Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
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.
On
March 5, 2018, the Company issued a board resolution authorizing
investment in a Vietnamese subsidiary and appointing a
representative for the subsidiary.
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.
(B) Foreign Currency
The
assets and liabilities of Prodigy Textiles, Co., Ltd. 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
purposes of the cash flow statements, the Company considers all
highly liquid investments with original maturities of three months
or less at the time of purchase to be cash
equivalents. There were no cash equivalents as of March
31, 2019 or December 31, 2018.
(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 FASB
Accounting Standards Codification No. 260, “Earnings per
Share.” For March 31, 2019 and March 31, 2018, 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 March 31, 2019
and March 31, 2018 excludes the common stock equivalents of the
following potentially dilutive securities because their inclusion
would be anti-dilutive:
|
|
|
Stock Warrants
(Exercise price - $0.001/share)
|
58,595,917
|
36,400,000
|
Convertible
Preferred Stock
|
2
|
2
|
Total
|
58,595,919
|
36,400,002
|
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
(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
740-10-25, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or
settled. Under ASC 740-10-25, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
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
December 31, 2018 and December 31, 2017 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
In
December 2004, the FASB issued FASB Accounting Standards
Codification No. 718,
Compensation – Stock
Compensation
. Under FASB Accounting Standards
Codification No. 718, companies are required to measure the
compensation costs of share-based compensation arrangements based
on the grant-date fair value and recognize the costs in the
financial statements over the period during which employees are
required to provide services. Share-based compensation arrangements
include stock options, restricted share plans, performance-based
awards, share appreciation rights and employee share purchase
plans. As such, compensation cost is measured on the date of grant
at their fair value. Such compensation amounts, if any, are
amortized over the respective vesting periods of the option grant.
The Company applies this statement prospectively.
Equity
instruments (“instruments”) issued to other than
employees are recorded on the basis of the fair value of the
instruments, as required by FASB Accounting Standards Codification
No. 718. FASB Accounting Standards Codification No. 505,
Equity Based Payments to
Non-Employees
defines the measurement date and
recognition period for such instruments. In general, the
measurement date is when either a (a) performance commitment, as
defined, is reached or (b) the earlier of (i) the non-employee
performance is complete or (ii) the instruments are vested. The
measured value related to the instruments is recognized over a
period based on the facts and circumstances of each particular
grant as defined in the FASB Accounting Standards
Codification.
The
Company operates in one segment and therefore segment information
is not presented.
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
(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.
A
s a result, the
Company has recorded Right-to-use assets and corresponding Lease
obligations as more fully discussed in Note 4.
In
February 2018, the FASB issued ASU No. 2018-02, Reclassification of
Certain Tax Effects from Accumulated Other Comprehensive Income.
The guidance permits entities to reclassify tax effects stranded in
Accumulated Other Comprehensive Income as a result of tax reform to
retained earnings. This new guidance is effective for annual and
interim periods in fiscal years beginning after December 15, 2018.
Early adoption is permitted in annual and interim periods and can
be applied retrospectively or in the period of adoption. We are
evaluating the impact of adopting this guidance on our Consolidated
Financial Statements.
In
March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic
740) - Amendments to SEC Paragraphs Pursuant to SEC Staff
Accounting Bulletin No. 118. The amendment provides guidance on
accounting for the impact of the Tax Cuts and Jobs Act (the
“Tax Act”) and allows entities to complete the
accounting under ASC 740 within a one-year measurement period from
the Tax Act enactment date. This standard is effective upon
issuance. The Tax Act has several significant changes that impact
all taxpayers, including a transition tax, which is a one-time tax
charge on accumulated, undistributed foreign earnings. The
calculation of accumulated foreign earnings requires an analysis of
each foreign entity’s financial results going back to 1986.
We are evaluating the impact of adopting this guidance on our
Consolidated Financial Statements.
In June
2018, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) 2018-07,
Compensation-Stock Compensation (Topic 718): Improvements to
Nonemployee Share-Based Payment Accounting, which expands the scope
of Topic 718 to include share-based payment transactions for
acquiring goods and services from nonemployees. An entity should
apply the requirements of Topic 718 to nonemployee awards except
for specific guidance on inputs to an option pricing model and the
attribution of cost (that is, the period of time over which
share-based payment awards vest and the pattern of cost recognition
over that period). The new guidance is effective for all entities
for annual periods, and interim periods within those annual
periods, beginning after December 15, 2017, with early adoption
permitted. We are evaluating the impact of adopting this guidance
on our Consolidated Financial Statements.
In
August 2018, the FASB issued ASU 2018-13, Fair Value Measurement
(Topic 820), Disclosure Framework – Changes to the Disclosure
Requirements for Fair Value Measurement. The amendments in this
Update modify certain disclosure requirements of fair value
measurements and are effective for all entities for fiscal years,
and interim periods within those fiscal years, beginning after
December 15, 2019. Early adoption is permitted. We are evaluating
the impact of adopting this guidance on our Consolidated Financial
Statements.
As a
result, a freestanding equity-linked financial instrument (or
embedded conversion option) no longer would be accounted for as a
derivative liability at fair value as a result of the existence of
a down round feature. For freestanding equity classified financial
instruments, the amendments require entities that present earnings
per share (EPS) in accordance with Topic 260 to recognize the
effect of the down round feature when it is triggered. That effect
is treated as a dividend and as a reduction of income available to
common shareholders in basic EPS. Convertible instruments with
embedded conversion options that have down round features are now
subject to the specialized guidance for contingent beneficial
conversion features (in Subtopic 470-20, Debt—Debt with
Conversion and Other Options), including related EPS guidance (in
Topic 260). The amendments in Part II of this Update recharacterize
the indefinite deferral of certain provisions of Topic 480 that now
are presented as pending content in the Codification, to a scope
exception.
Those
amendments do not have an accounting effect. For public business
entities, the amendments in Part I of this Update are effective for
fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2018. Early adoption is permitted for
all entities, including adoption in an interim period. If an entity
early adopts the amendments in an interim period, any adjustments
should be reflected as of the beginning of the fiscal year that
includes that interim period.
The
Company is currently reviewing the impact of adoption of ASU
2017-11on its financial statements.
All other newly issued accounting pronouncements but not yet
effective have been deemed either immaterial or not
applicable
The
2018 financial statements have been reclassified to conform to the
2019 presentation.
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
(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 Accounting Standards Codification No. 360,
Property, Plant and
Equipment
, the Company carries long-lived assets at the
lower of the carrying amount or fair value. Impairment is evaluated
by estimating future undiscounted cash flows expected to result
from the use of the asset and its eventual disposition. If the sum
of the expected undiscounted future cash flow is less than the
carrying amount of the assets, an impairment loss is recognized.
Fair value, for purposes of calculating impairment, is measured
based on estimated future cash flows, discounted at a market rate
of interest.
There
were no impairment losses recorded for the three months ended March
31, 2019 and 2018.
(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 March 31, 2019 and
December 31, 2018.
|
°
|
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.
|
|
|
|
Level
1
|
$
-
|
$
-
|
Level
2
|
$
-
|
$
-
|
Level
3
|
$
-
|
$
-
|
Total
|
$
-
|
$
-
|
(L)
Revenue Recognition
During the year ended December 31, 2018 the Company’s
revenues were generated primarily from a contract with the U.S.
Government. The Company performs work under this
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 has worked to develop
new recombinant silks.
Effective January 1, 2018, the Company adopted ASC 606 —
Revenue from Contracts with Customers. Under ASC 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 comparative periods, revenue has
not been adjusted and continues to be reported under ASC 605
— Revenue Recognition. Under ASC 605, revenue is recognized
when the following criteria are met: (1) persuasive evidence of an
arrangement exists;(2) the performance of service has been rendered
to a customer or delivery has occurred; (3) the amount of fee to be
paid by a customer is fixed and determinable; and (4) the
collectability of the fee is reasonably assured.
For the three months ended March 31, 2019 and 2018, the Company
recognized $0 and $108,629 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.
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
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 March 31, 2019 and December 31, 2018, the Company had
approximately $657,651 and $0, respectively in excess of FDIC
insurance limits.
For the three months ended March 31, 2019 and 2018, the Company had
a concentration of sales of:
Customer
|
|
|
Customer
A
|
-
|
0
%
|
Customer
A
|
$
-
|
$
108,629
|
For the
three months ended March 31, 2019 and 2018, 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 $3,506,211 and stockholders’
deficiency of $3,650,363 and used $225,046 of cash in operations
for three months ended March 31, 2019. This raises
substantial doubt about its ability to continue as a going
concern. The ability of the Company to continue as a
going concern is dependent on the Company’s ability to raise
additional capital and implement its business plan. The
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going
concern.
Management
believes that actions presently being taken to obtain additional
funding and implement its strategic plans provide the opportunity
for the Company to continue as a going concern.
NOTE 3 EQUIPMENT
At
March 31, 2019 and December 31, 2018, property and equipment, net,
is as follows:
|
|
|
Automobile
|
$
41,805
|
$
41,805
|
Laboratory Equipment
|
73,194
|
73,194
|
Office Equipment
|
7,260
|
7,260
|
Leasehold
Improvements
|
7,938
|
7,938
|
Less: Accumulated
Depreciation
|
(89,553
)
|
(82,887
)
|
Total Property and Equipment,
net
|
$
40,645
|
$
47,310
|
Depreciation
expense for the three months ended March 31, 2019 and 2018 was
$6,665 and $6,396 respectively.
NOTE 4 – RIGHT TO USE ASSETS AND LEASE LIABILITY
The
Company leases its headquarters in Ann Arbor, Michigan which
consists of 5,600 square feet of space, which it leases at a
current rent of approximately $39,200 for year one and $42,000 for
year two.
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.
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.
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
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 $157,130 and lease liabilities
of $157,777.
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
$167,867.
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:
|
|
Right to use
assets, net – related party
|
$
60,123
|
Right to use
assets, net
|
97,007
|
Total
|
$
157,130
|
During
the three months ended March 31, 2019, the Company recorded $10,755
as lease expense to current period operations.
During
the three months ended March 31, 2019, the Company recorded $3,273
as lease expense – related party to current period
operations.
Lease
liability is summarized below:
|
|
Right to use
assets, net – related party
|
63,396
|
Right to use
assets, net
|
94,381
|
Total
|
157,777
|
Less: short term
portion
|
$
(42,576
)
|
Long term
position
|
$
115,201
|
Lease
expense for the three months ended March 31, 2019 was comprised of
the following:
Operating lease
expense
|
$
10,755
|
Operating lease
expense – related party
|
$
3,273
|
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
NOTE 5 ACRRUED INTEREST – RELATED
PARTY
On June
6, 2016, the Company received $50,000 from a principal
stockholder. Subsequently on December 1, 2017, the Company
received an additional $30,000 from a principal stockholder. On
January 8, 2018 and March 31, 2018 the Company received an
additional $100,000 and $15,000, respectively. On April 26,
2018, the Company received $20,000 from a principal stockholder,
$15,000 on June 21, 2018, $15,000 on June 29, 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 and $17,000 on January 4, 2019. 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, 2018 is $322,000. Pursuant to
the terms of the loans, the advances bear an interest at 3%, is
unsecured and due on demand. During the three months ended
March 31, 2019, the Company recorded $4,947 as an in-kind
contribution of interest related to the loan and recorded accrued
interest payable of $3,445. During the three months ended March 31,
2018 the Company recorded $2,142 as an in-kind contribution of
interest related to the loan and recorded accrued interest payable
of $1,330.
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 commences immediately over a twenty-four month period
according to the following table (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
4.
Final payment of
all remaining balance, in the amount of $180,244 in 24
months.
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 shares 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).
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, 2018
of $21,000. The issuance of shares resulted in gain on settlement
of accounts payable of $19,924. See Note 8(B).
(C)
Common Stock Warrants
On
February 9, 2018, the Company issued 3-year warrant to purchase
3,000,000 shares of common stock at an exercise price of $0.056 per
share to a consultant for services rendered. The warrants had a
fair value of $52,660, based upon the Black-Scholes option-pricing
model on the date of grant and are fully vested on the date
granted. Warrants will be exercisable on August 9, 2019, and
for a period of 2 years expiring on August 9, 2021. During the year
ended December 31, 2018, the Company recorded 52,660 as an expense
for warrants issued.
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
Expected
dividends
|
0
%
|
Expected
volatility
|
96.95
%
|
Expected
term
|
|
Risk free
interest rate
|
2.26
%
|
Expected
forfeitures
|
0
%
|
On
March 20, 2018, the Company issued 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.
Expected
dividends
|
0
%
|
Expected
volatility
|
97.56
%
|
Expected
term
|
|
Risk free
interest rate
|
2.65
%
|
Expected
forfeitures
|
0
%
|
|
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Life (in Years)
|
Balance, December
31, 2018
|
36,400,000
|
|
3.0
|
Granted
|
22,195,917
|
-
|
2.94
|
Exercised
|
-
|
-
|
|
Cancelled/Forfeited
|
-
|
-
|
|
Balance, March 31,
2019
|
58,595,917
|
|
2.6
|
Intrinsic
Value
|
$
4,336,098
|
|
|
For the three months ended March 31, 2019, the following warrants
were outstanding:
Exercise Price Warrants
Outstandin
g
|
|
Weighted
Average Remaining Contractual Life
|
Aggregate Intrinsic
Value
|
|
|
|
|
$
0.001
|
31,100,000
|
2.6
|
2,301,400
|
$
0.056
|
3,000,000
|
2.4
|
$
222,000
|
$
0.04
|
2,300,000
|
2.4
|
$
170,200
|
$
0.06
|
7,398,639
|
1.94
|
$
547,499
|
$
0.06
|
7,398,639
|
2.94
|
$
547,499
|
$
0.08
|
3,699,320
|
2.94
|
$
273,750
|
$
0.08
|
3,699,320
|
3.94
|
$
273,750
|
|
|
|
|
For the year ended December 31, 2018, the following warrants were
outstanding:
Exercise
Price Warrants Outstanding
|
|
Weighted Average Remaining Contractual
Life
|
Aggregate Intrinsic
Value
|
|
|
|
|
$
0.001
|
31,100,000
|
2.9
|
$
1,523,900
|
$
0.056
|
3,000,000
|
2.6
|
$
147,000
|
$
0.04
|
2,300,000
|
2.7
|
$
112,700
|
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
(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.
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, 2018. As
of March 31, 2019 and December 31, 2018, the accrued salary balance
is $2,198,152 and $2,109,454, respectively. (See Note
9).
On
October 2, 2014, the Company entered into a letter agreement for an
equity line of financing up to $7,500,000 (the
“Letter Agreement”) with Calm Seas Capital, LLC
(“Calm Seas”).
Under
the Letter Agreement, over a 24 month period from the effective
date of a registration statement covering shares issuable to Calm
Seas (the "Effective Date"), we may put to Calm Seas up to an
aggregate of $7,500,000 in shares of our Class A common stock for a
purchase price equal to 80% of the lowest price of our Class A
common stock during the five consecutive trading days immediately
following the date we deliver notice to Calm Seas of our election
to put shares pursuant to the Letter Agreement. We may
put shares bi-monthly. The dollar value that will be
permitted for each put pursuant to the Letter Agreement
will be the lesser of: (A) the product of (i) 200% of the average
daily volume in the US market of our Class A common stock for the
ten trading days prior to the date we deliver our put notice to
Calm Seas multiplied by (ii) the average of the daily closing
prices for the ten (10) trading days immediately preceding the date
we deliver our put notice to Calm Seas, or (B)
$100,000. We will automatically withdraw our put notice
to Calm Seas if the lowest closing bid price used to determine the
purchase price of the put shares is not at least equal to
seventy-five percent (75%) of the average closing “bid”
price for our Class A common stock for the ten (10) trading days
prior to the date we deliver our put notice to Calm Seas.
Notwithstanding the $100,000 ceiling for each bi-monthly put,
as described above, we may at any time request Calm Seas to
purchase shares in excess of such ceiling, either as a part of
bi-monthly puts or as an additional put(s) during such
month. If Calm Seas, in its sole discretion, accepts
such request to purchase additional shares, then we may include the
put for additional shares in our monthly put request or submit an
additional put for such additional shares in accordance with the
procedure set forth above.
The
Letter Agreement will terminate when any of the following events
occur:
●
|
Calm
Seas has purchased an aggregate of $7,500,000 of our Class A common
stock; or
|
●
|
The
second anniversary from the Effective Date.
|
As of December 31, 2018, 78,089,079 shares of class A common stock
were issued pursuant to the Letter Agreement and the Letter
Agreement was terminated passing the second anniversary from the
Effective Date.
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
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. For the year ended December 31, 2016, the
Company recorded $193,652 for the warrants issued to Mr. Rice in
2016. For the year ended December 31, 2017, the Company recorded
$17,473 for the warrants issued to Mr. Rice in 2016. 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 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. As of March 31, 2019 and December 31,
2018 the Company owes $20,044 and $24,433, respectively, to Mr.
Rice for payroll payable.
(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 (See Notes 6 and 7(E)).
(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, 2018 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 Accounting Standards
Codification No 480,
Distinguishing Liabilities from Equity
,
the Company determined that the present value of the payment of
$120,000 that was due on December 26, 2007. As
of December 31, 2018 and December 31, 2017, the outstanding
balance is $65,292. As of December 31, 2017, the Company recorded
interest expense and related accrued interest payable of $2,623. In
2019 the Company recorded $490 in interest expensed and related
accrued interest payable. As of March 31, 2019, the Company
recorded interest expense and related accrued interest payable of
$5,073.
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
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
(C) Consulting Agreement
On
February 9, 2018, the Company issued a 3-year warrant to purchase
3,000,000 shares of common stock at an exercise price of $0.056 per
share to a consultant for services rendered. The warrants had a
fair value of $52,660, based upon the Black-Scholes option-pricing
model on the date of grant and are fully vested on the date
granted. Warrants will be exercisable on August 9, 2019, and
for a period of 2 years expiring on August 9, 2021. During the year
ended December 31, 2018, the Company recorded 52,660 as an expense
for warrants issued (See Note 7 (C)).
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)).
(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.
Rent
expense for the three months ended March 31, 2019 and 2018 was
$3,273 and $10,382, respectively.
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 three months ended March 31,
2019 and 2018, was $6,153 and $2,880, 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.
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 Accounting Standards Codification No. 480,
Distinguishing Liabilities from Equity
,
the Company determined that the present value of the payment of
$120,000 that was due on December 26, 2007, 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 December 31, 2017 the
outstanding balance is $65,292. Additionally, the
accrued expenses are accruing 7% interest per year. As
of December 31, 2018, the Company recorded interest expense and
related accrued interest payable of $4,593.
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, 2018. As
of March 31, 2019 and December 31, 2018, the accrued salary balance
is $2,198,152 and $2,109,454, 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. For the year
ended December 31, 2016, the Company recorded $193,654 for the
warrants issued to Mr Rice. For the year ended December 31, 2017
the Company recorded $17,473 for the warrants issued to Mr. Rice in
2016. 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 for an employee. Additionally, on March
15, 2018, the Company signed an extension of its at-will employment
agreement with its COO.
On June
6, 2016, the Company received $50,000 from a principal
stockholder. Subsequently on December 1, 2017, the Company
received an additional $30,000 from a principal stockholder. On
January 8, 2018 and March 31, 2018 the Company received an
additional $100,000 and $15,000, respectively. On April 26,
2018, the Company received $20,000 from a principal stockholder,
$15,000 on June 21, 2018, $15,000 on June 29, 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 and $17,000 on January 4,2019. 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, 2018 is $322,000. Pursuant to
the terms of the loans, the advances bear an interest at 3%, is
unsecured and due on demand. During the three months ended
March 31, 2019, the Company recorded $4,947 as an in-kind
contribution of interest related to the loan and recorded accrued
interest payable of $3,445. During the three months ended March 31,
2018 the Company recorded $2,142 as an in-kind contribution of
interest related to the loan and recorded accrued interest payable
of $1,330.
Kraig Biocraft Laboratories,
Inc.
Notes to Consolidated Financial Statements
As of March 31, 2019 and 2018
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 three months ended March 31, 2019 and 2018 was
$3,273 and $2,880, respectively.
As of
March 31, 2019 and December 31, 2018, there was $263,094 and
$247,652, 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
March 31, 2019 there was $998,688 of accrued interest- related
party and $31,578 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, 2018 there was $940,158 of accrued interest- related
party and $28,135 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
March 31, 2019, the Company owes $2,198,152 in accrued salary to
principal stockholder, $20,044 to the Company’s COO, and
$3,762 to its office employees
As of
December 31, 2018, the Company owes $2,109,454 in accrued salary to
principal stockholder, $24,433 to the Company’s COO, and
$7,640 to its office employees.
The
Company owes $65,292 in royalty payable to related party as of
March 31, 2019 and December 31, 2018.
NOTE 10 SUBSEQUENT EVENTS
The
Company has analyzed its operations subsequent to March 31, 2019
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 April 5, 2019, the Company
cancelled 600,000 warrant issued to a consultant on February 20,
2018 in exchange for $6,000 cash payment.
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. 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.