Document/ExhibitDescriptionPagesSize 1: SB-2 Regsitration Statement HTML 766K
2: EX-3.1 Articles of Incorporation HTML 15K
3: EX-3.2 By-Laws HTML 90K
4: EX-5.1 Opinion of Anslow & Jaclin, LLP HTML 10K
5: EX-10.1 Employment Agreement Between Kraig Biocraft HTML 89K
Laboratories and Kim Thompson
6: EX-10.2 Securities Purchase Agreement Between Kraig HTML 103K
Biocraft Laboratories and Worth Equity
Fund, L.P.
7: EX-10.3 Securities Purchase Agreement Between Kraig HTML 52K
Biocraft Laboratories and Lion Equity
8: EX-21.1 List of Subsidiaries HTML 5K
9: EX-23.1 Consent of Webb & Company, P.A. HTML 7K
Approximate
date of commencement of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective. If any of the securities
being registered on this Form are to be offered on a delayed or continuous
basis
pursuant to Rule 415 under the Securities Act of 1933, check the following
box.
|X|
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act of 1933, please check the following box and
list
the Securities Act registration Statement number of the earlier effective
registration statement for the same offering. |_|
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.|_| If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.|_|
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. |_|
Title
of Each Class Of Securities to be Registered
Amount
to be
Registered
Proposed
Maximum
Aggregate
Offering
Price
per
share
Proposed
Maximum
Aggregate
Offering
Price
Amount
of
Registration
fee
Common
Stock, par value $0.001
16,981,800
$.03
$509,454
$15.64
The
offering price has been estimated solely for the purpose of computing the amount
of the registration fee in accordance with Rule 457(c). Our common stock is
not
traded on any national exchange and in accordance with Rule 457, the offering
price was determined by the price shareholders were sold to our shareholders
in
a private placement memorandum. The price of $0.03 is a fixed price at which
the
selling security holders may sell their shares until our common stock is quoted
on the OTC Bulletin Board at which time the shares may be sold at prevailing
market prices or privately negotiated prices. There can be no assurance that
a
market maker will agree to file the necessary documents with the National
Association of Securities Dealers, which operates the OTC Electronic Bulletin
Board, nor can there be any assurance that such an application for quotation
will be approved.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION DATED SEPTEMBER
, 2007
The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
securities act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
The
selling shareholders named in this
prospectus are offering all of the shares of Class A common stock offered
through this prospectus. Our common stock is presently not traded on any market
or securities exchange. The 16,981,800 shares
of our common stock can be sold
by selling security holders at a fixed price of $.03
per share until our shares are quoted
on the OTC Bulletin Board and thereafter at prevailing market prices or
privately negotiated prices. There can be no assurance that a market maker
will
agree to file the necessary documents with the National Association of
Securities Dealers, which operates the OTC Electronic Bulletin Board, nor can
there be any assurance that such an application for quotation will be approved.
We have agreed to bear the expenses relating to the registration of the shares
for the selling security holders.
THE
COMPANY IS CONSIDERED TO BE IN UNSOUND FINANCIAL CONDITION. PERSONS SHOULD
NOT
INVEST UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENTS.
THE
PURCHASE OF THE SECURITIES OFFERED THROUGH THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE
HEADING “RISK FACTORS” BEGINNING ON PAGE 2.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
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.
Terms
of
the Offering
The
selling shareholders named in this prospectus are offering all of the shares
of
common stock offered through this prospectus. The selling stockholders are
selling shares of common stock covered by this prospectus for their own
account.
We
will
not receive any of the proceeds from the resale of these shares. The offering
price of $.03 was determined by the most recent price at which shares were
sold
to our shareholders in a private placement memorandum and is a fixed price
at
which the selling security holders may sell their shares until our common stock
is quoted on the OTC Bulletin Board, at which time the shares may be sold at
prevailing market prices or privately negotiated prices. There can be no
assurance that a market maker will agree to file the necessary documents with
the National Association of Securities Dealers, which operates the OTC
Electronic Bulletin Board, nor can there be any assurance that such an
application for quotation will be approved. We have agreed to bear the expenses
relating to the registration of the shares for the selling security
holders.
Summary
Financial Data
The
following summary financial data should be read in conjunction with
“Management’s Discussion and Analysis,”“Plan of Operation” and the Financial
Statements and Notes thereto, included elsewhere in this prospectus. The
statement of operations and balance sheet data from inception (April 26,2006)
through December 31, 2006 are derived from our audited financial statements
and
the period January 1, 2007 to June 30, 2007 are derived from our unaudited
financial statements.
We
presently maintain our principal offices at 120 N. Washington Square, Suite
805,
Lansing, Michigan, 48933. We rent mail and fax receiving services, and access
to
meeting and conference facilities at this location on a month-to-month basis,
our phone number is (517) 336-0807. We believe that this location is sufficient
and adequate to operate our current business.
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below and the other information in this
prospectus before investing in our common stock. If any of the following risks
occur, our business, operating results and financial condition could be
seriously harmed. Please note that throughout this prospectus, the words “we”,
“our” or “us” refer to the Company and not to the selling
stockholders.
WE
HAVE A LIMITED OPERATING HISTORY THAT YOU CAN USE TO EVALUATE US, AND THE
LIKELIHOOD OF OUR SUCCESS MUST BE CONSIDERED IN LIGHT OF THE PROBLEMS, EXPENSES,
DIFFICULTIES, COMPLICATIONS AND DELAYS FREQUENTLY ENCOUNTERED BY A SMALL
DEVELOPING COMPANY.
We
were
incorporated in Wyoming in April 2006. With the exception of $45,239 in cash
as
of June 30, 2007, we have no significant financial resources and no revenue
to
date. The likelihood of our success must be considered in light of the problems,
expenses, difficulties, complications and delays frequently encountered by
a
small developing company starting a new business enterprise and the highly
competitive environment in which we will operate. Since we have a limited
operating history, we cannot assure you that our business will be profitable
or
that we will ever generate sufficient revenues to meet our expenses and support
our anticipated activities.
WE
WILL REQUIRE FINANCING TO ACHIEVE OUR CURRENT BUSINESS STRATEGY AND OUR
INABILITY TO OBTAIN SUCH FINANCING COULD PROHIBIT US FROM EXECUTING OUR BUSINESS
PLAN AND CAUSE US TO CEASE OPPERATIONS.
We
will
need to raise additional funds through public or private debt or sale of equity
to achieve our current business strategy. Such financing may not be available
when needed. Even if such financing is available, it may be on terms that are
materially adverse to your interests with respect to dilution of book value,
dividend preferences, liquidation preferences, or other terms. Our capital
requirements to implement our business strategy will be significant. Moreover,
in addition to monies needed to continue operations over the next twelve months,
we anticipate requiring additional funds in order to significantly expand our
research. No assurance can be given that such funds will be available or, if
available, will be on commercially reasonable terms satisfactory to us. There
can be no assurance that we will be able to obtain financing if and when it
is
needed on terms we deem acceptable.
If
we are
unable to obtain financing on reasonable terms, we could be forced to delay
or
scale back our plans for expansion of our research and development. In addition,
such inability to obtain financing on reasonable terms could have a material
adverse effect on our business, operating results, or financial condition,
and
could lead to the company’s ceasing of its business operations and scientific
research.
OUR
AUDITOR HAS EXPRESSED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A
GOING
CONCERN.
Based
on
our financial history since inception, our auditor has expressed substantial
doubt as to our ability to continue as a going concern. We are a development
stage company that has never generated any revenue. From inception to June30,2007, we have incurred a net loss of $750,246, and an accumulated deficit of
$750,246. If we cannot raise additional funds through public or private debt
or
sale of equity, we may have to delay the expansion of our research, and we
may
further be forced to reduce the current pace of our research. In a
worse case scenario, the failure to raise additional funding could be fatal
to
the corporation.
OUR
FUTURE SUCCESS IS DEPENDENT, IN PART, ON THE PERFORMANCE AND CONTINUED SERVICE
OF KIM THOMPSON, OUR ONLY OFFICER. WITHOUT HIS CONTINUED SERVICE, WE MAY BE
FORCED TO INTERRUPT OR EVENTUALLY CEASE OUR OPERATIONS.
We
are
presently dependent to a great extent upon the experience, abilities and
continued services of Kim Thompson, our only officer. The loss of his services
could have a material adverse effect on our business, financial condition or
results of operation.
WE
ARE OPPERATING IN A HIGHLY COMPETITIVE MARKET AND WE ARE UNSURE AS TO WHETHER
OR
NOT THERE WILL BE ANY CONSUMER DEMAND FOR OUR PRODUCTS.
Some
of
our competitors are much larger and better capitalized than we are. It may
be
that our competitors will better address the same market opportunities that
we
are addressing. These competitors, either alone or with collaborative partners,
may succeed in developing business models that are more effective or have
greater market success than our own. The Company is especially susceptible
to
larger enterprises that invest more money in research and development and
marketing. Moreover, the market for our products is large but highly
competitive. There is little or no hard data that substantiates the demand
for
our products or how this demand will be segmented. It is possible that there
will be low consumer demand for our products, or that interest in our products
could decline or die out, which would cause us to be unable to sustain our
operations.
CERTAIN
RISKS EXIST WITH REGARD TO PRODUCT LIABILITY, INCLUDING BUT NOT LIMITED TO
DESIGN DEFECT, ENVIRONMENTAL HAZARDS, QUALITY CONTROL, AND DURABILITY OF
PRODUCT.
With
respect to our product liability, certain risks exist concerning design defect,
environmental hazards, quality contol and durability product. This
potential liability is increased when the Company's products in development
may
be used as protective and safety materials. This potential liability
is also increased by virtue of the fact that the Company's products, if
successfully developed, will be produced by means of genetic
engineering. These transgenic methods may carry inherent
environmental risks and the production of the products may therefore also be
heavily regulated by the government.
WE
ARE POTENTIALLY LIABLE TO ANY PERSON WHO IS INJURED BY, OR WHILE USING, ONE
OF
OUR PRODUCTS.
There
is
tremendous potential liability to any person who is injured by, or while using,
one of the Company's products. The Company may be strictly liable for
any injury. This liability might not be covered by insurance, or may
exceed the Company’s coverage. Under these circumstances the investor
could expect to lose his entire investment.
GOVERNMENTAL
REGULATION REGARDING IMPORT/EXPORT, TAXES, TRANSGENIC, SCIENTIFIC RESEARCH
AND
UNIVERSITY BASED RESEARCH, BIOLOGICAL RESEARCH, TRANSGENIC PRODUCT MANUFACTURE
AND DISTRIBUTION, ENVIRONMENTAL REGULATION, PACKAGING REQUIREMENTS, ETC., MAY
BE
ADVERSE TO THE OPERATIONS, RESEARCH AND DEVELOPMENT, REVENUES, AND POTENTIAL
PROFIT OF THE COMPANY.
Our
industry is highly regulated. As such, it is possible that government
regulation regarding import/export, taxes, transgenic, scientific research
and
university based research, biological research, transgenic product manufacture
and distribution, environmental regulation, packaging requirements, etc., may
be
adverse to the operations, research and development, revenues, and potential
profit of the company.
THE
COMPANY IS ESPECIALLY AT RISK FROM GOVERNMENTAL RESTRICTION AND REGULATIONS
AS
THE COMPANY’S BUSINESS INVOLVES THE DEVELOPMENT OF MATERIALS BY USE OF
TRANSGENIC AND POTENTIALLY HAZARDOUS ORGANISMS.
U.S.
federal and state regulations impose strict regulation on the use, storage,
and
transportation of such transgenic organisms. The law will imposes
severe penalties on the Company for any breach of regulations, for any spill,
release, or contamination caused while the substances are under the ownership
or
control of the Company or its agents. Although the Company is not
aware of any such breach of governmental regulation, or of any spill, release,
or contamination at this time, if such a release, or other regulatory breach
does occur in the future, the resulting clean up costs, and/or fines and
penalties, would cause a material negative effect on the Company and its
financial future.
THE
COMPANY HAS NO PATENTS OR DESIGN PATENTS ON ANY OF ITS PRODUCTS IN DEVELOPMENT.
At
this
time, the Company has no patents or design patents on any of its products in
development. As a result, there is a possibility that the Company's
products could be imitated or directly manufactured and sold by a
competitor. It is also possible that some or all of the Company's
research, development ideas and proposed products are covered by patent rights
held by some other entity. In that event, the Company could incur
devastating liability and be forced to cease operations.
ALTHOUGH
WE HAVE ENTERED INTO AN INTELLECTUAL PROPERTY LICENSING AGREEMENT WITH A
UNIVERSITY THAT PROVIDES CERTAIN EXCLUSIVE RIGHTS TO USE INTELLECTUAL PROPERTY
AND GENETIC SEQUENCES OWNED BY THE UNIVERSITY THERE CAN BE NO GUARANTEE OF
THE
VIABILITY OF THAT INTELLECTUAL PROPERTY OR THE LEGAL RIGHTS TO USE SUCH
PROPERTY.
Without
guarantee of the viability of the intellectual property of the university or
the
legal rights to use such property, there is a substantial risk that the subject
patents could either be challenged or voided, or that the licensed intellectual
property is worthless and without utility. There is also a risk that
the company will need to license additional intellectual property from persons
or entities in order to successfully complete its research and
development. There can be no guarantee that the Company will be able
to enter into a license agreement with such persons or entities. In
such event any investment may be lost.
THE
INTELLECTUAL PROPERTY WHICH WE HAVE LICENSED FROM THE UNIVERSITY IS COVERED
BY A
SERIES OF US PATENTS AND US PATENT APPLICATIONS WITH LIMITED OR NO INTERNATIONAL
PATENT PROTECTION.
With
limited or no international patent protection, there is therefore a substantial
risk of overseas competitors using the same technology described in said patents
we have licensed to use. There is also a substantial risk that the
patents would expire prior to the time that the Company is ready to market
or
commercialize any product, or while the Company is still in research and
development of proposed products. In which event the patents would be
worthless and would not protect the company from potential competitors who
would
then have low barriers to entry and who would be in a position to out compete
the Company. Some, but not all, of the gene sequences that the
Company has licensed from the university, are covered by restrictions in the
licensing agreement which preclude their use by the Company for sporting goods
and medical applications.
OUR
RESEARCH, PROPOSED PRODUCTS, PRODUCT NAMES, LABELS, SIGNAGE AND ADVERTISING
MATERIAL, ARE NOT PROTECTED BY ANY COMPANY OWNED TRADEMARK, OR MAY BE SUBJECT
TO
AN EXPIRED TRADEMARK.
Without
trademark protection we may be forced by litigation, or threat of litigation,
to
abandon product names, labels, signage, advertising material, and even its
research. In such event, we would incur substantial material expense,
and would lose the value of marketing and promotional work and its research
performed up to that date. These losses would be in addition to the
loss resulting from the payment of an award of damages to the party instituting
or threatening litigation. The likely result would be a loss of the
entire investment.
DUE
TO THE SPECULATIVE NATURE OF THIS SCIENTIFIC AND BIOLOGICAL RESEARCH, THERE
CAN
BE NO GUARANTEES THAT WE WILL SUCCEED IN DEVELOPING NEW FIBERS OR THAT OUR
USE
OF NOVEL TRANSGENIC METHODS WILL BE SUCCESSFUL.
We
are
engaging in research and development of new recombinant protein based
fibers. Due to the speculative nature of this scientific and
biological research, there can be no guarantees that the Company will succeed
in
developing new fibers or that its use of novel transgenic methods will be
successful. For these and other reasons, the purchase of stock must
be considered to be highly speculative and risky.
WHILE
NO CURRENT LAWSUITS ARE FILED AGAINST THE COMPANY, THE POSSIBILITY EXISTS THAT
A
CLAIM OF SOME KIND MAY BE MADE IN THE FUTURE.
While
no
current lawsuits are filed against the Company, the possibility exists that
a
claim of some kind may be made in the future. While we will work to insure
high
product quality and accuracy in all marketing and labeling, no assurance can
be
given that some claims for damages will not arise. While we plan to properly
insure ourselves with standard product liability insurance, there can be no
assurance that this insurance will be adequate to cover litigation expenses
and
any awards to plaintiffs.
THE
ABILITY TO SUCCESSFULLY DEPLOY OUR BUSINESS MODEL IS HEAVILTY DEPENDENT UPON
UNITED STATES’ ECONOMIC CONDITIONS.
The
ability to successfully deploy our business model is heavily dependent upon
the
general state of the US economy. We cannot assure you that favorable conditions
will exist in the future. A general economic recession in the United States
or a
devaluation of the US Dollar relative to the Euro could have a serious adverse
economic impact on us and our ability to obtain funding and generate projected
revenues.
THE
OFFERING PRICE OF THE SHARES WAS ARBITRARILY DETERMINED, AND THEREFORE SHOULD
NOT BE USED AS AN INDICATOR OF THE FUTURE MARKET PRICE OF THE SECURITIES.
THEREFORE, THE OFFERING PRICE BEARS NO RELATIONSHIP TO THE ACTUAL VALUE OF
THE
COMPANY, AND MAY MAKE OUR SHARES DIFFICULT TO SELL.
Since
our
shares are not listed or quoted on any exchange or quotation system, the
offering price of $.03 for the shares of common stock was arbitrarily
determined. The facts considered in determining the offering price were our
financial condition and prospects, our limited operating history and the general
condition of the securities market. The offering price bears no relationship
to
the book value, assets or earnings of our company or any other recognized
criteria of value. The offering price should not be regarded as an indicator
of
the future market price of the securities.
THERE
IS NO ASSURANCE OF A PUBLIC MARKET OR THAT THE COMMON STOCK WILL EVER TRADE
ON A
RECOGNIZED EXCHANGE. THEREFORE, YOU MAY BE UNABLE TO LIQUIDATE YOUR INVESTMENT
IN OUR STOCK.
There
is
no established public trading market for our common stock. Our shares are not
and have not been listed or quoted on any exchange or quotation system. There
can be no assurance that a market maker will agree to file the necessary
documents with the National Association of Securities Dealers, which operates
the OTC Electronic Bulletin Board, nor can there be any assurance that such
an
application for quotation will be approved or that a regular trading market
will
develop or that if developed, will be sustained. In the absence of a trading
market, an investor may be unable to liquidate their investment.
OUR
COMMON STOCK IS CONSIDERED A PENNY STOCK, WHICH IS SUBJECT TO RESTRICTIONS
ON
MARKETABILITY, SO YOU MAY NOT BE ABLE TO SELL YOUR SHARES.
If
our
common stock becomes tradable in the secondary market, we will be subject to
the
penny stock rules adopted by the Securities and Exchange Commission that require
brokers to provide extensive disclosure to their customers prior to executing
trades in penny stocks. These disclosure requirements may cause a reduction
in
the trading activity of our common stock, which in all likelihood would make
it
difficult for our shareholders to sell their securities.
USE
OF PROCEEDS
The
selling stockholders are selling shares of common stock covered by this
prospectus for their own account. We will not receive any of the proceeds from
the resale of these shares. We have agreed to bear the expenses relating to
the
registration of the shares for the selling security holders.
DETERMINATION
OF OFFERING PRICE
Since
our
shares are not listed or quoted on any exchange or quotation system, the
offering price of the shares of common stock was arbitrarily determined. The
offering price was determined by the price shares were most recently sold to
our
shareholders in our private placement which was completed September 12, 2007
pursuant to an exemption under Rule 506 of Regulation D.
The
offering price of the shares of our common stock has been determined arbitrarily
by us and does not necessarily bear any relationship to our book value, assets,
past operating results, financial condition or any other established criteria
of
value. The facts considered in determining the offering price were our financial
condition and prospects, our limited operating history and the general condition
of the securities market. Although our common stock is not listed on a public
exchange, we will be filing to obtain a listing on the Over the Counter Bulletin
Board (OTCBB) concurrently with the filing of this prospectus. In order to
be
quoted on the Bulletin Board, a market maker must file an application on our
behalf in order to make a market for our common stock. There can be no assurance
that a market maker will agree to file the necessary documents with the National
Association of Securities Dealers, which operates the OTC Electronic Bulletin
Board, nor can there be any assurance that such an application for quotation
will be approved.
In
addition, there is no assurance that our common stock will trade at market
prices in excess of the initial public offering price as prices for the common
stock in any public market which may develop will be determined in the
marketplace and may be influenced by many factors, including the depth and
liquidity.
DILUTION
The
Class
A common stock to be sold by the selling shareholders is common stock that
is
currently issued. Accordingly, there will be no dilution to our existing
shareholders.
PENNY
STOCK CONSIDERATIONS
Our
common stock will be penny stock; therefore, trading in our securities is
subject to penny stock considerations. Broker-dealer practices in connection
with transactions in “penny stocks” are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission.
Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted
on
the NASDAQ system). Penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver
a
standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock
held
in the customer’s account. The broker-dealer must also make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser’s written agreement to the transaction. These
requirements may have the effect of reducing the level of trading activity,
if
any, in the secondary market for a security that becomes subject to the penny
stock rules. The additional burdens imposed upon broker-dealers by such
requirements may discourage broker-dealers from effecting transactions in our
securities, which could severely limit their market price and liquidity of
our
securities. These requirements may restrict the ability of broker-dealers to
sell our common stock and may affect your ability to resell our common
stock.
SELLING
SHAREHOLDERS
The
shares being offered for resale by the selling stockholders consist of the
9,016,500 shares of our Class “A” common stock held by 32 shareholders of our
common stock which sold in our Regulation D Rule 506 offering completed
September 12, 2007 and 7,965,300 shares of our Class “A” common stock issued
since our inception (April 26, 2007) pursuant to the exemption from registration
contained in Section 4(2) of the Act.
The
following table sets forth the name of the selling stockholders, the number
of
shares of Class A common stock beneficially owned by each of the selling
stockholders as of September 25, 2007 and the number of shares of common
stock being offered by the selling stockholders. The shares being offered hereby
are being registered to permit public secondary trading, and the selling
stockholders may offer all or part of the shares for resale from time to time.
However, the selling stockholders are under no obligation to sell all or any
portion of such shares nor are the selling stockholders obligated to sell any
shares immediately upon effectiveness of this prospectus. All information with
respect to share ownership has been furnished by the selling
stockholders.
Junior
Corzo is the principal of JR Acquisitions &
Consultants.
(12)
Gilberto
Arroyave is the principal of Invesionnes G & G
Corp
Except
as listed
below, to our knowledge, none of the selling shareholders or their
beneficial owners:
-
has
had a material relationship with us other than as a shareholder
at
any
time within the past three years; or
-
has
ever been one of our officers or directors or an officer
or
director
of our predecessors or affiliates
-
Are
broker-dealers or affiliated with broker-dealers.
PLAN
OF DISTRIBUTION
The
selling security holders may sell some or all of their shares at a fixed price
of $.03 per share until our shares are quoted on the OTC Bulletin Board and
thereafter at prevailing market prices or privately negotiated prices. Prior
to
being quoted on the OTCBB, shareholders may sell their shares in private
transactions to other individuals. Although our common stock is not listed
on a
public exchange, we will be filing to obtain a listing on the Over the Counter
Bulletin Board (OTCBB) concurrently with the filing of this prospectus. In
order
to be quoted on the Bulletin Board, a market maker must file an application
on
our behalf in order to make a market for our common stock. There can be no
assurance that a market maker will agree to file the necessary documents with
the National Association of Securities Dealers, which operates the OTC
Electronic Bulletin Board, nor can there be any assurance that such an
application for quotation will be approved. There can be no assurance that
a
market maker will agree to file the necessary documents with the National
Association of Securities Dealers, which operates the OTC Electronic Bulletin
Board, nor can there be any assurance that such an application for quotation
will be approved. However, sales by selling security holder must be made at
the
fixed price of $.03 until a market develops for the stock.
Once
a
market has been developed for our common stock, the shares may be sold or
distributed from time to time by the selling stockholders directly to one or
more purchasers or through brokers or dealers who act solely as agents, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices, which may
be
changed. The distribution of the shares may be effected in one or more of the
following methods:
o
ordinary
brokers transactions, which may include long or short
sales,
o
transactions
involving cross or block trades on any securities or market where
our
common stock is trading,
market
where our common stock is trading,
o
through
direct sales to purchasers or sales effected through
agents,
o
through
transactions in options, swaps or other derivatives (whether exchange
listed of otherwise), or
exchange
listed or otherwise), or
o
any
combination of the foregoing.
In
addition, the selling stockholders may enter into hedging transactions with
broker-dealers who may engage in short sales, if short sales were permitted,
of
shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant
to
this prospectus.
Brokers,
dealers, or agents participating in the distribution of the shares may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders and/or the purchasers of shares for whom such
broker-dealers may act as agent or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). Neither the selling stockholders nor we can presently
estimate the amount of such compensation. We know of no existing arrangements
between the selling stockholders and any other stockholder, broker, dealer
or
agent relating to the sale or distribution of the shares. We will not receive
any proceeds from the sale of the shares of the selling security holders
pursuant to this prospectus.
We
have
agreed to bear the expenses of the registration of the shares, including legal
and accounting fees, and such expenses are estimated to be approximately
$45,000.
Notwithstanding
anything set forth herein, no NASD member will charge commissions that exceed
8%
of the total proceeds of the offering.
LEGAL
PROCEEDINGS
There
are
no legal proceedings pending or threatened against us.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our
executive officer’s and director’s and their respective ages as of September 25,2007 are as follows:
NAME
AGE
POSITION
Kim
Thompson
46
President,
Chief Executive Officer and Director
Set
forth
below is a brief description of the background and business experience of our
executive officers and directors for the past five years.
KIM
THOMPSON, 46, President, CEO, and
Director. Mr. Thompson was a founder of the
California law firm of Ching & Thompson which was founded in 1997 where
he specialized in commercial litigation. He has been a partner in the
Illinois law firm of McJessy, Ching & Thompson since 2004 where he also
specializes in commercial litigation. Mr. Thompson received his
bachelor’s degree in applied economics from James Madison College, Michigan
State University, and his Juris Doctorate from the University of
Michigan.
Term
of
Office
Our
directors are appointed for a one-year term to hold office until the next annual
general meeting of our shareholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board. Mr. Thompson is employed as the
CEO of the company pursuant to a five year employment contract.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table provides the names and addresses of each person known to us
to
own more than 5% of our outstanding shares of common stock as of September25,2007 and by the officers and directors, individually and as a group. Except
as
otherwise indicated, all shares are owned directly.
The
percent of class is based 49,934,850 shares of our common class “A” stock
issued and outstanding as of September 25,2007.
DESCRIPTION
OF SECURITIES
General
Our
original articles of incorporation authorized 60,000,000 shares of Class A
common stock, 25,000,000 shares of Class B common stock with no par value per
share and 10,000,000 shares of preferred stock with no par value per share.
There are no provisions in our charter or by-laws that would delay, defer or
prevent a change in our control.
Common
Stock
As
of
September 25, 2007, 49,934,850 shares of common stock Class A are issued
and
outstanding and held by 39 shareholders. Holders of our common stock are
entitled to one vote for each share on all matters submitted to a stockholder
vote.
Holders
of common stock do not have cumulative voting rights.
Therefore,
holders of a majority of the shares of common stock voting for the election
of
directors can elect all of the directors. Holders of our common stock
representing a majority of the voting power of our capital stock issued and
outstanding and entitled to vote, represented in person or by proxy, are
necessary to constitute a quorum at any meeting of our stockholders. A vote
by
the holders of a majority of our outstanding shares is required to effectuate
certain fundamental corporate changes such as liquidation, merger or an
amendment to our Articles of Incorporation.
Although
there are no provisions in our
charter or by-laws that may delay, defer or prevent a change in control, we
are
authorized, without shareholder approval, to issue shares of preferred stock
that may contain rights or restrictions that could have this
effect.
Holders
of common stock are entitled to share in all dividends that the board of
directors, in its discretion, declares from legally available funds. In the
event of liquidation, dissolution or winding up, each outstanding share entitles
its holder to participate pro rata in all assets that remain after payment
of
liabilities and after providing for each class of stock, if any, having
preference over the common stock. Holders of our common stock have no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to our common stock.
Preferred
Stock
Our
articles of incorporation also provide that we are authorized to issue up to
10,000,000 shares of preferred stock with no par value per
share. As of the date of this prospectus, there are no shares of preferred
stock
issued and outstanding. Our Board of Directors has the authority, without
further action by the shareholders, to issue from time to time the preferred
stock in one or more series for such consideration and with such relative
rights, privileges, preferences and restrictions that the Board may determine.
The preferences, powers, rights and restrictions of different series of
preferred stock may differ with respect to dividend rates, amounts payable
on
liquidation, voting rights, conversion rights, redemption provisions, sinking
fund provisions and purchase funds and other matters. The issuance of preferred
stock could adversely affect the voting power or other rights of the holders
of
common stock.
As
further described in our financial statements, the company anticipates that
it
will issue 200,000 preferred shares to Kim Thompson pursuant an agreement
between the company and Mr. Thompson. Such preferred shares will have
no right to dividends or other distributions, but will have super voting rights
such that each preferred share will have the voting power equivalent to one
hundred common class “A” shares.
Dividends
Since
inception we have not paid any dividends on our common stock. We currently
do
not anticipate paying any cash dividends in the foreseeable future on our common
stock, when issued pursuant to this offering. Although we intend to retain
our
earnings, if any, to finance the exploration and growth of our business, our
Board of Directors will have the discretion to declare and pay dividends in
the
future. Payment of dividends in the future will depend upon our earnings,
capital requirements, and other factors, which our Board of Directors may deem
relevant.
Warrants
There
are
no outstanding warrants to purchase our securities.
Options
There
are
no options to purchase our securities outstanding. We may in the future
establish an incentive stock option plan for our directors, employees and
consultants.
INTERESTS
OF NAMED EXPERTS AND COUNSEL
No
expert
or counsel named in this prospectus as having prepared or certified any part
of
this prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis, or had,
or
is to receive, in connection with the offering, a substantial interest, direct
or indirect, in the registrant or any of its parents or subsidiaries. Nor was
any such person connected with the registrant or any of its parents or
subsidiaries as a promoter, managing or principal underwriter, voting trustee,
director, officer, or employee.
The
financial statements included in this prospectus and the registration statement
have been audited by Webb & Company, P.A. to the extent and for the periods
set forth in their report appearing elsewhere herein and in the registration
statement, and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our
director and officer is indemnified as provided by the Wyoming Statutes and
our
Bylaws. We have agreed to indemnify each of our directors and certain officers
against certain liabilities, including liabilities under the Securities Act
of
1933.Insofar as indemnification for liabilities arising under the Securities
Act
of1933 may be permitted to our directors, officers and controlling persons
pursuant to the provisions described above, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
of1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than our payment of expenses
incurred or paid by our director, officer or controlling person in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
We
have
been advised that in the opinion of the Securities and Exchange Commission
indemnification for liabilities arising under the Securities Act is against
public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless
in
the opinion of our legal counsel the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be governed by
the
court’s decision.
ORGANIZATION
WITHIN LAST FIVE YEARS
We
were
incorporated in April 2006 in the State of Wyoming and 33,329,200 shares each
of
Class “A” common stock were issued to Kim Thompson in exchange for Intellectual
Property. On December 29, 2006, Mr. Thompson surrendered 1,166,650
shares of Class “A” common stock pursuant to the Stock Purchase Agreement
entered into with Worth Equity Fund, L.P.
DESCRIPTION
OF BUSINESS
Kraig
Biocraft Laboratories, Inc. was incorporated in April 2006 in Wyoming. Our
business office is located at 120 N. Washington Square, Suite 805, Lansing,
Michigan48950.
The
Market
We
are
focusing our work on the development and production of high performance
and
technical fiber. The performance fiber market is currently dominated
by two classes of product: aramid fibers and ultra high molecular weight
polyethylene fiber. These products service the need for materials
with high strength, resilience, and flexibility. Because these
synthetic performance fibers are stronger and tougher than steel, they
are used
in a wide variety of military, industrial, and consumer
applications.
The users
of these materials include the military and police departments, which employ
them for ballistic protection. The materials are also used for
industrial applications requiring superior strength and toughness, i.e. critical
cables and abrasion/impact resistant components. These fibers are
also employed in safety equipment, and high strength composite materials for
the
aero-space industry.
The
Product
It
has
long been known that certain fibers produced in nature possess unique mechanical
properties in terms of strength, resilience and flexibility. These
protein based fibers, exemplified by spider silk, have been the subject of
much
interest to materials scientists.
We believe
that the production of recombinant protein based polymers in
commercial quantities holds the promise of a material, which is lighter,
thinner, more flexible, and tougher than aramid fibers. Other applications
include use as structural material for aircraft, and for any application
in
which light weight and high strength are required.
While
the
properties of spider silks are well known, there is presently no known way
to
produce the fibers in commercial quantity. The spiders are
cannibalistic, and can not be raised in concentrated colonies.
The
Technology
While
scientists have been able to replicate the proteins that are the building blocks
of spider silk, the technological barrier that has stymied production, is the
incapacity to form these proteins into a fiber with the desired mechanical
characteristics.
We
have
acquired the right to use the patented genetic sequences and genetic engineering
technology developed in two university laboratories. Our technology
builds upon the unique advantages of the discoveries made within the university
system. The university technology, in collaboration with our own
concepts and leadership, form the foundations of our research and product
development.
We
are
working to use this genetic engineering technology to create recombinant
protein
based polymers. Management is committed to steering the research
toward the development of commercial production of spider silks, spider silks
analogs and new polymers composed of recombinant proteins. The goal is to
create
recombinant fibers for use in the technical textiles market.
The
Company
The
inventor of this technology concept, Kim Thompson, is the founder of Kraig
Biocraft Laboratories, Inc.
Certain
patented genetic tools, methods, and proprietary gene sequences invented
and
discovered by university researchers are pivotal in our work. We have
negotiated and obtained certain exclusive proprietary rights to use the
universities’ intellectual property for our product development and
commercialization.
The
company has entered into a intellectual property and collaborative
research
agreement with the University of Notre Dame, whereby the genetic work
is being
conducted in concert with the University and within the University’s
laboratories. The company has also entered into an intellectual
property and sponsored research agreement with the University of
Wyoming. Pursuant to these two agreements, the company anticipates
that the genetic work will be performed primarily or exclusively within
university controlled genetic laboratories. Also pursuant to these
agreements, we have ongoing financial commitments to both universities
in
connection with the collaborative and sponsored scientific and genetic
research. We are performing our research in cooperation
and collaboration with researchers within the two university
systems. At the present time, we do not itself operate any
laboratories, and all laboratories are owned and operated by the
universities.
We
are in the research and development
stage. We currently have no developed products and does
not produce any revenue from the sale of products. Management
anticipates that we will remain in the research and development stage
for the
next two to three years at a minimum.
MANAGEMENT
DISCUSSION AND ANALYSIS
This
section of the Registration Statement includes a number of forward-looking
statements that reflect our current views with respect to future events and
financial performance. Forward-looking statements are often identified by words
like believe, expect, estimate, anticipate, intend, project and similar
expressions, or words which, by their nature, refer to future events. You should
not place undue certainty on these forward-looking statements. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from our
predictions.
During
the next twelve months, we expect to take the following steps in connection
with
the further development of our business and the implementation of our plan
of
operations:
»
We
expect to spend approximately $150,000 on collaborative research
and
development of high strength polymers at the University of Notre
Dame over
the next twelve months. We believe that this research is
essential to our product development. If our financing will
allow, management will give strong consideration to accelerating
the pace
of spending on research and development within the University of
Notre
Dame’s laboratories.
»
We
expect to spend approximately $13,800 on collaborative research and
development of high strength polymers and spider silk protein at
the
University of Wyoming over the next twelve months. We believe
that this research is important to our product
development. This level of research spending at the university
is also a requirement of our licensing agreement with the
university. If our financing will allow, management will give
strong consideration to accelerating the pace of spending on research
and
development within the University of Wyoming’s
laboratories.
»
We
will actively consider pursuing collaborative research opportunities
with
other university laboratories in the area of high strength
polymers. If our financing will allow, management will give
strong consideration to increasing the depth of our research to include
polymer production technologies that are closely related to our core
research
»
We
will consider buying an established revenue producing company which
is
operating in the biotechnology arena, in order to broaden our financial
base and increase our research and development capability. We expect
to
use a combination of stock and cash for any such
purchase.
»
We
will also actively consider pursuing collaborative research opportunities
with university laboratories in areas of research which overlap the
company’s existing research and development. One such potential
area for collaborative research which the company is considering
is
protein expression platforms. If our financing will allow,
management will give strong consideration to increasing the breadth
of our
research to include protein expression platform
technologies.
Limited
Operating History
We
have
not previously demonstrated that we will be able to expand our business through
an increased investment in our resaerch and development efforts. We cannot
guarantee that the resaerch and development efforts described in this
Registration Statement will be successful. Our business is subject to risks
inherent in growing an enterprise, including limited capital resources, risks
inherent in the research and development process and possible rejection of
our
products in development.
If
financing is not available on satisfactory terms, we may be unable to continue
expanding our operations. Equity financing will result in a dilution to existing
shareholders.
Results
of Operations for the Six Months Ended June 30,2007.
Revenue
for the six months ended June 30, 2007 was $0. This compares to $0 in
revenue for the preceding period dated from the founding of the corporation
in
April, 2006 to June 30, 2006. No sales are anticipated during the
next twelve months as the company will remain in the research and development
stage.
Research
and development expenses for the six months ended June 30, 2007 was
$95,169. This compares to $152,463 spent on research and development
in the period from inception to June 30, 2006. The decrease in
research and development is primarily attributable to the company entering
into
a research and development agreement with the University of Notre Dame
whereby
we are sponsoring research and development within the university’s
laboratories. The decrease in research and development expense is
secondarily attributable to payments made to the University of Wyoming
for
research that we are sponsoring in that university’s
laboratories.
We
believe we can not satisfy our cash requirements for the next twelve months
with
our current cash. Completion of our plan of operation is subject to
attaining adequate financing. We cannot assure investors that
adequate financing will be available. In the absence of such financing, we
may
be unable to proceed with our plan of operations.
We
anticipate that our operational, and general & administrative expenses for
the next 12 months will total approximately $400,000. We do not anticipate
the
purchase or sale of any significant equipment. We also do not expect any
significant additions to the number of employees. The foregoing represents
our
best estimate of our cash needs based on current planning and business
conditions. The exact allocation, purposes and timing of any monies raised
in
subsequent private financings may vary significantly depending upon the exact
amount of funds raised and our progress with the execution of our business
plan.
In
the
event we are not successful in obtaining financing, we may not be able to
proceed with our business plan for the research and development of our
products. We anticipate that we will incur operating losses in the
foreseeable future. Therefore, our auditors have raised substantial doubt about
our ability to continue as a going concern.
DESCRIPTION
OF PROPERTY
Kraig
Biocraft Laboratories, Inc. was incorporated in April 2006 in
Wyoming. Our business office is located at 120 N. Washington Square, Suite
805,
Lansing, Michigan48950.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
In
April
2006, we issued 33,229,200 restricted shares of Class “A” common stock to our
founder, Kim Thompson, in consideration for for intellectual
property. The shares were issued pursuant to the exemption from
registration contained in Section 4(2) of the Act. No commission was
paid to anyone in connection with the sale of Shares to Mr.
Thompson.
On
December 29, 2006, Mr. Thompson surrendered 1,166,650 shares of Class “A” common
stock pursuant to the Stock Purchase Agreement entered into with Worth Equity
Fund, L.P.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There
is
presently no public market for our shares of common stock. We anticipate
applying for trading of our common stock on the Over the Counter Bulletin Board
upon the effectiveness of the registration statement of which this prospectus
forms apart. However, we can provide no assurance that our shares of common
stock will be traded on the Bulletin Board or, if traded, that a public market
will materialize.
Holders
of Our Common Stock
As
of the
date of this registration statement, we had 39 shareholders of our common
stock.
Stock
Option Grants
In
2006,
our CEO, Kim Thompson, received substantial warrants on our stock pursuant
to
the employment agreement between Mr. Thompson and us. However, Mr.
Thompson surrendered all such warrants and options to the corporation prior
to
the close of the 2006 calendar year. As of this date, we have no
outstanding stock options.
Registration
Rights
We
have
not granted registration rights to the selling shareholders or to any other
persons.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
Compensation
of Executive Officers
Summary
Compensation Table
The
following summary compensation table sets forth all compensation awarded to,
earned by, or paid to the named executive officers paid by us during the period
ended June 30, 2007 in all capacities for the accounts of our executives,
including the Chief Executive Officer (CEO) and Chief Financial Officer
(CFO):
Prorated
based upon a salary of $185,000 for the year such amount has not
been paid
but has been accrued.
2)
None
of the options were exercised and have been subsequently
cancelled.
3)
For
the calendar year 2007, Kim Thompson is to receive $7,229
in medical and
dental insurance as well as $950 for automobile expenses
pursuant to an
employment agreement entered into with
us.
Option
Grants Table. There were no individual grants of stock options to
purchase our common stock made to the executive officer named in the Summary
Compensation Table from January 1, 2007 through September 25,2007. Warrants were granted to the executive officer in 2006, however
the same have been returned to the corporation unexercised, and have been
terminated.
Aggregated
Option Exercises and Fiscal Year-End Option Value Table. There were no
stock options exercised during period ending September 25, 2007, by the
executive officer named in the Summary Compensation Table.
Long-Term
Incentive Plan (“LTIP”) Awards Table. There were no awards made to a
named executive officer in the last completed fiscal year under any
LTIP
Compensation
of Directors
Directors
are permitted to receive fixed fees and other compensation for their services
as
directors. The Board of Directors has the authority to fix the compensation
of
directors. No amounts have been paid to, or accrued to, directors in such
capacity.
Employment
Agreements
On
April26, 2006, we entered into a five-year employment agreement with our Chairman
and
Chief Executive Officer. The agreement renews annually so that at all times,
the
term of the agreement is five years.
We
have filed a registration statement
on Form SB-2 under the Securities Act of 1933 with the Securities and Exchange
Commission with respect to the shares of our common stock offered through this
prospectus. This prospectus is filed as apart of that registration statement
and
does not contain all of the information contained in the registration statement
and exhibits. We refer you to our registration statement and each exhibit
attached to it for a more complete description of matters involving us, and
the
statements we have made in this prospectus are qualified in their entirety
by
reference to these additional materials. You may inspect the registration
statement and exhibits and schedules filed with the Securities and Exchange
Commission at the Commission’s principal office in Washington, D.C. Copies of
all or any part of the registration statement may be obtained from the Public
Reference Section of the Securities and Exchange Commission, 100 F Street NE,
Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. The Securities
and
Exchange Commission also maintains a web site at http://www.sec.gov that
contains reports, proxy statements and information regarding registrants that
file electronically with the Commission. In addition, we will file electronic
versions of our annual and quarterly reports on the Commission’s Electronic Data
Gathering Analysis and Retrieval, or EDGAR System. Our registration statement
and the referenced exhibits can also be found on this site as well as our
quarterly and annual reports. We will not send the annual report to our
shareholders unless requested by the individual
shareholders.
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.The interim results
for the period ended June 30, 2007 are not necessarily indicative of results
for
the full fiscal year. 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.
(B)
Organization
Kraig
Biocraft Laboratories, Inc. (a development stage company) (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.
Activities
during the development stage include developing the business plan, negotiating
intellectual property agreements and raising capital.
(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.
(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 Financial Accounting Standards No.
128,
“Earnings per Share.” As of June 30, 2006, the effect of 4,200,000
warrants was anti –dilutive and not included in the dilutive weighted average
calculation. As of June 30, 2007, the Company does not have any
dilutive securities outstanding.
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 the Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (“Statement
109”). Under Statement 109, 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 Statement 109, 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.
(H)
Stock-Based Compensation
The
Company has adopted the provisions of SFAS No. 123R and related interpretations
as provided by SAB 107. 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.
Common
stock, stock options and common stock warrantsissued to
other than employeesor directors are recorded on the
basis of their fair value, as required by SFAS No. 123(R), which is measured
as
of the date required by EITF Issue 96-18, “Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction
with
Selling, Goods or Services.” In accordance with EITF 96-18, the stock options or
common stock warrants are valued using the Black-Scholes option pricing model
on
the basis of the market price of the underlying common stock on the “valuation
date,” which for options and warrants related to contracts that have substantial
disincentives to non-performance is the date of the contract, and for all
other
contracts is the vesting date. Expense related to the options and warrants
is
recognized on a straight-line basis over the shorter of the period over which
services are to be received or the vesting period. Where expense must be
recognized prior to a valuation date, the expense is computed under the
Black-Scholes option pricing model on the basis of the market price of the
underlying common stock at the end of the period, and any subsequent changes
in
the market price of the underlying common stock up through the valuation
date is
reflected in the expense recorded in the subsequent period in which that
change
occurs.
The
Company operates in one segment and therefore segment information is not
presented.
(J)
Recent Accounting Pronouncements
In
June
2007, the Emerging SEC’s Issues Task Force (“EITF”) issued EITF No. 07-3,
Accounting for Nonrefundable Advance Payments for Goods or Services
to Be
Used in Future Research and Development Activities, (“EITF 07-3”). EITF
07-3 provides guidance for upfront payments related to goods and services
of
research and development costs and is effective for fiscal years beginning
after
December 15, 2007. The Company is currently evaluating the impact of EITF
07-3
on its financial statements.
In
June
2007, the EITF issued EITF No. 07-01, Accounting for Collaborative
Arrangements, (“EITF 07-1”). EITF 07-1 provides guidance for companies in
the biotechnology or pharmaceutical industries that may enter into agreements
with other companies to collaboratively develop, manufacture, and market
a drug
candidate (Collaboration Agreements) and is effective for fiscal years beginning
after December 15, 2007. The Company does not expect that EITF 07-01 will
have
an effect on its financial condition or results of operations.
In
September 2006, the FASB issued Statement No. 157, Fair Value Measurements
(“FAS 157”), which defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles and expands
disclosures about fair value measurements. FAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007. The
Company does not expect the adoption of FAS 157 to significantly affect its
financial condition or results of operations.
In
February 2007, the FASB issued Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities, Including an amendment of SFAS
115
(“FAS 159”), which permits companies to choose to measure many financial
instruments and certain other items at fair value. FAS 159 is effective for
fiscal years beginning after November 15, 2007 and interim periods within
those
fiscal years. The Company is currently evaluating the effect FAS 159 will
have
on our consolidated financial position and results of operations
As
reflected in the accompanying financial statements, the Company is in the
development stage, has a working capital deficiency and stockholders deficiency
of $205,631 and used $211,161 of cash in operations from
inception. 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
STOCKHOLDERS’
DEFCIT
(A) Common
Stock Issued for Cash
On
January 8, 2007the Company issued 175,000 shares of common stock for $15,000
($0.08/share). This agreement was subsequently terminated effective
May 23, 2007.
On
January 22, 2007the Company issued 1,200,000 shares of common stock for
$103,000 ($0.08/share). In addition, 900,000 shares were issued
for $3,000 ($0.0033/share).
On
April4, 2007, the Company issued 187,500 shares of common stock for cash of $15,000
($0.08 per share).
On
April20, 2007, the Company issued 187,500 shares of common stock for cash of $15,000
($0.08 per share).
On
May18, 2007, the Company issued 1,312,500 shares of common stock for cash of
$105,000 ($0.08 per share).
On
April28, 2006, the Company issued 800 shares of common stock for cash of $400
($0.50
per share).
(B)
Common Stock Issued for Intellectual Property
On
April26, 2006, the Company issued 33,329,200 shares of common stock to its founder
having a fair value of $180 ($0.00005/share) in exchange for intellectual
property. The fair value of the patent was determined based upon the
historical cost of the intellectual property contributed by the
founder.
On
May 8,2006, the Company entered into a license agreement for research and development.
Pursuant to the terms of the agreement, the Company issued 1,750,000 of
common
stock upon execution of the agreement. The Company also received a five-year
call option from the license holder to repurchase 700,000 common shares
at an
exercise price of $150,000 or $.21 per share. The option gives the Company
the
right, but not the obligation to repurchase the shares of common
stock. The call option expires May 4, 2011. As of June 30, 2007 the
fair value of the call option was less then the exercise price of the option
and
no value has been recorded for the option. (See additional
commitments in Note 4)
On
July1, 2006the Company entered into a five year consulting agreement for research
and development. Pursuant to the terms of the agreement, the Company paid
70,000
shares of common stock upon execution. These shares had a fair value
of $5,600 ($0.08/share) based upon the recent cash offering
price. Additionally, 200,000 shares of common stock were issued on
May 18, 2007 with a fair value of $16,000 ($0.08/share).
(D)
Cancellation and Retirement of Common Stock
On
December 29, 2006, the Company’s founder returned 1,166,650 shares of common
stock to the Company. These shares were cancelled and
retired. Accordingly, the net effect on equity is $0.
(E)
Common Stock Warrants
During
2006, the Company issued 4,200,000 warrants to an officer under his employment
agreement. The Company recognized an expense of $126,435 for
the period from inception to December 31, 2006. The Company recorded
the fair market value of the warrants based on the fair value of each
warrant grant estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions used for grants
in
2006, dividend yield of zero, expected volatility of 183%; risk-free interest
rates of 4.98%, expected life of one year. The warrants vested
immediately. The options expire between 5 and 9 years from the
date of issuance and have an exercise price of between $.21 and $.40 per
share.
During November 2006, the Company and the officer entered into an amendment
to
the employment agreement whereby all the warrants were retired.
NOTE
4
COMMITMENTS
AND CONTINGENCIES
(A)
Employment Agreement
On
April26, 2006, the Company entered into a five-year employment agreement with
the
Company’s Chairman and Chief Executive Officer. The agreement renews annually so
that at all times, the term of the agreement is five years. Pursuant
to this agreement, the Company will pay an annual base salary of $185,000
for
the period May 1, 2006 through December 31, 2006.
Base
pay
will be increased each January 1st, for
the
subsequent twelve month periods by six percent. The officer will also
be entitled to life, disability, health and dental
insurance. In addition, the officer received 700,000 five year
warrants at an exercise price of $.21 per share, 1,500,000 eight year warrants
at an exercise price of $ .33 per share and 2,000,000 nine year warrants
at an
exercise price of $ .40 per share. The warrants fully vested on the date
of
grant. The agreement also calls for the issuance of warrants and
increase in the officer’s base compensation upon the Company reaching certain
milestones:
1. Upon
the
Company’s successful laboratory development of a new silk fiber composed of one
or more proteins that are exogenous to a host, the Company will issue 500,000
eight year warrants at an exercise price of $.20 per share and raise executive’s
base salary by 14%.
2. Upon
the Company’s successful laboratory development of a new silk fiber composed of
two or more proteins that are exogenous to a host, the Company will issue
600,000 eight year warrants at an exercise price of $.18 per share and raise
executive’s base salary by 15%.
3. Upon
the
Company’s successful laboratory development of a new silk fiber composed of at
least in part of one or more synthetic proteins, the Company will issue 900,000
eight year warrants at an exercise price of $.18 per share and raise executive’s
base salary by 18%.
4. Upon
the
Company’s successful laboratory development of a new silk fiber composed of at
least in part of one or more proteins that are genetic modifications or induced
mutations of a host silk proteins, the Company will raise the executive’s
base salary by 8%.
5. Upon
the
Company becoming either a registered company or upon its stock trading and
the
company achieving a market capitalization in excess of $35 million for over
120
calendar day period, the executive’s base salary will increase to
$225,000.
6. Upon
the
Company becoming either a registered company or upon its stock trading and
the
company achieving a market capitalization in excess of $65 million for over
91
calendar day period, the executive’s base salary will increase to
$260,000.
7. Upon
the
Company becoming either a registered company or upon its stock trading and
the
company achieving a market capitalization in excess of $100 million for over
91
calendar day period, the executive’s base salary will increase to
$290,000.
8. Upon
the
Company becoming either a registered company or upon its stock trading and
the
company achieving a market capitalization in excess of $200 million for over
120
calendar day period, the executive’s base salary will increase to
$365,000.
9. Upon
the
Company becoming either a registered company or upon its stock trading and the
company achieving a market capitalization in excess of $350 million for over
150
calendar day period, the executive’s base salary will increase to
$420,000.
On
November 6, 2006, the Company entered into an addendum to the employment
agreement whereby the officer agreed to retire all stock warrants issued
or to
be issued under his employment agreement in return for an increase in his
severance allowance to $600,000 or seventy five percent of total salary due
under the remaining term of the employment agreement, which ever is greater
and
a death benefit of $300,000 or thirty five percent of the total salary due
under
the remaining term of the employment agreement.
In
addition, upon expiration or termination of the employment agreement, the
Company agrees to keep the officer employed as a consultant for a period
of six
years at a rate of $4,000 per month with annual increases of 3%. The agreement
also calls for certain increase based on milestones reached by the company,
including:
1. If
the company achieves gross sales exceeding $10 million or net income exceeding
$1 million for any two years within the ten year period after the date of
this
agreement or a market capitalization in excess of $45 million for over 180
calendar days within six years from the date of this agreement, the term
of the
consulting agreement will be extended to 10 years.
2. If
the company achieves gross sales exceeding $19 million or net income exceeding
$3 million for any two years within the twelve year period after the date
of
this agreement or a market capitalization in excess of $65 million for over
180
calendar days within six years from the date of this agreement, the term
of the
consulting agreement will be extended to 20 years or the life of the officer
and
his spouse at a rate of $6,500 per month with a 3% annual increase.
3. If
the company achieves gross sales exceeding $38 million or net income exceeding
$6 million for any two years within the twelve year period after the date
of
this agreement or a market capitalization in excess of $120 million for over
180
calendar days within six years from the date of this agreement, the term
of the
consulting agreement will be extended to 20 years or the life of the officer
and
his spouse at a rate of $10,000 per month with a 3% annual
increase.
4. If
the company achieves gross sales exceeding $59 million or net income exceeding
$9 million for any year within the twelve year period after the date of this
agreement or a market capitalization in excess of $210 million for over 180
calendar days within six years from the date of this agreement, the term
of the
consulting agreement will be extended to 20 years or the life of the officer
and
his spouse at a rate of $15,000 per month with a 3% annual
increase.
5. If
the company achieves gross sales exceeding $78 million or net income exceeding
$12 million for any year within the twelve year period after the date of
this
agreement or a market capitalization in excess of $320 million for over 180
calendar days within six years from the date of this agreement, the term
of the
consulting agreement will be extended to 20 years or the life of the officer
and
his spouse at a rate of $20,000 per month with a 3% annual
increase.
(B)License
Agreement
On
May 8,2006, the Company entered into a license agreement. Pursuant to the
terms of the agreement, the Company paid a non-refundable license fee of
$10,000. The Company will pay a license maintenance fee of $10,000 on the
one
year anniversary of this agreement and each year thereafter. The
Company will pay an annual research fee of $13,700 with first payment due
January 2007, then on each subsequent anniversary of the effective date
commencing May 4, 2007. Pursuant to the terms of the agreement the
Company may be required to pay additional fees aggregating up to a maximum
of
$10,000 a year for patent maintenance and prosecution relating to the licensed
intellectual property. (See Note 3(C)) for equity
component of payment)
(C)Royalty
Agreement
On
December 26, 2006, the Company entered into an addendum to the intellectual
property transfer agreement with an officer. In consideration of the
Company issuing either 200,000 preferred shares with the following preferences;
no dividends and voting rights equal to 100 common shares per share of preferred
stock or the payment of $120,000, the officer agreed to terminate the royalty
payments due under the agreement and give title to the exclusive license
for the
non protective apparel use of the intellectual property to the
Company. On the date of the agreement, the Company did not have any
preferred stock authorized with the required preferences. In
accordance with SFAS 150, the Company determined that the present value of
the
payment of $120,000 that is due on the one year anniversary of the addendum
should be recorded as an accrued expense until such time as the Company has
the
ability to assert that it has preferred shares authorized. As of June30, 2007, the Company has recorded $113,519 in accrued expenses- related
party.
On
February 1, 2007the Company entered into a consulting agreement for research
and development. Pursuant to the terms of the agreement, the Company
paid $50,000 upon execution. As of June 30, 2007, the initial payment
of $50,000 and the first installment of $50,000 have been paid and an
additionally $50,000 is due by October 1, 2007.
On
February 26, 2007the Company entered into a five year consulting agreement
for
research and development. Pursuant to the terms of the agreement, the Company
paid 200,000 shares of common stock upon execution. These shares had
a fair value of $16,000 ($0.08/share) based upon the recent cash offering
price.
Additionally, 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 $0.10 per share or the average of the closing
price of the Company’s shares over the five days preceding such stock
issuance. As of June 30, 2007 no shares have been issued, however,
60,000 shares were issued on August 31, 2007. The agreement also
requires the Company to issue up to 450,000 additional shares to the consultant
upon the consultant reaching certain milestone events. As of
September 5, 2007, the consultant has not reached the milestone events and
no
additional shares are earned.
NOTE
5
RELATED
PARTY TRANSACTIONS
On
October 6, 2006the Company received $10,000 from a principal
stockholder. Pursuant to the terms of the loan, the
advance bears interest at 12%, is unsecured and matures on May 1, 2007. At
June30, 2007, the Company recorded interest expense and related accrued interest
payable of $776.
As
of
June 30, 2007, the loan principle was repaid. However, the related
accrued interest remains outstanding.
During
2006, the Company entered into addendum to the Intellectual Property transaction
and agreed to issue the CEO either 20,000 preferred shares or a payment of
$120,000 (See Note 4 (C).
NOTE
6
SUBSEQUENT
EVENTS
(A)Stock
Issued for Services
During
August 2007 the Company issued 60,000 shares of common stock for consulting
services rendered with a fair value of $1,800 ($0.03/share) based upon the
recent cash offering price.
(B)Stock
Issued for Cash
On
August28, 2007the Company entered into a stock purchase agreement to issue 8,049,500
shares common stock in the amount of $241,485 ($0.03/share).
On
August29, 2007the Company entered into a stock purchase agreement to issue 20,000
shares common stock in the amount of $600 ($0.03/share).
On
August29, 2007the Company entered into a stock purchase agreement to issue 830,000
shares common stock in the amount of $24,900 ($0.03/share).
On
September 1, 2007the Company entered into a stock purchase agreement to
issue
2,500 shares common stock in the amount of $75 ($0.03/share).
On
September 5, 2007the Company entered into a stock purchase agreement to
issue
12,000 shares common stock in the amount of $360 ($0.03/share).
In
accordance with the May 2007 stock purchase agreement which contains an
anti-dilution clause which requires the Company to issue additional common
shares under the stock purchase agreement for any subsequent issuance at
a price
below $.08 per share for a period of 12 months. The Company will issue 2,812,500
additional shares through September 2007 as a result of the subsequent stock
issuances at $.03 per share.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors of:
Kraig
Biocraft Laboratories, Inc.
We
have
audited the accompanying balance sheet of Kraig Biocraft Laboratories, Inc.,
(a development stage company), as of December 31, 2006 and the
related statements of operations, changes in stockholders’ deficiency and cash
flows for the period April 25, 2006 (Inception) to December 31,2006. The financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In
our
opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Kraig Biocraft Laboratories,
Inc.
as of December 31, 2006 and the results of its operations and its cash flows
for
the period April 25, 2006, (Inception) to December 31, 2006 in conformity
with
accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the
financial statements. The Company is in the development stages with
no operations and a working capital and stockholders’ deficiency of $257,706 and
used $10, 010 of cash in operations from inception. These factors
raise substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans concerning these matters are also
described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION
(A)
Organization
Kraig
Biocraft Laboratories, Inc. (a development stage company) (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.
Activities
during the development stage include developing the business plan, negotiating
intellectual property agreements and raising capital.
(B)
Use of Estimates
In
preparing financial statements in conformity with generally accepted accounting
principles, management is required to make estimates and assumptions that
affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and revenues
and
expenses during the reported period. Actual results could differ from
those estimates.
(C)
Cash and Cash Equivalents
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.
(D)
Loss Per Share
Basic
and
diluted net loss per common share is computed based upon the weighted average
common shares outstanding as defined by Financial Accounting Standards No.
128,
“Earnings per Share.” As of December 31, 2006, there were
no common share equivalents outstanding.
(E)
Research and Development Costs
The
Company expenses all research and development costs as incurred for which
there
is no alternative future use. These costs also include the expensing of employee
compensation and employee stock based compensation.
(F)
Income Taxes
The
Company accounts for income taxes under the Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (“Statement
109”).
Under
Statement 109, 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
Statement 109, 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.
As
of
December 31, 2006, the Company has a net operating loss carryforward
of approximately $403,866 available to offset future
taxable income through 2026. The valuation allowance at December 31, 2006
was
$137,321.
(G)
Stock-Based Compensation
The
Company has adopted the provisions of SFAS No. 123R and related interpretations
as provided by SAB 107. 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.
Common
stock, stock options and common stock warrantsissued to
other than employeesor directors are recorded on the
basis of their fair value, as required by SFAS No. 123(R), which is measured
as
of the date required by EITF Issue 96-18, “Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction
with
Selling, Goods or Services.” In accordance with EITF 96-18, the stock options or
common stock warrants are valued using the Black-Scholes option pricing model
on
the basis of the market price of the underlying common stock on the “valuation
date,” which for options and warrants related to contracts that have substantial
disincentives to non-performance is the date of the contract, and for all
other
contracts is the vesting date. Expense related to the options and warrants
is
recognized on a straight-line basis over the shorter of the period over which
services are to be received or the vesting period. Where expense must be
recognized prior to a valuation date, the expense is computed under the
Black-Scholes option pricing model on the basis of the market price of the
underlying common stock at the end of the period, and any subsequent changes
in
the market price of the underlying common stock up through the valuation
date is
reflected in the expense recorded in the subsequent period in which that
change
occurs.
(H)
Business Segments
The
Company operates in one segment and therefore segment information is not
presented.
(I)
Recent Accounting Pronouncements
In
February 2006 the FASB issued SFAS 155, "Accounting for Certain Hybrid
Financial Instruments" which amends SFAS No. 133 to narrow the scope
exception for interest-only and principal-only strips on debt instruments
to
include only such strips representing rights to receive a specified portion
of
the contractual interest or principal cash flows.
SFAS
No.
155 also amends SFAS No. 140 to allow qualifying special-purpose entities
to
hold a passive derivative financial instrument pertaining to beneficial
interests that it is a derivative financial instrument. The Company will
adopt
SFAS No. 155 on January 1, 2007 and does not expect it to have a material
effect
on financial position, results of operations, or cash flows.
In
July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, (“FIN 48”) “Accounting for uncertainty in income
taxes – an interpretation of SFAS No. 109." This Interpretation provides
guidance for recognizing and measuring uncertain tax positions, as defined
in
FASB No. 109, “Accounting for income taxes." FIN 48 prescribes a
threshold condition that a tax position must meet for any of the benefit
of an
uncertain tax position to be recognized in the financial statements.
Guidance is also provided regarding derecognition, classification and disclosure
of uncertain tax positions. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The Company does not expect that this Interpretation
will have a material impact on their financial position, results of operations
or cash flows.
In
September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), “Fair Value
Measurements.” SFAS 157 clarifies the principle that fair value should be
based on the assumptions that market participants would use when pricing
an
asset or liability. Additionally, it establishes a fair value hierarchy that
prioritizes the information used to develop those assumptions. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007. The Company does not expect the adoption of SFAS 157 to
have
a material impact on their financial position, results of operations or cash
flows.
In
September 2006, the FASB issued SFAS No. 158 (“SFAS 158”), Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans, an
amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS 158
requires employers to recognize the underfunded or overfunded status of a
defined benefit postretirement plan as an asset or liability in its statement
of
financial position and to recognize changes in the funded status in the year
in
which the changes occur through accumulated other comprehensive income.
Additionally, SFAS 158 requires employers to measure the funded status of
a plan
as of the date of its year-end statement of financial position. The new
reporting requirements and related new footnote disclosure rules of SFAS
158 are
effective for fiscal years ending after December 15, 2006. The new measurement
date requirement applies for fiscal years ending after December 15, 2008.
The
Company does not expect the adoption of SFAS 158 to have a material impact
on
their financial position, results of operations or cash flows.
As
reflected in the accompanying financial statements, the Company is in the
development stage, has a working capital and stockholders deficiency of $257,706
and used $10,010 of cash in operations from inception. 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
STOCKHOLDERS’
DEFCIT
(A)
Common Stock Issued for Cash
On
April28, 2006, the Company issued 800 shares of common stock for cash of $400
($0.50
per share).
(B)
Common Stock Issued for Intellectual Property
On
April26, 2006, the Company issued 33,329,200 shares of common stock to its founder
having a fair value of $180 ($0.000005 per share) in exchange for intellectual
property. The fair value of the patent was determined based upon the
historical cost of the intellectual property contributed by the
founder.
(C)
Common Stock Issued for Services
On
May 8,2006, the Company entered into a license agreement for research and development.
Pursuant to the terms of the agreement, the Company issued 1,750,000 of common
stock upon execution of the agreement. These shares had a fair value
of $140,000 ($0.08/share) based upon the recent cash offering price. The
Company
also received a five-year call option from the license holder to repurchase
700,000 common shares at an exercise price of $150,000 or $.21 per share.
The
option gives the Company the right, but not the obligation to repurchase
the
shares of common stock. The call option expires May 4, 2011. As of
December 31, 2006, the fair value of the call option was less then the exercise
price of the option and no value has been recorded for the
option. (See additional commitments in Note 4)
On
July1, 2006the Company entered into a five year consulting agreement for research
and development. Pursuant to the terms of the agreement, the Company paid
70,000
shares of common stock upon execution. These shares had a fair value
of $5,600 ($0.08/share) based upon the recent cash offering
price.
On
December 29, 2006, the Company’s founder returned 1,166,650 shares of common
stock to the Company. These shares were cancelled and
retired. Accordingly, the net effect on equity is $0.
(E)
Common Stock Warrants
During
2006, the Company issued 4,200,000 warrants to an officer under his employment
agreement. The Company recognized an expense of $126,435 for
the period from inception to December 31, 2006. The Company recorded
the fair market value of the warrants based on the fair value of each
warrant grant estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions used for grants
in
2006, dividend yield of zero, expected volatility of 183%; risk-free interest
rates of 4.98%, expected life of one year. The warrants vested
immediately. The options expire between 5 and 9 years from the
date of issuance and have an exercise price of between $.21 and $.40 per
share.
During November 2006, the Company and the officer entered into an amendment
to
the employment agreement whereby all the warrants were retired. (See
Note 4)
NOTE
4
COMMITMENTS
AND CONTINGENCIES
(A)
Employment Agreement
On
April26, 2006, the Company entered into a five-year employment agreement with
the
Company’s Chairman and Chief Executive Officer. The agreement renews annually so
that at all times, the term of the agreement is five years. Pursuant
to this agreement, the Company will pay an annual base salary of $185,000
for
the period May 1, 2006 through December 31, 2006. Base pay will be
increased each January 1st, for
the
subsequent twelve month periods by six percent. The officer will also
be entitled to life, disability, health and dental
insurance. In addition, the officer received 700,000 five year
warrants at an exercise price of $.21 per share, 1,500,000 eight year warrants
at an exercise price of $ .33 per share and 2,000,000 nine year warrants
at an
exercise price of $ .40 per share. The warrants fully vested on the date
of
grant. The agreement also calls for the issuance of warrants and
increase in the officer’s base compensation upon the Company reaching certain
milestones:
1. Upon
the
Company’s successful laboratory development of a new silk fiber composed of one
or more proteins that are exogenous to a host, the Company will issue 500,000
eight year warrants at an exercise price of $.20 per share and raise executive’s
base salary by 14%.
2. Upon
the Company’s successful laboratory development of a new silk fiber composed of
two or more proteins that are exogenous to a host, the Company will issue
600,000 eight year warrants at an exercise price of $.18 per share and raise
executive’s base salary by 15%.
3. Upon
the
Company’s successful laboratory development of a new silk fiber composed of at
least in part of one or more synthetic proteins, the Company will issue 900,000
eight year warrants at an exercise price of $.18 per share and raise executive’s
base salary by 18%.
4. Upon
the
Company’s successful laboratory development of a new silk fiber composed of at
least in part of one or more proteins that are genetic modifications or induced
mutations of a host silk proteins, the Company will raise the
executive’s base salary by 8%.
5. Upon
the
Company becoming either a registered company or upon its stock trading and
the
company achieving a market capitalization in excess of $35 million for over
120
calendar day period, the executive’s base salary will increase to
$225,000.
6. Upon
the
Company becoming either a registered company or upon its stock trading and
the
company achieving a market capitalization in excess of $65 million for over
91
calendar day period, the executive’s base salary will increase to
$260,000.
7. Upon
the
Company becoming either a registered company or upon its stock trading and
the
company achieving a market capitalization in excess of $100 million for over
91
calendar day period, the executive’s base salary will increase to
$290,000.
8. Upon
the
Company becoming either a registered company or upon its stock trading and
the
company achieving a market capitalization in excess of $200 million for over
120
calendar day period, the executive’s base salary will increase to
$365,000.
9. Upon
the
Company becoming either a registered company or upon its stock trading and
the
company achieving a market capitalization in excess of $350 million for over
150
calendar day period, the executive’s base salary will increase to
$420,000.
On
November 6, 2006, the Company entered into an addendum to the employment
agreement whereby the officer agreed to retire all stock warrants issued
or to
be issued under his employment agreement in return for an increase in his
severance allowance to $600,000 or seventy five percent of total salary due
under the remaining term of the employment agreement, which ever is greater
and
a death benefit of $300,000 or thirty five percent of the total salary due
under
the remaining term of the employment agreement.
In
addition, upon expiration or termination of the employment agreement, the
Company agrees to keep the officer employed as a consultant for a period
of six
years at a rate of $4,000 per month with annual increases of 3%. The agreement
also calls for certain increase based on milestones reached by the company,
including:
1. If
the company achieves gross sales exceeding $10 million or net income exceeding
$1 million for any two years within the ten year period after the date of
this
agreement or a market capitalization in excess of $45 million for over 180
calendar days within six years from the date of this agreement, the term
of the
consulting agreement will be extended to 10 years.
2. If
the company achieves gross sales exceeding $19 million or net income exceeding
$3 million for any two years within the twelve year period after the date
of
this agreement or a market capitalization in excess of $65 million for over
180
calendar days within six years from the date of this agreement, the term
of the
consulting agreement will be extended to 20 years or the life of the officer
and
his spouse at a rate of $6,500 per month with a 3% annual increase.
3. If
the company achieves gross sales exceeding $38 million or net income exceeding
$6 million for any two years within the twelve year period after the date
of
this agreement or a market capitalization in excess of $120 million for over
180
calendar days within six years from the date of this agreement, the term
of the
consulting agreement will be extended to 20 years or the life of the officer
and
his spouse at a rate of $10,000 per month with a 3% annual
increase.
4. If
the company achieves gross sales exceeding $59 million or net income exceeding
$9 million for any year within the twelve year period after the date of this
agreement or a market capitalization in excess of $210 million for over 180
calendar days within six years from the date of this agreement, the term
of the
consulting agreement will be extended to 20 years or the life of the officer
and
his spouse at a rate of $15,000 per month with a 3% annual
increase.
5. If
the company achieves gross sales exceeding $78 million or net income exceeding
$12 million for any year within the twelve year period after the date of
this
agreement or a market capitalization in excess of $320 million for over 180
calendar days within six years from the date of this agreement, the term
of the
consulting agreement will be extended to 20 years or the life of the officer
and
his spouse at a rate of $20,000 per month with a 3% annual
increase.
During
2006, the Company recorded compensation expense of $249,768. As of
December 31, 2006, $123,333 is recorded in accrued expenses – related
party.
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 the first payment
due
January 2007, then on each subsequent anniversary of the effective date
commencing May 4, 2007. Pursuant to the terms of the agreement the
Company may be required to pay additional fees aggregating up to a maximum
of
$10,000 a year for patent maintenance and prosecution relating to the licensed
intellectual property. (See Note 3(C)) for equity
component of payment)
(C)
Royalty Agreement
On
December 26, 2006, the Company entered into an addendum to the intellectual
property transfer agreement with an officer. In consideration of the
Company issuing either 200,000 preferred shares with the following preferences;
no dividends and voting rights equal to 100 common shares per share of preferred
stock or the payment of $120,000, the officer agreed to terminate the royalty
payments due under the agreement and give title to the exclusive license
for the
non protective apparel use of the intellectual property to the
Company. On the date of the agreement, the Company did not have any
preferred stock authorized with the required preferences. In
accordance with SFAS 150, the Company determined that the present value of
the
payment of $120,000 that is due on the one year anniversary of the addendum
should be recorded as an accrued expense until such time as the Company has
the
ability to assert that it has preferred shares authorized. As of
December 31, 2006, the Company has recorded $107,143 in accrued expenses
–
related party.
NOTE
5
RELATED
PARTY TRANSACTIONS
On
October 6, 2006the Company received $10,000 from a principal
stockholder. Pursuant to the terms of the loan, the
advance bears interest at 12%, is unsecured and matures on May 1, 2007. At
December 31, 2006, the Company recorded interest expense and related accrued
interest payable of $654.
During
2007, the loan principle was repaid. However, the related accrued
interest remains outstanding.
During
2006, the Company entered into addendum to the Intellectual Property transaction
and agreed to issue the CEO either 20,000 preferred shares or a payment of
$120,000 (See Note 4 (C).
On
February 1, 2007, the Company entered into a one year consulting agreement
for
research and development with a university for a fee of $150,000 per
year. Pursuant to the terms of the agreement, the Company paid
$50,000 upon execution of the agreement. Additionally, the Company is
required to pay an additional $50,000 on June 1, 2007 and October 1,2007.
On
February 26, 2007the Company entered into a five year consulting agreement
for
research and development with a university. Pursuant to the terms of the
agreement, the Company paid 200,000 shares of common stock upon
execution. These shares had a fair value of $16,000 ($0.08/share)
based upon the recent cash offering price. Additionally, the Company will
be
required to pay $1,000 per month over the term of the agreement, or at the
Company’s option, the consulting fee may be paid in the form of Company’s common
stock based upon the greater of $0.10 per share or the average of the closing
price of the Company’s shares over the five days preceding such stock issuance.
During August 2007, the Company issued 60,000 shares related to this
agreement. The agreement also requires the Company to issue up
to 450,000 additional shares to the consultant upon the consultant reaching
certain milestone events. As of September 5, 2007, the consultant has
not reached the milestone events and no additional shares are
earned.
(B)
Common Stock Issued for Cash
On
January 8, 2007the Company issued 175,000 shares of common stock for $15,000
($0.08/share). This agreement was subsequently terminated effective
May 23, 2007.
On
January 22, 2007the Company entered into a stock purchase
agreement. On January 29, 2007the Company issued 1,200,000 shares of
common stock for $103,000 ($.09 per share). In addition,
900,000 shares were issued for $3,000 ($0.0033/share).
On
May23, 2007the Company entered into a stock purchase agreement. The
Company issued 1,687,500 shares of common stock for cash of $135,000 ($.08
per
share). The agreement contains an anti-dilution clause which requires the
Company to issue additional common shares under the stock purchase agreement
for
any subsequent issuance at a price below $.08 per share for a period of 12
months. The Company is obligated to issue additional common shares
which would have the effect of making the issuance equal to the per share
price
of the subsequent issuances. The Company will issue 2,812,500
additional shares through September 2007 as a result of the subsequent stock
issuances.
YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE
REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND
IS
NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR
SALE
IS NOT PERMITTED.
Until
_____________, all dealers that effect transactions in these securities whether
or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
PART
II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
ITEM
24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The
General Corporation Law of Wyoming provides that directors, officers, employees
or agents of Wyoming corporations are entitled, under certain
circumstances, to be indemnified against expenses (including attorneys' fees)
and other liabilities actually and reasonably incurred by them in connection
with any suit brought against them in their capacity as a director, officer,
employee or agent, if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation,
and
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. This statute provides that
directors, officers, employees and agents may also be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by them
in
connection with a derivative suit brought against them in their capacity as
a
director, if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation, except that
no
indemnification may be made without court approval if such person was adjudged
liable to the corporation.
Our
Certificate of Incorporation provides that we shall indemnify any and all
persons whom we shall have power to indemnify to the fullest extent permitted
by
the Wyoming Corporate Law. Article VII of our by-laws provides that we shall
indemnify our authorized representatives to the fullest extent permitted by the
Wyoming Law. Our by-laws also permit us to purchase insurance on behalf of
any
such person against any liability asserted against such person and incurred
by
such person in any capacity, or out of such person's status as such, whether
or
not we would have the power to indemnify such person against such liability
under the foregoing provision of the by-laws.
ITEM
25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities
and Exchange Commission registration fee
$
15.64
Federal
Taxes
$
0
State
Taxes and Fees
$
0
Transfer
Agent Fees
$
0
Accounting
fees and expenses
$
6,000
Legal
fees and expense
$
35,000
Blue
Sky fees and expenses
$
0
Miscellaneous
$
0
Total
$
41,015.64
All
amounts are estimates other than the Commission’s registration fee. We are
paying all expenses of the offering listed above. No portion of these expenses
will be borne by the selling shareholders. The selling shareholders, however,
will pay any other expenses incurred in selling their common stock, including
any brokerage commissions or costs of sale.
ITEM
26. RECENT SALES OF UNREGISTERED SECURITIES
We
were
incorporated in the State of Wyoming in April 2006 and on April 26, 2006
33,229,200 shares of our Class “A” common stock, were issued to Kim Thompson in
exchange for intellectual property. These shares were issued in reliance
on the
exemption under Section 4(2) of the Securities Act of 1933, as amended (the
“Act”) and were issued as founder’s shares. These shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933
since
the issuance shares by us did not involve a public offering. The offering
was
not a “public offering” as defined in Section 4(2) due to the insubstantial
number of persons involved in the deal, size of the offering, manner of the
offering and number of shares offered. We did not undertake an offering in
which
we sold a high number of shares to a high number of investors. In addition,
Mr.
Thompson had the necessary investment intent as required by Section 4(2)
since
he agreed to and received share certificates bearing a legend stating that
such
shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This
restriction ensures that these shares would not be immediately redistributed
into the market and therefore not be part of a “public offering.” Based on an
analysis of the above factors, we have met the requirements to qualify for
exemption under Section 4(2) of the Securities Act of 1933 for this
transaction.
On
April28, 2006 we issued 400 shares of our Class “A” common stock to Samuel Ching at a
price per share of $.50, for an aggregate of $400 cash. On January26, 2007 we also issued 2,100,000 shares of our Class “A” common stock to Samuel
Ching at a price per share of $.0505 for an aggregate of
$106,000.00. These shares were issued in reliance on the exemption
under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These
shares of our common stock qualified for exemption under Section 4(2) of the
Securities Act of 1933 since the issuance shares by us did not involve a public
offering. The offering was not a “public offering” as defined in Section 4(2)
due to the insubstantial number of persons involved in the deal, size of the
offering, manner of the offering and number of shares offered. We did not
undertake an offering in which we sold a high number of shares to a high number
of investors. In addition, Mr. Ching had the necessary investment intent as
required by Section 4(2) since he agreed to and received share certificates
bearing a legend stating that such shares are restricted pursuant to Rule 144
of
the 1933 Securities Act. This restriction ensures that these shares would not
be
immediately redistributed into the market and therefore not be part of a “public
offering.” Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities
Act
of 1933 for this transaction.
On
April28, 2006 we issued 400 shares of our Class “A” common stock to Richard Duzenbury
at a price per share of $.50 for an aggregate of $400 cash. These
shares were issued in reliance on the exemption under Section 4(2) of the
Securities Act of 1933, as amended (the “Act”). These shares of our common stock
qualified for exemption under Section 4(2) of the Securities Act of 1933 since
the issuance shares by us did not involve a public offering. The offering was
not a “public offering” as defined in Section 4(2) due to the insubstantial
number of persons involved in the deal, size of the offering, manner of the
offering and number of shares offered. We did not undertake an offering in
which
we sold a high number of shares to a high number of investors. In addition,
Mr.
Duzenbury had the necessary investment intent as required by Section 4(2) since
he agreed to and received share certificates bearing a legend stating that
such
shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This
restriction ensures that these shares would not be immediately redistributed
into the market and therefore not be part of a “public offering.” Based on an
analysis of the above factors, we have met the requirements to qualify for
exemption under Section 4(2) of the Securities Act of 1933 for this
transaction.
On
July5, 2006, pursuant to an Intellectual Property Agreement, we issued 1,750,000
shares of our Class “A” common stock to the University of Wyoming Foundation in
exchange for intellectual property. The Company holds a five year
call, dated from May 8, 2006, 700,000 shares held by the University of Wyoming
Foundation. These shares were issued in reliance on the exemption
under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These
shares of our common stock qualified for exemption under Section 4(2) of the
Securities Act of 1933 since the issuance shares by us did not involve a public
offering. The offering was not a “public offering” as defined in Section 4(2)
due to the insubstantial number of persons involved in the deal, size of the
offering, manner of the offering and number of shares offered. We did not
undertake an offering in which we sold a high number of shares to a high number
of investors. In addition, Mr. Duzenbury had the necessary investment intent
as
required by Section 4(2) since he agreed to and received share certificates
bearing a legend stating that such shares are restricted pursuant to Rule 144
of
the 1933 Securities Act. This restriction ensures that these shares would not
be
immediately redistributed into the market and therefore not be part of a “public
offering.” Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities
Act
of 1933 for this transaction.
On
September 12, 2006, March 21, 2007 and August 1, 2007 pursuant to a Consulting
Agreement, we issued an aggregate of 330,000 shares of our Class “A” common
stock to Malcolm Fraser for consulting services performed. Pursuant
to the Consulting Agreement, Mr. Fraser is contractually restricted from
reselling 175,000 shares for a period of 26 months from February 26,2007. In addition, the Consulting Agreement restricts Mr. Fraser from
resale of 60,000 shares for a period of 24 following the commencement of
public
trade of the Company’s stock. These shares were issued in reliance on
the exemption under Section 4(2) of the Securities Act of 1933, as amended
(the
“Act”). These shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance shares by us did not
involve a public offering. The offering was not a “public offering” as defined
in Section 4(2) due to the insubstantial number of persons involved in the
deal,
size of the offering, manner of the offering and number of shares offered.
We
did not undertake an offering in which we sold a high number of shares to
a high
number of investors. In addition, Mr. Fraser had the necessary investment
intent
as required by Section 4(2) since he agreed to and received share certificates
bearing a legend stating that such shares are restricted pursuant to Rule
144 of
the 1933 Securities Act. This restriction ensures that these shares would
not be
immediately redistributed into the market and therefore not be part of a
“public
offering.” Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities
Act
of 1933 for this transaction.
On
January 9, 2007, we issued an aggregate of 175,000 shares of our Class “A”
common stock to Worth Equity Fund, L.P., at a price per share of $0.0857, for
an
aggregate of $15,000 cash. These shares were issued in reliance on
the exemption under Section 4(2) of the Securities Act of 1933, as amended
(the
“Act”). These shares of our common stock qualified for exemption under Section
4(2) of the Securities Act of 1933 since the issuance shares by us did not
involve a public offering. The offering was not a “public offering” as defined
in Section 4(2) due to the insubstantial number of persons involved in the
deal,
size of the offering, manner of the offering and number of shares offered.
We
did not undertake an offering in which we sold a high number of shares to a
high
number of investors. In addition, Worth Equity Fund, L.P. had the necessary
investment intent as required by Section 4(2) since he agreed to and received
share certificates bearing a legend stating that such shares are restricted
pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that
these shares would not be immediately redistributed into the market and
therefore not be part of a “public offering.” Based on an analysis of the above
factors, we have met the requirements to qualify for exemption under Section
4(2) of the Securities Act of 1933 for this transaction.
On
May31, 2007 we issued an aggregate of 1,687,500 shares of our Class “A” common
stock to Lion Equity, at a price per share of $0.08, for an aggregate of
$135,000 cash. In addition, on September 12, 2007 we issued an
aggregate of 2,812,500 shares of our Class “A” common stock to Lion Equity
pursuant to the Securities Purchase Agreement. These shares were
issued in reliance on the exemption under Section 4(2) of the Securities Act
of
1933, as amended (the “Act”). These shares of our common stock qualified for
exemption under Section 4(2) of the Securities Act of 1933 since the issuance
shares by us did not involve a public offering. The offering was not a “public
offering” as defined in Section 4(2) due to the insubstantial number of persons
involved in the deal, size of the offering, manner of the offering and number
of
shares offered. We did not undertake an offering in which we sold a high number
of shares to a high number of investors. In addition, Lion Equity had the
necessary investment intent as required by Section 4(2) since he agreed to
and
received share certificates bearing a legend stating that such shares are
restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction
ensures that these shares would not be immediately redistributed into the market
and therefore not be part of a “public offering.” Based on an analysis of the
above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act of 1933 for this transaction.
On
September 12, 2007, we completed a Regulation D Rule 506 offering in which
we
sold 9,016,500 shares of common stock to 32 investors, at a price per share
of
$.03 for an aggregate offering price $270,195. The following sets forth the
identity of the class of persons to whom we sold these shares and the amount
of
shares for each shareholder:
The
Common Stock issued in our Regulation D, Rule 506 Offering was issued in a
transaction not involving a public offering in reliance upon an exemption from
registration provided by Rule 506 of Regulation D of the Securities Act of
1933.
In accordance with Section 230.506 (b)(1) of the Securities Act of 1933, these
shares qualified for exemption under the Rule 506 exemption for this offerings
since it met the following requirements set forth in Reg.
ss.230.506:
(A)
No
general solicitation or advertising was conducted by us in connection
with
the offering of any of the Shares.
(B)
At
the time of the offering we were not: (1) subject to the reporting
requirements of Section 13 or 15 (d) of the Exchange Act; or (2)
an
“investment company” within the meaning of the federal securities
laws.
Neither
we, nor any of our predecessors, nor any of our directors, nor any
beneficial owner of 10% or more of any class of our equity securities,
nor
any promoter currently connected with us in any capacity has been
convicted within the past ten years of any felony in connection with
the
purchase or sale of any security.
(D)
The
offers and sales of securities by us pursuant to the offerings were
not
attempts to evade any registration or resale requirements of the
securities laws of the United States or any of its
states.
(E)
None
of the investors are affiliated with any of our directors, officers
or
promoters or any beneficial owner of 10% or more of our
securities.
Please
note that pursuant to Rule 506, all shares purchased in the Regulation D Rule
506 offering completed on September 12, 2007 were restricted in accordance
with
Rule 144 of the Securities Act of 1933. In addition, each of these shareholders
were either accredited as defined in Rule 501 (a) of Regulation D promulgated
under the Securities Act or sophisticated as defined in Rule 506(b)(2)(ii)
of
Regulation D promulgated under the Securities Act.
We
have
never utilized an underwriter for an offering of our securities. Other than
the
securities mentioned above, we have not issued or sold any
securities.
To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this registration statement
to:
(i)
To
include any prospectus required by Section 10(a)(3) of the Securities
Act
of 1933;
(ii)
Reflect
in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase
or
decrease in volume of securities offered (if the total dollar value
of
securities offered would not exceed that which was registered) any
deviation from the low or high end of the estimated maximum offering
range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in
the effective registration statement; and
(iii)
Include
any material information with respect to the plan of distribution
not
previously disclosed in the registration statement or any material
change
to such information in the registration statement.
(2)
That,
for the purpose of determining any liability under the Securities
Act of
1933, each such post-effective amendment shall be deemed to be a
new
registration statement relating to the securities offered therein,
and the
offering therein, and the offering of such securities at that time
shall
be deemed to be the initial bona fide offering thereof.
(3)
To
remove from registration by means of a post-effective amendment any
of the
securities being registered which remain unsold at the termination
of the
offering.
(B)
Undertaking Required by Regulation S-B, Item 512(e).
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers or controlling persons pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in
the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in
the
opinion of its counsel that the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(C)
Undertaking Required by Regulation S-B, Item 512(f)
The
undersigned Registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the Registrant’s
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(D)
Undertaking pursuant to Item 512(g) of Regulation S-B
The
undersigned registrant hereby undertakes that, for the purpose of determining
liability under the Securities Act to any purchaser:
1.
If the
small business issuer is relying on Rule 430B (ss. 230. 430B of this
chapter):
(i)
Each
prospectus filed by the undersigned small business issuer pursuant to Rule
424(b)(3) (ss. 230. 424(b)(3) of this chapter) shall be deemed to be part of
the
registration statement as of the date the filed prospectus was deemed part
of
and included in the registration statement; and
(ii)
Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7)
(ss. 230. 424(b)(2), (b)(5), or (b)(7) of this chapter) as part of a
registration statement in reliance on Rule 430B relating to an offering made
pursuant to Rule 415(a)(1)(i),(vii), or (x) (ss. 230.415(a)(1)(i), (vii), or
(x)
of this chapter) for the purpose of providing the information required by
section 10(a) of the Securities Act shall be deemed to be part of and included
in the registration statement as of the earlier of the date such form of
prospectus is first used after effectiveness or the date of the first contract
of sale of securities in the offering described in the prospectus. As provided
in Rule 430B, for liability purposes of the issuer and any person that is at
that date an underwriter, such date shall be deemed to be a new effective date
of the registration statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such effective date; or
2.
If the
small business issuer is subject to Rule 430C (ss. 230. 430C of this chapter),
include the following: Each prospectus filed pursuant to Rule 424(b)(ss. 230.
424(b) of this chapter) as part of a registration statement relating to an
offering, other than registration statements relying on Rule 430B or other
than
prospectuses filed in reliance on Rule 430A (ss. 230. 430A of this chapter),
shall be deemed to be part of and included in the registration statement as
of
the date it is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of
the
registration statement will, as to a purchaser with a time of contract of sale
prior to such first use, supersede or modify any statement that was made in
the
registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first
use.
In
accordance with the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and authorized this registration statement
to be signed on its behalf by the undersigned, in the City of Lansing, Michigan
on September 25, 2007.
KRAIG
BIOCRAFT LABORATORIES, INC.
By:
/s/
Kim Thompson
KIM
THOMPSON
President,
Chief Executive Officer, Principal Financial and Accounting Officer
and
Chairman of the Board of Directors
POWER
OF ATTORNEY
KNOW
ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Kim Thompson and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including his capacity as a director and/or officer of Kraig
Biocraft Laboratories, Inc.) to sign any or all amendments (including
post-effective amendments) to this registration statement and any and all
additional registration statements pursuant to rule 462(b) of the Securities
Act
of 1933, as amended, and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the SEC, granting unto each said
attorneys-in-fact and agents, and each of them, full power and authority to
do
and perform each and every act and thing requisite and necessary to be done
in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In
accordance with the requirements of the Securities Act of 1933, as amended,
this
registration statement was signed below by the following persons in the
capacities and on the dates stated.
By:
/s/
Kim Thompson
President,
Chief Executive Officer,
KIM
THOMPSON
Principal
Financial and Accounting Officer and Chairman of the Board of
Directors
II-8
Dates Referenced Herein and Documents Incorporated by Reference
