 shares of common stock for cash of $15,000 ($0.01 per share).
On May 18, 2007, the Company issued 13,125,000 shares of common stock for cash of $105,000 ($0.01 per share).
On August 28, 2007 the Company entered into a stock purchase agreement to issue 80,495,000 shares common stock in the amount of $241,485 ($0.003/share).
On August 29, 2007 the Company entered into a stock purchase agreement to issue 200,000 shares common stock in the amount of $600 ($0.003/share).
On August 29, 2007 the Company entered into a stock purchase agreement to issue 8,300,000 shares common stock in the amount of $24,900 ($0.003/share).
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF JUNE 30, 2014
(UNAUDITED)
On September 1, 2007 the Company entered into a stock purchase agreement to issue 25,000 shares common stock in the amount of $75 ($0.003/share).
On September 5, 2007 the Company entered into a stock purchase agreement to issue 120,000 shares common stock in the amount of $360 ($0.003/share).
On September 12, 2007 the Company entered into a stock purchase agreement to issue 1,025,000 shares common stock in the amount of $3,075 ($0.003/share).
In accordance with the May 2007 stock purchase agreement which contains an anti-dilution clause which requires the Company to issue additional common shares under the stock purchase agreement for any subsequent issuance at a price below $.08 per share for a period of 12 months, the Company has issued 28,125,000 additional shares through May 2008 as a result of the subsequent stock issuances at $0.003/share.
On April 24, 2009 the Company issued 2,000,000 shares of common stock for $20,000 ($0.01/share).
On May 22, 2009, the Company issued 500,000 shares of common stock for $5,000 ($0.01/share).
On September 30, 2009, the Company issued 366,599 shares of common stock for $3,000 ($0.01/share).
On May 18, 2010, the Company issued 4,000,000 shares of common stock for cash of $21,642 and in exchange of $6,990 in note payables ($0.007158 per share).
On July 21, 2010, the Company issued 1,875,000 shares of common stock for $15,000 ($0.008/share).
On September 10, 2010, the Company issued 1,351,351 shares of common stock for $20,000 ($0.0148/share).
On September 22, 2010, the Company issued 1,286,765 shares of common stock for $35,000 ($0.0272/share).
On October 15, 2010, the Company issued 1,179,245 shares of common stock for $100,000 ($0.084/share).
On December 7, 2010, the Company issued 1,157,407 shares of common stock for $75,000 ($0.065/share).
During the year ended December 31, 2013, the Company had to issue an additional 845,800 make-up shares related to a transaction entered into during the year ended December 31, 2010.
On January 25, 2011 the Company issued 1,470,588 shares of common stock for $100,000 ($0.068/share).
On March 22, 2011 the Company issued 2,083,333 shares of common stock for $100,000 ($0.048/share).
On April 18, 2011 the Company issued 1,029,412 shares of common stock for $70,000 ($0.07/share).
On April 22, 2011 the Company issued 1,420,455 shares of common stock for $100,000 ($0.07/share).
On September 22, 2011, the Company issued 1,372,119 shares of common stock for $100,000 ($0.07/share).
On November 9, 2011, the Company issued 1,314,406 shares of common stock for $100,000 ($0.08/share).
On December 16, 2011, the Company issued 1,543,210 shares of common stock for $100,000 ($0.06/share).
On January 20, 2012, the Company issued 1,562,500 shares of common stock for $100,000 ($0.06/share).
On April 19, 2012, the Company issued 2,403,846 shares of common stock for $100,000 ($0.06/share).
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF JUNE 30, 2014
(UNAUDITED)
On May 19, 2012, the Company issued 1,923,077 shares of common stock for $100,000 ($0.05/share).
On June 29, 2012, the Company issued 2,155,172 shares of common stock for $100,000 ($0.04/share).
On December 21, 2012, the Company issued 1,004,832 shares of common stock for $25,000 ($0.02/share).
On February 19, 2013, the Company issued 961,538 shares of common stock for $50,000 ($0.05/share).
On March 4, 2013, the Company issued 945,537 shares of common stock for $50,000 ($0.05/share).
On April 1, 2013, the Company issued 822,368 shares of common stock for $50,000 ($0.06/share).
On April 15, 2013, the Company issued 884,434 shares of common stock for $75,000 ($0.08/share).
On July 11, 2013 the Company issued 1,760,563 shares of common stock for $100,000 ($0.06/share).
On July 25, 2013 the Company issued 1,760,563 shares of common stock for $100,000 ($0.06/share).
On August 13, 2013 the Company issued 1,838,235 shares of common stock for $100,000 ($0.05/share).
On September 3, 2013 the Company issued 1,923,077 shares of common stock for $100,000 ($0.05/share).
On September 19, 2013 the Company issued 2,100,840 shares of common stock for $100,000 ($0.05/share).
On October 3, 2013 the Company issued 2,604,167 shares of common stock for $100,000 ($0.04/share).
On October 17, 2013 the Company issued 2,604,167 shares of common stock for $100,000 ($0.04/share).
On December 11, 2013 the Company issued 3,063,725 shares of common stock for $125,000 ($0.04/share).
On January 28, 2014 the Company issued 3,537,736 shares of common stock for $150,000 ($0.04/share).
On February 18, 2014 the Company issued 3,409,091 shares of common stock for $150,000 ($0.04/share).
On March 12, 2014 the Company issued 2,551,020 shares of common stock for $100,000 ($0.04/share).
On April 7, 2014 the Company issued 2,212,389 shares of common stock for $100,000 ($0.05/share).
On April 22, 2014 the Company issued 2,173,913 shares of common stock for $100,000 ($0.05/share).
On June 10, 2014 the Company issued 3,409,091 shares of common stock for $150,000 ($0.04/share).
(B) Common Stock Issued for Intellectual Property
On April 26, 2006, the Company issued 332,292,000 shares of common stock to its founder having a fair value of $180 ($0.000001/share) in exchange for intellectual property. The fair value of the patent was determined based upon the historical cost of the intellectual property contributed by the founder.
(C) Common Stock Issued for Services
Shares issued for services as mentioned below were valued at the closing price of the stock on the date of grant.
On May 8, 2006, the Company entered into a license agreement for research and development. Pursuant to the terms of the agreement, the Company issued 17,500,000 shares of common stock upon execution of the agreement. The Company also received a five-year call option from the license holder to repurchase 7,000,000 common shares at an exercise price of $150,000 or $.02 per share. The option gives the Company the right, but not the obligation to repurchase the shares of common stock. The call option expires May 4, 2011. As of June 30, 2011 the value of the stock was $.07 per share. The Company does not have the obligation to repurchase the shares.
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
AS OF JUNE 30, 2014
(UNAUDITED)