|
Item
1.01
|
Entry
into a Material Definitive Agreement.
|
On
December 11, 2020, Kraig Biocraft Laboratories, Inc. (the “Company”) entered into a Securities Purchase Agreement
(the “Purchase Agreement”) with one accredited investor (the “Investor”). Pursuant to the
Purchase Agreement, the Company sold and issued a convertible debenture (the “Convertible Debenture”)
in the principal amount of $1,000,000 to the Investor and received the purchase price of $950,000 from such Investor (the “Financing”).
The Company also issued the Investor a five-year warrant to purchase up to 3,125,000 shares of the Company’s common stock,
no par value (the “Common Stock”) at an initial exercise price of $0.16 per share (the “Exercise Price”),
subject to adjustment (the “Warrant”). Maxim Group LLC (“Maxim”) acted as placement agent
in the Financing.
The
Convertible Debenture was issued on December 11, 2020 (the “Issuance Date”) and the maturity date of
the Convertible Debenture is January 11, 2022 (the “Maturity Date”). The Convertible Debenture
bears an interest rate of ten percent (10%) per annum, which increases to 15% per annum upon the occurrence of an event of default
under the Convertible Debenture and until such default is cured. Commencing July 1, 2021 and on the first business day
of each month thereafter until the entire principal amount on the Convertible Debenture has been paid, the Company can
either: (i) pay the Investor in cash, in an amount equal to $166,666 (the last payment being $166,670) of principal (the “the
Installment Amount”), plus accrued and outstanding interest and an amount equal to 10% of the current Installment
Amount for Installment Amounts due within 180 days following the closing of the Financing, and 15% of the Installment Amount for
Installment Amounts due thereafter; (ii) by converting such Installment Amount into shares of Common Stock, provided that certain
conditions are met; or (iii) by any combination of a cash payment and Common Stock conversion. Should the Company decide to pay
all or part of the Installment Amount in shares of Common Stock, it shall issue that number of shares of Common Stock as is equal
to the applicable amount of the Installment Amount divided by the then current Market Conversion Price. “Market Conversion
Price” means, as of any conversion date, 90% of the lowest volume weighted average price of the Common Stock during
the 10 trading days immediately preceding the conversion date, subject to adjustment; provided, that if the Company uplists the
Common Stock to Nasdaq, then the Market Conversion Price shall not be lower than the Market Conversion Price on the date of the
first conversion (as adjusted for stock splits and similar events).
Following
an event of default, as outlined in the Convertible Debenture, the holders of each Convertible Debenture may elect
to convert part or all of the outstanding balance of the Convertible Debenture into shares of Common Stock at the Market
Conversion Price. The number of shares of Common Stock issuable upon such a conversion shall be determined by dividing (x) the
conversion amount by (y) the Market Conversion Price. A holder may not convert any amount into shares of Common Stock, if after
such conversion the holder would beneficially own in excess of 4.99% of the Common Stock then outstanding (the “Ownership
Limit”).
The
Company maintains the right to redeem the outstanding principal and interest of the Convertible Debenture in whole or in
part prior to the Maturity Date. Upon the maturity date, the Company shall pay to the Investor an amount, in cash, representing
all outstanding principal and accrued and unpaid interest under the Convertible Debenture.
The
Warrant may be exercised at any time before expiration so long as the exercise would not result in the holder exceeding the Ownership
Limit. The Warrant may also be exercised via cashless exercise. If the Company issues any shares of Common Stock at a price less
than the Exercise Price, then the exercise price of the Warrant shall be reduced to such lower price at which the additional shares
of Common Stock were sold.
The
Purchase Agreement also contains customary representation and warranties of the Company and the Investor, indemnification obligations
of the Company, termination provisions, and other obligations and rights of the parties.
The
foregoing description of the SPA, Convertible Debenture and Warrant is qualified by reference to the full text of the forms
of SPA, Convertible Debenture and Warrant, which are filed as Exhibits 10.1, 10.2 and 10.3 hereto and incorporated herein
by reference.
Maxim
shall receive a $76,000 cash fee for their services as placement agent.
This disclosure does not constitute an
offer to sell, or the solicitation of an offer to buy nor shall there be any sales of the Company’s securities in any state
in which such offer, solicitation or sale would be unlawful. The securities mentioned herein have not been, nor will they be,
registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent
registration or an applicable exemption from the registration requirements under the Securities Act and applicable state securities
laws.