Kraig Biocraft Laboratories, Inc.
|
Condensed Balance Sheets
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
March 31, 2015
|
|
|
December 31, 2014
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$ |
249,253 |
|
|
$ |
495,036 |
|
Prepaid expenses
|
|
|
1,000 |
|
|
|
1,000 |
|
Total Current Assets
|
|
|
250,253 |
|
|
|
496,036 |
|
|
|
|
|
|
|
|
|
|
Property and Equipment, net
|
|
|
79,837 |
|
|
|
43,191 |
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$ |
330,090 |
|
|
$ |
539,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$ |
533,563 |
|
|
$ |
522,586 |
|
Royalty agreement payable - related party
|
|
|
64,720 |
|
|
|
64,720 |
|
Accounts payable and accrued expenses - related party
|
|
|
1,301,026 |
|
|
|
1,177,603 |
|
Total Current Liabilities
|
|
|
1,899,309 |
|
|
|
1,764,909 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
|
|
Preferred stock Series A, no par value;
|
|
|
|
|
|
|
|
|
2 and 2 shares issued and outstanding, respectively
|
|
|
5,217,800 |
|
|
|
5,217,800 |
|
Common stock Class A, no par value; unlimited shares authorized,
|
|
|
|
|
|
|
|
|
676,903,348 and 673,974,429 shares issued and outstanding, respectively
|
|
|
9,984,268 |
|
|
|
9,812,845 |
|
Common stock Class B, no par value; unlimited shares authorized,
|
|
|
|
|
|
|
|
|
no shares issued and outstanding
|
|
|
- |
|
|
|
- |
|
Common Stock Issuable, 1,122,311 and 1,122,311 shares, respectively
|
|
|
22,000 |
|
|
|
22,000 |
|
Additional paid-in capital
|
|
|
1,801,233 |
|
|
|
1,900,018 |
|
Accumulated Deficit
|
|
|
(18,594,520 |
) |
|
|
(18,178,345 |
) |
|
|
|
|
|
|
|
|
|
Total Stockholders' Deficit
|
|
|
(1,569,219 |
) |
|
|
(1,225,682 |
) |
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Deficit
|
|
$ |
330,090 |
|
|
$ |
539,227 |
|
See accompanying notes which are an integral part of these unaudited condensed financial statements.
Kraig Biocraft Laboratories, Inc.
|
Condensed Statements of Operations
|
(Unaudited)
|
|
|
|
For the Three Months Ended
|
|
|
|
March 31, 2015
|
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
General and Administrative
|
|
|
156,470 |
|
|
|
452,873 |
|
Professional Fees
|
|
|
81,330 |
|
|
|
43,806 |
|
Officer's Salary
|
|
|
86,576 |
|
|
|
62,528 |
|
Research and Development
|
|
|
79,586 |
|
|
|
93,179 |
|
Total Operating Expenses
|
|
|
403,962 |
|
|
|
652,386 |
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(403,962 |
) |
|
|
(652,386 |
) |
|
|
|
|
|
|
|
|
|
Other Income/(Expenses)
|
|
|
|
|
|
|
|
|
Gain on forgiveness of debt
|
|
|
9,679 |
|
|
|
19,136 |
|
Interest expense
|
|
|
(21,892 |
) |
|
|
(17,052 |
) |
Total Other Income/(Expenses)
|
|
|
(12,213 |
) |
|
|
2,084 |
|
|
|
|
|
|
|
|
|
|
Net (Loss) before Provision for Income Taxes
|
|
|
(416,175 |
) |
|
|
(650,302 |
) |
|
|
|
|
|
|
|
|
|
Provision for Income Taxes
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net (Loss)
|
|
$ |
(416,175 |
) |
|
$ |
(650,302 |
) |
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per Share - Basic and Diluted
|
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
|
|
|
|
|
|
during the period - Basic and Diluted
|
|
|
676,215,156 |
|
|
|
646,636,324 |
|
See accompanying notes which are an integral part of these unaudited condensed financial statements.
Kraig Biocraft Laboratories, Inc.
|
|
Condensed Statement of Changes in Stockholders Deficit
|
|
For the three months period ended March 31, 2015 and the year ended December 31, 2014
|
|
(Unaudited)
|
|
|
|
|
|
Preferred Stock - Series A
|
|
|
Common Stock - Class A
|
|
|
Common Stock –
Class B
|
|
|
Common Stock -
Class A Shares
To be issued
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Par
|
|
|
Shares
|
|
|
Par
|
|
|
Shares
|
|
|
Par
|
|
|
Shares
|
|
|
Par
|
|
|
APIC
|
|
|
Accumulated Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
|
2 |
|
|
|
5,217,800 |
|
|
|
635,241,994 |
|
|
|
7,810,920 |
|
|
|
- |
|
|
|
- |
|
|
|
1,122,311 |
|
|
|
22,000 |
|
|
|
2,053,236 |
|
|
|
(16,305,358 |
) |
|
|
(1,201,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for cash ($0.04/share)
|
|
|
- |
|
|
|
- |
|
|
|
27,051,006 |
|
|
|
1,150,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of 10,000,000 warrants in exchange for stock
|
|
|
- |
|
|
|
- |
|
|
|
9,821,429 |
|
|
|
736,816 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(736,816 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant 10,200,000 warrants for services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
574,642 |
|
|
|
- |
|
|
|
574,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of accounts payable with stock issuance ($0.06/share)
|
|
|
- |
|
|
|
- |
|
|
|
60,000 |
|
|
|
3,509 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for services ($0.062/share)
|
|
|
- |
|
|
|
- |
|
|
|
1,800,000 |
|
|
|
111,600 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
111,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on the sale of the fixed asset to a related party
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,956 |
|
|
|
- |
|
|
|
8,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended December 31, 2014
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,872,987 |
) |
|
|
(1,872,987 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31 ,2014
|
|
|
2 |
|
|
|
5,217,800 |
|
|
|
673,974,429 |
|
|
|
9,812,845 |
|
|
|
- |
|
|
|
- |
|
|
|
1,122,311 |
|
|
|
22,000 |
|
|
|
1,900,018 |
|
|
|
(18,178,345 |
) |
|
|
(1,225,682 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant 2,000,000 warrants for services to related party
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
72,317 |
|
|
|
- |
|
|
|
72,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of 3,000,000 warrants in exchange for stock
|
|
|
- |
|
|
|
- |
|
|
|
2,918,919 |
|
|
|
171,102 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(171,102 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of accounts payable with stock issuance ($0.03/share)
|
|
|
- |
|
|
|
- |
|
|
|
10,000 |
|
|
|
321 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the three months ended march 31, 2015
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(416,175 |
) |
|
|
(416,175 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2015 (Unaudited)
|
|
|
2 |
|
|
$ |
5,217,800 |
|
|
|
676,903,348 |
|
|
$ |
9,984,268 |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,122,311 |
|
|
$ |
22,000 |
|
|
$ |
1,801,233 |
|
|
$ |
(18,594,520 |
) |
|
$ |
(1,569,219 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes which are an integral part of these unaudited condensed financial statements.
Kraig Biocraft Laboratories, Inc.
|
Condensed Statements of Cash Flows
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
2015
|
|
|
2014
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
Net Loss
|
|
$ |
(416,175 |
) |
|
$ |
(650,302 |
) |
Adjustments to reconcile net loss to net cash used in operations
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
2,632 |
|
|
|
1,548 |
|
Gain on forgiveness of debt
|
|
|
(9,679 |
) |
|
|
(19,136 |
) |
Warrants issued to consultants
|
|
|
- |
|
|
|
403,540 |
|
Warrants issued to employees
|
|
|
72,317 |
|
|
|
- |
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase) Decrease in prepaid expenses
|
|
|
- |
|
|
|
372 |
|
(Decrease) in accrued expenses and other payables - related party
|
|
|
123,423 |
|
|
|
(1,788 |
) |
Increase in accounts payable
|
|
|
20,977 |
|
|
|
110,644 |
|
Net Cash Used In Operating Activities
|
|
|
(206,505 |
) |
|
|
(155,122 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of Fixed Assets and Domain Name
|
|
|
(39,278 |
) |
|
|
- |
|
Net Cash Used In Investing Activities
|
|
|
(39,278 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Repayment of loan payable
|
|
|
- |
|
|
|
(1,086 |
) |
Proceeds from issuance of common stock
|
|
|
- |
|
|
|
400,000 |
|
Net Cash Provided by Financing Activities
|
|
|
- |
|
|
|
398,914 |
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
|
|
(245,783 |
) |
|
|
243,792 |
|
|
|
|
|
|
|
|
|
|
Cash at Beginning of Period
|
|
|
495,036 |
|
|
|
295,381 |
|
|
|
|
|
|
|
|
|
|
Cash at End of Period
|
|
$ |
249,253 |
|
|
$ |
539,173 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
- |
|
|
$ |
- |
|
Cash paid for taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Shares issued in connection with cashless warrants exercise
|
|
$ |
171,102 |
|
|
$ |
736,813 |
|
Settlement of accounts payable with stock issuance
|
|
$ |
321 |
|
|
$ |
2,864 |
|
See accompanying notes which are an integral part of these unaudited condensed financial statements.
Kraig Biocraft Laboratories, Inc.
Notes to Condensed Financial Statements (Unaudited)
Three month Periods Ended March 31, 2015 and 2014
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A)
|
Basis of Presentation
|
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.
It is management's opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.
Kraig Biocraft Laboratories, Inc. (the "Company") was incorporated under the laws of the State of Wyoming on April 25, 2006. The Company was organized to develop high strength, protein based fiber, using recombinant DNA technology, for commercial applications in the textile and specialty fiber industries.
(B) Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
(C) Cash
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents as of March 31, 2015 or December 31, 2014.
(D) Loss Per Share
Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB Accounting Standards Codification No. 260, “Earnings per Share.” As of March 31, 2015 and March 31, 2014, warrants were not included in the computation of income/ (loss) per share because their inclusion is anti-dilutive.
The computation of basic and diluted loss per share at March 31, 2015 and March 31, 2014 excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:
|
|
March 31,
2015
|
|
|
March 31,
2014
|
|
|
|
|
|
|
|
|
|
|
Stock Warrants (Exercise price - $0.001/share)
|
|
|
17,200,000
|
|
|
|
15,200,000
|
|
Convertible Preferred Stock
|
|
|
2
|
|
|
|
2
|
|
Total
|
|
|
17,200,002
|
|
|
|
15,200,002
|
|
(E) Research and Development Costs
The Company expenses all research and development costs as incurred for which there is no alternative future use. These costs also include the expensing of employee compensation and employee stock based compensation.
(F) Income Taxes
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Effective January 1, 2009, the Company adopted guidance regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the financial statements and applies to all federal or state income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. As of March 31, 2015 and December 31, 2014 there were no amounts that had been accrued in respect to uncertain tax positions.
None of the Company’s federal or state income tax returns is currently under examination by the Internal Revenue Service (“IRS”) or state authorities. However, fiscal years 2009 and later remain subject to examination by the IRS and respective states.
(G) Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.
(H) Stock-Based Compensation
In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
(I) Business Segments
The Company operates in one segment and therefore segment information is not presented.
(J) Recent Accounting Pronouncements
In November 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-16—Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update do not change the current criteria in GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. That is, an entity will continue to evaluate whether the economic characteristics and risks of the embedded derivative feature are clearly and closely related to those of the host contract, among other relevant criteria. The amendments clarify how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. The effects of initially adopting the amendments in this Update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.
In November 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-17—Business Combinations (Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued
On June 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation ("ASUE 2014-10"). The guidance is intended to reduce the overall cost and complexity associated with financial reporting for development stage entities without reducing the availability of relevant information. The Board also believes the changes will simplify the consolidation accounting guidance by removing the differential accounting requirements for development stage entities. As a result of these changes, there no longer will be any accounting or reporting differences in GAAP between development stage entities and other operating entities. For organizations defined as public business entities the presentation and disclosure requirements in Topic 915 will no longer be required starting with the first annual period beginning after December 15, 2014, including interim periods therein. Early application is permitted for any annual reporting period or interim period for which the entity's financial statements have not yet been issued (public business entities) or made available for issuance (other entities). The Company adopted this pronouncement for the period from April 25, 2006 (inception) through March 31, 2015.
In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected to have a material impact on our results of operations, cash flows or financial condition. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition
In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. As of December 31, 2014, we have adopted the provisions of this ASU.
All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable.
(K) Reclassification
The 2014 financial statements have been reclassified to conform to the 2015 presentation.
(L) Equipment
The Company values property and equipment at cost and depreciates these assets using the straight-line method over their expected useful life. The Company uses a five year life for automobiles.
In accordance with FASB Accounting Standards Codification No. 360, Property, Plant and Equipment, the Company carries long-lived assets at the lower of the carrying amount or fair value. Impairment is evaluated by estimating future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected undiscounted future cash flow is less than the carrying amount of the assets, an impairment loss is recognized. Fair value, for purposes of calculating impairment, is measured based on estimated future cash flows, discounted at a market rate of interest.
There were no impairment losses recorded during the years ended March 31, 2015 and December 31, 2014.
(M) Fair Value of Financial Instruments
We hold certain financial assets, which are required to be measured at fair value on a recurring basis in accordance with the Statement of Financial Accounting Standard No. 157, “Fair Value Measurements” (“ASC Topic 820-10”). ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Level 1 instruments include cash, account receivable, prepaid expenses, inventory and account payable and accrued liabilities. The carrying values are assumed to approximate the fair value due to the short term nature of the instrument.
The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:
°
|
Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access. We believe our carrying value of level 1 instruments approximate their fair value at March 31, 2015, and December 31, 2014.
|
°
|
Level 2 - Valuations based on quoted prices for similar assets or liabilities, quoted prices for identical assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
|
°
|
Level 3 - Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. We consider depleting assets, asset retirement obligations and net profit interest liability to be Level 3. We determine the fair value of Level 3 assets and liabilities utilizing various inputs, including NYMEX price quotations and contract terms.
|
|
|
March 31,
2015
|
|
|
December 31,
2014
|
|
Level 1
|
|
$
|
-
|
|
|
$
|
-
|
|
Level 2
|
|
|
-
|
|
|
|
-
|
|
Level 3
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
-
|
|
|
$
|
-
|
|
NOTE 2 GOING CONCERN
As reflected in the accompanying unaudited financial statements, the Company has a working capital deficiency of 1,649,056 and stockholders’ deficiency of $1,569,219 and used $206,505 of cash in operations for the three months ended March 31, 2015. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
NOTE 3 EQUIPMENT
At March 31, 2015 and December 31, 2014 equipment is as follows:
|
|
As of
March 31,
2015
|
|
|
As of
December 31,
2014
|
|
|
|
|
|
|
|
|
Automobile
|
|
$
|
41,805
|
|
|
$
|
41,805
|
|
Laboratory Equipment
|
|
|
36,822
|
|
|
|
-
|
|
Office Equipment
|
|
|
8,017
|
|
|
|
5,560
|
|
Less Accumulated Depreciation
|
|
|
(6,807
|
)
|
|
|
(4,174
|
)
|
|
|
|
|
|
|
|
|
|
Total Property and Equipment
|
|
$
|
79,837
|
|
|
$
|
43,191
|
|
Depreciation and amortization expense for the three months ended March 31, 2015 and 2014 was $2,632 and $1,548 respectively.
On November 10, 2014, the Company sold to the officer of the Company a used automobile for the price of $14,504. The Company recorded a gain on the sale of the asset of $8,956 as donated capital due to the transaction being with a related party.
NOTE 4 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. For the years ending December 31, 2014 and December 31, 2013, the Company repaid $3,981, and $4,774 in loan balance, respectively. At December 31, 2014 the loan balance was repaid in full.
NOTE 5 STOCKHOLDERS’ DEFICIT
(A) Common Stock Issued for Cash
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).
On July 7, 2014, the Company issued 2,212,389 share of common stock for $100,000 ($0.05/share).
On August 6, 2014, the Company issued 2,272,727 share of common stock for $100,000 ($0.04/share).
On September 3, 2014, the Company issued 2,450,980 share of common stock for $100,000 ($0.04/share).
On September 22, 2014, the Company issued 2,821,670 share of common stock for $100,000 ($0.04/share).
(B) 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 March 5, 2015, the Company issued 10,000 shares with a fair value of $321 ($0.0321/share) to a consultant as consideration for consulting fees owed from October 1, 2014 through February 28, 2015 of $10,000. The issuance of shares resulted in gain on settlement of accounts payable of $9,679.
On March 28, 2014, the Company issued 44,000 shares of common stock with a fair value of $2,864 ($0.065/share) to a consultant as consideration for consulting fees owed from June 1, 2012 through March 31, 2014 of $44,000. The issuance of shares resulted in gain on settlement of accounts payable of $19,136.
On April 23, 2014, the Company issued 1,800,000 shares of common stock with a fair value of $111,600 ($0.062/share) to a consultant as consideration for consulting services.
On October 9, 2014 the Company issued 12,000 shares with a fair value of $484 ($0.0403/share) to a consultant as consideration for consulting fees owed from April 1, 2014 through September 30, 2014 of $12,000. The consultant also received a bonus of 4,000 shares with a fair value of $161 ($0.0403/share). The issuance of shares resulted in gain on settlement of accounts payable of $11,516.
(C) Common Stock Warrants
On January 21, 2015, the Company issued 2,918,919 shares in connection with the cashless exercise of the 3,000,000 warrants.
On February 2, 2014, the Company issued 9,821,429 shares in connection with the cashless exercise of 10,000,000 shares of warrants.
On February 17, 2014, the Company issued 1-year warrants for 600,000 shares to a consultant, with an exercise price of $0.001 per share. The warrants were granted for services to be rendered. The warrants had a fair value of $33,620, based upon the Black-Scholes option-pricing model on the date of grant and were fully vested upon and will be exercisable beginning on the 14th month anniversary of the agreement and for a period of twelve months thereafter.
|
|
Grant Date
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
86.94
|
%
|
Expected term
|
|
2 years
|
|
Risk free interest rate
|
|
|
1.53
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On February 17, 2014, the Company issued 1-year warrants for 600,000 shares to a consultant, with an exercise price of $0.001 per share. The warrants were granted for services to be rendered. The warrants had a fair value of $33,620, based upon the Black-Scholes option-pricing model on the date of grant and were fully vested upon issuance and will be exercisable beginning on the 14th month anniversary of the agreement and for a period of twelve months thereafter.
|
|
Grant Date
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
86.94
|
%
|
Expected term
|
|
2 years
|
|
Risk free interest rate
|
|
|
1.53
|
%
|
On February 17, 2014, the Company issued 1-year warrants for 1,000,000 shares to a consultant, with an exercise price of $0.001 per share. The warrants were granted for services to be rendered. The warrants had a fair value of $56,040, based upon the Black-Scholes option-pricing model on the date of grant and were fully vested upon issuance and will be exercisable beginning on the 20th month anniversary of the agreement and for a period of twelve months thereafter.
|
|
Grant Date
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
86.23
|
%
|
Expected term
|
|
3 years
|
|
Risk free interest rate
|
|
|
1.53
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On February 17, 2014, the Company issued 1-year warrants for 1,000,000 shares to a consultant, with an exercise price of $0.001 per share. The warrants were granted for services to be rendered. The warrants had a fair value of $56,040, based upon the Black-Scholes option-pricing model on the date of grant and were fully vested upon issuance and will be exercisable beginning on the 20th month anniversary of the agreement and for a period of twelve months thereafter.
|
|
Grant Date
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
86.23
|
%
|
Expected term
|
|
3 years
|
|
Risk free interest rate
|
|
|
1.53
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On February 17, 2014, the Company issued 1-year warrants for 2,000,000 shares to a consultant, with an exercise price of $0.001 per share. The warrants were granted for services to be rendered. The warrants had a fair value of $112,110, based upon the Black-Scholes option-pricing model on the date of grant and were fully vested upon issuance and will be exercisable beginning on the 32nd month anniversary of the agreement and for a period of twelve months thereafter.
|
|
Grant Date
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
123.49
|
%
|
Expected term
|
|
3 years
|
|
Risk free interest rate
|
|
|
1.53
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On February 17, 2014, the Company issued 1-year warrants for 2,000,000 shares to a consultant, with an exercise price of $0.001 per share. The warrants were granted for services to be rendered. The warrants had a fair value of $112,110, based upon the Black-Scholes option-pricing model on the date of grant and were fully vested upon issuance and will be exercisable beginning on the 32nd month anniversary of the agreement and for a period of twelve months thereafter.
|
|
Grant Date
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
123.49
|
%
|
Expected term
|
|
3 years
|
|
Risk free interest rate
|
|
|
1.53
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On June 4, 2014, the Company issued 3-year warrant for 3,000,000 shares to a consultant, with an exercise price of $0.001 per share. The warrants were granted for services to be rendered. The warrants had a fair value of $171,102, based upon the Black-Scholes option-pricing model on the date of grant and were fully vested upon issuance and will be exercisable beginning on the 32nd month anniversary of the agreement and for a period of twelve months thereafter.
|
|
Grant Date
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
86.69
|
%
|
Expected term
|
|
3 years
|
|
Risk free interest rate
|
|
|
0.85
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
On January 23, 2015, the Company issued 3-year warrant for 2,000,000 shares to a consultant, with an exercise price of $0.001 per share. The warrants were granted for services to be rendered. The warrants had a fair value of $72,317, based upon the Black-Scholes option-pricing model on the date of grant and were fully vested upon issuance and will be exercisable on February 2, 2016, and for a period expiring on January 19, 2018.
|
|
Grant Date
|
|
Expected dividends
|
|
|
0
|
%
|
Expected volatility
|
|
|
88.13
|
%
|
Expected term
|
|
3 years
|
|
Risk free interest rate
|
|
|
1.33
|
%
|
Expected forfeitures
|
|
|
0
|
%
|
Balance, December 31, 2014
|
|
|
18,200,000 |
|
|
$ |
0.001 |
|
|
|
2.1 |
|
Granted
|
|
|
2,000,000 |
|
|
$ |
- |
|
|
|
|
|
Exercised
|
|
|
(3,000,000 |
) |
|
$ |
- |
|
|
|
|
|
Cancelled/Forfeited
|
|
|
- |
|
|
|
|
|
|
|
|
|
Balance, March 31, 2015
|
|
|
17,200,000 |
|
|
$ |
0.001 |
|
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic Value
|
|
$ |
508,000
|
|
|
|
|
|
|
|
|
|
For the quarter ending March 31, 2015, the following warrants were outstanding:
Exercise Price
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
Weighted Average
Remaining Contractual Life
|
|
|
Aggregate
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.001
|
|
|
|
17,200,000
|
|
|
|
-
|
|
|
|
1.9
|
|
|
|
508,000
|
|
For the year ended December 31, 2014, the following warrants were outstanding:
Exercise Price
|
|
|
Warrants
Outstanding
|
|
|
Warrants
Exercisable
|
|
|
Weighted Average
Remaining Contractual Life
|
|
|
Aggregate
Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.001
|
|
|
|
18,200,000
|
|
|
|
-
|
|
|
|
2.1
|
|
|
|
801,900
|
|
NOTE 6 COMMITMENTS AND CONTINGENCIES
On March 18, 2010, the Company entered into an addendum to the employment agreement whereby the Company will reimburse the employee and his family for up to $20,000 of out of pocket medical and dental care costs, including prescription costs or co-pays.
On November 10, 2010, the Company entered into an addendum to the employment agreement, with its CEO, effective January 1, 2011 through the December 31, 2015. The term of the agreement is a five year period at an annual salary of $210,000. There is a 6% annual increase. For the year ending December 31, 2014 the annual salary is $265,120 and for the year ended December 31, 2015 the annual salary shall be $281,027. The employee is also to receive a 20% bonus based on the annual based salary. Any stock, stock options bonuses have to be approved by the board of directors (See Note 8).
On October 2, 2014, the Company entered into a letter agreement for an equity line of financing up to $7,500,000 (the “Letter Agreement”) with Calm Seas Capital, LLC (“Calm Seas”).
Under the Letter Agreement, over a 24 month period from the Effective Date (as defined below) we may put to Calm Seas up to an aggregate of $7,500,000 in shares of our Class A common stock for a purchase price equal to 80% of the lowest price of our Class A common stock during the five consecutive trading days immediately following the date we deliver notice to Calm Seas of our election to put shares pursuant to the Letter Agreement. We may put shares bi-monthly. The dollar value that will be permitted for each put pursuant to the Letter Agreement will be the lesser of: (A) the product of (i) 200% of the average daily volume in the US market of our Class A common stock for the ten trading days prior to the date we deliver our put notice to Calm Seas multiplied by (ii) the average of the daily closing prices for the ten (10) trading days immediately preceding the date we deliver our put notice to Calm Seas, or (B) $100,000. We will automatically withdraw our put notice to Calm Seas if the lowest closing bid price used to determine the purchase price of the put shares is not at least equal to seventy-five percent (75%) of the average closing “bid” price for our Class A common stock for the ten (10) trading days prior to the date we deliver our put notice to Calm Seas. Notwithstanding the $100,000 ceiling for each bi-monthly put, as described above, we may at any time request Calm Seas to purchase shares in excess of such ceiling, either as a part of bi-monthly puts or as an additional put(s) during such month. If Calm Seas, in its sole discretion, accepts such request to purchase additional shares, then we may include the put for additional shares in our monthly put request or submit an additional put for such additional shares in accordance with the procedure set forth above.
The Letter Agreement will terminate when any of the following events occur:
●
|
Calm Seas has purchased an aggregate of $7,500,000 of our Class A common stock; or
|
●
|
The second anniversary from the Effective Date.
|
On January 23, 2015, the board of directors appointed Mr. Jonathan R. Rice as its Chief Operating Officer. Mr. Rice’s employment agreement has a term of one year and can be terminated by either the Company or Mr. Rice at any time. Under the employment agreement, Mr. Rice is entitled to an annual cash compensation of $120,000, which includes salary, health insurance, 401K retirement plan contributions, etc. The Company also agreed to reimburse Mr. Rice for his past educational expenses of approximately $11,000. In addition, Mr. Rice will be issued a three-year warrant to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.001 per share pursuant to the employment agreement.
(A)License Agreement
On May 8, 2006, the Company entered into a license agreement. Pursuant to the terms of the agreement, the Company paid a non-refundable license fee of $10,000. The Company will pay a license maintenance fee of $10,000 on the one year anniversary of this agreement and each year thereafter. The Company will pay an annual research fee of $13,700 with first payment due January 2007, then on each subsequent anniversary of the effective date commencing May 4, 2007. Pursuant to the terms of the agreement the Company may be required to pay additional fees aggregating up to a maximum of $10,000 a year for patent maintenance and prosecution relating to the licensed intellectual property.
On October 28, 2011, the Company entered into a license agreement with the University of Notre Dame. Under the agreement, the Company received exclusive and non-exclusive rights to certain spider silk technologies including commercial rights with the right to sublicense such intellectual property. In consideration of the licenses granted under the agreement, the Company agreed to issue to the University of Notre Dame 2,200,000 shares of its common stock and to pay a royalty of 2% of net sales. On March 4, 2015, the Company entered into a new Intellectual Property / Collaborative Research Agreement with Notre Dame extending the duration of the agreement through March 2016. Under the agreement the Company will provide approximately $534,000 in financial support. The license agreement has a term of 20 years which can be extended on an annual basis after that. It can be terminated by the University of Notre Dame if the Company defaults on its obligations under the agreement and fails to cure such default within 90 days of a written notice by the university. The Company can terminate the agreement upon a 90 day written notice subject to payment of a termination fee of $5,000 if the termination takes place within 2 years after its effectiveness, $10,000 if the termination takes place within 4 years after its effectiveness and $20,000 if the Agreement is terminated after 4 years.
(B)Royalty and Research Agreements
On May 1, 2008, the Company entered into a five year consulting agreement for research and development. Pursuant to the terms of the agreement, the Company will be required to pay $1,000 per month, or at the Company’s option, the consulting fee may be paid in the form of Company common stock based upon the greater of $0.05 per share or the average of the closing price of the Company’s shares over the five days preceding such stock issuance. As of June 30, 2011 the Company had accrued $17,000 of accounts payable for the services provided of which was paid in common stock on July 1, 2009 (See Note 5(C)). As of June 30, 2011, the Company issued 280,000 shares of common stock in exchange for $14,000 of accounts payable for the services performed. On March 19, 2014, the Company entered into a five year consulting agreement for general advisor and consulting services. As consideration for the services performed, the Company agrees to pay the consultant a fee of $1,000 per month. At the Company’s option, said consulting fee may be paid to the consultant in the form of Company stock based upon the greater of $0.50/share or the average of the closing price of the Company’s common stock over the five days preceding such stock issuance. On March 28, 2014, the Company issues 44,000 shares of common stock as consideration for consulting fees owed from June 1, 2012 through March 31, 2014. On October 9, 2014 the Company issued 12,000 shares with a fair value of $484 ($0.0403/share) to a consultant as consideration for consulting fees owed from April 1, 2014 through September 30, 2014 of $12,000. The issuance of shares resulted in gain on settlement of accounts payable of $11,516. The consultant also received a bonus of 4,000 shares with a fair value of $161 ($0.0403/share). On March 5, 2015, the Company issued 10,000 shares with a fair value of $321 ($0.0321/share) to a consultant as consideration for consulting fees owed from October 1, 2014 through February 28, 2015 of $10,000. The issuance of shares resulted in gain on settlement of accounts payable of $9,679.
On December 26, 2006, the Company entered into an addendum to the intellectual property transfer agreement with an officer. In consideration of the Company issuing either 200,000 preferred shares with the following preferences; no dividends and voting rights equal to 100 common shares per share of preferred stock or the payment of $120,000, the officer agreed to terminate the royalty payments due under the agreement and give title to the exclusive license for the non-protective apparel use of the intellectual property to the Company. On the date of the agreement, the Company did not have any preferred stock authorized with the required preferences. In accordance with FASB Accounting Standards Codification No 480, Distinguishing Liabilities from Equity, the Company determined that the present value of the payment of $120,000 that was due on December 26, 2007, the one year anniversary of the addendum, should be recorded as an accrued expense until such time as the Company has the ability to assert that it has preferred shares authorized. As of March 31, 2010, the Company has recorded $120,000 in accrued expenses- related party. On December 21, 2007 the officer extended the due date to July 30, 2008. On May 30, 2008 the officer extended the due date to December 31, 2008. On October 10, 2008, the officer extended the due date to the earlier of (a) March 30, 2010 or (b) upon demand by the officer. The due date was extended to March 31, 2011. On September 8, 2009, a payment of $15,000 was paid to the officer. An additional payment of $10,000 was made on October 19, 2009 and December 1, 2009, respectfully. Additionally, the accrued expenses are accruing 7% interest per year. On January 15, 2010 an additional payment of $10,000 was made. During the quarter ending September 30, 2010 an additional payment of $8,000 was made. During the quarter ending September 30, 2012 an additional payment of $1,000 was made. During the year ended December 31, 2013, an additional payment of $1,280 was made. During the year ended December 31, 2014, an additional loan of $572 was made. As of March 31, 2015 the outstanding balance is $65,292. As of March 31, 2015, the Company recorded interest expense and related accrued interest payable of $490.
On June 6, 2012, the Company entered into a consulting agreement for intellectual property and collaborative research and development with an American university. The agreement covers ongoing research and development work performed by the university at the Company’s behest and with the Company’s assistance. On March 4, 2015, the Company entered into a new Intellectual Property / Collaborative Research Agreement with Notre Dame extending the duration of the agreement through March 2016. Pursuant to the terms of the agreement the Company will be required to pay approximately $534,000 for research and development over the two year period. For the three months ended March 31, 2015 and 2014, respectively, the company recorded $79,586 and $93,179 in research and development fees.
(C)Consulting Agreement
On July 9, 2013, the Company entered into an agreement with a consultant to provide investor relations services in exchange for a warrant for 10,000,000 common shares at $.001 with a cashless provision and a five year term.
On September 30, 2013, the Company entered into a Collaborative Yarn and Textile Development Agreement with a technical textile manufacturing company. Pursuant to the terms of that agreement the Company has agreed to supply the technical textile manufacturing company with sample quantities of the Company’s recombinant spider silk for the purpose of developing and testing new textiles which are made from, or which incorporate recombinant spider silk. The agreement provides that the two companies will jointly share, on an equal basis, any intellectual property, including any utility patents, which are developed as a result of this collaboration. Such intellectual property potentially includes utility patents on textile designs. The Company has agreed that it will pay half of the cost associated with the filing and prosecution of utility patents relating to intellectual property which is developed through its collaboration with the technical textile manufacturing company.
On October 15, 2013, the Company entered into an intellectual property agreement with a scientific researcher relating to the development of new recombinant silk fibers. Under the terms of that agreement the scientific researcher will transfer to the Company his rights to intellectual property, inventions and trade secrets which the researcher develops relating to recombinant silk. The researcher will receive 8,000,000 warrants of the Company’s stock, exercisable 24 months from the date of the agreement. The researcher will also receive additional warrants when and if the researcher develops advanced recombinant silk fibers for the Company’s use. Under the terms of the agreement the researcher will receive 10,000,000 warrants in the event that he develops a new recombinant silk fiber with certain performance characteristics, and another 10,000,000 warrants if he develops a second recombinant silk fiber with certain characteristics. If the consultant performs the contract in good faith the consultant will be entitled to an additional 8,000 warrants. The warrants described in this note all contain a cashless exercise provision and are exercisable on the 24 month anniversary of the date on which they were issuable under the agreement.
On February 17, 2014, the Company entered into two consulting agreements with two consultants for independent technical expertise to further the Company’s business plans and scientific research and development. As consideration for the services performed, the Company agrees to issue the following to each of the consultants:
●
|
Within 30 days of the date of this agreement, a warrant for six hundred thousand shares of the Company’s common stock to be exercisable on the 14 month anniversary of this agreement for a period of 12 months with a cashless exercise provision.
|
●
|
Within 30 days of the date of this agreement, a warrant for one million shares of the Company’s common stock to be exercisable on the 20 month anniversary of this agreement for a period of 12 months with a cashless exercise provision.
|
●
|
Within 30 days of the date of this agreement, a warrant for two million shares of the Company’s common stock to be exercisable on the 32 month anniversary of this agreement for a period of 12 months with a cashless exercise provision.
|
●
|
Based on the consultants reaching two sets of benchmarks, two separate warrants for one million five hundred thousand shares of the Company’s common stock to be exercisable on the 28 month anniversary of this agreement for a period of 12 months with a cashless exercise provision.
|
●
|
On the three year anniversary, assuming the consultant acted in good faith and the Company’s board of directors approval, a warrant for one million five hundred thousand shares of the Company’s common stock to be exercisable on the 28 month anniversary of this agreement for a period of 12 months with a cashless exercise provision.
|
On April 23, 2014, the Company entered into a six months agreement with a consultant to provide investor relations services. As consideration for the services performed, the Company agreed to issue 1,800,000 shares of common stock. On May 5, 2014, the Company issued 1,800,000 shares of common stock for $111,600 ($0.062/share).
On April 30, 2014, the Company entered into a one year agreement with a consultant for research and development. As consideration for services, the Company agreed to pay for Consultant’s air fare from the United States to Africa, for a trip scheduled in early May 2014.
On June 4, 2014, the Company entered into a one year agreement with a consultant to provide investor relations services. As consideration for the services performed, the Company agreed to issue a warrant for 3,000,000 shares of common stock $0.001 with a cashless exercise provision and a three year term. On June 24, 2014, the Company issued a warrant for 3,000,000 shares of common stock with a fair value of $171,102 (See Note 5(E)).
(D) Operating Lease Agreement
On April 1, 2012, the Company executed a one-year non-cancelable operating lease for its Laboratory space. The lease was subsequently extended through March 31, 2014. In March of 2014, the Company once again extended the lease on a month to month basis; the lease had an annual rate of $12,750. On February 25, 2015, the Company renewed its lease of a Laboratory. The lease is on a month to month basis at an annual rate of $13,200.
We rent office space at 120 N. Washington Square, Suite 805, Lansing, Michigan 48950, which is our principal place of business. Our lease is on a month to month basis. We pay an annual rent of $600 for conference facilities, mail, fax and reception services located at our principal place of business.
Starting in February of 2015, we rent additional office space in East Lansing, Michigan. We pay an annual rent of $4,338 for office space, conference facilities, mail, fax, and reception services. This lease expires on July 1, 2015 and is expected to be renewed.
Rent expense for the three months ended March 31, 2015 and 2014, is $4,999 and $3,305, respectively.
NOTE 7 RELATED PARTY TRANSACTIONS
On December 26, 2006, the Company entered into an addendum to the intellectual property transfer agreement with an officer. In consideration of the Company issuing either 200,000 preferred shares with the following preferences; no dividends and voting rights equal to 100 common shares per share of preferred stock or the payment of $120,000, the officer agreed to terminate the royalty payments due under the agreement and give title to the exclusive license for the non-protective apparel use of the intellectual property to the Company. On the date of the agreement, the Company did not have any preferred stock authorized with the required preferences. In accordance with FASB Accounting Standards Codification No. 480, Distinguishing Liabilities from Equity, the Company determined that the present value of the payment of $120,000 that was due on December 26, 2007, the one year anniversary of the addendum, should be recorded as an accrued expense until such time as the Company has the ability to assert that it has preferred shares authorized. As of March 31, 2010, the Company has recorded $120,000 in royalty agreement payable- related party. On December 21, 2007 the officer extended the due date to July 30, 2008. On May 30, 2008 the officer extended the due date to March 31, 2009. On October 10, 2008, the officer extended the due date to the earlier of (a) March 30, 2010 or (b) upon demand by the officer. On March 30, 2010, the officer extended the due date to the earlier of (a) March 30, 2010 or (b) upon demand by the officer. On September 8, 2009, a payment of $15,000 was paid to the officer. On October 19, 2009 and December 1, 2009, $10,000 was paid to the officer respectfully. An additional payment of $10,000 was made on January 15, 2010. During the quarter ending September 30, 2010 an additional payment of $8,000 was made. During the year ended December 31, 2012 an additional payment of $1,000 was made. During the year ended December 31, 2013 an additional payment of $1,280 was made. During the year ended December 31, 2014, an additional loan of $572 was made. As of March 31, 2015, the outstanding balance is $65,292. Additionally, the accrued expenses are accruing 7% interest per year. As of March 31, 2015, the Company recorded interest expense and related accrued interest payable of $490.
As of March 31, 2015, the Company owes $838,177 in accrued salary to a principal stockholder.
On November 10, 2010, the Company entered into an addendum to the employment agreement, with its CEO, effective January 1, 2011 through December 31, 2015. The term of the agreement is a five year period at an annual salary of $210,000. There is a 6% annual increase. For the year ending December 31, 2014 the annual salary is $265,120. For the year ending December 31, 2015 the annual salary shall be $281,027. The employee is also to receive a 20% bonus based on the annual based salary. Any stock, stock options bonuses have to be approved by the board of directors.
On January 23, 2015, the board of directors appointed Mr. Jonathan R. Rice as its Chief Operating Officer. The employment agreement has a term of one year and can be terminated by either the Company or Mr. Rice at any time. Under the employment agreement, Mr. Rice is entitled to an annual cash compensation of $120,000, which includes salary, health insurance, 401K retirement plan contributions, etc. The Company also agreed to reimburse Mr. Rice for his past educational expenses of approximately $11,000. In addition, Mr. Rice will be issued a three-year warrant to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.001 per share pursuant to the employment agreement.
On November 10, 2014, the Company sold to the officer of the Company a used automobile for the price of $14,504. The Company reduced the accrued salary by the purchase price of the vehicle and recorded a gain on the sale of the asset of $8,956.
As of March 31, 2015 and December 31, 2014 there was $119,099 and $86,325, respectively, included in accounts payable and accrued expenses - related party, which is owed to the Company’s Chief Executive Officer.
As of March 31, 2015, there was $347,870 of accrued interest- related party and $11,250 in shareholder loan interest – related party included in accounts payable and accrued expenses – related party, which is owed to the Company’s Chief Executive officer.
As of December 31, 2014, there was $326,467 of accrued interest- related party and $10,760 in shareholder loan interest – related party included in accounts payable and accrued expenses – related party, which his owed to the Company’s Chief Executive officer.
NOTE 8 SUBSEQUENT EVENTS
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through May 14, 2015, the date the financial statements were issued. There were no subsequent events that required recognition or disclosure.