☑
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
☐
|
TRANSITION
REPORT PURSUANT TO PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
Wyoming
|
|
|
|
83-0459707
|
(State
or Other Jurisdiction of Incorporation)
|
|
(Commission
File No.)
|
|
(I.R.S.
Employer Identification No.)
|
2723
South State St. Suite 150
Ann
Arbor, Michigan 48104
|
|
(734) 619-8066
|
(Address
of Principal Executive Offices)
|
|
(Registrant’s
Telephone Number)
|
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
Non-accelerated
filer ☐
|
Smaller
reporting company ☑
Emerging
growth company ☐
|
|
Page
|
PART
I FINANCIAL INFORMATION
|
3
|
|
|
Item 1. Unaudited
Condensed Financial Statements:
|
3
|
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2018 (Unaudited)
and December 31, 2017 (Audited)
|
3
|
|
|
Condensed
Consolidated
Statements of Operations (Unaudited) for the three and nine month
periods ended September 30, 2018 and 2017
|
4
|
|
|
Condensed
Consolidated
Statements of Stockholders’ Deficit (Unaudited) for the nine
months ended September 30, 2018 and the year ended December 31,
2017
|
5
|
|
|
Condensed
Consolidated
Statements of Cash Flows (Unaudited) for the nine month periods
ended September 30, 2018 and 2017
|
6
|
|
|
Notes to Condensed
Consolidated
Financial Statements (Unaudited)
|
7
|
|
|
Item 2.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
23
|
|
|
Item 3.
Quantitative and Qualitative Disclosures about Market
Risk
|
30
|
|
|
Item 4. Controls
and Procedures
|
30
|
|
|
PART
II OTHER INFORMATION
|
31
|
|
|
Item 1. Legal
proceedings
|
31
|
|
|
Item 1A. Risk
Factors
|
31
|
|
|
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
|
31
|
|
|
Item 3. Defaults
upon Senior Securities
|
31
|
|
|
Item 4. Mine Safety
Disclosures
|
31
|
|
|
Item 5. Other
information
|
31
|
|
|
Item 6. Exhibits
|
32
|
KRAIG
BIOCRAFT LABORATORIES, INC.
|
||
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||
|
|
|
|
September
30, 2018
|
December
31, 2017
|
ASSET
|
(Unaudited)
|
|
Current
Assets
|
|
|
Cash
|
$22,339
|
$18,150
|
Accounts
receivable, net
|
99,256
|
25,872
|
Prepaid
expenses
|
1,360
|
4,465
|
Total
Current Assets
|
122,955
|
48,487
|
|
|
|
Property and
Equipment, net
|
54,133
|
62,494
|
Security
deposit
|
3,518
|
3,518
|
|
|
|
Total
Assets
|
$180,606
|
$114,499
|
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
|
|
Current
Liabilities
|
|
|
Accounts payable
and accrued expenses
|
$697,671
|
$678,157
|
Note payable -
related party
|
265,000
|
80,000
|
Royalty agreement
payable - related party
|
65,292
|
65,292
|
Accounts payable
and accrued expenses - related party
|
3,121,201
|
2,666,856
|
Total
Current Liabilities
|
4,149,164
|
3,490,305
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
Stockholders'
Deficit
|
|
|
Preferred
stock Series A, no par value;
|
|
|
2 and 2 shares
issued and outstanding, respectively
|
5,217,800
|
5,217,800
|
Common
stock Class A, no par value; unlimited shares
authorized,
|
|
|
816,883,910 and
816,847,910 shares issued and outstanding,
respectively
|
15,145,798
|
15,144,722
|
Common
stock Class B, no par value; unlimited shares
authorized,
|
|
|
no shares issued
and outstanding
|
-
|
-
|
Common
Stock Issuable, 1,122,311 and 1,122,311 shares,
respectively
|
22,000
|
22,000
|
Additional
paid-in capital
|
2,039,423
|
1,958,751
|
Accumulated
Deficit
|
(26,393,579)
|
(25,719,079)
|
|
|
|
Total
Stockholders' Deficit
|
(3,968,558)
|
(3,375,806)
|
|
|
|
Total
Liabilities and Stockholders' Deficit
|
$180,606
|
$114,499
|
KRAIG
BIOCRAFT LABORATORIES, INC.
|
||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||
(Unaudited)
|
||||
|
|
|
||
|
For
the Three Months Ended
|
For
the Nine Months Ended
|
||
|
September
30, 2018
|
September
30, 2017
|
September
30, 2018
|
September
30, 2017
|
Revenue
|
$140,761
|
$27,222
|
$401,620
|
$27,222
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
General and
Administrative
|
123,695
|
65,297
|
404,643
|
1,121,808
|
Professional
Fees
|
31,287
|
58,125
|
79,463
|
281,034
|
Officer's
Salary
|
110,626
|
109,958
|
345,064
|
330,638
|
Rent - Related
Party
|
2,880
|
2,880
|
8,640
|
7,680
|
Research and
Development
|
20,221
|
25,382
|
91,242
|
190,989
|
Total
Operating Expenses
|
288,709
|
261,642
|
929,052
|
1,932,149
|
|
|
|
|
|
Loss
from Operations
|
(147,948)
|
(234,420)
|
(527,432)
|
(1,904,927)
|
|
|
|
|
|
Other
Income/(Expenses)
|
|
|
|
|
Gain on forgiveness
of debt
|
-
|
-
|
19,924
|
-
|
Interest
expense
|
(59,033)
|
(45,365)
|
(166,992)
|
(129,342)
|
Total
Other Income/(Expenses)
|
(59,033)
|
(45,365)
|
(147,068)
|
(129,342)
|
|
|
|
|
|
Net
(Loss) before Provision for Income Taxes
|
(206,981)
|
(279,785)
|
(674,500)
|
(2,034,269)
|
|
|
|
|
|
Provision
for Income Taxes
|
-
|
-
|
-
|
-
|
|
|
|
|
|
Net
(Loss)
|
$(206,981)
|
$(279,785)
|
$(674,500)
|
$(2,034,269)
|
|
|
|
|
|
Net
Income (Loss) Per Share - Basic and Diluted
|
$(0.00)
|
$(0.00)
|
$(0.00)
|
$(0.00)
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
|
|
during
the period - Basic and Diluted
|
816,883,910
|
799,952,913
|
816,871,251
|
787,538,080
|
KRAIG
BIOCRAFT LABORATORIES, INC.
|
|||||||||||
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS
DEFICITS
|
|||||||||||
For
the nine months ended September 30, 2018
|
|||||||||||
(Unaudited)
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock -
Series A
|
Common Stock -
Class A
|
Common Stock -
Class B
|
Common Stock
–
Class A
Shares
To be
issued
|
|
Accumulated
Deficit
|
|
||||
|
Shares
|
Par
|
Shares
|
Par
|
Shares
|
Par
|
Shares
|
Par
|
APIC
|
|
Total
|
Balance,
December 31, 2016
|
2
|
$5,217,800
|
773,627,964
|
$12,958,757
|
-
|
$-
|
5,778,633
|
$279,754
|
$2,568,855
|
$(23,385,979)
|
$(2,360,813)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for
cash ($0.0491/share)
|
-
|
$-
|
9,167,259
|
$450,000
|
-
|
$-
|
-
|
$-
|
$-
|
$-
|
$450,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued for
services - related party
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
$17,473
|
$-
|
$17,473
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued for
services
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
$848,011
|
$-
|
$848,011
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of
30,000,000 warrants in exchange for stock
|
-
|
$-
|
29,396,365
|
$1,478,211
|
-
|
$-
|
|
|
$(1,478,211)
|
$-
|
$-
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued shares for
warrant exercise issuable as of December 31, 2016
|
-
|
$-
|
3,906,322
|
$224,904
|
-
|
$-
|
(3,906,322)
|
$(224,904)
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued shares for
services issuable as of December 31, 2016
|
-
|
$-
|
750,000
|
$32,850
|
-
|
$-
|
(750,000)
|
$(32,850)
|
$-
|
$-
|
$-
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed interest -
related party
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
$2,623
|
$-
|
$2,623
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the
years ended December 31, 2017
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
$-
|
$(2,333,100)
|
$(2,333,100)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2017
|
2
|
$5,217,800
|
816,847,910
|
$15,144,722
|
-
|
$-
|
1,122,311
|
$22,000
|
$1,958,751
|
$(25,719,079)
|
$(3,375,806)
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued for
services
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
$72,575
|
$-
|
$72,575
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for
services ($0.0299/Sh)
|
-
|
$-
|
36,000
|
$1,076
|
-
|
$-
|
-
|
$-
|
$-
|
$-
|
$1,076
|
|
|
|
|
|
|
|
|
|
|
|
|
Imputed interest -
related party
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
$8,097
|
$-
|
$8,097
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the
quarter ended September 30, 2018
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
-
|
$-
|
$-
|
$(674,500)
|
$(674,500)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
September 30, 2018
|
2
|
$5,217,800
|
816,883,910
|
$15,145,798
|
-
|
$-
|
1,122,311
|
$22,000
|
$2,039,423
|
$(26,393,579)
|
$(3,968,558)
|
KRAIG BIOCRAFT
LABORATORIES, INC.
|
||
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||
(Unaudited)
|
||
|
|
|
|
|
|
|
For
Nine Months Ended September 30,
|
|
|
|
|
|
2018
|
2017
|
Cash
Flows From Operating Activities:
|
|
|
Net
Loss
|
$(674,500)
|
$(2,034,269)
|
Adjustments
to reconcile net loss to net cash used in operations
|
|
|
Depreciation
expense
|
19,809
|
14,119
|
Gain
on forgiveness of debt
|
(19,924)
|
-
|
Imputed
interest - related party
|
8,097
|
1,870
|
Stock
issuable for services
|
-
|
-
|
Warrants
issued to consultants
|
72,575
|
848,011
|
Warrants
issued to related party
|
-
|
17,472
|
Changes
in operating assets and liabilities:
|
|
|
(Increase)
Decrease in prepaid expenses
|
3,105
|
(5,459)
|
(Increase)
Decrease in accounts receivables, net
|
(73,384)
|
4,636
|
Increase
in accrued expenses and other payables - related party
|
454,345
|
410,282
|
Increase
in accounts payable
|
40,514
|
93,069
|
Net
Cash Used In Operating Activities
|
(169,363)
|
(650,269)
|
|
|
|
Cash
Flows From Investing Activities:
|
|
|
Purchase of Fixed
Assets and Domain Name
|
(11,448)
|
(24,170)
|
Net
Cash Used In Investing Activities
|
(11,448)
|
(24,170)
|
|
|
|
Cash
Flows From Financing Activities:
|
|
|
Proceeds from Notes
Payable - related party
|
185,000
|
-
|
Proceeds from
issuance of common stock
|
-
|
450,000
|
Net
Cash Provided by Financing Activities
|
185,000
|
450,000
|
|
|
|
Net
Increase in Cash
|
4,189
|
(224,439)
|
|
|
|
Cash at Beginning
of Period
|
18,150
|
298,859
|
|
|
|
Cash
at End of Period
|
$22,339
|
$74,420
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
Cash paid for
interest
|
$-
|
$
|
Cash paid for
taxes
|
$-
|
$
|
|
|
|
Supplemental
disclosure of non-cash investing and financing
activities:
|
|
|
Shares
issued in connection with cashless warrants exercise
|
$-
|
$855,104
|
Shares
issued from stock payable
|
$-
|
$
|
Settlement of accounts payable with stock issuance
|
$1,076
|
$
|
|
September 30, 2018
|
September 30, 2017
|
Stock
Warrants (Exercise price - $0.001/share)
|
36,400,000
|
47,800,000
|
Convertible
Preferred Stock
|
2
|
2
|
Total
|
36,400,002
|
47,800,002
|
|
°
|
Level 1
- Valuations based on quoted prices in active markets for identical
assets or liabilities that an entity has the ability to
access. We believe our carrying value of level 1
instruments approximate their fair value at September 30, 2018 and
December 31, 2017.
|
°
|
Level 2
- Valuations based on quoted prices for similar assets or
liabilities, quoted prices for identical assets or liabilities in
markets that are not active, or other inputs that are observable or
can be corroborated by observable data for substantially the full
term of the assets or liabilities.
|
°
|
Level 3
- Valuations based on inputs that are supported by little or no
market activity and that are significant to the fair value of the
assets or liabilities. We consider depleting assets, asset
retirement obligations and net profit interest liability to be
Level 3. We determine the fair value of Level 3
assets and liabilities utilizing various inputs, including NYMEX
price quotations and contract terms.
|
|
September
30, 2018
|
December
31, 2017
|
Level
1
|
$-
|
$-
|
Level
2
|
$-
|
$-
|
Level
3
|
$-
|
$-
|
Total
|
$-
|
$-
|
Customer
|
September
30, 2018
|
December
31, 2017
|
Customer
A
|
100%
|
100%
|
Customer
A
|
$99,256
|
$25,872
|
Customer
|
September
30, 2018
|
September
30, 2017
|
Customer
A
|
100%
|
0%
|
Customer
A
|
$401,620
|
$--
|
|
As
of September 30, 2018
|
December
31, 2017
|
Automobile
|
$41,805
|
$41,805
|
Laboratory Equipment
|
73,194
|
61,746
|
Office Equipment
|
7,260
|
7,260
|
Leasehold
Improvements
|
7,938
|
7,938
|
Less: Accumulated
Depreciation
|
(76,064)
|
(56,255)
|
Total Property and Equipment,
net
|
$54,133
|
$62,494
|
Expected
dividends
|
0%
|
Expected
volatility
|
78.58%
|
Expected
term
|
3
years
|
Risk free
interest rate
|
1.32%
|
Expected
forfeitures
|
0%
|
Expected
dividends
|
0%
|
Expected
volatility
|
93.6%
|
Expected
term
|
4
years
|
Risk free
interest rate
|
1.01%
|
Expected
forfeitures
|
0%
|
Expected
dividends
|
0%
|
Expected
volatility
|
93.60%
|
Expected
term
|
4
years
|
Risk free
interest rate
|
1.01%
|
Expected
forfeitures
|
0%
|
Expected
dividends
|
0%
|
Expected
volatility
|
107.51%
|
Expected
term
|
2
years
|
Risk free
interest rate
|
0.82%
|
Expected
forfeitures
|
0%
|
Expected
dividends
|
0%
|
Expected
volatility
|
106.40%
|
Expected
term
|
3
years
|
Risk free
interest rate
|
1.43%
|
Expected
forfeitures
|
0%
|
Expected
dividends
|
0%
|
Expected
volatility
|
106.57%
|
Expected
term
|
2
years
|
Risk free
interest rate
|
1.15%
|
Expected
forfeitures
|
0%
|
Expected
dividends
|
0%
|
Expected
volatility
|
102.65%
|
Expected
term
|
2
years
|
Risk free
interest rate
|
1.38%
|
Expected
forfeitures
|
0%
|
Expected
dividends
|
0%
|
Expected
volatility
|
96.95%
|
Expected
term
|
3
years
|
Risk free
interest rate
|
2.26%
|
Expected
forfeitures
|
0%
|
Expected
dividends
|
0%
|
Expected
volatility
|
97.56%
|
Expected
term
|
4
years
|
Risk free
interest rate
|
2.65%
|
Expected
forfeitures
|
0%
|
|
Number
of
Warrants
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Life (in Years)
|
Balance, December
31, 2017
|
32,800,000
|
|
3.0
|
Granted
|
3,600,000
|
-
|
|
Exercised
|
-
|
-
|
|
Cancelled/Forfeited
|
-
|
-
|
|
Balance, September
30, 2018
|
36,400,000
|
|
3.5
|
Intrinsic
Value
|
$1,146,600
|
|
|
Exercise
Price Warrants Outstanding
|
Warrants Exercisable
|
Weighted Average Remaining Contractual
Life
|
Aggregate Intrinsic
Value
|
|
|
|
|
$0.001
|
31,100,000
|
3.2
|
$2,021,500
|
$0.056
|
3,000,000
|
2.9
|
$195,000
|
$0.04
|
2,300,000
|
2.9
|
$149,500
|
Exercise
Price Warrants Outstanding
|
Warrants Exercisable
|
Weighted Average Remaining Contractual
Life
|
Aggregate Intrinsic
Value
|
|
|
|
|
$0.001
|
30,500,000
|
2.5
|
$2,639,000
|
$0.04
|
2,300,000
|
3.1
|
$133,400
|
●
|
Common
stock Class A, unlimited number of shares authorized, no par
value
|
●
|
Common
stock Class B, unlimited number of shares authorized, no par
value
|
●
|
Preferred
stock, unlimited number of shares authorized, no par
value
|
●
|
Calm
Seas has purchased an aggregate of $7,500,000 of our Class A common
stock; or
|
●
|
The
second anniversary from the Effective Date.
|
|
●
|
We plan
to accelerate both our microbiology and selective breeding programs
as well as providing more resources for our material testing
protocols into 2019. We spent approximately $190,988 between
January 2017 and September 2017 on collaborative research and
development of high strength polymers at the University of Notre
Dame. In 2018 we have directed the focus our research and
development efforts on growing our internal capabilities. We will
consider continued funding of the collaborative research and
development of high strength polymers at the University of Notre
Dame in 2019.
|
|
|
|
|
●
|
We
expect to spend approximately $13,700 on collaborative research and
development of high strength polymers and spider silk protein at
the University of Wyoming over the next twelve months. This level
of research spending at the university is also a requirement of our
licensing agreement with the university.
|
|
|
|
|
●
|
We will
prepare to launch operations in Vietnam according to our investment
and enterprise registration certificates and with a focus on
scaling our production of recombinant spider silk to commercial
levels.
|
|
|
|
|
●
|
We will
consider buying an established revenue producing company in a
compatible business, in order to broaden our financial base and
facilitate the commercialization of our products. We expect to use
a combination of stock and cash for any such purchase.
|
|
|
|
|
●
|
We will
also actively consider pursuing collaborative research
opportunities with both private and 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 allows, management will give strong
consideration to increasing the breadth of our research to include
protein expression platform technologies.
|
|
|
|
|
●
|
We plan
to actively pursue collaborative research and product testing,
opportunities with companies in the biotechnology, materials,
textile and other industries.
|
|
|
|
|
●
|
We plan
to actively pursue collaborative commercialization, marketing and
manufacturing opportunities with companies in the textile and
material sectors for the fibers we developed and for any new
polymers that we create in 2018.
|
|
|
|
|
●
|
We plan
to actively pursue the development of commercial scale production
of our recombinant materials including Monster Silk® and Dragon
SilkTM
|
|
Quarter Ended
September 30,
|
|
%
Change
Increase
(Decrease)
|
|
|
2018
|
2017
|
Change
|
|
NET
REVENUES
|
$140,761
|
$27,222
|
113,539
|
417.09%
|
OPERATING
EXPENSES:
|
|
|
|
|
General
and Administrative
|
123,695
|
65,297
|
58,398
|
89.43%
|
Professional
Fees
|
31,287
|
58,125
|
(26,838)
|
-46.17%
|
Officer's
Salary
|
110,626
|
109,958
|
668
|
0.61%
|
Rent
- related party
|
2,880
|
2,880
|
-
|
0.00%
|
Research
and Development
|
20,221
|
25,382
|
(5,161)
|
-20.33%
|
Total operating expenses
|
288,709
|
261,642
|
27,067
|
10.35%
|
Loss from operations
|
(147,948)
|
(234,420)
|
86,472
|
-36.89%
|
Interest
expense
|
(59,033)
|
(45,365)
|
(13,668)
|
30.13%
|
Net Loss
|
$(206,981)
|
$(279,785)
|
72,804
|
-26.02%
|
|
Nine Months Ended
September 30,
|
|
%
Change
Increase
(Decrease)
|
|
|
2018
|
2017
|
Change
|
|
NET
REVENUES
|
$401,620
|
$27,222
|
374,398
|
1375.35%
|
OPERATING
EXPENSES:
|
|
|
|
|
General
and Administrative
|
404,643
|
1,121,808
|
(717,165)
|
-63.93%
|
Professional
Fees
|
79,463
|
281,034
|
(201,571)
|
-71.72%
|
Officer's
Salary
|
345,064
|
330,638
|
14,426
|
4.36%
|
Rent
- related party
|
8,640
|
7,680
|
960
|
12.50%
|
Research
and Development
|
91,242
|
190,989
|
(99,747)
|
-52.23%
|
Total operating expenses
|
929,052
|
1,932,149
|
(1,003,097)
|
-51.92%
|
Loss from operations
|
(527,432)
|
(1,904,927)
|
1,377,495
|
-72.31%
|
Gain
on forgiveness of debt
|
19,924
|
-
|
19,924
|
100.00%
|
Interest
expense
|
(166,992)
|
(129,342)
|
(37,650)
|
29.11%
|
Net Loss
|
$(674,500)
|
$(2,034,269)
|
1,359,769
|
-66.84%
|
|
September 30, 2018
|
December 31, 2017
|
Cash
|
$22,339
|
$18,150
|
Accounts
receivable
|
$99,256
|
$25,872
|
Prepaid
expenses
|
$1,360
|
$4,465
|
Total
current assets
|
$122,955
|
$48,487
|
Total
assets
|
$180,606
|
$114,499
|
Total
current liabilities
|
$4,149,164
|
$3,490,305
|
Total
liabilities
|
$4,149,164
|
$3,490,305
|
(a)
|
Not
applicable.
|
(b)
|
Not
applicable.
|
Exhibit
No.
|
Description
|
3.1
|
Articles of
Incorporation (1)
|
3.2
|
Articles of
Amendment (2)
|
3.3
|
Articles of
Amendment, filed with the Wyoming Secretary of State on November
15, 2013 (3)
|
3.4
|
Articles of
Amendment, filed with the Wyoming Secretary of State on December
17, 2013 (4)
|
3.5
|
Bylaws(1)
|
4.1
|
Form of Warrant
issued Mr. Jonathan R. Rice (5)
|
31.1*
|
Certification of
the Chief Executive Officer and Principal Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)
|
32.1**
|
Certification of
the Principal Executive Officer and Principal Financial Officer
pursuant to U.S.C. Section 1350 As adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 (furnished herewith)
|
101.INS
|
XBRL Instance
Document (filed herewith)
|
101.SCH
|
XBRL Taxonomy
Extension Schema Document (filed
herewith)
|
101.CAL
|
XBRL Taxonomy
Extension Calculation Linkbase Document (filed
herewith)
|
101.DEF
|
XBRL Taxonomy
Extension Definition Linkbase Document (filed
herewith)
|
101.LAB
|
XBRL Taxonomy
Extension Label Linkbase Document (filed
herewith)
|
101.PRE
|
XBRL Taxonomy
Extension Presentation Linkbase Document (filed
herewith)
|
1.
|
Incorporated
by reference to our Registration Statement on Form SB-2 (Reg. No.
333-146316) filed with the SEC on September 26, 2007
|
2.
|
Incorporated
by reference to our Registration Statement on Form S-1 (Reg. No.
333-162316) filed with the SEC on October 2, 2009
|
3.
|
Incorporated
by reference to our Current Report on Form 8-K filed with the SEC
on November 22, 2013
|
4.
|
Incorporated
by reference to our Current Report on Form 8-K filed with the SEC
on December 19, 2013
|
5.
|
Incorporated
by reference to our Annual Report on Form 10-K filed with the SEC
on March 22, 2017
|
|
Kraig Biocraft Laboratories, Inc.
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
Date:
November 13, 2018
|
By:
|
/s/ Kim
Thompson
|
|
|
|
Kim
Thompson
|
|
|
|
President,
Chief Executive Officer and Chief Financial Officer (Principal
Executive Officer and Principal Financial and Accounting
Officer)
|
|
|
|
|
|
|
1.
|
I have
reviewed this quarterly report on Form 10-Q for the period ended
September 30, 2018 of Kraig Biocraft Laboratories,
Inc.;
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
|
|
4.
|
The
registrant’s other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
|
|
a.
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
|
b.
|
Designed
such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
c.
|
Evaluated
the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
d.
|
Disclosed
in this report any change in the registrant’s internal
control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over
financial reporting; and
|
|
5.
|
The
registrant’s other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions):
|
|
a.
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial
information; and
|
|
b.
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s
internal control over financial reporting.
|
Date:
November 13, 2018
|
By:
|
/s/ Kim
Thompson
|
|
|
Kim
Thompson
|
|
|
Chief
Executive Officer
|
|
|
(Principal
Executive Officer)
|
|
|
|
Date: November 13, 2018
|
By:
|
/s/ Kim Thompson
|
|
|
Kim
Thompson
|
|
|
Chief
Financial Officer
|
|
|
(Principal
Finance and Accounting Officer)
|
|
1.
|
The
Quarterly Report on Form 10-Q of Kraig Biocraft Laboratories, Inc.
(the “Company”) for the period ended September 30, 2018
(the “Report”) fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(U.S.C. 78m or 78o(d)); and
|
|
2.
|
The
information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
|
Date:
November 13, 2018
|
By:
|
/s/ Kim
Thompson
|
|
|
Kim
Thompson
|
|
|
Chief
Executive Officer
(Principal
Executive Officer)
|
Date:
November 13, 2018
|
|
|
|
By:
|
/s/ Kim
Thompson
|
|
|
Kim
Thompson
|
|
|
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Nov. 12, 2018 |
|
Stock issued to founder, Shares | ||
Entity Registrant Name | Kraig Biocraft Laboratories, Inc | |
Entity Central Index Key | 0001413119 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 816,883,910 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2018 |
Condensed Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Stockholders equity: | ||
Preferred stock, par value | $ 0 | $ 0 |
Preferred stock, issued shares | 2 | |
Preferred stock, outstanding shares | 2 | |
Common stock Class A, par value | $ 0 | $ 0 |
Common stock Class A, authorized | Unlimited | Unlimited |
Common stock Class A, issued shares | 816,883,910 | 816,847,910 |
Common stock Class A, outstanding shares | 816,883,910 | 816,847,910 |
Common stock Class B, par value | $ 0 | $ 0 |
Common stock Class B, authorized | Unlimited | Unlimited |
Common stock Class B, issued shares | 0 | 0 |
Common stock Class B, outstanding shares | 0 | 0 |
Common Stock Issuable, Shares | 1,122,311 | 1,122,311 |
Condensed Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Income Statement [Abstract] | ||||
Revenue | $ 140,761 | $ 27,222 | $ 401,620 | $ 27,222 |
Operating Expenses | ||||
General and Administrative | 123,695 | 65,297 | 404,643 | 1,121,808 |
Professional Fees | 31,287 | 58,125 | 79,463 | 281,034 |
Officer's Salary | 110,626 | 109,958 | 345,064 | 330,638 |
Rent - Related Party | 2,880 | 2,880 | 8,640 | 7,680 |
Research and Development | 20,221 | 25,382 | 91,242 | 190,989 |
Total Operating Expenses | 288,709 | 261,642 | 929,052 | 1,932,149 |
Loss from Operations | (147,948) | (234,420) | (527,432) | (1,904,927) |
Other Income/(Expenses) | ||||
Gain on forgiveness of debt | 0 | 0 | 19,924 | 0 |
Interest expense | (59,033) | (45,365) | (166,992) | (129,342) |
Total Other Income/(Expenses) | (59,033) | (45,365) | (147,068) | (129,342) |
Net (Loss) before Provision for Income Taxes | (206,981) | (279,785) | (674,500) | (2,034,269) |
Provision for Income Taxes | 0 | 0 | 0 | 0 |
Net (Loss) | $ (206,981) | $ (279,785) | $ (674,500) | $ (2,034,269) |
Net Income (Loss) Per Share - Basic and Diluted | $ (0.00) | $ (0.00) | $ (0.00) | $ (0.00) |
Weighted average number of shares outstanding during the period - Basic and Diluted | 816,883,910 | 799,952,913 | 816,871,251 | 787,538,080 |
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As Reported | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION | (A) Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.
It is management's opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.
Kraig Biocraft Laboratories, Inc. (the "Company") was incorporated under the laws of the State of Wyoming on April 25, 2006. The Company was organized to develop high strength, protein based fiber, using recombinant DNA technology, for commercial applications in the textile and specialty fiber industries.
On March 5, 2018, the Company issued a board resolution authorizing investment in a Vietnamese subsidiary and appointing a representative for the subsidiary.
On April 24, 2018, the Company reported that it had received its investment registration certificate for its new Vietnamese subsidiary Prodigy Textiles Co,. Ltd.
On May 1, 2018, the Company reported that it had received its enterprise registration certificate for its new Vietnamese subsidiary Prodigy Textiles Co,. Ltd.
(B) Foreign Currency
The assets and liabilities of Prodigy Textiles, Co., Ltd. whose functional currency is the Vietnamese Dong, are translated into US dollars at period-end exchange rates prior to consolidation. Income and expense items are translated at the average rates of exchange prevailing during the period. The adjustments resulting from translating the Company’s financial statements are reflected as a component of other comprehensive (loss) income. Foreign currency transaction gains and losses are recognized in net earnings based on differences between foreign exchange rates on the transaction date and settlement date.
(C) Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
(D) Cash
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents as of September 30, 2018 or December 31, 2017.
(E) Loss Per Share
Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB Accounting Standards Codification No. 260, “Earnings per Share.” For September 30, 2018 and September 30, 2017, warrants were not included in the computation of income/ (loss) per share because their inclusion is anti-dilutive.
The computation of basic and diluted loss per share for September 30, 2018 and September 30, 2017 excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:
(F) Research and Development Costs
The Company expenses all research and development costs as incurred for which there is no alternative future use. These costs also include the expensing of employee compensation and employee stock based compensation.
(G) Income Taxes
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the Tax Act) was enacted into law and the new legislation contains several key tax provisions that affected us, including a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, remeasuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the transition tax, deferred tax re-measurements, and other items to be incomplete due to the forthcoming guidance and our ongoing analysis of final year-end data and tax positions. We expect to complete our analysis within the measurement period in accordance with SAB 118.
Effective January 1, 2009, the Company adopted guidance regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the financial statements and applies to all federal or state income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. As of September 30, 2018 and December 31, 2017 there were no amounts that had been accrued in respect to uncertain tax positions.
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.
(H) Stock-Based Compensation
In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
The Company operates in one segment and therefore segment information is not presented.
(I) Recent Accounting Pronouncements
In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in this update simplify the test for goodwill impairment by eliminating Step 2 from the impairment test, which required the entity to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining fair value of assets acquired and liabilities assumed in a business combination. The amendments in this update are effective for public companies for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We are evaluating the impact of adopting this guidance on our Consolidated Financial Statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805); Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business to help companies evaluate whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The amendments in this update are effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those periods. We are evaluating the impact of adopting this guidance on our Consolidated Financial Statements.
In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.
As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception.
Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently reviewing the impact of adoption of ASU 2017-11on its financial statements.
In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of adopting ASU No. 2016-02 on our financial statements.
In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-08 on its financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, or ASU No. 2016-09. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method.
In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides further guidance on identifying performance obligations and improves the operability and understandability of licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients,” which amends the guidance on transition, collectability, non-cash consideration, and the presentation of sales and other similar taxes. ASU 2016-12 clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The standard allows for both retrospective and modified retrospective methods of adoption. The Company has not yet determined the impact of ASU 2016-10 on its financial statements.
In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Statements," which requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019 (fiscal year 2021 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-13 on its Financial Statements.
In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments," which aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017 (fiscal year 2019 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-15 on its Financial Statements.
In November 2016, the FASB issued ASU No. 2016-18, ("ASU 2016-18") Statement of Cash Flows (Topic 230): Restricted Cash. This ASU is intended to provide guidance on the presentation of restricted cash or restricted cash equivalents and reduce the diversity in practice. This ASU requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts on the statement of cash flows. We elected as permitted by the standard, to early adopt ASU 2016-18 retrospectively as of January 1, 2017 and have applied to all periods presented herein. The adoption of ASU 2016-18 did not have a material impact to our unaudited condensed consolidated financial statements. The effect of the adoption of ASU 2016-18 on our condensed consolidated statements of cash flows was to include restricted cash balances in the beginning and end of period balances of cash and cash equivalent and restricted cash. The change in restricted cash was previously disclosed in operating activities and financing activities in the condensed consolidated statements of cash flows.
All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable
The 2017 financial statements have been reclassified to conform to the 2018 presentation.
(J) Equipment
The Company values property and equipment at cost and depreciates these assets using the straight-line method over their expected useful life. The Company uses a five year life for automobiles.
In accordance with FASB Accounting Standards Codification No. 360, Property, Plant and Equipment, the Company carries long-lived assets at the lower of the carrying amount or fair value. Impairment is evaluated by estimating future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected undiscounted future cash flow is less than the carrying amount of the assets, an impairment loss is recognized. Fair value, for purposes of calculating impairment, is measured based on estimated future cash flows, discounted at a market rate of interest.
There were no impairment losses recorded for the nine months ended September 30, 2018 and 2017.
(K) Fair Value of Financial Instruments
We hold certain financial assets, which are required to be measured at fair value on a recurring basis in accordance with the Statement of Financial Accounting Standard No. 157, “Fair Value Measurements” (“ASC Topic 820-10”). ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Level 1 instruments include cash, account receivable, prepaid expenses, inventory and account payable and accrued liabilities. The carrying values are assumed to approximate the fair value due to the short term nature of the instrument. The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:
(L) Revenue Recognition
During 2017 and the nine months ended September 30, 2018 the Company’s revenues were generated primarily from a contract with the U.S. Government. The Company performs work under this cost-plus-fixed-fee contract. Under the base phase of that contract the Company produced recombinant spider silk woven into ballistic shootpack panels. Those shootpack panels were delivered to the U.S. Government customer. Under an option period award starting in July 2017, to that original contract, the Company has worked to develop new recombinant silks.
Cost-plus-fixed-fee contracts—Revenue is recognized on cost-plus-fixed-fee contracts with the U.S. Government on the basis of partial performance equal to costs incurred plus an estimate of applicable fees earned as the Company becomes contractually entitled to reimbursement of costs and the applicable fees. Invoicing for costs and applicable fees are reported to the U.S. Government on a monthly basis and invoices are typically paid within 30 days.
For the nine months ended September 30, 2018 and 2017, the Company recognized $401,620 and $0 respectively in revenue from the Government contract. These revenues were generated for work performed in the development and production of the Company’s recombinant silks under the base and option period phases of our ongoing contract with the US Army.
On July 24, 2017, the Company signed a contract option extension with the US Army to research and deliver recombinant spider silk fibers and threads. This contract option increased the total contract award by an additional $921,130 to a total of $1,021,092 and added 12 months to the contract duration. This effort was scheduled to end on September 24, 2018, the Company has requested an extension of this contract option period through April 2019. The Company is in communication with the contracting office and is working with the contracting office as they determine the best path forward. Management believes there is a reasonable probability of securing the extension request and delivering the materials within the requested time extension.
(M) Concentration of Credit Risk
The Company at times has cash in banks in excess of FDIC insurance limits. At September 30, 2018 and December 31, 2017, the Company had approximately $0 and $0, respectively in excess of FDIC insurance limits.
At September 30, 2018 and December 31, 2017, the Company had a concentration of accounts receivable of:
For the nine months ended September 30, 2018 and 2017, the Company had a concentration of sales of:
For the nine months ended September 30, 2018 and 2017, the Company booked $0 and $0 for doubtful accounts. |
2. GOING CONCERN |
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Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GOING CONCERN | As reflected in the accompanying unaudited financial statements, the Company has a working capital deficiency of $4,026,209 and stockholders’ deficiency of $3,968,558 and used $169,363 of cash in operations for nine months ended September 30, 2018. 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. |
3. EQUIPMENT |
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUIPMENT | At September 30, 2018 and December 31, 2017, property and equipment, net, is as follows:
Depreciation expense for the nine months ended September 30, 2018 and 2017 was $19,809 and $14,119 respectively.
Depreciation expense for the three months ended September 30, 2018 and 2017 was $6,774 and $5,405 respectively. |
4. ACCRUED INTEREST PAYABLE - RELATED PARTY |
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Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
ACCRUED INTEREST PAYABLE - RELATED PARTY | On June 6, 2016, the Company received $50,000 from a principal stockholder. Subsequently on December 1, 2017, the Company received an additional $30,000 from a principal stockholder. On January 8, 2018 and March 31, 2018 the Company received an additional $100,000 and $15,000, respectively. On April 26, 2018, the Company received $20,000 from a principal stockholder, and $15,000 on June 21, 2018 and $15,000 on June 29, 2018. On July 5, 2018, the Company received $20,000 from a principal stockholder. Pursuant to the terms of the loan, the advance bears an interest at 3%, is unsecured, and due on demand. Total loan payable to principal stockholder for as of September 30, 2018 is $265,000. Pursuant to the terms of the loans, the advances bear an interest at 3%, is unsecured and due on demand. During the nine months ended September 30, 2018 the Company recorded $8,097 as an in-kind contribution of interest related to the loan and recorded accrued interest payable of $4,968. During the nine months ended September 30, 2017, the Company recorded accrued interest payable of $1,613 and $1,870 as an in-kind contribution of interest related to the loan. |
5. STOCKHOLDERS' DEFICIT |
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STOCKHOLDERS' DEFICIT | (A) Common Stock Issued for Cash
On January 25, 2017, the Company issued 2,678,571 share of common stock for $150,000 ($0.056/share).
On April 6, 2017, the Company issued 2,083,333 share of common stock for $100,000 ($0.05/share).
On June 12, 2017, the Company issued 2,268,603 shares of common stock for $100,000 ($0.044/share)
On June 15, 2017, the Company issued 2,136,752 shares of common stock for $100,000 ($0.047/share)
(B) Common Stock Issued for Services
Shares issued for services as mentioned below were valued at the closing price of the stock on the date of grant.
On December 30, 2016, the Company recorded 3,906,322 issuable shares with a fair value of $224,904 ($0.0575/share) to two consultants for services rendered. Those shares were issued on January 23, 2017.
On January 25, 2017, the Company issued 750,000 shares of common stock previously recorded as common stock issuable for the year end December 31, 2016 (See Note 6 (C)).
On April 6, 2018, the Company issued 36,000 shares with a fair value of $1,076 ($0.0299/share) to a consultant as consideration for consulting fees owed from October 1, 2014 through September 30, 2018 of $21,000. The issuance of shares resulted in gain on settlement of accounts payable of $19,924 (See Note 6(B)).
(C) Common Stock Warrants On January 1, 2016, the Company issued 3-year warrant to purchase 6,000,000 shares of common stock at $0.001 per share to a related party for services to be rendered. The warrants had a fair value of $142,526, based upon the Black-Scholes option-pricing model on the date of grant and vested on February 20, 2017, and became exercisable commencing on February 20, 2018, and for a period expiring on February 20, 2021. During the year ended December 31, 2016, the Company recorded $17,473 as an expense for warrants issued to related party.
On July 26, 2016, the Company issued 4-year warrant to purchase 10,000,000 shares of common stock at $0.001 per share to a consultant for services rendered. The warrants had a fair value of $365,157, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants became exercisable on July 26, 2018, and for a period of 4 years expiring on July 26, 2022. During the years ended December 31, 2016, the Company recorded $365,157 as an expense for such warrants issued.
On July 26, 2016, the Company issued 4-year warrant to purchase 8,000,000 shares of common stock at a price of $0.001 per share to a consultant for services rendered. The warrants had a fair value of $292,126, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants became exercisable on July 26, 2018, and for a period of 4 years expiring on July 26, 2022. During the years ended December 31, 2016, the Company recorded $292,126 as an expense for such warrants issued.
On October 2, 2016, the Company issued 2-year warrant to purchase 2,300,000 shares of common stock at an exercise price of $0.04 per share to a consultant for services rendered. The warrants had a fair value of $68,686, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants will become exercisable on August 25, 2019, and for a period of 2 years expiring on August 25, 2021. During the year ended December 31, 2016, the Company recorded $68,686 as an expense for such warrants issued (See Note 6(C)).
On December 8, 2016, the Company issued 4-year warrant to purchase 15,000,000 shares of common stock at an exercise price of $0.001 per share to a consultant for services rendered. The warrants had a fair value of $630,259, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants became exercisable on June 12, 2017, and for a period of 2 years expiring on December 8, 2019. During the years ended December 31, 2016, the Company recorded $630,259 as an expense for warrants.
On December 30, 2016, the Company recorded stock issuable of 1,953,161 shares in connection with the cashless exercise of the 1,500,000 warrants. The shares were subsequently issued on January 23, 2017.
On December 30, 2016, the Company recorded stock issuable of 1,953,161 shares in connection with the cashless exercise of the 1,500,000 warrants. The shares were subsequently issued on January 23, 2017.
On February 6, 2017, the Company issued 4-year warrant to purchase 750,000 shares of common stock at an exercise price of $0.03 per share to a consultant for services rendered. The warrants had a fair value of $44,421, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on March 6, 2018 as long as the employee remains as full time. Warrants will be exercisable on October 6, 2019, and for a period of 3 years expiring on October 6, 2022. During the year ended December 31, 2017, the Company recorded $5,161 as an expense for warrants issued. On May 2, 2017, the Company cancelled a 750,000 share warrant with a consultant as the consultant was terminated and the option expense was recaptured by the Company.
On June 26, 2017, the Company issued 2-year warrant to purchase 15,000,000 shares of common stock at an exercise price of $0.001 per share to a consultant for services rendered. The warrants had a fair value of $848,011, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants became exercisable on December 26, 2017, and for a period of 2 years expiring on June 26, 2019. During the year ended December 31, 2017, the Company recorded 848,011 as an expense for warrants issued.
On July 14, 2017 the Company granted 14,745,203 shares in connection with the cashless exercise of the 15,000,000 warrants. (See Note 6 (C)).
On December 27, 2017, the Company issued of 14,651,162 shares in connection with the cashless exercise of the 15,000,000 warrants. The shares were issued on December 29, 2017. (See Note 6 (C)).
On February 9, 2018, the Company issued 3-year warrant to purchase 3,000,000 shares of common stock at an exercise price of $0.056 per share to a consultant for services rendered. The warrants had a fair value of $52,660, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants will be exercisable on August 9, 2019, and for a period of 2 years expiring on August 9, 2021. During the nine months ended September 30, 2018, the Company recorded 52,660 as an expense for warrants issued.
On March 20, 2018, the Company issued 4-year warrant to purchase 600,000 shares of common stock at an exercise price of $0.001 per share to a consultant for services rendered. The warrants had a fair value of $19,915, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on March 20, 2018. Warrants will be exercisable on March 20, 2019, and for a period of 3 years expiring on March 20, 22. During the nine months ended September 30, 2018, the Company recorded 19,915 as an expense for warrants issued.
For the nine months ended September 30, 2018, the following warrants were outstanding:
For the year ended December 31, 2017 the following warrants were outstanding:
(D) Amendment to Articles of Incorporation
On February 16, 2009, the Company amended its articles of incorporation to amend the number and class of shares the Company is authorized to issue as follows:
Effective December 17, 2013, the Company amended its articles of incorporation to designate a Series A no par value preferred stock. Two shares of Series A Preferred stock have been authorized. |
6. COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |||||
COMMITMENTS AND CONTINGENCIES | On November 10, 2010, the Company entered into an addendum to the employment agreement with its CEO, effective January 1, 2011 through the December 31, 2015. The term of the agreement is a five year period at an annual salary of $210,000. There is a 6% annual increase. For the year ending December 31, 2015, the annual salary was $281,027. The employee is also to receive a 20% bonus based on the annual based salary. Any stock, stock options bonuses have to be approved by the board of directors. On January 1, 2016 the agreement renewed with the same terms for another 5 years with an annual salary of $297,889 for the year ended December 31, 2016. On January 1, 2017 the agreement renewed with the same terms for another 5 years with an annual salary of $315,764 for the year ended December 31, 2017. On January 1, 2018 the agreement renewed with the same terms for another 5 years with an annual salary of $334,708 for the year ended December 31, 2018. As of September 30, 2018 and December 31, 2017, the accrued salary balance is $1,958,835 and $1,707,804, respectively. (See Note 7).
On October 2, 2014, the Company entered into a letter agreement for an equity line of financing up to $7,500,000 (the “Letter Agreement”) with Calm Seas Capital, LLC (“Calm Seas”).
Under the Letter Agreement, over a 24 month period from the Effective Date we may put to Calm Seas up to an aggregate of $7,500,000 in shares of our Class A common stock for a purchase price equal to 80% of the lowest price of our Class A common stock during the five consecutive trading days immediately following the date we deliver notice to Calm Seas of our election to put shares pursuant to the Letter Agreement. We may put shares bi-monthly. The dollar value that will be permitted for each put pursuant to the Letter Agreement will be the lesser of: (A) the product of (i) 200% of the average daily volume in the US market of our Class A common stock for the ten trading days prior to the date we deliver our put notice to Calm Seas multiplied by (ii) the average of the daily closing prices for the ten (10) trading days immediately preceding the date we deliver our put notice to Calm Seas, or (B) $100,000. We will automatically withdraw our put notice to Calm Seas if the lowest closing bid price used to determine the purchase price of the put shares is not at least equal to seventy-five percent (75%) of the average closing “bid” price for our Class A common stock for the ten (10) trading days prior to the date we deliver our put notice to Calm Seas. Notwithstanding the $100,000 ceiling for each bi-monthly put, as described above, we may at any time request Calm Seas to purchase shares in excess of such ceiling, either as a part of bi-monthly puts or as an additional put(s) during such month. If Calm Seas, in its sole discretion, accepts such request to purchase additional shares, then we may include the put for additional shares in our monthly put request or submit an additional put for such additional shares in accordance with the procedure set forth above.
The Letter Agreement will terminate when any of the following events occur:
On January 23, 2015, the board of directors appointed Mr. Jonathan R. Rice as our Chief Operating Officer. Mr. Rice’s employment agreement has a term of one year and can be terminated by either the Company or Mr. Rice at any time. Under the employment agreement, Mr. Rice is entitled to an annual cash compensation of $120,000, which includes salary, health insurance, 401K retirement plan contributions, etc. The Company also agreed to reimburse Mr. Rice for his past educational expenses of approximately $11,000. In addition, Mr. Rice will be issued a three-year warrant to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.001 per share pursuant to the employment agreement. Additionally, on May 28, 2015, the Company issued a three-year warrant to purchase 3,000,000 shares of common stock of the Company at an exercise price of $0.001 per share to Mr. Rice. The warrant fully vested on October 28, 2016. For the year ended December 31, 2015, the Company recorded $121,448 for the warrants issued to Mr. Rice. On January 14, 2016 the Company signed a new employment agreement with Mr. Rice, our COO. The employment agreement has a term of one year and can be terminated by either the Company or Mr. Rice at any time. Under the employment agreement, Mr. Rice is entitled to an annual cash compensation of $140,000, which includes salary, health insurance, 401K retirement plan contributions, etc. In addition, Mr. Rice was issued a three-year warrant to purchase 6,000,000 shares of common stock of the Company at an exercise price of $0.001 per share pursuant to the employment agreement. For the year ended December 31, 2016, the Company recorded $193,652 for the warrants issued to Mr. Rice in 2016. For the year ended December 31, 2017 the Company recorded $17,473 for the warrants issued to Mr. Rice in 2016. On January 9, 2018, the Company extended the expiration date of a warrant for 2,000,000 shares of common stock from January 19, 2018 to January 31, 2020 for its COO, additionally, on March 15, 2018, the Company signed an extension of its at-will employment agreement with its COO.
(A)License Agreement
On May 8, 2006, the Company entered into a license agreement. Pursuant to the terms of the agreement, the Company paid a non-refundable license fee of $10,000. The Company will pay a license maintenance fee of $10,000 on the one year anniversary of this agreement and each year thereafter. The Company will pay an annual research fee of $13,700 with first payment due January 2007, then on each subsequent anniversary of the effective date commencing May 4, 2007. The annual research fees are accrued by the Company for future payment. Pursuant to the terms of the agreement the Company may be required to pay additional fees aggregating up to a maximum of $10,000 a year for patent maintenance and prosecution relating to the licensed intellectual property.
On October 28, 2011, the Company entered into a license agreement with the University of Notre Dame. Under the agreement, the Company received exclusive and non-exclusive rights to certain spider silk technologies including commercial rights with the right to sublicense such intellectual property. In consideration of the licenses granted under the agreement, the Company agreed to issue to the University of Notre Dame 2,200,000 shares of its common stock and to pay a royalty of 2% of net sales. On March 4, 2015, the Company entered into a new Intellectual Property / Collaborative Research Agreement with Notre Dame extending the duration of the agreement through March 2016. In February of 2016 this agreement was extended to July 31, 2016. Under the agreement the Company will provide approximately $534,000 in financial support. The license agreement has a term of 20 years which can be extended on an annual basis after that. It can be terminated by the University of Notre Dame if the Company defaults on its obligations under the agreement and fails to cure such default within 90 days of a written notice by the university. The Company can terminate the agreement upon a 90 day written notice subject to payment of a termination fee of $5,000 if the termination takes place within 2 years after its effectiveness, $10,000 if the termination takes place within 4 years after its effectiveness and $20,000 if the Agreement is terminated after 4 years. On May 5, 2017 the Company signed an addendum to that agreement relating to tangible property and project intellectual property.
(B) Royalty and Research Agreements
On May 1, 2008 the Company entered into a five year consulting agreement for research and development. Pursuant to the terms of the agreement, the Company will be required to pay $1,000 per month, or at the Company’s option, the consulting fee may be paid in the form of Company common stock based upon the greater of $0.05 per share or the average of the closing price of the Company’s shares over the five days preceding such stock issuance. On April 6, 2018, the Company issued 36,000 shares with a fair value of $1,076 ($0.0299/share) to a consultant as consideration for consulting fees owed from October 1, 2014 through September 30, 2018 of $21,000. The issuance of shares resulted in gain on settlement of accounts payable of $19,924. On April 1, 2018, the Company ended the consulting agreement and no additional compensation will be issued. (See Note 5 (B)).
On December 26, 2006, the Company entered into an addendum to the intellectual property transfer agreement with Mr. Thompson, its CEO. In accordance with FASB Accounting Standards Codification No 480, Distinguishing Liabilities from Equity, the Company determined that the present value of the payment of $120,000 that was due on December 26, 2007. As of September 30, 2018 and December 31, 2017, the outstanding balance is $65,292. As of December 31, 2017, the Company recorded interest expense and related accrued interest payable of $2,623. As of September 30, 2018 the Company recorded interest expense and related accrued interest payable of $4,093.
On June 6, 2012, the Company entered into a consulting agreement for intellectual property and collaborative research and development with an American university. In May 2017 this agreement was amended to increase the total funding by approximately $189,000 and the duration of this agreement was extended to September 30, 2017. The Company did not extend the agreement after September 30, 2017. As of September 30, 2018 no new agreement has been signed.
On December 30, 2015, the Company entered into a cooperative agreement for the research and pilot production of hybrid silkworms in Vietnam. Under this agreement, the Company will establish a subsidiary in Vietnam where it will develop and produce hybrid silkworms. On April 24, 2018, the Company reported that it had received its investment registration certificate for its new Vietnamese subsidiary Prodigy Textiles Co,. Ltd. On May 1, 2018, the Company reported that it had received its enterprise registration certificate for its new Vietnamese subsidiary Prodigy Textiles Co,. Ltd
(C) Consulting Agreement
On August 25, 2016, the Company entered into an agreement with a consultant to provide consulting services in helping the Company expand its operations. The agreement commenced on August 25, 2016 and will continue for 18 months. On January 24, 2017, the Company agreed to continue the agreement and agreed to advance $10,000 for costs and expenses incurred.
On December 4, 2016, the Company entered into an agreement with a consultant to provide investor relations services. The agreement commenced on December 4, 2016 and will continue for twelve months. As consideration for the services performed, the Company will issue 750,000 shares with a fair value of $32,850 ($0.0321/share) to this consultant. For the year ended December 31, 2016, the Company recorded 750,000 as common stock issuable. Shares were subsequently issued on January 25, 2017 (See Note 5).
On June 26, 2017, the Company entered into an agreement with a consultant to provide investor relations services for nine months. As consideration for the services performed, the Company agrees to issue a 2-year warrant to purchase 15,000,000 shares of common stock at a price of $0.001 per share with a cashless exercise provision. On June 26, 2016, the company issued such warrant with a fair value of $848,011. On December 27, 2017, the Company issued of 14,651,162 shares in connection with the cashless exercise of the 15,000,000 warrants. The shares were issued on December 29, 2017. (See Note 5 (C)).
On February 9, 2018, the Company issued a 3-year warrant to purchase 3,000,000 shares of common stock at an exercise price of $0.056 per share to a consultant for services rendered. The warrants had a fair value of $52,660, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants will be exercisable on August 9, 2019, and for a period of 2 years expiring on August 9, 2021. During the nine months ended September 30, 2018, the Company recorded 52,660 as an expense for warrants issued (See Note 5 (C)).
On February 20, 2018, the Company signed an agreement with a consultant to provide services. Under this agreement the consultant will receive a warrant for 600,000 shares of common stock and may be awarded additional warrants for up to 3,000,000 shares of common stock if performance metrics are achieved. On March 20, 2018, the Company issued a 4-year warrant to purchase 600,000 shares of common stock at an exercise price of $0.001 per share to a consultant for services rendered. The warrants had a fair value of $19,915, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on March 20, 2018. Warrants will be exercisable on March 20, 2019, and for a period of 3 years expiring on March 20, 2022. During the nine months ended September 30, 2018, the Company recorded $19,915 as an expense for warrants issued (See Note 5 (C)).
(D) Operating Lease Agreements
Starting in February of 2015, we rent additional office space in East Lansing, Michigan. In July 2015, the Company signed a new lease for its East Lansing, Michigan office space. On February 1, 2016 the Company signed a six (6) month lease extension for its East Lansing office. In July 2016 the Company signed a twelve (12) month lease extension for its East Lansing office. The Company pays an annual rent of $5,187 for office space, conference facilities, mail, fax, and reception services. In July 2017 the Company signed a twelve (12) month lease extension for its East Lansing office. The Company pays an annual rent of $4,804.68 for office space, conference facilities, mail, fax, and reception services. In October 2017 the Company ended this lease.
Since September of 2015, we rent office space at 2723 South State Street, Suite 150, Ann Arbor, Michigan 48104, which is our principal place of business. We pay an annual rent of $2,508 for conference facilities, mail, fax, and reception services located at our principal place of business.
On June 29, 2016 the Company signed a twelve (12) month lease for new office space in Vietnam. The Company pays an annual rent of $2,329 for office space and reception services. The company ended this lease on June 29, 2017.
On July 19, 2016 the Company signed a month to month lease for a production facility in Indiana. The Company pays a monthly rent of $670 for office space light industrial manufacturing space. In November 2017 the Company ended this lease.
Rent expense for the nine months ended September 30, 2018 and 2017 was $20,182 and $6,880, respectively.
On January 23, 2017 the Company signed an 8 year property lease with the Company’s President for land in Texas where the Company grows its mulberry. The Company pays a monthly rent of $960. Rent expense – related party for the nine months ended September 30, 2018 and 2017, was $5,760 and $4,800, respectively (See Note 7).
On September 13, 2017, the Company signed a new two year lease commencing on October 1, 2017 and ending on September 30, 2019. The Company pays an annual rent of $39,200 for the year one of lease and $42,000 for the year two of lease for office and manufacturing space. For the nine months ended September 30, 2018 the Company paid $29,400. For the year ended December 31, 2017 the Company paid $9,800 for office and manufacturing space. |
7. RELATED PARTY TRANSACTIONS |
9 Months Ended |
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Sep. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | On December 26, 2006, the Company entered into an addendum to the intellectual property transfer agreement with Mr. Thompson, its CEO. Pursuant to the addendum, the Company agreed to issue either 200,000 preferred shares with the following preferences; no dividends and voting rights equal to 100 common shares per share of preferred stock or the payment of $120,000, the officer agreed to terminate the royalty payments due under the agreement and give title to the exclusive license for the non-protective apparel use of the intellectual property to the Company. On the date of the agreement, the Company did not have any preferred stock authorized with the required preferences. In accordance with FASB Accounting Standards Codification No. 480, Distinguishing Liabilities from Equity, the Company determined that the present value of the payment of $120,000 that was due on December 26, 2007, one year anniversary of the addendum, should be recorded as an accrued expense until such time as the Company has the ability to assert that it has preferred shares authorized. As of December 31, 2017 the outstanding balance is $65,292. Additionally, the accrued expenses are accruing 7% interest per year. As of September 30, 2018, the Company recorded interest expense and related accrued interest payable of $4,093.
On November 10, 2010, the Company entered into an addendum to the employment agreement, with its CEO, effective January 1, 2011 through the March 31, 2016. Subsequently, on January 1, 2018 the agreement renewed with the same terms for another 5 years with an annual salary of $334,708 for the year ended December 31, 2018. As of September 30, 2018 and December 31, 2017, the accrued salary balance is $1,958,835 and $1,707,804, respectively.
On January 14, 2016 the Company signed a new employment agreement with Mr. Rice, the Company's COO. The employment agreement has a term of one year and can be terminated by either the Company or Mr. Rice at any time. Under the employment agreement, Mr. Rice is entitled to an annual cash compensation of $140,000, which includes salary, health insurance, 401K retirement plan contributions, etc. In addition, Mr. Rice will be issued a three-year warrant to purchase 6,000,000 shares of common stock of the Company at an exercise price of $0.001 per share pursuant to the employment agreement. For the year ended December 31, 2016, the Company recorded $193,654 for the warrants issued to Mr Rice. For the year ended December 31, 2017 the Company recorded $17,473 for the warrants issued to Mr. Rice in 2016. On January 9, 2018, the Company extended the expiration date of a warrant for 2,000,000 shares of common stock from January 19, 2018 to January 31, 2020 for an employee. Additionally, on March 15, 2018, the Company signed an extension of its at-will employment agreement with its COO.
On January 1, 2016, the Company issued 3-year warrant for 6,000,000 shares to a related party, with an exercise price of $0.001 per share. The warrants were granted for services to be rendered. The warrants had a fair value of $142,526, based upon the Black-Scholes option-pricing model on the date of grant and vesting on February 20, 2017, and will be exercisable on February 20, 2018, and for a period expiring on February 20, 2021. During the year ended December 31, 2017, the Company recorded $17,473 as an expense for warrants issued to related party.
On June 6, 2016, the Company received $50,000 from a principal stockholder. Subsequently on December 1, 2017, the Company received an additional $30,000 from a principal stockholder. On January 8, 2018 and March 31, 2018 the Company received an additional $100,000 and $15,000, respectively. On April 26, 2018, the Company received $20,000 from a principal stockholder, and $15,000 on June 21, 2018 and $15,000 on June 29, 2018. Pursuant to the terms of the loan, the advance bears an interest at 3%, is unsecured, and due on demand. Total loan payable to principal stockholder for as of September 30, 2018 is $245,000. Pursuant to the terms of the loans, the advances bear an interest at 3%, is unsecured and due on demand. During the nine months ended September 30, 2018 the Company recorded $4,771 as an in-kind contribution of interest related to the loan and recorded accrued interest payable of $2,933. During the nine months ended September 30, 2017, the Company recorded accrued interest payable of $1,225 and $1,240 as an in-kind contribution of interest related to the loan.
On August 4, 2016 the Company issued a bonus of $20,000 payable to Mr. Rice if he remains employed with the Company through March 30, 2018.
On January 23, 2017 the Company signed an 8 year property lease with the Company’s President for land in Texas. The Company pays $960 per month starting on February 1, 2017 and uses this facility to grow mulberry for its U.S. silk operations. Rent expense – related party for the nine months ended September 30, 2018 was $7,680 and $4,800, respectively.
As of September 30, 2018 and December 31, 2017, there was $231,213 and $184,439, respectively, included in accounts payable and accrued expenses - related party, which is owed to the Company’s Chief Executive Officer and Chief Operations Officer.
As of September 30, 2018 there was $884,604 of accrued interest- related party and $25,549 in shareholder loan interest – related party included in accounts payable and accrued expenses – related party, which is owed to the Company’s Chief Executive officer.
As of December 31, 2017 there was $732,147 of accrued interest- related party and $19,111 in shareholder loan interest – related party included in accounts payable and accrued expenses – related party, which is owed to the Company’s Chief Executive officer.
As of September 30, 2018, the Company owes $1,958,835 in accrued salary to principal stockholder, $21,000 to the Company’s COO, and $2,523 to its office employees.
As of December 31, 2017, the Company owes $1,707,804 in accrued salary to principal stockholder, $23,354 to the Company’s COO, and $3,554 to its office employees.
The Company owes $65,292 in royalty payable to related party as of September 30, 2018 and December 31, 2017. |
8. SUBSEQUENT EVENTS |
9 Months Ended |
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Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | The Company has analyzed its operations subsequent to September 30, 2018 through the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose.
On October 1, 2018, the Company received $26,000 from a principal stockholder. Pursuant to the terms of the loan, the advances bear an interest at 3%, is unsecured and due on demand. |
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (Policies) |
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Basis of Presentation | The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.
It is management's opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.
Kraig Biocraft Laboratories, Inc. (the "Company") was incorporated under the laws of the State of Wyoming on April 25, 2006. The Company was organized to develop high strength, protein based fiber, using recombinant DNA technology, for commercial applications in the textile and specialty fiber industries.
On March 5, 2018, the Company issued a board resolution authorizing investment in a Vietnamese subsidiary and appointing a representative for the subsidiary.
On April 24, 2018, the Company reported that it had received its investment registration certificate for its new Vietnamese subsidiary Prodigy Textiles Co,. Ltd.
On May 1, 2018, the Company reported that it had received its enterprise registration certificate for its new Vietnamese subsidiary Prodigy Textiles Co,. Ltd. |
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Foreign Currency | The assets and liabilities of Prodigy Textiles, Co., Ltd. whose functional currency is the Vietnamese Dong, are translated into US dollars at period-end exchange rates prior to consolidation. Income and expense items are translated at the average rates of exchange prevailing during the period. The adjustments resulting from translating the Company’s financial statements are reflected as a component of other comprehensive (loss) income. Foreign currency transaction gains and losses are recognized in net earnings based on differences between foreign exchange rates on the transaction date and settlement date. |
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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. |
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Cash | For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents as of September 30, 2018 or December 31, 2017. |
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Loss Per Share | Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB Accounting Standards Codification No. 260, “Earnings per Share.” For September 30, 2018 and September 30, 2017, warrants were not included in the computation of income/ (loss) per share because their inclusion is anti-dilutive.
The computation of basic and diluted loss per share for September 30, 2018 and September 30, 2017 excludes the common stock equivalents of the following potentially dilutive securities because their inclusion would be anti-dilutive:
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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. |
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Income Taxes | The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the Tax Act) was enacted into law and the new legislation contains several key tax provisions that affected us, including a one-time mandatory transition tax on accumulated foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others. We are required to recognize the effect of the tax law changes in the period of enactment, such as determining the transition tax, remeasuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the transition tax, deferred tax re-measurements, and other items to be incomplete due to the forthcoming guidance and our ongoing analysis of final year-end data and tax positions. We expect to complete our analysis within the measurement period in accordance with SAB 118.
Effective January 1, 2009, the Company adopted guidance regarding accounting for uncertainty in income taxes. This guidance clarifies the accounting for income taxes by prescribing the minimum recognition threshold an income tax position is required to meet before being recognized in the financial statements and applies to all federal or state income tax positions. Each income tax position is assessed using a two-step process. A determination is first made as to whether it is more likely than not that the income tax position will be sustained, based upon technical merits, upon examination by the taxing authorities. If the income tax position is expected to meet the more likely than not criteria, the benefit recorded in the financial statements equals the largest amount that is greater than 50% likely to be realized upon its ultimate settlement. As of September 30, 2018 and December 31, 2017 there were no amounts that had been accrued in respect to uncertain tax positions.
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments, and measurement of their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt, the Company will continue its evaluation process of these instruments as derivative financial instruments.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model. |
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Stock-Based Compensation | In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
The Company operates in one segment and therefore segment information is not presented. |
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Recent Accounting Pronouncements | In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in this update simplify the test for goodwill impairment by eliminating Step 2 from the impairment test, which required the entity to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining fair value of assets acquired and liabilities assumed in a business combination. The amendments in this update are effective for public companies for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We are evaluating the impact of adopting this guidance on our Consolidated Financial Statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805); Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business to help companies evaluate whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The amendments in this update are effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those periods. We are evaluating the impact of adopting this guidance on our Consolidated Financial Statements.
In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.
As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception.
Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently reviewing the impact of adoption of ASU 2017-11on its financial statements.
In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For public companies, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of adopting ASU No. 2016-02 on our financial statements.
In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) that clarifies how to apply revenue recognition guidance related to whether an entity is a principal or an agent. ASU 2016-08 clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer and provides additional guidance about how to apply the control principle when services are provided and when goods or services are combined with other goods or services. The effective date for ASU 2016-08 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. The Company has not yet determined the impact of ASU 2016-08 on its financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation, or ASU No. 2016-09. The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method.
In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides further guidance on identifying performance obligations and improves the operability and understandability of licensing implementation guidance. The effective date for ASU 2016-10 is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years. In May 2016, the FASB issued ASU 2016-12 “Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients,” which amends the guidance on transition, collectability, non-cash consideration, and the presentation of sales and other similar taxes. ASU 2016-12 clarifies that, for a contract to be considered completed at transition, all (or substantially all) of the revenue must have been recognized under legacy GAAP. In addition, ASU 2016-12 clarifies how an entity should evaluate the collectability threshold and when an entity can recognize nonrefundable consideration received as revenue if an arrangement does not meet the standard’s contract criteria. The standard allows for both retrospective and modified retrospective methods of adoption. The Company has not yet determined the impact of ASU 2016-10 on its financial statements.
In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Statements," which requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019 (fiscal year 2021 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-13 on its Financial Statements.
In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments," which aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017 (fiscal year 2019 for the Company). The Company has not yet determined the potential effects of the adoption of ASU 2016-15 on its Financial Statements.
In November 2016, the FASB issued ASU No. 2016-18, ("ASU 2016-18") Statement of Cash Flows (Topic 230): Restricted Cash. This ASU is intended to provide guidance on the presentation of restricted cash or restricted cash equivalents and reduce the diversity in practice. This ASU requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts on the statement of cash flows. We elected as permitted by the standard, to early adopt ASU 2016-18 retrospectively as of January 1, 2017 and have applied to all periods presented herein. The adoption of ASU 2016-18 did not have a material impact to our unaudited condensed consolidated financial statements. The effect of the adoption of ASU 2016-18 on our condensed consolidated statements of cash flows was to include restricted cash balances in the beginning and end of period balances of cash and cash equivalent and restricted cash. The change in restricted cash was previously disclosed in operating activities and financing activities in the condensed consolidated statements of cash flows.
All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable
The 2017 financial statements have been reclassified to conform to the 2018 presentation. |
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Equipment | The Company values property and equipment at cost and depreciates these assets using the straight-line method over their expected useful life. The Company uses a five year life for automobiles.
In accordance with FASB Accounting Standards Codification No. 360, Property, Plant and Equipment, the Company carries long-lived assets at the lower of the carrying amount or fair value. Impairment is evaluated by estimating future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected undiscounted future cash flow is less than the carrying amount of the assets, an impairment loss is recognized. Fair value, for purposes of calculating impairment, is measured based on estimated future cash flows, discounted at a market rate of interest.
There were no impairment losses recorded for the nine months ended September 30, 2018 and 2017. |
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Fair Value of Financial Instruments | We hold certain financial assets, which are required to be measured at fair value on a recurring basis in accordance with the Statement of Financial Accounting Standard No. 157, “Fair Value Measurements” (“ASC Topic 820-10”). ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Level 1 instruments include cash, account receivable, prepaid expenses, inventory and account payable and accrued liabilities. The carrying values are assumed to approximate the fair value due to the short term nature of the instrument. The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:
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Revenue Recognition |
During 2017 and the nine months ended September 30, 2018 the Company’s revenues were generated primarily from a contract with the U.S. Government. The Company performs work under this cost-plus-fixed-fee contract. Under the base phase of that contract the Company produced recombinant spider silk woven into ballistic shootpack panels. Those shootpack panels were delivered to the U.S. Government customer. Under an option period award starting in July 2017, to that original contract, the Company has worked to develop new recombinant silks.
Cost-plus-fixed-fee contracts—Revenue is recognized on cost-plus-fixed-fee contracts with the U.S. Government on the basis of partial performance equal to costs incurred plus an estimate of applicable fees earned as the Company becomes contractually entitled to reimbursement of costs and the applicable fees. Invoicing for costs and applicable fees are reported to the U.S. Government on a monthly basis and invoices are typically paid within 30 days.
For the nine months ended September 30, 2018 and 2017, the Company recognized $401,620 and $0 respectively in revenue from the Government contract. These revenues were generated for work performed in the development and production of the Company’s recombinant silks under the base and option period phases of our ongoing contract with the US Army.
On July 24, 2017, the Company signed a contract option extension with the US Army to research and deliver recombinant spider silk fibers and threads. This contract option increased the total contract award by an additional $921,130 to a total of $1,021,092 and added 12 months to the contract duration. This effort was scheduled to end on September 24, 2018, the Company has requested an extension of this contract option period through April 2019. The Company is in communication with the contracting office and is working with the contracting office as they determine the best path forward. Management believes there is a reasonable probability of securing the extension request and delivering the materials within the requested time extension. |
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Concentration of Credit Risk | The Company at times has cash in banks in excess of FDIC insurance limits. At September 30, 2018 and December 31, 2017, the Company had approximately $0 and $0, respectively in excess of FDIC insurance limits.
At September 30, 2018 and December 31, 2017, the Company had a concentration of accounts receivable of:
For the nine months ended September 30, 2018 and 2017, the Company had a concentration of sales of:
For the nine months ended September 30, 2018 and 2017, the Company booked $0 and $0 for doubtful accounts. |
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Significant Accounting Policies And Organization | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share |
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Schedule of fair Value of Financial Instruments |
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Concentration of credit risk | At September 30, 2018 and December 31, 2017, the Company had a concentration of accounts receivable of:
For the nine months ended September 30, 2018 and 2017, the Company had a concentration of sales of:
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3. EQUIPMENT (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equipment |
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5. STOCKHOLDERS' DEFICIT (Tables) |
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Weighted average assumptions for warrants issued | On January 1, 2016, the Company issued 3-year warrant to purchase 6,000,000 shares of common stock at $0.001 per share to a related party for services to be rendered. The warrants had a fair value of $142,526, based upon the Black-Scholes option-pricing model on the date of grant and vested on February 20, 2017, and became exercisable commencing on February 20, 2018, and for a period expiring on February 20, 2021. During the year ended December 31, 2016, the Company recorded $17,473 as an expense for warrants issued to related party.
On July 26, 2016, the Company issued 4-year warrant to purchase 10,000,000 shares of common stock at $0.001 per share to a consultant for services rendered. The warrants had a fair value of $365,157, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants became exercisable on July 26, 2018, and for a period of 4 years expiring on July 26, 2022. During the years ended December 31, 2016, the Company recorded $365,157 as an expense for such warrants issued.
On July 26, 2016, the Company issued 4-year warrant to purchase 8,000,000 shares of common stock at a price of $0.001 per share to a consultant for services rendered. The warrants had a fair value of $292,126, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants became exercisable on July 26, 2018, and for a period of 4 years expiring on July 26, 2022. During the years ended December 31, 2016, the Company recorded $292,126 as an expense for such warrants issued.
On October 2, 2016, the Company issued 2-year warrant to purchase 2,300,000 shares of common stock at an exercise price of $0.04 per share to a consultant for services rendered. The warrants had a fair value of $68,686, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants will become exercisable on August 25, 2019, and for a period of 2 years expiring on August 25, 2021. During the year ended December 31, 2016, the Company recorded $68,686 as an expense for such warrants issued (See Note 6(C)).
On December 8, 2016, the Company issued 4-year warrant to purchase 15,000,000 shares of common stock at an exercise price of $0.001 per share to a consultant for services rendered. The warrants had a fair value of $630,259, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants became exercisable on June 12, 2017, and for a period of 2 years expiring on December 8, 2019. During the years ended December 31, 2016, the Company recorded $630,259 as an expense for warrants.
On December 30, 2016, the Company recorded stock issuable of 1,953,161 shares in connection with the cashless exercise of the 1,500,000 warrants. The shares were subsequently issued on January 23, 2017.
On December 30, 2016, the Company recorded stock issuable of 1,953,161 shares in connection with the cashless exercise of the 1,500,000 warrants. The shares were subsequently issued on January 23, 2017.
On February 6, 2017, the Company issued 4-year warrant to purchase 750,000 shares of common stock at an exercise price of $0.03 per share to a consultant for services rendered. The warrants had a fair value of $44,421, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on March 6, 2018 as long as the employee remains as full time. Warrants will be exercisable on October 6, 2019, and for a period of 3 years expiring on October 6, 2022. During the year ended December 31, 2017, the Company recorded $5,161 as an expense for warrants issued. On May 2, 2017, the Company cancelled a 750,000 share warrant with a consultant as the consultant was terminated and the option expense was recaptured by the Company.
On June 26, 2017, the Company issued 2-year warrant to purchase 15,000,000 shares of common stock at an exercise price of $0.001 per share to a consultant for services rendered. The warrants had a fair value of $848,011, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants became exercisable on December 26, 2017, and for a period of 2 years expiring on June 26, 2019. During the year ended December 31, 2017, the Company recorded 848,011 as an expense for warrants issued.
On July 14, 2017 the Company granted 14,745,203 shares in connection with the cashless exercise of the 15,000,000 warrants. (See Note 6 (C)).
On December 27, 2017, the Company issued of 14,651,162 shares in connection with the cashless exercise of the 15,000,000 warrants. The shares were issued on December 29, 2017. (See Note 6 (C)).
On February 9, 2018, the Company issued 3-year warrant to purchase 3,000,000 shares of common stock at an exercise price of $0.056 per share to a consultant for services rendered. The warrants had a fair value of $52,660, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on the date granted. Warrants will be exercisable on August 9, 2019, and for a period of 2 years expiring on August 9, 2021. During the nine months ended September 30, 2018, the Company recorded 52,660 as an expense for warrants issued.
On March 20, 2018, the Company issued 4-year warrant to purchase 600,000 shares of common stock at an exercise price of $0.001 per share to a consultant for services rendered. The warrants had a fair value of $19,915, based upon the Black-Scholes option-pricing model on the date of grant and are fully vested on March 20, 2018. Warrants will be exercisable on March 20, 2019, and for a period of 3 years expiring on March 20, 22. During the nine months ended September 30, 2018, the Company recorded 19,915 as an expense for warrants issued.
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Summary of warrants outstanding |
For the nine months ended September 30, 2018, the following warrants were outstanding:
For the year ended December 31, 2017 the following warrants were outstanding:
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (Details) - shares |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
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Antidilutive Securities, Stock Warrants | 36,400,002 | 47,800,002 | 36,400,002 | 47,800,002 |
Stock Warrants | ||||
Antidilutive Securities, Stock Warrants | 36,400,000 | 47,800,000 | 36,400,000 | 47,800,000 |
Convertible Preferred Stock | ||||
Antidilutive Securities, Stock Warrants | 2 | 2 | 2 | 2 |
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (Details 1) - USD ($) |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair value of assets | $ 0 | $ 0 |
Fair value of liability | 0 | 0 |
Level 1 [Member] | ||
Fair value of assets | 0 | 0 |
Fair value of liability | 0 | 0 |
Level 2 [Member] | ||
Fair value of assets | 0 | 0 |
Fair value of liability | 0 | 0 |
Level 3 [Member] | ||
Fair value of assets | 0 | 0 |
Fair value of liability | $ 0 | $ 0 |
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (Details 4) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
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Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Dec. 31, 2017 |
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Sales | $ 140,761 | $ 27,222 | $ 401,620 | $ 27,222 | |
Customer A | Sales | |||||
Concentration risk | 100.00% | 0.00% | |||
Sales | $ 401,620 | $ 0 | |||
Customer A | Accounts Receivable | |||||
Concentration risk | 100.00% | 100.00% | |||
Accounts receivable | $ 99,256 | $ 99,256 | $ 25,872 |
3. EQUIPMENT (Details) - USD ($) |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Stock issued in connection to cash offering, Amount | ||
Automobile | $ 41,805 | $ 41,805 |
Laboratory Equipment | 73,194 | 61,746 |
Office Equipment | 7,260 | 7,260 |
Leasehold Improvements | 7,938 | 7,938 |
Less Accumulated Depreciation | (76,064) | (56,255) |
Total Property and Equipment | $ 54,133 | $ 62,494 |
3. EQUIPMENT (Details Narrative) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Equipment Details Narrative Abstract | ||
Depreciation and amortization expense | $ 19,809 | $ 14,119 |
5. STOCKHOLDERS' DEFICIT (Details 1) |
9 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
$ / shares
shares
| |
Stockholders Deficit | |
Number of Warrants Outstanding, Beginning | shares | 32,800,000 |
Number of Warrants Granted | shares | 3,600,000 |
Number of Warrants Exercised | shares | 0 |
Number of Warrants Cancelled/Forfeited | shares | 0 |
36,400,000 | shares | |
Weighted Average Exercise Price Outstanding, Beginning | $ / shares | $ 0.00 |
Weighted Average Exercise Price Granted | $ / shares | 0.00 |
Weighted Average Exercise Price Exercised | $ / shares | 0.00 |
Weighted Average Exercise Price Cancelled/Forfeited | $ / shares | 0.00 |
Weighted Average Exercise Price Outstanding, Ending | $ / shares | $ 0.00 |
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending | 3 years |
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending | 3 years 6 months |
Aggregate Intrinsic Value | $ | $ 1,146,600 |
5. STOCKHOLDERS' DEFICIT (Details 2) - USD ($) |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Exercise Price | $ 0.00 | $ 0.00 |
Weighted Average Remaining Contractual Life | 3 years 6 months | |
Aggregate Intrinsic Value | $ 1,146,600 | |
Warrant 1 [Member] | ||
Exercise Price | $ 0.001 | $ 0.001 |
Warrants Exercisable | 31,100,000 | 30,500,000 |
Weighted Average Remaining Contractual Life | 3 years 73 days | 2 years 6 months |
Aggregate Intrinsic Value | $ 2,021,500 | $ 2,639,000 |
Warrant 2 [Member] | ||
Exercise Price | $ 0.056 | $ 0.04 |
Warrants Exercisable | 3,000,000 | 2,300,000 |
Weighted Average Remaining Contractual Life | 2 years 328 days | 3 years 1 month 6 days |
Aggregate Intrinsic Value | $ 195,000 | $ 133,400 |
Warrant 3 [Member] | ||
Exercise Price | $ 0.04 | |
Warrants Exercisable | 2,300,000 | |
Weighted Average Remaining Contractual Life | 2 years 328 days | |
Aggregate Intrinsic Value | $ 149,500 |
6. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Commitments And Contingencies | ||
Rent expense | $ 20,182 | $ 6,880 |
7. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Accrued interest- related party | $ 884,604 | $ 732,147 |
Royalty payable | 65,292 | 65,292 |
Chief Executive Officer | ||
Accounts payable and accrued expenses - related party | 231,213 | 184,439 |
Shareholder | ||
Accrued interest- related party | 25,549 | 19,111 |
Accrued salary | 1,958,835 | 1,707,804 |
Chief Operating Officer | ||
Accrued salary | 21,000 | 23,354 |
Office Staff | ||
Accrued salary | $ 2,523 | $ 3,554 |
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