UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
|
[X] |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For
the quarterly period ended September 30, 2020
OR
|
[ ] |
TRANSITION
REPORT PURSUANT TO PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from_____ to _____
Commission
File Number: 333-146316
KRAIG
BIOCRAFT LABORATORIES, INC.
(Exact
Name of Registrant as Specified in Charter)
|
Wyoming |
|
83-0459707 |
|
(State
or Other Jurisdiction
of
Incorporation)
|
|
(I.R.S.
Employer
Identification
No.)
|
|
2723
South State St. Suite 150
Ann
Arbor, Michigan 48104
|
|
(Address
of Principal Executive Offices) |
(734)
619-8066
(Registrant’s
telephone number, including area code)
(Former
name and address, if changed since last report)
Copies
to:
Hunter
Taubman Fischer & Li LLC
800
Third Ave., Suite 2800
New
York, NY 10022
Securities
registered pursuant to Section 12(b) of the Act:
|
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of exchange on which registered |
|
None |
|
- |
|
- |
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes [X] No
[ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and emerging growth company in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer [ ] |
|
Accelerated
filer [ ] |
| Non-accelerated
filer [X] |
|
Smaller
reporting company [X] |
| |
|
Emerging
growth company [ ] |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate
by check mark whether the registrant is a shell company (as defined
by Rule 12b-2 of the Exchange Act). Yes [ ] No
[X]
As of
November 10, 2020, there were 854,410,001 shares of the issuer’s
Class A common stock, no par value per share, outstanding, 0 shares
of the issuer’s Class B common stock, no par value per share,
outstanding and 2 shares of preferred stock, no par value per
share, outstanding.
TABLE
OF CONTENTS
PART I
ITEM 1. FINANCIAL
STATEMENTS
Kraig Biocraft Laboratories, Inc. and
Subsidiary
Condensed
Consolidated Balance Sheets
|
|
|
September
30, 2020 |
|
|
December
31, 2019 |
|
|
|
|
(Unaudited) |
|
|
(Audited) |
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current
Assets |
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
43,062 |
|
|
$ |
125,024 |
|
|
Prepaid
expenses |
|
|
12,979 |
|
|
|
31,745 |
|
|
Total
Current Assets |
|
|
56,041 |
|
|
|
156,769 |
|
| |
|
|
|
|
|
|
|
|
|
Property
and Equipment, net |
|
|
96,044 |
|
|
|
117,321 |
|
|
Operating
lease right-of-use asset, net |
|
|
385,436 |
|
|
|
473,242 |
|
|
Security
deposit |
|
|
3,518 |
|
|
|
3,518 |
|
| |
|
|
|
|
|
|
|
|
|
Total
Assets |
|
$ |
541,039 |
|
|
$ |
750,850 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
520,410 |
|
|
$ |
560,948 |
|
|
Note
payable - related party |
|
|
1,492,000 |
|
|
|
642,000 |
|
|
Royalty
agreement payable - related party |
|
|
65,292 |
|
|
|
65,292 |
|
|
Accounts
payable and accrued expenses - related party |
|
|
4,614,733 |
|
|
|
4,145,465 |
|
|
Operating
lease liability, current |
|
|
122,028 |
|
|
|
110,678 |
|
|
Loan
payable |
|
|
60,000 |
|
|
|
60,000 |
|
|
SBA
Pacheck Protection Loan |
|
|
90,100 |
|
|
|
- |
|
|
Total
Current Liabilities |
|
|
6,964,563 |
|
|
|
5,584,383 |
|
| |
|
|
|
|
|
|
|
|
|
Long Term
Liabilities |
|
|
|
|
|
|
|
|
|
Loan
payable, net of current |
|
|
140,244 |
|
|
|
185,244 |
|
|
Operating
lease liability, net of current |
|
|
276,314 |
|
|
|
369,281 |
|
| |
|
|
|
|
|
|
|
|
|
Total
Liabilities |
|
|
7,381,121 |
|
|
|
6,138,908 |
|
| |
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Stockholders’
Deficit |
|
|
|
|
|
|
|
|
|
Preferred
stock, no par value; unlimited shares authorized, none, issued and
outstanding |
|
|
- |
|
|
|
- |
|
|
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,
854,410,001 and 844,468,378 shares issued and outstanding,
respectively |
|
|
17,122,236 |
|
|
|
16,757,079 |
|
|
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 |
|
|
4,909,082 |
|
|
|
2,412,969 |
|
|
Deferred
Compensation |
|
|
- |
|
|
|
- |
|
|
Accumulated
Deficit |
|
|
(34,111,200 |
) |
|
|
(29,797,906 |
) |
| |
|
|
|
|
|
|
|
|
|
Total
Stockholders’ Deficit |
|
|
(6,840,082 |
) |
|
|
(5,388,058 |
) |
| |
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Deficit |
|
$ |
541,039 |
|
|
$ |
750,850 |
|
Kraig Biocraft Laboratories, Inc. and
Subsidiary
Condensed
Consolidated Statements of Operations
(Unaudited)
|
|
|
For the
Three Months Ended |
|
|
For the
Nine Months Ended |
|
|
|
|
September
30, 2020 |
|
|
September
30, 2019 |
|
|
September
30, 2020 |
|
|
September
30, 2019 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative |
|
|
366,243 |
|
|
|
826,571 |
|
|
|
3,507,302 |
|
|
|
1,066,724 |
|
|
Professional
Fees |
|
|
39,169 |
|
|
|
54,230 |
|
|
|
89,643 |
|
|
|
242,458 |
|
|
Officer’s
Salary |
|
|
161,861 |
|
|
|
129,577 |
|
|
|
361,276 |
|
|
|
395,782 |
|
|
Rent -
Related Party |
|
|
3,556 |
|
|
|
2,487 |
|
|
|
9,819 |
|
|
|
11,913 |
|
|
Research
and Development |
|
|
27,626 |
|
|
|
43,987 |
|
|
|
65,408 |
|
|
|
87,228 |
|
|
Total
Operating Expenses |
|
|
598,455 |
|
|
|
1,056,852 |
|
|
|
4,033,448 |
|
|
|
1,804,105 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
Operations |
|
|
(598,455 |
) |
|
|
(1,056,852 |
) |
|
|
(4,033,448 |
) |
|
|
(1,804,105 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income/(Expenses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
|
(94,703 |
) |
|
|
(73,276 |
) |
|
|
(279,846 |
) |
|
|
(210,891 |
) |
|
Interest
income |
|
|
- |
|
|
|
1,640 |
|
|
|
- |
|
|
|
6,265 |
|
|
Total
Other Income/(Expenses) |
|
|
(94,703 |
) |
|
|
(71,636 |
) |
|
|
(279,846 |
) |
|
|
(204,626 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss)
before Provision for Income Taxes |
|
|
(693,158 |
) |
|
|
(1,128,488 |
) |
|
|
(4,313,294 |
) |
|
|
(2,008,731 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for Income Taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss) |
|
$ |
(693,158 |
) |
|
$ |
(1,128,488 |
) |
|
$ |
(4,313,294 |
) |
|
$ |
(2,008,731 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss) Per Share - Basic and Diluted |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding during the period - Basic and
Diluted |
|
|
851,168,167 |
|
|
|
839,837,716 |
|
|
|
846,717,942 |
|
|
|
832,594,572 |
|
Kraig Biocraft Laboratories, Inc. and
Subsidiary
Condensed
Consolidated Statement of Changes in Stockholders
Deficit
For the three and nine months ended September 30,
2020
(Unaudited)
| |
|
Preferred
Stock - |
|
|
Common
Stock - |
|
|
Common
Stock - |
|
|
Common
Stock - Class A Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
A |
|
|
Class
A |
|
|
Class
B |
|
|
To be
issued |
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Shares |
|
|
Par |
|
|
Shares |
|
|
Par |
|
|
Shares |
|
|
Par |
|
|
Shares |
|
|
Par |
|
|
APIC |
|
|
Deficit |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019 |
|
|
2 |
|
|
$ |
5,217,800 |
|
|
|
844,468,378 |
|
|
$ |
16,757,079 |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,122,311 |
|
|
$ |
22,000 |
|
|
$ |
2,412,969 |
|
|
$ |
(29,797,906 |
) |
|
$ |
(5,388,058 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued for services - related parties |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,754,031 |
|
|
|
- |
|
|
|
2,754,031 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued for services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
50,763 |
|
|
|
- |
|
|
|
50,763 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of 10,000,000 warrants in exchange for stock |
|
|
- |
|
|
|
- |
|
|
|
9,941,623 |
|
|
|
365,157 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(365,157 |
) |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed
capital - related party |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
17,495 |
|
|
|
- |
|
|
|
17,495 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed
interest - related party |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
38,981 |
|
|
|
- |
|
|
|
38,981 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the nine months ended September 30, 2020 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,313,294 |
) |
|
|
(4,313,294 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2020 |
|
|
2 |
|
|
$ |
5,217,800 |
|
|
|
854,410,001 |
|
|
$ |
17,122,236 |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,122,311 |
|
|
$ |
22,000 |
|
|
$ |
4,909,082 |
|
|
$ |
(34,111,200 |
) |
|
$ |
(6,840,082 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2020 |
|
|
2 |
|
|
$ |
5,217,800 |
|
|
|
844,468,378 |
|
|
$ |
16,757,079 |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,122,311 |
|
|
$ |
22,000 |
|
|
$ |
5,107,560 |
|
|
$ |
(33,418,042 |
) |
|
$ |
(6,313,603 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued for services - related parties |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
141,620 |
|
|
|
- |
|
|
|
141,620 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued for services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,050 |
|
|
|
- |
|
|
|
8,050 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of 10,000,000 warrants in exchange for stock |
|
|
- |
|
|
|
- |
|
|
|
9,941,623 |
|
|
|
365,157 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(365,157 |
) |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed
interest - related party |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
17,009 |
|
|
|
- |
|
|
|
17,009 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months ended September 30, 2020 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(693,158 |
) |
|
|
(693,158 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2020 |
|
|
2 |
|
|
$ |
5,217,800 |
|
|
|
854,410,001 |
|
|
$ |
17,122,236 |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,122,311 |
|
|
$ |
22,000 |
|
|
$ |
4,909,082 |
|
|
$ |
(34,111,200 |
) |
|
$ |
(6,840,082 |
) |
Kraig Biocraft Laboratories, Inc. and
Subsidiary
Condensed
Consolidated Statement of Changes in Stockholders
Deficit
For the three and nine months ended September 30,
2019
(Unaudited)
|
|
|
Preferred
Stock -
Series
A
|
|
|
Common
Stock -
Class
A
|
|
|
Common
Stock -
Class
B
|
|
|
Common
Stock
Class
A Shares
To
be issued
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
Shares |
|
|
Par |
|
|
Shares |
|
|
Par |
|
|
Shares |
|
|
Par |
|
|
Shares |
|
|
Par |
|
|
APIC |
|
|
Deficit |
|
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018 |
|
|
2 |
|
|
$ |
5,217,800 |
|
|
|
816,883,910 |
|
|
$ |
15,145,798 |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,122,311 |
|
|
$ |
22,000 |
|
|
$ |
2,043,235 |
|
|
$ |
(26,888,056 |
) |
|
$ |
(4,459,223 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
issued for cash |
|
|
- |
|
|
|
- |
|
|
|
14,797,278 |
|
|
|
1,000,000 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,000,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued in exchange for accounts payable |
|
|
- |
|
|
|
- |
|
|
|
4,052,652 |
|
|
|
281,659 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
281,659 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
issued for services - related parties |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
584,776 |
|
|
|
- |
|
|
|
584,776 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of 9,000,000 warrants in exchange for stock |
|
|
- |
|
|
|
- |
|
|
|
8,734,538 |
|
|
|
329,622 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(329,622 |
) |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation
of warrants issued for services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(19,915 |
) |
|
|
- |
|
|
|
(19,915 |
) |
| . |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed
interest - related party |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,027 |
|
|
|
- |
|
|
|
16,027 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the nine months ended September 30, 2019 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,008,731 |
) |
|
|
(2,008,731 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2019 |
|
|
2 |
|
|
$ |
5,217,800 |
|
|
|
844,468,378 |
|
|
$ |
16,757,079 |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,122,311 |
|
|
$ |
22,000 |
|
|
$ |
2,294,501 |
|
|
$ |
(28,896,787 |
) |
|
$ |
(4,605,407 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2019 |
|
|
2 |
|
|
$ |
5,217,800 |
|
|
|
835,733,840 |
|
|
$ |
16,427,457 |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,122,311 |
|
|
$ |
22,000 |
|
|
$ |
2,033,777 |
|
|
$ |
(27,768,299 |
) |
|
$ |
(4,067,265 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
issued for services - related parties |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
584,776 |
|
|
|
- |
|
|
|
584,776 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of 9,000,000 warrants in exchange for stock |
|
|
- |
|
|
|
- |
|
|
|
8,734,538 |
|
|
|
329,622 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(329,622 |
) |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed
interest - related party |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,570 |
|
|
|
- |
|
|
|
5,570 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
Net
loss for the three months ended September 30, 2019 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,128,488 |
) |
|
|
(1,128,488 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2019 |
|
|
4 |
|
|
$ |
5,217,800 |
|
|
|
844,468,378 |
|
|
$ |
16,757,079 |
|
|
|
- |
|
|
$ |
- |
|
|
|
1,122,311 |
|
|
$ |
22,000 |
|
|
$ |
2,294,501 |
|
|
$ |
(28,896,787 |
) |
|
$ |
(4,605,407 |
) |
Kraig Biocraft Laboratories, Inc. and
Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| |
|
For the nine months ended
September 30, |
|
| |
|
2020 |
|
|
2019 |
|
| Cash Flows From
Operating Activities: |
|
|
|
|
|
|
|
|
| Net Loss |
|
$ |
(4,313,294 |
) |
|
$ |
(2,008,731 |
) |
| Adjustments to
reconcile net loss to net cash used in operations |
|
|
|
|
|
|
|
|
| Depreciation
expense |
|
|
21,277 |
|
|
|
22,448 |
|
| Imputed interest -
related party |
|
|
38,981 |
|
|
|
16,027 |
|
| Fair value of
options issued for services |
|
|
2,804,794 |
|
|
|
584,776 |
|
| Warrants
issued/(cancelled) to consultants |
|
|
- |
|
|
|
(19,915 |
) |
| Decrease
(Increase) in prepaid expenses |
|
|
18,766 |
|
|
|
(5,812 |
) |
| Operating lease
right-of-use, net |
|
|
87,806 |
|
|
|
58,123 |
|
| Increase in
accrued expenses and other payables - related party |
|
|
469,268 |
|
|
|
541,175 |
|
| (Decrease)
Increase in royalty agreement payable - related party |
|
|
|
|
|
|
|
|
| (Decrease)Increase
in accounts payable |
|
|
(40,538 |
) |
|
|
95,927 |
|
|
Operating lease liabilities, current |
|
|
(81,617 |
) |
|
|
(53,601 |
) |
| Net
Cash Used In Operating Activities |
|
|
(994,557 |
) |
|
|
(769,583 |
) |
| |
|
|
|
|
|
|
|
|
| Cash Flows From
Investing Activities: |
|
|
|
|
|
|
|
|
| Purchase of
Fixed Assets and Leasehold Improvements |
|
|
- |
|
|
|
(72,966 |
) |
| Net
Cash Used In Investing Activities |
|
|
- |
|
|
|
(72,966 |
) |
| |
|
|
|
|
|
|
|
|
| Cash Flows From
Financing Activities: |
|
|
|
|
|
|
|
|
| Proceeds from Notes Payable - related
party |
|
|
850,000 |
|
|
|
120,000 |
|
| Principal payments on debt |
|
|
(45,000 |
) |
|
|
(8,000 |
) |
| Contributed capital - related
party |
|
|
17,495 |
|
|
|
- |
|
| Proceeds from SBA Paycheck Protection
Loan |
|
|
90,100 |
|
|
|
- |
|
| Proceeds from
issuance of common stock |
|
|
- |
|
|
|
1,000,000 |
|
| Net
Cash Provided by Financing Activities |
|
|
912,595 |
|
|
|
1,112,000 |
|
| |
|
|
|
|
|
|
|
|
| Net Increase
(Decrease) in Cash |
|
|
(81,962 |
) |
|
|
269,451 |
|
| |
|
|
|
|
|
|
|
|
| Cash at Beginning of Period |
|
|
125,024 |
|
|
|
13,697 |
|
| |
|
|
|
|
|
|
|
|
| Cash at End of
Period |
|
$ |
43,062 |
|
|
$ |
283,148 |
|
| |
|
|
|
|
|
|
|
|
|
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 |
|
$ |
365,157 |
|
|
$ |
329,622 |
|
|
Settlement of accounts payable with note payable |
|
$ |
- |
|
|
$ |
265,244 |
|
|
Settlement of accounts payable with stock issuance |
|
$ |
- |
|
|
$ |
281,659 |
|
|
Adoption of lease standard ASC 842 |
|
$ |
- |
|
|
$ |
559,568 |
|
Kraig Biocraft Laboratories,
Inc.
Notes
to Condensed Consolidated Financial Statements as of September 30,
2020 and 2019
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)
Foreign Currency
The
assets and liabilities of Prodigy Textiles, Co., Ltd. (the
Company’s Vietnamese subsidiary) whose functional currency is the
Vietnamese Dong, are translated into US dollars at period-end
exchange rates prior to consolidation. Income and expense items are
translated at the average rates of exchange prevailing during the
period. The adjustments resulting from translating the Company’s
financial statements are reflected as a component of other
comprehensive (loss) income. Foreign currency transaction gains and
losses are recognized in net earnings based on differences between
foreign exchange rates on the transaction date and settlement
date.
(C)
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.
(D)
Cash
For
the 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 September 30, 2020 or December 31,
2019.
(E)
Loss Per Share
Basic
and diluted net loss per common share is computed based upon the
weighted average common shares outstanding as defined by the
Financial Accounting Standards Board (“FASB” Accounting Standards
Codification (“ASC”) No. 260, “Earnings per Share.” For September
30, 2020 and September 30, 2019, 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 for September 30,
2020 and September 30, 2019 excludes the common stock equivalents
of the following potentially dilutive securities because their
inclusion would be anti-dilutive:
|
|
|
September
30, 2020 |
|
|
September
30, 2019 |
|
|
Stock
Warrants (Exercise price - $0.001/share) |
|
|
45,995,917 |
|
|
|
57,995,917 |
|
| Stock Options
(Exercise price - $0.1150/Share) |
|
|
27,340,000 |
|
|
|
- |
|
|
Convertible Preferred
Stock |
|
|
2 |
|
|
|
2 |
|
| Total |
|
|
73,335,919 |
|
|
|
57,995,919 |
|
(F)
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.
(G)
Income Taxes
The
Company accounts for income taxes under FASB Codification Topic
740-10-25 (“ASC 740-10-25”). Under ASC No. 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 No. 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.
On
December 22, 2017, the 2017 Tax Cuts and Jobs Act (the “Tax Act”)
was enacted into law and the new legislation contains several key
tax provisions that affected us, including a one-time mandatory
transition tax on accumulated foreign earnings and a reduction of
the corporate income tax rate to 21% effective January 1, 2018,
among others. We are required to recognize the effect of the tax
law changes in the period of enactment, such as determining the
transition tax, remeasuring our U.S. deferred tax assets and
liabilities as well as reassessing the net realizability of our
deferred tax assets and liabilities. In December 2017, the SEC
staff issued Staff Accounting Bulletin No. 118, Income Tax
Accounting Implications of the Tax Cuts and Jobs Act (SAB 118),
which allows us to record provisional amounts during a measurement
period not to extend beyond one year of the enactment date. Since
the Tax Act was passed late in the fourth quarter of 2017, and
ongoing guidance and accounting interpretation are expected over
the next 12 months, we consider the accounting of the transition
tax, deferred tax re-measurements, and other items to be incomplete
due to the forthcoming guidance and our ongoing analysis of final
year-end data and tax positions. We expect to complete our analysis
within the measurement period in accordance with SAB
118.
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
September 30, 2020 and December 31, 2019 there were no amounts that
had been accrued in respect to uncertain tax positions.
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
The
Company accounts for stock-based compensation for employees and
directors in accordance with ASC 718, Compensation (“ASC 718”). ASC
718 requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the statement
of operations based on their fair values. Under the provisions of
ASC 718, stock-based compensation costs are measured at the grant
date, based on the fair value of the award, and are recognized as
expense over the employee’s requisite service period (generally the
vesting period of the equity grant). The fair value of the
Company’s common stock options are estimated using the Black
Scholes option-pricing model with the following assumptions:
expected volatility, dividend rate, risk free interest rate and the
expected life. The Company expenses stock-based compensation by
using the straight-line method. In accordance with ASC 718 and,
excess tax benefits realized from the exercise of stock-based
awards are classified as cash flows from operating activities. All
excess tax benefits and tax deficiencies (including tax benefits of
dividends on share-based payment awards) are recognized as income
tax expense or benefit in the condensed consolidated statements of
operations.
The
Company accounts for stock-based compensation awards issued to
non-employees for services, as prescribed by ASC 718-10, at either
the fair value of the services rendered or the instruments issued
in exchange for such services, whichever is more readily
determinable, using the measurement date guidelines enumerated in
ASU 2018-07.
(I)
Recent Accounting Pronouncements
In
February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842,
which amends the guidance in former ASC Topic 840, Leases.
The new standard increases transparency and comparability most
significantly by requiring the recognition by lessees of
right-of-use (“ROU”) assets and lease liabilities on the balance
sheet for all leases longer than 12 months. Under the standard,
disclosures are required to meet the objective of enabling users of
financial statements to assess the amount, timing, and uncertainty
of cash flows arising from leases. For lessees, leases will be
classified as finance or operating, with classification affecting
the pattern and classification of expense recognition in the income
statement. The Company adopted the new lease guidance effective
January 1, 2019 using the modified retrospective transition
approach, applying the new standard to all of its leases existing
at the date of initial application which is the effective date of
adoption. Consequently, financial information will not be updated
and the disclosures required under the new standard will not be
provided for dates and periods before January 1, 2019. We elected
the package of practical expedients which permits us to not
reassess (1) whether any expired or existing contracts are or
contain leases, (2) the lease classification for any expired or
existing leases, and (3) any initial direct costs for any existing
leases as of the effective date. We did not elect the hindsight
practical expedient which permits entities to use hindsight in
determining the lease term and assessing impairment. The adoption
of the lease standard did not change our previously reported
consolidated statements of operations and did not result in a
cumulative catch-up adjustment to opening equity. As a result, the
Company has recorded Right-to-use assets and corresponding Lease
obligations as more fully discussed in Note 4.
All
other newly issued accounting pronouncements but not yet effective
have been deemed either immaterial or not applicable.
(J)
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 ASC 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 for the nine months ended
September 30, 2020 and 2019.
(K)
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 September 30, 2020 and December 31,
2019. |
| |
|
|
| |
● |
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. |
|
|
|
September
30, 2020 |
|
|
December
31, 2019 |
|
|
Level
1 |
|
$ |
- |
|
|
$ |
- |
|
| Level 2 |
|
$ |
- |
|
|
$ |
- |
|
| Level 3 |
|
$ |
- |
|
|
$ |
- |
|
| Total |
|
$ |
- |
|
|
$ |
- |
|
(L)
Revenue Recognition
The Company’s revenues have been generated primarily from a
contract with the U.S. Government. The Company performed work under
a cost-plus-fixed-fee contract. Under the base phase of that
contract, the Company produced recombinant spider silk woven into
ballistic shootpack panels. Those shootpack panels were delivered
to the U.S. Government customer. Under an option period award
starting in July 2017, to that original contract, the Company
worked to develop new recombinant silks.
Effective
January 1, 2018, the Company adopted ASC No. 606 — Revenue from
Contracts with Customers. Under ASC No. 606, the Company recognizes
revenue from the commercial sales of products, licensing agreements
and contracts by applying the following steps: (1) identify the
contract with a customer; (2) identify the performance obligations
in the contract; (3) determine the transaction price; (4) allocate
the transaction price to each performance obligation in the
contract; and (5) recognize revenue when each performance
obligation is satisfied.
For
the three and nine months ended September 30, 2020 and 2019, the
Company recognized $0 and $0 respectively in revenue from the
Government contract. These revenues were generated for work
performed in the development and production of the Company’s
recombinant silks under the base and option period phases of our
ongoing contract with the US Army.
On
July 24, 2017, the Company signed a contract option extension with
the US Army to research and deliver recombinant spider silk fibers
and threads. This contract option increased the total contract
award by an additional $921,130 to a total of $1,021,092 and added
12 months to the contract duration. This effort was scheduled to
end on September 24, 2018, but the Company requested an extension
of this contract option period through April 2019 to complete the
work. The Company has been in communication with the contracting
office and is working with them as they determine the best path
forward; Management believes there is a possibility of securing a
follow-up contract to complete the delivery of all materials for
the contract. The Company is also continuing to pursue additional
contract opportunities with the Department of Defense, Department
of Energy and other governmental agencies.
(M)
Concentration of Credit Risk
The
Company at times has cash in banks in excess of FDIC insurance
limits. At September 30, 2020 and December 31, 2019, the Company
had approximately $0 and $0, respectively in excess of FDIC
insurance limits.
For
the three and nine months ended September 30, 2020 and 2019, the
Company booked $0 and $0 for doubtful accounts.
NOTE
2 GOING CONCERN
As reflected in the accompanying financial statements, the Company
has a working capital deficiency of $6,908,522 and stockholders’
deficiency of $6,840,082 and used $994,557 of cash in operations
for nine months ended September 30, 2020. 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
September 30, 2020 and December 31, 2019, property and equipment,
net, is as follows:
|
|
|
As
of
September
30, 2020
|
|
|
December
31, 2019 |
|
|
Automobile |
|
$ |
41,805 |
|
|
$ |
41,805 |
|
|
Laboratory
Equipment |
|
|
96,536 |
|
|
|
96,536 |
|
|
Office
Equipment |
|
|
7,260 |
|
|
|
7,260 |
|
|
Leasehold
Improvements |
|
|
85,389 |
|
|
|
85,389 |
|
|
Less:
Accumulated Depreciation |
|
|
(134,946 |
) |
|
|
(113,669 |
) |
|
Total
Property and Equipment, net |
|
$ |
96,044 |
|
|
$ |
117,321 |
|
Depreciation
expense for the nine months ended September 30, 2020 and 2019, was
$21,277 and $22,448, respectively
Depreciation
expense for the three months ended September 30, 2020 and 2019, was
$8,159 and $9,045, respectively.
NOTE
4 - RIGHT TO USE ASSETS AND LEASE LIABILITITY
Since
September of 2015, we rent office space at 2723 South State Street,
Suite 150, Ann Arbor, Michigan 48104, which is our principal place
of business. We pay an annual rent of $2,508 for conference
facilities, mail, fax, and reception services located at our
principal place of business.
On
January 23, 2017 the Company signed an 8 year property lease with
the Company’s President for land in Texas where the Company grows
its mulberry. The Company pays a monthly rent of $960. Rent expense
– related party for the nine months ended September 30, 2020 and
2019, was $9,819 and $11,913, respectively (See Note 9).
On
September 13, 2017, the Company signed a new two year lease
commencing on October 1, 2017 and ending on September 30, 2019. The
Company pays an annual rent of $39,200 for the year one of lease
and $42,000 for the year two of lease for office and manufacturing
space.
On
May 9, 2019 the Company signed a 5 year property lease with the
Socialist Republic of Vietnam which consists of 4,560.57 square
meters of space, which it leases at a current rent of approximately
$45,150 per year one and two and with the 5% increase per year for
years three through five.
In
February 2016, the FASB issued ASU 2016-02, “Leases” Topic 842,
which amends the guidance in former ASC Topic 840, Leases.
The new standard increases transparency and comparability most
significantly by requiring the recognition by lessees of
right-of-use (“ROU”) assets and lease liabilities on the balance
sheet for all leases longer than 12 months. Under the standard,
disclosures are required to meet the objective of enabling users of
financial statements to assess the amount, timing, and uncertainty
of cash flows arising from leases. For lessees, leases will be
classified as finance or operating, with classification affecting
the pattern and classification of expense recognition in the income
statement.
The
Company adopted the new lease guidance effective January 1, 2019
using the modified retrospective transition approach, applying the
new standard to all of its leases existing at the date of initial
application which is the effective date of adoption. Consequently,
financial information will not be updated and the disclosures
required under the new standard will not be provided for dates and
periods before January 1, 2019. We elected the package of practical
expedients which permits us to not reassess (1) whether any expired
or existing contracts are or contain leases, (2) the lease
classification for any expired or existing leases, and (3) any
initial direct costs for any existing leases as of the effective
date. We did not elect the hindsight practical expedient which
permits entities to use hindsight in determining the lease term and
assessing impairment. The adoption of the lease standard did not
change our previously reported consolidated statements of
operations and did not result in a cumulative catch-up adjustment
to opening equity. The adoption of the new guidance resulted in the
recognition of ROU assets of $529,135 and lease liabilities of
$531,462.
The
interest rate implicit in lease contracts is typically not readily
determinable. As such, the Company utilizes its incremental
borrowing rate, which is the rate incurred to borrow on a
collateralized basis over a similar term an amount equal to the
lease payments in a similar economic environment. In calculating
the present value of the lease payments, the Company elected to
utilize its incremental borrowing rate based on the remaining lease
terms as of the January 1, 2019 adoption date. This rate was
determined to be 8% and the Company determined the initial present
value, at inception, of $559,568.
Operating
lease ROU assets and operating lease liabilities are recognized
based on the present value of the future minimum lease payments
over the lease term at the commencement date. The operating lease
ROU asset also includes any lease payments made and excludes lease
incentives and initial direct costs incurred, if any.
The
Company has elected the practical expedient to combine lease and
non-lease components as a single component. The lease expense is
recognized over the expected term on a straight-line basis.
Operating leases are recognized on the balance sheet as
right-of-use assets, current operating lease liabilities and
non-current operating lease liabilities.
The
new standard also provides practical expedients and certain
exemptions for an entity’s ongoing accounting. We have elected the
short-term lease recognition exemption for all leases that qualify.
This means, for those leases where the initial lease term is one
year or less or for which the ROU asset at inception is deemed
immaterial, we will not recognize ROU assets or lease liabilities.
Those leases are expensed on a straight line basis over the term of
the lease
Right
to use assets is summarized below:
| |
|
September
30, 2020 |
|
|
Right to
use assets, net – related party |
|
$ |
47,147 |
|
|
Right to
use assets, net |
|
|
41,136 |
|
|
Right to
use assets, net |
|
|
297,153 |
|
| Total |
|
$ |
385,436 |
|
During
the nine months ended September 30, 2020, the Company recorded
$72,428 as lease expense to current period operations.
During
the nine months ended September 30, 2020, the Company recorded
$9,819 as lease expense – related party to current period
operations.
Lease
liability is summarized below:
|
|
|
September
30, 2020 |
|
|
Right to
use liability, net – related party |
|
|
49,466 |
|
|
Right to
use liability, net |
|
|
42,918 |
|
|
Right to
use liability, net |
|
|
305,958 |
|
| Total |
|
|
398,342 |
|
|
Less:
short term portion |
|
$ |
(122,028 |
) |
|
Long term
position |
|
$ |
276,314 |
|
Lease
expense for the nine months ended September 30, 2020 was comprised
of the following:
|
Operating
lease expense |
|
$ |
33,866 |
|
|
Operating
lease expense |
|
$ |
34,743 |
|
|
Operating
lease expense – related party |
|
$ |
9,819 |
|
NOTE
5 ACCRUED INTEREST – RELATED PARTY
On
June 6, 2016, the Company received a $50,000 loan from our
principal stockholder. Subsequently on December 1, 2017, the
Company received an additional $30,000 loan from the same
stockholder. On January 8, 2018 and March 31, 2018 the Company
received an additional loan of $100,000 and $15,000, respectively.
The Company received additional loan funds from the same
stockholder as follows: $20,000 on April 26, 2018; $15,000 on June
21, 2018; $15,000 on June 29, 2018; $20,000 on July 5, 2018;
$26,000 on October 1, 2018; $11,000 on October 12, 2018; $20,000 on
December 21, 2018; $3,000 on January 4, 2019; $30,000 on January
17, 2019; $30,000 on February 1, 2019; $20,000 on February 15,
2019; $20,000 on March 1, 2019; $17,000 on January 4, 2019,
$100,000 on November 20, 2019, $100,000 on December 18, 2019,
$100,000 on January 24, 2020, $100,000 on February 19, 2020
$100,000 on March 9, 2020, $100,000 on April 8, 2020, $150,000 on
June 3, 2020, $100,000 on July 16, 2020, $100,000 on August 12,
2020 and $100,000 on September 10, 2020. Pursuant to the terms of
the loan, the advance bears an interest at 3%, is unsecured, and
due on demand. Total loan payable to principal stockholder for as
of December 31, 2019 is $642,000. Total loan payable to this
principal stockholder as of September 30, 2020 is $1,492,000.
During the nine months ended September 30, 2020, the Company
recorded $38,981 as an in-kind contribution of interest related to
the loan and recorded accrued interest payable of $24,485. During
the nine months ended September 30, 2019, the Company recorded
$16,027 as an in-kind contribution of interest related to the loan
and recorded accrued interest payable of $10,624.
NOTE
6 NOTE PAYABLE
On
March 1, 2019, the Company entered into an unsecured promissory
note with Notre Dame - an unrelated party in the amount of $265,244
in exchange for outstanding account payable due to the debtor.
Pursuant to the terms of the note, the note bears 10% interest per
year from the date of default until the date the loan is paid in
full. The term of the loan is twenty four months. The loan
repayment commenced immediately over a twenty-four month period
according to the following table. During the nine months ended
September 30, 2020, the Company paid $45,000 of the loan balance
(See Note 8 (A)):
1.
$1,000 per month for the first six months;
2.
$2,000 per month for the months seven and eight;
3.
$5,000 per month for months nine through twenty three;
and,
4.
Final payment of all remaining balance, in the amount of $180,224
in month 24.
On
April 16, 2020, the Company, was granted a loan (the “Loan”) from
The Huntington National Bank, in the aggregate amount of $90,100,
pursuant to the Paycheck Protection Program (the “PPP”) under
Division A, Title I of the CARES Act, which was enacted March 27,
2020.
The
Loan, which was in the form of a Note dated on or about April 16,
2020 issued by the Borrower, matures on or about April 16, 2022 and
bears interest at an approximate rate of 1% per annum. The Note may
be prepaid by the Borrower at any time prior to maturity with no
prepayment penalties. Funds from the Loan may only be used for
payroll costs, costs used to continue group health care benefits,
mortgage payments, rent, utilities, and interest on other debt
obligations incurred before February 15, 2020. The Company intends
to use the entire Loan amount for qualifying expenses. Under the
terms of the PPP, certain amounts of the Loan may be forgiven if
they are used for qualifying expenses as described in the CARES
Act.
NOTE
7 STOCKHOLDERS’ DEFICIT
(A)
Common Stock Issued for Cash
On
March 9, 2019, the Company entered into a purchase agreement with
one investor (the “Purchase Agreement”). Pursuant to the Purchase
Agreement, the Company issued the investor 14,797,278 Units at a
purchase price of $0.06758 per Unit, for total gross proceeds to
the Company of $1,000,000. The Units consist of 14,797,278 shares
of the Company’s Class A Common Stock (the “Common Stock”) and two
warrants (the “Warrants”): (i) one warrant entitles the investor to
purchase up to 14,797,278 shares of Common Stock at an exercise
price of $0.06 per share (the “6 Cent Warrants”) and (ii) one
warrant entitles the investor to purchase up to 7,398,639 shares of
Common Stock at an exercise price of $0.08 per share (the “8 Cent
Warrant”). The Warrants shall be exercisable at any time from the
issuance date until the following expiration dates:
● ½
of all $0.06 Warrants shall expire on March 8, 2021;
●
½ of all $0.06 Warrants shall expire
on March 8, 2022;
●
½ of all $0.08 Warrants shall expire
on March 8, 2022; and,
●
½ of all $0.08 Warrants shall expire
on March 8, 2023.
(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 20, 2019, the Company issued 4,052,652 shares of its class A
common stock with a fair value of $281,659 ($0.0695/share) on the
date of settlement. The Company settled $243,159 of accounts
payable to the University of Notre Dame. The Company recorded an
additional amount of $38,500 based on the fair value of the shares
on the date of settlement. See Note 8 (A).
(C)
Common Stock Warrants and Options
On
July 30, 2020, the Company issued 9,941,623 shares of Common stock
in connection with the cashless exercise of 10,000,000
warrants.
On
February 19, 2020 the Company issued a 20-year option to purchase
20,000,000 shares of common stock at an exercise price of $0.115
per share to a related party for services rendered. The options had
a fair value of $2,198,411, based upon the Black-Scholes
option-pricing model on the date of grant and are fully vested on
the date granted. Options will be exercisable on February 19, 2025,
and for a period of 15 years expiring on February 19, 2040. During
the nine months ended September 30, 2020, the Company recorded
$2,198,411 as an expense for options issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
125.19 |
% |
|
Expected
term |
|
|
3
years |
|
|
Risk free
interest rate |
|
|
1.56 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
February 19, 2020 the Company issued a 10-year option to purchase
6,000,000 shares of common stock at an exercise price of $0.115 per
share to a related party for services rendered. The options had a
fair value of $626,047, based upon the Black-Scholes option-pricing
model on the date of grant and 2,000,000 options are fully vested
on the date granted and 1,000,000 options vest at the end of each
successive year for four years. Options will be exercisable on
February 19, 2021, and for a period of 10 years expiring on
February 19, 2030. During the nine months ended September 30, 2020,
the Company recorded $272,673 as an expense for options
issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
125.19 |
% |
|
Expected
term |
|
|
3
years |
|
|
Risk free
interest rate |
|
|
1.50 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
February 19, 2020 the Company issued a 7-year option to purchase
1,340,000 shares of common stock at an exercise price of $0.115 per
share to employees for services rendered. The options had a fair
value of $133,063, based upon the Black-Scholes option-pricing
model on the date of grant and 268,000 options are fully vested on
the date granted and the remaining option vest equally over the
remaining 4 years at the end of each successive year. Options will
be exercisable on February 19, 2021, and for a period of 6 years
expiring on February 19, 2027. During the nine months ended
September 30, 2020, the Company recorded $40,935 as an expense for
options issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
125.19 |
% |
|
Expected
term |
|
|
6
years |
|
|
Risk free
interest rate |
|
|
1.46 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
September 26, 2019, the Company issued 766,667 shares in connection
with the cashless exercise of the 1,000,000 warrants. On August 14,
2019, the Company issued 7,967,871 shares in connection with the
cashless exercise of the 8,000,000 warrants.
On
August 8, 2019, the Company issued a 2-year option to purchase
2,000,000 shares of common stock at an exercise price of $0.2299
per share to a related party for services rendered. The options had
a fair value of $267,574, based upon the Black-Scholes
option-pricing model on the date of grant and are fully vested on
the date granted. Options will be exercisable on August 8, 2020,
and for a period of 3 years expiring on August 8, 2024. During the
year ended December 31, 2019, the Company recorded $267,574 as an
expense for options issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
105.73 |
% |
|
Expected
term |
|
|
2
years |
|
|
Risk free
interest rate |
|
|
1.62 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
August 8, 2019, the Company issued a 2-year option to purchase
2,000,000 shares of common stock at an exercise price of $0.2299
per share to a related party for services rendered. The options had
a fair value of $267,574, based upon the Black-Scholes
option-pricing model on the date of grant and is fully vested on
August 8, 2020. Options will be exercisable on August 8, 2022, and
for a period of 3 years expiring on August 8, 2025. During the nine
months ended September 30, 2020, the Company recorded $161,568 as
an expense for options issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
105.73 |
% |
|
Expected
term |
|
|
2
years |
|
|
Risk free
interest rate |
|
|
1.62 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
August 8, 2019, the Company issued a 3-year option to purchase
2,000,000 shares of common stock at an exercise price of $0.2299
per share to a related party for services rendered. The options had
a fair value of $291,842, based upon the Black-Scholes
option-pricing model on the date of grant and is fully vested on
August 8, 2021. Options will be exercisable on August 8, 2023, and
for a period of 3 years expiring on August 8, 2026. During the nine
months ended September 30, 2020, the Company recorded $109,391 as
an expense for options issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
105.73 |
% |
|
Expected
term |
|
|
3
years |
|
|
Risk free
interest rate |
|
|
1.54 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
August 8, 2019, the Company issued a 2-year option to purchase
1,000,000 shares of common stock at an exercise price of $0.2299
per share to a related party for services rendered. The options had
a fair value of $118,874, based upon the Black-Scholes
option-pricing model on the date of grant and are fully vested on
the date granted. Options will be exercisable on August 8, 2020,
and for a period of 3 years expiring on August 8, 2023. During the
year ended December 31, 2019, the Company recorded $118,874 as an
expense for options issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
105.73 |
% |
|
Expected
term |
|
|
2
years |
|
|
Risk free
interest rate |
|
|
1.62 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
August 8, 2019, the Company issued a 2-year option to purchase
1,000,000 shares of common stock at an exercise price of $0.2299
per share to a related party for services rendered. The options had
a fair value of $118,874, based upon the Black-Scholes
option-pricing model on the date of grant and are fully vested on
the date granted. Options will be exercisable on August 8, 2021,
and for a period of 3 years expiring on August 8, 2024. During the
year ended December 31, 2019, the Company recorded $118,874 as an
expense for options issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
105.73 |
% |
|
Expected
term |
|
|
2
years |
|
|
Risk free
interest rate |
|
|
1.62 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
August 8, 2019, the Company issued a 2-year option to purchase
125,000 shares of common stock at an exercise price of $0.2299 per
share to an employee for services rendered. The options had a fair
value of $14,859, based upon the Black-Scholes option-pricing model
on the date of grant and are fully vested on the date granted.
Options will be exercisable on August 8, 2020, and for a period of
3 years expiring on August 8, 2023. During the year ended December
31, 2019, the Company recorded $14,859, as an expense for options
issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
105.73 |
% |
|
Expected
term |
|
|
2
years |
|
|
Risk free
interest rate |
|
|
1.62 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
August 8, 2019, the Company issued a 2-year option to purchase
125,000 shares of common stock at an exercise price of $0.2299 per
share to a related party for services rendered. The options had a
fair value of $16,723, based upon the Black-Scholes option-pricing
model on the date of grant and are fully vested on August 8, 2020.
Options will be exercisable on August 8, 2022, and for a period of
3 years expiring on August 8, 2025. During the nine months ended
September 30, 2020, the Company recorded $10,098, as an expense for
options issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
105.73 |
% |
|
Expected
term |
|
|
2
years |
|
|
Risk free
interest rate |
|
|
1.62 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
August 8, 2019, the Company issued a 2-year options to purchase
125,000 shares of common stock at an exercise price of $0.2299 per
share to a related party for services rendered. The options had a
fair value of $18,240, based upon the Black-Scholes option-pricing
model on the date of grant and are fully vested on August 8, 2021.
Options will be exercisable on August 8, 2023, and for a period of
3 years expiring on August 8, 2026. During the nine months ended
September 30, 2020, the Company recorded $6,837, as an expense for
options issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
105.73 |
% |
|
Expected
term |
|
|
3
years |
|
|
Risk free
interest rate |
|
|
1.54 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
August 8, 2019, the Company issued a 2-year options to purchase
125,000 shares of common stock at an exercise price of $0.2299 per
share to a related party for services rendered. The options had a
fair value of $19,525, based upon the Black-Scholes option-pricing
model on the date of grant and are fully vested on August 8, 2022.
Options will be exercisable on August 8, 2024, and for a period of
3 years expiring on August 8, 2027. During the nine months ended
September 30, 2020, the Company recorded $4,881, as an expense for
options issued.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
105.73 |
% |
|
Expected
term |
|
|
3
years |
|
|
Risk free
interest rate |
|
|
1.54 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
March 20, 2018, the Company issued a 4-year warrant to purchase
600,000 shares of common stock at an exercise price of $0.001 per
share to a consultant for services rendered. The warrants had a
fair value of $19,915, based upon the Black-Scholes option-pricing
model on the date of grant and are fully vested on March 20, 2018.
Warrants will be exercisable on March 20, 2019, and for a period of
3 years expiring on March 20, 2022. During the year ended December
31, 2019, the Company recorded $19,915 as an expense for warrants
issued. On April 5, 2019, the Company cancelled 600,000 warrant
issued to a consultant on February 20, 2018 in exchange for $6,000
cash payment. In addition the Company also recorded a $19,915
reduction to warrant expense related to the warrant
cancellation.
|
Expected
dividends |
|
|
0 |
% |
|
Expected
volatility |
|
|
97.56 |
% |
|
Expected
term |
|
|
4
years |
|
|
Risk free
interest rate |
|
|
2.65 |
% |
|
Expected
forfeitures |
|
|
0 |
% |
On
September 26, 2019, the Company issued 766,667 shares in connection
with the cashless exercise of the 1,000,000 warrants.
On
August 14, 2019, the Company issued 7,967,871 shares in connection
with the cashless exercise of the 8,000,000 warrants.
|
|
|
Number of
Warrants |
|
|
Weighted
Average Exercise Price |
|
|
Weighted
Average
Remaining
Contractual Life
(in
Years)
|
|
| |
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019 |
|
|
55,395,917 |
|
|
|
|
|
|
|
2.77 |
|
|
Granted |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Exercised |
|
|
(10,000,000 |
) |
|
|
- |
|
|
|
|
|
|
Cancelled/Forfeited |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Balance,
September 30, 2020 |
|
|
45,395,917 |
|
|
|
|
|
|
|
2.02 |
|
|
Intrinsic
Value |
|
$ |
9,799,286 |
|
|
|
|
|
|
|
|
|
For
the nine months ended September 30, 2020, the following warrants
were outstanding:
Exercise
Price
Warrants
Outstanding |
|
|
Warrants
Exercisable |
|
|
Weighted
Average
Remaining
Contractual Life |
|
|
Aggregate
Intrinsic Value |
|
|
$ |
0.001 |
|
|
|
11,000,000 |
|
|
|
0.80 |
|
|
$ |
4,326,000 |
|
|
$ |
0.056 |
|
|
|
3,000,000 |
|
|
|
0.86 |
|
|
$ |
618,000 |
|
|
$ |
0.04 |
|
|
|
2,300,000 |
|
|
|
0.90 |
|
|
$ |
473,800 |
|
|
$ |
0.06 |
|
|
|
7,398,639 |
|
|
|
0.44 |
|
|
$ |
1,524,120 |
|
|
$ |
0.06 |
|
|
|
7,398,639 |
|
|
|
1.44 |
|
|
$ |
1,524,120 |
|
|
$ |
0.08 |
|
|
|
3,699,320 |
|
|
|
1.44 |
|
|
$ |
762,060 |
|
|
$ |
0.08 |
|
|
|
3,699,320 |
|
|
|
2.44 |
|
|
$ |
762,060 |
|
|
$ |
0.2299 |
|
|
|
8,500,000 |
|
|
|
4.63 |
|
|
$ |
1,751,000 |
|
For
the year ended December 31, 2019, the following warrants were
outstanding:
Exercise
Price
Warrants
Outstanding |
|
|
Warrants
Exercisable |
|
|
Weighted
Average
Remaining
Contractual Life |
|
|
Aggregate
Intrinsic Value |
|
|
$ |
0.001 |
|
|
|
21,000,000 |
|
|
|
1.65 |
|
|
$ |
4,069,800 |
|
|
$ |
0.056 |
|
|
|
3,000,000 |
|
|
|
1.61 |
|
|
$ |
387,600 |
|
|
$ |
0.04 |
|
|
|
2,300,000 |
|
|
|
1.70 |
|
|
$ |
445,740 |
|
|
$ |
0.06 |
|
|
|
7,398,639 |
|
|
|
1.19 |
|
|
$ |
1,433,856 |
|
|
$ |
0.06 |
|
|
|
7,398,639 |
|
|
|
2.19 |
|
|
$ |
1,433,856 |
|
|
$ |
0.08 |
|
|
|
3,699,320 |
|
|
|
2.19 |
|
|
$ |
716,928 |
|
|
$ |
0.08 |
|
|
|
3,699,320 |
|
|
|
3.19 |
|
|
$ |
719,928 |
|
|
$ |
0.2299 |
|
|
|
8,500,000 |
|
|
|
5.39 |
|
|
$ |
1,647,300 |
|
For
the nine months ended September 30, 2020, the following options
were outstanding:
|
|
|
|
|
|
|
|
|
|
Weighted
Average |
|
|
Exercise |
|
|
Options |
|
|
Options |
|
|
Remaining |
|
|
Price |
|
|
Outstanding |
|
|
Exercisable |
|
|
Contractual
Life |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0.115 |
|
|
|
- |
|
|
|
22,267,800 |
|
|
|
22.8 |
|
(D)
Amendment to Articles of Incorporation
On
February 16, 2009, the Company amended its articles of
incorporation to amend the number and class of shares the Company
is authorized to issue as follows:
|
● |
Common
stock Class A, unlimited number of shares authorized, no par
value |
| ● |
Common
stock Class B, unlimited number of shares authorized, no par
value |
| ● |
Preferred
stock, unlimited number of shares authorized, no par
value |
Effective
December 17, 2013, the Company amended its articles of
incorporation to designate a Series A no par value preferred stock.
Two shares of Series A Preferred stock have been
authorized.
(E)
Common Stock Issued for Debt
None
(F)
Capital contribution – Related Party
For
the nine months ended September 30, 2020, the Company recorded
$17,495 as contribution of capital by Chief Financial
Officer.
NOTE
8 COMMITMENTS AND CONTINGENCIES
On
November 10, 2010, the Company entered into an 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, 2015, the annual salary was $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 1, 2016 the agreement was renewed
with the same terms for another 5 years with an annual salary of
$297,889 for the year ended December 31, 2016. On January 1, 2017
the agreement renewed with the same terms for another 5 years, but
with an annual salary of $315,764 for the year ended December 31,
2017. On January 1, 2019 the agreement renewed again with the same
terms for another 5 years, but with an annual salary of $354,791
for the year ended December 31, 2019. On January 1, 2020 the
agreement renewed again with the same terms for another 5 years,
but with an annual salary of $376,078 for the year ended December
31, 2020. As of September 30, 2020 and December 31, 2019, the
accrued salary balance is $2,710,706 and $2,535,203, respectively.
(See Note 9).
On
January 20, 2015, the board of directors appointed Mr. Jonathan R.
Rice as our 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 was 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 (the “January 2015 Warrant”) pursuant to
the employment agreement. Additionally, on May 28, 2015, the
Company issued a three-year warrant to purchase 3,000,000 shares of
common stock of the Company at an exercise price of $0.001 per
share (the “May 20165 Warrant”) to Mr. Rice. The 2,000,000 share
warrant fully vested on October 28, 2016. For the year ended
December 31, 2015, the Company recorded $121,448 for the warrants
issued to Mr. Rice. On January 14, 2016, the Company signed a new
employment agreement with Mr. Rice. 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 annual cash compensation of $140,000, which includes
salary, health insurance, 401K retirement plan contributions, etc.
In addition, Mr. Rice was issued a three-year warrant to purchase
6,000,000 shares of common stock of the Company at an exercise
price of $0.001 per share pursuant to the employment agreement. On
January 9, 2018, the Company extended the expiration date of the
January 2015 warrant from January 19, 2018 to January 31, 2020, and
on January 10, 2020 the Company extended the expiration date of the
warrant to January 23, 2015 and on March 15, 2018, the Company
signed an extension of its at-will employment agreement with its
COO, extending the term to January 31, 2019. On March 25, 2019, the
Company signed an extension of its at-will employment agreement
with its COO, extending the term to January 1, 2020. On April 26,
2019, the Company signed an agreement to increase Mr. Rice’s base
salary by $20,000 per year and issue a one-time $20,000 bonus.
Additionally, on August 15, 2019, the Company signed an agreement
to increase Mr. Rice’s base salary by an additional $20,000 per
year. The salary increase and the bonus is accrued and to be paid
in full earlier by the direction of the Board or upon the earlier
of:
●The
Company maintaining $6,000,000 or more in working
capital,
●Upon
the transfer of ownership of more than 50% of the Corporation’s
voting share or an assignment for the benefit of creditors or
bankruptcy, or
●Upon
the fifth year anniversary of the salary increase and the bonus
issuance.
As of
September 30, 2020 and December 31, 2019 the Company owes $95,467
and $64,352, respectively, to Mr. Rice for payroll
payable.
On
October 21, 2019, the Company signed an agreement to increase Mr.
Rice’s base salary by $20,000 per year (effective August 15, 2019).
The salary increase is accrued and to be paid in full earlier by
the direction of the Board or upon the earlier of:
●The
Company maintaining $6,000,000 or more in working
capital,
●Upon
the transfer of ownership of more than 50% of the Corporation’s
voting share or an assignment for the benefit of creditors or
bankruptcy, or
●Upon
the fifth year anniversary of the salary increase and the bonus
issuance.
On
July 3, 2019, the board of directors appointed Mr. Kenneth Le as
the Company’s Director of Government relations and President of
Prodigy Textiles. Mr. Le’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. Le is entitled to annual
cash compensation of $60,000. In addition, Mr. Le was issued two
three-year warrants to purchase 2,000,000 shares of common stock of
the Company at an exercise price of $0.2299 per share. As of
September 30, 2020 and December 31, 2019, the accrued salary
balance is $1,961 and $1,154, respectively.
(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. The annual research fees are accrued by the Company for
future payment. 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. 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. On May 5, 2017, the Company signed an
addendum to that agreement relating to tangible property and
project intellectual property. On March 1, 2019, the Company singed
an addendum to that agreement. The Company entered into a separate
loan agreement and promissory noted dated March 1, 2019 as a
payment for expenses paid by the University prior to January 31,
2019 totaling $265,244 and issued 4,025,652 shares of Class A
common stock with a fair value of $281,659 as payment of certain
debt. In the event of default the license agreement will be
terminated. During the nine months ended September 30, 2020, the
Company paid $45,000 of the balance (See Notes 6).
(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. On April
6, 2018, the Company issued 36,000 shares with a fair value of
$1,076 ($0.0299/share) to a consultant as consideration for
consulting fees owed from October 1, 2014 through December 31, 2019
of $21,000. The issuance of shares resulted in gain on settlement
of accounts payable of $19,924. On April 1, 2018, the Company ended
the consulting agreement and no additional compensation will be
issued. (See Note 7 (B)).
On
December 26, 2006, the Company entered into an addendum to the
intellectual property transfer agreement with Mr. Thompson, its
CEO. In accordance with FASB ASC 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. As of September 30, 2020 and December 31, 2019, the
outstanding balance is $65,292. As of December 31, 2019, the
Company recorded interest expense and related accrued interest
payable of $2,623. In 2020 the Company recorded $1,469 in interest
expensed and related accrued interest payable. As of September 30,
2020 the Company recorded interest expense and related accrued
interest payable of $8,013.
On
December 30, 2015, the Company entered into a cooperative agreement
for the research and pilot production of hybrid silkworms in
Vietnam. Under this agreement, the Company will establish a
subsidiary in Vietnam where it will develop and produce hybrid
silkworms. On April 24, 2018, the Company announced that it had
received its investment registration certificate for its new
Vietnamese subsidiary Prodigy Textiles Co., Ltd. On May 1, 2018,
the Company announced that it had received its enterprise
registration certificate for its new Vietnamese subsidiary Prodigy
Textiles Co., Ltd.
(C)
Consulting Agreement
On
February 20, 2018, the Company signed an agreement with a
consultant to provide services. Under this agreement the consultant
will receive a warrant for 600,000 shares of common stock and may
be awarded additional warrants for up to 3,000,000 shares of common
stock if performance metrics are achieved. On March 20, 2018, the
Company issued a 4-year warrant to purchase 600,000 shares of
common stock at an exercise price of $0.001 per share to a
consultant for services rendered. The warrants had a fair value of
$19,915, based upon the Black-Scholes option-pricing model on the
date of grant and are fully vested on March 20, 2018. Warrants will
be exercisable on March 20, 2019, and for a period of 3 years
expiring on March 20, 2022. During the year ended December 31,
2018, the Company recorded $19,915 as an expense for warrants
issued (See Note 7 (C)). On April 5, 2019, the Company cancelled
600,000 warrant issued to a consultant on February 20, 2018 in
exchange for $6,000 cash payment.
(D)
Operating Lease Agreements
Since
September of 2015, we rent office space at 2723 South State Street,
Suite 150, Ann Arbor, Michigan 48104, which is our principal place
of business. We pay an annual rent of $2,508 for conference
facilities, mail, fax, and reception services located at our
principal place of business.
On
May 9, 2019 the Company signed a 5 year property lease Socialist
Republic of Vietnam which consists of 4,560.57 square meters of
space, which it leases at a current rent of approximately $45,150
per year one and two and with the 5% increase per year for years
three through five.
On
January 23, 2017 the Company signed an 8 year property lease with
the Company’s President for land in Texas where the Company grows
its mulberry. The Company pays a monthly rent of $960. Rent expense
– related party for the nine months ended September 30, 2020 and
2019, was $9,819 and $11,913, respectively (See Note 9).
On
September 13, 2017, the Company signed a new two year lease
commencing on October 1, 2017 and ending on March 31, 2020. The
Company pays an annual rent of $39,200 for the year one of lease
and $42,000 for the year two of lease for office and manufacturing
space. On September 5, 2019, the Company signed a new two-year
lease for this 5,000 square foot property in Lansing, MI that
commenced on October 1, 2019 and ends on September 30, 2021, for
its research and development headquarters. The Company pays an
annual rent of $42,000 for year one of the lease and $44,800 for
year two of the lease.
NOTE
9 RELATED PARTY TRANSACTIONS
On
December 26, 2006, the Company entered into an addendum to the
intellectual property transfer agreement with Mr. Thompson, its
CEO. Pursuant to the addendum, the Company agreed to issue 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 ASC 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, 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 September 30, 2020 the outstanding balance is
$65,292. Additionally, the accrued expenses are accruing 7%
interest per year. As of September 30, 2020, the Company recorded
interest expense and related accrued interest payable of
$8,013.
On
November 10, 2010, the Company entered into an employment
agreement, with its CEO, effective January 1, 2011 through the
December 31, 2015. Subsequently, on January 1, 2018 the agreement
renewed with the same terms for another 5 years with an annual
salary of $334,708 for the year ended December 31, 2019. As of
September 30, 2020 and December 31, 2019, the accrued salary
balance is $2,710,706 and $2,535,203, respectively.
On
January 14, 2016 the Company signed a new employment agreement with
Mr. Rice, the Company’s COO. 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
annual cash compensation of $140,000, which includes salary, health
insurance, 401K retirement plan contributions, etc. In addition,
Mr. Rice was issued a three-year warrant to purchase 6,000,000
shares of common stock of the Company at an exercise price of
$0.001 per share pursuant to the employment agreement. On January
9, 2018, the Company extended the expiration date of a warrant for
2,000,000 shares of common stock from January 19, 2018 to January
31, 2020 and on January 10, 2020, the Company extended the
expiration date of the warrant to January 23, 2015 for Mr. Rice.
Additionally, on March 15, 2018, the Company signed an extension of
its at-will employment agreement with its COO. On April 26, 2019,
the Company signed an agreement to increase Mr. Rice’s base salary
by $20,000 per year and issue a one-time $20,000 bonus. Additional,
on August 15, 2019, the Company signed an agreement to increase Mr.
Rice’s base salary by an additional $20,000 per year. The salary
increase and the bonus is accrued and to be paid in full earlier by
the direction of the Board or upon the earlier of:
|
|
● |
The
Company maintaining $6,000,000 or more in working
capital, |
|
|
|
|
|
|
● |
Upon
the transfer of ownership of more than 50% of the Corporation’s
voting share or an assignment for the benefit of creditors or
bankruptcy, or |
|
|
|
|
|
|
● |
Upon
the fifth year anniversary of the salary increase and the bonus
issuance. |
As of
September 30, 2020 and December 31, 2019, the Company owes $95,467
and $64,351, respectively, to Mr. Rice for payroll
payable.
On
July 3, 2019, the board of directors appointed Mr. Kenneth Le as
the Company’s Director of Government relations and President of
Prodigy Textiles. Mr. Le’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. Le is entitled to an
annual cash compensation of $60,000. In addition, Mr. Le was issued
two three-year warrants to purchase 2,000,000 shares of common
stock of the Company at an exercise price of $0.2299 per share. As
of September 30, 2020 and December 31, 2019, the accrued salary
balance is $1,961 and $1,154, respectively. .
On
June 6, 2016, the Company received a $50,000 loan from our
principal stockholder. Subsequently on December 1, 2017, the
Company received an additional $30,000 loan from the same
stockholder. On January 8, 2018 and March 31, 2018 the Company
received an additional loan of $100,000 and $15,000, respectively.
The Company received additional loan funds from the same
stockholder as follows: $20,000 on April 26, 2018; $15,000 on June
21, 2018; $15,000 on June 29, 2018; $20,000 on July 5, 2018;
$26,000 on October 1, 2018; $11,000 on October 12, 2018; $20,000 on
December 21, 2018; $3,000 on January 4, 2019; $30,000 on January
17, 2019; $30,000 on February 1, 2019; $20,000 on February 15,
2019; $20,000 on March 1, 2019; $17,000 on January 4, 2019,
$100,000 on November 20, 2019, $100,000 on December 18, 2019,
$100,000 on January 24, 2020, $100,000 on February 19, 2020,
$100,000 on April 8, 2020, $150,000 on June 3, 2020, $100,000 on
July 16, 2020, $100,000 on August 12, 2020 and $100,000 on
September 10, 2020. Pursuant to the terms of the loan, the advance
bears an interest at 3%, is unsecured, and due on demand. Total
loan payable to principal stockholder for as of December 31, 2019
is $642,000. Total loan payable to this principal stockholder as of
September 30, 2020 is $1,492,000. During the nine months ended
September 30, 2020, the Company recorded $38,981 as an in-kind
contribution of interest related to the loan and recorded accrued
interest payable of $24,485. During the nine months ended September
30, 2019, the Company recorded $16,027 as an in-kind contribution
of interest related to the loan and recorded accrued interest
payable of $10,624.
On
January 23, 2017, the Company signed an 8 year property lease with
the Company’s President for land in Texas. The Company pays $960
per month starting on February 1, 2017 and uses this facility to
grow mulberry for its U.S. silk operations. Rent expense – related
party for nine months ended September 30, 2020 and 2019 was $9,819
and $11,913, respectively.
As of
September 30, 2020 and December 31, 2019, there was $325,516 and
$304,539, respectively, included in accounts payable and accrued
expenses - related party, which is owed to the Company’s Chief
Executive Officer and Chief Operations Officer.
As of
September 30, 2020, there was $1,411,414 of accrued interest-
related party and $69,669 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, 2019, there was $1,196,503 of accrued interest-
related party and $43,715 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
September 30, 2020, the Company owes $2,710,706 in accrued salary
to principal stockholder, $95,467 to the Company’s COO, $1,962 to
Director of Prodigy Textiles and $22,900 to its office
employees.
As of
December 31, 2019, the Company owes $2,535,203 in accrued salary to
principal stockholder, $64,351 to the Company’s COO, $1,153 to
Director of Prodigy Textiles and $4,477 to its office
employees.
The
Company owes $65,292 in royalty payable to related party as of
September 30, 2020 and December 31, 2019.
NOTE
10 SUBSEQUENT EVENTS
The Company has analyzed its operations subsequent to November 10,
2020 through the date these financial statements were issued, and
has determined that, other than disclosed below, it does not have
any material subsequent events to disclose.
On November 4, 2020, the Company received $30,000 from a principal
stockholder. Pursuant to the terms of the loan, the advanced bear
an interest at 3%, is unsecured and due on demand.
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING
INFORMATION
The
following information should be read in conjunction with Kraig
Biocraft Laboratories, Inc. and its subsidiaries (“we”, “us”,
“our”, or the “Company”) condensed unaudited financial statements
and the notes thereto contained elsewhere in this report.
Information in this Item 2, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” and elsewhere in
this Form 10-Q that does not consist of historical facts, are
“forward-looking statements.” Statements accompanied or qualified
by, or containing words such as “may,” “will,” “should,”
“believes,” “expects,” “intends,” “plans,” “projects,” “estimates,”
“predicts,” “potential,” “outlook,” “forecast,” “anticipates,”
“presume,” and “assume” constitute forward-looking statements, and
as such, are not a guarantee of future performance.
Forward-looking
statements are subject to risks and uncertainties, certain of which
are beyond our control. Actual results could differ materially from
those anticipated as a result of the factors described in the “Risk
Factors” and detailed in our other Securities and Exchange
Commission (“SEC”) filings. Risks and uncertainties can include,
among others, international, national and local general economic
and market conditions: demographic changes; the ability of the
Company to sustain, manage or forecast its growth; the ability of
the Company to successfully make and integrate acquisitions; raw
material costs and availability; new product development and
introduction; existing government regulations and changes in, or
the failure to comply with, government regulations; adverse
publicity; competition; the loss of significant customers or
suppliers; fluctuations and difficulty in forecasting operating
results; changes in business strategy or development plans;
business disruptions; the ability to attract and retain qualified
personnel; the ability to obtain sufficient financing to continue
and expand business operations; the ability to develop technology
and products; changes in technology and the development of
technology and intellectual property by competitors; the ability to
protect technology and develop intellectual property; and other
factors referenced in this and previous filings. Consequently,
investors should not place undue reliance on forward-looking
statements as predictive of future results.
Because
of these risks and uncertainties, the forward-looking events and
circumstances discussed in this report or incorporated by reference
might not transpire. Factors that cause actual results or
conditions to differ from those anticipated by these and other
forward-looking statements include those more fully described
elsewhere in this report and in the “Risk Factors” section of our
registration statement on Form S-1.
The
Company disclaims any obligation to update the forward-looking
statements in this report.
Overview
Kraig
Biocraft Laboratories, Inc. is a corporation organized under the
laws of Wyoming on April 25, 2006. We were organized to develop
high strength fibers using recombinant DNA technology for
commercial applications in technical textile. We use genetically
engineered silkworms that produce spider silk to create our
recombinant spider silk. Applications include performance apparel,
workwear, filtration, luxury fashion, flexible composites, medical
implants, and more. We believe that we have been a leader in the
research and development of commercially scalable and cost
effective spider silk for technical textile. Our primary
proprietary fiber technology includes natural and engineered
variants of spider silk produced in domesticated mulberry
silkworms. Our business brings twenty-first century biotechnology
to the historical silk industry, permitting us to introduce
materials with innovative properties and claims into an established
commercial ecosystem of silkworm rearing, silk spinning and
weaving, and manufacture of garments and other products that can
include our specialty fibers and textiles. Specialty fibers are
engineered for specific uses that require exceptional strength,
flexibility, heat resistance and/or chemical resistance. The
specialty fiber market is exemplified by two synthetic fiber
products that come fro