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Replies to post #24638 on Kraig Biocraft Laboratories Inc (KBLB)
06/15/11 11:55 PM
and must maintain a contractual relationship with a public relations firm, which is related to the investor group (see Note 5(D))
On August 3, 2009, the Company entered into an agreement with a consultant to provide investor relations services. On October 5, 2009 the Company issued 10,000,000 shares with a fair value of $200,000 ($0.02/share) to a consultant for investor relations to be provided over a term of 180 days. The Company started receiving services beginning October 5, 2009. As of June 30, 2010 $200,000 was recorded as an (See Note 7(D)).
Company: Kraig Biocraft Laboratories Inc. ( KBLB ) Promoter: QualityStocks
8/13/2009
End of Day: Close: 0.014 Volume: 649,635
Change: 0 % Change: 0
3 Month : High/Low: 0.039 / 0.013 Volume 3m : 1,519,971
Compensation: 10,000,000 shares
Equity Line of Credit
The selling security holder is reselling shares of our Class A common stock sold to it by our exercise of the put right under the Letter Agreement. Each month we may put up to $75,000 of our Class A common stock to Calm Seas, which will purchase such shares at a price per share equal to 80% of the lowest closing bid price of our Class A common stock during the five consecutive trading days immediately following the date the notice of our election to put shares pursuant to the Letter Agreement is delivered to Clam Seas (the date of delivery of such notice is referred to as the “put date”). Notwithstanding the $75,000 ceiling for each monthly put, if both we and Calm Seas agree, we may submit one or more additional puts during any given month to the extent we need additional capital for our operations and/or our product development. We can only submit such additional put(s) if Calm Seas Capital agrees to it. Furthermore, the additional put is subject to the $1,000,000 limitation of this offering. The additional put allows us to obtain additional capital in the event that our product development proceeds quicker than we expect.
We will automatically withdraw our put notice to Calm Seas if the lowest closing bid price used to determine the purchase price of the put shares is not at least equal to seventy-five percent (75%) of the average closing “bid” price for our Class A common stock for the ten (10) trading days prior to the put date.
The selling shareholder will not receive any compensation, fees or commissions under the Equity Line Agreement.
We expect to be able to raise the full $1,000,000 from the equity line of credit. We believe that positive results of our research and development efforts under our arrangement with the University of Notre Dame will help increase our stock price and, therefore, reduce the number of shares we will need to put to Calm Seas in order to raise the full $1,000,000 in gross proceeds we are seeking to raise under the equity line of credit.
Our equity line with Calm Seas Capital contemplates our future possible issuance of up to an aggregate 63,600,000 shares of our Class A common stock as a result of this registration statement, subject to certain restrictions. Currently, we believe it is likely we will need to draw the full amount available under this equity line prior to the expiration of the equity line. If the terms and conditions of the equity line are satisfied, and we choose to exercise our put rights to the fullest extent permitted and sell all of the 63,600,000 shares of our common stock to Calm Seas Capital, the ownership by our existing non-affiliate stockholders will be diluted by approximately 33% based on 198,064,050 shares of Class A common stock held by non-affiliates on March 29, 2010. If we issue all of the shares under the equity line, we would have 582,289,550 shares issued and outstanding, of which 261,664,050 shares will be held by non-affiliates, resulting in a 33% increase in the public float. We expect that the initial issuance of the shares under the equity line and subsequent resale by Calm Seas Capital will probably cause our share price to decrease. However, we also expect that with a substantial amount of the proceeds form the equity line being spent on research and development activities we may be able to offset such downward pressure on our stock price with announcements of our ongoing research and development. If our research and development efforts are positive, we expect would expect the announcement of such result would cause our share price to increase. Conversely, if we announce any negative results of our research and development efforts, we would expect the announcement of such result would cause a significant decrease in our stock price.
In the event that we raise substantially less than the maximum proceeds we expect to raise under the equity line of credit by the expiration of its 24 month term, we will seek to extend or renew the equity line of credit with Calm Seas Capital to raise the short-fall additional revenue on substantially the same terms as under the September 14, 2009 letter agreement. If Calm Seas Capital is unwilling or unable to enter into such an arrangement, we will be forced to raise additional capital from other investors. Alternatively, if our research yields some promising or positive results, we may seek a corporate partner in a joint venture or licensing arrangement in which we would seek to negotiation an upfront licensing fee and/or capital investment from such corporate partner. We have not yet identified any corporate partners for any such joint venture or licensing arrangement.
Equity Line of Credit
The selling security holder is reselling shares of our Class A common stock sold to it by our exercise of the put right under the Letter Agreement. Each month we may put up to $75,000 of our Class A common stock to Calm Seas, which will purchase such shares at a price per share equal to 80% of the lowest closing bid price of our Class A common stock during the five consecutive trading days immediately following the date the notice of our election to put shares pursuant to the Letter Agreement is delivered to Clam Seas (the date of delivery of such notice is referred to as the “put date”). Notwithstanding the $75,000 ceiling for each monthly put, if both we and Calm Seas agree, we may submit one or more additional puts during any given month to the extent we need additional capital for our operations and/or our product development. We can only submit such additional put(s) if Calm Seas Capital agrees to it. Furthermore, the additional put is subject to the $1,000,000 limitation of this offering. The additional put allows us to obtain additional capital in the event that our product development proceeds quicker than we expect.
We will automatically withdraw our put notice to Calm Seas if the lowest closing bid price used to determine the purchase price of the put shares is not at least equal to seventy-five percent (75%) of the average closing “bid” price for our Class A common stock for the ten (10) trading days prior to the put date.
The selling shareholder will not receive any compensation, fees or commissions under the Equity Line Agreement.
We expect to be able to raise the full $1,000,000 from the equity line of credit. We believe that positive results of our research and development efforts under our arrangement with the University of Notre Dame will help increase our stock price and, therefore, reduce the number of shares we will need to put to Calm Seas in order to raise the full $1,000,000 in gross proceeds we are seeking to raise under the equity line of credit.
Our equity line with Calm Seas Capital contemplates our future possible issuance of up to an aggregate 63,600,000 shares of our Class A common stock as a result of this registration statement, subject to certain restrictions. Currently, we believe it is likely we will need to draw the full amount available under this equity line prior to the expiration of the equity line. If the terms and conditions of the equity line are satisfied, and we choose to exercise our put rights to the fullest extent permitted and sell all of the 63,600,000 shares of our common stock to Calm Seas Capital, the ownership by our existing non-affiliate stockholders will be diluted by approximately 33% based on 198,064,050 shares of Class A common stock held by non-affiliates on March 29, 2010. If we issue all of the shares under the equity line, we would have 582,289,550 shares issued and outstanding, of which 261,664,050 shares will be held by non-affiliates, resulting in a 33% increase in the public float. We expect that the initial issuance of the shares under the equity line and subsequent resale by Calm Seas Capital will probably cause our share price to decrease. However, we also expect that with a substantial amount of the proceeds form the equity line being spent on research and development activities we may be able to offset such downward pressure on our stock price with announcements of our ongoing research and development. If our research and development efforts are positive, we expect would expect the announcement of such result would cause our share price to increase. Conversely, if we announce any negative results of our research and development efforts, we would expect the announcement of such result would cause a significant decrease in our stock price.
In the event that we raise substantially less than the maximum proceeds we expect to raise under the equity line of credit by the expiration of its 24 month term, we will seek to extend or renew the equity line of credit with Calm Seas Capital to raise the short-fall additional revenue on substantially the same terms as under the September 14, 2009 letter agreement. If Calm Seas Capital is unwilling or unable to enter into such an arrangement, we will be forced to raise additional capital from other investors. Alternatively, if our research yields some promising or positive results, we may seek a corporate partner in a joint venture or licensing arrangement in which we would seek to negotiation an upfront licensing fee and/or capital investment from such corporate partner. We have not yet identified any corporate partners for any such joint venture or licensing arrangement.
The Offering
This prospectus relates to the resale of up to 63,600,000 shares of our Class A common stock that may be issued to Calm Seas pursuant to a “put right” under a letter agreement for an Equity Line of Credit, that we entered into with Calm Seas on July 17, 2009 as amended on September 14, 2009 (together, as amended, the “Letter Agreement”).
For the purpose of determining the number of shares of common stock to be offered by this prospectus, we have assumed that we will issue not more than 63,600,000 shares pursuant to the exercise of our put right under the Letter Agreement, although the number of shares that we will actually issue pursuant to that put right may be significantly less than 63,600,000, depending on the trading price of our Class A common stock.
The Letter Agreement with Calm Seas provides that over a 24 month period we may put to Calm Seas up to an aggregate of $1,000,000 in shares of our Class A common stock for a purchase price equal to 80% of the lowest closing “bid” price of our Class A common stock during the five consecutive trading days immediately following the date we deliver notice to Calm Seas of our election to put shares pursuant to the Letter Agreement. We may only put shares at the beginning of each calendar month, unless Calm Seas accepts an additional put (as described below). The dollar value that we will be permitted to put each month pursuant to the Letter Agreement will be the lesser of: (A) the product of (i) 200% of the average daily volume in the US market of our Class A common stock for the ten trading days prior to the date we deliver our put notice to Calm Seas multiplied by (ii) the average of the daily closing prices for the ten (10) trading days immediately preceding the date we deliver our put notice to Calm Seas, or (B) $75,000. We will automatically withdraw our put notice to Calm Seas if the lowest closing bid price used to determine the purchase price of the put shares is not at least equal to seventy-five percent (75%) of the average closing “bid” price for our Class A common stock for the ten (10) trading days prior to the date we deliver our put notice to Calm Seas.
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On the seventh business day after we deliver our put notice to it, Calm Seas will purchase the number of shares share set forth in the put notice at the dollar value set forth in the put notice by delivering such amount to us by wire transfer.
Notwithstanding the $75,000 ceiling for each monthly put, as described above, we may at any time request Calm Seas to purchase shares in excess of such ceiling, either as a part of a monthly put or as an additional put(s) during such month. If Calm Seas, in its sole discretion, accepts such request to purchase additional shares, then we may include the put for additional shares in our monthly put request or submit an additional put for such additional shares in accordance with the procedure set forth above.
Calm Seas has indicated that it will resell those shares in the open market, resell our shares to other investors through negotiated transactions, or hold our shares in its portfolio. This prospectus covers the resale of our stock by Calm Seas either in the open market or to other investors through negotiated transactions. Calm Seas’ obligations under the Letter Agreement are not transferrable and this registration statement does not cover sales of our common stock by transferees of Calm Seas.
Except as described above, there are no other conditions that must be met in order for Calm Seas to be obligated to purchase the shares set forth in the put notice.
The Letter Agreement will terminate when any of the following events occur:
·Calm Seas has purchased an aggregate of $1,000,000 of our Class A common stock; or
·The second anniversary of the effective date of the registration statement covering our equity line of credit with Calm Seas.
As we draw down on the Equity Line of Credit, shares of our Class A common stock will be sold into the market by Calm Seas. The sale of these additional shares could cause our stock price to decline. In turn, if the stock price declines and we issue more puts, more shares will come into the market, which could cause a further drop in the stock price. You should be aware that there is an inverse relationship between the market price of our Class A common stock and the number of shares to be issued under the Equity Line of Credit. If our stock price declines, we will be required to issue a greater number of shares under the Equity Line of Credit. We have no obligation to utilize the full amount available under the Equity Line of Credit.
Terms of the Offering
Class A common stock offered:Up to 63,600,000 shares of Class A common stock, no par value, to be offered for resale by Calm Seas.
Class A common stock to be outstanding
before this offering:519,543,719 shares
Common stock to be outstanding
after this offering:583,143,719 shares
Use of proceeds:We will not receive any proceeds from the sale of the shares of Class A common stock. However, we will receive proceeds from the Equity Line of Credit. See “Use of Proceeds”.
Risk factors:An investment in our Class A common stock involves a high degree of risk. See “Risk Factors” beginning on page 5 of this prospectus.
OTC Bulletin Board symbol:“KBLB”
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in the face amount of $10,000 each, mature on December 31, 2010, bear interest at the rate of 5% simple interest per annum, payable at maturity or convertible with the principal, and the principal and interest shall be convertible at the option of the holder at a fixed price of $0.018 per share. Each debenture shall have a warrant attached exercisable for the purchase of 500,000 shares of common stock. The warrants shall expire on December 31, 2011, have a cashless exercise provision, and be exercisable at a fixed price of $0.02. The agreement also requires the investment group to purchase up to $1,000,000 of common stock monthly at the lesser of $75,000 or 200% of the average daily volume multiplied by the average of the daily closing prices for the ten days immediately preceding the exercise date. Each investment by the investment group is priced at the lowest closing “bid” price of the common stock during the five days immediately before the investment. The term of the funding shall be the earlier of (a) the drawing down of the entire $1,000,000 or (b) 24 months after the Effective Date, July 17, 2011. In addition, the Company is required to file and maintain an effective registration statement covering the convertible units, cannot issue more than 5% of its common stock outstanding without the investor group’s consent and must maintain a contractual relationship with a public relations firm, which is related to the investor group (see Note 5(D)). The Company has issued $120,000 of convertible debt to date. On July 21, 2010, the issuance of 1,799,434 shares was approved by the board of directors in exchange for the $15,000 specified in the put notice (See Note 8).
The $120,000 convertible debt instrument was determined to have a separate derivative liability instrument requiring bifurcation and the computation of fair value. The conversion price per share equals to the lower of the conversion price and the average closing bid price of the common stock during the 20 trading days prior to and including the date on which the conversion notice is delivered to the holder, however, the mandatory Conversion price shall not be less than $0.005. The Company calculated the estimated fair values of the liabilities for warrant derivative instruments and embedded conversion option derivative instruments with the Black-Scholes option pricing model using the share prices of the Company’s stock on the dates of valuation and using the following ranges for volatility, expected term and the risk free interest rate at each respective valuation date, no dividend has been assumed for any of the periods:
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 In accordance with FASB Accounting Standards Codification No. 480, Distinguishing Liabilities from Equity, the Company determined that the present value of the payment of $120,000 that was due on December 26, 2007, 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 June 30, 2010, the Company has recorded $120,000 in royalty agreement payable- related party. On December 21, 2007 the officer extended the due date to July 30, 2008. On May 30, 2008 the officer extended the due date to March 31, 2009. On October 10, 2008, the officer extended the due date to the earlier of (a) March 30, 2010 or (b) upon demand by the officer. On March 30, 2010, the officer extended the due date to the earlier of (a) March 30, 2010 or (b) upon demand by the officer. On September 8, 2009, a payment of $15,000 was paid to the officer. On October 19, 2009 and December 1, 2009, $10,000 was paid to the officer respectfully. An additional payment of $10,000 was made on January 15, 2010. During the quarter ending September 30, 2010 an additional payment of $8,000 was made. As of December 31, 2010, the outstanding balance is $67,000. Additionally, the accrued expenses are accruing 7% interest per year. At December 31, 2010, the Company recorded interest expense and related accrued interest payable of $14,181 (See Note 7(C).
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in the common stock. You should carefully read the entire prospectus, including “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements, before making an investment decision .
About Our Company
We are Kraig Biocraft Laboratories, Inc., a corporation organized under the laws of Wyoming on April 25, 2006. We were organized to develop high strength, protein-based fibers, using recombinant DNA technology, for commercial applications in both the specialty fiber and technical textile industries. Specialty fibers are engineered for specific uses that require exceptional strength, heat resistance and/or chemical resistance. The specialty fiber market is dominated by two synthetic fiber products: aramid fibers and ultra high molecular weight polyethylene fiber. Examples of these synthetic fibers include Kevlar® and Spectra®. The technical textile industry involves products for both industrial and consumer products, such as filtration fabrics, medical textiles (e.g., sutures and artificial ligaments), safety and protective clothing and fabrics used in military and aerospace applications (e.g., high-strength composite materials).
We have collaboration agreements with University of Notre Dame and the University of Wyoming that give us the exclusive use of certain intellectual property for developing transgenic silkworms to produce spider silk fibers in commercially viable quantities. We are using these genetic engineering technologies to develop fibers with greater strength, resiliency and flexibility for use in our target markets, namely the specialty fiber and technical textile industries. Our agreement with the University of Notre Dame has lapsed. However, we are finalizing the negotiation of a new agreement with Notre Dame which is on substantially the same terms as the agreement that has expired. This new agreement is currently going through the approval procedures at the University of Notre Dame. Based on the Emails from our contacts at Notre Dame and our past dealings with Notre Dame, we expect the new agreement with Notre Dame will be signed prior to January 31, 2010. If we were unable to renew our agreement with Notre Dame, we would work with a different university laboratory, such as the University of Wyoming. Michigan State University or the University of Michigan are also possible candidates. There would be some additional cost and loss of time if we had to restart our research with another university laboratory. We estimate that it would be an approximate six (6) month time loss and an additional research cost of $60,000 to $130,000 if we had to move the Notre Dame research operation to another university and use new laboratory personnel. Even if we do not renew our research agreement with the University of Notre Dame, we would be able to continue to license Notre Dame’s piggybac gene splicing technology under a separate, new licensing agreement at an estimated annual cost of $15,000. If we were unable to secure a license for Notre Dame’s gene splicing technology, we would have to switch to an alternative gene splicing technology, which would probably result in a loss of an additional 90 days. The cost of licensing such alternative gene splicing technology would be at a comparable cost as licensing Notre Dame’s piggybac gene splicing technology.
We are currently in the first stage of our development, which is to develop a transgenic silkworm that can produce a recombinant spider silk fiber by inserting genetic sequences into ordinary silkworms using patented genetic engineering technology under our license and collaboration agreements with the University of Norte Dame and the University of Wyoming. The proceeds from the offering, as described below, will be used to fund this first stage, which we expect to complete by October 1, 2011.
As of the date of this prospectus, we have not generated any revenues from our development activities. To date, we have generated an accumulated deficit of $ 4.15 million. As of December 31, 2009 we had $ 24,570 in cash (which are the remaining proceeds from a bridge financing that we closed prior to the initial filing of the registration statement in which this prospectus is contained). Our cash balance is not sufficient to advance our research and development obligations under our agreements with The Universities of Norte Dame and Wyoming. Both universities have indicated to us that they desire to continue their respective collaborative efforts with us, with the expectation that we will be able to raise capital under the Equity Line of Credit to fund our research and development efforts. We have also received a going concern opinion from our independent registered accounting firm in its audit report for our fiscal year ended December 31, 2009.
Approximately 95% of the proceeds from the equity line of credit will be used for expenses that are non-discretionary, such as employee salaries, the costs of our research and development obligations under the pending agreement with the University of Notre Dame, the costs related to our operation as a public company (primarily, legal and accounting fees) as well legal fees for securing our intellectual property, rent and telecommunications (phone, fax and Internet). Consequently, we believe that it is highly likely that we will use all $1,000,000 of the proceeds we expect to raise from the equity line of credit. We also expect to be able to raise the full $1,000,000 from the equity line of credit. We believe the results of our research and development efforts will help increase our stock price and, therefore, reduce the number of shares we will need to put to Calm Seas in order to raise the full $1,000,000 in gross proceeds we are seeking to raise under the equity line of credit. In the event that we do not have positive results from our research and development during the 24 month term of the equity line of credit, we believe it will be unlikely that we will raise the full $1,000,000 in gross proceeds under the equity line of credit. In the event that we raise substantially less than the maximum proceeds we expect to raise under the equity line of credit by the expiration of its 24 month term, we will seek to
