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. 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 June 30, 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 June 30, 2019 and June 30, 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 June 30, 2019 and June 30,
2018 excludes the common stock equivalents of the following
potentially dilutive securities because their inclusion would be
anti-dilutive:
Kraig
Biocraft Laboratories, Inc.
Notes to
Consolidated Financial Statements As of June 30, 2019 and
2018
|
June
30
,
2019
|
June
30
,
2018
|
Stock Warrants
(Exercise price - $0.001/share)
|
57,995,917
|
36,400,000
|
Convertible
Preferred Stock
|
2
|
2
|
Total
|
57,995,919
|
36,400,002
|
(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.
Kraig
Biocraft Laboratories, Inc.
Notes to
Consolidated Financial Statements As of June 30, 2019 and
2018
(I) The Company in one segment and therefore segment information is
not presented.
(J) Recent
Accounting Prounoucements
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.
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 June 30, 2019 and
2018
(K)
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 six months ended June 30, 2019
and 2018.
(L) 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:
o
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 June 30, 2019 and December 31,
2018.
o
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.
o
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
|
$
-
|
$
-
|
(M) Revenue
Recongnition
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 six months
ended June 30, 2019 and 2018, the Company recognized $0 and
$260,859 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 June 30, 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.
(N) Concentration of Credit
Risk
The Company at times has cash in banks in excess
of FDIC insurance limits. At June 30, 2019 and December 31, 2018,
the Company had approximately $424,228 and $0, respectively in
excess of FDIC insurance limits.
For the six months ended June 30, 2019 and 2018,
the Company had a concentration of sales
of:
Customer
|
|
|
Customer
A
|
-
|
0
%
|
Customer
A
|
$
-
|
$
260,859
|
For the six months
ended June 30, 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
$3,986,716 and stockholders’ deficiency of $4,067,265 and
used $455,469 of cash in operations for six months ended June 30,
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 June 30, 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
|
(96,290
)
|
(82,887
)
|
Total Property and
Equipment, net
|
$
33,907
|
$
47,310
|
Depreciation
expense for the six months ended June 30, 2019 and 2018, was
$13,403 and $13,035, respectively.
Depreciation
expense for the three months ended June 30, 2019 and 2018, was
$6,738 and $6,639, 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
six months ended June 30, 2019 and 2018, was $6,153 and $2,880,
respectively (See Note 9).
Kraig Biocraft Laboratories, Inc.
Notes to
Consolidated Financial Statements As of June 30, 2019 and
2018
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:
|
|
Right to use
assets, net – related party
|
$
58,049
|
Right to use
assets, net
|
88,140
|
Right to use
assets, net
|
382,946
|
Total
|
$
529,135
|
During the six
months ended June 30, 2019, the Company recorded $39,255 as lease
expense to current period operations.
During the six
months ended June 30, 2019, the Company recorded $9,426 as lease
expense – related party to current period
operations.
Kraig
Biocraft Laboratories, Inc.
Notes to
Consolidated Financial Statements As of June 30, 2019 and
2018
Lease
liability is summarized
below:
|
|
Right to use
assets, net – related party
|
58,835
|
Right to use
assets, net
|
88,649
|
|
383,978
|
Total
|
531,462
|
|
$
(105,394
)
|
Long term
position
|
$
426,068
|
Lease expense for
the six months ended June 30, 2019 was comprised of the
following:
Operating lease
expense
|
$
22,522
|
Operating lease
expense
|
$
16,733
|
Operating lease
expense – related party
|
$
9,426
|
NOTE
5 ACRRUED 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 stockhoder
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; 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. Total
loan payable to principal stockholder for as of June 30, 2019 is
$442,000. During the six months ended June 30, 2019, the
Company recorded $10,457 as an in-kind contribution of interest
related to the loan and recorded accrued interest payable of
$7,033. During the six months ended June 30, 2018, the Company
recorded $4,771 as an in-kind contribution of interest related to
the loan and recorded accrued interest payable of
$2,933.
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 six months ended June 30, 2019, the Company paid $4,000
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.
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.
Kraig
Biocraft Laboratories, Inc.
Notes to
Consolidated Financial Statements As of June 30, 2019 and
2018
(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.
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. 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
|
|
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
|
(600,000
)
|
-
|
|
Balance, June 30,
2019
|
57,995,917
|
|
2.4
|
Intrinsic
Value
|
$
24,056,706
|
|
|
For the six months
ended June 30, 2019, the following warrants were
outstanding:
Exercise Price
Warrants Outstandin
g
|
|
Weighted Average Remaining Contractual Life
|
Aggregate Intrinsic Value
|
|
|
|
|
$
0.001
|
30,500,000
|
2.4
|
$
12.651,400
|
$
0.056
|
3,000,000
|
2.16
|
$
222,000
|
$
0.04
|
2,300,000
|
2.2
|
$
954,040
|
$
0.06
|
7,398,639
|
1.69
|
$
3,068,955
|
$
0.06
|
7,398,639
|
2.69
|
$
3,068,955
|
$
0.08
|
3,699,320
|
2.69
|
$
1,534,478
|
$
0.08
|
3,699,320
|
3.69
|
$
1,534,478
|
|
|
|
|
Kraig
Biocraft Laboratories, Inc.
Notes to
Consolidated Financial Statements As of June 30, 2019 and
2018
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
|
(D)
Amendment to Articles of
Incorporation
16
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 June 30, 2019 and December 31,
2018, the accrued salary balance is $2,286,849 and $2,109,454,
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. 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 in2016. 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. 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 maintaing $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 incrase and the bonus
issuance.
Kraig
Biocraft Laboratories, Inc.
Notes to
Consolidated Financial Statements As of June 30, 2019 and
2018
As of June 30, 2019 and December 31, 2018 the
Company owes $46,384 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. During the six months ended June 30, 2019, the
Company paid $4,00 of the land 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, 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 June 30, 2019, the Company recorded
interest expense and related accrued interest payable of
$5,563.
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 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 fullyvested 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.
Kraig
Biocraft Laboratories, Inc.
Notes to
Consolidated Financial Statements As of June 30, 2019 and
2018
(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 an 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 six months ended June 30, 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, 2018
the outstanding balance is $65,292. Additionally, the accrued
expenses are accruing 7% interest per year. As of June 30, 2019,
the Company recorded interest expense and related accrued interest
payable of $5,563.
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 June 30, 2019 and
December 31, 2018, the accrued salary balance is $2,286,849 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 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. 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 maintaing $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 incrase and the bonus
issuance.
As of June 30,
2019 and December 31, 2018, the Company owes $46,384 and $24,433,
respectively, to Mr. Rice for payroll payable.
Kraig
Biocraft Laboratories, Inc.
Notes to
Consolidated Financial Statements As of June 30, 2019 and
2018
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 stockhoder 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; 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. Total loan payable to principal stockholder for
as of June 30, 2019 is $442,000. During the six months ended
June 30, 2019, the Company recorded $10,457 as an in-kind
contribution of interest related to the loan and recorded accrued
interest payable of $7,033. During the six months ended June 30,
2018, the Company recorded $4,771 as an in-kind contribution of
interest related to the loan and recorded accrued interest payable
of $2,933.
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 six months ended June 30, 2019 and 2018 was
$9,426 and $5,760, respectively.
As of June 30,
2019 and December 31, 2018, there was $294,616 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 June 30,
2019, there was $1,060,283 of accrued interest- related party and
$35,168 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 June 30,
2019, the Company owes $2,286,849 in accrued salary to principal
stockholder, $46,384 to the Company’s COO, and $5,211 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 June 30, 2019 and
December 31, 2018.
Kraig
Biocraft Laboratories, Inc.
Notes to
Consolidated Financial Statements As of June 30, 2019 and
2018
NOTE 10 SUBSEQUENT
EVENTS
The Company has
analyzed its operations subsequent to June 30, 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 July 24, 2019,
Kraig Biocraft Laboratories, Inc. held its 2019 annual meeting of
stockholders. At the Annual Meeting,
the Company
’
s
shareholders voted on 6 proposals. At the beginning of the Annual
Meeting, there were 421,680,767 Class A Stock (1 vote per share)
and 2 Series A Preferred Stock (200,000,000 votes per share),
respectively in person or by proxy. This attendance represents
821,680,767 votes (66.49%) of the voting power of the shares
entitled to vote at the Annual Meeting, constituting a quorum for
the transaction of business.
Shareholders voted
to approved all 6 ballot measures which included:
●
To re-elect the
sole director to the Company
’
s board of directors (the
“Board”
), with such
director to serve until the 2020 annual meeting of shareholders. -
The
Company is currently working to add at least 3 additional
independent directors to meet the listing requirements for a
national securities exchange. As per the Company’s bylaws,
these additional directors will be appointed by the board and we
will file another Current Report on Form 8-K to disclose the
appointment of any director. During the meeting, shareholders voted
to approve an uplisting of the Company to a national securities
exchange.
●
To ratify the
appointment of M&K CPAS, PLLC Certified Public Accountants LLP
(“M&K”) as the Company’s independent
registered public accounting firm for fiscal year ending December
31, 2019
.
●
To approve a
reverse stock split of the Company’s issued and outstanding
Class A Stock by a ratio of not less than one-for-ten and not more
than one-for-forty (the “Reverse Split”) at any time
prior to July 23, 2020, with the exact ratios to be set at a whole
number within this range, as determined by our board of directors
in its sole discretion and approve and adopt the Articles of
Amendment to affect same
. -
Approval of this
vote does not require the Company to complete a reverse split, this
vote simply authorizes the board to issue a reverse if the Board
believes it in the best interest of the Company. The
Company’s board anticipates that, if exercised, a reverse
split would be completed to meet the listing requirements of an
uplist to a national securities exchange, or to allow investment
from larger institutional investors currently prohibited from
investing in the Company. The Company will file a Current Report on
Form 8-K to disclose such events, should they
occur.
●
To
approve,
by non-binding,
advisory vote,
the
uplisting of the Company’s Class A Class A Stock,
no par value (the “Class A Stock”) from the OTCQB
to a national securities
exchange
, such as NASDAQ or NYSE:American
. -
As
described at the shareholder meeting, the Company is working toward
a move from the OTC and onto a national exchange. The Company
believes that listing on a nation exchange will provide; additional
liquidity for shareholders, allow for institutional investment, and
open up additional pathways to finance the commercialization of its
spider silk materials. The Company will file a Current Report on
Form 8-K to disclose such events, should they occur.
●
To transact such other business as may properly come before the
Meeting or any adjournment or postponement
thereof
.
●
To
direct the chairman of the meeting to adjourn the meeting to a
later date or dates, if necessary, to permit further solicitation
and vote of proxies if, based upon the tabulated vote at the time
of the annual meeting, there are not sufficient votes to approve
any of the foregoing proposals.
On August 8, 2019,
the Company issued a set of four (4) warrants totaling 500,000
shares to a related party, with an exercise price of $0.2299 per
share.
On August 8, 2019,
the Company issued a set of two (2) warrants totaling 2,000,000
shares to a related party, with an exercise price of $0.2299 per
share.
On August 8, 2019,
the Company issued a set of three (3) warrant totaling 6,000,000
shares to a related party, with an exercise price of $0.2299 per
share.