Kraig Biocraft Laboratories Inc (KBLB)

[DimesForShares]

Think about the fixed price for warrants in the S-1A.

There were several variables in the revised S-1A. But not the cost of exchanging a warrant for a share of stock. Those are priced at $5.25.

People who participate in the offering purchase units. Each unit includes one share and one warrant. The share price is variable, but the cost of exchanging a warrant for another share: $5.25. Suppose after the reverse split occurs the share price falls down to $5. How many people will exchange a warrant for a share when they could just buy shares on the market for a quarter less? Answer, none.

But if the share price goes to $7, cashing in the warrant makes sense. An immediate gain of $1.75. People will cash in those warrants and KBLB will realize income from those direct sales.

How will Maxim price these units? If the price of a share is $7 after the reverse split, Maxim can sell lots of units at the market price. If the price of shares only hits $5, Maxim will have to discount the shares because the warrants are worthless. They start selling the shares at $4.50. The price on NASDAQ drops to $4.5. They mark them down to $4. The price on the board drops again.

This offering is structured so that the warrants must have value to both KBLB and investors. That happens when the share price after dilution lands above $5.25. Thus Thompson has an incentive to perform a high ratio split.