Filed Pursuant to Rule 424(b)(3)
Registration No. 333-284773
PROSPECTUS
KRAIG
BIOCRAFT LABORATORIES, INC.
Up
to 207,787,193 Shares of Common Stock
This
prospectus relates to the resale from time to time of up to 207,787,193 shares of common stock, par value $0.0001 per share (“Common
Stock”), of Kraig Biocraft Laboratories, Inc., a Wyoming corporation (“Kraig Biocraft Laboratories” or the “Company”)
by YA II PN, Ltd., a Cayman Islands exempt limited partnership (“Yorkville” or the “Selling Stockholder”). The
shares being offered by this prospectus consist of shares of common stock that we have issued or that we may, in our discretion, elect
to issue and sell to the Selling Stockholder, from time to time, pursuant to a standby equity purchase agreement we entered into with
the Selling Stockholder on January 21, 2025 (the “SEPA”), pursuant to which the Selling Stockholder has committed to purchase
from us, at our direction, up to $10,000,000 of Common Stock, subject to terms and conditions specified in the SEPA. As consideration
for the Selling Stockholder’s irrevocable commitment to purchase shares of our Common Stock at our election and in our discretion
from time to time after the date of the SEPA and prior to the third anniversary of the SEPA, upon the terms and subject to the satisfaction
of the conditions set forth in the SEPA, we have issued to the Selling Stockholder 1,081,471 shares of Common Stock pursuant to the terms
of the SEPA (the “Commitment Shares”). See “Summary-Overview-Standby Equity Purchase Agreement” and “Description
of Securities - SEPA” for a description of the SEPA and “Selling Stockholders” for additional information regarding
Yorkville. As of the date of this prospectus, we have not issued any shares of common stock to the Selling Stockholder pursuant to the
SEPA, other than the Commitment Shares.
We
will bear all of the registration expenses incurred in connection with the registration of these shares of Common Stock. The Selling
Stockholder will pay discounts, commissions, fees of underwriters, selling brokers or dealer managers and similar expenses, if any, incurred
for the sale of these shares of Common Stock.
Our
registration of the securities covered by this prospectus does not mean that the Selling Stockholder will offer or sell any of the shares
of common stock. The Selling Stockholder may offer, sell, or distribute all or a portion of its shares of common stock publicly or through
private transactions at prevailing market prices or at negotiated prices. We will not receive any proceeds from the sale of shares of
common stock by the Selling Stockholder pursuant to this prospectus. However, we may receive up to $10,000,000 in aggregate gross proceeds
from sales of our common stock to the Selling Stockholder that we may, in our discretion, elect to make, from time to time pursuant to
the SEPA. The resale of our common stock being offered by the Selling Stockholder pursuant to this prospectus, or the perception that
these sales could occur, could result in a decline in the public trading price of our common stock. We provide more information about
how the Selling Stockholder may sell or otherwise dispose of the shares of our common stock in the section entitled “Plan of Distribution.”
We will bear all costs, expenses, and fees in connection with the registration of the shares of common stock offered hereby. The Selling
Stockholder will bear all commissions and discounts, if any, attributable to its sales of the shares of common stock offered hereby.
The
Selling Stockholder is an “underwriter” within the meaning of Section 2(a)(11) of the U.S. Securities Act of 1933, as amended
(the “Securities Act”), and any profits on the sales of shares of our common stock by the Selling Stockholder and any discounts,
commissions, or concessions received by the Selling Stockholder are deemed to be underwriting discounts and commissions under the Securities
Act.
We
may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire
prospectus and any amendments or supplements carefully before you make your investment decision.
As
of December 10, 2020, we are a fully reporting company under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). Our Common Stock is currently quoted on the OTCQB under the symbol “KBLB.” As of May 5, 2025, the last
reported sales price for our Common Stock as quoted on the OTCQB was $0.092 per share. Quotes of stock trading prices on an over-the-counter
marketplace may not be indicative of the market price on a national securities exchange. There is a limited public trading market for
our Common Stock.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page 10 of this prospectus, as
well as the other information contained in or incorporated by reference in this prospectus or in any accompanying prospectus
supplement before making a decision to invest in our securities.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is May 6, 2025
Table
of Contents
About
this Prospectus
We
have not authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus
or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred
you. We do not take responsibility for, or provide any assurance as to the reliability of, any other information that others may give
you. We will not make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.
We
may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or
change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective
amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus
entitled “Where You Can Find More Information.”
“Kraig”,
“Kraig Biocraft” “KBLB”, “the Company”, “we”, “us” and “our”
refer to Kraig Biocraft Laboratories, Inc., a Wyoming corporation, unless the context otherwise requires.
Industry
and Market Data
Unless
otherwise indicated, information in this prospectus concerning economic conditions, our industry, our markets, and our competitive position
is based on a variety of sources, including information from third-party industry analysts and publications and our own estimates and
research. Some of the industry and market data contained in this prospectus are based on third-party industry publications. This information
involves a number of assumptions, estimates and limitations.
The
industry publications, surveys and forecasts and other public information generally indicate or suggest that their information has been
obtained from sources believed to be reliable. None of the third-party industry publications used in this prospectus were prepared on
our behalf. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including
those described in “Risk Factors” in this prospectus. These and other factors could cause results to differ materially from
those expressed in these publications.
Trademarks
This
prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience,
trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references
are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or
the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’
trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by any other companies.
DISCLOSURE
REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements about our industry and us that involve substantial risks and uncertainties. Our actual
results could differ materially from those discussed in the forward-looking statements. All statements other than statements of historical
facts contained in this prospectus, including statements regarding our future results of operations and financial condition, business
strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify
forward-looking statements by words such as “anticipate,” “believe,” “continue,” “could,”
“design,” “estimate,” “expect,” “intend,” “may,” “plan,” “potentially,”
“predict,” “project,” “should,” “will” or the negative of these terms or other similar
expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and
financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These
forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described
in the section titled “Risk Factors” and elsewhere in this prospectus and should not be relied upon.
The
forward-looking statements in this prospectus include statements about:
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Our
ability to continue as a going concern; |
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Our
ability to generate significant revenues and to become profitable; |
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Our
ability to estimate future expenses; |
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The
effect of the ongoing COVID-19 pandemic; |
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Our
ability to maintain an effective system of internal controls; |
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Our
ability to protect our intellectual property rights and to secure additional rights domestically and internationally; |
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Our
ability to successfully manage our growth domestically and internationally; |
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Our
ability to retain the services of key personnel; |
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Our
reliance on independent third-party collaborators to develop and deliver products to market; |
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Our
reliance on key management personnel and future need for highly skilled personnel; |
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Our
ability to successfully develop sales and marketing for our products; |
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Market
acceptance of pricing and performance for products we develop; |
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Our
ability to generate sustainable earnings and net operating profits; |
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Our
ability to adapt to regulatory and technology changes impacting our industry; |
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The
potential for product liability claims regarding our products and the use of GMOs in our production system; |
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Actions
taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial,
and other governmental authorities; |
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Competition
in our industry; |
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The
loss of or failure to obtain any license or permit necessary or desirable in the operation of our business; |
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The
availability of additional capital to support development; |
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Our
production system is based upon living transgenic organisms; and |
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Certain
other risks and uncertainties set forth elsewhere in this prospectus under the section titled “Risk Factors”. |
These
risks are not exhaustive. Other sections of this prospectus may include additional factors that could harm our business and financial
performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time,
and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or
the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by,
any forward-looking statements. There are undoubtedly risks which are unknown or under appreciated by management which are not listed
here or incorporated into our projections and timelines. Given these uncertainties, you should not place undue reliance on these forward-looking
statements.
Although
we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels
of activity, performance, or achievements, which speak only as of their dates. Except as required by law, we undertake no obligation
to update publicly any forward-looking statements for any reason after the date of this prospectus or to conform these statements to
actual results or to changes in our expectations.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider
in making your investment decision. Before investing in our Common Stock, you should carefully read this entire prospectus, including
our financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus and our consolidated
financial statements and the accompanying notes included in this prospectus. Except as otherwise indicated herein or as the context otherwise
requires, references in this prospectus to “Kraig.” “Kraig Labs,” “the Company,” “we,”
“us,” and “our” refer to Kraig Biocraft Laboratories, Inc. together with its wholly-owned subsidiary Prodigy
Textiles Co., Ltd., a Vietnamese corporation (“Prodigy Textiles”).
Company
Overview
Kraig
Biocraft Laboratories, Inc., a Wyoming corporation, is a corporation organized to develop high strength fibers using recombinant DNA
technology for commercial applications including technical textiles. We use genetically engineered silkworms that produce
spider silk proteins to create our recombinant spider silk. Applications include performance apparel, workwear, filtration, luxury
fashion, flexible composites, medical implants, cosmetics and more. We believe that we are a world leader in the research,
development, and production of commercially scalable and cost-effective spider silk fiber. Our primary proprietary fiber
technology utilizes natural and engineered variants of spider silk produced in domesticated mulberry silkworms. Our business brings
twenty-first century biotechnology to the historical silk industry. We are introducing materials with innovative properties into
an established commercial ecosystem of silkworm rearing, silk spinning, weaving, and manufacture of garments and other products.
We
are using genetic engineering technologies to develop fibers with greater strength, resiliency, and flexibility for use in our target
markets, including the specialty fiber and technical textile industries. We believe that the genetically engineered protein-based
fibers we seek to produce have properties that are in some ways superior to the materials currently available in the marketplace. Production
of our product in commercial quantities holds what we believe to be potential life-saving ballistic resistant material, which we believe
is lighter, thinner, more flexible, and tougher than steel. Other potential applications for spider silk based recombinant fibers include
use as structural material and for any application in which light weight and high strength are required. We believe that fibers made
with recombinant protein-based polymers will make significant inroads into the specialty fiber and technical textile markets.
Through
our technologies, the introduction of the gene sequence based on those found in native spider silk, results in a germline transformation
and is therefore self-perpetuating. This technology is in essence a protein expression platform which has other potential applications
including diagnostics and pharmaceutical production. Moreover, our technologies are “green” in as much as our fibers and
textiles are derived from nature and do not use any petrochemicals as an input into the fibers.
The
Report of Independent Registered Public Accounting Firm to our financial statements as of December 31, 2023, and as of December
31, 2024, include an explanatory paragraph stating that our net loss from operations and net capital deficiency at December 31,
2024, raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Products
Our
products exploit the unique characteristics of spider silk, specifically dragline silk from Nephila clavipes (golden orb-web spider)
and variants thereof. Such fibers possess unique mechanical properties in terms of strength, resilience, and flexibility. Through the
use of genetic engineering, we have produced a variety of unique transgenic silkworm strains that produce recombinant spider silk. Our
recombinant spider silk fibers incorporates the silk proteins found in spider silk with the native silkworm silk proteins. This
combination of native silkworm proteins combined with spider silk protein structures results in a new and unique recombinant silk fiber.
Monster
Silk®
Monster
Silk® was the first recombinant spider silk fiber product we developed. Monster Silk incorporates the natural elasticity of spider
silk to make a silk fiber which is more flexible that conventional silk fibers and textiles. We have produced sample products using Monster
Silk® including knit fabrics, gloves, and shirts in collaboration with textile mills. We expect that Monster Silk® will have
market applications across the traditional textile markets where its increased flexibility will provide increased durability and comfort.
Dragon
SilkTM
Dragon
SilkTM is the next evolution in recombinant spider silk, combining the elasticity of Monster Silk® with additional high
strength elements of native spider silk. Some samples of Dragon SilkTM have demonstrated strength beyond that of native spider
silk. This combination of strength and elasticity results in a silk fiber which is soft and flexible, yet tougher than leading synthetic
fiber available on the market. Based on inquires we have received from end market leaders, we believe that Dragon SilkTM- will
have applications in performance apparel, durable workwear, luxury goods and apparel, and composites.
Other
Products
We
are continuing to develop new recombinant silks and other protein-based fibers and materials using our genetic engineering capabilities.
The Company leverages the latest in genetic engineering technology to develop new silk and protein technologies that it believes will
have significant advantages over our legacy technology which created Dragon Silk and Monster Silk. Chief among these is the potential
to produce spider silks with greatly increased purity and performance. Due to the biocompatible and biodegradable properties of silk,
we believe that the materials developed using this process will create opportunities for products in the medical industry, including
sutures, grafts, and implants.
Strengths
We
have developed a method for the production of high-performance bio-degradable, bio-compatible, and ecologically friendly recombinant
spider silk materials to replace the existing global infrastructure for mundane silk manufacturing. This system of operations utilizes
genetically modified silkworms that have been engineered to produce silks based on the proteins and physical characteristics of native
spider silk, a material that has been prized for its physical and chemical properties. By adapting the common silkworm and the production
process for the manufacture of traditional silk, we are able to leverage a global production model which currently processes more than
150,000 metric tons of silk per year. Our technology is a direct drop-in replacement for traditional silk manufacturing, allowing any
silk operation employing our silkworm technology to immediately be converted, without any additional need for capital investment. We
have been granted patent protection in numerous international markets and continue to pursue additional patent protection for our technologies
in silk producing and silk consuming countries.
In
2020, we developed a new technology platform, based on a non-CRISPR Cas9 gene editing knock-in knock-out technology. This is our first
knock-in knock-out technology which we are now using for the development of advanced materials. This system is built on our eco-friendly
and cost-effective silkworm production system, which we believe is more advanced than current competing methods. Knock-in knock-out technology
allows for the targeting of specific locations and genetic traits for modification, addition, and removal. This capability should allow
us to accelerate new product developments and bring products to market more quickly. This capability also allows for genetic trait modifications
that were previously impractical, creating opportunities for products outside of silk fibers and increased flexibility in production
location.
Based
on our internal analysis, management believes that this new platform technology will allow us to outpace and surpass Dragon Silk, a fiber
that we developed with our previous tools. Samples of Dragon Silk have already demonstrated to be tougher than many fibers used in bullet
proof vests. We expect that this new approach will yield materials beyond those capabilities based upon its potential for significantly
improved purity.
Strategies
Our
approach to disrupting the performance and technical textile market is to adapt existing silk industry infrastructure and capacity to
produce our high-performance silk with minimal capital investment. Our proprietary recombinant spider silkworms are designed as direct
drop-in replacement for existing commercial silk producing operations. Our genetically engineered silks are produced using the same equipment
and processes that traditional silk uses. In designing our technologies in this manner, we have minimized our need for expansion capital,
limiting our direct investment and contracting with existing secondary fiber processors where the majority of large-scale equipment is
needed. Through our subsidiary, Prodigy Textiles in Vietnam, we have established the relationships necessary to secure these contracted
secondary services.
We
are actively pursuing relationships within our targeted end markets to secure product collaborations with key market channel leaders,
but no definitive agreements have been entered into as of the date hereof. We have received numerous unsolicited requests from leading
businesses across a range of attractive end markets requesting materials for applications development, which is most likely due to the
unique nature of our product. This substantial interest in spider silk materials across abroad spectrum of applications for high performance
fibers and textiles, combined with the limited initial production capacity, provides the potential to be selective in choosing the market
channel partners best able to quickly bring our product to market at scale. We are working under non-disclosure agreements to secure
these collaborative development agreements and to establish limited channel exclusivity for firms we believe mirror our culture of innovation.
In January 2021, we entered into a partnership and exclusive purchase agreement with M the Movement by Kings Group, pursuant to which
they committed to purchase up to $40 million worth of product. This partnership will establish a jointly owned apparel and fashion brand
headquarter in Singapore focuses on sales to the ASEAN region. With recent advancements in our manufacturing capacity, we expect to generate
revenues from these relationships in 2023.
Additionally,
we are currently focused on building production capacity in Vietnam. A significant part of that operation is our work to increase the
robustness of our silkworms within the production environment by developing new hybrids We are currently utilizing a mix of direct staffing
and contract labor to support its in-house operations. We are exploring a production expansion model utilizing contract production consistent
with the distributed model used for mundane silk production. We will also consider technology licensing models with companies, regions,
or countries where its silkworms could be produced under exclusive license.
Recent
Developments
In
January 2022, we completed production of the first Dragon Silk yarn produced entirely in Vietnam. The finished recombinant spider silk
yarn was spun from raw recombinant spider silk produced by our subsidiary, Prodigy Textiles. While Prodigy Textiles remains focused
on ramping up the output of silk cocoons, supporting vendors will play an essential role in processing that silk into finished goods
for a wide range of consumer markets. Once we achieve larger scale production, we plan to ship Dragon Silk yarn to various
commercial entities including SpydaSilk Enterprises in Singapore, a joint venture partially owned by the Company for weaving into
fabrics and finished garments.
Our
study of previous production runs indicated that our laboratory strains lacked the necessary robustness to carry out our production objectives.
In 2024 we made substantial progress in improving robustness. We are accelerating our hybridization and breeding program to further increase
production robustness and cocoon size.
On
January 24, 2024, we signed a memorandum of understand with the Vietnam Sericulture Association (VSA) and the Lam Dong Agro-Forestry
Research & Experiment Center (LAREC) to enhance sericulture in Vietnam through the expanded application of the Company’s spider
silk silkworm technology.
On
April 2, 2024, the Company signed final agreements with the VSA and LAREC.
Standby
Equity Purchase Agreement
On
January 21, 2025, we entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD., a Cayman Islands
exempt limited company (the “Investor”). Capitalized terms used herein, but not otherwise defined, have the meaning ascribed
to such terms in the SEPA, a copy of which is filed herewith as Exhibit 10.14.
Pursuant
to the SEPA, the Company has the right to sell to the Investor up to $10 million of its shares of common stock, subject to certain limitations
and conditions set forth in the SEPA, from time to time during the term of the SEPA. Sales of the shares of common stock to the Investor
under the SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any
shares of common stock to the Investor under the SEPA except in connection with notices that may be submitted by the Investor, in certain
circumstances as described below.
Upon
the satisfaction of the conditions to the Investor’s purchase obligation set forth in the SEPA, including having a registration
statement registering the resale of the shares of common stock issuable under the SEPA declared effective by the SEC, the Company will
have the right, but not the obligation, from time to time at its discretion until the SEPA is terminated to direct the Investor to purchase
a specified number of shares of common stock (“Advance”) by delivering written notice to the Investor (“Advance Notice”).
While there is no mandatory minimum amount for any Advance, it may not exceed an amount equal to 100% of the average of the daily traded
amount during the five consecutive trading days immediately preceding an Advance Notice.
In
addition to the satisfaction of the conditions, the Investor shall not be obligated to purchase or acquire, and shall not purchase or
acquire, any common stock under the SEPA which, when aggregated with all other common stock beneficially owned by the Investor and its
affiliates, would result in the beneficial ownership by the Investor and its affiliates (on an aggregated basis) of a number of shares
of common stock exceeding 4.99% of the then outstanding voting power or number of common shares. In addition, in no event shall an Advance
exceed the number of common shares registered in respect of the transactions contemplated hereby under the registration statement then
in effect.
The
Company shall pay the Investor a structuring fee in an amount of $25,000, of which $10,000 has been paid, and $15,000 shall be paid on
the earlier of (a) the Closing of the first Advance, or (b) the termination of the SEPA. Additionally, within three days of signing the
SEPA (the “Effective Date”), the Company shall pay a commitment fee in an amount equal to 1.00% of the Commitment Amount
(the “Commitment Fee”) consisting of such number of Common Shares that is equal to the Commitment Fee divided by the average
of the daily VWAPs of the Common Shares during the 3 Trading Days immediately prior to the Effective Date (the “Commitment Shares”).
The Commitment Shares issuable hereunder shall be included on the initial Registration Statement.
The
SEPA will automatically terminate on the earliest to occur of (i) 36-month anniversary of the Effective Date or (ii) the date on which
the Investor shall have made payment of Advances pursuant to the SEPA for shares of common stock equal to the Commitment Amount. The
Company has the right to terminate the SEPA at no cost or penalty upon five (5) trading days’ prior written notice to the Investor,
provided that there are no outstanding Advance Notices for which shares of common stock need to be issued. Neither the Company nor the
Investor may assign or transfer their respective rights and obligations under the SEPA, and no provision of the SEPA may be modified
or waived other than by an instrument in writing signed by both parties.
The
SEPA contains customary representations, warranties, conditions, and indemnification obligations of the parties. The representations,
warranties and covenants contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely
for the benefit of the parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
The
net proceeds received by the Company under the SEPA will depend on the frequency and prices at which the Company sells its shares of
common stock to the Investor. The Company expects that any proceeds received from such sales to the Investor will be used for working
capital and general corporate purposes.
Covid-19
On
March 19, 2020, we furloughed non-essential staff in response to governmental regulations relating to COVID. This decision primarily
impacted staff at our fully owned subsidiary, Prodigy Textiles, in Vietnam and resulted in the temporary closing of silk production
operations. As of the date hereof, we have resumed silk production operations. The Company supported its furloughed staff and paid their
salaries during all mandatory closures. During the duration of the furlough, the Company’s CEO voluntarily waved the payment or
accrual of his salary. The Company leveraged this forced closure time to improve its production infrastructure based on the lessons learned
from its operations. Following the mandated closures, the Company has enhanced its operations with process automation, moved its production
headquarters to a facility designed for silk production and created a more self-reliant supply chain. We have also established a microbiology
laboratory in the factory for enhanced quality control. Based on lessons learned during Prodigy’s pre-COVID production ramp up,
Management views the in-factory microbiology lab as a critical element to successful large-scale production. The global COVID pandemic
and government regulations associated with the pandemic continue to evolve. Management continues to stockpile critical inventories and
establish alternative supply and vendor chains as a precaution against future pandemics, disasters, or governmental actions. We will
continue to monitor the situation closely, including its potential effect on our plans and timelines.
Summary
of Risk Factors
As
an OTCQB listed Company, we have limited resources with pressing capital requirements as we attempt to ramp up production. We are mindful
of the challenges involved in achieving growth without compromising our ability to manage our operating risks and comply with rules and
regulations. As we are commercializing a new technology, no one is in a position to know all of the risks, obstacles, and hurdles that
the Company will face as it works to commercialize its new technology. Any investment in our securities involves a high degree of risk.
We are aware of numerous risks associated with our business, including:
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Our
ability to continue as a going concern; |
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Our
ability to generate revenues and to become profitable; |
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Our
ability to estimate future expenses; |
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Our
ability to maintain an effective system of internal controls; |
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Our
ability to protect our intellectual property rights and to secure additional rights domestically and internationally; |
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Our
ability to increase the robustness of our silkworms in the production environment; |
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Our
ability to successfully manage our growth domestically and internationally; |
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Our
ability to attract and retain the services of key personnel; |
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Our
reliance on independent third-party collaborators to develop and deliver products to market; |
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Our
reliance on key management personnel and future need for highly skilled personnel; |
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Our
ability to successfully develop sales and marketing for our products; |
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Market
acceptance of pricing and performance for products we develop; |
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Our
ability to generate sustainable earnings and net operating profits; |
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Our
ability to adapt to regulatory and technology changes impacting our industry; |
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The
potential for product liability claims regarding our products and the use of genetically modified organisms (“GMO’s”)
in our production system; |
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Actions
taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial,
and other governmental authorities; |
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Competition
in our industry; |
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The
loss of or failure to obtain any license or permit necessary or desirable in the operation of our business; |
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The
availability of additional capital to support development; |
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An
active, liquid, and orderly market for our Common Stock may not develop; |
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Our
production system is based upon living transgenic organisms; |
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Our
business, operations and plans and timelines could be adversely affected by the effects of health epidemics, including the recent
COVID-19 pandemic; |
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It
is not possible to predict the actual number of shares we will sell under the SEPA to the Selling Stockholder, or the actual gross
proceeds resulting from those sales; |
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Investors
who buy shares at different times will likely pay different prices; |
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| ● |
Our
management team will have broad discretion over the use of the net proceeds from our sale of shares of Common Stock to the Selling
Stockholder, if any, and you may not agree with how we use the proceeds, and the proceeds may not be invested successfully. |
| |
|
| ● |
Other
factors which are unanticipated by management; and |
| |
|
| ● |
Numerous
other risks and uncertainties set forth elsewhere in this prospectus under the section titled “Risk Factors”. |
Corporate
Information
Kraig
Biocraft Laboratories, Inc. is a Wyoming corporation. Our Common Stock is quoted on the OTCQB under the ticker symbol “KBLB”.
As of May 5, 2025, there are 1,046,126,733
shares of Common Stock issued and outstanding. Kim Thompson, our founder, and Chief Executive Officer, owns approximately 19.28%
of our issued and outstanding Common Stock. As of May 6, 2025, there are 3 shares of super voting Series A Preferred Stock issued
and outstanding, all of which are owned by Kim Thompson, which represent approximately 36.45% of all voting rights of our capital
stock (See, “Description of Securities” for additional information about our securities).
Our
principal executive office and mailing address is 2723 South State St., Suite 150, Ann Arbor, Michigan 48104. Our telephone number is
(734) 619-8066. Our corporate website is http://www.kraiglabs.com. The information contained on, or that can be accessed through,
our website is not part of, and is not incorporated by reference into, this prospectus and should not be relied upon with respect to
this offering.
The
Offering
The
following Summary contains general information about this offering. The Summary is not intended to be complete. You should read the full
text and more specific details contained elsewhere in this prospectus.
| Common
Stock to be offered by Selling Stockholder |
|
Up
to 207,787,193 shares, consisting of (i) 1,081,471 Commitment Shares and (ii) up to 206,705,722 shares of common stock we may elect,
in our discretion, to issue and sell to the Selling Stockholder under the SEPA from time to time. |
| |
|
|
| Terms
of the Offering |
|
The
Selling Stockholder will determine when and how it will dispose of any shares of common stock registered under this prospectus for
resale |
| |
|
|
| Common
Stock outstanding prior to this offering |
|
1,039,455,690
shares |
| |
|
|
| Common
Stock outstanding after this offering |
|
1,246,161,412
shares of common stock, assuming the sale by us of a total of 206,705,722 shares pursuant to SEPA. The actual number of shares issued
will vary depending upon the actual sale prices under the SEPA. |
| |
|
|
| Use
of proceeds |
|
We
will not receive any proceeds from the sale of the shares of Common Stock by the Selling Stockholder. However, we may receive up
to $10.0 million in aggregate gross proceeds from sales of our shares of Common Stock to the Selling Stockholder that we may, in
our discretion, elect to make, from time to time after the date of this prospectus, pursuant to the SEPA. We expect to use the net
proceeds that we receive from sales of our Common Stock to the Selling Stockholder, if any, under the SEPA for working capital and
general corporate purposes. See “Use of Proceeds.” |
| |
|
|
| Exchange
Listing |
|
Our
Common Stock is quoted on the OTCQB under the ticker symbol “KBLB”. |
| |
|
|
| Plan
of Distribution |
|
The
Selling Stockholder may sell or otherwise dispose of the Common Stock covered by this prospectus in a number of different ways and
at varying prices. For further information, see “Plan of Distribution” beginning on page 53. |
| |
|
|
| Risk
factors |
|
The
shares of Common Stock offered hereby involves a high degree of risk. You should read “Risk Factors,” and other information
included in this prospectus for a discussion of factors to consider before deciding to invest in our securities. |
RISK
FACTORS
An
investment in our Common Stock involves a high degree of risk. You should carefully consider the following risk factors, together with
the other information contained in this prospectus before you decide to buy any Common Stock. Any of the following risks could cause
our business, results of operations and financial condition to suffer materially, causing the market price of our shares of Common Stock
to decline, in which event you may lose part or all of your investment. Additional risks and uncertainties not currently known to us
or that we currently do not deem material may also become important factors that may materially and adversely affect our business.
Risk
Related to Our Company
The
report of the independent registered public accounting firm on our 2024 and 2023 financial statements contains a going
concern qualification.
The
report of the independent registered public accounting firm covering our financial statements for the years ended December 31, 2024,
and December 31, 2023, stated that certain factors, including that we have a working capital and shareholder deficit, raised substantial
doubt as to our ability to continue as a going concern. Because we are not yet producing revenue to sustain our operating costs, we are
dependent upon raising capital to continue our business. If we are unable to raise capital, our ability to continue could remain an ongoing
concern.
We
may be unable to generate revenues and may never become profitable.
We
generated $0 and $0, in revenue for the fiscal years ended December 31, 2024, and 2023, respectively, and do not currently
have any recurring sources of revenues, making it difficult to predict when we will be profitable. We expect to incur significant research
and development costs for the foreseeable future. We may not be able to successfully market fiber products we produce in the future that
will generate significant revenues. In addition, any revenues that we may generate may be insufficient for us to become profitable.
As
a result of our limited operating history, we may not be able to correctly estimate our future revenues, operating expenses, need for
investment capital, or stability of operations, which could lead to cash shortfalls.
We
have a limited operating history from which to evaluate our business. Our failure to develop additional transgenic silkworms would have
a material adverse effect on our ability to continue operating. Accordingly, our prospects must be considered in light of the risks,
expenses, and difficulties frequently encountered by companies at our stage of development. We may not be successful in addressing such
risks, and the failure to do so could have a material adverse effect on our business, operating results, and financial condition.
Because
of this limited operating history and because of the emerging nature of our fiber product we are producing, our historical financial
data is of limited value in estimating future operating expenses. Our budgeted operating expense levels are based in part on our expectations
concerning future revenues. However, our ability to generate any revenues depends largely on the market acceptance of the fibers we develop,
which is difficult to forecast. The failure of our target markets to adopt our products would have a material adverse effect on our business.
Our
operating results may fluctuate as a result of a number of factors, many of which are outside of our control. For these reasons, comparing
our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as any indication
of our future performance. Our quarterly and annual expenses are likely to increase substantially over the next several years depending
upon the level of fiber development activities. Our operating results in future quarters may fall below expectations. Any of these events
could adversely impact our business prospects and make it more difficult to raise additional equity capital at an acceptable price per
share.
If
we lose the services of key management personnel, we may not be able to execute our business strategy effectively.
Our
future success depends in a large part upon the continued service of key senior management personnel. If the Company is unable to hire
and retain senior leadership, it may be unable to execute on its business plan. We do not maintain key-person life insurance policies
on the Company’s senior leadership. The loss of the leadership team would materially harm our business.
Our
ability to produce our products in a cost-effective manner will depend on our ability to improve the robustness and tolerance of our
silkworm to conditions in the production environment.
Working
with our contract manufacturer in Vietnam we have identified robustness and acclimation of our silkworm strains to the local climate
as the most significant challenges to production. We are working to overcome these challenges by acclimating our silkworms to the local
environment and accelerating the introduction of our multi-strain hybrids. If we are unable to improve the robustness, including disease
and environmental tolerance, of our silkworms, we may not be able to generate product revenue and may not become profitable.
As
our business grows, we will need to hire highly skilled personnel and, if we are unable to hire, retain, or motivate additional qualified
personnel, we may not be able to grow effectively.
Our
performance will be largely dependent on the talents and efforts of highly skilled individuals. Our future success depends on our continuing
ability to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our company. Competition in our industry
for qualified employees remains intense as the skills we require in our employees are highly specialized. We compete with companies in
the biotechnology and pharmaceutical industries that seek to retain scientists with genetic engineering experience and expertise. We
expect that over the longer term we will continue to face stiff competition and may not be able to successfully recruit or retain such
personnel. Attracting and retaining qualified personnel will be critical to our success.
Our
management has no previous experience in developing, producing, marketing, or selling recombinant fiber which may have a negative effect
on our ability to develop or sell our products.
Since,
to our knowledge, commercialization of spider silk on a large scale has yet to be accomplished, we are not aware of any candidates with
specific experience in this field. There may be numerous hurdles and obstacles that we are not currently able to foresee.
Our
current management has limited experience in developing, marketing and selling recombinant fiber and the other products that we intend
to develop and market. Additionally, our current management has no formal training in the business of scientific research and development,
which may be critical to our success. The inexperience of our management and lack of experienced workforce may negatively affect our
ability to succeed in developing, marketing and/or distributing our proposed products.
We
may be unprepared for technological changes in our industry, which could result in our products being obsolete or replaced by better
technology.
The
industry in which we participate is subject to rapid business and technological changes. The business, technology, marketing, legal and
regulatory changes that could occur may have a material adverse impact on us. New inventions and product innovations may make our proposed
products obsolete. Potential customers may prefer existing materials to our new technology. New materials may come to market that outperform
our technologies. Other researchers may develop and patent technologies which make our line of research obsolete. We may not have the
financial or technical ability to keep up with our competitors.
If
we experience product recalls, we may incur significant and unexpected costs and damage to our reputation and, therefore, could have
a material adverse effect on our business, financial condition, or results of operations.
We
may be subject to product recalls, withdrawals, or seizures if any of our products are believed to cause injury. A recall, withdrawal,
or seizure of any of our products could materially and adversely affect consumer confidence in our brands and lead to decreased demand
for our products. In addition, a recall, withdrawal, or seizure of any of our products would require significant management attention,
would likely result in substantial and unexpected expenditures, and could materially and adversely affect our business, financial condition,
or results of operations.
Our
operations would be negatively affected by any dispute with our collaborating universities or by labor unrest (such as disputes, strikes
or lockouts) between such universities and their academic staff.
We
have signed intellectual property, sponsored research, and collaborative research agreements with one or more universities. The continued
cooperation of these universities, as well as the cooperation of other institutions and or universities is essential for the success
of the Company. In the event of a material dispute with one or more of the universities, such a dispute could create a cessation of operations
for a period of time that could be detrimental to our operations and survival. Additionally, a material dispute between any such university
and its employees could create a cessation of operations for a period of time that could be detrimental to our product development.
Our
competitors are larger with greater financial resources than we have, and we may face increased competition due to the low barriers of
entry to our industry.
We
compete directly with numerous other companies with similar product lines and/or distribution that have extensive capital, resources,
market share, and brand recognition. There are few barriers to entry on the industry in which we compete, namely the textile, specialty
fabric and technical textile industries. This creates the strong possibility of new competitors emerging, and of others succeeding in
developing the same or similar fibers that we are trying to develop. The effects of this increased competition may be materially adverse
to us and our stockholders.
Our
business, operations and plans and timelines have been adversely affected by health epidemics, including the recent COVID-19 pandemic,
and governmental action relating to the same, on the manufacturing, production and other business activities performed by us or by third
parties with whom we conduct business, including our suppliers, target end market potential collaboration partners, and others.
Our
business could be further adversely affected by health epidemics, or governmental response to the same wherever we have business operations.
In addition, health epidemics could cause significant disruption in the operations of third-party manufacturers, CROs and other third
parties upon whom we rely. For example, in December 2019, a novel strain of coronavirus, SARS-CoV-2, causing a disease referred to as
COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple countries worldwide, including the
United States. Our headquarters is located in Michigan and our manufacturing located in Vietnam. The COVID-19 pandemic resulted in the
Company furloughing all non-essential personnel and pausing its production operations. In March 2020, the World Health Organization declared
the COVID-19 outbreak a pandemic, and the U.S. government-imposed travel restrictions on travel between the United States, Europe, and
certain other countries. Further, the President of the United States declared the COVID-19 pandemic a national emergency and invoked
powers under the Stafford Act, the legislation that directs federal emergency disaster response, under the Defense Production Act, the
legislation that facilitates the production of goods and services necessary for national security and for other purposes. The state of
Michigan imposed its own separate restrictions on businesses. We have implemented work-from-home policies for some employees. The effects
of the executive order and our work-from-home policies may negatively impact productivity, disrupt our business, and delay our timelines,
the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct
our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our operations could negatively impact
our business, operating results, and financial condition.
Quarantines,
shelter-in-place and similar government orders, or the expectation that such orders, shutdowns or other restrictions could occur, whether
related to COVID-19 or other causes, could impact our operations or personnel at third-party manufacturing facilities in the United States
and other countries, or the availability or cost of materials, which could disrupt our supply chain or end markets. For example, we may
face shortages in mulberry feed for our silkworms as a result shifting agricultural priorities, or a drop in demand for our finished
materials as a result of an economic downturn. In addition, closures of transportation carriers and modal hubs could materially impact
our development and any future commercialization timelines.
If
our relationships with our suppliers or other vendors are terminated or scaled back as a result of the COVID-19 pandemic or other causes,
we may not be able to enter into arrangements with alternative suppliers or vendors or do so on commercially reasonable terms or in a
timely manner. Switching or adding additional suppliers or vendors involves substantial cost and requires management time and focus.
In addition, there is a natural transition period when a new supplier or vendor commences work. As a result, delays occur, which could
adversely impact our ability to meet our desired clinical development and any future commercialization timelines. Although we carefully
manage our relationships with our suppliers and vendors, there can be no assurance that we will not encounter challenges or delays in
the future or that these delays or challenges will not have an adverse impact on our business, financial condition, and prospects. See
“-Risks Related to Our Dependence on Third Parties.”
The
spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact
brought by the duration of COVID-19 may be difficult to assess or predict, a widespread pandemic or other crisis or governmental action
could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future
negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19, other pandemics,
or governmental action, could materially affect our business and the value of our Common Stock.
As
stated elsewhere in this Registration Statement, governmental travel restrictions impacted our ability to ship eggs to our Vietnam facility
and our production is dependent on those shipments. In October of 2020, with restrictions lifted, we were able to deliver silkworm eggs
to the Vietnam facility and production resumed; in January of 2021 we received the first shipment of silk from our factory in Vietnam.
However, given the speed and frequency of the continuously evolving developments with respect to the pandemic, and the unpredictability
of governmental responses, the Company cannot reasonably estimate the magnitude of the impact to its consolidated results of operations.
We have taken every precaution possible to ensure the safety of our employees. The ultimate impact of the COVID-19 pandemic or a similar
health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business,
our production, healthcare systems or the global economy as a whole. However, these effects could have a material impact on our operations,
and we will continue to monitor the COVID-19 situation closely. See, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations - Impact of COVID-19 Outbreak.”
Our
operations or those of the third parties upon whom we depend on might be affected by the occurrence of a natural disaster, pandemic,
war, or other catastrophic event.
We
depend on our employees, consultants, and suppliers, as well as regulatory agencies and other parties, for the continued operation of
our business. Despite any precautions we take for natural disasters or other catastrophic events, these events, including terrorist attacks,
wars, pandemics, embargos, sanctions, trade or supply chain disruptions, hurricanes, fires, floods and ice and snowstorms, could result
in significant disruptions to our research and development, and, ultimately, commercialization of our products. Long-term disruptions
in the infrastructure caused by events, such as natural disasters, the outbreak of war (including expansion of the current armed conflict
between Russia and Ukraine or the outbreak of war in the far East), the escalation of hostilities and acts of terrorism, embargos, sanction,
trade disruptions, or other “acts of God,” particularly involving countries in which we have offices, manufacturing or key
supply chain partners, could adversely affect our businesses. Any natural disaster or catastrophic event affecting us, our suppliers,
our customers, regulatory agencies, or other parties with which we are engaged could have a material adverse effect on our operations
and financial performance.
We
may not successfully manage any growth that we may experience.
Our
future success will depend upon not only product development, but also on the expansion of our operations and the effective management
of any such growth, which will place a significant strain on our management and on our administrative, operational, and financial resources.
To manage any such growth, we must expand our facilities, augment our operational, financial and management systems, and hire and train
additional qualified personnel. If we are unable to manage our growth effectively, our business would be harmed as our growth could be
adversely affected by such mismanagement.
We
may be unable to maintain an effective system of internal controls and accurately report our financial results or prevent fraud, which
may cause our current and potential stockholders to lose confidence in our financial reporting and adversely impact our business and
our ability to raise additional funds in the future.
Effective
internal controls are necessary for us to provide reliable financial statements and effectively prevent fraud. We have no internal audit
function. As we noted in our annual report on Form 10-K for the year ended December 31, 2024, we reported that our internal control
over financial reporting was not effective for the purposes for which it is intended because we had material weaknesses, as described
below. Though we have taken some steps to address our material weaknesses in our internal control over financial reporting, including
education of management of disclosure requirements and financial reporting controls, we still have not eliminated the material weakness
in our internal controls over financial reporting. If we cannot provide reliable financial statements or prevent fraud, our operating
results and our reputation could be harmed as a result, causing stockholders and/or prospective investors to lose confidence in management
and making it more difficult for us to raise additional capital in the future.
In
our “Management’s Annual Report on Internal Control Over Financial Reporting” that appeared in our annual report on
Form 10-K for the year ended December 31, 2024, we reported that our internal control over financial reporting was not effective
for the purposes for which it is intended based on a material weakness associated with our lack of qualified resources to perform the
internal audit functions properly, no segregation of duties that results in ineffective controls over financial reporting and lack of
control over related party transactions. As reported in our most recent annual report, we are taking some remediation steps to help address
our material weaknesses in our internal control over financial reporting, but we do not expect to remediate the weaknesses in our internal
controls over financial reporting until the time when we start to commercialize a recombinant fiber (and, therefore, may have sufficient
cash flow for hiring personnel to handle our accounting and reporting functions).
Risks
Related to Our Product and Business
Our
business is based on scientific research which has not demonstrated commercial viability and makes our business highly risky.
We
are engaging in research and development of new recombinant silk fibers. Due to the speculative nature of this scientific research, our
chances of success are uncertain, and we cannot guarantee that we will succeed in developing new fibers that deliver performance results
to meet customer requirements or obtain commercial acceptance. An investment in us, therefore, is highly speculative and risky.
The
fibers we develop could expose us to product liability claims, which could have a negative impact on our results of operations.
The
fibers we are seeking to develop may subject us to product liability claims if widely used, including but not limited to design defect,
environmental hazards, quality control, and durability of product. This potential liability is increased by virtue of the fact that our
products in development may be used as protective and safety materials. The fibers and end products we are developing are based on a
GMO and are subject to public opinion, risks, and concerns regarding GMOs. There is tremendous potential liability to any person who
is injured by, or while using, one of our products. As a manufacturer, we may be strictly liable for any damage caused by our products.
This liability might not be covered by insurance or may exceed any coverage that we may obtain.
Ethical,
legal, and social concerns about synthetic biologically engineered products and processes could limit or prevent the use of products
or processes using our technologies, limit consumer acceptance and limit our revenues.
Our
technologies involve the use of genetically engineered (“GE”) products or technologies. Public perception about the safety
and environmental hazards of, and ethical concerns over, GE products and processes could influence public acceptance of our and our collaborators’
technologies, products, and processes.
The
subject of GMOs has received negative publicity, which has aroused public debate. This adverse publicity has led to, and could continue
to lead to, greater regulation and trade restrictions on genetically altered products and organisms. Such changes in regulation, or changes
in the interpretation of regulations could negatively impact our ability to produce enhanced fiber and products. Further, there is a
risk that products produced using our technologies could cause adverse health effects or other adverse events, which could also lead
to negative publicity.
There
is also an active and vocal group of opponents to GMOs who wish to ban or restrict the technology and who, at a minimum, hope to sway
consumer perceptions and acceptance of this technology. Their efforts include regulatory legal challenges and labeling campaigns for
genetically modified products, as well as application of pressure to consumer retail outlets seeking a commitment not to carry genetically
modified products. Further, these groups have a history of bringing legal action against companies attempting to bring new biotechnology
products to market. We may be subject to future litigation brought by one or more of these organizations in their attempt to block the
development or sale of our products. In addition, animal rights groups and various other organizations and individuals have attempted
to stop genetic engineering activities by pressing for legislation and additional regulation in these areas. We may not be able to overcome
the negative consumer perceptions and potential legal hurdles that these organizations seek to instill or assert against our products,
and our business could be harmed.
If
we are not able to overcome the ethical, legal, and social concerns relating to genetic engineering, products and processes using our
technologies may not be accepted. These concerns could result in increased expenses, regulatory scrutiny, delays or other impediments
to our programs or the public acceptance and commercialization of products and processes dependent on our technologies or inventions.
Our ability to develop and commercialize products, or processes using our technologies could be limited by public attitudes and governmental
regulation.
Inadvertent
releases or unintended consequences of releases of synthetic biology technologies by us or others could lead to adverse effects on our
business and results of operations.
The
genetically engineered technologies that we develop may have significantly enhanced strength and elasticity characteristics compared
to those found in native silkworms. While we produce these technologies only for use in a controlled industrial environment, the release
of such technologies into uncontrolled environments could have unintended consequences. Any adverse effect resulting from such a release,
by us or others, could have a material adverse effect on the public acceptance of our products and our business and financial condition.
Such a release could result in enhanced regulatory activity, and we could have exposure to liability for any resulting harm.
Our
development of recombinant silk products and development programs depends upon third parties.
As
we bring our product to market, we will need to develop new relations and collaborations with wholesalers, retailers, silk spinners,
weavers, and freight handlers and end product developers. We expect to depend upon independent collaborations with textile producers,
to conduct development of applications for our transgenic silkworm and recombinant silk polymers, such as recombinant spider silk. We
expect that these collaborators would perform services under agreements with us. Such agreements are often standard-form agreements typically
not subject to extensive negotiation. These collaborators would not be our employees, and in general we would not control the amount
or timing of resources that they devoted to our product development programs. These future collaborators may not assign as great a priority
to our programs or pursue them as diligently as we would if we were undertaking such programs ourselves. If outside collaborators fail
to devote sufficient time and resources to product developments programs using our transgenic silkworm technologies, or if their performance
is substandard, our introduction of protein-based fiber products will be delayed or may not result at all. These future collaborators
may also have relationships with other commercial entities, some of whom may compete with us.
If
conflicts arise with our collaborators, they may act in their self-interests, which may be adverse to our interests.
Conflicts
may arise in collaborations we have entered into or may enter into due to one or more of the following:
| ● |
disputes
with respect to payments that we believe are due under a collaboration agreement; |
| |
|
| ● |
disagreements
with respect to ownership of intellectual property rights; |
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|
| ● |
unwillingness
on the part of a collaborator to keep us informed regarding the progress of its development and commercialization activities, or
to permit public disclosure of these activities; |
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| ● |
delay
of a collaborator’s development or commercialization efforts with respect to our product development; or |
| |
|
| ● |
termination
or non-renewal of the collaboration. |
In
addition, in our collaborations, we may be required to agree not to conduct independently, or with any third party, any research or developments
that are competitive with the research conducted under our collaborations. Our collaborations may have the effect of limiting the areas
of research or product commercialization that we may pursue, either alone or with others. Our collaborators, however, may be able to
develop, either alone or with others, products in related fields that are competitive with the products or potential products that are
the subject of these collaborations.
If
we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market products we
may develop, we may not be able to generate product revenue.
We
do not currently have an organization for the sales, marketing, and distribution of any fiber products that we expect to develop other
than our joint venture, SpydaSilk Enterprises. In order to market any products that may be developed, we must build our sales, marketing,
managerial and other non-technical capabilities or make arrangements with third parties to perform these services. In addition, we have
no experience in developing, training, or managing a sales force and will incur substantial additional expenses in doing so. The cost
of establishing and maintaining a sales force may exceed its cost effectiveness. Furthermore, we will compete with many companies that
currently have extensive and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to compete successfully
against these companies. If we are unable to establish adequate sales, marketing, and distribution capabilities, whether independently
or with third parties, we may not be able to generate product revenue and may not become profitable.
We
may be unable to meet or sustain pricing or material performance requirements.
We
are not aware of any other company that has established a commercially viable and cost-effective production system for recombinant spider
silks. We have not yet achieved large scale commercial production of spider silk and therefore have not demonstrated an ability to sustain
pricing and materials performance targets at scale. If we are unable to match or sustain the pricing requirement for our target markets
or achieve and maintain material performance expectations, it will have a material adverse impact on our business.
Our
production system is based upon living transgenic organisms.
Our
production system is based on transgenic silkworms. Therefore, anything affecting the lifecycle of those silkworms, including but not
limited to known and unknown silkworm diseases, climate, or nutrition could have significant negative effects on our production or our
products. Silkworms are prone to numerous diseases and also have very strict dietary requirements. Such negative effects to our production
could materially adversely affect our operations and ability to receive revenue in the future. We are working to increase the robustness
of our silkworms within the production environment, including disease resistance and tolerance to local climates. Our ability to produce
silk in a cost-effective manner will be dependent upon the success of our hybridization program and other initiatives to increase robustness.
Risks
Related to Intellectual Property
We
currently do not have patent rights to the products we are seeking to develop, and we currently license some of the genetic sequences
and genetic engineering technology we need to develop our products. If any third party challenges our claim to intellectual property
rights in the fiber products we are seeking to develop or the intellectual property rights that we license, our business may be materially
harmed.
We
do not have utility or design patents to the fibers and products we are seeking to develop. It is possible that the fiber products we
are seeking to develop could be imitated or directly manufactured and sold by a competitor. In addition, some or all of our research,
development ideas and proposed products may be covered by patent rights held by some other entity. In that event, we could incur substantial
liability, we could be subject to litigation and claims, and our business would be materially adversely affected.
The
intellectual property rights that we have licensed could be challenged or voided or we could realize that the licensed intellectual property
is worthless and without utility. We may also need to license additional intellectual property from persons or entities in order to successfully
complete our research and development, and we cannot be certain that we will be able to enter into a license agreement with such persons
or entities. If we cannot enter into such license agreements, our operations will be adversely affected, and our prospects negatively
affected.
We
have no assurance of the future grant of patents for technologies we hope to develop. If we are unable to secure intellectual property
protection rights for new technologies developed, our business would be materially harmed.
We
have limited intellectual property protection in foreign markets, which could affect our ability to grow our markets and increase our
revenue.
The
intellectual property that we licensed from Notre Dame is covered by a series of U.S. patents and U.S. patent applications with limited
or no international patent protection. Foreign competitors could be using the same technology that we have licensed, which would affect
our ability to expand our markets beyond the United States. We are aware that international laboratories and potential competitors are
using the “piggyback” gene splicing technology for the genetic modification of silkworm. Such limited foreign intellectual
property could affect our ability to introduce fiber products in international markets or effectively compete in such markets.
The
patents underlying our license agreements could expire or be invalidated prior to our commercializing our specialty fibers, which would
result in the loss of our competitive edge and could negatively impact our revenues and results of operations.
The
patent rights that we license could expire or be invalidated before we are ready to market or commercialize any fiber product, or while
we are still in research and development phases of proposed products, in which event the patents would be worthless and would not protect
us from potential competitors who would then have low barriers to entry and who would be in a position to compete more effectively with
us.
Risks
Related to International Operations
We
may fail to foresee challenges with international operations.
The
Company and its current management have no history or experience in establishing and developing international business units and production
facilities outside of those we have already established. Our future success will depend heavily upon on our ability to oversee production
operations at facilities and locations outside of the United States and management’s day-to-day oversight. Unforeseen challenges
in sustaining efficient operations, decreases in product quality, language and cultural difference, or theft of intellectual property
from these satellite production facilities, or other yet undiscovered challenges could have an adverse material effect on us.
We
may face unforeseen challenges with the import and export of our products.
The
success of our operations depends on our ability to ship the silk fibers and yarns produced by GMO’s. There is no guarantee that
the existing authorizations and interpretations of rules will remain in effect. Increasing restrictions on the shipping of products with
GMO’s or importation of GMO’s may materially impact our business.
Our
international operations will be subject to the laws of the jurisdictions in which we operate.
A
significant portion of our business operations will occur in South-East Asia. We will be generally subject to laws and regulations applicable
to foreign business, investment, molecular biology, transgenic organisms, land use, in Vietnam and possibly other countries. The Vietnamese
legal system is based, at least in part, on written statutes. However, since these laws and regulations are relatively new and the Vietnamese
legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement
of these laws, regulations and rules involves risks and uncertainties. Governmental agencies may have overlapping jurisdiction and possible
conflicting regulation or interpretation of regulations, adding additional risk and uncertainty.
We
cannot predict the effect of future developments in the legal or administrative systems of developing countries, including the promulgation
of new laws, changes to existing laws or the interpretation or enforcement thereof, the preemption of local regulations by national laws,
or the overturn of local government’s decisions by the superior government or the overruling or ignoring of one agency’s
decision by another agency. These uncertainties create risks which may adversely and materially impact our business.
We
may be adversely affected by economic and political conditions in the countries where we operate.
We
operate in the United States, Vietnam, and we have a joint venture in Singapore. Economic and political changes in these countries, such
as inflation rates, recession, foreign ownership restrictions, import/export restrictions, labor policies, policies related to GMO’s,
restrictions on transfer of funds into or out of a country and similar factors may adversely and materially affect results of operations.
While
it is our understanding that the economy in Vietnam has grown significantly in the past 20 years, the growth has been uneven, both geographically
and among various economic sectors. The government of Vietnam has implemented various measures to encourage or control economic growth
and guide the allocation of resources. Some of these measures benefit the overall Vietnamese economy but may also have a negative effect
on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments,
land use or changes in tax regulations that are applicable to us.
The
Vietnamese economy has been transitioning from a planned economy to a more market-oriented economy4. Although in recent years
the Vietnamese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of
state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion
of the productive assets in Vietnam are still owned by the Vietnamese government. The continued control of these assets and other aspects
of the national economy by Vietnam government could materially and adversely affect our business. The Vietnamese government also exercises
significant control over Vietnamese economic growth through the allocation of resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy, and providing preferential treatment to particular industries or companies. Efforts by the Vietnamese
government to slow the pace of growth of the Vietnamese economy could negatively affect our business.
4
https://www.lowyinstitute.org/publications/missing-middle-political-economy-economic-restructuring-vietnam
We
may be adversely affected by social, political, or legal changes.
We
have a substantial portion of our operations in parts of the world where internal social, legal, and political changes are not uncommon
and are taking place. The direction and consequences of these changes are not predictable by us nor are they transparent to us.
Any
such changes as they may relate to attitudes, policy, enforcement, or regulation, regarding investment, property rights, biotechnology,
GMOs and the general business, investment, or taxation environment may have material negative consequences for our business. We have
very limited ability to protect our interests from societal or political changes anywhere in the world.
Risks
Related to Regulations
Potential
future regulations limiting our ability to sell or produce genetically engineered products could harm our business.
We
have and expect to continue to develop biologic products using GMOs. Products derived from GMOs may in some instances be subject to bans
or additional regulation by federal, state, local and foreign government agencies. This complex regulatory environment is in flux and
is not predictable by us. These agencies may not allow us or our collaborators and licensees to produce GMOs and market products derived
from GMOs or could prevent us from doing so in a timely manner or under technically or commercially feasible conditions.
Further,
we and our current and future collaborators and licensees are subject to regulations in the other countries in which we operate outside
of the U.S., which may have different rules and regulations depending on the jurisdiction. Different countries have different rules regarding
which products qualify as GMO. If any of these countries expand the definition of GMO or increase the regulatory burden on GMO products,
our business could be harmed.
Changes
in regulatory enforcement, requirements, laws and policies, or evolving interpretations of existing regulatory requirements, laws, and
policies, may result in increased compliance costs, delays, capital expenditures, ceasing of production operations and other financial
obligations that could materially and adversely affect our business or financial results.
We
face various governmental regulations, which could have a material negative impact on our business.
We
face various governmental regulations regarding import/export, taxes, transgenics and biological research, as well as, transgenic product
manufacture and distribution, environmental regulation, and packaging requirements. Any changes in regulation, enforcement, or interpretation
may be adverse to our operations production, revenues, and potential profit. We are especially at risk from governmental restriction
and regulations related to GMO’s and the use of transgenic organisms in our productions. Federal, state, and foreign regulations
impose strict regulation on the use, storage, and transportation of such transgenic organisms. Such rules impose severe penalties on
us for any breach of regulations, for any spill, release, or contamination caused while the substances are under our direct or indirect
ownership or control. We are not aware of any such breach of governmental regulation, or of any spill, release, or contamination, however,
if such a release, or other regulatory breach does occur in the future, the resulting clean-up costs, and/or fines and penalties, would
cause a material negative effect on the Company and our financial future.
We
face additional challenges associated with operating in overseas locations, which have additional governmental regulations and restrictions.
Those regulations are subject to change and interpretation relating to GMO’s. Such changes could limit our ability to sell or produce
GMO products. We cannot be assured that what is allowed today will be allowable in the future. Furthermore, the revocation or loss of
any license, permit or authorization necessary or desirable for the conduct of our business, or our failure to obtain such an authorization
could materially and adversely affect our business.
Any
such change in regulation, the interpretation of laws and regulations or changes in enforcement, or governmental agency attitudes, especially
as they relate to GMOs could have a material negative impact on our operations.
Risks
Related to This Offering and Our Common Stock
It
is not possible to predict the actual number of shares we will sell under the SEPA to the Selling Stockholder, or the actual gross proceeds
resulting from those sales.
On
January 21, 2025, we entered into the SEPA with the Selling Stockholder, pursuant to which the Selling Stockholder has committed to purchase
up to $10 million of shares of Common Stock, subject to certain limitations and conditions set forth in the SEPA. The shares of Common
Stock that may be issued under the SEPA may be sold by us to the Selling Stockholder at our discretion from time to time for a period
of up to 36 months following the execution of the SEPA or the date on which the Selling Stockholder shall have purchased from us under
the SEPA shares of our common stock for an aggregate gross purchase price of $10,000,000, unless the SEPA is earlier terminated.
We
generally have the right to control the timing and amount of any sales of our shares of Common Stock to the Selling Stockholder under
the SEPA. Generally, sales of our Common Stock, if any, to the Selling Stockholder under the SEPA will depend upon market conditions
and other factors to be determined by us. We may ultimately decide to sell to the Selling Stockholder all, some, or none of the shares
of our Common Stock that may be available for us to sell to the Selling Stockholder pursuant to the SEPA.
Because
the purchase price per share to be paid by the Selling Stockholder for the shares of Common Stock that we may elect to sell to the Selling
Stockholder under the SEPA, if any, will fluctuate based on the market prices of our Common Stock prior to each advance made pursuant
to the SEPA, if any, it is not possible for us to predict, as of the date of this prospectus and prior to any such sales, the number
of shares of Common Stock that we will sell to the Selling Stockholder under the SEPA, the purchase price per share that the Selling
Stockholder will pay for shares purchased from us under the SEPA, or the aggregate gross proceeds that we will receive from those purchases
by the Selling Stockholder under the SEPA, if any.
Investors
who buy shares at different times will likely pay different prices.
Pursuant
to the SEPA, we will generally have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold to the
Selling Stockholder. If and when we do elect to sell shares of Common Stock to the Selling Stockholder pursuant to the SEPA, after the
Selling Stockholder has acquired such shares, the Selling Stockholder may resell all, some, or none of such shares at any time or from
time to time in its discretion and at different prices. As a result, investors who purchase shares from the Selling Stockholder in this
offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution, and
in some cases substantial dilution, and different outcomes in their investment results. Investors may experience a decline in the value
of the shares they purchase from the Selling Stockholder in this offering as a result of future sales made by us to the Selling Stockholder
at prices lower than the prices such investors paid for their shares in this offering. In addition, if we sell a substantial number of
shares to the Selling Stockholder under the SEPA, or if investors expect that we will do so, the actual sales of shares or the mere existence
of our arrangement with the Selling Stockholder may make it more difficult for us to sell equity or equity-related securities in the
future at a time and at a price that we might otherwise wish to effect such sales.
Our
management team will have broad discretion over the use of the net proceeds from our sale of shares of Common Stock to the Selling Stockholder,
if any, and you may not agree with how we use the proceeds, and the proceeds may not be invested successfully.
Our
management team will have broad discretion as to the use of the net proceeds from our sale of shares of Common Stock to the Selling Stockholder,
if any, and we could use such proceeds for purposes other than those contemplated at the time of commencement of this offering. Accordingly,
you will be relying on the judgment of our management team with regard to the use of those net proceeds, and you will not have the opportunity,
as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that, pending their
use, we may invest those net proceeds in a way that does not yield a favorable, or any, return for us. The failure of our management
team to use such funds effectively could have a material adverse effect on our business, financial condition, operating results, and
cash flows.
Our
sole Director owns a significant percentage of our outstanding voting securities which could reduce the ability of minority stockholders
to effect certain corporate actions.
Collectively,
due to the voting rights features of the Series A Preferred Stock (which is owned solely by our chief executive officer), our officers
and directors own an aggregate of 807,028,623 shares of our voting securities, or approximately 49.07% of our outstanding
voting securities as of the date of this Registration Statement. As a result, currently, and after this offering, they will possess significant
influence and can elect a majority of our Board and authorize or prevent proposed significant corporate transactions without the votes
of any other stockholders. They are expected to have significant influence over a decision to enter into any corporate transaction and
have the ability to prevent any transaction that requires the approval of stockholders, regardless of whether or not our other stockholders
believe that such transaction is in our best interests. Such concentration of voting power could have the effect of delaying, deterring,
or preventing a change of control or other business combination, which could, in turn, have an adverse effect on the market price of
our Common Stock or prevent our shareholders from realizing a premium over the then-prevailing market price for their Common Stock.
We
may need to raise additional capital by sales of our securities, which may adversely affect the market price of our Common Stock and
your rights in us may be reduced.
We
expect to continue to incur product development and selling, general and administrative costs, and in order to satisfy our funding requirements,
we will need to continue to raise additional capital above and beyond the anticipated proceeds of this offering. The sale or the proposed
sale of substantial amounts of our Common Stock or other securities in the public markets may adversely affect the market price of our
Common Stock and our stock price may decline substantially. Our stockholders may experience substantial dilution and a reduction in the
price that they are able to obtain upon sale of their shares. Also, new equity securities issued may have greater rights, preferences,
or privileges than our existing Common Stock. Furthermore, additional capital may not be available in sufficient amounts or on reasonable
terms, if at all, and our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions
and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the
ongoing COVID-19 pandemic.
We
do not intend to pay dividends.
We
have never declared or paid any cash dividends on our securities. We currently intend to retain our earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.
The
market price of our Common Stock may be volatile and may be affected by market conditions beyond our control, and you may not be able
to sell our Common Stock.
Publicly
traded companies generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our securities,
regardless of our actual operating performance.
The
market for our Common Stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our
share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is
attributable to a number of factors. First, our shares of Common Stock are sporadically and thinly traded. As a consequence of this lack
of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of
those shares in either direction. The price for our shares Common Stock could, for example, decline precipitously in the event that a
large number of shares of our Common Stock are sold on the market without commensurate demand, as compared to a seasoned issuer which
could better absorb those sales without adverse impact on its share price. Second, we are a speculative or “risky” investment
due to our limited operating history and lack of revenue to date, and uncertainty of future market acceptance for our potential products.
As a consequence of this enhanced risk, more risk-averse investors may, under the fear of losing all or most of their investment in the
event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts
than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market
price of our Common Stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing
market price for our Common Stock will be at any time, including as to whether our Common Stock will sustain its current market price,
or as to what effect the sale of shares or the availability of Common Stock for sale at any time will have on the prevailing market price.
The
market price of our Common Stock is subject to significant fluctuations in response to, among other factors:
| ● |
the
significant downward pressure on our Common Stock price caused by the sale of a significant number of shares could cause our Common
Stock price to decline, thus allowing short sellers of our Common Stock an opportunity to take advantage of any decrease in the value
of our Common Stock; |
| ● |
the
presence and action of short sellers in our Common Stock; |
| ● |
market
acceptance of our existing products, as well as products in development; |
| ● |
the
timing of regulatory approvals; |
| ● |
our
ability or the ability of third-party distributors to sell, market, and distribute our products; |
| ● |
our
ability or the ability of our contract manufacturers to manufacture our products efficiently; |
| ● |
changes
in our financial performance or a change in financial estimates or recommendations by securities analysts; |
| ● |
our
ability to raise additional funds to complete development of our pharmaceutical product candidates; |
| ● |
announcements
of innovations or new products or services by us or our competitors; |
| ● |
the
emergence of new competitors or success of our existing competitors; |
| ● |
operating
and market price performance of other companies that investors deem comparable; |
| ● |
sales
or purchases of our Common Stock by insiders; |
| ● |
commencement
of, or involvement in, litigation; |
| ● |
changes
in governmental regulations; and |
| ● |
general
economic conditions and slow or negative growth of related markets. |
In
addition, if the market for stock in our industry, or the stock market in general, experiences a loss of investor confidence, the market
price of our common stock could decline for reasons unrelated to our business, financial condition, or results of operations.
The
stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity
securities of many companies, including very recently in connection with the ongoing COVID-19 pandemic, which has resulted in decreased
stock prices for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects. These
fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry
factors, including potentially worsening economic conditions and other adverse effects or developments relating to the ongoing COVID-19
pandemic, political, regulatory, and other market conditions, may negatively affect the market price of shares of our Common Stock, regardless
of our actual operating performance. The market price of shares of our Common Stock may decline below the initial public offering price,
and you may lose some or all of your investment.
If
any of the foregoing occurs, it could cause the price of our Common Stock to fall and may expose us to lawsuits that, even if unsuccessful,
could be costly to defend and distract our Board and management.
We
are currently subject to penny stock regulations and restrictions and if we continue to be subject to such regulations and restrictions
you may have difficulty selling shares of our Common Stock.
The
Commission has adopted regulations which generally define so-called “penny stocks” as an equity security that has a market
price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our Common Stock
is a “penny stock”, and we are subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional
sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited
investors” (generally, individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser’s written consent to the transaction prior to sale. As a result, this rule affects the ability of broker-dealers
to sell our securities and affects the ability of purchasers to sell any of our securities in the secondary market.
For
any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure
schedule prepared by the Commission relating to the penny stock market. Disclosure is also required to be made about sales commissions
payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements
are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market
in penny stock.
In
addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (“FINRA”) has
adopted similar rules that may also limit a stockholder’s ability to buy and sell our Common Stock. FINRA rules require that in
recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable
for such customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must
make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other
information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities
will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that
their customers buy our Common Stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market
for our shares.
Shares
eligible for future sale may have adverse effects on our share price.
Sales
of substantial amounts of shares or the perception that such sales could occur may adversely affect the prevailing market price for our
shares. We may issue additional shares in subsequent public offerings or private placements to make new investments or for other purposes.
We are not required to offer any such shares to existing shareholders on a preemptive basis. Therefore, it may not be possible for existing
shareholders to participate in such future share issuances, which may dilute the existing shareholders’ interests in us.
Future
sales of additional shares of our Common Stock or securities convertible into shares of our Common Stock may dilute our shareholders’
ownership in us and may adversely affect us or the trading price of our Common Stock.
We
may issue additional shares of our Common Stock or securities convertible into our Common Stock in the future pursuant to current or
future employee stock incentive plans, employee stock grants, or in connection with future acquisitions or financings. We cannot predict
the size of any such future issuances or the effect, if any, that any such future issuances will have on the trading price of our Common
Stock. Any such future issuances of shares of our Common Stock or securities convertible into Common Stock may have a dilutive effect
on the holders of our Common Stock and could have a material negative effect on the trading price of our Common Stock.
Future
sales of shares of our Common Stock could lower the trading price of our Common Stock, and any additional capital raised by us through
the sale of additional equity or convertible debt securities may dilute our shareholders’ ownership in us and may adversely affect
us or the trading price of our Common Stock.
We
may issue additional shares of Common Stock or other securities in primary offerings and the Selling Stockholder may resell shares of
our Common Stock in subsequent secondary offerings. We cannot predict the size of additional issuances or future resales of shares of
our Common Stock or convertible securities, the offering price in any such issuance or resale or the effect, if any, that additional
issuances or future resales will have on the trading price of our Common Stock. Additional issuances and resales of substantial amounts
of our Common Stock or convertible securities, or the perception that such additional issuances or resales could occur, may adversely
affect prevailing trading prices for our Common Stock.
The
loss of liquidity could adversely impact a Shareholder’s ability to sell Shares.
The
Shares are listed for trading on the OTCQB under the market symbol “KBLB.” The Company’s stock is thinly traded. Any
reduction in the volume of shares traded could result in the loss of liquidity. Such loss of liquidity could limit the ability for the
Company to raise additional capital to fund the operations and impact the Shareholders ability to sell shares. There is no guarantee
that our stock will continue to be listed on the OTCQB. If we were delisted from the OTCQB there would be a loss of liquidity that would
significantly impact our shareholders and their ability to liquate their investment.
USE
OF PROCEEDS
All
shares of Common Stock offered by this prospectus are being registered for resale by the Selling Stockholder and will be sold by the
Selling Stockholder for its account. We will not receive any of the proceeds from the sale of these securities. However, we may receive
up to $10.0 million aggregate gross proceeds from any sales we make to the Selling Stockholder pursuant to the SEPA. The net proceeds
from sales, if any, under the SEPA, will depend on the frequency and prices at which we sell Common Stock to the Selling Stockholder
after the date of this prospectus. See the section titled “Plan of Distribution” elsewhere in this prospectus for more information.
We
expect to use any proceeds that we receive under the SEPA for working capital and general corporate purposes. As of the date of this
prospectus, we cannot specify with certainty all of the particular uses, and the respective amounts we may allocate to those uses, for
any net proceeds we receive. Accordingly, we will retain broad discretion over the use of these proceeds.
The
Selling Stockholder will bear all commissions and discounts, if any, attributable to the resale of the shares of Common Stock.
MARKET
INFORMATION FOR CLASS A COMMON STOCK AND DIVIDEND POLICY
Market
Information
Our
common stock trades on the OTCQB system under the symbol “KBLB.” Our CUSIP number is 50075W.
Dividend
Policy
We
have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends on our
capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support operations
and to finance the growth and development of our business. Any future determination to pay dividends will be made at the discretion of
our Board, subject to applicable laws and will depend upon, among other factors, our results of operations, financial condition, contractual
restrictions, and capital requirements. Our future ability to pay cash dividends on our capital stock may also be limited by the terms
of any debt instruments or preferred securities issued in the future.
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table discloses information as of the date of this prospectus, with respect to compensation plans (including individual compensation
arrangements) under which our equity securities are authorized for issuance, aggregated as follows:
Equity
Compensation Plan Information
| Plan
category |
|
Number
of securities to be issued upon exercise of outstanding options, warrants and rights |
|
|
Weighted-average
exercise price of outstanding options, warrants and rights |
|
|
Number
of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|
| |
|
(a) |
|
|
(b) |
|
|
(c) |
|
| Equity
compensation plans approved by security holders |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
| Equity
compensation plans not approved by security holders |
|
|
69,681,000 |
|
|
|
0 |
|
|
|
121,477,720 |
|
| Total |
|
|
69,681,000 |
|
|
|
0 |
|
|
|
121,477,720 |
|
2019
Employee Stock Option Plan
Effective
December 9, 2019, we adopted the 2019 Employee Stock Option Plan (“Plan”), with 80,000,000 shares issuable pursuant to the
Plan. Beginning on January 1, 2020 and continuing on each January 1st that the Plan is in place, an additional number of shares
equal to the lesser of: (i) 2% of the number of shares of Common Stock outstanding (fully-diluted) on the immediately preceding December
31 and (ii) such lower number of shares as may be determined by the Board or committee, shall be added to the number of shares issuable
under the Plan. As of the date of this prospectus, 73,101,000 options have been issued pursuant to the Plan (although some have
been cancelled or exercised) and 121,477,720 shares remain issuable pursuant to the Plan, based on the terms of the Plan as set
forth above.
Eligibility.
The Plan provides for the grant of incentive stock options to our employees and any parent and subsidiary corporations’ employees
and for the grant of nonqualified share options, restricted shares, restricted share units, share appreciation rights, share bonuses
and performance awards to our employees, directors and consultants and our parent and subsidiary corporations’ employees and consultants.
Administration.
The Plan is administered by the Board or by a committee of not fewer than 2 members, each of whom is an outside Director and all
of whom are disinterested, designated by the Board to administer the Plan. The plan administrator determines the terms of all awards.
Types
of Awards. The Plan allows for the grant of nonqualified stock options, incentive stock options, restricted share options, restricted
stock units, stock appreciation rights, stock bonuses and performance awards.
Award
Agreements. All awards under the Plan are evidenced by an award agreement which shall set forth the number of shares subject to the
award and the terms and conditions of the award, which shall be consistent with the Plan.
Term
of Awards. The term of awards granted under the Plan is ten years.
Vesting
Schedule and Price. The plan administrator has the sole discretion in setting the vesting period and, if applicable, exercise schedule
of an award, determining that an award may not vest for a specified period after it is granted and accelerating the vesting period of
an award. The plan administrator determines the exercise or purchase price of each award, to the extent applicable.
Transferability.
Unless the plan administrator provides otherwise, the Plan does not allow for the transfer of awards other than by will or the laws
of descent and distribution. Unless otherwise permitted by the plan administrator, options may be exercised during the lifetime of the
optionee only by the optionee or the optionee’s guardian or legal representative.
Adjustments.
In the event the Board or committee determines that any dividend or distribution, recapitalization, stock split, reorganization,
merger, consolidate, split-up, spin-off, or other similar corporate transact or event affects the shares subject to the Plan such that
an adjustment is determined by the Board or committee to be appropriate to prevent dilution or enlargement of the benefits intended to
be made under the Plan, appropriate adjustments will be made to the share maximums and exercise prices, as applicable.
Governing
Law and Compliance with Law. The Plan and awards granted under it are governed by and construed in accordance with the laws of the
Wyoming. Shares will not be issued under an award unless the issuance is permitted by applicable law.
Amendment
and Termination. The Plan terminates ten years from the date it was approved unless it is terminated earlier by our Board. The Board
may amend, alter, suspend, discontinue, or terminate the plan, including, without limitation, any amendment, alternation, suspension,
discontinuation, or termination that would impart the rights of any participant, or any other holder or beneficiary of any award theretofore
granted, without the consent of any share owner, participant, other holder or beneficiary of an award, or other person, unless required
by applicable law.
BUSINESS
Overview
Kraig
Biocraft Laboratories, Inc., a Wyoming corporation, is a corporation organized to develop high strength fibers using recombinant DNA
technology for commercial applications including technical textiles. We use genetically engineered silkworms that produce
spider silk proteins to create our recombinant spider silk. Applications include performance apparel, workwear, filtration, luxury fashion,
flexible composites, medical implants, cosmetics and more. We believe that we are a world leader in the research, development,
and production of commercially scalable and cost-effective spider silk fiber. Our primary proprietary fiber technology utilizes
natural and engineered variants of spider silk produced in domesticated mulberry silkworms. Our business brings twenty-first century
biotechnology to the historical silk industry. We are introducing materials with innovative properties into an established commercial
ecosystem of silkworm rearing, silk spinning, weaving, and manufacture of garments and other products.
We
are using genetic engineering technologies to develop fibers with greater strength, resiliency, and flexibility for use in our target
markets, including the specialty fiber and technical textile industries. We believe that the genetically engineered protein-based
fibers we seek to produce have properties that are in some ways superior to the materials currently available in the marketplace. Production
of our product in commercial quantities holds what we believe to be potential life-saving ballistic resistant material, which we believe
is lighter, thinner, more flexible, and tougher than steel. Other potential applications for spider silk based recombinant fibers include
use as structural material and for any application in which light weight and high strength are required. We believe that fibers made
with recombinant protein-based polymers will make significant inroads into the specialty fiber and technical textile markets.
Through
our technologies, the introduction of the gene sequence based on those found in native spider silk, results in a germline transformation
and is therefore self-perpetuating. Our recombinant spider silk fibers incorporate the silk proteins found in spider silk with native
silkworm silk proteins. This combination of native silkworm proteins combined with spider silk protein structures results in new and
unique recombinant silk fibers. This technology is in essence a protein expression platform which has other potential applications including
diagnostics and pharmaceutical production. Moreover, our technologies are “green” inasmuch as our fibers and textiles are
derived from nature and do not use any petrochemicals as an input into the fibers.
The
Report of Independent Registered Public Accounting Firm to our financial statements as of December 31, 2023, and as of December
31, 2024, include an explanatory paragraph stating that our net loss from operations and net capital deficiency at December 31,
2024 raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
The
Product
Our
products exploit the unique characteristics of spider silk, specifically dragline silk from Nephila clavipes (golden orb-web spider)
and variants thereof. Such fibers possess unique mechanical properties in terms of strength, resilience, and flexibility. Through the
use of genetic engineering, we believe that we have produced a variety of unique transgenic silkworm strains that produce recombinant
spider silk. Our recombinant spider silk fibers incorporates the silk proteins found in spider silk with the native silkworm silk
proteins. This combination of native silkworm proteins combined with spider silk protein structures results in a new and unique recombinant
silk fiber.
Monster
Silk®
Monster
Silk® was the first recombinant spider silk fiber product we developed. Monster Silk incorporates the natural elasticity of spider
silk to make a silk fiber which is more flexible that conventional silk fibers and textiles. We have produced sample products using Monster
Silk® including knit fabrics, gloves, and shirts in collaboration with textile mills. We expect that Monster Silk® will have
market applications across the traditional textile markets where its increased flexibility will provide increased durability and comfort.
Dragon
SilkTM
Dragon
SilkTM is the next evolution in recombinant spider silk, combining the elasticity of Monster Silk® with additional high
strength elements of native spider silk. Some samples of Dragon SilkTM have demonstrated strength beyond that of native spider
silk. This combination of strength and elasticity results in a silk fiber which is soft and flexible, yet tougher than leading synthetic
fiber available on the market. Based on inquires we have received from end market leaders, we believe that Dragon SilkTM- will
have applications in performance apparel, durable workwear, luxury goods and apparel, and composites.
Other
Products
We
are continuing to develop new recombinant silks and other protein-based fibers and materials using our genetic engineering capabilities.
The Company leverages the latest in genetic engineering technology to develop new silk and protein technologies that it believes will
have significant advantages over our legacy technology which created Dragon Silk and Monster Silk. Chief among these is the potential
to produce spider silks with greatly increased purity and performance. Due to the biocompatible and biodegradable properties of silk,
we believe that the materials developed using this process will create opportunities for products in the medical industry, including
sutures, grafts, and implants.
Our
Technology
Our
technology builds upon the unique advantages of the domesticated silkworm. The silkworm is an efficient commercial and industrial producer
of protein-based polymers, and forty percent (40%) of the caterpillars’ weight is devoted to the silk glands. The silk glands produce
large amounts of an insoluble protein called fibroin, which the silkworm spins into a composite protein thread (silk).
We
use our genetic engineering technology to create proprietary recombinant silk polymers from the silkworms. On September 29, 2010, we,
along with our collaborators at Notre Dame created approximately twenty different strains of transgenic silkworm which produce recombinant
silk polymers. In October of 2017, with the support of funding from the U.S. Army, we transitioned our research operations out of Notre
Dame and into our own research and development headquarters.
Our
transgenic silkworms are created by inserting the genes expressing spider silk with either natural or engineered amino acid sequences
into the embryos of the silkworm. The spider silk sequence is introduced to the embryo of the silkworm and incorporated into the silkworm
genome using state of the art molecular biology approaches. The spider sequence is created on a circular loop of DNA called a plasmid.
We developed a method to alter the plasmid DNA to more readily allow the mixing and matching of various targeted traits including spider
DNA genes, disease resistance, commercially marketable proteins and other physical properties. In this way, we can more rapidly combine
different genetic cassettes to create fibers and proteins with the desired chemical, physical, and mechanical properties than through
conventional methods.
Production
of this material in commercial quantities holds the potential of a life-saving ballistic resistant material, which is lighter, thinner,
more flexible, and tougher than steel. However, the Company does not currently have any life-saving ballistic products and could be some
time before we are able to produce such a product from the material. Other applications for spider silk based recombinant fibers include
use as structural material and for any application in which light weight and high strength are required. We believe that fibers made
with recombinant protein-based polymers will make significant inroads into the specialty fiber and technical textile markets. Our interactions
with manufacturers of high-performance textiles, convince us that there is an eager commercial market for our innovative, sustainable,
and differentiated technology and products.
Manufacturing
Our
spider silk technology is designed for plug and play incorporation into the existing silk production model. We manufacture and plan to
continue to manufacture our proprietary spider silk fibers using traditional silkworm production practices (sericulture).
The
Company, through Prodigy Textiles, has hired local workers with experience in sericulture production to care for and raise our silkworms
through the five instars, or stages, of the silkworm life cycle, including the final instar when the mature caterpillars produce a cocoon
comprised of pure silk. These cocoons are then reeled to our specifications to form the final spider silk threads such as Dragon SilkTM and
Monster Silk®.
By
utilizing existing production methodology in traditional silk regions to produce our high-performance materials, we leverage historical
knowledge, available labor, and existing capital infrastructure for production, spinning, and weaving of our spider silk materials. This
approach reduces the risk to our manufacturing operations and decreases our need for upfront capital expenditure.
We
believe that we will be able to target metric tons of capacity of spider silk fiber per annum from our operations when fully developed.
This capacity will allow us to address our anticipated initial demand for applications in the protective, performance, and luxury textile
markets.
The
Market
We
are focusing our work on the creation of new fibers with unique properties including fibers with potential high performance and technical
fiber applications for the performance fiber market. The performance fiber market is currently dominated by two classes of product: aramid
fibers, and ultra-high molecular weight polyethylene fibers. These existing products serve the need for materials with high strength,
resilience, but are unable to delivery flexibility. Because these synthetic performance fibers are stronger and tougher than steel, they
are used in a wide variety of military, industrial, and consumer applications.
The
military and police are among the users of performance fibers for its ballistic protection. The materials are also used for industrial
applications requiring superior strength and toughness, e.g., critical cables and abrasion/impact resistant components. Performance fibers
are also employed in safety equipment, high strength composite materials for the aero-space industry and for ballistic protection by
the defense industry.
The
global market for technical textiles was estimated at greater than $200 billion in 2024 and projected to reach $272
billion by 20301.
These
are industrial materials which have become essential products for both industrial and consumer applications. The market for technical
textiles can be defined as consisting of:
| ● |
Medical
textiles; |
| |
|
| ● |
Geotextiles; |
| |
|
| ● |
Textiles
used in Defense and Military; |
| |
|
| ● |
Safe
and Protective Clothing; |
| |
|
| ● |
Filtration
Textiles; |
| |
|
| ● |
Textiles
used in Transportation; |
| |
|
| ● |
Textiles
used in Buildings; |
| |
|
| ● |
Composites
with Textile Structure; and |
| |
|
| ● |
Functional
and Sportive Textiles. |
1https://www.grandviewresearch.com/industry-analysis/technical-textiles-market#:~:text=Report%20Overview,4.5%25%20from%202020%20to%202027.
We
believe that the superior mechanical characteristics of the next generation of protein-based polymers (in other words, genetically engineered
silk fibers), will open up new applications for the technology. The materials which we are working to produce are tougher and stronger
than steel.
We
are actively pursuing relationships within target end markets to secure product collaborations with key market channel leaders. Due to
the unique nature of our product, we received numerous unsolicited requests from leading businesses across a range of attractive end
markets requesting materials for applications development. This substantial interest in spider silk materials across the broad spectrum
of applications for high performance fibers and textiles, combined with the limited initial production capacity, has, we believe, provided
the opportunity to be selective in choosing market channel partners best able to bring our product to market at scale. We are working
under non-disclosure agreements to secure these collaborative development agreements and to establish limited channel exclusivity for
firms we believe mirror our culture of innovation.
Research
and Development
During
the fiscal years ended December 31, 2024, and 2023, we have spent approximately 22,206 and 15,126 hours, respectively, on research
and development activities, which consisted primarily of laboratory research on genetic engineering by our in-house research operations.
We
have initiated production of our recombinant materials, which we have named Monster Silk® and Dragon SilkTM. Additionally,
we are accelerating both our microbiology and selective breeding programs.
Our
R&D is focused on creating new materials through molecular biology and genetic engineering. One of the main focuses of our work is
utilizing the domestic silkworm to create brand-new fibers and materials. We are advancing this work very quickly, creating many new
transgenics in the fourth quarter of 2024 and accelerating that work into 2025. We believe these new transgenics could have potentially
significant impacts on the apparel and technical textiles markets.
A
key aspect of our research program is designed to increase the robustness of our silkworms within the production environment.
Working with our contractors we have identified robustness and acclimation of our silkworm lines to the local climate as one of our
most significant challenges. In 2024 we made substantial progress in improving robustness. We are accelerating our
hybridization and breeding program to further increase production robustness and cocoon size.
Our
Intellectual Property Approach
Our
intellectual property strategy utilizes a blended approach of licensed technologies and in-house developments. As part of our intellectual
property portfolio, we have licensed the exclusive right to use certain patented gene-splicing technologies for use in silkworm.
Under
the Notre Dame Agreements, we exercised our right to exclusive commercial use for spider silk technologies developed under that agreement.
We have worked collaboratively with the university to develop fibers with the mechanical characteristics of spider silk. We are applying
this proprietary genetic engineering technology to domesticated silkworms, which we believe is the best path to economical, commercial
scale production of spider silk.
In
2017, we opened a research and development facility to expand on the work conducted at Notre Dame. Since opening this new facility, we
have expanded our intellectual property portfolio with multiple additional provisional and utility patent filings based on new discoveries
and inventions. We will continue to utilize our in-house research capabilities to expand and strengthen its patent portfolio while also
maintaining and growing our trade secrets relating to genetic advancement and spider silk. We are actively working to develop new approaches
to the development of genetically engineering silkworms, underlying construction techniques, and fundamental genetic sequences for improved
material performance.
The
Notre Dame Agreements will last for the duration of the patented materials that we developed with Notre Dame. The new technologies that
we are developing in our internal research labs does not rely on the Notre Dame patented materials and as a result will not be impacted
by an expiration of those agreements.
License
Agreements/Intellectual Property
We
have obtained certain rights to use a number of university created, and patented gene splicing and spider silk protein technologies.
As
part of the joint development program with the University of Notre Dame and the Notre Dame Agreements, Kraig Labs negotiated an option
for exclusive global commercial rights to technologies jointly developed with Notre Dame. Kraig Labs has exercised that option. As of
the date of this filing, four patents relating to the jointly developed technologies have been issued, number 10-1926286 in South Korea,
number 2011314072 in Australia, number 26612 in Vietnam, and number 2,812,791 in Canada. These jurisdictions are a mix of silk producing
and consuming countries. We believe protecting our technologies in these countries will be beneficial to our future operations.
In
addition to the patents related to licensed technologies from Notre Dame listed above, Kraig Labs has filed a number of patent applications
and provisional applications based on technologies developed solely within the Company’s own laboratories. Kraig has filed two
such patent applications and four provisional patent applications based on technologies developed and discoveries from our own independent
research operations.
Table
of Patent Applications and Status
| Title |
|
Country |
|
Application
No. |
|
Filing
Date |
|
Patent
No. |
|
Patent
Date |
|
Status |
| Transgenic
Silkworms Capable of Producing Chimeric Spider Silk Polypeptides and Fibers |
|
United
States of America |
|
14/754946 |
|
30-Jun-2015 |
|
|
|
|
|
Under
Exam |
| Chimeric
Spider Silk and Uses Thereof |
|
Japan |
|
2017-038829 |
|
01-Mar-2017 |
|
|
|
|
|
Under
Exam |
| Chimeric
Spider Silk and Uses thereof |
|
China
(People’s Republic) |
|
201180057127.1 |
|
28-May-2013 |
|
|
|
|
|
Pending |
| Chimeric
Spider Silk and Uses thereof |
|
Korea,
Republic of |
|
10-2017-7005086 |
|
22-Feb-2017 |
|
10-1926286 |
|
30-Nov-2018 |
|
Granted |
| A
Nucleic Acid Encoding a Chimeric Spider Silk Polypeptide, Chimeric Spider Silk Polypeptide, Composite Fiber Comprising the Chimeric
Spider Silk Polypeptide and Method of Preparing a Transgenic Silkworm |
|
Vietnam |
|
1-2013-01306 |
|
25-Apr-2013 |
|
26612 |
|
03-Nov-2020 |
|
Granted |
| Chimeric
Spider Silk and Uses thereof |
|
Canada |
|
2812791 |
|
28-Sep-2011 |
|
2812791 |
|
14-Jul-2020 |
|
Granted |
| Chimeric
Spider Silk Polypeptides and Fibers Uses Thereof |
|
United
States of America |
|
14/754916 |
|
30-Jun-2015 |
|
|
|
|
|
Under
Exam |
| Chimeric
Spider Silk and Uses thereof |
|
Japan |
|
2013-530432 |
|
26-Mar-2013 |
|
|
|
|
|
Pending |
| Chimeric
Spider Silk and Uses thereof |
|
France |
|
11833071.1 |
|
26-Apr-2013 |
|
2621957 |
|
02-Jun-2021 |
|
Granted |
| Chimeric
Spider Silk and Uses thereof |
|
India |
|
3574/DELNP/2013 |
|
22-Apr-2013 |
|
|
|
|
|
Under
Exam |
| Chimeric
Spider Silk and Uses thereof |
|
Germany |
|
11833071.1 |
|
26-Apr-2013 |
|
602011071095.8 |
|
02-Jun-2021 |
|
Granted |
| Chimeric
Spider Silk and Uses Thereof |
|
United
States of America |
|
61/387332 |
|
28-Sep-2010 |
|
|
|
|
|
Expired |
| Chimeric
Spider Silk and Uses thereof |
|
China
(People’s Republic) |
|
201710335250.4 |
|
12-May-2017 |
|
|
|
|
|
|
*
The terms in this column have the following meanings:
Published:
Pending patent applications that have been published by a corresponding state Patent Office (e.g., the U.S. Patent and Trademark Office)
or international patent authority (e.g., the World Intellectual Property Association).
Pending:
Patent applications that have been submitted to a corresponding state Patent Office for examination but that have not been issued or
abandoned.
Under
Exam: Pending patent applications currently being examined by a corresponding state Patent Office.
Granted:
Patent applications that have been allowed by a corresponding state Patent Office and that have passed through the registration process;
a granted patent application is synonymous with a “patent” and is conferred the associated patent rights for the given jurisdiction.
In
addition to patent protection for intellectual property developed by the Company and through its collaborative research agreements, the
Company has developed specialized skills and knowledge in the field of selective breeding, performance selection, and husbandry. This
information is considered to be trade secrets and will play a critical role in the development of unique strains of new transgenic with
diverse mechanical properties. These operations and knowledge held as trade secrets provide an additional layer of security and protection
for the products and technologies we seek to develop.
In
2014, the following six trademarks were issued to the Company; the Company shall use these trademarks for product branding in the future:
Marks
Monster
SilkTM
SpiderpillarTM
SpilkTM
Monster
WormTM
Spider
WormTM
Spider
MothTM
Dragon
SilkTM
In
2021, through its Singapore based joint venture the following four trademarks were issued.
Notre
Dame Agreements
As
discussed above, in 2007 we entered into the first of the series of Notre Dame Agreements. We provided financial support to ongoing research
and development of transgenic silkworms and the creation of recombinant silk fibers. In exchange, we have an option to obtain the exclusive
global commercialization rights to the technology developed pursuant to the research effort.
Following
the first agreement, we entered into successive intellectual property and collaborative research agreements with Notre Dame to provide
different levels of financial support. The trend had been for an increase in financial support for the research and development in nearly
every successive agreement. In June 2012, we entered into an Intellectual Property / Collaborative Research Agreement with Notre Dame
(“2012 Notre Dame Research Agreement”). On March 4, 2015, we entered into a new Intellectual Property / Collaborative Research
Agreement with Notre Dame extending the agreement through March 2016 (“2015 Notre Dame Research Agreement”). Under the 2015
Notre Dame Research agreement, the Company provided approximately $534,000 in financial support. On September 20, 2015, the 2015 Notre
Dame Research Agreement was amended to increase the total funding by approximately $179,000; in February 2016, the 2015 Notre Dame Research
Agreement was extended to July 31, 2016, and in August 2016, the 2015 Notre Dame Research Agreement was extended to December 31, 2016.
In May 2017, the 2015 Notre Dame Research Agreement was amended to increase the total funding by approximately $189,000 and the duration
of the 2015 Notre Dame Research Agreement was extended to September 30, 2017. With the funding we received from the U.S. Army, we were
able to conduct our research and development in-house, at less cost, and therefore we did not extend the 2015 Notre Dame Research Agreement
after September 30, 2017.
In
2011, we exercised our option to obtain the global commercialization rights to the technology developed under the Notre Dame Agreements,
which resulted in a separate license agreement with Notre Dame (the “2011 Notre Dame Agreement”). Pursuant to the 2011 Notre
Dame Agreement, Notre Dame filed an international patent application and numerous national patent applications on technology relating
to the creation and use of recombinant spider silks and we received exclusive and non-exclusive rights to certain spider silk and gene-splicing
technologies including commercial rights with the right to sublicense such intellectual property. The 2011 Notre Dame Agreement obligates
us to reimburse Notre Dame for costs associated with the filing, prosecuting and maintaining of such patents and patent applications.
In exchange for the rights to commercialization, Notre Dame has received 2,200,000 shares of our Common Stock and we have agreed to pay
Notre Dame royalties equal to 2% of our gross sales of the licensed products and 10% of any sublicensing fees received by the Company
on licensed technology.
Cooperative
Agreement in Vietnam
On
December 30, 2015, we entered into a cooperative agreement with a provincial government office in Vietnam for the research and pilot
production of hybrid silkworms. In April 2018, we received an investment registration certificate for our subsidiary in
Vietnam. Later that month the Company was issued its enterprise registration certificate which allowed us to commence operations.
Other
Agreements
On
October 15, 2013, we entered into an intellectual property agreement with a scientific researcher relating to the development of new
recombinant silk fibers. Under the terms of that agreement, the scientific researcher transferred his rights of intellectual property,
inventions, and trade secrets which the researcher develops relating to recombinant silk to us. Upon signing, the researcher received
8,000,000 Common Stock purchase warrants from the Company, exercisable 24 months from the date of the agreement. As per the terms of
the agreement, the researcher received an additional 10,000,000 warrants after creating a new recombinant silk fiber for us that met
specified performance characteristics and another 8,000,000 warrants for performing the contract in good faith. The warrants described
above all contain a cashless exercise provision and are exercisable on the 24-month anniversary of the date on which they were issuable
under the agreement. All warrants under this agreement were exercised.
Governmental
Regulations
We
are subject to U.S. federal, state and local laws and regulations, as well as several countries in Southeast Asia. These laws and regulations
govern, among other things, labor relations, the labeling and safety of our products, the environment, distribution of products, the
production of products, and our molecular biology, GMO based technologies. We believe that we are in material compliance with all such
applicable laws and regulations, although no assurance can be provided that this will remain true in the future or that interpretation
of laws and regulations will remain a constant.
A
significant portion of our business operations will occur in Southeast Asia. We will be generally subject to laws and regulations applicable
in Vietnam and possibly other countries. The Vietnamese legal system is based, at least in part, on written statutes. However, since
these laws and regulations are relatively new and the Vietnamese legal system continues to rapidly evolve, the interpretations of many
laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involves risks and uncertainties.
Governmental agencies may have overlapping jurisdiction and possible conflicting regulation or interpretation of regulations, adding
additional risk and uncertainty.
Laws
and particularly their interpretations and enforcement can and do change. Social and political trends shift in ways that we cannot predict,
and which could negatively and materially impact our business and our ability to produce products. With regards to areas where law is
vague, lacking, or could be subject to interpretation we endeavor to conform to industry norms.
Environment
Kraig Labs is fully committed to its vision of bringing
spider silk technologies to commercial markets while maintaining the highest levels of environmental responsibility. We believe our technology,
built on a renewable resource, has a positive environmental impact, and offers significant benefits over competing synthetic textiles.
Our production system is derived from nature and does not use any petrochemicals as an input into our fibers.
We seek to comply with and exceed all applicable statutory
and administrative requirements concerning environmental quality. Expenditures for compliance with federal state and local environmental
laws have not had, and are not expected to have, a material effect on our capital expenditures, results of operations or competitive position.
While being environmentally conscious is the objective
of all producers in this industry, the fermentation process used by our competitors produces high levels of carbon dioxide. CO2
is a greenhouse gas and is argued to be the leading cause of global warming. In stark contrast, Kraig Labs’ mulberry trees and the
silk from silkworms have proven to be effective at sequestering carbon dioxide and are renewable resources. Mulberry trees also provide
essential global green-cover and significantly help in reducing soil erosion in areas.
Competition
We compete directly with numerous other companies
with similar product lines and/or distribution that have extensive capital, resources, market share, and brand recognition.
There are presently three primary competitors that
we face in the fledgling spider silk industry, but there are few barriers to entry in our industry. This creates the strong possibility
of new competitors emerging, and of others succeeding in developing the same or similar fibers for application that we are trying to develop.
The effects of this increased competition may be materially adverse to us and our stockholders. As this is an emergent industry there
is no one producer that has captured a significant portion of the market. Bolt Threads, Inc. based in California and Spiber Inc. based
in Japan are competitors which have raised the largest amounts of investment capital to date. We also compete with AMSilk, which is based
in Germany. We believe that our technology offers more cost-effective methods with lower environmental impact than technologies used by
our identified competitors, however, new technologies could be developed that remove this advantage.
These competitors have raised and spent 100’s
of millions of dollars in pursuit of spider silk production.
Property
Our principal executive office is located at 2723
South State St., Suite 150, Ann Arbor, Michigan. We pay an annual rent of $2,508 for conference facilities, mail, fax, and reception services
located at this location.
On September 5, 2019, we signed a two-year lease for
a 5,000 square foot property in Lansing, MI that commenced on October 1, 2019, and ends on September 30, 2021, for its research and development
headquarters. Pursuant to the lease, it was an annual rent of $42,000 for year one of the lease and $44,800 for year two of the lease.
On April 16, 2021, we signed a two-year amendment to this lease, pursuant to which, commencing on July 1, 2021, and ending on September
30, 2022, we pay an annualized rent of $42,000 and from October 1, 2022 through September 30, 2023, we will pay an annual rent of $44,800.
On October 1, 2023, the Company extended the terms of the lease through September 30, 2025. From October 1, 2023, through September 30,
2024, the Company will pay an annual rent of $44,800. From October 1, 2024, through September 30, 2025, the Company will pay an annual
rent of $47,600.
On July 1, 2021, the Company signed a 5-year property
lease in the Socialist Republic of Vietnam which consists of 30,000 square meters of property and 6,000 square meter of buildings, which
it leases at a rate of approximately $8,645 per year for each of the five years.
On January 31, 2024, the Company signed a five-year
lease for a 700 square meter facility in Lam Dong, Vietnam that commenced on February 1, 2024, and ends on January 31, 2029. We pay an
annual rent of approximately $7,284 for year one and two of the lease. For years 3-5 the price will increase with Vietnam’s state
land price bracket, not to exceed 10%. The Company recorded ROU asset of $30,084 and lease liability of $30,084 in accordance with the
adoption of the new guidance. During the nine months ended September 30, 2024, the Company terminated its ROU lease arrangement. The Company
does not occupy or use the facility and therefore has determined to impair this asset as there is no future benefit.
On September 20, 2024, the Company
signed a six-year lease for a 80 square meter facility in Lam Dong, Vietnam that commenced on September 20, 2024, and ends on December
31, 2030. We pay an annual rent of approximately $7,032 for year one and two of the lease, $7,740 for year three, and $8,520 for years
four through six.
Employees
The Company currently employs between
10-14 people at its U.S. facilities, 7 full-time and up to 7 part-time, including Kim Thompson, our officer and sole director
and Jonathan R. Rice, our Chief Operating Officer. The Company employs between 8-30 full time personnel at its Vietnamese subsidiary
depending on the production cycle. We plan to hire more persons on as-needed basis.
Legal Proceedings
We may from time to time become a party to various
legal or administrative proceedings arising in the ordinary course of our business.
To the knowledge of our management, we are currently
not a party to any material legal or administrative proceedings and are not aware of any pending or threatened legal or administrative
proceedings against us.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis
of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included
elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results
and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various
factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. Readers are cautioned not to place
undue reliance on forward-looking statements, since such statements speak only as of the date they were made. Forward-looking statements
involve risks and uncertainties that could cause actual events or results to differ materially from the events or results described in
the forward-looking statements, including any forward-looking statements contained in this prospectus. The events described in forward-looking
statements might not occur or might occur to a different extent or at a different time than described in the forward-looking statements.
We undertake no obligation, except to the extent required by federal securities laws, to publicly update or revise any forward-looking
statements contained in this prospectus, whether as a result of new information, future events, or otherwise.
The following section reflects management’s
views on the financial condition as of December 31, 2024, and 2023, and the results of operations and cash flows for the fiscal years ended December 31, 2024, and 2023. This section is provided as a supplement to, and should be read in conjunction with, the Company’s audited
consolidated financial statements and related notes to the consolidated financial statements contained elsewhere in this report.
Overview
Kraig Biocraft
Laboratories, Inc., a Wyoming corporation, is a corporation organized to develop high strength fibers using recombinant DNA technology
for commercial applications including technical textiles. We use genetically engineered silkworms that produce spider silk proteins to
create our recombinant spider silk. Applications include performance apparel, workwear, filtration, luxury fashion, flexible composites,
medical implants, cosmetics and more. We believe that we are a world leader in the research, development, and production of commercially
scalable and cost-effective spider silk fiber. Our primary proprietary fiber technology utilizes natural and engineered variants of spider
silk produced in domesticated mulberry silkworms. Our business brings twenty-first century biotechnology to the historical silk industry.
We are introducing materials with innovative properties into an established commercial ecosystem of silkworm rearing, silk spinning,
weaving, and manufacture of garments and other products.
We are using
genetic engineering technologies to develop fibers with greater strength, resiliency, and flexibility for use in our target markets,
including the specialty fiber and technical textile industries. We believe that the genetically engineered protein-based fibers we
seek to produce have properties that are in some ways superior to the materials currently available in the marketplace. Production of
our product in commercial quantities holds what we believe to be potential life-saving ballistic resistant material, which we believe
is lighter, thinner, more flexible, and tougher than steel. Other potential applications for spider silk based recombinant fibers include
use as structural material and for any application in which light weight and high strength are required. We believe that fibers made
with recombinant protein-based polymers will make significant inroads into the specialty fiber and technical textile markets.
Through our
technologies, the introduction of the gene sequence based on those found in native spider silk, results in a germline transformation
and is therefore self-perpetuating. Our recombinant spider silk fibers incorporate the silk proteins found in spider silk with native
silkworm silk proteins. This combination of native silkworm proteins combined with spider silk protein structures results in new and
unique recombinant silk fibers. This technology is in essence a protein expression platform which has other potential applications including
diagnostics and pharmaceutical production. Moreover, our technologies are “green” inasmuch as our fibers and textiles are
derived from nature and do not use any petrochemicals as an input into the fibers.
The Report of
Independent Registered Public Accounting Firm to our financial statements as of December 31, 2023, and as of December 31, 2024, include
an explanatory paragraph stating that our net loss from operations and net capital deficiency at December 31, 2024 raise substantial
doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Plan of Operations
During the next twelve months, we expect to take the
following steps in connection with the further development of our business and the implementation of our plan of operations:
| ● |
We plan to expand our research and development to accelerate our work in creating next generation materials and to improve the robustness of our recombinant spider silk lines. This will involve new selective breed protocols, the creation of new hybrids, and the development of new transgenics utilizing plasmids that are already in an advanced state of development. |
| |
|
| ● |
We plan to create a line of spider silk-based fashion and performance wear. The company plans to pursue this market entry in combination with one or more joint venture or development partners, although has not entered into any definitive agreements as of the date hereof. |
| |
|
| ● |
We plan to continue the expansion of our spider silk production capacity including new facilities and expansion of existing facilities. |
| ● |
We plan to continue and accelerate our work to improve the overall robustness of our recombinant spider silk lines through a combination of climate acclimation, improved silkworm genetics, and the implementation of a multiple-strain hybrid breeding program. This program is already in an advanced state |
| ● |
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; as of the date hereof, we have not had any formal discussion or entered into any definitive agreements regarding any such purchase. |
| |
|
| ● |
We will also actively consider pursuing collaborative research opportunities with private laboratories in areas of research that overlap the company’s existing research and development. One such potential area for collaborative research that the company is considering is protein expression platforms. If our financing allows, management will strongly consider 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 additional 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 2025 and going forward. |
| |
|
| ● |
We plan to actively pursue the development of commercial scale production of our recombinant materials including under the brand names: Monster Silk®, Dragon SilkTM, SpydaSilkTM, and SpydraTM. |
Limited Operating History
We have not previously demonstrated that we will be
able to expand our business through an increased investment in our research and development efforts. We cannot guarantee that the research
and development efforts described in this filing will be successful. Our business is subject to risks inherent in growing an enterprise,
including limited capital resources, risks inherent in the research and development process and possible rejection of our products in
development.
If financing is not available on satisfactory terms,
we may be unable to continue our research and development and other operations. Equity financing will result in dilution to existing stockholders.
Standby Equity Purchase
Agreement
On January 21, 2025, Kraig
Biocraft Laboratories entered into the SEPA with the Selling Stockholder. Pursuant to the SEPA, the Company has the right to sell to the
Selling Stockholder up to $10 million of its shares of common stock, subject to certain limitations and conditions set forth in the SEPA,
from time to time during the term of the SEPA. Sales of the shares of common stock to the Selling Stockholder under the SEPA, and the
timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of common stock
to the Selling Stockholder under the SEPA.
We have filed the registration
statement of which this prospectus forms a part with the Securities and Exchange Commission (the “SEC”) to register under
the Securities Act the resale by the Selling Stockholder of up to 207,787,193 shares of common stock, consisting of an aggregate amount
of 1,081,471 Commitment Shares and up to 206,705,722 shares of common stock that we may elect, in our sole discretion, to issue and sell
to the Selling Stockholder, from time to time under the SEPA. From time to time at our discretion for the 36-month period after the date
of the SEPA, upon the satisfaction of the conditions to the Selling Stockholder’s purchase obligation set forth in the SEPA, including
that the registration statement of which this prospectus forms a part be declared effective by the SEC and the final form of this prospectus
is filed with the SEC, we will have the right, but not the obligation to direct the Selling Stockholder to purchase a specified number
of shares of common stock (each such sale, an “Advance”) by delivering written notice to the Selling Stockholder (each, an
“Advance Notice”). While there is no mandatory minimum amount for any Advance, it may not to exceed 100% of the average of
the daily trading volume of the common stock on the five consecutive trading days immediately preceding an Advance Notice. The per share
purchase price for the shares of common stock, if any, that we elect to sell to the Selling Stockholder in an Advance pursuant to the
Purchase Agreement will be determined by reference to the volume weighted average price of our common stock (the “VWAP”) and
calculated in accordance with the SEPA; provided, however, that the Company may establish a minimum acceptable price in certain Advance
Notices, as specified in the SEPA, below which it shall not be obligated to make any sales to the Selling Stockholder. There is no upper
limit on the price per share that the Selling Stockholder could be obligated to pay for the common stock we may elect to sell to it in
any Advance. We will control the timing and amount of any sales of common stock to the Selling Stockholder. Actual sales of shares of
our common stock to the Selling Stockholder under the SEPA will depend on a variety of factors to be determined by us from time to time,
which may include, among other things, market conditions, the trading price of our common stock, and determinations by us as to the appropriate
sources of funding for our business and its operations.
In addition to the satisfaction
of the conditions, the Selling Stockholder shall not be obligated to purchase or acquire, and shall not purchase or acquire, any common
stock under the SEPA which, when aggregated with all other common stock beneficially owned by the Selling Stockholder and its affiliates,
would result in the beneficial ownership by the Selling Stockholder and its affiliates (on an aggregated basis) of a number of shares
of common stock exceeding 4.99% of the then outstanding voting power or number of common shares. In addition, in no event shall an Advance
exceed the number of common shares registered in respect of the transactions contemplated hereby under the registration statement then
in effect.
As consideration for the
Selling Stockholder’s commitment to purchase shares of common stock at our direction upon the terms and subject to the conditions
set forth in the SEPA, upon execution of the SEPA, we issued 1,081,471 Commitment Shares to the Selling Stockholder. The Company shall
also pay the Selling Stockholder a structuring fee in an amount of $25,000, of which $10,000 has been paid prior to the execution of the
SEPA, and $15,000 shall be paid on the earlier of (a) the closing of the first Advance, or (b) the termination of the SEPA.
The SEPA will automatically
terminate on the earliest to occur of (i) 36-month anniversary of the date of the SEPA or (ii) the date on which the Selling Stockholder
shall have purchased from us under the Purchase Agreement shares of our common stock for an aggregate gross purchase price of $10,000,000.
We have the right to terminate the SEPA at no cost or penalty upon five trading days’ prior written notice to the Selling Stockholder;
provided that there are no outstanding Advance Notices and all outstanding amounts the Company owes to the Selling Stockholder pursuant
to the SEPA are repaid. We and the Selling Stockholder may also agree to terminate the SEPA by mutual written consent. Neither we nor
the Selling Stockholder may assign or transfer our respective rights and obligations under the SEPA, and no provision of the SEPA may
be modified or waived by us or the Selling Stockholder other than by an instrument in writing signed by both parties.
The SEPA contains customary
representations, warranties, conditions, and indemnification obligations of the parties. The representations, warranties and covenants
contained in such agreements were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the
parties to such agreements and may be subject to limitations agreed upon by the contracting parties.
The net proceeds received by the Company under the
SEPA will depend on the frequency and prices at which the Company sells its shares of common stock to the Selling Stockholder. The Company
expects that any proceeds received from such sales to the Selling Stockholder will be used for working capital and general corporate purposes.
The Selling Stockholder has agreed that it and its affiliates will not engage in any short sales of the common stock nor enter into any
transaction that establishes a net short position in the common stock during the term of the SEPA.
If and when we elect to issue and sell shares to the
Selling Stockholder under the SEPA, we may need to register for resale under the Securities Act additional shares of our common stock
in order to receive aggregate gross proceeds equal to the $10,000,000 available to us under the SEPA, depending on market prices for our
common stock. If all of the 206,705,722 shares offered by the Selling Stockholder for resale under the registration statement of which
this prospectus forms a part were issued and outstanding as of the date hereof (without taking into account the 4.99% Ownership Limitation),
such shares would represent approximately 19.88% of the total number of shares of our common stock outstanding as of February 7, 2025.
If we elect to issue and sell more than the 206,705,722 shares offered under this prospectus to the Selling Stockholder, which we have
the right, but not the obligation, to do, we must first register for resale under the Securities Act any such additional shares, which
could cause substantial additional dilution to our stockholders. The number of shares ultimately offered for resale by the Selling Stockholder
is dependent upon the number of shares we may elect to sell to the Selling Stockholder under the SEPA.
Results of Operations for the Years ended December
31, 2024 and 2023
Our revenue, operating expenses, and net loss from
operations for the years ended December 31, 2024, as compared to the year ended December 31, 2023, were as follows – some balances
on the prior period’s combined financial statements have been reclassified to conform to the current period presentation:
| | |
Years Ended | | |
| | |
% Change | |
| | |
December 31, | | |
| | |
Increase | |
| | |
2024 | | |
2023 | | |
Change | | |
(Decrease) | |
| NET REVENUES | |
$ | - | | |
$ | - | | |
| - | | |
| - | |
| COSTS OF REVENUES | |
| - | | |
| - | | |
| - | | |
| | |
| Gross Profit | |
| - | | |
| - | | |
| - | | |
| | |
| OPERATING EXPENSES: | |
| | | |
| | | |
| | | |
| | |
| General and Administrative | |
| 1,747,585 | | |
| 1,454,295 | | |
| 293,290 | | |
| 20.17 | % |
| Professional Fees | |
| 290,313 | | |
| 125,222 | | |
| 165,091 | | |
| 131.84 | % |
| Officer’s Salary | |
| 872,289 | | |
| 797,406 | | |
| 74,883 | | |
| 9.39 | % |
| Research and Development | |
| 164,374 | | |
| 237,871 | | |
| (73,497 | ) | |
| -30.90 | % |
| Total operating expenses | |
| 3,074,561 | | |
| 2,614,794 | | |
| 459,767 | | |
| 17.58 | % |
| Loss from operations | |
| (3,074,561 | ) | |
| (2,614,794 | ) | |
| (459,767 | ) | |
| 17.58 | % |
| Interest expense | |
| (529,603 | ) | |
| (484,658 | ) | |
| (44,945 | ) | |
| 9.27 | % |
| Gain on asset impairment | |
| - | | |
| (95,872 | ) | |
| 95,872 | | |
| -100.00 | % |
| Net change in unrealized appreciation on investment in gold bullion | |
| 133,829 | | |
| 55,985 | | |
| 77,844 | | |
| 139.04 | % |
| Interest income | |
| 71,396 | | |
| 109,559 | | |
| (38,163 | ) | |
| -34.83 | % |
| Net Loss | |
$ | (3,398,939 | ) | |
$ | (3,029,780 | ) | |
| (369,159 | ) | |
| 12.18 | % |
Net Revenues:
During the year ended December 31, 2024, we realized $0 of revenues from our business. During the year ended December 31,
2023, we realized $0 of revenues from our business. Accordingly, there was no change in revenues between the years ended December 31,
2024 and 2023.
Research and development
expenses: During the year ended December 31, 2024, we incurred $164,374 of research and development expenses,
a decrease of $73,497 or 30.90% compared with the same period in 2023. The research and development expenses are
attributable to the research and development with the Notre Dame University; the increase was due to the timing of research related activity
and costs by insources the Company’s research operations.
Professional Fees:
During year ended December 31, 2024, we incurred $290,313 professional expenses, which increased by $165,091
or 131.84% from $125,222 for year ended December 31, 2023. The increase in professional fees expense was
attributable to increased expenses related to investor relations services during year ended December 31, 2024.
Officers Salary:
During year ended December 31, 2024, officers’ salary expenses increased to $872,289 or 9.39% compared to
$797,406 for year ended December 31, 2023. The increase is due to contractual terms of employment. In order to conserve
Company resources, the CEO agreed to accrue and not collect a majority of his salary for 2024.
General and Administrative
Expense: General and administrative expenses increased by $293,290 or 20.17% to $1,747,585 for year ended December
31, 2024 from $1,454,295 for year ended December 31, 2023. Our general and administrative expenses for year ended December 31,
2024 consisted of other general and administrative expenses (which includes expenses such as Auto, Business Development, SEC Filing,
Investor Relations, General Office, warrant Compensation) of $1,052,808, Travel of $65,631, office salary of $467,931, and consulting
of $161,215 for a total of $1,747,585. Our general and administrative expenses for year ended December 31, 2023 consisted of other
general and administrative expenses (which includes expenses such as Auto, Business Development, SEC Filing, Investor Relations, General
Office, warrant Compensation) of $1,031,363, Travel of $44,629, office salary of $368,683, and consulting of $9,620 for a total of $1,454,295.
Interest Expense:
Interest expense increased to $529,603, or 9.27% for the year ended December 31, 2024, compared to $484,658 for the year ended December
31, 2023. The increase was primarily due to interest on the related party loans and accounts payable and accrued expenses to the related
parties.
Net
Change in Unrealized Depreciation on Investment in Gold Bullion: Net change in unrealized appreciation on investment in gold bullion
increased by $77,844 to $133,829 for the year ended December 31, 2024, from $55,985 for the year ended December 31, 2023.
The increase was primarily due to a net change in unrealized depreciation on investment in gold bullion.
Asset impairment
expense: Asset impairment expense decreased to $0, or 100% for the year ended December 31, 2024, compared to $95,872 for the year
ended December 31, 2023. The decrease was primarily due to recognizing impairment expense of a deposit towards the purchase of inventory
during the year ended December 31, 2023.
Net Loss:
Net loss increased by $369,159, or 12.18%, to a net loss of $3,398,939 for the year ended December 31, 2024, from a net loss of $3,029,780
for the year ended December 31, 2023. This increase in net loss was driven primarily by an increase in warrant compensation, professional
fees, officer’s salary and slightly offset by a decrease in research and administration expense and impairment expense.
Capital Resources and Liquidity
Our financial
statements have been presented on the basis that we have a going concern, which contemplates the realization of assets and satisfaction
of liabilities in the normal course of business. As presented in the financial statements, we incurred a net loss of $3,398,939 during
the year ended December 31, 2024, and losses are expected to continue in the near term. The accumulated deficit is $53,085,719 at December
31, 2024. Refer to Note 2 for our discussion of stockholder deficit. We have been funding our operations through private loans and the
sale of common stock in private placement transactions. Refer to Note 6 and Note 7 in the financial statements for our discussion of
notes payable and shares issued, respectively. Our cash resources are insufficient to meet our planned business objectives without additional
financing. These and other factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial
statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the possible inability of our company to continue as a going concern.
Management anticipates
that significant additional expenditures will be necessary to develop and expand our business before significant positive operating cash
flows can be achieved. Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to ultimately
achieve sustainable revenues and profitable operations. At December 31, 2024, we had $673,264 of cash on hand. These funds
are insufficient to complete our business plan and as a consequence, we will need to seek additional funds, primarily through the issuance
of debt or equity securities for cash to operate our business. No assurance can be given that any future financing will be available
or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, it may contain
undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in the case of
equity financing.
Management has undertaken steps
as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps
include (a) raising additional capital and/or obtaining financing; (b) controlling overhead and expenses; and (c) executing material sales
or research contracts. There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the
Company will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing
will be available to the Company on satisfactory terms and conditions, if at all. As of the date of this Report, we have not entered into
any formal agreements regarding the above.
In the event the Company is unable
to continue as a going concern, the Company may elect or be required to seek protection from its creditors by filing a voluntary petition
in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative, nor
does management view it as a likely occurrence.
Cash, total current
assets, total assets, total current liabilities, and total liabilities as of December 31, 2024, as compared to December 31, 2023,
were as follows:
| | |
December 31, 2024 | | |
December 31, 2023 | |
| Cash | |
$ | 673,264 | | |
$ | 2,551,834 | |
| Inventory | |
$ | 6,884 | | |
$ | 6,884 | |
| Prepaid expenses | |
$ | 60,137 | | |
$ | 14,902 | |
| Total current assets | |
$ | 740,285 | | |
$ | 2,573,620 | |
| Total assets | |
$ | 1,505,333 | | |
$ | 3,232,822 | |
| Total current liabilities | |
$ | 9,614,428 | | |
$ | 8,885,610 | |
| Total liabilities | |
$ | 9,654,954 | | |
$ | 8,939,978 | |
At December 31,
2024, we had a working capital deficit of $8,874,143, compared to a working capital deficit of
$6,311,990 at December 31, 2023. Current liabilities increased to $9,614,428 at December 31, 2024 from $8,885,610 at December 31, 2023,
primarily as a result of accounts payable.
For
the year ended December 31, 2024, net cash used in operations of $1,839,086 was the result of a net loss of $3,398,939 offset
by depreciation expense of $26,159, net change in unrealized appreciation in gold bullions of $133,829, warrants issuance of $851,205,
imputed interest on related party loans of $81,072, increase in prepaid expenses of $45,235, increase in deposits of $3,656, and a decrease
in operating lease right of use of $49,209, an increase of accrued expenses and other payables-related party of $818,538, a decrease
in accounts payable of $39,635 and a decrease in operating lease liabilities of $48,172.
For
the year ended December 31, 2023, net cash used in operations of $1,244,483 was the result of a net loss of $3,029,780 offset by
depreciation expense of $27,620, asset impairment expense of $95,872, net change in unrealized appreciation in gold bullions of $55,985,
stock issued for services of $225,000, warrants issuance of $538,633, imputed interest on related party loans of $80,851, increase in
prepaid expenses of $763, decrease in deposits of $2,608, increase in inventory of $304, and a decrease in operating lease right of use
of $48,064, an increase of accrued expenses and other payables-related party of $869,640, increase in accounts payable of $1,298 and a
decrease in operating lease liabilities of $48,763.
Net
cash used in our investing activities were $4,240 and $6,399 for the year ended December 31, 2024, and December 31, 2023, respectively.
During the year ended December 31, 2024, the Company had purchase of fixed assets of $4,240.
During the year ended December 31, 2023, the Company had net purchases of treasury bills of $2,587,811 and net proceeds from maturities
of treasury bills of $2,587,811 and purchase of fixed assets of $6,399.
Our
financing activities resulted in a cash inflow of $35,244 for the year ended December 31, 2024, which is represented by $35,244 loan
repayment.
Our
financing activities resulted in a cash inflow of $60,000 for the year ended December 31, 2023, which is represented by $60,000 loan repayment.
Critical Accounting Policies
Our financial statements and related public financial
information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires
the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets,
liabilities, and revenue and expense amounts reported. These estimates can also affect supplemental information contained in our external
disclosures including information regarding contingencies, risk, and financial condition. We believe our use of estimates and underlying
accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these
estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial
statements.
Our significant accounting policies are summarized
in Note 1 of our audited financial statements. While all these significant accounting policies impact its financial condition and results
of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most
significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results
may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any
other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity
for the periods presented in this report.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In November 2023, the FASB issued
ASU No. 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures, to require enhanced disclosures
that include reportable segment expenses. The amendments in this update provide that a business entity disclose significant segment expenses,
segment profit or loss (after significant segment expenses) and allows reporting of additional measures of a segments profit or loss
if used in assessing segment performance. Such disclosures apply to entities with a single reportable segment. These amendments were
effective for the Company in 2024 and retrospectively to all prior periods using the significant segment expense categories identified.
The impact of the adoption of the amendments in this update was not material to the Company’s consolidated financial position and
results of operations, as the requirements impact only segment reporting disclosures in the footnotes to the Company’s consolidated
financial statements.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In November 2024, the FASB issued
ASU No. 2024-03, Disaggregation of Income Statement Expenses to improve the disclosures about a public business entity’s
expenses and address requests from investors for more detailed information about the types of expenses including purchases of inventory,
employee compensation, depreciation and intangible asset amortization in commonly presented expense captions such as cost of sales, selling,
general and administrative expense, and research and development. These amendments are effective for the Company for annual periods in
2027, applied prospectively, with early adoption permitted, and interim periods beginning in 2028. The Company intends to adopt the amendments
in this update prospectively in 2027 for annual periods and in 2028 for interim periods. The impact of the adoption of the amendments
in this update is not expected to be material to the Company’s consolidated financial position and results of operations, as the
requirements only require more detailed disclosures in the footnotes to the Company’s consolidated financial statements.
In March 2024, the FASB issued ASU
No. 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements to remove various references
to concepts statements from the FASB Accounting Standards Codification. This guidance is to clarify guidance, simplify wording or structure
of guidance, and other minor improvements. These amendments are effective for the Company for annual periods in 2025, applied prospectively,
with early adoption and retrospective application permitted. The Company intends to adopt the amendments in this update prospectively
in 2025. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated
financial position and results of operations.
In March 2024, the FASB issued ASU
No. 2024-01, Compensation - Stock Compensation (Topic 718) - Scope Application of Profits Interest and Similar Awards, to clarify
whether profits interest and similar awards should be accounted for in accordance with Topic 718, Compensation - Stock Compensation.
The guidance applies to all business entities that issue profits interest awards as compensation to employees or nonemployees in
exchange for goods or services. These amendments are effective for the Company for annual and interim periods in 2025, applied prospectively,
with early adoption and retrospective application permitted. As the Company does not issue profit interest awards, the impact of the
adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results
of operations.
In December 2023, the FASB issued
ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, to require enhanced income tax disclosures
to provide information to assess how an entity’s operations and related tax risks, tax planning, and operational opportunities
affect its tax rate and prospects for future cash flows. The amendments in this update provide that a business entity disclose (1) a
tabular income tax rate reconciliation, using both percentages and amounts, (2) separate disclosure of any individual reconciling items
that are equal to or greater than 5% of the amount computed by multiplying the income (loss) from continuing operations before income
taxes by the applicable statutory income tax rate, and disaggregation of certain items that are significant and (3) amount of income
taxes paid (net of refunds received) disaggregated by federal, state and foreign jurisdictions, including separate disclosure of any
individual jurisdictions greater than 5% of total income taxes paid. These amendments are effective for the Company for annual periods
in 2025, applied prospectively, with early adoption and retrospective application permitted. The Company intends to adopt the amendments
in this update prospectively in 2025. The impact of the adoption of the amendments in this update is not expected to be material to the
Company’s consolidated financial position and results of operations since the amendments require only enhancement of existing income
tax disclosures in the footnotes to the Company’s consolidated financial statements.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Below is a list of our executive officers and sole
director as of the date of this Registration Statement.
| NAME |
|
AGE |
|
POSITION |
|
DATE APPOINTED |
| Kim Thompson |
|
63 |
|
President, Chief Executive Officer,
Chief Financial Officer and Sole Director |
|
April 25, 2006 |
| Jonathan R. Rice |
|
45 |
|
Chief Operating Officer |
|
January 20, 2015 |
| Kenneth Le |
|
61 |
|
President of Prodigy Textiles |
|
July 2019 |
The following summarizes the occupation and business
experience during the past five years for our officers, current director, and Director Nominees.
Kim Thompson.
Mr. Kim Thompson was a founder of the California law
firm of Ching & Thompson, which was established in 1997. His work focused primarily on commercial litigation. He has been a founder
and partner in the Illinois law firm of McJessy, Ching & Thompson, where he also emphasizes commercial and civil rights litigation.
In his civil rights practice, Mr. Thompson was, and remains a staunch defender of constitutional rights with a focus on freedom of speech,
Fourth Amendment protections, and combating racial discrimination. Prior to founding Kraig Labs, Mr. Thompson joined the firm of Shearson,
Lehman, Hutton where he specialized in equity trading and research of small-cap companies. His experience in those small-cap equity markets
has proven to be invaluable both in his legal and business successes. Mr. Thompson received his bachelor’s degree in applied economics
from James Madison College, Michigan State University, and his Juris Doctorate from the University of Michigan. Mr. Thompson is a member
of the Triple Nine Society for persons with documented genius level IQs (having tested above the 99.9th percentile). He is the named inventor
or co-inventor on a number of issued patents, pending patent applications, and provisional patent applications, including inventions relating
to biotechnology and mechanics. Mr. Thompson is the inventor of the technology concept that led to the formation of the Company. For his
efforts in disrupting the textile markets, Mr. Thompson was recognized as one of the top 20 Pioneering CEO’s of 2019. We believe
that Mr. Thompson is well suited to serve as our director because of his knowledge of biotechnology, legal expertise, and business background.
Jonathan R. Rice.
Mr. Jonathan R. Rice worked at Ultra Electronics,
Adaptive Materials Inc., a Michigan company (“UEA”) from 2002 through 2015. At the time he left UEA, Mr. Rice worked as the
Director of Advanced Technologies, where he was responsible for new products development and commercialization. He was also the Corporate
Facility Security Officer for UEA from 2006 through 2015, where Mr. Rice ensured UEA’s compliance with federal regulations under
the National Industrial Security Program Operating Manual and completed its annual security audit. During 2004 through 2007 while working
as an Engineering Manager at UEA, Mr. Rice, among other things, led the design and development of multiple fuel cell and power management
systems, established a team to identify and eliminate production and performance limitation, authored technical progress and final reports
for customers and provided training to military personnel on use of fuel cell systems. From 2002 through 2005, Mr. Rice also served as
UEA’s Production Manager in charge of developing manufacturing process and techniques and sourcing the production equipment for
UEA’s products. Mr. Rice graduated from Michigan Technological University in 2002 with a degree of Bachelors of Science in Chemical
Engineering. Mr. Rice received his Masters of Business Administration at
Michigan State University in 2016.
Kenneth Le. Mr. Le was appointed
as our Director of government relations and the President of Prodigy Textiles in July 2019. In light of his position with our subsidiary
and the duties associated with such position, we believe Mr. Le meets the definition of “executive officer” as such term
is defined in the Exchange Act. Kenneth Le has over 25 years of successful international business experience specializing in entrepreneurial
enterprises. As previous managing partner of Pacific Bay Ventures, Mr. Le worked on a joint venture developing 1,550 hectares as a mixed
use residential industrial park in conjunction with Dat Quang Chu Lai Industrial Park, JSP in Tam An city in Chu Lai province, Vietnam’s
first international open economic trade zone. He was Managing Director of Minh Nhat Company, which was developing Da Deh Lake, an eco-resort
of over 500 hectares in a surrounded lake in the Lam Dong province, the third and the largest plateau province on the Central Highlands
three hours outside of Ho Chi Minh City in Vietnam. Mr. Le has extensive high-level business contacts in Southeast Asia, many of which
he has helped bring together acting as international liaison. Management believes that Mr. Le’s work has been instrumental in helping
the Company establish and grow its operations in Southeast Asia.
Term of Office
Our directors are appointed for a one-year term to
hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our bylaws. Our
officers are appointed by our Board and hold office until removed by the Board. Mr. Thompson is employed as the Chief Executive Officer
and Chief Financial Officer of the Company pursuant to a five-year employment contract.
Involvement in Certain Legal Proceedings
To the best of the Company’s knowledge, none
of the following events occurred during the past ten years that are material to an evaluation of the ability or integrity of any of our
executive officers, directors, Director Nominees, or promoters:
(1) A petition under the Federal
bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a
court for the business or property of such person, or any partnership in which he was a general partner at or within two years before
the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before
the time of such filing;
(2) Convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) Subject of any order, judgment,
or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining
him from, or otherwise limiting, the following activities:
(i) Acting as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other
person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
(ii) Engaging in any type of business
practice; or
(iii) Engaging in any activity
in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities
laws or Federal commodities laws;
(4) Subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting
for more than 60 days the right of such person to engage in any activity described by such activity;
(5) Found by a court of competent
jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil
action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
(6) Found by a court of competent
jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
(7) Subject of, or a party to,
any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended, or vacated,
relating to an alleged violation of:
(i) Any Federal or State securities
or commodities law or regulation; or
(ii) Any law or regulation respecting
financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement
or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
(iii) Any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity; or
(8) Subject of, or a party to, any sanction or order,
not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act
(15 U.S. C 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any
equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a
member.
Director Independence and Board Committees
We are not currently required
under the Securities and Exchange Act to maintain any committees of our Board.
Our board of directors has
not established any committees, including an audit committee, a compensation committee, a nominating committee, or any committee performing
a similar function. The functions of those committees are being undertaken by our sole Board member. Because we have only one director
and do not have any independent directors, the establishment of committees of the Board of Directors would not provide any benefits to
our company and could be considered more form than substance. In addition, we do not have an “audit committee financial expert,”
because our sole director does not qualify as such within the applicable definition of the Securities and Exchange Commission.
Meetings of the Board of Directors
During its fiscal year ended December 31, 2024, the
Board of Directors did not meet on any occasion, but rather transacted business by unanimous written consent.
Family Relationships
There are no family relationships by between or among
the members of the Board or other executive officers of the Company.
Indemnification
Our amended and restated articles of incorporation
and amended and restated bylaws include provisions limiting the liability of directors and officers and indemnifying them under certain
circumstances. See “Indemnification of Directors and Officers” for further information. We intend to secure directors’
and officers’ liability insurance following the completion of this offering.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to Wyoming law, we
are informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
EXECUTIVE COMPENSATION
The following summary compensation table
sets forth all compensation awarded to, earned by, or paid to the named executive officer during the two years ended December
31, 2024, in all capacities for the accounts of our executive, including the Chief Executive Officer (CEO) and Chief Financial Officer
(CFO):
SUMMARY COMPENSATION TABLE
| Name and principal position |
|
Year |
|
|
Salary ($) |
|
|
Bonus ($) |
|
|
Stock Awards ($) |
|
|
Option Awards ($) |
|
|
Non-Equity Incentive Plan Compensation ($) |
|
|
Nonqualified Deferred Compensation Earnings ($) |
|
|
All Other Compensation ($) |
|
|
Total
($) |
|
| Kim Thompson President, CEO, CFO and Director |
|
2024 |
(*) |
|
$ |
474,789 |
(1) |
|
$ |
94,958 |
(2) |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
59,651 |
(3) |
|
$ |
629,398 |
|
| |
|
2023 |
|
|
$ |
447,914 |
(4) |
|
$ |
89,583 |
(5) |
|
|
|
|
|
$ |
260,000 |
(6) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
56,574 |
(7) |
|
$ |
867,081 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Jonathan R. Rice COO |
|
2024 |
(*) |
|
$ |
180,000 |
(8) |
|
$ |
50,000 |
(9) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
4,040 |
(10) |
|
$ |
234,040 |
|
| |
|
2023 |
|
|
$ |
180,243 |
(11) |
|
$ |
20,000 |
(12) |
|
$ |
- |
|
|
$ |
162,000 |
(13) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
4,080 |
(14) |
|
$ |
366,323 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Kenneth Le President of Prodigy Textiles (13) |
|
2024 |
(*) |
|
$ |
60,000 |
(15) |
|
$ |
10,000 |
(16) |
|
$ |
|
|
|
$ |
682,450 |
(17) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
752,450 |
|
| |
|
2023 |
|
|
$ |
60,000 |
(18) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
108,000 |
(19) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
168,000 |
|
| (1) |
This represents the annual salary payable to Mr. Thompson pursuant to the then current terms of his employment agreement. See the section, “Employment Agreements” below for additional information regarding certain accruals and deferrals regarding Mr. Thompson’s compensation. |
| (2) |
This represents the annual bonus payable to Mr. Thompson pursuant to the then current terms of his employment agreement. See the section, “Employment Agreements” below for additional information regarding certain accruals and deferrals regarding Mr. Thompson’s compensation. |
| (3) |
This amount includes: $47,121 in medical insurance and medical reimbursement we agreed to cover for Mr. Thompson pursuant to his employment agreement and $12,530 in reimbursement for office and travel related expenses. |
| (4) |
This represents the annual salary payable to Mr. Thompson pursuant to the then current terms of his employment agreement. See the section, “Employment Agreements” below for additional information regarding certain accruals and deferrals regarding Mr. Thompson’s compensation. . |
| (5) |
This represents the annual bonus payable to Mr. Thompson pursuant to the then current terms of his employment agreement. See the section, “Employment Agreements” below for additional information regarding certain accruals and deferrals regarding Mr. Thompson’s compensation. . |
| (6) |
In December 2023, Mr. Thompson was issued a ten-year warrant to purchase 10,000,000 shares of common stock of the Company at an exercise price of $0.04 per share pursuant to the 2019 Employee Stock Option Plan |
| (7) |
This amount includes: $50,880 in medical insurance and medical reimbursement we agreed to cover for Mr. Thompson pursuant to his employment agreement and $5,694 in reimbursement for office and travel related expenses. |
| (8) |
This represents the annual salary paid to Mr. Rice pursuant to the then current terms of his employment agreement. In 2024, Mr. Rice’s annual base salary was $180,000. In addition to his annual base salary Mr. Rice was reimbursed for $3,000 in medical insurance premiums and $1,040 in phone service expenses, pursuant to his employment agreement recorded and reported under “all other compensation”. |
| (9) |
This represents the annual bonus payable to Mr. Rice pursuant to the then current terms of his employment agreement. |
| (10) |
In 2024, Mr. Rice received $3,000 in medical insurance and medical reimbursement and $1040 in phone service expenses, pursuant to his employment agreement. |
| (11) |
This represents the annual salary paid to Mr. Rice pursuant to the then current terms of his employment agreement. In 2023, Mr. Rice’s annual base salary was $180,000. In addition to his annual base salary Mr. Rice was reimbursed for $3,000 in medical insurance premiums and $1080 in phone service expenses, pursuant to his employment agreement recorded and reported under “all other compensation”. |
| (12) |
This represents the annual bonus payable to Mr. Rice pursuant to the then current terms of his employment agreement. |
| (13) |
In December 2023, Mr. Rice was issued a ten-year warrant to purchase 6,000,000 shares of common stock of the Company at an exercise price of $0.04 per share pursuant to the 2019 Employee Stock Option Plan. |
| (14) |
In 2023, Mr. Rice received $3,000 in medical insurance and medical reimbursement and $1080 in phone service expenses, pursuant to his employment agreement. |
| (15) |
This represents the annual salary paid to Mr. Le pursuant to the then current terms of his employment agreement. |
| (16) |
This represents the annual bonus payable to Mr. Le pursuant to the then current terms of his employment agreement. |
| (17) |
In April 2024, Mr. Le was issued a ten-year warrant to purchase 10,000,000 shares of common stock of the Company at an exercise price of $0.08225 per share pursuant to the 2019 Employee Stock Option Plan. |
| (18) |
This represents the annual salary paid to Mr. Le pursuant to the then current terms of his employment agreement. |
| (19) |
In December 2023, Mr. Le was issued a ten-year warrant to purchase 4,000,000 shares of common stock of the Company at an exercise price of $0.04 per share pursuant to the 2019 Employee Stock Option Plan. |
Employment Agreements
CEO
On November 10, 2010, the Company entered
into an employment agreement with Kim Thompson, its President, Chief Executive Officer, Chief Financial Officer and sole director, effective
January 1, 2011, through the December 31, 2015. The agreement was for a term of five years at an annual salary of $210,000 in 2011, with
a 6% annual increase thereafter. For the year ended December 31, 2015, the annual salary was $281,027, but in light of the Company’s
cash position, Mr. Thompson deferred such compensation. On January 1, 2016, the agreement was renewed with the same terms for another
5 years with an annual salary of $297,889 for the year ended December 31, 2016, but in light of the Company’s cash position, Mr.
Thompson deferred such compensation. On January 1, 2017, the agreement renewed with the same terms for another 5 years, but with an annual
salary of $315,764 for the year ended December 31, 2017, but in light of the Company’s cash position, Mr. Thompson deferred such
compensation. On January 1, 2018, the agreement renewed again with the same terms for another 5 years, but with an annual salary of $334,708
for the year ended December 31, 2018, but in light of the Company’s cash position, Mr. Thompson deferred such compensation. On
January 1, 2019, the agreement renewed again with the same terms for another 5 years, but with an annual salary of $354,791 for the year
ended December 31, 2019. On January 1, 2020, the agreement renewed again with the same terms for another 5 years, but with an annual
salary of $376,078 for the year ended December 31, 2020. On January 1, 2021, the agreement renewed again with the same terms for
another 5 years, but with an annual salary of $447,915 for the year ended December 31, 2023. In order to conserve Company
resources, the CEO agreed to accrue a majority of his salary. As of December 31, 2024, the accrued salary balance is $3,951,133. See,
“Certain Relationships and Related Transactions, And Director Independence - Accrued Salaries and Officer Loans – Mr. Thompson,
CEO/President.”
On December 13, 2023, Mr. Thompson was issued a ten-year
warrant to purchase 10,000,000 shares of common stock of the Company at an exercise price of $0.04 per share pursuant to the 2019 Employee
Stock Option Plan; this warrant fully vested on the grant date and will expire on December 13, 2033.
For the years ended December 31, 2024
and 2023, the Company recorded $0 and $260,000 for the warrants issued to related party.
Base pay will be increased each January 1st, for the
subsequent twelve-month periods by 6%. Mr. Thompson will also be entitled to life, disability, health, and dental insurance as well as
an annual bonus in an amount equal to 20% of the base salary. In light of the Company cash position, Mr. Thompson declined the life and
disability insurance.
The agreement also calls for the retention of the
executive as a consultant following the termination of employment with compensation during such consultancy based upon the Company reaching
certain milestones:
Upon the expiration or termination of this agreement
for any reason, or by either party, Company agrees that it will employ Executive as a consultant for a period of four (4) years and at
a rate of $4,500 per month.
| (a) |
In the event that Company achieves gross sales of five million dollars ($5,000,000) or more, or one million dollars ($1,000,000) or more in net income, in any year during the term of this agreement, or upon the Company’s achieving an average market capitalization over a 240 consecutive calendar day period, in excess of $70,000,000 during the term of this agreement, then the consulting period will be for five (5) years and the consulting rate will be increased to $5,500 per month. |
| (b) |
In the event that Company achieves gross sales of ten million dollars ($10,000,000) or more, or two million dollars ($2,000,000) or more in net income, in any year during the term of this agreement, or upon the Company’s achieving an average market capitalization over a 240 consecutive calendar day period, in excess of $90,000,000 during the term of this agreement, then the consulting period will be for six (6) years and the consulting rate will be increased to $7,500 per month. |
COO
On January 20, 2015, the Company entered into an at-will
employment agreement with Mr. Jonathan R. Rice, its Chief Operating Officer (the “2015 COO Employment Agreement”). Although
the 2015 COO Employment Agreement has been superseded (as described below), on January 23, 2015, Mr. Rice was issued a three-year warrant
to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.001 per share pursuant to the COO Employment Agreement
(the “January 2015 Warrant”) and on May 28, 2015, the Company issued a three-year warrant to purchase 3,000,000 shares of
common stock of the Company at an exercise price of $0.001 per share (the “May 2015 Warrant”). The May 2015 share warrant
fully vested on October 28, 2016, and will expire on May 28, 2022. For the twelve months ended December 31, 2015, the Company recorded
$121,448 for the warrants issued to Mr. Rice.
On January 14, 2016, the Company entered into a new
at-will employment agreement with Mr. Rice (the “2016 COO Employment Agreement”). The 2016 COO Employment Agreement had a
term of one year and can be terminated by either the Company or Mr. Rice at any time. Under the 2016 COO Employment Agreement, Mr. Rice
is entitled to an annual cash compensation of $140,000, which includes salary, health insurance, 401K retirement plan contributions, and
other benefits. In addition, on March 30, 2016, 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 2016 COO Employment Agreement; this warrant fully vested on February
20, 2017, and will expire on May 20, 2026. Additionally, on August 4, 2016, the Company approved a performance retention bonus to Mr.
Rice of $20,000 which was paid in 2021.
The Company extended the 2016 COO Employment Agreement
to a term ending on January 31, 2019. On March 25, 2019, the Company signed an extension of its at-will employment agreement with its
COO, extending the term to January 31, 2020. On May 19, 2020, the Company signed an extension of its at-will employment agreement with
its COO, extending the term to January 31, 2021. On March 5, 2021, the Company signed an extension of its at-will employment agreement
with its COO, extending the term to January 1, 2022. On February 24, 2022, the Company signed an extension of its at-will employment agreement
with its COO, extending the term to January 1, 2023. The COO Employment Agreement can be terminated by either the Company or Mr. Rice
at any time.
On January 9, 2018, the Company extended the expiration
date of the January 2015 Warrant from January 19, 2018, to January 31, 2020. On January 10, 2020, the Company extended the expiration
date of the January 2015 Warrant from January 31, 2020, to January 10, 2025.
On April 26, 2019, the Company signed an agreement
to increase Mr. Rice’s base salary by $20,000 per year and issue a one-time $20,000 bonus.
On October 21, 2019, the Company signed another agreement
to increase Mr. Rice’s base salary by another $20,000 per year (effective August 15, 2019).
On August 8, 2019, Mr. Rice was issued a set of three
five-year warrants to purchase a total of 6,000,000 shares of common stock of the Company at an exercise price of $0.2299 per share pursuant
to his employment agreement.
On December 13, 2023, Mr. Rice was issued a ten-year
warrant to purchase 6,000,000 shares of common stock of the Company at an exercise price of $0.04 per share pursuant to the 2019 Employee
Stock Option Plan; this warrant fully vested on December 13, 2027, and will expire on December 13, 2033.
For the years ended December 31, 2024
and 2023, the Company recorded $0 and $136,670, respectively for the warrants issued to related party.
Compensation of Directors
Directors are permitted to receive fixed fees and
other compensation for their services as directors. The Board has the authority to fix the compensation of directors. No amounts have
been paid to, or accrued to, directors in such capacity.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information
regarding the beneficial ownership of our Common Stock and Series A Preferred Stock as of the date of this Registration Statement by (a)
each stockholder who is known to us to own beneficially 5% or more of our outstanding Common Stock, (b) directors, (c) our executive officers,
and (d) all executive officers and directors as a group. Beneficial ownership is determined according to the rules of the SEC, and generally
means that person has beneficial ownership of a security if he or she possesses sole or shared voting or investment power of that security
and includes options, warrants and other securities convertible or exercisable into shares of Common Stock, provided that such securities
are currently exercisable or convertible or exercisable or convertible within 60 days of the date hereof. Each director or officer, as
the case may be, has furnished us with information with respect to their beneficial ownership. Except as otherwise indicated, all persons
listed below have (i) sole voting power and investment power with respect to their Common Stock, except to the extent that authority is
shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to their Common Stock.
Title
of Class | |
Name and Address of Beneficial Owner | |
Amount and Nature of Beneficial | | |
Percent of Class (1) | | |
Percent of All Voting Classes (6) | |
| Class A Common Stock | |
| |
| | | |
| | | |
| | |
| | |
Kim Thompson | |
| 201,650,422 | (2) | |
| 19.31 | % | |
| 12.26 | % |
| | |
2723 South State St Suite 150 | |
| | | |
| | | |
| | |
| | |
Ann Arbor, MI 48104 | |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | |
| | |
Jonathan R. Rice | |
| 24,096,683 | (3) | |
| 2.31 | % | |
| 1.14 | % |
| | |
2723 South State St Suite 150 | |
| | | |
| | | |
| | |
| | |
Ann Arbor, MI 48104 | |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | |
| | |
Kenneth Le | |
| 7,400,000 | (4) | |
| 0.71 | % | |
| 0.45 | % |
| | |
2723 South State St Suite 150 | |
| | | |
| | | |
| | |
| | |
Ann Arbor, MI 48104 | |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | |
| | |
All executive officers and directors as a group (3 Persons) | |
| 233,147,105 | | |
| 22.32 | % | |
| 14.18 | % |
| | |
| |
| | | |
| | | |
| | |
| | |
George Roland Gill 160 King Street Sydney NSW 2000, Australia | |
| 55,3000,000 | (5) | |
| 5.29 | % | |
| 3.36 | % |
| | |
| |
| | | |
| | | |
| | |
| Series A Preferred Stock | |
| |
| | | |
| | | |
| | |
| | |
Kim Thompson | |
| 3 | | |
| 100 | % | |
| 36.5 | % |
| | |
2723 South State St Suite 150 | |
| | | |
| | | |
| | |
| | |
Ann Arbor, MI 48104 | |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | |
| | |
Jonathan R. Rice | |
| - | | |
| - | | |
| - | |
| | |
2723 South State St Suite 150 | |
| | | |
| | | |
| | |
| | |
Ann Arbor, MI 48104 | |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | |
| | |
Kenneth Le | |
| - | | |
| - | | |
| - | |
| | |
2723 South State St Suite 150 | |
| | | |
| | | |
| | |
| | |
Ann Arbor, MI 48104 | |
| | | |
| | | |
| | |
| | |
| |
| | | |
| | | |
| | |
| | |
All executive officers and directors as a group (3 Persons) | |
| 3 | | |
| 100 | % | |
| 36.5 | % |
(1) The percent of class is based on
1,044,526,733 shares of our Common Stock issued and outstanding as of the date hereof.
(2) Such shares include 201,587,922 shares of Common
Stock that are owned by Mr. Thompson, and 3 shares of Common Stock that may be issued upon conversion of the Series A preferred stock
that are owned by Mr. Thompson. In addition to this, Mr. Thompson owns 30,000,000 warrant shares of Common Stock that may be issued upon
exercise of outstanding warrants no sooner than February 19, 2025.
(3) Such shares include 5,378,201
shares of Common Stock that are owned by Mr. Rice and 18,718,482 shares of Common Stock that may be issued upon exercise of warrants
Mr. Rice owns. Additionally, Mr. Rice owns warrants to purchase up to 3,600,000 shares of Common Stock, which are not exercisable
at this time.
(4) These shares represent shares of
Common Stock that may be issued upon exercise of warrants Mr. Le owns. Mr. Le owns warrants to purchase up to 12,400,000 shares
of Common Stock, which are not exercisable at this time.
(5) Such Shares include 55,300,000
shares of Common Stock that are controlled by Mr. Gill.
(6) The percent of all voting classes
is based on 1,644,526,733 votes, which includes 1,044,526,733 votes from the holders of our issued and outstanding Common
Stock and 600,000,0000 votes from the holder of our issued and outstanding Series A preferred stock.
Change in Control
As of the date of this Registration Statement, there
were no arrangements which may result in a change in control of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as disclosed herein, no director, executive
officer, shareholder holding at least 5% of shares of our Common Stock, or any family member thereof, had any material interest, direct
or indirect, in any transaction, or proposed transaction since January 1, 2023, in which the amount involved in the transaction exceeds
the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last two completed fiscal years.
Related Party Transactions
Accrued Salaries and Officer Loans
Mr. Thompson, CEO/President
In order to conserve Company resources,
Mr. Thompson agreed to defer a significant portion of the compensation and other payments, as set forth below, owed to him.
| |
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Annual Compensation: Between December 31, 2016, and December 31, 2024, Kim Thompson, our CEO accrued $3,951,133 of unpaid salary, which represents a portion of the annual compensation owed to him pursuant to the terms of his employment agreements during such time period. As of December 31, 2024, there was $3,128,768 in accrued interest on Mr. Thompson’s accrued salary; such interest accrues at the rate of 3% per annum. As a result of these accruals, as of December 31, 2024, we owed Mr. Thompson $7,079,901 in salary and interest related payments. |
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Company Loans: As of December 31, 2024, Mr. Thompson
loaned the Company an aggregate of $1,657,000 and has been repaid $40,000, leaving a balance of $1,617,000. As of December
31, 2024, there was $304,545 in loan interest; such interest accrues at the rate of 3% per annum. |
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Royalty Payments: Mr. Thompson was entitled to certain royalties as compensation for the transfer of intellectual property he owned to the Company. As of December 31, 2024, there was $65,292 in royalty payments payable to Mr. Thompson. |
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As of December 31, 2024, there was $296,154 included
in accounts payable, rent payable, and accrued expense payable to Mr. Thompson. |
The Company is not a subsidiary of any company.
Warrants
On December 13, 2023, the Company issued Mr. Thompson
warrants to purchase 10,000,000 shares of common stock of the Company at an exercise price of $0.04 per share pursuant to the 2019 Employee
Stock Option Plan. See “Executive Compensation” for additional details.
On December 13, 2023, the Company issued Mr. Rice
warrants to purchase 6,000,000 shares of common stock of the Company at an exercise price of $0.04 per share pursuant to the 2019 Employee
Stock Option Plan. See “Executive Compensation” for additional details.
On December 13, 2023, the Company issued Mr. Le warrants
to purchase 4,000,000 shares of common stock of the Company at an exercise price of $0.04 per share pursuant to the 2019 Employee Stock
Option Plan. See “Executive Compensation” for additional details.
On April 3, 2024, the Company issued
a consultant warrants to purchase 500,000 shares of common stock of the Company at an exercise price of $0.082 per share pursuant to
the 2019 Employee Stock Option Plan.
On April 8, 2024, the Company issued
a consultant warrants to purchase 150,000 shares of common stock of the Company at an exercise price of $0.0834 per share pursuant to
the 2019 Employee Stock Option Plan.
On April 13,
2024, the Company issued Mr. Le warrants to purchase 10,000,000 shares of common stock of the Company at an exercise price of $0.08225
per share pursuant to the 2019 Employee Stock Option Plan. See “Executive Compensation” for additional details
On
August 6, 2024, the Company issued four employees warrants to purchase a total of 6,050,000 shares of common stock of the Company at
an exercise price of $0.1024 per share pursuant to the 2019 Employee Stock Option Plan.
On
October 1, 2024, the Company issued an employee warrants to purchase 461,000 shares of common stock of the Company at an exercise price
of $0.08685 per share pursuant to the 2019 Employee Stock Option Plan.
On
April 1, 2025, the Company issued an employee warrants to purchase 6,000,000 shares of common stock of the Company at an exercise price
of $0.089 per share pursuant to the 2019 Employee Stock Option Plan.
Related Party Policy
Our current Code of Ethics requires the CEO and CFO
to avoid, wherever possible, actual conflicts of interest in personal and professional relationships; however, we have not yet adopted
a formal policy for the review, approval, or ratification of related party transactions. Accordingly, the transactions discussed above
were not reviewed, approved, or ratified in accordance with any such policy. A conflict-of-interest situation can arise when a person
takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest
may also arise if a person, or a member of his or her family, receives improper personal benefits as a result of his or her position.
We also require each of our directors and executive
officers to annually complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether
any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director,
employee, or officer.
DETERMINATION OF THE OFFERING
PRICE
The prices at which the shares
of Common Stock covered by this prospectus may actually be sold will be determined by the prevailing public market price for shares of
our Common Stock or by negotiations between the Selling Stockholder and buyers of our Common Stock in private transactions or as otherwise
described in “Plan of Distribution.”
SELLING STOCKHOLDER
This prospectus relates to
the offer and sale by the Selling Stockholder of up to 207,787,193 shares of common stock that have been and may be issued by us to the
Selling Stockholder under the SEPA. For additional information regarding the shares of common stock being offered by this prospectus,
see the section entitled “Standby Equity Distribution Agreement” above. We are registering the shares of common stock being
offered by this prospectus pursuant to the provisions of the SEPA we entered into with the Selling Stockholder on January 21, 2025 in
order to permit the Selling Stockholder to offer such shares for resale from time to time. Except for the transactions contemplated by
the SEPA, as set forth in the section entitled “Prospectus Summary - Recent Developments - Standby Equity Purchase Agreement,”,
in this prospectus, the Selling Stockholder has not had any material relationship with us within the past three years . As used in this
prospectus, the term “Selling Stockholder” means YA II PN, Ltd., a Cayman Islands exempt limited partnership, and the pledgees,
donees, transferees, assignees, successors, designees, and others who later come to hold any of the Selling Stockholder’s interest
in the common stock other than through a public sale.
The table below presents
information regarding the Selling Stockholder and the shares of common stock that may be resold by the Selling Stockholder from time to
time under this prospectus. This table is prepared based on information supplied to us by the Selling Stockholder, and reflects holdings
as of February 7, 2025. The number of shares in the column entitled “Maximum Number of Shares of Common Stock to be Offered”
represents all of the shares of common stock being offered for resale by the Selling Stockholder under this prospectus. The Selling Stockholder
may sell some, all, or none of the shares being offered for resale in this offering. We do not know how long the Selling Stockholder will
hold the shares before selling them, and we are not aware of any existing arrangements between the Selling Stockholder and any other stockholder,
broker, dealer, underwriter, or agent relating to the sale or distribution of the shares of our common stock being offered for resale
by this prospectus.
Beneficial ownership is determined
in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act and includes shares of common stock with respect to which
the Selling Stockholder has sole or shared voting and investment power. The percentage of shares of common stock beneficially owned by
the Selling Stockholder prior to the offering shown in the table below is based on an aggregate of 1,039,455,690 shares of our common
stock outstanding on February 7, 2025. Because the purchase price to be paid by the Selling Stockholder for shares of common stock, if
any, that we may elect to sell to the Selling Stockholder in one or more Advances from time to time under the Purchase Agreement will
be determined on the applicable Advance Dates for such Advances, the actual number of shares of common stock that we may sell to the Selling
Stockholder under the Purchase Agreement may be fewer than the number of shares being offered for resale under this prospectus. The fourth
column in the table below assumes the resale by the Selling Stockholder of all of the shares of common stock being offered for resale
pursuant to this prospectus.
We have determined beneficial
ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished
to us, that the Selling Stockholder has sole voting and investment power with respect to all shares of common stock that it beneficially
owns, subject to applicable community property laws. Except as otherwise described below, based on the information provided to us by the
Selling Stockholder, the Selling Stockholder is not a broker-dealer or an affiliate of a broker-dealer.
| | |
Number of Shares of Common Stock Beneficially Owned | | |
Maximum Number of Shares of Common Stock Being | | |
Shares of Common Stock Beneficially Owned After the Offered Shares of Common Stock Are Sold | |
| Name of Selling Securityholder | |
Number(1) | | |
Percent | | |
Offered(4) | | |
Number(2) | | |
Percent | |
| YA II PN, Ltd.(3) | |
| 28,992,185 | | |
| 2.79 | % | |
| 207,787,193 | | |
| 27,910,714 | | |
| 2.69 | % |
| (1) |
Represents 1,081,471 Commitment Shares we issued to the Selling Stockholder in consideration for entering into the SEPA with us. In accordance with Rule 13d-3(d) under the Exchange Act, we have excluded from the number of shares beneficially owned prior to the offering all of the shares that the Selling Stockholder may be required to purchase under the SEPA, because the issuance of such shares is at our discretion and is subject to conditions contained in the SEPA, the satisfaction of which are entirely outside of the Selling Stockholder’s control, including the registration statement that includes this prospectus becoming and remaining effective. Furthermore, the Advances of common stock under the SEPA are subject to certain agreed upon maximum amount limitations set forth in the SEPA. This amount also represents 27,910,714 shares of the Company’s Common Stock underlying Yorkville’s warrants, which have initial exercise prices varying from $0.12 per share to $0.25 per share that may be exercised at any time between now and the applicable expiration date, the earliest of which is December 11, 2025 and the latest of which is January 18, 2027. Under the terms of the SEPA and aforementioned warrants, we may not issue or sell any shares of common stock to the Selling Stockholder under the SEPA or upon exercise of the warrants, if, when aggregated with all other shares of common stock then beneficially owned by the Selling Stockholder and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in the Selling Stockholder beneficially owning shares of common stock in excess of 4.99% of our then outstanding shares of common stock. |
| (2) |
Assumes the sale of all shares being offered pursuant to this prospectus. |
| (3) |
YA II PN, Ltd. is a fund managed by Yorkville Advisors Global, LP (“Yorkville LP”). Yorkville Advisors Global II, LLC (“Yorkville LLC”) is the General Partner of Yorkville LP. All investment decisions for YA II PN, Ltd. are made by Yorkville LLC’s President and Managing Member, Mr. Mark Angelo. The business address of the Selling Stockholder, Yorkville LP and Yorkville LLC is 1012 Springfield Avenue, Mountainside, New Jersey 07092. |
| (4) |
This amount includes the commitment shares and the maximum number of shares issuable under the SEPA, based on $0.048 per share. |
PLAN OF DISTRIBUTION
The shares of Common Stock
offered by this prospectus are being offered by the Selling Stockholder. The shares of Common Stock may be sold or distributed from time
to time by the Selling Stockholder directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely
as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or
at fixed prices, which may be changed. We will not receive any of the proceeds from the sale of the securities by the Selling Stockholder.
We may receive up to $10,000,000 aggregate gross proceeds under the SEPA from any sales we make to the Selling Stockholder pursuant to
the SEPA. The net proceeds from sales, if any, under the SEPA, will depend on the frequency and prices at which we sell shares of common
stock to the Selling Stockholder after the date of this prospectus. The sale of the shares of Common Stock offered by this prospectus
could be effected in one or more of the following methods:
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ordinary brokers’ transactions; |
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transactions involving cross or block trades; |
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through brokers, dealers, or underwriters who may act solely as agents; |
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“at the market” into an existing market for our common stock; |
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in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents; |
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in privately negotiated transactions; or |
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any combination of the foregoing. |
In order to comply with the
securities laws of certain states, if applicable, the shares of Common Stock may be sold only through registered or licensed brokers or
dealers. In addition, in certain states, the shares of Common Stock may not be sold unless they have been registered or qualified for
sale in the state or an exemption from the state’s registration or qualification requirement is available and complied with.
The Selling Stockholder is
an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act.
The Selling Stockholder has
informed us that it intends to use one or more registered broker-dealers to effectuate all sales, if any, of our Common Stock that it
has acquired and may in the future acquire from us pursuant to the SEPA. Such sales will be made at prices and at terms then prevailing
or at prices related to the then current market price. Each such registered broker-dealer will be an underwriter within the meaning of
Section 2(a)(11) of the Securities Act. the Selling Stockholder has informed us that each such broker-dealer will receive commissions
from the Selling Stockholder that will not exceed customary brokerage commissions.
Brokers, dealers, underwriters,
or agents participating in the distribution of the shares of our Common Stock offered by this prospectus may receive compensation in the
form of commissions, discounts, or concessions from the purchasers, for whom the broker-dealers may act as agent, of the shares of Common
Stock sold by the Selling Stockholder through this prospectus. The compensation paid to any such particular broker-dealer by any such
purchasers of shares of our Common Stock sold by the Selling Stockholder may be less than or in excess of customary commissions. Neither
we nor the Selling Stockholder can presently estimate the amount of compensation that any agent will receive from any purchasers of shares
of our Common Stock sold by the Selling Stockholder.
We know of no existing arrangements
between the Selling Stockholder or any other stockholder, broker, dealer, underwriter, or agent relating to the sale or distribution of
the shares of our Common Stock offered by this prospectus.
We may from time to time
file with the SEC one or more supplements to this prospectus or amendments to the registration statement of which this prospectus forms
a part to amend, supplement or update information contained in this prospectus, including, if and when required under the Securities Act,
to disclose certain information relating to a particular sale of shares of Common Stock offered by this prospectus by the Selling Stockholder,
including the names of any brokers, dealers, underwriters or agents participating in the distribution of such shares of Common Stock by
the Selling Stockholder, any compensation paid by the Selling Stockholder to any such brokers, dealers, underwriters or agents, and any
other required information.
We will pay the expenses
incident to the registration under the Securities Act of the offer and sale of the shares of our Common Stock covered by this prospectus
by the Selling Stockholder.
As consideration for its
irrevocable commitment to purchase our common stock under the SEPA, we have issued to the Selling Stockholder 1,081,471 shares of our
common stock as Commitment Shares upon execution of the SEPA. In addition, we have paid the Selling Stockholder a structuring fee of $25,000,
of which $10,000 has been paid prior the execution of the SEPA, and $15,000 shall be paid on the earlier of (a) the closing of the first
Advance, or (b) the termination of the SEPA.
We also have agreed to indemnify
the Selling Stockholder and certain other persons against certain liabilities in connection with the offering of shares of our Common
Stock offered hereby, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts
required to be paid in respect of such liabilities. The Selling Stockholder has agreed to indemnify us against liabilities under the Securities
Act that may arise from certain written information furnished to us by the Selling Stockholder specifically for use in this prospectus
or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been advised
that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable.
The Selling Stockholder has
represented to us that at no time prior to the date of the SEPA has the Selling Stockholder or its agents, representatives or affiliates
engaged in or effected, in any manner whatsoever, directly or indirectly, any short sale (as such term is defined in Rule 200 of Regulation
SHO of the Exchange Act) of our common stock or any hedging transaction, which establishes a net short position with respect to our Common
Stock. The Selling Stockholder has agreed that during the term of the SEPA, neither the Selling Stockholder nor any of its agents, representatives
or affiliates will enter into or effect, directly or indirectly, any of the foregoing transactions.
We have advised the Selling
Stockholder that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M
precludes the Selling Stockholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution
from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security that is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the foregoing may affect the marketability of the securities offered
by this prospectus.
This offering will terminate
on the date that all shares of our Common Stock offered by this prospectus have been sold by the Selling Stockholder.
DESCRIPTION OF SECURITIES
General
Our original articles of incorporation
authorized 60,000,000 shares of Class A Common Stock, 25,000,000 shares of Class B Common Stock with no par value per share and 10,000,000
shares of preferred stock with no par value per share. On March 18, 2009, we amended our articles of incorporation to provide for unlimited
authorized shares, no par value, of Class A Common Stock and Class B Common Stock, and preferred stock. In December 2013, we further
amended our articles of incorporation to designate Series A of the Company’s preferred stock, no par value; there are two shares
of Series A preferred stock authorized. There are no provisions in our charter or by-laws that would delay, defer, or prevent a change
in our control. As of the date hereof, we have 1,044,526,733 shares of Class A Common Stock, 0 shares of Class B Common Stock and 2 shares
of Series A Preferred Stock outstanding. The Class B Common Stock is not listed on the OTCQB, or any other market and we are not seeking
to have it listed on Nasdaq or another national exchange.
Common Stock
As of May 5, 2025, 1,046,126,733 shares
of Class A Common Stock were issued and outstanding and held by 33 stockholders of record, and we had no shares of Class B Common Stock
issued and outstanding. Holders of our Common Stock are entitled to one vote for each share on all matters submitted to a stockholder
vote; Class B Common Stock does not have any voting rights.
Holders of Common Stock do not have cumulative voting
rights.
Holders of a majority of the shares of Common Stock
voting for the election of directors can elect all of the directors. Holders of our Common Stock representing a majority of the voting
power of our capital stock issued and outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute
a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain
fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation.
Although there are no provisions in our charter or
by-laws that may delay, defer, or prevent a change in control, we are authorized, without stockholder approval, to issue shares of preferred
stock that may contain rights or restrictions that could have this effect.
Holders of both classes of Common Stock are entitled
to share in all dividends that the Board, in its discretion, declares from legally available funds. In the event of liquidation, dissolution
or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities
and after providing for each class of stock, if any, having preference over the Common Stock. Holders of both classes of our Common Stock
have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our Common Stock.
Preferred Stock
Our Board has the authority, without further action
by the stockholders, to issue from time to time the preferred stock in one or more series for such consideration and with such relative
rights, privileges, preferences, and restrictions that the Board may determine. The preferences, powers, rights, and restrictions of different
series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights,
redemption provisions, sinking fund provisions and purchase funds and other matters. The issuance of preferred stock could adversely affect
the voting power or other rights of the holders of Common Stock.
Effective December 17, 2013, the Company amended its
Articles of Incorporation to designate Series A of the Company’s preferred stock, no par value. Under the amendment, there are two
shares of Series A preferred stock authorized. The holders of Series A preferred stock are entitled to vote together with the holders
of the Company’s Common Stock on all matters upon which the Company’s stockholders may vote.
Each share of Series A preferred stock is entitled
to 200,000,000 votes on all such matters. Each share of Series A preferred stock is convertible into one share of the Company’s
Common Stock at the holder’s option. On December 19, 2013, the Company issued two shares of Series A preferred stock to Kim Thompson,
the Company’s founder, CEO, CFO, President, and sole director.
The shares of Series A preferred stock were issued
to Mr. Thompson in exchange for an agreement to extend to October 30, 2014, the date on which the Company would pay certain debts owed
to Mr. Thompson. As part of the transaction, Mr. Thompson also agreed to forgive $30,000 which the Company owed to him as compensation.
In connection with the transaction, the Company incurred a loss on settlement of debt of $5,187,800.
On March 26, 2024, the Company issued one share of
Series A preferred stock to Mr. Thompson. In consideration of the share of Series A preferred stock, Mr. Thompson paid twenty thousand
dollars ($20,000), in the form of debt cancellation.
Dividends
Since inception we have not paid any cash dividends
on our capital stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our Common Stock, when issued
pursuant to this offering. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our
Board will have the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings,
capital requirements, and other factors, which our Board may deem relevant.
SEPA
On January 21, 2025, we entered into the SEPA with
the Selling Stockholder. Pursuant to the SEPA, we have the right to sell to the Selling Stockholder up to $10 million of its shares of
common stock, subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA. Sales
of the shares of common stock to the Selling Stockholder under the SEPA, and the timing of any such sales, are at the Company’s
option, and the Company is under no obligation to sell any shares of common stock to the Selling Stockholder under the SEPA.
We do not have the right to commence any sales of
our common stock to the Selling Stockholder under the SEPA until the date on which all of the conditions to the Selling Stockholder’s
purchase obligation set forth in the SEPA have been satisfied, including that the registration statement of which this prospectus forms
a part be declared effective by the SEC and the final form of this prospectus is filed with the SEC. From and after such date, we will
have the right, but not the obligation, from time to time, at our sole and exclusive discretion, for the 36-month period after the date
of the SEPA, to direct the Selling Stockholder to purchase a specified amount of shares of common stock, not to exceed the greater of
100.0% of the average of the daily volume traded of the common stock on the five consecutive trading days immediately preceding an Advance
Notice, as described further below under the heading “-Advances and Payments of Common Stock Under the SEPA.”
We will control the timing and amount of any sales
of common stock to the Selling Stockholder. Actual sales of shares of our common stock to the Selling Stockholder under the SEPA will
depend on a variety of factors to be determined by us from time to time, which may include, among other things, market conditions, the
trading price of our common stock, and determinations by us as to the appropriate sources of funding for our company and its operations.
We may not issue or sell any shares of common stock
to the Selling Stockholder under the SEPA which, when aggregated with all other shares of common stock then beneficially owned by the
Selling Stockholder and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder),
would result in the Selling Stockholder beneficially owning shares of common stock in excess of the 4.99% Ownership Limitation.
Neither we nor the Selling Stockholder may assign
or transfer any of our respective rights and obligations under the SEPA, and no provision of the SEPA may be modified or waived by the
parties other than by an instrument in writing signed by both parties.
The net proceeds from sales, if any, under the SEPA,
will depend on the frequency and prices at which we sell shares of common stock to the Selling Stockholder. To the extent we sell shares
under the SEPA, we currently plan to use any proceeds therefrom for working capital and general corporate purposes, including the repayment
of debt.
As consideration for the Selling Stockholder’s
commitment to purchase shares of common stock at our direction upon the terms and subject to the conditions set forth in the SEPA, upon
execution of the SEPA, we issued 1,081,471 Commitment Shares to the Selling Stockholder as set forth in the SEPA.
The SEPA contains customary representations, warranties,
conditions, and indemnification obligations of the parties. The representations, warranties, and covenants contained in such agreements
were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements
and may be subject to limitations agreed upon by the contracting parties.
Advances of Common Stock Under the SEPA
We will have the right, but not the obligation, from
time to time, at our sole and exclusive discretion, for the 36-month period after the date of the SEPA, to direct the Selling Stockholder
to purchase up to a specified maximum amount of shares of common stock as set forth in the SEPA by delivering written notice to the Selling
Stockholder (each, an “Advance Notice”) on any trading day (each, an “Advance Notice Date”), so long as certain
conditions are met, including:
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the amount under any single Advance does not exceed 100.0% of the average of the daily trading volume of the common stock on the five consecutive trading days immediately preceding an Advance Notice, unless otherwise agreed by the parties; |
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the price to be paid for the shares of common stock that the Selling Stockholder is required to purchase in any single Advance under the SEPA is equal to 95.0% of the lowest daily VWAP during the three (3) trading days commencing on the date of the Advance Notice (unless otherwise agreed by the parties), other than on any Excluded Days (as defined in the SEPA). |
The Selling Stockholder’s obligation to accept
Advance Notices that are timely delivered by us under the SEPA and to purchase shares of our common stock in Advances under the SEPA are
subject to the satisfaction, at the applicable Advance Notice Date, of the conditions precedent thereto set forth in the SEPA, all of
which are entirely outside of the Selling Stockholder’s control, which conditions include the following:
● the accuracy in all material respects of our
representations and warranties included in the SEPA;
● we shall have issued the Commitment Shares;
● there being an effective registration statement
pursuant to which the Selling Stockholder is permitted to utilize the prospectus thereunder to resell all of the Advance Shares pursuant
to such Advance Notice and we shall have filed in a timely manner all reports required under the Exchange Act during the twelve-month
period immediately preceding the applicable date;
● the sale and issuance of such Advance Shares
being legally permitted by all laws and regulations to which we are subject;
● no Material Outside Event (as such term is
defined in the SEPA) shall have occurred and be continuing;
● us having performed, satisfied, and complied
in all material respects with all covenants, agreements, and conditions required by the SEPA to be performed, satisfied, or complied with
by us;
● no statute, rule, regulation, executive order,
decree, ruling, or injunction having been enacted, entered, promulgated, or endorsed by any court or governmental authority of competent
jurisdiction that prohibits or directly, materially, and adversely affects any of the transactions contemplated by the SEPA.
Termination of the SEPA
Unless earlier terminated as provided in the SEPA,
the SEPA will terminate automatically on the earlier to occur of:
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● |
the 36-month anniversary of the date of the SEPA; and |
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the date on which the Selling Stockholder shall have purchased shares of common stock under the SEPA for an aggregate gross purchase price equal to $10,000,000. |
We also have the right to terminate the SEPA at any
time, at no cost or penalty, upon five trading days’ prior written notice to the Selling Stockholder; provided that there are no
outstanding Advance Notices under which we are yet to issue common stock and we have paid all amounts owed to the Selling Stockholder
under the SEPA. We and the Selling Stockholder may also terminate the SEPA at any time by mutual written consent.
No Short-Selling by the Selling Stockholder
The Selling Stockholder has agreed that it and its
affiliates will not engage in any short sales during the term of the SEPA and will not enter into any transaction that establishes a net
short position with respect to the common stock. The SEPA stipulates that the Selling Stockholder may sell our common stock to be issued
pursuant to an Advance Notice, following receipt of the Advance Notice, but prior to receiving such shares, and may sell other common
stock acquired pursuant to the SEPA that the Selling Stockholder has continuously held from a prior date of acquisition.
Effect of Sales of Our Common Stock under the SEPA
on Our Stockholders
All shares of common stock that may be issued or sold
by us to the Selling Stockholder under the SEPA that are being registered under the Securities Act for resale by the Selling Stockholder
in this offering are expected to be freely tradable. The shares of common stock being registered for resale in this offering may be issued
and sold by us to the Selling Stockholder from time to time at our discretion over the term of the SEPA. The resale by the Selling Stockholder
of a significant amount of shares registered for resale in this offering at any given time, or the perception that these sales may occur,
could cause the market price of our common stock to decline and to be highly volatile. Sales of our common stock, if any, to the Selling
Stockholder under the SEPA will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell
to the Selling Stockholder all, some, or none of the shares of our common stock that may be available for us to sell to the Selling Stockholder
pursuant to the SEPA.
If and when we do elect to sell shares of our common
stock to the Selling Stockholder pursuant to the SEPA, the Selling Stockholder may resell all, some, or none of such shares in its discretion
and at different prices subject to the terms of the SEPA. As a result, investors who purchase shares from the Selling Stockholder in this
offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution and,
in some cases, substantial dilution and different outcomes in their investment results. Investors may experience a decline in the value
of the shares they purchase from the Selling Stockholder in this offering as a result of future sales made by us to the Selling Stockholder
at prices lower than the prices such investors paid for their shares in this offering. In addition, if we sell a substantial number of
shares to the Selling Stockholder under the SEPA, or if investors expect that we will do so, the actual sales of shares or the mere existence
of our arrangement with the Selling Stockholder may make it more difficult for us to sell equity or equity-related securities in the future
at a desirable time and price.
Because the purchase price per share
to be paid by the Selling Stockholder for the shares of common stock that we may elect to sell to the Selling Stockholder under the SEPA,
if any, will fluctuate based on the market prices of our common stock during the applicable pricing period, as of the date of this prospectus
we cannot reliably predict the number of shares of common stock that we will sell to the Selling Stockholder under the SEPA, the actual
purchase price per share to be paid by the Selling Stockholder for those shares, or the actual gross proceeds to be raised by us from
those sales, if any. As of May 5, 2025, there were 1,046,126,733 shares of our common stock outstanding. If all of the
207,787,193 shares offered for resale by the Selling Stockholder under the registration statement that includes this prospectus were
issued and outstanding as of May 5, 2025, such shares would represent approximately 19.99% of the total number of shares of our
common stock outstanding.
Although the SEPA provides that we may,
in our discretion, from time to time after the date of the SEPA and during the term of the SEPA, direct the Selling Stockholder to purchase
shares of our common stock from us in one or more Advances under the SEPA, for a maximum aggregate purchase price of up to $10,000,000,
only 207,787,193 shares of common stock (1,081,471 of which represent the Commitment Shares we issued to the Selling Stockholder pursuant
to the SEPA as consideration for the Selling Stockholder’s commitment to purchase shares of our common stock under the SEPA) are
being registered for resale under the registration statement that includes this prospectus. Assuming all of such 207,787,193 shares were
sold to the Selling Stockholder at the maximum 5.0% discount to the per share price of $0.0902 (the average official closing price
of our common stock on the OTCQB for the five consecutive trading days ending on May 2, 2025), such number of shares might be
insufficient to enable us to receive aggregate gross proceeds from the sale of such shares to the Selling Stockholder equal to the Selling
Stockholder’s $10,000,000 total aggregate purchase commitment under the SEPA, depending on the final purchase price for each advance.
While the market price of our common stock may fluctuate from time to time after the date of this prospectus and, as a result, the actual
purchase price to be paid by the Selling Stockholder under the SEPA for shares of our common stock, if any, may also fluctuate, in order
for us to receive the full amount of the Selling Stockholder’s commitment under the SEPA, it is possible that we may need to issue
and sell more than the number of shares being registered for resale under the registration statement that includes this prospectus.
If it becomes necessary for us to issue and
sell to the Selling Stockholder more shares than are being registered for resale under this prospectus in order to receive aggregate gross
proceeds of $10,000,000 under the SEPA, we must file with the SEC one or more additional registration statements to register under the
Securities Act the resale by the Selling Stockholder of any such additional shares of our common stock, which the SEC must declare effective,
in each case, before we may elect to sell any additional shares of our common stock to the Selling Stockholder under the SEPA. The number
of shares of our common stock ultimately offered for resale by the Selling Stockholder depends upon the number of shares of common stock,
if any, we ultimately sell to the Selling Stockholder under the SEPA.
The issuance, if any, of shares of our common stock
to the Selling Stockholder pursuant to the SEPA would not affect the rights or privileges of our existing stockholders, except that the
economic and voting interests of each of our existing stockholders would be diluted. Although the number of shares of our common stock
that our existing stockholders own would not decrease as a result of sales, if any, under the SEPA, the shares of our common stock owned
by our existing stockholders would represent a smaller percentage of our total outstanding shares of our common stock after any such issuance.
As of the date hereof, we have sold 5,013,333
shares under the SEPA at varying purchase prices, ranging from $0.0768 to $0.092, which resulted in aggregate gross proceeds of $397,028
to the Company. Therefore, we only have $9,602,972 of shares available for sale under the SEPA as of the date hereof.
The following table sets forth the number
of shares of common stock to be issued to the Selling Stockholder under the SEPA at varying purchase prices, to reach the maximum
gross proceeds of $10,000,000:
| Assumed Average Purchase Price Per Share | | |
Number of Registered Shares to be Issued if Full Purchase(1) | | |
Percentage of Outstanding Shares After Giving Effect to the Issuance to the Selling Stockholder(2) | | |
Gross Proceeds from the Sale of Shares to the Selling Stockholder Under the SEPA | |
| $ | 0.10 | | |
| 101,083,912 | | |
| 9.7 | % | |
$ | 9,602,972 | |
| $ | 0.0856 | (3) | |
| 117,964,654 | | |
| 11.27 | % | |
$ | 9,602,972 | |
| $ | 0.043 | | |
| 201,692,389 | | |
| 19.27 | % | |
$ | 8,337,174 | |
| (1) |
Does not include 1,081,471 Commitment Shares that we issued to the Selling Stockholder as consideration for its commitment to purchase shares of common stock under the SEPA. The number of shares of common stock offered by this prospectus may not cover all the shares we ultimately sell to the Selling Stockholder under the SEPA, depending on the purchase price per share. We have included in this column only those shares being offered for resale by the Selling Stockholder under this prospectus (excluding the 1,081,471 Commitment Shares), without regard for the Ownership Limitation. The assumed average purchase prices are solely for illustration and are not intended to be estimates or predictions of future stock performance. |
| |
|
| (2) |
The
denominator is based on 1,046,126,733 shares outstanding as of May 5, 2025,
adjusted to include the Commitment Shares and the issuance of the number of shares set forth
in the second column that we would have sold to the Selling Stockholder, assuming the average
purchase price in the first column. The numerator is based on the number of shares of common
stock set forth in the second column. |
| |
|
| (3) |
Represents a Purchase Price equal to $0.086, which
represents 95% of the lowest of the daily VWAPs of the Common Shares during the relevant Pricing Period, which is assumed to be the
three trading days commencing on an assumed advance notice date of the date hereof. |
Certain Anti-Takeover Effects
Certain provisions of Wyoming law may have an anti-takeover
effect and may delay or prevent a tender offer or other acquisition transaction that a shareholder might consider to be in his or her
best interest. The summary of the provisions of Wyoming law set forth below does not purport to be complete and is qualified in its entirety
by reference to Wyoming law.
The issuance of shares of preferred stock, the
issuance of rights to purchase such shares, and the imposition of certain other adverse effects on any party contemplating a takeover
could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of the preferred stock, if the option to acquire
such shares is exercised, would impede a business combination by the voting rights that would enable a holder to block such a transaction.
In addition, under certain circumstances, the issuance of other preferred stock could adversely affect the voting power of holders of
our Common Stock.
Under Wyoming law, a director, in determining what
he reasonably believes to be in or not opposed to the best interests of the corporation, does not need to consider only the interests
of the corporation’s stockholders in any takeover matter but may also, in his discretion, may consider any of the following:
| |
(i) |
The interests of the corporation’s employees, suppliers, creditors, and customers; |
| |
|
|
| |
(ii) |
The economy of the state and nation; |
| |
|
|
| |
(iii) |
The impact of any action upon the communities in or near which the corporation’s facilities or operations are located; |
| |
|
|
| |
(iv) |
The long-term interests of the corporation and its stockholders, including the possibility that those interests may be best served by the continued independence of the corporation; and |
| |
|
|
| |
(v) |
Any other factors relevant to promoting or preserving public or community interests. |
The outstanding Series A Preferred Stock can deter
a takeover.
Because our Board is not required to make any determination
on matters affecting potential takeovers solely based on its judgment as to the best interests of our stockholders, our board of directors
could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of our stockholders
might believe to be in their best interests or in which such stockholders might receive a premium for their stock over the then market
price of such stock. Our Board of directors presently does not intend to seek stockholder approval prior to the issuance of currently
authorized stock, unless otherwise required by law or applicable stock exchange rules.
Transfer Agent
The transfer agent for our Common Stock is Olde Monmouth
Stock Transfer Co., Inc.
Listing
Our Common stock is quoted on the OTCQB under the
trading symbol KBLB”.
Limitation on Liability and Indemnification Matters
See the section of this prospectus entitled “Management
- Indemnification”.
Penny Stock Regulation
The SEC has adopted regulations which generally define
“penny stock” to be any equity security that has a market price of less than Five Dollars ($5.00) per share or an exercise
price of less than Five Dollars ($5.00) per share. Such securities are subject to rules that impose additional sales practice requirements
on broker-dealers who sell them. For transactions covered by these rules, the broker-dealer must make a special suitability determination
for the purchaser of such securities and have received the purchaser’s written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of
a disclosure schedule prepared by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable
to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole
market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, among
other requirements, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information
on the limited market in penny stocks. As our Common Stock immediately following this Offering may be subject to such penny stock rules,
purchasers in this Offering will in all likelihood find it more difficult to sell their Common Stock shares in the secondary market.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes certain U.S. federal income
tax considerations relating to the purchase, ownership, and disposition of our Common Stock. This summary does not provide a complete
analysis of all potential tax considerations. The information provided below is based upon provisions of the Internal Revenue Code of
1986, as amended (the “Code”), Treasury regulations promulgated thereunder and administrative rulings and judicial decisions,
all as currently in effect. These authorities may change at any time, possibly on a retroactive basis, or the U.S. Internal Revenue Service
(the “IRS”), might interpret the existing authorities differently. In either case, the tax considerations of purchasing, owning,
or disposing of Common Stock could differ from those described below.
This discussion is addressed only to U.S. holders
(defined below) which hold our shares of Common Stock as a “capital asset” within the meaning of Section 1221 of the Code
(generally, property held for investment). This discussion does not address all of the U.S. federal income tax considerations that might
be relevant to a beneficial owner in light of such beneficial owner’s particular circumstances or to beneficial owners subject to
special treatment under the U.S. federal income tax laws, including:
| |
● |
a broker, dealer or trader in securities, currencies, commodities, or notional principal contracts; |
| |
● |
a bank, financial institution, or insurance company; |
| |
● |
a regulated investment company, a real estate investment trust or grantor trust; |
| |
● |
a tax-exempt entity or organization, including an individual retirement account or Roth IRA as defined in Section 408 or 408A of the Code, respectively; |
| |
● |
a person holding the Common Stock as part of a hedging, integrated, or conversion transaction or a straddle, or a person deemed to sell Common Stock under the constructive sale provisions of the Code; |
| |
● |
a trader in securities that has elected the mark-to-market method of tax accounting for securities; |
| |
● |
an entity that is treated as a partnership or other pass-through entity for U.S. federal income tax purposes; |
| |
● |
a person who is a partner or investor in a partnership or other pass-through entity that holds the Common Stock; |
| |
● |
a U.S. person whose “functional currency” is not the U.S. dollar; |
| |
● |
a controlled foreign corporation or passive foreign investment company; |
| |
● |
a qualified foreign pension fund or an entity that is wholly owned by one or more qualified foreign pension funds; or |
| |
● |
a U.S. expatriate. |
For purposes of this discussion, a “U.S. holder”
is a beneficial owner of a share of Common Stock that is, for U.S. federal income tax purposes:
| |
● |
an individual who is a citizen or resident of the United States; |
| |
● |
a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
| |
● |
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
| |
● |
a trust if (1) it is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
For purposes of this discussion, a “non-U.S.
holder” is a beneficial owner of a share of Common Stock that is (i) a foreign corporation, (ii) a nonresident alien individual,
or (iii) a foreign estate or trust that in each case is not subject to U.S. federal income tax on a net-income basis on income or gain
from a share of Common Stock.
If a partnership holds shares of Common
Stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. A partnership
holding shares of Common Stock, or a partner therein should consult its own tax advisors as to the tax consequences of holding and disposing
of shares of Common Stock.
You are urged to consult your tax advisor with
respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase,
ownership and disposition of our Common Stock arising under the U.S. federal estate or gift tax rules or under the laws of any U.S. state
or local or any non-U.S. or other taxing jurisdiction or under any applicable tax treaty.
Certain U.S. Federal Income Tax Considerations
for U.S. Holders of Common Stock
Dividends on our Common Stock
We do not expect to declare or pay any distributions
on our Common Stock in the foreseeable future. If we do make any distributions on shares of our Common Stock, however, such distributions
will be includible in the gross income of a U.S. holder as ordinary dividend income to the extent paid out of current or accumulated earnings
and profits, as determined for U.S. federal income tax purposes. Any portion of a distribution in excess of current or accumulated earnings
and profits would be treated as a return of the holder’s tax basis in its Common Stock and then as gain from the sale or exchange
of the Common Stock. Under current law, if certain requirements are met, a preferential U.S. federal income tax rate will apply to any
dividends paid to a holder of Common Stock who is a U.S. individual.
Distributions to U.S. holders that are corporate stockholders,
constituting dividends for U.S. federal income tax purposes, may qualify for the dividends received deduction, or DRD, which is generally
available to corporate stockholders. No assurance can be given that we will have sufficient earnings and profits (as determined for U.S.
federal income tax purposes) to cause any distributions to be eligible for a DRD. In addition, a DRD is available only if certain holding
periods and other taxable income requirements are satisfied.
Sale of Common Stock
A U.S. holder of Common Stock will generally recognize
gain or loss on the taxable sale, exchange, or other taxable disposition of such stock in an amount equal to the difference between such
U.S. holder’s amount realized on the sale and its adjusted tax basis in the Common Stock sold. A U.S. holder’s amount realized
should equal the amount of cash and the fair market value of any property received in consideration of its stock. The gain or loss should
be capital gain or loss and should be long-term capital gain or loss if the Common Stock is held for more than one year at the time of
disposition. The deductibility of capital losses for U.S. federal income tax purposes is subject to limitations under the Code. Under
current law, long-term capital gain recognized by an individual U.S. holder is generally eligible for a preferential U.S. federal income
tax rate.
Information Reporting and Backup Withholding
Information reporting requirements generally will
apply to payments of dividends on shares of Common Stock and to the proceeds of a sale of Common Stock unless a U.S. holder is an exempt
recipient, such as a corporation. Backup withholding will apply to those payments if a U.S. holder fails to provide its correct taxpayer
identification number and certification of exempt status or fails to report in full dividend income. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against U.S. federal income tax liability, provided the required information
is timely furnished to the IRS.
LEGAL MATTERS
The validity of the shares of our Common Stock offered
hereby and other legal matters concerning this Offering relating to Wyoming law will be passed upon for us by Tynsky Law office, P.C.,
Green River, Wyoming. Certain legal matters in connection with this Offering with respect to the United States federal securities law
and New York law will be passed upon for us by Hunter Taubman Fischer & Li LLC, New York, New York.
EXPERTS
The consolidated financial statements
as of December 31, 2024, and 2023, included in this prospectus have been audited and so included in reliance on the report
of M&K CPAS, PLLC, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement
on Form S-1, including relevant exhibits and schedules under the Securities Act, covering the Common Stocks offered by this prospectus.
You should refer to our registration statements and their exhibits and schedules if you would like to find out more about us and about
the Common Stocks. This prospectus summarizes material provisions of contracts and other documents that we refer you to. Since the prospectus
may not contain all the information that you may find important, you should review the full text of these documents.
The registration statements, reports and other information
so filed can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C.
20549. You can request copies of these documents upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. The SEC also maintains a website that contains reports, proxy
statements and other information about issuers, such as us, who file electronically with the SEC. The address of that website is http://www.sec.gov.
The information on that website is not a part of this prospectus.
No dealers, salesperson or other person is authorized
to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions
where it is lawful to do so. The information contained in this prospectus is current only as of its date.
KRAIG BIOCRAFT LABORATORIES,
INC.
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CONTENTS
| PAGE |
F-2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 2738) |
| |
|
|
| PAGE |
F-4 |
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2024, AND DECEMBER 31, 2023. |
| |
|
|
| PAGE |
F-5 |
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2024, AND DECEMBER 31, 2023. |
| |
|
|
| PAGES |
F-6 |
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2024, AND DECEMBER 31, 2023. |
| |
|
|
| PAGE |
F-7 |
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2024, AND DECEMBER 31, 2023. |
| |
|
|
| PAGES |
F-8 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. |
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of Kraig Biocraft Laboratories, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Kraig Biocraft Laboratories, Inc. (the Company) as of December 31, 2024
and 2023, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for each of the
years in the two-years ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the two years in the period
ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 2 to the consolidated financial statements, the Company has suffered net losses from operations and has a net capital deficiency,
which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are
discussed in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and the significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe our audits provide a reasonable basis for our opinion.
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material
to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication
of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we
are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts
or disclosures to which it relates.
Going
Concern
Due
to the net loss, negative cash flows from operations for the year, and working capital deficiency, the Company evaluated the need for
a going concern listed in note 2.
Auditing
management’s evaluation of a going concern can be a significant judgment given the fact that the Company uses management estimates
on future revenues and expenses, which are not able to be easily substantiated.
We
evaluated the appropriateness of the going concern, we examined and evaluated the financial information along with management’s
plans to mitigate the going concern and management’s disclosure on going concern.
/s/
M&K CPAS, PLLC
We
have served as the Company’s auditor since 2013
The
Woodlands, TX
March 28, 2025
Kraig
Biocraft Laboratories, Inc. and Subsidiary
Consolidated
Balance Sheets
| | |
December 31, 2024 | | |
December 31, 2023 | |
| ASSETS | |
| | | |
| | |
| Current
Assets | |
| | | |
| | |
| Cash
and cash equivalents | |
$ | 673,264 | | |
$ | 2,551,834 | |
| Inventory | |
| 6,884 | | |
| 6,884 | |
| Prepaid expenses | |
| 60,137 | | |
| 14,902 | |
| Total
Current Assets | |
| 740,285 | | |
| 2,573,620 | |
| | |
| | | |
| | |
| Property and Equipment, net | |
| 44,721 | | |
| 66,640 | |
| Investment in gold bullions
(cost $450,216 and $450,216, respectively) | |
| 627,065 | | |
| 493,236 | |
| Operating lease right-of-use
asset, net | |
| 86,088 | | |
| 95,808 | |
| Security deposit | |
| 7,174 | | |
| 3,518 | |
| | |
| | | |
| | |
| Total Assets | |
$ | 1,505,333 | | |
$ | 3,232,822 | |
| | |
| | | |
| | |
| LIABILITIES
AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
| | |
| | | |
| | |
| Current
Liabilities | |
| | | |
| | |
| Accounts payable and accrued
expenses | |
$ | 502,002 | | |
$ | 541,637 | |
| Note payable - related party | |
| 1,617,000 | | |
| 1,617,000 | |
| Royalty agreement payable
- related party | |
| 65,292 | | |
| 65,292 | |
| Accounts payable and accrued
expenses - related party | |
| 7,383,186 | | |
| 6,584,648 | |
| Accounts payable and accrued
expenses | |
| 7,383,186 | | |
| 6,584,648 | |
| Operating lease liability,
current | |
| 46,948 | | |
| 41,789 | |
| Loan payable | |
| - | | |
| 35,244 | |
| Total Current
Liabilities | |
| 9,614,428 | | |
| 8,885,610 | |
| | |
| | | |
| | |
| Long Term
Liabilities | |
| | | |
| | |
| Operating lease liability,
net of current | |
| 40,526 | | |
| 54,368 | |
| Total Liabilities | |
| 9,654,954 | | |
| 8,939,978 | |
| | |
| | | |
| | |
| Commitments
and Contingencies (Note 9) | |
| - | | |
| - | |
| | |
| | | |
| | |
| Stockholders’
Deficit | |
| | | |
| | |
| Preferred stock,
no par value; unlimited shares authorized, none, issued and outstanding | |
| - | | |
| - | |
| Preferred stock Series A, no par value; 3 and 2
shares issued and outstanding, respectively | |
| 5,237,800 | | |
| 5,217,800 | |
| Preferred stock value | |
| 5,237,800 | | |
| 5,217,800 | |
| Common stock Class A, no par value; unlimited shares
authorized, 1,038,374,219 and 1,030,940,008 shares issued and outstanding, respectively | |
| 27,385,611 | | |
| 27,385,611 | |
| Common stock Class B, no par value; unlimited shares
authorized, no shares issued and outstanding | |
| - | | |
| - | |
| Common stock value | |
| - | | |
| - | |
| Common Stock Issuable, 1,122,311 and 1,122,311 shares, respectively | |
| 22,000 | | |
| 22,000 | |
| Additional paid-in capital | |
| 12,290,687 | | |
| 11,354,213 | |
| Accumulated Deficit | |
| (53,085,719 | ) | |
| (49,686,780 | ) |
| | |
| | | |
| | |
| Total Stockholders’
Deficit | |
| (8,149,621 | ) | |
| (5,707,156 | ) |
| | |
| | | |
| | |
| Total Liabilities
and Stockholders’ Deficit | |
$ | 1,505,333 | | |
$ | 3,232,822 | |
Kraig
Biocraft Laboratories, Inc. and Subsidiary
Consolidated
Statements of Operations
| | |
December 31, 2024 | | |
December 31, 2023 | |
| | |
For the Years Ended | |
| | |
December 31, 2024 | | |
December 31, 2023 | |
| | |
| | |
| |
| Revenue | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| Operating Expenses | |
| | | |
| | |
| General and Administrative | |
| 1,747,585 | | |
| 1,454,295 | |
| Professional Fees | |
| 290,313 | | |
| 125,222 | |
| Officer’s Salary | |
| 872,289 | | |
| 797,406 | |
| Research and Development | |
| 164,374 | | |
| 237,871 | |
| Total Operating Expenses | |
| 3,074,561 | | |
| 2,614,794 | |
| | |
| | | |
| | |
| Loss from Operations | |
| (3,074,561 | ) | |
| (2,614,794 | ) |
| | |
| | | |
| | |
| Other Income/(Expenses) | |
| | | |
| | |
| Net change in unrealized depreciation on investment in gold bullion | |
| 133,829 | | |
| 55,985 | |
| Interest expense | |
| (529,603 | ) | |
| (484,658 | ) |
| Amortization of debt issue costs | |
| - | | |
| - | |
| Gain on Asset Impairment | |
| - | | |
| (95,872 | ) |
| Interest income | |
| 71,396 | | |
| 109,559 | |
| Total Other Income/(Expenses) | |
| (324,378 | ) | |
| (414,986 | ) |
| | |
| | | |
| | |
| Net (Loss) before Provision for Income Taxes | |
| (3,398,939 | ) | |
| (3,029,780 | ) |
| | |
| | | |
| | |
| Provision for Income Taxes | |
| - | | |
| - | |
| | |
| | | |
| | |
| Net (Loss) | |
$ | (3,398,939 | ) | |
$ | (3,029,780 | ) |
| | |
| | | |
| | |
| Net Income (Loss) Per Share - Basic and Diluted | |
$ | (0.00 | ) | |
$ | (0.00 | ) |
| | |
| | | |
| | |
| Weighted average number of shares outstanding during the
period - Basic and Diluted | |
| 1,038,374,219 | | |
| 1,033,122,597 | |
Kraig
Biocraft Laboratories, Inc. and Subsidiary
Consolidated
Statement of Changes in Stockholders’ Deficit
For
the years ended December 31, 2024 and 2023
| | |
Shares | | |
Par | | |
Shares | | |
Par | | |
Shares | | |
Par | | |
Shares | | |
Par | | |
APIC | | |
Deficit | | |
Total | |
| | |
Preferred Stock - Series A | | |
Common Stock - Class A | | |
Common Stock - Class B | | |
To be issued | | |
| | |
Accumulated | | |
| |
| | |
Shares | | |
Par | | |
Shares | | |
Par | | |
Shares | | |
Par | | |
Shares | | |
Par | | |
APIC | | |
Deficit | | |
Total | |
| Balance, December 31, 2022 (Audited) | |
| 2 | | |
$ | 5,217,800 | | |
| 1,030,940,008 | | |
$ | 27,060,611 | | |
| - | | |
$ | - | | |
| 1,122,311 | | |
$ | 22,000 | | |
$ | 10,834,729 | | |
$ | (46,657,000 | ) | |
$ | (3,521,860 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Warrants issued for services - related parties | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 512,039 | | |
| - | | |
| 512,039 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Warrants issued for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 26,594 | | |
| - | | |
| 26,594 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares issued for services | |
| - | | |
| - | | |
| 5,000,000 | | |
| 225,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 225,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares issued in connection with cashless warrants exercise | |
| - | | |
| - | | |
| 2,434,211 | | |
| 100,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (100,000 | ) | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Imputed interest - related party | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 80,851 | | |
| - | | |
| 80,851 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Beneficial conversion feature | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net loss for the year ended December 31, 2023 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,029,780 | ) | |
| (3,029,780 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, December 31, 2023 (Audited) | |
| 2 | | |
| 5,217,800 | | |
| 1,038,374,219 | | |
| 27,385,611 | | |
| - | | |
| - | | |
| 1,122,311 | | |
| 22,000 | | |
| 11,354,213 | | |
| (49,686,780 | ) | |
| (5,707,156 | ) |
| Balance | |
| 2 | | |
| 5,217,800 | | |
| 1,038,374,219 | | |
| 27,385,611 | | |
| - | | |
| - | | |
| 1,122,311 | | |
| 22,000 | | |
| 11,354,213 | | |
| (49,686,780 | ) | |
| (5,707,156 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Preferred share issued in connection with debt cancellation - related party | |
| 1 | | |
| 20,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 20,000 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Warrants issued for services - related parties | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 771,026 | | |
| - | | |
| 771,026 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Warrants issued for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 80,179 | | |
| - | | |
| 80,179 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Options issued for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,197 | | |
| - | | |
| 4,197 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Imputed interest - related party | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 81,072 | | |
| - | | |
| 81,072 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net loss for the year ended December 31, 2024 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,398,939 | ) | |
| (3,398,939 | ) |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,398,939 | ) | |
| (3,398,939 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance, December 31, 2024 (Audited) | |
| 3 | | |
$ | 5,237,800 | | |
| 1,038,374,219 | | |
$ | 27,385,611 | | |
| - | | |
$ | - | | |
| 1,122,311 | | |
$ | 22,000 | | |
$ | 12,290,687 | | |
$ | (53,085,719 | ) | |
| (8,149,621 | ) |
| Balance | |
| 3 | | |
$ | 5,237,800 | | |
| 1,038,374,219 | | |
$ | 27,385,611 | | |
| - | | |
$ | - | | |
| 1,122,311 | | |
$ | 22,000 | | |
$ | 12,290,687 | | |
$ | (53,085,719 | ) | |
| (8,149,621 | ) |
Kraig
Biocraft Laboratories, Inc. and Subsidiary
Consolidated
Statements of Cash Flows
| | |
2024 | | |
2023 | |
| | |
For the Years Ended December 31, | |
| | |
2024 | | |
2023 | |
| Cash Flows From Operating Activities: | |
| | | |
| | |
| Net Loss | |
$ | (3,398,939 | ) | |
$ | (3,029,780 | ) |
| Adjustments to reconcile net loss to net cash used in operations | |
| | | |
| | |
| Depreciation expense | |
| 26,159 | | |
| 27,620 | |
| Asset impairment expense | |
| - | | |
| 95,872 | |
| Net change in unrealized appreciation and depreciation in gold bullions | |
| (133,829 | ) | |
| (55,985 | ) |
| Imputed interest - related party | |
| 81,072 | | |
| 80,851 | |
| Stock issuable for services | |
| - | | |
| 225,000 | |
| Fair value of options issued for services | |
| 4,197 | | |
| - | |
| Warrants issued/(cancelled) to consultants | |
| 851,205 | | |
| 538,633 | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| (Increase) in inventory | |
| - | | |
| (304 | ) |
| (Increase) Decrease prepaid expenses | |
| (45,236 | ) | |
| 763 | |
| (Increase) in deposits | |
| (3,656 | ) | |
| 2,608 | |
| Decrease in operating lease right-of-use, net | |
| 49,209 | | |
| 48,064 | |
| Increase in accrued expenses and other payables - related party | |
| 818,538 | | |
| 869,640 | |
| Decrease in accounts payable | |
| (39,635 | ) | |
| 1,298 | |
| Decrease in operating lease liabilities, current | |
| (48,172 | ) | |
| (48,763 | ) |
| Net Cash Used In Operating Activities | |
| (1,839,086 | ) | |
| (1,244,483 | ) |
| | |
| | | |
| | |
| Net Cash Used In Investing Activities | |
| | | |
| | |
| Purchase of treasury bills | |
| - | | |
| (2,587,811 | ) |
| Proceeds from maturity of treasury bills | |
| - | | |
| 2,587,811 | |
| Purchase of fixed assets | |
| (4,240 | ) | |
| (6,399 | ) |
| Net Cash Provided by Investing Activities | |
| (4,240 | ) | |
| (6,399 | ) |
| | |
| | | |
| | |
| Cash Flows From Financing Activities: | |
| | | |
| | |
| Principal payments on debt | |
| (35,244 | ) | |
| (60,000 | ) |
| Net Cash Provided by Financing Activities | |
| (35,244 | ) | |
| (60,000 | ) |
| | |
| | | |
| | |
| Net Change in Cash and Cash Equivalents | |
| (1,878,570 | ) | |
| (1,310,882 | ) |
| | |
| | | |
| | |
| Cash and Cash Equivalents at Beginning of Year | |
| 2,551,834 | | |
| 3,862,716 | |
| | |
| | | |
| | |
| Cash and Cash Equivalents at End of Year | |
$ | 673,264 | | |
$ | 2,551,834 | |
| | |
| | | |
| | |
| 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 | |
$ | - | | |
$ | 100,000 | |
| Adoption of lease standard ASC 842 | |
$ | 30,084 | | |
$ | 85,023 | |
| Adoption of lease standard ASC 842 | |
$ | 39,489 | | |
$ | - | |
| Reduction of right of use asset and associated lease liability due to lease
cancellation | |
$ | 30,084 | | |
$ | - | |
| Preferred share issued in connection with debt cancellation - related party | |
$ | 20,000 | | |
$ | - | |
Kraig
Biocraft Laboratories, Inc.
Notes
to Consolidated Financial Statements as of December 31, 2024 and 2023
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
Organization
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
January 24, 2024, the Company signed a memorandum of understand with the Vietnam Sericulture Association (“VSA”) and the
Lam Dong Agro-Forestry Research & Experiment Center (“LAREC”) to enhance sericulture in Vietnam through the expanded
application of the Company’s spider silk silkworm technology.
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 announced that it had received its investment registration certificate for its new Vietnamese subsidiary
Prodigy Textiles Co., Ltd.
On
May 1, 2018, the Company announced that it had received its enterprise registration certificate for its new Vietnamese subsidiary Prodigy
Textiles Co., Ltd
Foreign
Currency
The
assets and liabilities of Prodigy Textiles, Co., Ltd. (the Company’s Vietnamese subsidiary) 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.
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 liabilities at the date of
the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
Cash
and cash equivalents consist of demand deposits at financial institutions, money market funds, and highly liquid investments with original
maturities of three months or less.
As
of December 31, 2024, and December 31, 2023, the Company had $673,264 and $2,551,834, in cash and cash equivalent accounts.
Loss
Per Share
Basic
and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by the Financial
Accounting Standards Board (“FASB” Accounting Standards Codification (“ASC”) No. 260, “Earnings per Share.”
For December 31, 2024, and 2023, 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 December 31, 2024, and December 31, 2023 excludes the common stock equivalents of
the following potentially dilutive securities because their inclusion would be anti-dilutive:
SCHEDULE OF ANTIDILUTIVE SECURITIES OF EARNING PER SHARE
| | |
December 31, 2024 | | |
December 31, 2023 | |
| | |
| | |
| |
| Stock Warrants (Exercise price - $0.001- $0.25/share) | |
| 81,035,714 | | |
| 67,335,714 | |
| Stock Options (Exercise price - $0.1150/Share) | |
| 26,981,000 | | |
| 26,520,000 | |
| Convertible Preferred Stock | |
| 3 | | |
| 2 | |
| Common Stock Payable | |
| 1,122,311 | | |
| 1,122,311 | |
| Total | |
| 109,139,028 | | |
| 94,978,027 | |
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.
For
the years ended December 31, 2024, and 2023, the Company had $164,374 and $237,871 respectively, in research and development costs
Advertising
Expense
The
Company follows the policy of charging the costs of advertising to expense as incurred. There was no advertising expense in the years
ended December 31, 2024, and 2023.
Income
Taxes
The
Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC No. 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 No. 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.
Stock-Based
Compensation
The
Company accounts for stock-based compensation for employees and directors in accordance with ASC 718, Compensation (“ASC
718”). ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in
the statement of operations based on their fair values. Under the provisions of ASC 718, stock-based compensation costs are measured
at the grant date, based on the fair value of the award, and are recognized as expense over the employee’s requisite service
period (generally the vesting period of the equity grant). The fair value of the Company’s common stock options are estimated
using the Black Scholes option-pricing model with the following assumptions: expected volatility, dividend rate, risk free interest
rate and the expected life (The expected life for awards uses the simplified method for all “plain vanilla” options, as defined in ASC 718-10-S99, and the contractual term for all other employee and non-employee awards. The Company expenses stock-based compensation by using the straight-line method. In accordance with ASC
718 and, excess tax benefits realized from the exercise of stock-based awards are classified as cash flows from operating
activities. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) are
recognized as income tax expense or benefit in the condensed consolidated statements of operations.
The
Company accounts for stock-based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the
fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable,
using the measurement date guidelines enumerated in ASU 2018-07.
RECENTLY
ADOPTED ACCOUNTING PRONOUNCEMENTS
In
November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures,
to require enhanced disclosures that include reportable segment expenses. The amendments in this update provide that a business entity
disclose significant segment expenses, segment profit or loss (after significant segment expenses), and allows reporting of additional
measures of a segments profit or loss if used in assessing segment performance. Such disclosures apply to entities with a single reportable
segment. These amendments were effective for the Company in 2024 and retrospectively to all prior periods using the significant segment
expense categories identified. The impact of the adoption of the amendments in this update was not material to the Company’s consolidated
financial position and results of operations, as the requirements impact only segment reporting disclosures in the footnotes to the Company’s
consolidated financial statements.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
In
November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses to improve the disclosures about a
public business entity’s expenses and address requests from investors for more detailed information about the types of expenses
including purchases of inventory, employee compensation, depreciation and intangible asset amortization in commonly presented expense
captions such as cost of sales, selling, general and administrative expense, and research and development. These amendments are effective
for the Company for annual periods in 2027, applied prospectively, with early adoption permitted, and interim periods beginning in 2028.
The Company intends to adopt the amendments in this update prospectively in 2027 for annual periods and in 2028 for interim periods.
The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial
position and results of operations, as the requirements only require more detailed disclosures in the footnotes to the Company’s
consolidated financial statements.
In
March 2024, the FASB issued ASU No. 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements
to remove various references to concepts statements from the FASB Accounting Standards Codification. This guidance is to clarify
guidance, simplify wording or structure of guidance, and other minor improvements. These amendments are effective for the Company for
annual periods in 2025, applied prospectively, with early adoption and retrospective application permitted. The Company intends to adopt
the amendments in this update prospectively in 2025. The impact of the adoption of the amendments in this update is not expected to be
material to the Company’s consolidated financial position and results of operations.
In
March 2024, the FASB issued ASU No. 2024-01, Compensation - Stock Compensation (Topic 718) - Scope Application of Profits Interest
and Similar Awards, to clarify whether profits interest and similar awards should be accounted for in accordance with Topic 718,
Compensation - Stock Compensation. The guidance applies to all business entities that issue profits interest awards as compensation
to employees or nonemployees in exchange for goods or services. These amendments are effective for the Company for annual and interim
periods in 2025, applied prospectively, with early adoption and retrospective application permitted. As the Company does not issue profit
interest awards, the impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated
financial position and results of operations.
In
December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, to require
enhanced income tax disclosures to provide information to assess how an entity’s operations and related tax risks, tax planning,
and operational opportunities affect its tax rate and prospects for future cash flows. The amendments in this update provide that a business
entity disclose (1) a tabular income tax rate reconciliation, using both percentages and amounts, (2) separate disclosure of any individual
reconciling items that are equal to or greater than 5% of the amount computed by multiplying the income (loss) from continuing operations
before income taxes by the applicable statutory income tax rate, and disaggregation of certain items that are significant and (3) amount
of income taxes paid (net of refunds received) disaggregated by federal, state and foreign jurisdictions, including separate disclosure
of any individual jurisdictions greater than 5% of total income taxes paid. These amendments are effective for the Company for annual
periods in 2025, applied prospectively, with early adoption and retrospective application permitted. The Company intends to adopt the
amendments in this update prospectively in 2025. The impact of the adoption of the amendments in this update is not expected to be material
to the Company’s consolidated financial position and results of operations, since the amendments require only enhancement of existing
income tax disclosures in the footnotes to the Company’s consolidated financial statements.
Equipment
The
Company values property and equipment at cost and depreciates these assets using the straight-line method over their expected useful
life.
In
accordance with FASB ASC 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.
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 and cash equivalents, 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:
| |
● |
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 December 31, 2024, and 2023. |
| |
|
|
| |
● |
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. |
The
following are the major categories of assets measured at fair value on a recurring basis: as of December 31, 2024, and December 31, 2023,
using quoted prices in active markets for identical liabilities (Level 1); significant other observable inputs (Level 2); and significant
unobservable inputs (Level 3):
The
Company has consistently applied the valuation techniques in all periods presented. The following table presents the Company’s
assets which were measured at fair value at December 31, 2024, and December 31, 2023:
SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
| | |
December 31, 2024 | | |
December 31, 2023 | |
| | |
Fair Value Measurement Using | | |
Fair Value Measurement Using | |
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Investment in gold | |
$ | 627,065 | | |
$ | - | | |
$ | - | | |
$ | 627,065 | | |
$ | 493,236 | | |
$ | - | | |
$ | - | | |
$ | 493,236 | |
| Money market fund | |
$ | 607,881 | | |
$ | - | | |
$ | - | | |
$ | 607,881 | | |
$ | 2,409,486 | | |
$ | - | | |
$ | - | | |
$ | 2,409,486 | |
| Total | |
$ | 1,234,946 | | |
$ | - | | |
$ | - | | |
$ | 1,234,946 | | |
$ | 2,902,722 | | |
$ | - | | |
$ | - | | |
$ | 2,902,722 | |
The
Board of Directors, who serves as the Custodian, is responsible for the safekeeping of gold bullion owned by the Company.
Valuation
of Gold Bullion
The
investment in Bullion is classified as a level 1 asset, as the Company’s investment in Bullion is calculated using
unadjusted quoted prices from primary market sources.
Gains
and Losses on Gold Bullion
Fair
value of the gold bullion held by the Company is based on that day’s London Bullion Market Association (“LBMA”) Gold
Price PM. “LBMA Gold Price PM” is the price per fine troy ounce of gold, stated in U.S. dollars, determined by ICE Benchmark
Administration (“IBA”) following an electronic auction consisting of one or more 30-second rounds starting at 3:00 p.m. (London
time), on each day that the London gold market is open for business and published shortly thereafter.
The
Company holds gold bullion as part of its strategy to manage inflation risk and diversify its assets. Upon acquisition, the Company elected
the Fair Value Option under ASC 825-10, Financial Instruments – Fair Value Option to account for its investment in gold bullion.
This election is irrevocable and was made to better reflect the Company’s intent to manage the assets based on fair value fluctuations.
Accounting
Policy and Election
The
Company follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”). ASC 820 provides guidance
for determining fair value and requires increased disclosure regarding the inputs to valuation techniques used to measure fair value.
ASC 820 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 at the measurement date.
The
Company recognizes changes in fair value of the investment in Bullion as changes in unrealized gains or losses on investment in Bullion
through the Statement of Operations.
In
accordance with ASC 825-10, the Company has elected to measure its gold bullion at fair value with changes in fair value recognized in
earnings. The gold bullion qualifies for the fair value option as it is a non-financial asset that is managed and evaluated on a fair
value basis.
| ● | The
fair value option was elected at initial recognition of the gold bullion. |
| ● | Changes
in fair value are recognized in “Other (Income) Expense, Net” in the Consolidated
Statements of Operations. |
For
the year ended December 31, 2024 and 2023, the Company recognized an unrealized gain of $133,829 and $55,985, respectively, in “Other
(income) expense, net” in the Consolidated Statements of Operations, reflecting changes in the fair value of gold bullion.
Storage
and Custody
The
Company holds its gold bullion in a segregated vault operated by an independent third-party custodian. The Company periodically verifies
the existence and condition of the gold through physical inspections and independent third-party audits.
The
following tables summarize activity in gold bullion for the year ended December 31, 2024:
SCHEDULE OF GOLD IN BULLION
| Year Ended December 31, 2024 | |
Ounces | | |
Cost | | |
Fair Value | |
| | |
| | |
| | |
| |
| Balance December 31, 2022 | |
| 239 | | |
$ | 1,829 | | |
$ | 437,251 | |
| Net change in unrealized gain | |
| | | |
| | | |
| 55,985 | |
| Balance December 31, 2023 | |
| 239 | | |
$ | 2,064 | | |
$ | 493,236 | |
| Net change in unrealized gain | |
| - | | |
| | | |
| 133,829 | |
| Balance December 31, 2024 | |
| 239 | | |
$ | 2,624 | | |
$ | 627,065 | |
Money Market Funds
Money market funds included in cash and cash
equivalents and U.S. government-backed securities are measured at fair value based on quoted prices in active markets, which are considered
Level 1 inputs. The Company’s policy is to recognize transfers in and/or out of the fair value hierarchy as of the date in which
the event or change in circumstances caused the transfer.
Revenue
Recognition
Effective
January 1, 2018, the Company adopted ASC No. 606 — Revenue from Contracts with Customers. Under ASC No. 606, the Company recognizes
revenue from the commercial sales of products, licensing agreements and contracts by applying the following steps: (1) identify the contract
with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction
price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
For
the years ended December 31, 2024, and 2023, the Company recognized $0 and $0 respectively in revenue.
Concentration
of Credit Risk
The
Company at times has cash and cash equivalents in banks in excess of FDIC insurance limits. At December 31, 2024, and December 31, 2023,
the Company had approximately $357,881 and $2,409,486, respectively in excess of FDIC insurance limits.
On
March 12, 2023, the U.S. government took extraordinary steps to stop a potential banking crisis after the historic failure of Silicon
Valley Bank, assuring all depositors at the failed institution that they could access all their money quickly, even as another major
bank was shut down. The Company had no exposure to a failed bank. The Company averts risks associated with such a crisis by holding minimum
cash balances required for uninterrupted operations, federal funds money market fund, and U.S. government-backed securities. As of December
31, 2024, the Company held $1,094,971 million in a federal money market fund (the “Fund”) with an investment objective to
seek to provide current income while maintaining liquidity and a stable share price of $1. The Fund invests at least 99.5% of its total
assets in cash, U.S. government securities, and/or repurchase agreements that are collateralized solely by U.S. government securities
or cash (collectively, government securities). As such it is considered one of the most conservative investment options offered.
Original
Issue Discount
For
certain notes issued, the Company provides the debt holder with an original issue discount. The original issue discount is recorded as
a debt discount, reducing the face amount of the note, and is amortized to amortization of original issue discount in the consolidated
statements of operations over the life of the debt.
Debt
Issue Cost
Debt
issuance cost paid to lenders, or third parties are recorded as debt discounts and amortized to interest expense in the consolidated
statements of operations, over the life of the underlying debt instrument.
Investments
without a Readily Determinable Fair Value (Cost Method)
Investments
in nonmarketable entities in which the Company is not able to exercise significant influence, our “Cost Method Investments,”
are accounted for at our initial cost, minus any impairment, plus or minus changes resulting from observable price changes in orderly
transactions for the identical or a similar investment of the same issuer.
The
Company holds a 15% direct equity investment in Global Silk Solutions Joint Stock Company, a private Company (see deposit on inventory
above). We received this investment in exchange for nominal consideration and carry the investment at $0 on December 31, 2024, and December
31, 2023, respectively.
Segment
Reporting
Operating
segments are defined as components of an enterprise that have the following characteristics: (i) they engage in business activities from
which they may earn revenue and incur expense, (ii) their operating results are regularly reviewed by the chief operating decision maker
(“CODM”) for resource allocation decisions and performance assessment, and (iii) their discrete financial information is
available. Our CODM is our Chief Executive Officer, who manages and allocates resources to our operations on a consolidated basis. We
operate as one segment, and our operations are focused on developing high strength, protein-based fiber, using recombinant DNA technology,
for commercial applications in the textile and specialty fiber industries. Segment information is further described in Note 11.
NOTE
2 GOING CONCERN
As
reflected in the accompanying financial statements, the Company has a working capital deficiency of $8,874,143 and stockholders’
deficiency of $8,149,621 and used $1,839,086 of cash in operations for the year ended December 31, 2024. This raises substantial doubt
about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s
ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going concern.
Management
believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for
the Company to continue as a going concern.
NOTE
3 EQUIPMENT
At
December 31, 2024, and December 31, 2023, property and equipment, net, is as follows:
SCHEDULE OF PROPERTY AND EQUIPMENT
| | |
December 31, 2024 | | |
December 31, 2023 | | |
Estimated
Useful Lives (Years) | |
| Automobile | |
$ | 41,805 | | |
$ | 41,805 | | |
| 5 | |
| Laboratory Equipment | |
| 134,550 | | |
| 130,310 | | |
| 5-10 | |
| Office Equipment | |
| 7,260 | | |
| 7,260 | | |
| 5-10 | |
| Leasehold Improvements | |
| 82,739 | | |
| 82,739 | | |
| 2-5 | |
| Property and Equipment, gross | |
| 82,739 | | |
| 82,739 | | |
| 2-5 | |
| | |
| | | |
| | | |
| | |
| Less: Accumulated Depreciation | |
| (221,633 | ) | |
| (195,474 | ) | |
| | |
| Total Property and Equipment, net | |
$ | 44,721 | | |
$ | 66,640 | | |
| | |
Depreciation
expense for the years ended December 31, 2024, and 2023, was $26,159 and $27,620, respectively.
NOTE
4 - RIGHT TO USE ASSETS AND LEASE LIABILITY
We
determine if an arrangement is a lease, or contains a lease, at inception and record the leases in our financial statements upon lease
commencement, which is the date when the underlying asset is made available for use by the lessor.
We
have a lease agreement with lease and non-lease components and have elected to utilize the practical expedient to account for lease and
non-lease components together as a single combined lease component, from both a lessee and lessor perspective with the exception of direct
sales-type leases and production equipment classes embedded in supply agreements. From a lessor perspective, the timing and pattern of
transfer are the same for the non-lease components and associated lease component and, the lease component, if accounted for separately,
would be classified as an operating lease.
We
have elected not to present short-term leases on the balance sheet as these leases have a lease term of 12 months or less at lease inception
and do not contain purchase options or renewal terms that we are reasonably certain to exercise. All other lease assets and lease liabilities
are recognized based on the present value of lease payments over the lease term at commencement date. Because our lease does not provide
an implicit rate of return, we used our incremental borrowing rate based on the information available at lease commencement date in determining
the present value of lease payments.
In
general, leases, where we are the lessee, may include options to extend the lease term. These leases may include options to terminate
the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options
to extend or terminate the lease when it is reasonably certain that we will exercise such options.
Lease
expense for operating leases is recognized on a straight-line basis over the lease term as cost of revenues or operating expenses depending
on the nature of the leased asset. Certain operating leases provide for annual increases to lease payments based on an index or rate.
We calculate the present value of future lease payments based on the index or rate at the lease commencement date.
Differences
between the calculated lease payment and actual payment are expensed as incurred. Amortization of finance lease assets is recognized
over the lease term as cost of revenues or operating expenses depending on the nature of the leased asset.
Interest
expense on finance lease liabilities is recognized over the lease term in interest expense.
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
September 5, 2019, we signed a two-year2
lease for a 5,000
square foot property in Lansing, MI that commenced on October
1, 2019 and ends on September 30, 2021, for its research and development headquarters. We pay an annual rent of $42,000
for year one of the lease and will pay $44,800
for year two of the lease. On April 16, 2021, the Company signed
a two year amendment to this lease. Commencing on July 1, 2021 and ending on September 30, 2022, the Company paid an annualized rent
of $42,000.
From October 1, 2022 through September 30, 2023, the Company will pay an annual rent of $44,800.
The Company recorded ROU asset of $79,862
and lease liability of $79,862
in accordance with the adoption of the new guidance. On October
1, 2023, the Company extended the terms of the lease through September 30, 2025. From October 1, 2023, through December 31, 2024, the
Company will pay an annual rent of $44,800.
From October 1, 2024, through September 30, 2025, the Company will pay an annual rent of $47,600.
The Company recorded ROU asset of $85,022
and lease liability of $85,022
in accordance with the adoption of the new guidance.
On
May 9, 2019, the Company signed a 5 year property lease with the Socialist Republic of Vietnam which consists of 4,560.57 square meters
of space, which it leases at a current rent of approximately $45,150 per year one and two and with the 5% increase per year for three
through five. On July 1, 2021, the Company ended this lease agreement, and the company recorded the associated ROU asset and lease liability
of $241,800.
On
July 1, 2021, the Company signed a 5-year property lease with the Socialist Republic of Vietnam which consists of 6,000 square meters
of space, which it leases at a current rent of approximately $8,645 per year.
On
January 31, 2024, the Company signed a five-year5
lease for a 700
square meter facility in Lam Dong, Vietnam that commenced on
February 1, 2024, and ends on January 31, 2029. We pay an annual rent of ~$7,284
for year one and two of the lease. For years 3-5 the price will increase with Vietnam’s state land price bracket, not to exceed 10%.
The Company recorded ROU asset of $30,084
and lease liability of $30,084
in accordance with the adoption of the new guidance. During
the year ended December 31, 2024, the Company was in terminated its ROU lease arrangement. The Company does not occupy or use the facility
and therefore has determined to impair this asset as there is no future benefit.
On
September 20, 2024, the Company signed a six-year6
lease for an 80
square meter facility in Lam Dong, Vietnam that commenced on
September 20, 2024, and ends on December 31, 2030. The rent payments started after December 31, 2024. We pay an annual rent as follows:
SCHEDULE OF ANNUAL RENT
| Lease Term | |
Annual Rent | |
| 9/20/2024 | |
9/30/2026 | |
$ | 7,200.00 | |
| 10/1/2026 | |
12/31/2027 | |
$ | 7,920.00 | |
| 1/1/2028 | |
12/31/2030 | |
$ | 8,712.00 | |
If
the agreement is renewed, price will increase with Vietnam’s state land price bracket, not to exceed 10%. In addition, the Company
paid a security deposit of ~$3,657 for October 1, 2026, through December 31, 2027. Additional deposit of ~$3,657 will be due on January
1, 2028. The Company recorded ROU asset of $39,489 and lease liability of $39,489 in accordance with the adoption of the new guidance.
The
tables below present information regarding the Company’s operating lease assets and liabilities at December 31, 2024:
At
December 31, 2024, and December 31, 2023, the Company had no financing leases as defined in ASC 842, “Leases.”
SCHEDULE OF OPERATING LEASE ASSETS AND LIABILITIES
| | |
December 31, 2024 | | |
December 31, 2023 | |
| Assets | |
| | | |
| | |
| | |
| | | |
| | |
| Operating lease - right-of-use asset - non-current | |
$ | 86,088 | | |
$ | 95,808 | |
| | |
| | | |
| | |
| Liabilities | |
| | | |
| | |
| | |
| | | |
| | |
| Operating lease liability | |
$ | 87,474 | | |
$ | 96,157 | |
| | |
| | | |
| | |
| Weighted-average remaining lease term (three months) | |
| 3.35 | | |
| 1.95 | |
| | |
| | | |
| | |
| Weighted-average discount rate | |
| 8 | % | |
| 8 | % |
| | |
| | | |
| | |
| The components of lease expense were as follows: | |
| | | |
| | |
| | |
| | | |
| | |
| Operating lease costs | |
| | | |
| | |
| | |
| | | |
| | |
| Amortization of right-of-use operating lease asset | |
$ | 66,394 | | |
$ | 20,194 | |
| Impairment of right of use asset | |
$ | 30,084 | | |
| - | |
| Total operating lease costs | |
$ | 96,479 | | |
$ | 20,194 | |
| | |
| | | |
| | |
| Supplemental cash flow information related to operating leases was as follows: | |
| | | |
| | |
| | |
| | | |
| | |
| Operating cash outflows from operating lease (obligation payment) | |
$ | 54,144 | | |
$ | 53,442 | |
| Right-of-use asset obtained in exchange for new operating lease liability | |
$ | 30,084 | | |
$ | - | |
| Impairment of right of use asset | |
$ | (30,084 | ) | |
$ | - | |
| Net | |
$ | - | | |
$ | - | |
Future
minimum lease payments required under leases that have initial or remaining non-cancellable lease terms in excess of one year at December
31, 2024:
SCHEDULE OF MINIMUM LEASE PAYMENTS
| | |
| | |
| 2025 | |
$ | 53,944 | |
| 2026 | |
| 13,143 | |
| 2027 | |
| 7,920 | |
| 2028 | |
| 8,712 | |
| 2029 | |
| 17,424 | |
| Total lease payments | |
| 101,143 | |
| Less: amount representing interest | |
| (13,669 | ) |
| Total lease obligations | |
| 87,474 | |
| Total lease payments | |
| 101,143 | |
| | |
| | |
| Less: current portion of operating lease liability | |
| (46,948 | ) |
| Long-term portion operating lease liability | |
$ | 40,526 | |
NOTE
5 NOTE PAYABLE – RELATED PARTY
Between
June 6, 2016, and December 1, 2020, the Company received a total of $1,657,000 in loans from its founder and CEO. Pursuant to the terms
of the loans, the advances bear an interest at 3%, is unsecured, and due on demand.
On
January 26, 2022, the Company repaid $40,000 of the outstanding loan to its founder and CEO.
Total
loan payable to the founder and CEO for as of December 31, 2024, is $1,617,000.
Total
loan payable to the founder and CEO as of December 31, 2023, is $1,617,000.
During
the year ended December 31, 2024, the Company recorded $81,072 as an in-kind contribution of interest related to the loan and recorded
accrued interest payable of $57,832. As of December 31, 2024, total interest payable is $304,545.
During
the year ended December 31, 2023, the Company recorded $80,851 as an in-kind contribution of interest related to the loan and recorded
accrued interest payable of $56,050. As of December 31, 2023, total interest payable is $246,714.
NOTE
6 LOAN PAYABLE
On
March 1, 2019, the Company entered into an unsecured promissory note with Notre Dame - an unrelated party in the amount of $265,244 in
exchange for outstanding account payable due to the debtor. Pursuant to the terms of the note, the note bears 10% interest per year from
the date of default until the date the loan is paid in full. The term of the loan is twenty-four months24. The loan repayment commenced
immediately over a twenty-four month period according to the following table.
1.
$1,000 per month for the first nine months;
2.
$2,000 per month for the months seven and eight;
3.
$5,000 per month for months nine through twenty-three; and,
4.
Final payment of all remaining balance, in the amount of $180,224 in month 24.
On
July 8, 2021, the Company entered into an amendment to the March 1, 2019, agreement. As of the date of the amendment, the remaining outstanding
balance was $180,244. The loan repayment commenced immediately following the amendment and extended over a fourteen-month period with
the following terms:
| 1. |
$5,000
per month for months one through thirteen. |
| 2. |
Final
payment of the remaining balance in the amount of $115,244 split into two equal payments, of which $57,622 to be paid in month fourteen
and $57,622 paid in month twenty. |
The
Company has continued to make $5,000 monthly payment against this remaining balance in lieu of the balloon payments in months fourteen
and twenty. The Company expects to make the final payment on August 1, 2024.
During
the year ended December 31, 2024, the Company paid $35,244 of the loan balance. The loan was repaid in full as of December 31, 2024.
NOTE
7 STOCKHOLDERS’ DEFICIT
(A)
Common Stock Issued for Cash
None
issued for the year ended December 31, 2024.
(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.
None
issued for the year ended December 31, 2024.
On
December 26, 2023, the Company issued 5,000,000 shares of its class A common stock for services with a fair value of $225,000 ($0.045/share)
on the date of grant.
(C)
Common Stock Warrants and Options
On
October 1, 2024, the Company issued a 7-year
option to purchase 461,000
shares of common stock at an exercise price of $0.8685 per
share for services rendered. The expected life for awards uses the simplified method for all “plain vanilla” options, as
defined in ASC 718-10-S99, and the contractual term for all other employee and non-employee awards.
The options had a fair value of $33,533,
based upon the Black-Scholes option-pricing model on the date of grant. Options will vest upon certain triggering events as defined
by the Company in the Employee Stock Option Plan, as long as the employee remains with the Company at vesting date. Options will be
exercisable on August 6, 2031. During the year ended December 31, 2024, the Company recorded $ 4,197
as an expense for options issued.
SCHEDULE OF OPTION ASSUMPTION
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 127.90 | % |
| Expected term | |
| 4.5 years | |
| Risk free interest rate | |
| 3.51 | % |
| Expected forfeitures | |
| 0 | % |
On
August 6, 2024, the Company issued a 7-year
option to purchase 2,000,000
shares of common stock at an exercise price of $0.1024
per share for services rendered. The expected life for awards uses the simplified method for all “plain vanilla”
options, as defined in ASC 718-10-S99, and the contractual term for all other employee and non-employee awards. The options had
a fair value of $190,880,
based upon the Black-Scholes option-pricing model on the date of grant. Options will vest upon certain triggering events as defined
by the Company in the Employee Stock Option Plan, as long as the employee remains with the Company at vesting date. Options will be
exercisable on August 6, 2031. During the year ended December 31, 2024, the Company recorded $11,357 as
an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 133.80 | % |
| Expected term | |
| 4.5 years | |
| Risk free interest rate | |
| 3.73 | % |
| Expected forfeitures | |
| 0 | % |
On
August 6, 2024, the Company issued a 7-year
option to purchase
2,000,000 shares of common stock at an exercise price of $0.1024
per share for services rendered. The expected life for awards uses the simplified method for all “plain vanilla”
options, as defined in ASC 718-10-S99, and the contractual term for all other employee and non-employee awards. The options had
a fair value of $190,880,
based upon the Black-Scholes option-pricing model on the date of grant. Options will vest upon certain triggering events as defined
by the Company in the Employee Stock Option Plan, as long as the employee remains with the Company at vesting date. Options will be
exercisable on August 6, 2031. During the year ended December 31, 2024, the Company recorded $11,357
as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 133.80 | % |
| Expected term | |
| 7 years | |
| Risk free interest rate | |
| 3.76 | % |
| Expected forfeitures | |
| 0 | % |
On
August 6, 2024, the Company issued a 7-year
option to purchase 2,000,000
shares of common stock at an exercise price of $0.1024
per share for services rendered. The expected life for awards uses the simplified method for all “plain vanilla”
options, as defined in ASC 718-10-S99, and the contractual term for all other employee and non-employee awards. The options had
a fair value of $190,880,
based upon the Black-Scholes option-pricing model on the date of grant. Options will vest upon certain triggering events as defined
by the Company in the Employee Stock Option Plan, as long as the employee remains with the Company at vesting date. Options will be
exercisable on August 6, 2031. During the year ended December 31, 2024, the Company recorded $11,357
as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 133.80 | % |
| Expected term | |
| 7 years | |
| Risk free interest rate | |
| 3.76 | % |
| Expected forfeitures | |
| 0 | % |
On
August 6, 2024 the Company issued a 7-year
option to purchase 50,000
shares of common stock at an exercise price of $0.1024
per share for services rendered. The expected life for awards uses the simplified method for all “plain vanilla”
options, as defined in ASC 718-10-S99, and the contractual term for all other employee and non-employee awards. The options had
a fair value of $4,345,
based upon the Black-Scholes option-pricing model on the date of grant. Options will vest upon certain triggering events as defined
by the Company in the Employee Stock Option Plan, as long as the employee remains with the Company at vesting date. Options will be
exercisable on August 6, 2026. During the year ended December 31, 2024, the Company recorded $905
as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 133.80 | % |
| Expected term | |
| 4.5 years | |
| Risk free interest rate | |
| 3.73 | % |
| Expected forfeitures | |
| 0 | % |
On
April 13, 2024, the Company issued a 8.5-year
option to purchase 5,000,000
shares of common stock at an exercise price of $0.08225
per share to a related party for services rendered. The expected life for awards uses the simplified method for all “plain
vanilla” options, as defined in ASC 718-10-S99, and the contractual term for all other employee and non-employee awards.
The options had a fair value of $339,100,
based upon the Black-Scholes option-pricing model on the date of grant. Options vest on grant date. Options are exercisable October
12, 2025, and for a period expiring on October 10, 2032. During the year ended December 31, 2024, the Company recorded $339,100 as
an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 134.80 | % |
| Expected term | |
| 4.25
years | |
| Risk free interest rate | |
| 4.54 | % |
| Expected forfeitures | |
| 0 | % |
On
April 13, 2024, the Company issued a 9.33-year
option to purchase 5,000,000 shares
of common stock at an exercise price of $0.08225
per share to a related party for services rendered. The expected life for awards uses the simplified method for all “plain
vanilla” options, as defined in ASC 718-10-S99, and the contractual term for all other employee and non-employee awards.
The options had a fair value of $343,350,
based upon the Black-Scholes option-pricing model on the date of grant. Options vest on grant date. Options are exercisable on
August 12, 2026, and for a period expiring on August 10, 2033. During the year ended December 31, 2024, the Company recorded $343,350
as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 130.50 | % |
| Expected term | |
| 4.75 years | |
| Risk free interest rate | |
| 4.54 | % |
| Expected forfeitures | |
| 0 | % |
On
April 8, 2024, the Company issued a 6.5-year
option to purchase 150,000
shares of common stock at an exercise price of $0.0834
per share for services rendered. The expected life for awards uses the simplified method for all “plain vanilla”
options, as defined in ASC 718-10-S99, and the contractual term for all other employee and non-employee awards. The options had
a fair value of $9,588,
based upon the Black-Scholes option-pricing model on the date of grant. Options vest on grant date. Options are exercisable on April
7, 2026, and for a period expiring on October 6, 2030. During the year ended December 31, 2024, the Company recorded $9,588
as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 138.60 | % |
| Expected term | |
| 3.25 years | |
| Risk free interest rate | |
| 4.60 | % |
| Expected forfeitures | |
| 0 | % |
On
April 3, 2024, the Company issued a 6.5-year
option to purchase 500,000
shares of common stock at an exercise price of $0.082
per share for services rendered. The expected life for awards uses the simplified method for all “plain vanilla”
options, as defined in ASC 718-10-S99, and the contractual term for all other employee and non-employee awards. The options had
a fair value of $31,970,
based upon the Black-Scholes option-pricing model on the date of grant. Options vest on grant date. Options are exercisable on
October 2, 2026, and for a period expiring on October 1, 2030. During the year ended December 31, 2024, the Company recorded $31,970
as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 138.30 | % |
| Expected term | |
| 3.25 years | |
| Risk free interest rate | |
| 4.48 | % |
| Expected forfeitures | |
| 0 | % |
On
January 4, 2024, the Company cancelled 1,000,000 warrants issued to a consultant on August 8, 2019.
On
February 16, 2023, the Company issued 2,434,211 shares of Common Stock in exchange for the cashless exercise of 2,500,000 warrants.
On
December 13, 2023 the Company issued a 10-year option to purchase 10,00,000 shares of common stock at an exercise price of $0.04 per
share to a related party for services rendered. The options had a fair value of $260,000, based upon the Black-Scholes option-pricing
model on the date of grant. Options vest on grant date. During the year ended December 31, 2023, the Company recorded $260,000 as an
expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 133.30 | % |
| Expected term | |
| 5 years | |
| Risk free interest rate | |
| 4.00 | % |
| Expected forfeitures | |
| 0 | % |
On
December 13, 2023, the Company issued a 5-year option to purchase 6,000,000 shares of common stock at an exercise price of $0.04 per
share to a related party for services rendered. The options had a fair value of $162,000, based upon the Black-Scholes option-pricing
model on the date of grant. Options vest 20% on the grant date, 20% will vest on the second anniversary, 20% will vest on the third-year
anniversary, 20% will vest on the fourth year anniversary as long as the employee remains with the Company at the end of each successive
year for four years. Options will be exercisable on December 31, 2023, and for a period of 10 years expiring on December 13, 2033. During
the year ended December 31, 2024, the Company recorded $32,400 as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 133.30 | % |
| Expected term | |
| 6.25 years | |
| Risk free interest rate | |
| 4.04 | % |
| Expected forfeitures | |
| 0 | % |
On
December 13, 2023, the Company issued a 5-year option to purchase 4,000,000 shares of common stock at an exercise price of $0.04 per
share to a related party for services rendered. The options had a fair value of $108,000, based upon the Black-Scholes option-pricing
model on the date of grant. Options vest 20% on the grant date, 20% will vest on the second anniversary, 20% will vest on the third-year
anniversary, 20% will vest on the fourth year anniversary as long as the employee remains with the Company at the end of each successive
year for four years. Options will be exercisable on December 31, 2024, and for a period of 10 years expiring on December 13, 2033. During
the year ended December 31, 2024, the Company recorded $21,600 as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 133.30 | % |
| Expected term | |
| 6.25 years | |
| Risk free interest rate | |
| 4.04 | % |
| Expected forfeitures | |
| 0 | % |
On
January 25, 2021, the Company issued a 7-year option to purchase 2,500,000 shares of common stock at an exercise price of $0.134 per
share to a related party for services rendered. The options had a fair value of $310,165, based upon the Black-Scholes option-pricing
model on the date of grant. Options vest 33.3% on the year one anniversary of the grant date, 33.3% will vest on the second anniversary,
and 33.3% will vest on the third year anniversary as long as the employee remains with the Company at the end of each successive year
for three years. Options will be exercisable on January 25, 2021, and for a period of 7 years expiring on January 25, 2028. During the
year ended December 31, 2024, the Company recorded $20,292 as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 133.22 | % |
| Expected term | |
| 7 years | |
| Risk free interest rate | |
| 1.46 | % |
| Expected forfeitures | |
| 0 | % |
On
February 19, 2020, the Company issued a 10-year option to purchase 6,000,000 shares of common stock at an exercise price of $0.115 per
share to a related party for services rendered. The options had a fair value of $626,047, based upon the Black-Scholes option-pricing
model on the date of grant and 2,000,000 options are fully vested on the date granted and 1,000,000 options vest at the end of each successive
year for four years. Options will be exercisable on February 19, 2021, and for a period of 10 years expiring on February 19, 2030. During
the year ended December 31, 2024, the Company recorded $14,284 as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 125.19 | % |
| Expected term | |
| 3 years | |
| Risk free interest rate | |
| 1.50 | % |
| Expected forfeitures | |
| 0 | % |
On
February 19, 2020, the Company issued a 7-year option to purchase 1,340,000 shares of common stock at an exercise price of $0.115 per
share to employees for services rendered. The options had a fair value of $133,063, based upon the Black-Scholes option-pricing model
on the date of grant and 268,000 options are fully vested on the date granted and the remaining option vest equally over the remaining
4 years at the end of each successive year. Options will be exercisable on February 19, 2021, and for a period of 6 years expiring on
February 19, 2027. During the year ended December 31, 2024, the Company recorded $3,643 as an expense for options issued.
| Expected dividends | |
| 0 | % |
| Expected volatility | |
| 125.19 | % |
| Expected term | |
| 6 years | |
| Risk free interest rate | |
| 1.46 | % |
| Expected forfeitures | |
| 0 | % |
Warrant
activity as of December 31, 2024, is summarized as follows:
SCHEDULE OF WARRANTS ACTIVITY
| Warrants | |
Number of Warrants | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Term (Years) | | |
Aggregate Intrinsic Value | |
| Outstanding – December 31, 2023 | |
| 67,335,714 | | |
$ | 0.12 | | |
| 3.89 | | |
$ | 331,500 | |
| Exercisable – December 31, 2023 | |
| 67,335,714 | | |
$ | 0.12 | | |
| 3.89 | | |
$ | 331,500 | |
| | |
| | | |
| | | |
| | | |
| | |
| Granted | |
| 16,700,000 | | |
$ | 0.0895 | | |
| 7.78 | | |
| 49,920 | |
| Exercised | |
| - | | |
$ | - | | |
| - | | |
| - | |
| Cancelled/Forfeited | |
| (3,000,000 | ) | |
$ | 0.2299 | | |
| - | | |
| - | |
| Outstanding – December 31, 2024 | |
| 81,035,714 | | |
$ | 0.0895 | | |
| 4.32 | | |
$ | 1,989,500 | |
| Exercisable – December 31, 2024 | |
| 81,035,714 | | |
$ | 0.10 | | |
| 4.32 | | |
$ | 1,989,500 | |
As
of December 31, 2024, the following warrants were outstanding:
SCHEDULE
OF WARRANTS OUTSTANDING
Exercise Price Warrants Outstanding | | |
Warrants Exercisable | | |
Weighted Average Remaining Contractual Life | | |
Aggregate Intrinsic Value | |
| $ | 0.001 | | |
| 8,500,000 | | |
| 1.39 | | |
$ | 756,500 | |
| $ | 0.04 | | |
| 2,300,000 | | |
| 2.00 | | |
$ | 115,000 | |
| $ | 0.056 | | |
| 1,000,000 | | |
| 0.77 | | |
$ | 34,000 | |
| $ | 0.2299 | | |
| 4,125,000 | | |
| 1.34 | | |
$ | - | |
| $ | 0.16 | | |
| 3,125,000 | | |
| 1.20 | | |
$ | - | |
| $ | 0.25 | | |
| 8,000,000 | | |
| 1.48 | | |
$ | - | |
| $ | 0.1160 | | |
| 500,000 | | |
| 0.77 | | |
$ | - | |
| $ | 0.12 | | |
| 12,500,000 | | |
| 2.29 | | |
$ | - | |
| $ | 0.14 | | |
| 4,285,714 | | |
| 2.29 | | |
$ | - | |
| $ | 0.04 | | |
| 4,000,000 | | |
| 8.21 | | |
$ | 200,000 | |
| $ | 0.04 | | |
| 6,000,000 | | |
| 8.21 | | |
$ | 300,000 | |
| $ | 0.04 | | |
| 10,000,000 | | |
| 8.21 | | |
$ | 500,000 | |
| $ | 0.0825 | | |
| 5,000,000 | | |
| 8.03 | | |
$ | 38,750 | |
| $ | 0.0825 | | |
| 5,000,000 | | |
| 8.87 | | |
$ | 38,750 | |
| $ | 0.08 | | |
| 150,000 | | |
| 6.01 | | |
$ | 1,500 | |
| $ | 0.08 | | |
| 500,000 | | |
| 6.01 | | |
$ | 5,000 | |
| $ | 0.1024 | | |
| 2,000,000 | | |
| 6.86 | | |
$ | - | |
| $ | 0.1024 | | |
| 2,000,000 | | |
| 6.86 | | |
$ | - | |
| $ | 0.1024 | | |
| 2,000,000 | | |
| 6.86 | | |
$ | - | |
| $ | 0.1024 | | |
| 50,000 | | |
| 6.86 | | |
$ | - | |
| | | | |
| 81,035,714 | | |
| | | |
$ | 1,989,500 | |
As
of December 31, 2023, the following warrants were outstanding:
Exercise Price Warrants Outstanding | | |
Warrants Exercisable | | |
Weighted Average Remaining Contractual Life | | |
Aggregate Intrinsic Value | |
| $ | 0.001 | | |
| 8,500,000 | | |
| 2.14 | | |
$ | 331,500 | |
| $ | 0.04 | | |
| 2,300,000 | | |
| 2.75 | | |
$ | - | |
| $ | 0.056 | | |
| 1,000,000 | | |
| 1.52 | | |
$ | - | |
| $ | 0.2299 | | |
| 7,125,000 | | |
| 1.27 | | |
$ | - | |
| $ | 0.16 | | |
| 3,125,000 | | |
| 1.95 | | |
$ | - | |
| $ | 0.25 | | |
| 8,000,000 | | |
| 2.23 | | |
$ | - | |
| $ | 0.1160 | | |
| 500,000 | | |
| 1.52 | | |
$ | - | |
| $ | 0.12 | | |
| 12,500,000 | | |
| 3.05 | | |
$ | - | |
| $ | 0.14 | | |
| 4,285,714 | | |
| 3.05 | | |
$ | - | |
| $ | 0.04 | | |
| 4,000,000 | | |
| 9.95 | | |
$ | - | |
| $ | 0.04 | | |
| 6,000,000 | | |
| 9.95 | | |
$ | - | |
| $ | 0.04 | | |
| 10,000,000 | | |
| 9.95 | | |
$ | - | |
| | | | |
| | | |
| | | |
| | |
| | | | |
| 67,335,714 | | |
| | | |
$ | 331,500 | |
Options
activity as of December 31, 2024, is summarized as follows:
SCHEDULE
OF OPTIONS ACTIVITY
| Options | |
Number of Options | | |
Weighted Average Exercise Price | |
|
Weighted Average Remaining Contractual Term (Years) | | |
Aggregate Intrinsic Value | |
| Outstanding - December 31, 2023 | |
| 26,520,000 | | |
$ | 0.12 | |
|
| 17.27 | | |
$ | - | |
| Granted | |
| 461,000 | | |
$ | 0.08685 | |
|
| 6.75 | | |
| - | |
| Exercised | |
| - | | |
$ | - | |
|
| - | | |
| - | |
| Cancelled/Forfeited | |
| - | | |
$ | - | |
|
| - | | |
| - | |
| Outstanding – December 31, 2024 | |
| 26,981,000 | | |
$ | 0.114 | |
|
| 16.10 | | |
$ | - | |
| Exercisable – December 31, 2024 | |
| 26,981,000 | | |
$ | 0.114 | |
|
| 16.10 | | |
$ | - | |
For
the year ended December 31, 2024, the following options were outstanding:
SCHEDULE OF OPTIONS OUTSTANDING
| Exercise Price | | |
Options Outstanding | | |
Options Exercisable | | |
Weighted Average Remaining Contractual Life (in Years) | |
| | | | |
| | | |
| | | |
| | |
| $ | 0.114 | | |
| 26,981,000 | | |
| 26,981,000 | | |
| 16.10 | |
For
the year ended December 31, 2023, the following options were outstanding:
| Exercise Price | | |
Options Outstanding | | |
Options Exercisable | | |
Weighted Average Remaining Contractual Life (in Years) | |
| | | | |
| | | |
| | | |
| | |
| $ | 0.115 | | |
| 26,520,000 | | |
| 26,520,000 | | |
| 17.27 | |
(C)
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:
| ● |
Common
stock Class A, unlimited number of shares authorized, no par value |
| ● |
Common
stock Class B, unlimited number of shares authorized, no par value |
| ● |
Preferred
stock, unlimited number of shares authorized, no par value |
Effective
December 17, 2013, the Company amended its articles of incorporation to designate a Series A no par value preferred stock. Two shares
of Series A Preferred stock have been authorized.
On
March 26, 2024, the Company increased the total authorized Series A preferred stock to four shares as approved by the board of directors.
On
March 26, 2024, the Company issued one share of Series A preferred stock to Mr. Thompson, our CEO and founder. In consideration for the
share of Series A preferred stock, Mr. Thompson paid twenty thousand dollars ($20,000), in the form of debt cancellation.
NOTE
8 COMMITMENTS AND CONTINGENCIES
On
November 10, 2010, the Company entered into an employment agreement with its CEO, effective January 1, 2011 through the December 31,
2015. The term of the agreement is a five year period at an annual salary of $210,000. There is a 6% annual increase. For the year ending
December 31, 2015, the annual salary was $281,027. The employee is also to receive a 20% bonus based on the annual based salary. Any
stock, stock options bonuses have to be approved by the board of directors. On January 1, 2016, the agreement was renewed with the same
terms for another 5 years with an annual salary of $297,889 for the year ended December 31, 2016. On January 1, 2017, the agreement renewed
with the same terms for another 5 years, but with an annual salary of $315,764 for the year ended December 31, 2017. On January 1, 2019,
the agreement renewed again with the same terms for another 5 years. On January 1, 2023, the agreement renewed again with the same terms,
but with an annual salary of $447,915 for the years ended December 31, 2023. As of December 31, 2024, and December 31, 2023, the accrued
salary balance is $3,951,133 and $3,511,776, respectively (See Note 9).
On
January 20, 2015, the board of directors appointed Mr. Jonathan R. Rice as our Chief Operating Officer. Mr. Rice’s employment agreement
has a term of one year and can be terminated by either the Company or Mr. Rice at any time. Under the employment agreement, Mr. Rice
is entitled to an annual cash compensation of $120,000, which includes salary, health insurance, 401K retirement plan contributions,
etc. The Company also agreed to reimburse Mr. Rice for his past educational expenses of approximately $11,000. In addition, Mr. Rice
was issued a three-year3 warrant to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.001 per share
(the “January 2015 Warrant”) pursuant to the employment agreement. Additionally, on May 28, 2015, the Company issued a three-year3
warrant to purchase 3,000,000 shares of common stock of the Company at an exercise price of $0.001 per share (the “May 2015 Warrant”)
to Mr. Rice. The May 2015 warrant fully vested on October 28, 2016, and will expire on May 28, 2022. For the year ended December 31,
2015, the Company recorded $121,448 for the warrants issued to Mr. Rice. On January 14, 2016, the Company signed a new employment agreement
with Mr. Rice. The employment agreement has a term of one year and can be terminated by either the Company or Mr. Rice at any time. Under
the employment agreement, Mr. Rice is entitled to annual cash compensation of $140,000, which includes salary, health insurance, 401K
retirement plan contributions, etc. In addition, Mr. Rice was issued a three-year warrant to purchase 6,000,000 shares of common stock
of the Company at an exercise price of $0.001 per share pursuant to the employment agreement (the “May 2016 Warrant”). The
May 2016 warrant fully vested on February 20, 2017 and will expire on May 20, 2026. On January 9, 2018, the Company extended the expiration
date of the January 2015 warrant from January 19, 2018 to January 31, 2020, and on January 10, 2020 the Company extended the expiration
date of the January 2015 warrant to January 10, 2025 and on March 15, 2018, the Company signed an extension of its at-will employment
agreement with its COO, extending the term to January 31, 2019. On March 25, 2019, the Company signed an extension of its at-will employment
agreement with its COO, extending the term to January 1, 2020. On March 5, 2021, the Company signed an extension of its at-will employment
agreement with its COO, extending the term to January 1, 2022. On February 25, 2022, the Company signed an extension of its at-will employment
agreement with its COO, extending the term to January 1, 2023. On August 8, 2019, Mr. Rice was issued a set of three five-year5 warrants
to purchase a total of 6,000,000 shares of common stock of the Company at an exercise price of $0.2299 per share pursuant to the employment
agreement. On April 26, 2019, the Company signed an agreement to increase Mr. Rice’s base salary by $20,000 per year and issue
a one-time $20,000 bonus. Additionally, on August 15, 2019, the Company signed an agreement to increase Mr. Rice’s base salary
by an additional $20,000 per year.
As
of December 31, 2024, and December 31, 2023, the Company owes $5,356 and $3,482, respectively, to Mr. Rice for payroll payable.
On
July 3, 2019, the board of directors appointed Mr. Kenneth Le as the Company’s Director of Government relations and President of
Prodigy Textiles. Mr. Le’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. Le is entitled to annual cash compensation of $60,000. In addition, Mr. Le was issued
two three-year3 warrants to purchase 2,000,000 shares of common stock of the Company at an exercise price of $0.2299 per share. As of
December 31, 2024, 2,000,000 warrants were cancelled by the Company. On December 13, 2023, the Company issued a 5-year option to purchase
4,000,000 shares of common stock at an exercise price of $0.04 per share to a related party for services rendered. The options had a
fair value of $108,000, based upon the Black-Scholes option-pricing model on the date of grant. Options vest 20% on the grant date, 20%
will vest on the second anniversary, 20% will vest on the third-year anniversary, 20% will vest on the fourth year anniversary as long
as the employee remains with the Company at the end of each successive year for four years. Options will be exercisable on December 31,
2023, and for a period of 10 years expiring on December 13, 2033. As of December 31, 2024, and December 31, 2023, the accrued salary
balance is $1,775 and $1,154, respectively.
Legal
Matters
The
Company may be involved in legal actions and claims arising in the ordinary course of business, from time to time, none of which at the
time are considered to be material to the Company’s business or financial condition.
(A)
License Agreement
On
May 8, 2006, the Company entered into a license agreement. Pursuant to the terms of the agreement, the Company paid a non- refundable
license fee of $10,000. The Company will pay a license maintenance fee of $10,000 on the one year anniversary of this agreement and each
year thereafter. The Company will pay an annual research fee of $13,700 with first payment due January 2007, then on each subsequent
anniversary of the effective date commencing May 4, 2007. The annual research fees are accrued by the Company for future payment. Pursuant
to the terms of the agreement the Company may be required to pay additional fees aggregating up to a maximum of $10,000 a year for patent
maintenance and prosecution relating to the licensed intellectual property.
On
October 28, 2011, the Company entered into a license agreement with the University of Notre Dame. Under the agreement, the Company received
exclusive and non-exclusive rights to certain spider silk technologies including commercial rights with the right to sublicense such
intellectual property. In consideration of the licenses granted under the agreement, the Company agreed to issue to the University of
Notre Dame 2,200,000 shares of its common stock and to pay a royalty of 2% of net sales. The license agreement has a term of 20 years
which can be extended on an annual basis after that. It can be terminated by the University of Notre Dame if the Company defaults on
its obligations under the agreement and fails to cure such default within 90 days of a written notice by the university. The Company
can terminate the agreement upon a 90 day written notice subject to payment of a termination fee of $5,000 if the termination takes place
within 2 years after its effectiveness, $10,000 if the termination takes place within 4 years after its effectiveness and $20,000 if
the Agreement is terminated after 4 years. On May 5, 2017, the Company signed an addendum to that agreement relating to tangible property
and project intellectual property. On March 1, 2019, the Company singed an addendum to that agreement. The Company entered into a separate
loan agreement and promissory note dated March 1, 2019, as a payment for expenses paid by the University prior to January 31, 2019, totaling
$265,244 and issued 4,025,652 shares of Class A common stock with a fair value of $281,659 as payment of certain debt. In the event of
default, the license agreement will be terminated. During the year ended December 31, 2024, the Company paid $35,244 of the balance (See
Notes 6).
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 ASC No 480, Distinguishing Liabilities from Equity, the Company determined that the present value of the
payment of $120,000 that was due on December 26, 2007. As of December 31, 2024, and December 31, 2023, the outstanding balance is $65,292.
For the year ended December 31, 2024, the Company recorded $1,960 in interest expensed and related accrued interest payable.
(B)
Operating Lease Agreements
Since
September of 2015, we rent office space at 2723 South State Street, Suite 150, Ann Arbor, Michigan 48104, which is our principal place
of business. We pay an annual rent of $2,508 for conference facilities, mail, fax, and reception services located at our principal place
of business.
On
September 20, 2024, the Company signed a six-year6 lease for an 80 square meter facility in Lam Dong, Vietnam that commenced on September
20, 2024 and ends on December 31, 2030. We pay an annual rent as follows:
SCHEDULE
OF ANNUAL RENT
| Lease Term | |
Annual Rent | |
| 9/20/2024 | |
9/30/2026 | |
$ | 7,200.00 | |
| 10/1/2026 | |
12/31/2027 | |
$ | 7,920.00 | |
| 1/1/2028 | |
12/31/2030 | |
$ | 8,712.00 | |
If
the agreement is renewed, price will increase with Vietnam’s state land price bracket, not to exceed 10%. In addition, the Company
paid a security deposit of ~$3,657 for October 1, 2026 through December 31, 2027. Additional deposit of ~$3,657 will be due on January
1, 2028.
On
January 31, 2024, the Company signed a five-year5 lease for a 700 square meter facility in Lam Dong, Vietnam that commenced on February
1, 2024, and ends on January 31, 2029. We pay an annual rent of ~$7,284 for year one and two of the lease. For years 3-5 the price will increase with Vietnam’s state land price bracket, not to exceed 10%. During the year ended December 31, 2024, the Company terminated
its ROU lease arrangement. The Company does not occupy or use the facility and therefore has determined to impair this asset as there
is no future benefit.
On
July 1, 2021, the Company signed a five year property lease in Vietnam which consists of 6,000 square meters of space, which it leases
at a current rent of approximately $8,645 per year. The Company accounts for the lease in accordance with ASC Topic 842, “Leases”
On
September 13, 2017, the Company signed a two year lease with a 2 year option commencing on October 1, 2017 and ending on September 31,
2019. The Company paid an annual rent of $39,200 for the year one of lease and $42,000 for the year two of lease for office and manufacturing
space. On September 5, 2019, the Company signed a new two-year lease for this 5,000 square foot property in Lansing, MI that commenced
on October 1, 2019, and ended on September 30, 2021, for its research and development headquarters. The Company pays an annual rent of
$42,000 for year one of the lease and $44,800 for year two of the lease. On April 16, 2021, the Company signed a two year amendment to
this lease. Commencing on July 1, 2021, and ending on September 30, 2022, the Company paid an annualized rent of $42,000. From October
1, 2022, through September 30, 2023, the Company will pay an annual rent of $44,800. On October 1, 2023, the Company extended the terms
of the lease through September 30, 2025. From October 1, 2023, through December 31, 2024, the Company will pay an annual rent of $44,800.
From October 1, 2024, through September 30, 2025, the Company will pay an annual rent of $47,600. The Company accounts for the lease
in accordance with ASC Topic 842, “Leases”
NOTE
9 RELATED PARTY TRANSACTIONS
Accounts
payable and accrued expenses – related party consists of the following:
SCHEDULE
OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES RELATED PARTY
| | |
As of
December 31, 2024 | | |
As of
December 31, 2023 | |
| | |
| | |
| |
| Accounts payable - related party | |
$ | 296,154 | | |
$ | 388,001 | |
| Accrued expenses - related party | |
| 3,958,264 | | |
| 3,516,411 | |
| Accrued interest - related party | |
| 3,128,768 | | |
| 2,680,236 | |
| Total accounts payable and accrued expenses - related party | |
$ | 7,383,186 | | |
$ | 6,584,648 | |
Between
June 6, 2016, and December 1, 2020, the Company received a total of $1,657,000 in loans from its founder and CEO. Pursuant to the terms
of the loan, the advance bears an interest at 3%, is unsecured, and due on demand.
On
January 26, 2022, the Company repaid $40,000 of the outstanding loan to its founder and CEO.
Total
loan payable to principal stockholder for as of December 31, 2024, is $1,617,000.
Total
loan payable to this principal stockholder as of December 31, 2023, is $1,617,000.
On
February 2, 2024, the Company repaid $90,000 of accrued expenses to its Chief Executive Officer.
During
the year ended December 31, 2024, the Company recorded $81,072 as an in-kind contribution of interest related to the loan.
In
addition, the Company recorded accrued interest payable of $57,832.
As of December 31, 2024, total interest payable is $305,545
As of December 31, 2024, total interest
payable is $3,128,768.
During
year ended December 31, 2023, the Company recorded $80,851 as an in-kind contribution of interest related to the loan.
In addition, the Company recorded
accrued
interest payable of $56,050. As of December 31, 2023, total interest payable is $246,714.
As of December 31, 2023, total interest payable
is $2,680,236.
As
of December 31, 2024, and December 31, 2023, there was $361,446 and $388,001, respectively, included in accounts payable – related
party, which is owed to the Company’s Chief Executive Officer for expenses paid on behalf of the Company.
As
of December 31, 2024, and December 31, 2023, there was $3,958,264 and $3,516,411, respectively, included in accrued expenses –
related party, which includes accrued salaries owed to the Company’s senior staff.
As
of December 31, 2024, and December 31, 2023, there was $3,128,768 and $2,680,236, respectively, included in accrued interest –
related party, which includes interest on accrued salary and accrued expenses owed to the Company’s Chief Executive Officer.
In
aggregate as of December 31, 2024, and December 31, 2023, the Company owed $7,383,186 and $6,584,648, respectively to its related parties
in accrued salaries and accrued interest.
As
of December 31, 2024, and December 31, 2023, the Company owed $65,292 and $65,292, respectively, in royalty agreement payable to Chief
Executive Officer.
NOTE
10 SEGMENT INFORMATION
We
operate as one segment, and our operations are focused on developing high strength, protein-based fiber, using recombinant DNA technology,
for commercial applications in the textile and specialty fiber industries
Our
Chief Executive Officer, as the CODM, uses consolidated net loss to evaluate our expenditures and monitor budget versus actual results.
The monitoring of budget versus actual results and cash on hand are used in assessing the performance of the segment and in establishing
resource allocation across the organization.
Factors
used in determining the reportable segment include the nature of our operating activities, the organizational and reporting structure
and the type of information reviewed by the CODM to allocate resources and evaluate financial performance.
Significant
expenses within net loss include general and administrative, professional fees, officers’ salary, research and development, interest
expense, interest income and other, net and income tax expense, which are each separately presented on our consolidated statements of
operations.
The
following table presents information about the segment’s loss:
SCHEDULE OF SEGMENT
INFORMATION ABOUT THE SEGMENTS LOSS
| | |
| | |
| Revenue | |
$ | - | |
| | |
| | |
| Less: | |
| | |
| Employee expense | |
| 1,491,027 | |
| Occupancy expense | |
| 58,868 | |
| Research and development expense | |
| 230,005 | |
| Professional services expense | |
| 309,063 | |
| Warrants issued for services expense | |
| 855,402 | |
| Depreciation and amortization expense | |
| 26,159 | |
| Interest Expense | |
| 529,603 | |
| Office expense | |
| 55,041 | |
| Other segment expense (a) | |
| 52,443 | |
| Interest income | |
| (74,843 | ) |
| Unrealized investment on gold | |
| (133,829 | ) |
| Segment net loss | |
| 3,398,939 | |
| | |
| | |
| Reconciliation of loss | |
| | |
| | |
| | |
| Adjustments and reconciling items | |
| - | |
| | |
| | |
| Consolidated net loss | |
$ | 3,398,939 | |
| (a) | Other segment items
included in segment net loss include bank service charges, insurance, filing fees, meals, and other overhead expenses |
Segment
Assets:
As
of December 31, 2024, total segment assets amounted to $1,505,333.
NOTE
11 SUBSEQUENT EVENTS
The
Company has analyzed its operations subsequent to March 28, 2025 through the date these financial statements were issued, and other
than those listed below, has determined that it does not have any material subsequent events to disclose.
On
January 14, 2025, the Company was granted a new Investment Registration Certificate and Enterprise Registration Certificate for its production
operations in Vietnam.
On
January 21, 2025, the Company entered into a Standby Equity Purchase Agreement with an investor granting the Company the rights to sell
up to $10 Million of common stock.
On
March 14, 2025, the Company issued 2,157,710 shares of Common Stock in exchange for the cashless exercise of 2,181,518 warrants.
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