SECURITIES AND EXCHANGE COMMISSION
 
==================================
FORM SB-2
 
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
==================================
 
Kraig Biocraft Laboratories, Inc.
(Exact Name of Small Business Issuer in its Charter)
 
Wyoming
 
83-0459707
(State of Incorporation) 
(Primary Standard Classification Code) 
(IRS Employer ID No.) 
 
 
 
 

120 N. Washington Square, Suite 805
Lansing, Michigan 48933

(517) 336-0807
Address and Telephone Number of Registrant’s Principal
Executive Offices and Principal Place of Business)
 
Kim Thompson
120 N. Washington Square, Suite 805
Lansing, Michigan 48933
  (517) 336-0807
(Name, Address and Telephone Number of Agent for Service)
 
Copies of communications to:
GREGG E. JACLIN, ESQ.
ANSLOW & JACLIN, LLP
195 Route 9 South, Suite 204
Manalapan, NJ 07726
TELEPHONE NO.: (732) 409-1212
FACSIMILE NO.: (732) 577-1188
 
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. |X|
 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration Statement number of the earlier effective registration statement for the same offering. |_| 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.|_| If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.|_|
 
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_| 
  
 
 
 
 
CALCULATION OF REGISTRATION FEE
 
Title of Each Class Of Securities to be Registered
Amount to be
Registered
Proposed Maximum
Aggregate
Offering Price
per share
Proposed Maximum
Aggregate
Offering Price
Amount of
Registration fee
 
 
 
 
 
Common Stock, par value $0.001
16,981,800
$.03
$509,454
$15.64
 
The offering price has been estimated solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(c). Our common stock is not traded on any national exchange and in accordance with Rule 457, the offering price was determined by the price shareholders were sold to our shareholders in a private placement memorandum. The price of $0.03 is a fixed price at which the selling security holders may sell their shares until our common stock is quoted on the OTC Bulletin Board at which time the shares may be sold at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved.
 
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED SEPTEMBER     ,  2007
 
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the securities act of 1933 or until the registration statement shall become effective on such date as the commission, acting pursuant to said section 8(a), may determine.
 
 
 




 
 
  
 
16,981,800
KRAIG BIOCRAFT LABORATORIES, INC.
SHARES OF
CLASS A COMMON STOCK
 
The selling shareholders named in this prospectus are offering all of the shares of Class A common stock offered through this prospectus. Our common stock is presently not traded on any market or securities exchange. The 1 6,981,800   shares of our common stock can be sold by selling security holders at a fixed price of $.03 per share until our shares are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved. We have agreed to bear the expenses relating to the registration of the shares for the selling security holders.
 
THE COMPANY IS CONSIDERED TO BE IN UNSOUND FINANCIAL CONDITION. PERSONS SHOULD NOT INVEST UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENTS.
 
THE PURCHASE OF THE SECURITIES OFFERED THROUGH THIS PROSPECTUS INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING “RISK FACTORS” BEGINNING ON PAGE 2.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
 
 
The Date of This Prospectus Is:    September , 2007
 



TABLE OF CONTENTS


 
PAGE
Summary Financial Data 
1
   
Risk Factors 
2
   
Use of Proceeds  
5
   
Determination of Offering Price  
5
   
Dilution 
6
   
Selling Shareholders 
6
   
Plan of Distribution 
8
   
Legal Proceedings  
9
   
Directors, Executive Officers, Promoters and Control Persons 
9
   
Security Ownership of Certain Beneficial Owners and Management 
10
   
Description of Securities Interests of Named Experts and Counsel  
10
   
Disclosure of Commission Position of Indemnification for Securities Act Liabilities 
12
   
Organization Within Last Five Years 
12
   
Description of Business 
12
   
Plan of Operation 
13
   
Description of Property 
15
   
Certain Relationships and Related Transactions  
15
   
Market for Common Equity and Related Stockholder Matters  
15
   
Executive Compensation
15
   
Available Information 
17
   
Index to Financial Statements 
F- 
 
 



ABOUT OUR COMPANY

Kraig Biocraft Laboratories, Inc. (the "Company") was incorporated under the laws of the State of Wyoming on April 25, 2006. The Company was organized to develop high strength, protein based fiber, using recombinant DNA technology, for commercial applications in the textile and specialty fiber industries.

Terms of the Offering

The selling shareholders named in this prospectus are offering all of the shares of common stock offered through this prospectus. The selling stockholders are selling shares of common stock covered by this prospectus for their own account.
 
We will not receive any of the proceeds from the resale of these shares. The offering price of $.03 was determined by the most recent price at which shares were sold to our shareholders in a private placement memorandum and is a fixed price at which the selling security holders may sell their shares until our common stock is quoted on the OTC Bulletin Board, at which time the shares may be sold at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved. We have agreed to bear the expenses relating to the registration of the shares for the selling security holders.

Summary Financial Data
 
The following summary financial data should be read in conjunction with “Management’s Discussion and Analysis,” “Plan of Operation” and the Financial Statements and Notes thereto, included elsewhere in this prospectus. The statement of operations and balance sheet data from inception (April 26, 2006) through December 31, 2006 are derived from our audited financial statements and the period January 1, 2007 to June 30, 2007 are derived from our unaudited financial statements.
  
 
 
 
 
Six Months Ended June 30, 2007
   
From Inception-
April 26, 2006 through
December 31, 2006
 
STATEMENT OF OPERATIONS
 
(unaudited)
   
 
 
 
 
 
   
 
 
Revenues
   
-
     
-
 
Total Operating Expenses
   
213,427
     
529,667
 
Net Loss
    (219,925 )     (530,321 )
 
 
 
Six Months Ended June 30, 2007
   
From Inception-
April 26, 2006 through
December 31, 2006
 
BALANCE SHEET DATA
 
(unaudited)
   
 
 
 
 
 
   
 
 
Cash 
   
45,239
     
390
 
Total Assets 
   
83,139
     
390
 
Total Liabilities  
   
288,770
     
258,096
 
Stockholders’ Equity   (Deficiency) 
   
205,631
      (257,706 )
 

 

WHERE YOU CAN FIND US

We presently maintain our principal offices at 120 N. Washington Square, Suite 805, Lansing, Michigan, 48933. We rent mail and fax receiving services, and access to meeting and conference facilities at this location on a month-to-month basis, our phone number is (517) 336-0807. We believe that this location is sufficient and adequate to operate our current business.

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this prospectus before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. Please note that throughout this prospectus, the words “we”, “our” or “us” refer to the Company and not to the selling stockholders.
 
WE HAVE A LIMITED OPERATING HISTORY THAT YOU CAN USE TO EVALUATE US, AND THE LIKELIHOOD OF OUR SUCCESS MUST BE CONSIDERED IN LIGHT OF THE PROBLEMS, EXPENSES, DIFFICULTIES, COMPLICATIONS AND DELAYS FREQUENTLY ENCOUNTERED BY A SMALL DEVELOPING COMPANY.
 
We were incorporated in Wyoming in April 2006. With the exception of $45,239 in cash as of June 30, 2007, we have no significant financial resources and no revenue to date. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the highly competitive environment in which we will operate. Since we have a limited operating history, we cannot assure you that our business will be profitable or that we will ever generate sufficient revenues to meet our expenses and support our anticipated activities.
 
WE WILL REQUIRE FINANCING TO ACHIEVE OUR CURRENT BUSINESS STRATEGY AND OUR INABILITY TO OBTAIN SUCH FINANCING COULD PROHIBIT US FROM EXECUTING OUR BUSINESS PLAN AND CAUSE US TO CEASE OPPERATIONS.
 
We will need to raise additional funds through public or private debt or sale of equity to achieve our current business strategy. Such financing may not be available when needed. Even if such financing is available, it may be on terms that are materially adverse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. Our capital requirements to implement our business strategy will be significant. Moreover, in addition to monies needed to continue operations over the next twelve months, we anticipate requiring additional funds in order to significantly expand our research. No assurance can be given that such funds will be available or, if available, will be on commercially reasonable terms satisfactory to us. There can be no assurance that we will be able to obtain financing if and when it is needed on terms we deem acceptable.
 
If we are unable to obtain financing on reasonable terms, we could be forced to delay or scale back our plans for expansion of our research and development. In addition, such inability to obtain financing on reasonable terms could have a material adverse effect on our business, operating results, or financial condition, and could lead to the company’s ceasing of its business operations and scientific research.

OUR AUDITOR HAS EXPRESSED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING CONCERN.
 
Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a going concern. We are a development stage company that has never generated any revenue. From inception to June 30, 2007, we have incurred a net loss of $750,246, and an accumulated deficit of $750,246. If we cannot raise additional funds through public or private debt or sale of equity, we may have to delay the expansion of our research, and we may further be forced to reduce the current pace of our research.  In a worse case scenario, the failure to raise additional funding could be fatal to the corporation.
 

 
 
OUR FUTURE SUCCESS IS DEPENDENT, IN PART, ON THE PERFORMANCE AND CONTINUED SERVICE OF KIM THOMPSON, OUR ONLY OFFICER. WITHOUT HIS CONTINUED SERVICE, WE MAY BE FORCED TO INTERRUPT OR EVENTUALLY CEASE OUR OPERATIONS.
 
We are presently dependent to a great extent upon the experience, abilities and continued services of Kim Thompson, our only officer. The loss of his services could have a material adverse effect on our business, financial condition or results of operation.

WE ARE OPPERATING IN A HIGHLY COMPETITIVE MARKET AND WE ARE UNSURE AS TO WHETHER OR NOT THERE WILL BE ANY CONSUMER DEMAND FOR OUR PRODUCTS.

Some of our competitors are much larger and better capitalized than we are. It may be that our competitors will better address the same market opportunities that we are addressing. These competitors, either alone or with collaborative partners, may succeed in developing business models that are more effective or have greater market success than our own. The Company is especially susceptible to larger enterprises that invest more money in research and development and marketing. Moreover, the market for our products is large but highly competitive. There is little or no hard data that substantiates the demand for our products or how this demand will be segmented. It is possible that there will be low consumer demand for our products, or that interest in our products could decline or die out, which would cause us to be unable to sustain our operations.

CERTAIN RISKS EXIST WITH REGARD TO PRODUCT LIABILITY, INCLUDING BUT NOT LIMITED TO DESIGN DEFECT, ENVIRONMENTAL HAZARDS, QUALITY CONTROL, AND DURABILITY OF PRODUCT.
 
With respect to our product liability, certain risks exist concerning design defect, environmental hazards, quality contol and durability product.  This potential liability is increased when the Company's products in development may be used as protective and safety materials.  This potential liability is also increased by virtue of the fact that the Company's products, if successfully developed, will be produced by means of genetic engineering.  These transgenic methods may carry inherent environmental risks and the production of the products may therefore also be heavily regulated by the government.
 
WE ARE POTENTIALLY LIABLE TO ANY PERSON WHO IS INJURED BY, OR WHILE USING, ONE OF OUR PRODUCTS.
 
There is tremendous potential liability to any person who is injured by, or while using, one of the Company's products.  The Company may be strictly liable for any injury.  This liability might not be covered by insurance, or may exceed the Company’s coverage.  Under these circumstances the investor could expect to lose his entire investment.
 
GOVERNMENTAL REGULATION REGARDING IMPORT/EXPORT, TAXES, TRANSGENIC, SCIENTIFIC RESEARCH AND UNIVERSITY BASED RESEARCH, BIOLOGICAL RESEARCH, TRANSGENIC PRODUCT MANUFACTURE AND DISTRIBUTION, ENVIRONMENTAL REGULATION, PACKAGING REQUIREMENTS, ETC., MAY BE ADVERSE TO THE OPERATIONS, RESEARCH AND DEVELOPMENT, REVENUES, AND POTENTIAL PROFIT OF THE COMPANY.
 
Our industry is highly regulated.  As such, it is possible that government regulation regarding import/export, taxes, transgenic, scientific research and university based research, biological research, transgenic product manufacture and distribution, environmental regulation, packaging requirements, etc., may be adverse to the operations, research and development, revenues, and potential profit of the company .
 
THE COMPANY IS ESPECIALLY AT RISK FROM GOVERNMENTAL RESTRICTION AND REGULATIONS AS THE COMPANY’S BUSINESS INVOLVES THE DEVELOPMENT OF MATERIALS BY USE OF TRANSGENIC AND POTENTIALLY HAZARDOUS ORGANISMS.
 
U.S. federal and state regulations impose strict regulation on the use, storage, and transportation of such transgenic organisms.  The law will imposes severe penalties on the Company for any breach of regulations, for any spill, release, or contamination caused while the substances are under the ownership or control of the Company or its agents.  Although the Company is not aware of any such breach of governmental regulation, or of any spill, release, or contamination at this time, if such a release, or other regulatory breach does occur in the future, the resulting clean up costs, and/or fines and penalties, would cause a material negative effect on the Company and its financial future.
 



THE COMPANY HAS NO PATENTS OR DESIGN PATENTS ON ANY OF ITS PRODUCTS IN DEVELOPMENT.
 
At this time, the Company has no patents or design patents on any of its products in development.  As a result, there is a possibility that the Company's products could be imitated or directly manufactured and sold by a competitor.  It is also possible that some or all of the Company's research, development ideas and proposed products are covered by patent rights held by some other entity.  In that event, the Company could incur devastating liability and be forced to cease operations.
 
ALTHOUGH WE HAVE ENTERED INTO AN INTELLECTUAL PROPERTY LICENSING AGREEMENT WITH A UNIVERSITY THAT PROVIDES CERTAIN EXCLUSIVE RIGHTS TO USE INTELLECTUAL PROPERTY AND GENETIC SEQUENCES OWNED BY THE UNIVERSITY THERE CAN BE NO GUARANTEE OF THE VIABILITY OF THAT INTELLECTUAL PROPERTY OR THE LEGAL RIGHTS TO USE SUCH PROPERTY.
 
Without guarantee of the viability of the intellectual property of the university or the legal rights to use such property, there is a substantial risk that the subject patents could either be challenged or voided, or that the licensed intellectual property is worthless and without utility.  There is also a risk that the company will need to license additional intellectual property from persons or entities in order to successfully complete its research and development.  There can be no guarantee that the Company will be able to enter into a license agreement with such persons or entities.  In such event any investment may be lost.
 
THE INTELLECTUAL PROPERTY WHICH WE HAVE LICENSED FROM THE UNIVERSITY IS COVERED BY A SERIES OF US PATENTS AND US PATENT APPLICATIONS WITH LIMITED OR NO INTERNATIONAL PATENT PROTECTION.
 
With limited or no international patent protection, there is therefore a substantial risk of overseas competitors using the same technology described in said patents we have licensed to use.  There is also a substantial risk that the patents would expire prior to the time that the Company is ready to market or commercialize any product, or while the Company is still in research and development of proposed products.  In which event the patents would be worthless and would not protect the company from potential competitors who would then have low barriers to entry and who would be in a position to out compete the Company.  Some, but not all, of the gene sequences that the Company has licensed from the university, are covered by restrictions in the licensing agreement which preclude their use by the Company for sporting goods and medical applications.
 
OUR RESEARCH, PROPOSED PRODUCTS, PRODUCT NAMES, LABELS, SIGNAGE AND ADVERTISING MATERIAL, ARE NOT PROTECTED BY ANY COMPANY OWNED TRADEMARK, OR MAY BE SUBJECT TO AN EXPIRED TRADEMARK.
 
Without trademark protection we may be forced by litigation, or threat of litigation, to abandon product names, labels, signage, advertising material, and even its research.  In such event, we would incur substantial material expense, and would lose the value of marketing and promotional work and its research performed up to that date.  These losses would be in addition to the loss resulting from the payment of an award of damages to the party instituting or threatening litigation.  The likely result would be a loss of the entire investment.
 
DUE TO THE SPECULATIVE NATURE OF THIS SCIENTIFIC AND BIOLOGICAL RESEARCH, THERE CAN BE NO GUARANTEES THAT WE WILL SUCCEED IN DEVELOPING NEW FIBERS OR THAT OUR USE OF NOVEL TRANSGENIC METHODS WILL BE SUCCESSFUL.
 
We are engaging in research and development of new recombinant protein based fibers.  Due to the speculative nature of this scientific and biological research, there can be no guarantees that the Company will succeed in developing new fibers or that its use of novel transgenic methods will be successful.  For these and other reasons, the purchase of stock must be considered to be highly speculative and risky.
 
WHILE NO CURRENT LAWSUITS ARE FILED AGAINST THE COMPANY, THE POSSIBILITY EXISTS THAT A CLAIM OF SOME KIND MAY BE MADE IN THE FUTURE.

While no current lawsuits are filed against the Company, the possibility exists that a claim of some kind may be made in the future. While we will work to insure high product quality and accuracy in all marketing and labeling, no assurance can be given that some claims for damages will not arise. While we plan to properly insure ourselves with standard product liability insurance, there can be no assurance that this insurance will be adequate to cover litigation expenses and any awards to plaintiffs.

THE ABILITY TO SUCCESSFULLY DEPLOY OUR BUSINESS MODEL IS HEAVILTY DEPENDENT UPON UNITED STATES’ ECONOMIC CONDITIONS.
 
 

 
The ability to successfully deploy our business model is heavily dependent upon the general state of the US economy. We cannot assure you that favorable conditions will exist in the future. A general economic recession in the United States or a devaluation of the US Dollar relative to the Euro could have a serious adverse economic impact on us and our ability to obtain funding and generate projected revenues.

THE OFFERING PRICE OF THE SHARES WAS ARBITRARILY DETERMINED, AND THEREFORE SHOULD NOT BE USED AS AN INDICATOR OF THE FUTURE MARKET PRICE OF THE SECURITIES. THEREFORE, THE OFFERING PRICE BEARS NO RELATIONSHIP TO THE ACTUAL VALUE OF THE COMPANY, AND MAY MAKE OUR SHARES DIFFICULT TO SELL.
 
Since our shares are not listed or quoted on any exchange or quotation system, the offering price of $.03 for the shares of common stock was arbitrarily determined. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market. The offering price bears no relationship to the book value, assets or earnings of our company or any other recognized criteria of value. The offering price should not be regarded as an indicator of the future market price of the securities.
 
THERE IS NO ASSURANCE OF A PUBLIC MARKET OR THAT THE COMMON STOCK WILL EVER TRADE ON A RECOGNIZED EXCHANGE. THEREFORE, YOU MAY BE UNABLE TO LIQUIDATE YOUR INVESTMENT IN OUR STOCK.
 
There is no established public trading market for our common stock. Our shares are not and have not been listed or quoted on any exchange or quotation system. There can be no assurance that a market maker will agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading market, an investor may be unable to liquidate their investment.
 
OUR COMMON STOCK IS CONSIDERED A PENNY STOCK, WHICH IS SUBJECT TO RESTRICTIONS ON MARKETABILITY, SO YOU MAY NOT BE ABLE TO SELL YOUR SHARES.
 
If our common stock becomes tradable in the secondary market, we will be subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their securities.

USE OF PROCEEDS

The selling stockholders are selling shares of common stock covered by this prospectus for their own account. We will not receive any of the proceeds from the resale of these shares. We have agreed to bear the expenses relating to the registration of the shares for the selling security holders.

DETERMINATION OF OFFERING PRICE

Since our shares are not listed or quoted on any exchange or quotation system, the offering price of the shares of common stock was arbitrarily determined. The offering price was determined by the price shares were most recently sold to our shareholders in our private placement which was completed September 12, 2007 pursuant to an exemption under Rule 506 of Regulation D.
 
The offering price of the shares of our common stock has been determined arbitrarily by us and does not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market. Although our common stock is not listed on a public exchange, we will be filing to obtain a listing on the Over the Counter Bulletin Board (OTCBB) concurrently with the filing of this prospectus. In order to be quoted on the Bulletin Board, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved.


In addition, there is no assurance that our common stock will trade at market prices in excess of the initial public offering price as prices for the common stock in any public market which may develop will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity.

DILUTION

The Class A common stock to be sold by the selling shareholders is common stock that is currently issued. Accordingly, there will be no dilution to our existing shareholders.

PENNY STOCK CONSIDERATIONS

Our common stock will be penny stock; therefore, trading in our securities is subject to penny stock considerations. Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the Securities and Exchange Commission.
 
Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.

SELLING SHAREHOLDERS

The shares being offered for resale by the selling stockholders consist of the 9,016,500 shares of our Class “A” common stock held by 32 shareholders of our common stock which sold in our Regulation D Rule 506 offering completed September 12, 2007 and 7,965,300 shares of our Class “A” common stock issued since our inception (April 26, 2007) pursuant to the exemption from registration contained in Section 4(2) of the Act.
 
The following table sets forth the name of the selling stockholders, the number of shares of Class A common stock beneficially owned by each of the selling stockholders as of September 25, 2007 and the number of shares of common stock being offered by the selling stockholders. The shares being offered hereby are being registered to permit public secondary trading, and the selling stockholders may offer all or part of the shares for resale from time to time. However, the selling stockholders are under no obligation to sell all or any portion of such shares nor are the selling stockholders obligated to sell any shares immediately upon effectiveness of this prospectus. All information with respect to share ownership has been furnished by the selling stockholders.

Name of selling stockholder
 
Shares of   common stock   owned prior   to offering
   
Shares of   common stock   to be sold
   
Shares of   common stock   owned after   offering
   
Percent of   common stock   owned after   offering
 
Kim Thompson
   
32,062,550
     
1,122,200
     
30,940,350
      61.96 %
Samuel Ching (1)
   
2,100,400
     
2,100,400
     
0
     
0
 
Richard Duzenbury (2)
   
400
     
400
     
0
     
0
 
U of  Wyoming Foundation
   
1,750,000
     
61,300
     
1,688,700
      3.38 %
Malcolm Fraser
   
330,000
     
6,000
     
324,000
      0.65 %
Worth Equity Fund, L.P. (3)
   
175,000
     
175,000
     
0
     
0
 
 
 
 
Lion Equity (4)
   
4,500,000
     
4,500,000
     
0
     
0
 
Sean March
   
4,000,000
     
4,000,000
     
0
     
0
 
Nicholas G. Kontos
   
2,250,000
     
2,250,000
     
0
     
0
 
Edward M. Defeudis
   
830,000
     
830,000
     
0
     
0
 
Woodland Hills Fund, SA (5)
   
600,000
     
600,000
     
0
     
0
 
Coral Springs Fund, SA (6)
   
300,000
     
300,000
     
0
     
0
 
Kristin Lee Sirota
   
10,000
     
10,000
     
0
     
0
 
Ann Harvey
   
10,000
     
10,000
     
0
     
0
 
Barry S. Wattenberg
   
10,000
     
10,000
     
0
     
0
 
Lucie Rousse
   
10,000
     
10,000
     
0
     
0
 
Karen E. Gallagher
   
6,000
     
6,000
     
0
     
0
 
Kyan W. Kraus
   
6,000
     
6,000
     
0
     
0
 
Carlos E. Gauch
   
5,000
     
5,000
     
0
     
0
 
Sarah Ferreira
   
5,000
     
5,000
     
0
     
0
 
Caroline Sirota
   
5,000
     
5,000
     
0
     
0
 
Priscila S. Ferreira
   
2,500
     
2,500
     
0
     
0
 
Gene Defeudis
   
830,000
     
830,000
     
0
     
0
 
Heidi Thompson (7)
   
5,000
     
5,000
     
0
     
0
 
Frank Thompson (8)
   
5,000
     
5,000
     
0
     
0
 
Jonathan Sweet (9)
   
10,000
     
10,000
     
0
     
0
 
Gary Lam
   
2,500
     
2,500
     
0
     
0
 
Frank Dantimo
   
6,000
     
6,000
     
0
     
0
 
Denise M Demarco Dantimo
   
6,000
     
6,000
     
0
     
0
 
Sirota & Associates PA (10)
   
54,000
     
54,000
     
0
     
0
 
JR Acquisitions & Consultants (11)
   
28,000
     
28,000
     
0
     
0
 
Marcos A. Lopez, Jr.
   
2,500
     
2,500
     
0
     
0
 
Olga C. Lopez
   
2,500
     
2,500
     
0
     
0
 
Camila Camargo
   
2,500
     
2,500
     
0
     
0
 
Bizmar Martinez
   
2,500
     
2,500
     
0
     
0
 
Michelle Y. Galletto
   
2,500
     
2,500
     
0
     
0
 
Inversiones G & G Corp. (12)
   
2,500
     
2,500
     
0
     
0
 
Douglas Nicaragua
   
2,500
     
2,500
     
0
     
0
 
Michael L. Price
   
3,000
     
3,000
     
0
     
0
 
 

(1)
Samuel is the father-in-law of Kim Thompson, an officer and director of the Company.
     
(2)
Richard Duzenbury is the husband of the mother of Kim Thompson, an officer and director of the Company.
   
(3)
Worth Equity Fund, L.P. is managed by its general partner Spider Investments LLC.  The principal of Spider Investments is Edward C. Defeudis.
           
(4)
Edward C. Defeudis is the principal of Lion Equity.

(5)
Carlos J. Solorano Castillo is the principal of Woodland Hills Fund, SA.

(6)
Rafael A. Vargas Rojas is the principal of Coral Springs Funds, SA.

(7)
Heidi Thompson is the sister of Kim Thompson, an officer and director of the Company.

(8)
Frank Thompson is the father of Kim Thompson, an officer and director of the Company.
 
(9)
Jonathan Sweet is a first cousin of Kim Thompson, an officer and director of the Company.
 
(10)
George Sirota is the principal of Sirota & Associates PA.
 

 
(11)  
Junior Corzo is the principal of JR Acquisitions & Consultants. 

(12)  
Gilberto Arroyave is the principal of Invesionnes G & G Corp

Except as listed below, to our knowledge, none of the selling shareholders or their beneficial owners:

-
has had a material relationship with us other than as a shareholder at
 
any time within the past three years; or
 
-
has ever been one of our officers or directors or an officer or
 
 
director of our predecessors or affiliates 
 
-  
Are broker-dealers or affiliated with broker-dealers. 
 

PLAN OF DISTRIBUTION

The selling security holders may sell some or all of their shares at a fixed price of $.03 per share until our shares are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. Prior to being quoted on the OTCBB, shareholders may sell their shares in private transactions to other individuals. Although our common stock is not listed on a public exchange, we will be filing to obtain a listing on the Over the Counter Bulletin Board (OTCBB) concurrently with the filing of this prospectus. In order to be quoted on the Bulletin Board, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved. There can be no assurance that a market maker will agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTC Electronic Bulletin Board, nor can there be any assurance that such an application for quotation will be approved. However, sales by selling security holder must be made at the fixed price of $.03 until a market develops for the stock.
 
Once a market has been developed for our common stock, the shares may be sold or distributed from time to time by the selling stockholders directly to one or more purchasers or through brokers or dealers who act solely as agents, at market prices prevailing at the time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices, which may be changed. The distribution of the shares may be effected in one or more of the following methods:
 
o
ordinary brokers transactions, which may include long or short sales,
 
o
transactions involving cross or block trades on any securities or market where our common stock is trading,
 
 
market where our common stock is trading,
 
o
through direct sales to purchasers or sales effected through agents,
 
o
through transactions in options, swaps or other derivatives (whether exchange listed of otherwise), or
 
 
exchange listed or otherwise), or
 
o
any combination of the foregoing.
 
 
In addition, the selling stockholders may enter into hedging transactions with broker-dealers who may engage in short sales, if short sales were permitted, of shares in the course of hedging the positions they assume with the selling stockholders. The selling stockholders may also enter into option or other transactions with broker-dealers that require the delivery by such broker-dealers of the shares, which shares may be resold thereafter pursuant to this prospectus.
 
Brokers, dealers, or agents participating in the distribution of the shares may receive compensation in the form of discounts, concessions or commissions from the selling stockholders and/or the purchasers of shares for whom such broker-dealers may act as agent or to whom they may sell as principal, or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). Neither the selling stockholders nor we can presently estimate the amount of such compensation. We know of no existing arrangements between the selling stockholders and any other stockholder, broker, dealer or agent relating to the sale or distribution of the shares. We will not receive any proceeds from the sale of the shares of the selling security holders pursuant to this prospectus.
 
 
 
We have agreed to bear the expenses of the registration of the shares, including legal and accounting fees, and such expenses are estimated to be approximately $45,000.
 
Notwithstanding anything set forth herein, no NASD member will charge commissions that exceed 8% of the total proceeds of the offering.

LEGAL PROCEEDINGS

There are no legal proceedings pending or threatened against us.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Our executive officer’s and director’s and their respective ages as of September 25, 2007 are as follows:
 
NAME
AGE
POSITION
 
 
 
Kim Thompson
46
President, Chief Executive Officer and Director
     
 
Set forth below is a brief description of the background and business experience of our executive officers and directors for the past five years.
 
KIM THOMPSON, 46, President, CEO, and Director .   Mr. Thompson was a founder of the California law firm of Ching & Thompson which was founded in 1997 where he specialized in commercial litigation.  He has been a partner in the Illinois law firm of McJessy, Ching & Thompson since 2004 where he also specializes in commercial litigation.   Mr. Thompson received his bachelor’s degree in applied economics from James Madison College, Michigan State University, and his Juris Doctorate from the University of Michigan.
 
Term of Office
 
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.  Mr. Thompson is employed as the CEO of the company pursuant to a five year employment contract.
 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of September 25, 2007 and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.
 
 
Title of Class
Name and Address
of Beneficial Owner
Amount and Nature
of Beneficial Owner
Percent
of Class (1)
 
 
 
 
Common Stock
Kim Thompson
120 N. Washington Square, Suite 805
Lansing, MI 48933
32,062,550
64.21%
 
 
 
 
Common Stock
Lion Equity
1001 Brickell Bay Dr, Suite 1812
Miami, FL 33131
4,500,000
9.01%
 
 
 
 
Common Stock
Sean March
8901 South Ocean Dr. #14
W. Hollywood, FL 33019
4,000,000
8.01%
 
 
 
 
Common Stock
All executive officers
and directors as a group
32,062,550
64.21%
 
 
 
 
 
 
(1)
The percent of class is based 49,934,850 shares of our common class “A” stock issued and outstanding as of September 25, 2007.
 
DESCRIPTION OF SECURITIES

General
 
Our original articles of incorporation authorized 60,000,000 shares of Class A common stock, 25,000,000 shares of Class B common stock with no par value per share and 10,000,000 shares of preferred stock with no par value per share. There are no provisions in our charter or by-laws that would delay, defer or prevent a change in our control.
 
Common Stock
 
As of September 25, 2007, 49,934,850 shares of common stock Class A are issued and outstanding and held by 39 shareholders. Holders of our common stock are entitled to one vote for each share on all matters submitted to a stockholder vote.
 
Holders of common stock do not have cumulative voting rights.
 
Therefore, holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors. Holders of our common stock representing a majority of the voting power of our capital stock issued and outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation.
 
Although there are no provisions in our charter or by-laws that may delay, defer or prevent a change in control, we are authorized, without shareholder approval, to issue shares of preferred stock that may contain rights or restrictions that could have this effect.    


Holders of common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock. Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
 
Preferred Stock
 
Our articles of incorporation also provide that we are authorized to issue up to 10,000,000 shares of preferred stock with no par value   per share. As of the date of this prospectus, there are no shares of preferred stock issued and outstanding. Our Board of Directors has the authority, without further action by the shareholders, to issue from time to time the preferred stock in one or more series for such consideration and with such relative rights, privileges, preferences and restrictions that the Board may determine. The preferences, powers, rights and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and purchase funds and other matters. The issuance of preferred stock could adversely affect the voting power or other rights of the holders of common stock.

As further described in our financial statements, the company anticipates that it will issue 200,000 preferred shares to Kim Thompson pursuant an agreement between the company and Mr. Thompson.  Such preferred shares will have no right to dividends or other distributions, but will have super voting rights such that each preferred share will have the voting power equivalent to one hundred common class “A” shares.

Dividends
 
Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock, when issued pursuant to this offering. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.
 
Warrants
 
There are no outstanding warrants to purchase our securities.
 
Options
 
There are no options to purchase our securities outstanding. We may in the future establish an incentive stock option plan for our directors, employees and consultants.


INTERESTS OF NAMED EXPERTS AND COUNSEL

No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
 
The financial statements included in this prospectus and the registration statement have been audited by Webb & Company, P.A. to the extent and for the periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.



DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our director and officer is indemnified as provided by the Wyoming Statutes and our Bylaws. We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act of 1933.Insofar as indemnification for liabilities arising under the Securities Act of1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
 
We have been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed by the court’s decision.

ORGANIZATION WITHIN LAST FIVE YEARS

We were incorporated in April 2006 in the State of Wyoming and 33,329,200 shares each of Class “A” common stock were issued to Kim Thompson in exchange for Intellectual Property.  On December 29, 2006, Mr. Thompson surrendered 1,166,650 shares of Class “A” common stock pursuant to the Stock Purchase Agreement entered into with Worth Equity Fund, L.P.


DESCRIPTION OF BUSINESS

Kraig Biocraft Laboratories, Inc. was incorporated in April 2006 in Wyoming. Our business office is located at 120 N. Washington Square, Suite 805, Lansing, Michigan 48950.

The Market

We are focusing our work on the development and production of high performance and technical fiber.  The performance fiber market is currently dominated by two classes of product: aramid fibers and ultra high molecular weight polyethylene fiber.  These products service the need for materials with high strength, resilience, and flexibility.  Because these synthetic performance fibers are stronger and tougher than steel, they are used in a wide variety of military, industrial, and consumer applications.

The users of these materials include the military and police departments, which employ them for ballistic protection.  The materials are also used for industrial applications requiring superior strength and toughness, i.e. critical cables and abrasion/impact resistant components.  These fibers are also employed in safety equipment, and high strength composite materials for the aero-space industry.
 
The Product
 
It has long been known that certain fibers produced in nature possess unique mechanical properties in terms of strength, resilience and flexibility.  These protein based fibers, exemplified by spider silk, have been the subject of much interest to materials scientists.
 
We believe that the production of  recombinant protein based polymers in commercial quantities holds the promise of a material, which is lighter, thinner, more flexible, and tougher than aramid fibers. Other applications include use as structural material for aircraft, and for any application in which light weight and high strength are required.


While the properties of spider silks are well known, there is presently no known way to produce the fibers in commercial quantity.  The spiders are cannibalistic, and can not be raised in concentrated colonies.

The Technology

While scientists have been able to replicate the proteins that are the building blocks of spider silk, the technological barrier that has stymied production, is the incapacity to form these proteins into a fiber with the desired mechanical characteristics.

We have acquired the right to use the patented genetic sequences and genetic engineering technology developed in two university laboratories.  Our technology builds upon the unique advantages of the discoveries made within the university system.  The university technology, in collaboration with our own concepts and leadership, form the foundations of our research and product development.
 
We are working to use this genetic engineering technology to create recombinant protein based polymers.  Management is committed to steering the research toward the development of commercial production of spider silks, spider silks analogs and new polymers composed of recombinant proteins. The goal is to create recombinant fibers for use in the technical textiles market.
 
The Company
 
The inventor of this technology concept, Kim Thompson, is the founder of Kraig Biocraft Laboratories, Inc.

Certain patented genetic tools, methods, and proprietary gene sequences invented and discovered by university researchers are pivotal in our work.  We have negotiated and obtained certain exclusive proprietary rights to use the universities’ intellectual property for our product development and commercialization.
 
The company has entered into a intellectual property and collaborative research agreement with the University of Notre Dame, whereby the genetic work is being conducted in concert with the University and within the University’s laboratories.  The company has also entered into an intellectual property and sponsored research agreement with the University of Wyoming.  Pursuant to these two agreements, the company anticipates that the genetic work will be performed primarily or exclusively within university controlled genetic laboratories.  Also pursuant to these agreements, we have ongoing financial commitments to both universities in connection with the collaborative and sponsored scientific and genetic research.  We are  performing our research in cooperation and collaboration with researchers within the two university systems.  At the present time, we do not itself operate any laboratories, and all laboratories are owned and operated by the universities.

We are  in the research and development stage.   We currently have no developed products and does not produce any revenue from the sale of products.  Management anticipates that we will remain in the research and development stage for the next two to three years at a minimum.
 
MANAGEMENT DISCUSSION AND ANALYSIS

This section of the Registration Statement includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

 
During the next twelve months, we expect to take the following steps in connection with the further development of our business and the implementation of our plan of operations:
 
   
»
We expect to spend approximately $150,000 on collaborative research and development of high strength polymers at the University of Notre Dame over the next twelve months.  We believe that this research is essential to our product development.  If our financing will allow, management will give strong consideration to accelerating the pace of spending on research and development within the University of Notre Dame’s laboratories.
»
We expect to spend approximately $13,800 on collaborative research and development of high strength polymers and spider silk protein at the University of Wyoming over the next twelve months.  We believe that this research is important to our product development.  This level of research spending at the university is also a requirement of our licensing agreement with the university.  If our financing will allow, management will give strong consideration to accelerating the pace of spending on research and development within the University of Wyoming’s laboratories.
»
We will actively consider pursuing collaborative research opportunities with other university laboratories in the area of high strength polymers.  If our financing will allow, management will give strong consideration to increasing the depth of our research to include polymer production technologies that are closely related to our core research
»
We will consider buying an established revenue producing company which is operating in the biotechnology arena, in order to broaden our financial base and increase our research and development capability. We expect to use a combination of stock and cash for any such purchase.
»
We will also actively consider pursuing collaborative research opportunities with university laboratories in areas of research which overlap the company’s existing research and development.  One such potential area for collaborative research which the company is considering is protein expression platforms.  If our financing will allow, management will give strong consideration to increasing the breadth of our research to include protein expression platform technologies.
 
Limited Operating History

We have not previously demonstrated that we will be able to expand our business through an increased investment in our resaerch and development efforts. We cannot guarantee that the resaerch and development efforts described in this Registration Statement will be successful. Our business is subject to risks inherent in growing an enterprise, including limited capital resources, risks inherent in the research and development process and possible rejection of our products in development.

If financing is not available on satisfactory terms, we may be unable to continue expanding our operations. Equity financing will result in a dilution to existing shareholders.

Results of Operations for the Six Months Ended June 30, 2007.
 
Revenue for the six months ended June 30, 2007 was $0.  This compares to $0 in revenue for the preceding period dated from the founding of the corporation in April, 2006 to June 30, 2006.  No sales are anticipated during the next twelve months as the company will remain in the research and development stage.

Research and development expenses for the six months ended June 30, 2007 was $95,169.  This compares to $152,463 spent on research and development in the period from inception to June 30, 2006.  The decrease in research and development is primarily attributable to the company entering into a research and development agreement with the University of Notre Dame whereby we are sponsoring research and development within the university’s laboratories.  The decrease in research and development expense is secondarily attributable to payments made to the University of Wyoming for research that we are sponsoring in that university’s laboratories.
 
Capital Resources and Liquidity
 
As of June 30, 2007 we had $45,239 in cash.
 
We believe we can not satisfy our cash requirements for the next twelve months with our current cash.  Completion of our plan of operation is subject to attaining adequate financing.  We cannot assure investors that adequate financing will be available. In the absence of such financing, we may be unable to proceed with our plan of operations.
 
We anticipate that our operational, and general & administrative expenses for the next 12 months will total approximately $400,000. We do not anticipate the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees. The foregoing represents our best estimate of our cash needs based on current planning and business conditions. The exact allocation, purposes and timing of any monies raised in subsequent private financings may vary significantly depending upon the exact amount of funds raised and our progress with the execution of our business plan.
 
 
 
 
In the event we are not successful in obtaining financing, we may not be able to proceed with our business plan for the research and development of our products.  We anticipate that we will incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern.

DESCRIPTION OF PROPERTY

Kraig Biocraft Laboratories, Inc.  was incorporated in April 2006 in Wyoming. Our business office is located at 120 N. Washington Square, Suite 805, Lansing, Michigan 48950.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In April 2006, we issued 33,229,200 restricted shares of Class “A” common stock to our founder, Kim Thompson, in consideration for for intellectual property.  The shares were issued pursuant to the exemption from registration contained in Section 4(2) of the Act.  No commission was paid to anyone in connection with the sale of Shares to Mr. Thompson.

On December 29, 2006, Mr. Thompson surrendered 1,166,650 shares of Class “A” common stock pursuant to the Stock Purchase Agreement entered into with Worth Equity Fund, L.P.
 
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
There is presently no public market for our shares of common stock. We anticipate applying for trading of our common stock on the Over the Counter Bulletin Board upon the effectiveness of the registration statement of which this prospectus forms apart. However, we can provide no assurance that our shares of common stock will be traded on the Bulletin Board or, if traded, that a public market will materialize.
 
Holders of Our Common Stock
 
As of the date of this registration statement, we had 39 shareholders of our common stock.

Stock Option Grants
 
In 2006, our CEO, Kim Thompson, received substantial warrants on our stock pursuant to the employment agreement between Mr. Thompson and us.  However, Mr. Thompson surrendered all such warrants and options to the corporation prior to the close of the 2006 calendar year.  As of this date, we have no outstanding stock options.
 
Registration Rights
 
We have not granted registration rights to the selling shareholders or to any other persons.

EXECUTIVE COMPENSATION

Summary Compensation Table
 
Compensation of Executive Officers

Summary Compensation Table

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the period ended June 30, 2007 in all capacities for the accounts of our executives, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO):






SUMMARY COMPENSATION TABLE
Name and Principal Position
Year  
 
Salary
($)
 
Bonus
($)
 
Stock Awards
($)
 
Option Awards
($)
 
Non-Equity Incentive Plan Compensation ($)
 
Non-Qualified Deferred Compensation Earnings
($)
 
All Other Compensation
($)
 
 
Totals
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kim Thompson
 
2006
 
 $
123,333 
 
(1)
 
 
0
 
 
 
0
 
 
 $
126,435
 
(2)
 
 
0
 
 
 
0
 
 
 
0
 
 
 $
249,768
 
President, Chief Executive Officer and Director
2007
 
$
196,100
 
 
 
0
 
 
 
0
 
 
 
0
 
 
 
0
 
 
 
0
 
 
 
8,204
 (3)
 
$
204,304
 
 
 
1)
Prorated based upon a salary of $185,000 for the year such amount has not been paid but has been accrued.
 
 
2)
None of the options were exercised and have been subsequently cancelled.
 
 
3)
For the calendar year 2007, Kim Thompson is to receive $7,229 in medical and dental insurance as well as $950 for automobile expenses pursuant to an employment agreement entered into with us.
 
Option Grants Table. There were no individual grants of stock options to purchase our common stock made to the executive officer named in the Summary Compensation Table from January 1, 2007 through September 25, 2007.  Warrants were granted to the executive officer in 2006, however the same have been returned to the corporation unexercised, and have been terminated.

Aggregated Option Exercises and Fiscal Year-End Option Value Table. There were no stock options exercised during period ending September 25, 2007, by the executive officer named in the Summary Compensation Table.

Long-Term Incentive Plan (“LTIP”) Awards Table. There were no awards made to a named executive officer in the last completed fiscal year under any LTIP
 
Compensation of Directors

Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.

Employment Agreements

On April 26, 2006, we entered into a five-year employment agreement with our Chairman and Chief Executive Officer. The agreement renews annually so that at all times, the term of the agreement is five years.
 

 
AVAILABLE INFORMATION

We have filed a registration statement on Form SB-2 under the Securities Act of 1933 with the Securities and Exchange Commission with respect to the shares of our common stock offered through this prospectus. This prospectus is filed as apart of that registration statement and does not contain all of the information contained in the registration statement and exhibits. We refer you to our registration statement and each exhibit attached to it for a more complete description of matters involving us, and the statements we have made in this prospectus are qualified in their entirety by reference to these additional materials. You may inspect the registration statement and exhibits and schedules filed with the Securities and Exchange Commission at the Commission’s principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the Securities and Exchange Commission, 100 F Street NE, Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The Securities and Exchange Commission also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the Commission. In addition, we will file electronic versions of our annual and quarterly reports on the Commission’s Electronic Data Gathering Analysis and Retrieval, or EDGAR System. Our registration statement and the referenced exhibits can also be found on this site as well as our quarterly and annual reports. We will not send the annual report to our shareholders unless requested by the individual shareholders.

 
 

 
 
 
Kraig Biocraft Laboratories, Inc.
(A DEVELOPMENT STAGE COMPANY)



CONTENTS

 
SIX MONTHS ENDED JUNE 30, 2007
 
PAGE
F-1
CONDENSED BALANCE SHEET AS OF JUNE 30, 2007 (UNAUDITED)
     
PAGE
F-2
CONDENSED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30 2007 AND THE PERIOD APRIL 25, 2006 (INCEPTION) TO JUNE 30, 2006 AND FOR THE PERIOD FROM APRIL 25, 2006 (INCEPTION) TO JUNE 30, 2007 (UNAUDITED)
     
PAGES
F-3
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE PERIOD FROM APRIL 25, 2006 (INCEPTION) TO JUNE 30, 2007 (UNAUDITED)
     
PAGE
F-4
CONDENSED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND THE PERIOD APRIL 25, 2006 (INCEPTION) TO DECEMBER 31, 2006 AND FOR THE PERIOD FROM APRIL 25, 2006  (INCEPTION) TO JUNE 30, 2007 (UNAUDITED)
     
PAGES
F-5 - F-14
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
     

YEAR ENDED DECEMBER 31, 2006
 
PAGE
F-15
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     
PAGE
F-16
BALANCE SHEET AS OF DECEMBER 31, 2006
     
PAGE
F-17
STATEMENTS OF OPERATIONS FOR THE PERIOD FROM APRIL 25, 2006 (INCEPTION) TO DECEMBER 31, 2006
     
PAGES
F-18
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY FOR THE PERIOD FROM APRIL 25, 2006 (INCEPTION) TO DECEMBER 31, 2006
     
PAGE
F-19
STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM APRIL 25, 2006  (INCEPTION) TO DECEMBER 31, 2006
     
PAGES
F-20 - F-29
NOTES TO FINANCIAL STATEMENTS
     
 
 
 
 
 
 
Kraig Biocraft Laboratories, Inc.
 
(A Development Stage Company)
 
Condensed Balance Sheet
 
June 30, 2007
 
(Unaudited)
 
       
   
   
       
ASSETS
 
       
Current Assets
     
   Cash
  $
45,239
 
Prepaid Rent
   
400
 
Prepaid Research and Development expense
   
37,500
 
         
Total Assets
  $
83,139
 
         
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
 
         
Current Liabilities
       
    Accounts Payable
  $
11,302
 
Payroll Tax Payable
   
33,912
 
Accrued Expenses - related party
   
243,556
 
Total Liabilities
   
288,770
 
         
Commitments and Contingencies
   
-
 
         
Stockholders' Deficiency
       
  Preferred stock, no par value; 10,000,000 shares authorized,
       
no shares issued and outstanding
   
-
 
Common stock Class A,  no par value; 60,000,000 shares authorized,
       
38,045,850 shares issued and outstanding
   
418,180
 
Common stock Class B, no par value; 25,000,000 shares authorized,
       
no shares issued and outstanding
   
-
 
Additional Paid in Capital
   
126,435
 
Accumulated deficit during development stage
    (750,246 )
         
Total Stockholders' Deficiency
    (205,631 )
         
Total Liabilities and Stockholders' Deficiency
  $
83,139
 
         
 
See accompanying notes to condensed financial statements
 
 
 
 
(A Development Stage Company)
 
Condensed Statements of Operations
 
(Unaudited)
 
                   
                   
                   
                   
   
Six Months Ended June 30,
   
For the period from April 25, 2006 (Inception) to June 30,
   
For the Period from April 25, 2006 (Inception) to June 30,
 
   
2007
   
2006
   
2007
 
                   
Revenue
  $
-
    $
-
    $
-
 
                         
Operating Expenses
                       
General and Administrative
   
11,233
     
-
     
11,243
 
Professional Fees
   
1,500
             
1,500
 
Officer's Salary
   
98,050
     
157,268
     
347,818
 
Payroll Taxes
   
7,475
     
2,359
     
15,308
 
Research and Development
   
95,169
     
152,463
     
260,082
 
Contract Settlement
   
-
     
-
     
107,143
 
Total Operating Expenses
   
213,427
     
312,090
     
743,094
 
                         
Net Loss from Operations
    (213,427 )     (312,090 )     (743,094 )
                         
Other Expense
                       
Interest Expense
    (6,498 )     (49 )     (7,152 )
Total Other Expense
    (6,498 )     (49 )     (7,152 )
                         
Loss from Operations
    (219,925 )     (312,139 )     (750,246 )
                         
Provision for Income  Taxes
   
-
     
-
     
-
 
                         
Net Loss
  $ (219,925 )   $ (312,139 )   $ (750,246 )
                         
Net Loss Per Share  - Basic and Diluted
  $ (0.01 )   $ (0.01 )        
                         
Weighted average number of shares outstanding
                       
  during the period - basic and diluted
   
36,361,458
     
32,726,067
         
                         
 
See accompanying notes to condensed financial statements
 
 
 
Kraig Biocraft Laboratories, Inc.
 
(A Development Stage Company)
 
Condensed Statement of Changes in Stockholders Deficit
 
For the period from April 25, 2006 (inception) to June 30, 2007
 
(Unaudited)
 
   
   
                                             
Deficit
       
   
Preferred Stock
   
Common Stock - Class A
   
Common Stock - Class B
   
Additional Paid
   
Accumulated during
       
   
Shares
   
Par
   
Shares
   
Amount
   
Shares
   
Par
   
In Capital
   
Development Stage
   
Total
 
                                                       
                                                       
Balance, April 25, 2006
   
-
    $
-
     
-
    $
-
     
-
    $
-
    $
-
    $
-
    $
-
 
                                                                         
Stock issued to founder
   
-
     
-
     
33,229,200
     
180
     
-
     
-
     
-
     
-
     
180
 
                                                                         
Stock issued for services
   
-
     
-
     
1,750,000
     
140,000
     
-
     
-
     
-
     
-
     
140,000
 
                                                                         
Stock issued for services
                   
70,000
     
5,600
     
-
     
-
     
-
     
-
     
5,600
 
                                                                         
Stock contributed by shareholder
   
-
     
-
      (1,166,650 )    
-
     
-
     
-
     
-
     
-
     
-
 
                                                                         
Stock issued for cash
   
-
     
-
     
400
     
200
     
-
     
-
     
-
     
-
     
200
 
                                                                         
Stock issued for cash
   
-
     
-
     
400
     
200
     
-
     
-
     
-
     
-
     
200
 
                                                                         
Fair value of warrants issued
                           
-
                     
126,435
             
126,435
 
                                                                         
Net Loss
   
-
     
-
     
-
     
-
     
-
     
-
     
-
      (530,321 )     (530,321 )
                                                                         
Balance, December 31, 2006
   
-
     
-
     
33,883,350
     
146,180
     
-
     
-
     
126,435
      (530,321 )     (257,706 )
                                                                         
Stock issued for cash
                   
175,000
     
15,000
     
-
     
-
     
-
     
-
     
15,000
 
                                                                         
Stock issued for cash
                   
1,200,000
     
103,000
     
-
     
-
     
-
     
-
     
103,000
 
                                                                         
Stock issued for cash
                   
900,000
     
3,000
     
-
     
-
     
-
     
-
     
3,000
 
                                                                         
Stock issued for cash
                   
187,500
     
15,000
     
-
     
-
     
-
     
-
     
15,000
 
                                                                         
Stock issued for cash
                   
187,500
     
15,000
     
-
     
-
     
-
     
-
     
15,000
 
                                                                     
-
 
Stock issued for services
                   
200,000
     
16,000
     
-
     
-
     
-
     
-
     
16,000
 
                                                                         
Stock issued for cash
                   
1,312,500
     
105,000
     
-
     
-
     
-
     
-
     
105,000
 
                                                                         
Net loss, six months ended June 30, 2007
                   
-
     
-
     
-
     
-
     
-
      (219,925 )     (219,925 )
                                                                         
Balance, June 30, 2007
   
-
    $
-
     
38,045,850
    $
418,180
     
-
    $
-
    $
126,435
    $ (750,246 )   $ (205,631 )
                                                                         
 
See accompanying notes to condensed financial statements
 
 
 
Kraig Biocraft Laboratories, Inc.
 
(A Development Stage Company)
 
Condensed Statements of Cash Flows
 
(Unaudited)
 
                   
                   
   
Six Months Ended June 30, 2007
   
For the period from April 25, 2006 (Inception) to June 30, 2006
   
For the Period from April 25, 2006 (Inception) to June 30, 2007
 
Cash Flows From Operating Activities:
                 
Net Loss
  $ (219,925 )   $ (312,139 )   $ (750,246 )
  Adjustments to reconcile net loss to net cash used in operations
                       
      Stock issued for services
   
16,000
     
266,615
     
288,215
 
  Changes in operating assets and liabilities:
                       
      Increase in prepaid expenses
    (37,900 )    
-
      (37,900 )
      Increase in accrued expenses
   
38,505
     
33,241
     
277,468
 
      Increase in accounts payable
   
2,169
     
2,283
     
11,302
 
Net Cash Provided by (Used In) Operating Activities
    (201,151 )     (10,000 )     (211,161 )
                         
Cash Flows From Investing Activities:
                       
     
-
     
-
     
-
 
Net Cash Provided By Investing Activities
   
-
     
-
     
-
 
                         
Cash Flows From Financing Activities:
                       
Proceeds from Notes Payable - Stockholder
   
-
     
10,000
     
10,000
 
Repayment of Notes Payable - Stockholder
    (10,000 )    
-
      (10,000 )
Proceeds from issuance of common stock
   
256,000
     
400
     
256,400
 
Net Cash Provided by Financing Activities
   
246,000
     
10,400
     
256,400
 
                         
Net Increase (Decrease) in Cash
   
44,849
     
400
     
45,239
 
                         
Cash at Beginning of Period/Year
   
390
     
-
     
-
 
                         
Cash at End of Period/Year
  $
45,239
    $
400
    $
45,239
 
                         
Supplemental disclosure of cash flow information:
                       
                         
Cash paid for interest
  $
-
    $
-
    $
-
 
Cash paid for taxes
  $
-
    $
-
    $
-
 
                         
 
SUPPLEMENTAL DISCLOSURE OF NON CASH ITEMS
 
   
During the period ended December 31, 2006, the principal stockholder contributed 1,166,650
shares of common stock to the Company as an in kind contribution of stock.  The shares were
retired by the Company.
 
 
 
See accompanying notes to condensed financial statements
 
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)
 
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A) Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information.  Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations.   The interim results for the period ended June 30, 2007 are not necessarily indicative of results for the full fiscal year. It is management's opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.

(B) Organization

Kraig Biocraft Laboratories, Inc. (a development stage company) (the "Company") was incorporated under the laws of the State of Wyoming on April 25, 2006. The Company was organized to develop high strength, protein based fiber, using recombinant DNA technology, for commercial applications in the textile and specialty fiber industries.
 
Activities during the development stage include developing the business plan, negotiating intellectual property agreements and raising capital.

(C) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.

(D) Cash

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
 
(E) Loss Per Share

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by Financial Accounting Standards No. 128, “Earnings per Share.”  As of June 30, 2006, the effect of 4,200,000 warrants was anti –dilutive and not included in the dilutive weighted average calculation.  As of June 30, 2007, the Company does not have any dilutive securities outstanding.
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)

(F) Research and Development Costs

The Company expenses all research and development costs as incurred for which there is no alternative future use. These costs also include the expensing of employee compensation and employee stock based compensation.

(G) Income Taxes

The Company accounts for income taxes under the Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“Statement 109”).  Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(H) Stock-Based Compensation
 
The Company has adopted the provisions of SFAS No. 123R and related interpretations as provided by SAB 107.  As such, compensation cost is measured on the date of grant at their fair value.  Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Common stock, stock options and common stock warrants   issued to other than employees   or directors are recorded on the basis of their fair value, as required by SFAS No. 123(R), which is measured as of the date required by EITF Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” In accordance with EITF 96-18, the stock options or common stock warrants are valued using the Black-Scholes option pricing model on the basis of the market price of the underlying common stock on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense is computed under the Black-Scholes option pricing model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected in the expense recorded in the subsequent period in which that change occurs.
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)

(I) Business Segments

The Company operates in one segment and therefore segment information is not presented.

(J) Recent Accounting Pronouncements
 
In June 2007, the Emerging SEC’s Issues Task Force (“EITF”) issued EITF No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities , (“EITF 07-3”). EITF 07-3 provides guidance for upfront payments related to goods and services of research and development costs and is effective for fiscal years beginning after December 15, 2007. The Company is currently evaluating the impact of EITF 07-3 on its financial statements.
 
In June 2007, the EITF issued EITF No. 07-01, Accounting for Collaborative Arrangements, (“EITF 07-1”). EITF 07-1 provides guidance for companies in the biotechnology or pharmaceutical industries that may enter into agreements with other companies to collaboratively develop, manufacture, and market a drug candidate (Collaboration Agreements) and is effective for fiscal years beginning after December 15, 2007. The Company does not expect that EITF 07-01 will have an effect on its financial condition or results of operations.
 
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“FAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not expect the adoption of FAS 157 to significantly affect its financial condition or results of operations.
 
In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of SFAS 115 (“FAS 159”), which permits companies to choose to measure many financial instruments and certain other items at fair value. FAS 159 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company is currently evaluating the effect FAS 159 will have on our consolidated financial position and results of operations
 

KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)



NOTE 2
GOING CONCERN

As reflected in the accompanying financial statements, the Company is in the development stage, has a working capital deficiency and stockholders deficiency of $205,631 and used $211,161 of cash in operations from inception.  This raises substantial doubt about its ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

NOTE 3
STOCKHOLDERS’ DEFCIT
 
(A)   Common Stock Issued for Cash
On January 8, 2007 the Company issued 175,000 shares of common stock for $15,000 ($0.08/share).  This agreement was subsequently terminated effective May 23, 2007.

 On January 22, 2007 the Company issued 1,200,000 shares of common stock for $103,000 ($0.08/share).   In addition, 900,000 shares were issued for $3,000 ($0.0033/share).

On April 4, 2007, the Company issued 187,500 shares of common stock for cash of $15,000 ($0.08 per share).

On April 20, 2007, the Company issued 187,500 shares of common stock for cash of $15,000 ($0.08 per share).

On May 18, 2007, the Company issued 1,312,500 shares of common stock for cash of $105,000 ($0.08 per share).

On April 28, 2006, the Company issued 800 shares of common stock for cash of $400 ($0.50 per share).

(B) Common Stock Issued for Intellectual Property

On April 26, 2006, the Company issued 33,329,200 shares of common stock to its founder having a fair value of $180 ($0.00005/share) in exchange for intellectual property.  The fair value of the patent was determined based upon the historical cost of the intellectual property contributed by the founder.
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)

(C) Common Stock Issued for Services
 
On May 8, 2006, the Company entered into a license agreement for research and development. Pursuant to the terms of the agreement, the Company issued 1,750,000 of common stock upon execution of the agreement. The Company also received a five-year call option from the license holder to repurchase 700,000 common shares at an exercise price of $150,000 or $.21 per share. The option gives the Company the right, but not the obligation to repurchase the shares of common stock.  The call option expires May 4, 2011. As of June 30, 2007 the fair value of the call option was less then the exercise price of the option and no value has been recorded for the option.   (See additional commitments in Note 4)  
On July 1, 2006 the Company entered into a five year consulting agreement for research and development. Pursuant to the terms of the agreement, the Company paid 70,000 shares of common stock upon execution.  These shares had a fair value of $5,600 ($0.08/share) based upon the recent cash offering price.  Additionally, 200,000 shares of common stock were issued on May 18, 2007 with a fair value of $16,000 ($0.08/share).

(D) Cancellation and Retirement of Common Stock

On December 29, 2006, the Company’s founder returned 1,166,650 shares of common stock to the Company.  These shares were cancelled and retired.  Accordingly, the net effect on equity is $0.

(E) Common Stock Warrants

During 2006, the Company issued 4,200,000 warrants to an officer under his employment agreement.   The Company recognized an expense of $126,435 for the period from inception to December 31, 2006.  The Company recorded the fair market value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2006, dividend yield of zero, expected volatility of 183%; risk-free interest rates of 4.98%, expected life of one year. The warrants vested immediately.   The options expire between 5 and 9 years from the date of issuance and have an exercise price of between $.21 and $.40 per share. During November 2006, the Company and the officer entered into an amendment to the employment agreement whereby all the warrants were retired.

NOTE 4
COMMITMENTS AND CONTINGENCIES

(A) Employment Agreement

On April 26, 2006, the Company entered into a five-year employment agreement with the Company’s Chairman and Chief Executive Officer. The agreement renews annually so that at all times, the term of the agreement is five years.  Pursuant to this agreement, the Company will pay an annual base salary of $185,000 for the period May 1, 2006 through December 31, 2006.  
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)
 
 
Base pay will be increased each January 1 st , for the subsequent twelve month periods by six percent.  The officer will also be entitled to life, disability, health and dental insurance.   In addition, the officer received 700,000 five year warrants at an exercise price of $.21 per share, 1,500,000 eight year warrants at an exercise price of $ .33 per share and 2,000,000 nine year warrants at an exercise price of $ .40 per share. The warrants fully vested on the date of grant.  The agreement also calls for the issuance of warrants and increase in the officer’s base compensation upon the Company reaching certain milestones:
 
1.    Upon the Company’s successful laboratory development of a new silk fiber composed of one or more proteins that are exogenous to a host, the Company will issue 500,000 eight year warrants at an exercise price of $.20 per share and raise executive’s base salary by 14%.
 
2.     Upon the Company’s successful laboratory development of a new silk fiber composed of two or more proteins that are exogenous to a host, the Company will issue 600,000 eight year warrants at an exercise price of $.18 per share and raise executive’s base salary by 15%.
 
3.    Upon the Company’s successful laboratory development of a new silk fiber composed of at least in part of one or more synthetic proteins, the Company will issue 900,000 eight year warrants at an exercise price of $.18 per share and raise executive’s base salary by 18%.
 
4.    Upon the Company’s successful laboratory development of a new silk fiber composed of at least in part of one or more proteins that are genetic modifications or induced mutations of  a host silk proteins, the Company will raise the executive’s base salary by 8%.
 
5.    Upon the Company becoming either a registered company or upon its stock trading and the company achieving a market capitalization in excess of $35 million for over 120 calendar day period, the executive’s base salary will increase to $225,000.
 
6.    Upon the Company becoming either a registered company or upon its stock trading and the company achieving a market capitalization in excess of $65 million for over 91 calendar day period, the executive’s base salary will increase to $260,000.
 
7.    Upon the Company becoming either a registered company or upon its stock trading and the company achieving a market capitalization in excess of $100 million for over 91 calendar day period, the executive’s base salary will increase to $290,000.
 
8.    Upon the Company becoming either a registered company or upon its stock trading and the company achieving a market capitalization in excess of $200 million for over 120 calendar day period, the executive’s base salary will increase to $365,000.
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)
 
 
 
9.    Upon the Company becoming either a registered company or upon its stock trading and the company achieving a market capitalization in excess of $350 million for over 150 calendar day period, the executive’s base salary will increase to $420,000.

On November 6, 2006, the Company entered into an addendum to the employment agreement whereby the officer agreed to retire all stock warrants issued or to be issued under his employment agreement in return for an increase in his severance allowance to $600,000 or seventy five percent of total salary due under the remaining term of the employment agreement, which ever is greater and a death benefit of $300,000 or thirty five percent of the total salary due under the remaining term of the employment agreement.

 In addition, upon expiration or termination of the employment agreement, the Company agrees to keep the officer employed as a consultant for a period of six years at a rate of $4,000 per month with annual increases of 3%. The agreement also calls for certain increase based on milestones reached by the company, including:

1.   If the company achieves gross sales exceeding $10 million or net income exceeding $1 million for any two years within the ten year period after the date of this agreement or a market capitalization in excess of $45 million for over 180 calendar days within six years from the date of this agreement, the term of the consulting agreement will be extended to 10 years.

2.  If the company achieves gross sales exceeding $19 million or net income exceeding $3 million for any two years within the twelve year period after the date of this agreement or a market capitalization in excess of $65 million for over 180 calendar days within six years from the date of this agreement, the term of the consulting agreement will be extended to 20 years or the life of the officer and his spouse at a rate of $6,500 per month with a 3% annual increase.

3.  If the company achieves gross sales exceeding $38 million or net income exceeding $6 million for any two years within the twelve year period after the date of this agreement or a market capitalization in excess of $120 million for over 180 calendar days within six years from the date of this agreement, the term of the consulting agreement will be extended to 20 years or the life of the officer and his spouse at a rate of $10,000 per month with a 3% annual increase.
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)

 4.  If the company achieves gross sales exceeding $59 million or net income exceeding $9 million for any year within the twelve year period after the date of this agreement or a market capitalization in excess of $210 million for over 180 calendar days within six years from the date of this agreement, the term of the consulting agreement will be extended to 20 years or the life of the officer and his spouse at a rate of $15,000 per month with a 3% annual increase.

5.  If the company achieves gross sales exceeding $78 million or net income exceeding $12 million for any year within the twelve year period after the date of this agreement or a market capitalization in excess of $320 million for over 180 calendar days within six years from the date of this agreement, the term of the consulting agreement will be extended to 20 years or the life of the officer and his spouse at a rate of $20,000 per month with a 3% annual increase.

(B)License Agreement
 
On May 8, 2006, the Company entered into a license agreement.  Pursuant to the terms of the agreement, the Company paid a non-refundable license fee of $10,000. The Company will pay a license maintenance fee of $10,000 on the one year anniversary of this agreement and each year thereafter.  The Company will pay an annual research fee of $13,700 with first payment due January 2007, then on each subsequent anniversary of the effective date commencing May 4, 2007.  Pursuant to the terms of the agreement the Company may be required to pay additional fees aggregating up to a maximum of $10,000 a year for patent maintenance and prosecution relating to the licensed intellectual property.    (See Note 3(C)) for equity component of payment)

(C)Royalty Agreement

On December 26, 2006, the Company entered into an addendum to the intellectual property transfer agreement with an officer.  In consideration of the Company issuing either 200,000 preferred shares with the following preferences; no dividends and voting rights equal to 100 common shares per share of preferred stock or the payment of $120,000, the officer agreed to terminate the royalty payments due under the agreement and give title to the exclusive license for the non protective apparel use of the intellectual property to the Company.  On the date of the agreement, the Company did not have any preferred stock authorized with the required preferences.  In accordance with SFAS 150, the Company determined that the present value of the payment of $120,000 that is due on the one year anniversary of the addendum should be recorded as an accrued expense until such time as the Company has the ability to assert that it has preferred shares authorized.  As of June 30, 2007, the Company has recorded $113,519 in accrued expenses- related party.

On February 1, 2007 the Company entered into a consulting agreement for research and development.  Pursuant to the terms of the agreement, the Company paid $50,000 upon execution.  As of June 30, 2007, the initial payment of $50,000 and the first installment of $50,000 have been paid and an additionally $50,000 is due by October 1, 2007.
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)

On February 26, 2007 the Company entered into a five year consulting agreement for research and development. Pursuant to the terms of the agreement, the Company paid 200,000 shares of common stock upon execution.  These shares had a fair value of $16,000 ($0.08/share) based upon the recent cash offering price. Additionally, the Company will be required to pay $1,000 per month, or at the Company’s option, the consulting fee may be paid in the form of Company common stock based upon the greater of $0.10 per share or the average of the closing price of the Company’s shares over the five days preceding such stock issuance.  As of June 30, 2007 no shares have been issued, however, 60,000 shares were issued on August 31, 2007.  The agreement also requires the Company to issue up to 450,000 additional shares to the consultant upon the consultant reaching certain milestone events.  As of September 5, 2007, the consultant has not reached the milestone events and no additional shares are earned.

NOTE 5
RELATED PARTY TRANSACTIONS

On October 6, 2006 the Company received $10,000 from a principal stockholder.    Pursuant to the terms of the loan, the advance bears interest at 12%, is unsecured and matures on May 1, 2007. At June 30, 2007, the Company recorded interest expense and related accrued interest payable of $776.

As of June 30, 2007, the loan principle was repaid.  However, the related accrued interest remains outstanding.

During 2006, the Company entered into addendum to the Intellectual Property transaction and agreed to issue the CEO either 20,000 preferred shares or a payment of $120,000 (See Note 4 (C).

NOTE 6
SUBSEQUENT EVENTS

(A)Stock Issued for Services

During August 2007 the Company issued 60,000 shares of common stock for consulting services rendered with a fair value of $1,800 ($0.03/share) based upon the recent cash offering price.

(B)Stock Issued for Cash

On August 28, 2007 the Company entered into a stock purchase agreement to issue 8,049,500 shares common stock in the amount of $241,485 ($0.03/share).
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2007
(UNAUDITED)

 
On August 29, 2007 the Company entered into a stock purchase agreement to issue 20,000 shares common stock in the amount of $600 ($0.03/share).

On August 29, 2007 the Company entered into a stock purchase agreement to issue 830,000 shares common stock in the amount of $24,900 ($0.03/share).

On September 1, 2007 the Company entered into a stock purchase agreement to issue 2,500 shares common stock in the amount of $75 ($0.03/share).

On September 5, 2007 the Company entered into a stock purchase agreement to issue 12,000 shares common stock in the amount of $360 ($0.03/share).

In accordance with the May 2007 stock purchase agreement which contains an anti-dilution clause which requires the Company to issue additional common shares under the stock purchase agreement for any subsequent issuance at a price below $.08 per share for a period of 12 months. The Company will issue 2,812,500 additional shares through September 2007 as a result of the subsequent stock issuances at $.03 per share.

 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
 
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors of:
Kraig Biocraft Laboratories, Inc.

We have audited the accompanying balance sheet of Kraig Biocraft Laboratories, Inc., (a  development stage company), as of December 31, 2006 and the related statements of operations, changes in stockholders’ deficiency and cash flows for the period April 25, 2006 (Inception) to December 31, 2006.  The financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of Kraig Biocraft Laboratories, Inc. as of December 31, 2006 and the results of its operations and its cash flows for the period April 25, 2006, (Inception) to December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2 to the financial statements.  The Company is in the development stages with no operations and a working capital and stockholders’ deficiency of $257,706 and used $10, 010 of cash in operations from inception.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans concerning these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


WEBB & COMPANY, P.A.

/s/  Webb & Company, P.A.
 
Boynton Beach, Florida
August 20, 2007, except for Note 6 to which
the date is September 5, 2007
 
 
 
 
 
Kraig Biocraft Laboratories, Inc.
 
(A Development Stage Company)
 
Balance Sheet
 
December 31, 2006
 
   
   
       
ASSETS
 
       
Current Assets
     
  Cash
  $
390
 
         
Total Assets
  $
390
 
         
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
 
         
Current Liabilities
       
    Accounts payable
  $
9,133
 
Accrued expenses - related party
   
238,963
 
Note payable -stockholder
   
10,000
 
Total Liabilities
   
258,096
 
         
Commitments and Contingencies
   
-
 
         
Stockholders' Deficiency
       
  Preferred stock,  no par value; 10,000,000 shares authorized,
       
no shares issued and outstanding
   
-
 
  Common stock Class A,  no par value; 60,000,000 shares authorized,
       
33,813,350 shares issued and outstanding
   
146,180
 
  Common stock Class B,  no par value; 25,000,000 shares authorized,
       
no shares issued and outstanding
   
-
 
Additional Paid in Capital
   
126,435
 
  Accumulated deficit during development stage
    (530,321 )
         
Total Stockholders' Deficiency
    (257,706 )
         
Total Liabilities and Stockholders' Deficiency
  $
390
 
         
 
See accompanying notes to financial statements
 
 
 
Kraig Biocraft Laboratories, Inc.
 
(A Development Stage Company)
 
Statements of Operations
 
Period from April 25, 2006 (Inception) to December 31, 2006
 
       
       
       
       
Revenue
  $
-
 
         
Operating Expenses
       
General and administrative
   
7,843
 
Officer's Compensation
   
249,768
 
Contract settlement
   
107,143
 
Research and Development
   
164,913
 
Total Operating Expenses
   
529,667
 
         
 Net loss from Operations
    (529,667 )
         
Other Expense
       
Interest Expense
    (654 )
Total Other expense
    (654 )
         
Loss from Operations
    (530,321 )
         
Provision for Income Taxes
   
-
 
         
Net Loss
  $ (530,321 )
         
         
Loss per Common Share - Basic and Diluted
  $ (0.02 )
         
Weighted average number of shares outstanding
       
  during the period - basic and diluted
   
32,950,041
 
         
 
See accompanying notes to financial statements
 
 
 
Kraig Biocraft Laboratories, Inc.
 
(A Development Stage Company)
 
Statement of Changes in Stockholders Deficiency
 
For the period from April 25, 2006 (inception) to December 31, 2006
 
                                             
  Accumulated
       
                                       
Additional
   
Deficit During
       
   
Preferred Stock
   
Common Stock - Class A
   
Common Stock - Class B
   
Paid In
   
Development
       
   
Shares
   
Par
   
Shares
   
Par
   
Shares
   
Par
   
Capital
   
 Stage
   
Total
 
                                                       
                                                       
Balance, April 25, 2006
   
-
    $
-
     
-
    $
-
     
-
    $
-
    $
-
    $
-
    $
-
 
                                                                         
Stock issued to founder
   
-
     
-
     
33,229,200
     
180
     
-
     
-
             
-
     
180
 
                                                                         
Stock issued for services
   
-
     
-
     
1,750,000
     
140,000
     
-
     
-
             
-
     
140,000
 
                                                                         
Stock issued for services
                   
70,000
     
5,600
     
-
     
-
             
-
     
5,600
 
                                                                         
Stock contributed by shareholder
   
-
     
-
      (1,166,650 )    
-
     
-
     
-
             
-
     
-
 
                                                                         
Stock issued for cash
   
-
     
-
     
400
     
200
     
-
     
-
             
-
     
200
 
                                                                         
Stock issued for cash
   
-
     
-
     
400
     
200
     
-
     
-
             
-
     
200
 
                                                                         
Warrants issued to employee
                                                   
126,435
             
126,435
 
                                                                         
Net Loss
   
-
     
-
     
-
     
-
     
-
     
-
              (530,321 )     (530,321 )
                                                                         
Balance, December 31, 2006
   
-
    $
-
     
33,883,350
    $
146,180
     
-
    $
-
    $
126,435
    $ (530,321 )   $ (257,706 )
                                                                         
 
See accompanying notes to financial statements
 
 
Kraig Biocraft Laboratories, Inc.
 
(A Development Stage Company)
 
Statement of Cash Flows
 
Period from April 25, 2006 (Inception) to December 31, 2006
 
       
       
       
       
       
Cash Flows From Operating Activities:
     
Net Loss
  $ (530,321 )
         
  Adjustments to reconcile net loss to net cash used in operations
       
    Issuances of shares for services rendered
   
145,780
 
    Warrants issued to employee
   
126,435
 
         
  Changes in operating assets and liabilities:
       
     Accounts Payable and Accrued Expenses
   
248,096
 
Net Cash Used In Operating Activities
    (10,010 )
         
Cash Flows From Investing Activities:
   
-
 
         
Cash Flows From Financing Activities:
       
Proceeds from Note payable - Stockholder
   
10,000
 
Common Stock issued for cash
   
400
 
Net Cash Provided by Financing Activities
   
10,400
 
         
Net Increase in Cash
   
390
 
         
Cash at Beginning of Period
   
-
 
         
Cash at End of Period
  $
390
 
         
Supplemental disclosure of cash flow information:
       
         
Cash paid for interest
  $
-
 
Cash paid for taxes
  $
-
 
         
 
SUPPLEMENTAL DISCLOSURE OF NON CASH ITEMS
 
During the period ended December 31, 2006, the principal stockholder contributed 1,166,650
shares of common stock to the Company as an in kind contribution of stock.  The shares were
retired by the Company.
 
See accompanying notes to financial statements
 
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
NOTES TO FINANCIAL STATEMENTS
 
 
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A) Organization

Kraig Biocraft Laboratories, Inc. (a development stage company) (the "Company") was incorporated under the laws of the State of Wyoming on April 25, 2006. The Company was organized to develop high strength, protein based fiber, using recombinant DNA technology, for commercial applications in the textile and specialty fiber industries.
 
Activities during the development stage include developing the business plan, negotiating intellectual property agreements and raising capital.

(B) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.
 
(C) Cash and Cash Equivalents

For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.

(D) Loss Per Share

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by Financial Accounting Standards No. 128, “Earnings per Share.”  As of  December 31, 2006, there were no common share equivalents outstanding.

(E) Research and Development Costs

The Company expenses all research and development costs as incurred for which there is no alternative future use. These costs also include the expensing of employee compensation and employee stock based compensation.

(F) Income Taxes

The Company accounts for income taxes under the Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“Statement 109”).  
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
NOTES TO FINANCIAL STATEMENTS
 
Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
 
As of December 31, 2006, the Company has a net operating loss carryforward of    approximately $403,866 available to offset future taxable income through 2026. The valuation allowance at December 31, 2006 was $137,321.

(G) Stock-Based Compensation
 
The Company has adopted the provisions of SFAS No. 123R and related interpretations as provided by SAB 107.  As such, compensation cost is measured on the date of grant at their fair value.  Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Common stock, stock options and common stock warrants   issued to other than employees   or directors are recorded on the basis of their fair value, as required by SFAS No. 123(R), which is measured as of the date required by EITF Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” In accordance with EITF 96-18, the stock options or common stock warrants are valued using the Black-Scholes option pricing model on the basis of the market price of the underlying common stock on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense is computed under the Black-Scholes option pricing model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected in the expense recorded in the subsequent period in which that change occurs.

(H) Business Segments

The Company operates in one segment and therefore segment information is not presented.

(I) Recent Accounting Pronouncements
 
In February 2006 the FASB issued SFAS 155, "Accounting for Certain Hybrid Financial Instruments" which amends SFAS No. 133 to narrow the scope exception for interest-only and principal-only strips on debt instruments to include only such strips representing rights to receive a specified portion of the contractual interest or principal cash flows.
 
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
NOTES TO FINANCIAL STATEMENTS
 
SFAS No. 155 also amends SFAS No. 140 to allow qualifying special-purpose entities to hold a passive derivative financial instrument pertaining to beneficial interests that it is a derivative financial instrument. The Company will adopt SFAS No. 155 on January 1, 2007 and does not expect it to have a material effect on financial position, results of operations, or cash flows.
 
 
 In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, (“FIN 48”) “Accounting for uncertainty in income taxes – an interpretation of SFAS No. 109." This Interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in FASB No. 109, “ Accounting for income taxes." FIN 48 prescribes a threshold condition that a tax position must meet for any of the benefit of an uncertain tax position to be recognized in the financial statements.  Guidance is also provided regarding derecognition, classification and disclosure of uncertain tax positions.  FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect that this Interpretation will have a material impact on their financial position, results of operations or cash flows.
 
 In September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), “Fair Value Measurements.” SFAS 157 clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not expect the adoption of SFAS 157 to have a material impact on their financial position, results of operations or cash flows.
 
 In September 2006, the FASB issued SFAS No. 158 (“SFAS 158”), Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS 158 requires employers to recognize the underfunded or overfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income. Additionally, SFAS 158 requires employers to measure the funded status of a plan as of the date of its year-end statement of financial position. The new reporting requirements and related new footnote disclosure rules of SFAS 158 are effective for fiscal years ending after December 15, 2006. The new measurement date requirement applies for fiscal years ending after December 15, 2008. The Company does not expect the adoption of SFAS 158 to have a material impact on their financial position, results of operations or cash flows.


KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
NOTES TO FINANCIAL STATEMENTS


NOTE 2
GOING CONCERN

As reflected in the accompanying financial statements, the Company is in the development stage, has a working capital and stockholders deficiency of $257,706 and used $10,010 of cash in operations from inception.  This raises substantial doubt about its ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

NOTE 3
STOCKHOLDERS’ DEFCIT

(A) Common Stock Issued for Cash

On April 28, 2006, the Company issued 800 shares of common stock for cash of $400 ($0.50 per share).

(B) Common Stock Issued for Intellectual Property

On April 26, 2006, the Company issued 33,329,200 shares of common stock to its founder having a fair value of $180 ($0.000005 per share) in exchange for intellectual property.  The fair value of the patent was determined based upon the historical cost of the intellectual property contributed by the founder.

(C) Common Stock Issued for Services
 
On May 8, 2006, the Company entered into a license agreement for research and development. Pursuant to the terms of the agreement, the Company issued 1,750,000 of common stock upon execution of the agreement.  These shares had a fair value of $140,000 ($0.08/share) based upon the recent cash offering price. The Company also received a five-year call option from the license holder to repurchase 700,000 common shares at an exercise price of $150,000 or $.21 per share. The option gives the Company the right, but not the obligation to repurchase the shares of common stock.  The call option expires May 4, 2011. As of December 31, 2006, the fair value of the call option was less then the exercise price of the option and no value has been recorded for the option.  (See additional commitments in Note 4)

On July 1, 2006 the Company entered into a five year consulting agreement for research and development. Pursuant to the terms of the agreement, the Company paid 70,000 shares of common stock upon execution.  These shares had a fair value of $5,600 ($0.08/share) based upon the recent cash offering price.


KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
NOTES TO FINANCIAL STATEMENTS


(D) Cancellation and Retirement of Common Stock

On December 29, 2006, the Company’s founder returned 1,166,650 shares of common stock to the Company.  These shares were cancelled and retired.  Accordingly, the net effect on equity is $0.

(E) Common Stock Warrants

During 2006, the Company issued 4,200,000 warrants to an officer under his employment agreement.   The Company recognized an expense of $126,435 for the period from inception to December 31, 2006.  The Company recorded the fair market value of the warrants  based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2006, dividend yield of zero, expected volatility of 183%; risk-free interest rates of 4.98%, expected life of one year. The warrants vested immediately.   The options expire between 5 and 9 years from the date of issuance and have an exercise price of between $.21 and $.40 per share. During November 2006, the Company and the officer entered into an amendment to the employment agreement whereby all the warrants were retired.  (See Note 4)

NOTE 4
COMMITMENTS AND CONTINGENCIES

(A) Employment Agreement

On April 26, 2006, the Company entered into a five-year employment agreement with the Company’s Chairman and Chief Executive Officer. The agreement renews annually so that at all times, the term of the agreement is five years.  Pursuant to this agreement, the Company will pay an annual base salary of $185,000 for the period May 1, 2006 through December 31, 2006.  Base pay will be increased each January 1 st , for the subsequent twelve month periods by six percent.  The officer will also be entitled to life, disability, health and dental insurance.   In addition, the officer received 700,000 five year warrants at an exercise price of $.21 per share, 1,500,000 eight year warrants at an exercise price of $ .33 per share and 2,000,000 nine year warrants at an exercise price of $ .40 per share. The warrants fully vested on the date of grant.  The agreement also calls for the issuance of warrants and increase in the officer’s base compensation upon the Company reaching certain milestones:
 
1.    Upon the Company’s successful laboratory development of a new silk fiber composed of one or more proteins that are exogenous to a host, the Company will issue 500,000 eight year warrants at an exercise price of $.20 per share and raise executive’s base salary by 14%.
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
NOTES TO FINANCIAL STATEMENTS
 
2.     Upon the Company’s successful laboratory development of a new silk fiber composed of two or more proteins that are exogenous to a host, the Company will issue 600,000 eight year warrants at an exercise price of $.18 per share and raise executive’s base salary by 15%.
 
3.    Upon the Company’s successful laboratory development of a new silk fiber composed of at least in part of one or more synthetic proteins, the Company will issue 900,000 eight year warrants at an exercise price of $.18 per share and raise executive’s base salary by 18%.
 
4.    Upon the Company’s successful laboratory development of a new silk fiber composed of at least in part of one or more proteins that are genetic modifications or induced mutations of a host silk proteins, the Company will raise the executive’s base salary by 8%.
 
5.    Upon the Company becoming either a registered company or upon its stock trading and the company achieving a market capitalization in excess of $35 million for over 120 calendar day period, the executive’s base salary will increase to $225,000.
 
6.    Upon the Company becoming either a registered company or upon its stock trading and the company achieving a market capitalization in excess of $65 million for over 91 calendar day period, the executive’s base salary will increase to $260,000.
 
7.    Upon the Company becoming either a registered company or upon its stock trading and the company achieving a market capitalization in excess of $100 million for over 91 calendar day period, the executive’s base salary will increase to $290,000.
 
8.    Upon the Company becoming either a registered company or upon its stock trading and the company achieving a market capitalization in excess of $200 million for over 120 calendar day period, the executive’s base salary will increase to $365,000.
 
9.    Upon the Company becoming either a registered company or upon its stock trading and the company achieving a market capitalization in excess of $350 million for over 150 calendar day period, the executive’s base salary will increase to $420,000.

On November 6, 2006, the Company entered into an addendum to the employment agreement whereby the officer agreed to retire all stock warrants issued or to be issued under his employment agreement in return for an increase in his severance allowance to $600,000 or seventy five percent of total salary due under the remaining term of the employment agreement, which ever is greater and a death benefit of $300,000 or thirty five percent of the total salary due under the remaining term of the employment agreement.

 In addition, upon expiration or termination of the employment agreement, the Company agrees to keep the officer employed as a consultant for a period of six years at a rate of $4,000 per month with annual increases of 3%. The agreement also calls for certain increase based on milestones reached by the company, including:
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
NOTES TO FINANCIAL STATEMENTS

1.   If the company achieves gross sales exceeding $10 million or net income exceeding $1 million for any two years within the ten year period after the date of this agreement or a market capitalization in excess of $45 million for over 180 calendar days within six years from the date of this agreement, the term of the consulting agreement will be extended to 10 years.

2.  If the company achieves gross sales exceeding $19 million or net income exceeding $3 million for any two years within the twelve year period after the date of this agreement or a market capitalization in excess of $65 million for over 180 calendar days within six years from the date of this agreement, the term of the consulting agreement will be extended to 20 years or the life of the officer and his spouse at a rate of $6,500 per month with a 3% annual increase.

3.  If the company achieves gross sales exceeding $38 million or net income exceeding $6 million for any two years within the twelve year period after the date of this agreement or a market capitalization in excess of $120 million for over 180 calendar days within six years from the date of this agreement, the term of the consulting agreement will be extended to 20 years or the life of the officer and his spouse at a rate of $10,000 per month with a 3% annual increase.

 4.  If the company achieves gross sales exceeding $59 million or net income exceeding $9 million for any year within the twelve year period after the date of this agreement or a market capitalization in excess of $210 million for over 180 calendar days within six years from the date of this agreement, the term of the consulting agreement will be extended to 20 years or the life of the officer and his spouse at a rate of $15,000 per month with a 3% annual increase.

5.  If the company achieves gross sales exceeding $78 million or net income exceeding $12 million for any year within the twelve year period after the date of this agreement or a market capitalization in excess of $320 million for over 180 calendar days within six years from the date of this agreement, the term of the consulting agreement will be extended to 20 years or the life of the officer and his spouse at a rate of $20,000 per month with a 3% annual increase.

During 2006, the Company recorded compensation expense of $249,768.  As of December 31, 2006, $123,333 is recorded in accrued expenses – related party.


KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
NOTES TO FINANCIAL STATEMENTS


(B)License Agreement
 
On May 8, 2006, the Company entered into a license agreement.  Pursuant to the terms of the agreement, the Company paid a non-refundable license fee of $10,000. The Company will pay a license maintenance fee of $10,000 on the one year anniversary of this agreement and each year thereafter.  The Company will pay an annual research fee of $13,700 with the first payment due January 2007, then on each subsequent anniversary of the effective date commencing May 4, 2007.  Pursuant to the terms of the agreement the Company may be required to pay additional fees aggregating up to a maximum of $10,000 a year for patent maintenance and prosecution relating to the licensed intellectual property.    (See Note 3(C)) for equity component of payment)

(C) Royalty Agreement

On December 26, 2006, the Company entered into an addendum to the intellectual property transfer agreement with an officer.  In consideration of the Company issuing either 200,000 preferred shares with the following preferences; no dividends and voting rights equal to 100 common shares per share of preferred stock or the payment of $120,000, the officer agreed to terminate the royalty payments due under the agreement and give title to the exclusive license for the non protective apparel use of the intellectual property to the Company.  On the date of the agreement, the Company did not have any preferred stock authorized with the required preferences.  In accordance with SFAS 150, the Company determined that the present value of the payment of $120,000 that is due on the one year anniversary of the addendum should be recorded as an accrued expense until such time as the Company has the ability to assert that it has preferred shares authorized.  As of December 31, 2006, the Company has recorded $107,143 in accrued expenses – related party.


NOTE 5
RELATED PARTY TRANSACTIONS

On October 6, 2006 the Company received $10,000 from a principal stockholder.    Pursuant to the terms of the loan, the advance bears interest at 12%, is unsecured and matures on May 1, 2007. At December 31, 2006, the Company recorded interest expense and related accrued interest payable of $654.

During 2007, the loan principle was repaid.  However, the related accrued interest remains outstanding.

During 2006, the Company entered into addendum to the Intellectual Property transaction and agreed to issue the CEO either 20,000 preferred shares or a payment of $120,000 (See Note 4 (C).

 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
NOTES TO FINANCIAL STATEMENTS

 
NOTE 6
SUBSEQUENT EVENTS

    (A)   Consulting Agreement

On February 1, 2007, the Company entered into a one year consulting agreement for research and development with a university for a fee of $150,000 per year.  Pursuant to the terms of the agreement, the Company paid $50,000 upon execution of the agreement.  Additionally, the Company is required to pay an additional $50,000 on June 1, 2007 and October 1, 2007.

On February 26, 2007 the Company entered into a five year consulting agreement for research and development with a university. Pursuant to the terms of the agreement, the Company paid 200,000 shares of common stock upon execution.  These shares had a fair value of $16,000 ($0.08/share) based upon the recent cash offering price. Additionally, the Company will be required to pay $1,000 per month over the term of the agreement, or at the Company’s option, the consulting fee may be paid in the form of Company’s common stock based upon the greater of $0.10 per share or the average of the closing price of the Company’s shares over the five days preceding such stock issuance. During August 2007, the Company issued 60,000 shares related to this agreement.   The agreement also requires the Company to issue up to 450,000 additional shares to the consultant upon the consultant reaching certain milestone events.  As of September 5, 2007, the consultant has not reached the milestone events and no additional shares are earned.

(B) Common Stock Issued for Cash

On January 8, 2007 the Company issued 175,000 shares of common stock for $15,000 ($0.08/share).  This agreement was subsequently terminated effective May 23, 2007.

On January 22, 2007 the Company entered into a stock purchase agreement.  On January 29, 2007 the Company issued 1,200,000 shares of common stock for $103,000 ($.09 per share).   In addition, 900,000 shares were issued for $3,000 ($0.0033/share).

On May 23, 2007 the Company entered into a stock purchase agreement.  The Company issued 1,687,500 shares of common stock for cash of $135,000 ($.08 per share). The agreement contains an anti-dilution clause which requires the Company to issue additional common shares under the stock purchase agreement for any subsequent issuance at a price below $.08 per share for a period of 12 months.  The Company is obligated to issue additional common shares which would have the effect of making the issuance equal to the per share price of the subsequent issuances.   The Company will issue 2,812,500 additional shares through September 2007 as a result of the subsequent stock issuances.
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
(A DEVELOPMENT STAGE COMPANY)
DECEMBER 31, 2006
NOTES TO FINANCIAL STATEMENTS

During August and September 2007, the Company issued 8,914,000 common shares for cash of $267,060 ($.03 per share).

(C) Note Payable- Related Party Repayment

During 2007, the Company repaid $10,000 of the note payable – stockholder.
 
 
 
 
 
 
 
KRAIG BIOCRAFT LABORATORIES, INC.
16,981,800
 SHARES OF CLASS “A” COMMON STOCK

PROSPECTUS

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
 
Until _____________, all dealers that effect transactions in these securities whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II
 
INFORMATION NOT REQUIRED IN THE PROSPECTUS
 
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
The General Corporation Law of Wyoming provides that directors, officers, employees or agents of  Wyoming corporations are entitled, under certain circumstances, to be indemnified against expenses (including attorneys' fees) and other liabilities actually and reasonably incurred by them in connection with any suit brought against them in their capacity as a director, officer, employee or agent, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful. This statute provides that directors, officers, employees and agents may also be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by them in connection with a derivative suit brought against them in their capacity as a director, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made without court approval if such person was adjudged liable to the corporation.

Our Certificate of Incorporation provides that we shall indemnify any and all persons whom we shall have power to indemnify to the fullest extent permitted by the Wyoming Corporate Law. Article VII of our by-laws provides that we shall indemnify our authorized representatives to the fullest extent permitted by the Wyoming Law. Our by-laws also permit us to purchase insurance on behalf of any such person against any liability asserted against such person and incurred by such person in any capacity, or out of such person's status as such, whether or not we would have the power to indemnify such person against such liability under the foregoing provision of the by-laws.




  
 
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Securities and Exchange Commission registration fee
  $
15.64
 
Federal Taxes
  $
0
 
State Taxes and Fees
  $
0
 
Transfer Agent Fees
  $
0
 
Accounting fees and expenses
  $
6,000
 
Legal fees and expense
  $
35,000
 
Blue Sky fees and expenses
  $
0
 
Miscellaneous
  $
0
 
Total
  $
41,015.64
 
 
All amounts are estimates other than the Commission’s registration fee. We are paying all expenses of the offering listed above. No portion of these expenses will be borne by the selling shareholders. The selling shareholders, however, will pay any other expenses incurred in selling their common stock, including any brokerage commissions or costs of sale.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
 
We were incorporated in the State of Wyoming in April 2006 and on April 26, 2006 33,229,200 shares of our Class “A” common stock, were issued to Kim Thompson in exchange for intellectual property. These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”) and were issued as founder’s shares. These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Thompson had the necessary investment intent as required by Section 4(2) since he agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.

On April 28, 2006 we issued 400 shares of our Class “A” common stock to Samuel Ching at a price per share of $.50, for an aggregate of $400 cash.  On January 26, 2007 we also issued 2,100,000 shares of our Class “A” common stock to Samuel Ching at a price per share of $.0505 for an aggregate of $106,000.00.  These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Ching had the necessary investment intent as required by Section 4(2) since he agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.

On April 28, 2006 we issued 400 shares of our Class “A” common stock to Richard Duzenbury at a price per share of $.50 for an aggregate of $400 cash.  These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Duzenbury had the necessary investment intent as required by Section 4(2) since he agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.
 
 
 
On July 5, 2006, pursuant to an Intellectual Property Agreement, we issued 1,750,000 shares of our Class “A” common stock to the University of Wyoming Foundation in exchange for intellectual property.  The Company holds a five year call, dated from May 8, 2006, 700,000 shares held by the University of Wyoming Foundation.  These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Duzenbury had the necessary investment intent as required by Section 4(2) since he agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.

On September 12, 2006, March 21, 2007 and August 1, 2007 pursuant to a Consulting Agreement, we issued an aggregate of 330,000 shares of our Class “A” common stock to Malcolm Fraser for consulting services performed.  Pursuant to the Consulting Agreement, Mr. Fraser is contractually restricted from reselling 175,000 shares for a period of 26 months from February 26, 2007.  In addition, the Consulting Agreement restricts Mr. Fraser from resale of 60,000 shares for a period of 24 following the commencement of public trade of the Company’s stock.  These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Mr. Fraser had the necessary investment intent as required by Section 4(2) since he agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.

On January 9, 2007, we issued an aggregate of 175,000 shares of our Class “A” common stock to Worth Equity Fund, L.P., at a price per share of $0.0857, for an aggregate of $15,000 cash.  These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Worth Equity Fund, L.P. had the necessary investment intent as required by Section 4(2) since he agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.

On May 31, 2007 we issued an aggregate of 1,687,500 shares of our Class “A” common stock to Lion Equity, at a price per share of $0.08, for an aggregate of $135,000 cash.  In addition, on September 12, 2007 we issued an aggregate of 2,812,500 shares of our Class “A” common stock to Lion Equity pursuant to the Securities Purchase Agreement.  These shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended (the “Act”). These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act of 1933 since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, Lion Equity had the necessary investment intent as required by Section 4(2) since he agreed to and received share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Securities Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act of 1933 for this transaction.

On September 12, 2007, we completed a Regulation D Rule 506 offering in which we sold 9,016,500 shares of common stock to 32 investors, at a price per share of $.03 for an aggregate offering price $270,195. The following sets forth the identity of the class of persons to whom we sold these shares and the amount of shares for each shareholder:


Sean March
4,000,000
Nicholas G. Kontos
2,250,000
Edward M. Defeudis
830,000
Woodland Hills Fund, SA
600,000
Coral Springs Fund, SA
300,000
Kristin Lee Sirota
10,000
Ann Harvey
10,000
Barry S. Wattenberg
10,000
Lucie Rousse
10,000
Karen E. Gallagher
6,000
Kyan W. Kraus
6,000
Carlos E. Gauch
5,000
Sarah Ferreira
5,000
Caroline Sirota
5,000
Priscila Ferreira
2,500
Gene Defeudis
830,000
Heidi Thompson
5,000
Frank Thompson
5,000
Jonathan Sweet
10,000
Gary Lam
2,500
Frank Dantimo
6,000
Denise M Demarco Dantimo
6,000
Sirota & Associates PA
54,000
JR Acquisitions & Consultants
28,000
Marcos A. Lopez, Jr.
2,500
Olga C. Lopez
2,500
Camila Camargo
2,500
Bizmar Martinez
2,500
Michelle Y. Galletto
2,500
Inversiones G & G Corp.
2,500
Douglas Nicaragua
2,500
Michael L. Price
3,000
 
The Common Stock issued in our Regulation D, Rule 506 Offering was issued in a transaction not involving a public offering in reliance upon an exemption from registration provided by Rule 506 of Regulation D of the Securities Act of 1933. In accordance with Section 230.506 (b)(1) of the Securities Act of 1933, these shares qualified for exemption under the Rule 506 exemption for this offerings since it met the following requirements set forth in Reg. ss.230.506:
 
(A)
No general solicitation or advertising was conducted by us in connection with the offering of any of the Shares.
 
 
(B)
 
At the time of the offering we were not: (1) subject to the reporting requirements of Section 13 or 15 (d) of the Exchange Act; or (2) an “investment company” within the meaning of the federal securities laws.
 
 
 

(C)
Neither we, nor any of our predecessors, nor any of our directors, nor any beneficial owner of 10% or more of any class of our equity securities, nor any promoter currently connected with us in any capacity has been convicted within the past ten years of any felony in connection with the purchase or sale of any security.
 
 
(D)
The offers and sales of securities by us pursuant to the offerings were not attempts to evade any registration or resale requirements of the securities laws of the United States or any of its states.
 
 
(E)
None of the investors are affiliated with any of our directors, officers or promoters or any beneficial owner of 10% or more of our securities.
 
Please note that pursuant to Rule 506, all shares purchased in the Regulation D Rule 506 offering completed on September 12, 2007 were restricted in accordance with Rule 144 of the Securities Act of 1933. In addition, each of these shareholders were either accredited as defined in Rule 501 (a) of Regulation D promulgated under the Securities Act or sophisticated as defined in Rule 506(b)(2)(ii) of Regulation D promulgated under the Securities Act.
 
We have never utilized an underwriter for an offering of our securities. Other than the securities mentioned above, we have not issued or sold any securities.
 
ITEM 27. EXHIBITS.
 
EXHIBIT
 
NUMBER
DESCRIPTION
3.1
Articles of Incorporation
3.2
By-Laws
5.1
Opinion of Anslow & Jaclin, LLP
10.1
Employment Agreement between Kraig Biocraft Laboratories and Kim Thompson
10.2
Securities Purchase Agreement between Kraig Biocraft Laboratories and Worth Equity Fund, L.P. and Mutual Release.
10.3
Securities Purchase Agreement between Kraig Biocraft Laboratories and Lion Equity
21
Subsidiaries
23.1
Consent of Webb & Company, P.A.
23.2
Consent of Counsel, as in Exhibit 5.1

 

  
ITEM 28. UNDERTAKINGS.
 
(A) The undersigned Registrant hereby undertakes:
 
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:
 
 
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
 
(ii)
Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
 
(iii)
 
Include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
 
 
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
 
 
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
 
(B) Undertaking Required by Regulation S-B, Item 512(e).
 
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or controlling persons pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in
 
the opinion of its counsel that the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.
 
(C) Undertaking Required by Regulation S-B, Item 512(f)
 
The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof.
 
 

 
(D) Undertaking pursuant to Item 512(g) of Regulation S-B
 
The undersigned registrant hereby undertakes that, for the purpose of determining liability under the Securities Act to any purchaser:
 
1. If the small business issuer is relying on Rule 430B (ss. 230. 430B of this chapter):
 
(i) Each prospectus filed by the undersigned small business issuer pursuant to Rule 424(b)(3) (ss. 230. 424(b)(3) of this chapter) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
 
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (ss. 230. 424(b)(2), (b)(5), or (b)(7) of this chapter) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i),(vii), or (x) (ss. 230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
 
2. If the small business issuer is subject to Rule 430C (ss. 230. 430C of this chapter), include the following: Each prospectus filed pursuant to Rule 424(b)(ss. 230. 424(b) of this chapter) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (ss. 230. 430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
 
 
 
SIGNATURES
 
In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Lansing, Michigan on September 25, 2007.
 
KRAIG BIOCRAFT LABORATORIES, INC.
 
By:
/s/ Kim Thompson
 
 KIM THOMPSON
 
President, Chief Executive Officer, Principal Financial and Accounting Officer and Chairman of the Board of Directors
 
 
POWER OF ATTORNEY
 
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kim Thompson and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including his capacity as a director and/or officer of Kraig Biocraft Laboratories, Inc.) to sign any or all amendments (including post-effective amendments) to this registration statement and any and all additional registration statements pursuant to rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the SEC, granting unto each said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement was signed below by the following persons in the capacities and on the dates stated.

By:
/ s/ Kim Thompson
President, Chief Executive Officer,
 
KIM THOMPSON
Principal Financial and Accounting Officer and Chairman of the Board of Directors
 
 
 

 
 
 

II-8
 

 

FILED: 04/25/2006
CID: 2006-00513138
WY Secretary of State
 
Articles of Incorporation
Wyoming Corporation

I
 
The name of the corporation is KRAIG BIOCRAFT LABORATORIES, INC.
 
II
 
The name and address of the registered agent is CORP 9S
                                                                                       109 E 17 th Street, Site 7
                                                                                      Cheyenne, WY 82001
 
III
 
The number and cuss of shares the company is authorized to issue are:
 
60,000,000 shares Class A common stock
No par value,
25,000,000 shares Class B common stock (no voting rights)
No par value,
10,000,000 shares Preferred stock.
No par value,
 
IV
 
The number and class of shares that are entitled to receive the net assets upon dissolution are:
 
60,000,000 shares Class A common stock.
No par value,
25,000,000 shares Class B common stock (no voting rights).
No par value,
10,000,000 shares Preferred stock.
No par value,
 
V
 
The address for mailing the. annual report form is: 33585C Del Obispo St #200, Dana Point, CA 92629
 
VI
 
The name and address of the incorporator is: David DeLaza
                                                                                33585C Del. Obispo St #200
                                                            Dana Point, CA 92629
 
VII
 
The liability of directors and officers of this corporation for monetary damages shall be eliminated to the fullest extent permissible under Wyoming law.
 

 
 
 
 
 
This corporation is authorized to provide indemnification of directors, ofand agents to the fullest extent permissible under Wyoming law.
 
Any amendment, repeal or modification of any provision of this Article shall not adversely affect any right or protection of a director, officer or agent of this corporation existing at the time of such amendment, repeal or modification.
 
VIII
 
The contact name and phone number are: David DeLoach (949) 487-2436
 
Dated: 4/21/06
 
/s/ David DeLoach
David DeLoach
Incorporator
 
Consent To Appointment
By Registered Agent
 
1, CORP 95, voluntarily consent to serve as the registered agent for KRAIG BIOCRAFT LABORATORIES, INC. on the date shown below.

LABORATORIES, INC . on the date shown below.
 
The registered agent certifies that it is a foreign corporation authorized to transact business in this state whose business office is identical with the registered office.
 
Dated: 4/21/06
 
 /s/                                                                                                          
Signature of Authorized Representative of Registered Agent
•

 
THE CORPORATE BYLAWS
OF
KRAIG .BIOCRAFT LABORATORIES, INC.
 
ARTICLE I.       CORPORATE OFFICES
 
Section 1.   Registered office. The registered office of the corporation shall be within the state of Wyoming, and at such place as is designated in the Articles of Incorporation, or as may be subsequently designated by the board of directors and registered with the secretary of state of Wyoming.
 
Section 2.   Registered agent. The registered agent shall be the person who is so designated in the Articles of Incorporation, or such person who may be subsequently designated by the board of directors and registered with the secretary of state of Wyoming.
 
Section 3.   Other offices. The corporation may also have offices, either within or outside of the state of Wyoming, at such other places as the Board of Directors may from time to time appoint or the business of the corporation may require.
 
ARTICLE II.       SHARE CERTIFICATES AND UNCERTIFICATED SHARES
 
Section 1.   Form and content of certificates. Shares may, but need not be, represented by certificates as may be determined by the board of directors. The rights and obligations of shareholders are identical whether or not their shares are represented by certificates.
 
Section 2.   Class designations on certificates. The designations, relative rights, preferences, and limitations applicable to each class of shares and the variations in rights, preferences, and limitations determined for each series, and the authority of the board of directors to determine variations for future series, shall be summarized on the front or back of each certificate, if certificates are issued. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder this information on request in writing and without charge.
 
Section 3.   Numbering and signing of certificates. The certificates of stock of the Corporation, if certificates shall be issued, shall be numbered and shall be entered in the books of the Corporation as they are issued. Each share certificate shall be signed, either manually or in facsimile, by two (2) persons designated by the board of directors,
 
Section 4.   Shares without certificates. The board of directors may authorize the issue of some or ail of the shares of any or all of the classes or series without certificates, The authorization does not affect shares already represented by certificates until they are surrendered to the corporation. Within a reasonable time after the issue or transfer of shares without certificates, the corporation shall send the shareholder a written statement of the information required on certificates by the Wyoming Business Corporation Act.

 
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Section 5.   Surrender and transfer of shares. Upon surrender to the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Corporation will issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Transfers of uncertificated shares will be made on the records of the Corporation as may be provided by law
 
Section 6.   Holders of record. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as expressly provided by the laws of Wyoming,
 
Section 7 .   Lost, stolen or destroyed certificates. A new certificate of stock of the Corporation may be issued in place of any certificate theretofore issued by the Corporation and alleged to have been lost, stolen or destroyed. The Board of Directors may from time to time prescribe the terms and conditions under which such new certificates may be issued. Among other things, the Board of Directors may require that the owner of the allegedly lost, stolen or destroyed certificate, or his legal representatives, submit proper evidence in writing and under oath that the alleged loss, theft, or destruction actually occurred, and may require that such owner or representatives give the Corporation a bond, satisfactory to the Corporation as to form and security, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate. A new certificate may be issued without requiring any bond when, in the judgment of the Board of Directors or of any officer of the Corporation to whom the Board of Directors may delegate appropriate authority, it is proper to waive the bond requirement.
 
Section 8. Consideration for shares. Before the corporation issues shares, the board of directors shall make a determination as to whether the consideration received or to be received for shares to be issued is adequate. That determination by the board of directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid, and nonassessable.
 
ARTICLE III.        RECORD DATE
 
Section 1. In order that the corporation may determine the shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any lawful action, the board may fix in advance, a record date, which, unless otherwise authorized by these bylaws, shall not be more than seventy (70) days prior to the date of such meeting nor more than sixty (60) days prior to any other action. If no record date is fixed by the board :
 
     (a)  The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of the business on the business day next preceding the day on which notice is given or, if notice is waived, at close of business on the business day next preceding the day on which the meeting is held.
 
 
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     (b)  The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the board is necessary, shall be the day on which the first written consent is given.
 
     (c)  The record date for determining shareholders for any other purpose shall be the close of business on the day on which the board adopts the resolution relating thereto, or the sixtieth (60th) day prior to the date of such other action, whichever is later.
 
Section 2.   Effect of record date. Only such shareholders as shall be shareholders of record on the record date, as described above, shall be entitled to such notice of, and to vote at, such meeting and any adjournment, thereof, or to receive such allotment of rights, or to exercise such rights or be entitled to receive any such dividend or distribution, or any other right in respect to any such change, conversion, or exchange of shares or to be considered as shareholders for such other purpose, as the case may be, notwithstanding any transfer of any share on the books of the Corporation after any such record date fixed as aforesaid.
 
ARTICLE IV.        MEETINGS OF THE SHAREHOLDERS
 
Section 1.   Place of shareholder meetings. Meetings of the shareholders shall be held at any place, either within or without this state, as may be selected from time to time by the Board of Directors. In the absence of any such designation to the contrary, shareholder's meetings shall be held at a place designated by the board of directors which is within 20 miles from Michigan State University's Beaumont Tower.
 
Section 2.   Electronic meetings. The board of directors may, in its sole discretion, determine that a meeting of shareholders shall not be held at any place, but may instead be held by means of remote communication. If a 'meeting is to take place by means of remote communication, the board shall take into consideration shareholders' ability to participate by remote communication and provide an alternative means of participation for those shareholders unable to participate by remote communication.
 
Section 3.   Notice of shareholder meetings. The corporation shall notify shareholders of the date, time, place and means of communication of each annual and special shareholders' meeting no fewer than ten (10) nor more than sixty (60) days before the meeting date. The corporation is required to give notice only to shareholders entitled to vote at the meeting.
 
Section 4.   Annual meeting of the shareholders. The annual meeting of the shareholders shall be held on the 2nd Wednesday of March at 11M A.M. local time. If this day be a legal holiday, then the meeting shall be held on the next succeeding business day, at the same time. At the annual meeting, the shareholders shall elect a board of directors, report the affairs of the corporation, and transact such other business as may properly be brought before the meeting, if the above date is inconvenient, as may be determined by the board of directors, the annual meeting of shareholders shall be held within each calendar year on a date and at a time designated by the board of directors upon proper notice to all shareholders.

 
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Section 5.   Special Meetings of shareholders. Special meetings of the shareholders may be called at any time by the Chairman of the Board of Directors, or the Board of Directors. Special meetings of the shareholders may also be called if the holders of at least twenty five percent (25%) of ali the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, either manually or in facsimile, date, and deriver to the corporation one (1) or more written demands for the meeting describing the purpose or purposes for which it is to be herd. A written demand for a special meeting may be revoked by a writing to that effect received by the corporation prior to the receipt by the corporation of demands sufficient in number to require the holding of a special meeting.
 
The record date for determining shareholders entitled to demand a special meeting is the date the first shareholder signs the demand.
 
Special shareholders' meetings may be held in or out of this state at the place determined by the board of directors and stated in the notice of the meeting. The board of directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held by means of remote communication as described above in the bylaws relating to annual meetings.
 
Section 6.   Notice of Special Meeting. At any time, upon written request of any person or persons who have properly called a special meeting, it shall be the duty of the Secretary to fix the date of the meeting, to be held not more than sixty days after receipt of the request, and to give due notice thereof. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so.
 
Business transacted at all special meetings shall be confined to the objects stated in the call and matters germane thereto, unless all shareholders entitled to vote are present and consent.
 
Written notice of a special meeting of shareholders stating the time and place and object thereof, shall be given to each shareholder entitled to vote thereat. Unless otherwise provided by law, written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each shareholder entitled to vote at such meeting.
 
Section 7.   Quorum: A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, If less than a majority of the outstanding shares entitled to vote is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave fess than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares requiredto constitute a quorum.
 
 
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ARTICLE V.       CALLING SHAREHOLDER MEETING TO ORDER
 
Section 1  Chairman and Secretary of the meeting. The President, or in the absence of the President, the Secretary, or in the absence of the secretary any corporate officer, shall call the meeting of the shareholders to order, and shall act as Chairman of the meeting. In the absence of any corporate officer, the shareholders shall appoint a Chairman at such meeting. The Secretary of the Corporation shall act as Secretary of all meetings of the shareholders, but in the absence of the Secretary at any meeting of the shareholders, the presiding Chairman of the meeting shall appoint any person to act as such secretary of the meeting.
 
Section 2.  One vote per common A series share. Except as may otherwise be provided by law or in the Articles of Incorporation of the Corporation each shareholder shall have one vote for each share of the Corporation's common A series stock registered in his name on the books of the Corporation. No share of stock upon which any installment is due and unpaid to the corporation shall be voted at any meeting. No share of common B series stock shall be voted at any meeting.
 
Section 3.  Voting of preferred shares. Preferred stock shall have such voting rights as are provided by law or in the Articles of Incorporation of the Corporation.
 
Section 4.  Nominations at the Annual Meeting of Shareholders. Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders pursuant to the Corporation's notice of meeting or by the Chief Executive Officer or any member of the Board of Directors, or by any shareholder of the Corporation who is entitled to vote at the meeting.
 
Section 5.  Multiple certificates or record entries of a single shareholder. Should a person who is a shareholder own shares evidenced by more than one stock certificate, nevertheless only one notice (when any is required to be, or may be, given to holders of shares of any or all classes) shall be, in the sole discretion of the Corporation, required to be mailed and if different addresses as to such person are recorded on the Corporation's stock ledger the notice may be mailed, or otherwise transmitted as authorized in these bylaws, to the address that appears to have been given latest in time unless the shareholders shall have expressly directed otherwise in writing to the Secretary of the Corporation.
 
Nor shall variations in the designation of the name or identity of any one shareholder require the mailing of more than one notice to any one shareholder, which may be mailed to any one of the names or designations that may so appear in the Corporation's stock ledger with respect to such shareholder; and, at the sole discretion of the Corporation, the distribution of dividend payments may be, unless a shareholder shall expressly request multiple distributions strictly in accordance with the stock ledger record of his multiple ownerships, handled in accordance with or so as not to be repugnant to the purpose of the above provisions, wh ich is to avoid the expenditure by the Corporation of effort, time and expense in such matters,

 
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Section 6. List of shareholders. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. The list shall be open to the examination of any shareholder, to the extent required by Wyoming law, or to the extent and under such conditions as may be determined by the board of directors consistent with the requirements of the law.
 
Section 7, List of management nominees. At any meetings where directors are erected, notice shall include the names of the nominees, if any, intended at the date of notice, to be presented by the management for election.
 
Section 8. Waiver of notice. Any shareholder, director or officer may waive any notice required to be given under the provisions of pertinent statutes or of the Articles of Incorporation or of these bylaws, either before or after the date and time stated in the notice or before or after the date and time of the meeting or other action to which such shareholder, director or officer would otherwise be entitled to notice.
 
The waiver shall be in writing, be signed, either manually or in facsimile, or shall be sent by electronic transmission by the shareholder, director or officer entitled to the notice, and be delivered to the corporation for inclusion in the minutes or filing with the corporate records.
 
Section 9. Waiver of notice by attendance. A shareholder's or director's or officer's attendance at a meeting constitutes a waiver of notice, and waives objection to lack of notice or defective notice of the meeting, unless the shareholder director or officer at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and in the case of a special meeting of the shareholder, waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.
 
Section 10. Action by unanimous consent. Any action which may be taken at a meeting of the shareholders or directors may be taken without a meeting or notice of meeting if authorized by a writing signed either manually, by electronic transmittal or in facsimile, by all of the shareholders entitled to vote at a meeting for such purpose and filed with the Secretary of the corporation.
 
Section 11 Action without meeting by the majority. Unless otherwise provided by state law, any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice if a consent in writing setting forth the action so taken shall be signed either manually, by electronic transmittal or in facsimile, by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
 
 
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Unless the consents of all shareholders entitled to vote have been solicited in writing, prompt notice shall be given of the taking of any other corporate action approved by shareholders without a meeting by less than unanimous written consent, to each of those shareholders entitled to vote who have not consented in writing.
 
Section 12.   Cure for defective notice of meeting of shareholders or directors. The transactions at any meeting of shareholders or directors, wither annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before of after the meeting, each person entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to a holding of the meeting, or any approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records of made a part of the minutes of the meeting.
 
ARTICLE VI.        PROXIES
 
Section 1.   Voting by proxy. Every shareholder entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a proxy validly executed by the shareholder. A shareholder or his agent or attorney-in-fact may appoint a proxy to vote or otherwise act for the shareholder by signing, either manually or in facsimile, an appointment form or by an electronic transmission. An electronic transmission must contain or be accompanied by information from which one can determine that the shareholder, the shareholder's agent, or the shareholder's attorney-in-fact authorized the electronic transmission.
 
Section 2.   When effective . An appointment of a proxy is effective when a signed appointment form or an electronic transmission of the appointment is received by the officer or agent of the corporation authorized to tabulate votes. An appointment is valid for eleven (11) months unless a longer period is expressly provided in the appointment.
 
Section 3.   Revocable and irrevocable proxies. An appointment of a proxy is revocable unless the appointment farm or electronic transmission states that it is irrevocable and the appointment is coupled with an interest, as described in the Wyoming Business Corporation Act.
 
ARTICLE VII.       THE BOARD OF DIRECTORS
 
Section 1.   Powers exercised by the Board. Subject to state law and the articles of incorporation. the business and affairs of this corporation shall be managed by and all corporate powers shall be exercised by or under the direction of the board of directors, the members of which need not be shareholders or residents of this state. In addition to the powers and authorities by these bylaws expressly conferred upon it, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these bylaws directed or required to be exercised or done by the shareholders.
 
Section 2.   Number of directors. The Board of Directors of the Corporation shall consist of such number of directors, not less than one, nor more than seven, as shall from time to time be fixed exclusively by resolution of the Board of Directors.

 
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Section 3.   Chairman. The Board of Directors of the Corporation shall elect form among its members a Chairman, whose title shall be Chairman of the Board and who shall, if present, preside at all meetings of the Directors.
 
Section 4.   Terms of directors, Directors shall be elected at each annual meeting of the shareholders to hold office until the next annual meeting, and until a successor has been elected end qualified or until there is a decrease in the number of directors. The term of a director elected to fill a vacancy expires at the next shareholders' meeting at which directors are elected. No reduction of the authorized number of directors shall have the effect of removing any director before the director's term of office expires.
 
Section 5.   Vacancies. Vacancies in the board of directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director. A vacancy in the board of directors shall be deemed to exist in the event of the death, resignation, or removal of any director, or if the shareholders fail, at any meeting of the shareholders at which any directors are elected, to elect the full number of authorized directors.
 
Section 6.   Place of meeting. The directors may hold their meetings, have one or more offices and keep the books of the Corporation at such places as they may from time to time determine and designate.
 
Section 7.  Telephone conference. The members of the Board of Directors or any committee thereof may participate in a meeting of such Board or committee, as the case may be, by means of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear or otherwise communicate with each other, and participation in a meeting pursuant to this subsection shall constitute presence in person at such a meeting,
 
Section 8.  Special Meetings of the Board. Special Meetings of the Board may be called by the Chairman on at least forty-eight (48) hours prior notice to each director, either personally or by telephone, or by electronic mail. Any oral notice given personally or by telephone must be communicated to the director. Any notice by electronic mail must be accompanied by an attempt to reach such director by telephone including the leaving of a voice mail message when practical. A special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of a majority of the directors in office.
 
Section 9.   Quorum. A majority of the total number of directors shall constitute a quorum for the transaction of business.
 
Section 10.   Consent in Lieu of Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting and without prior notice if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. A member of the board may record a vote against a proposed action while providing his or her Witten consent that the proposal action adopted by the majority of the board shall be taken without a meeting, under this provision.
 
 
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Section 11.   Action by majority without a meeting. Unless otherwise provided by state law, Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting and without prior notice if a consent in writingsetting forth the action so taken shall be signed by the majority of the members of the board of directors. Unless the consents of all the members of the board have been obtained in writing, prompt notice shall be given of the taking of any action by the board of directors if such is approved under this section by less than unanimous written consent, to each of the board members who did not provide written consent.
 
Section 12.   Director Compensation Directors as such, shall not receive any stated salary for their services, but may, by resolution of the Board, receive a fixed sum and expenses of attendance at each regular or special meeting of the Board, however, nothing herein shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefore.
 
Section 13.   Removal of a Director. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except that when cumulative voting is permitted, if less than the entire Board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors, or, if there be classes of directors, at an election of the class of directors of which he is a part.
 
Section 14.   Board meeting following shareholder meeting. Immediately following each annual meeting of shareholders, the board of directors shall hold a regular meeting for the purpose of organization, the election of officers and the transaction of other business. Notice of this meeting shall not be required. Minutes of any meeting of the board, or any committee of the board, shall be maintained by the Secretary or other officer designated for that purpose.
 
Section 15.   Waver of notice. The transactions of any meeting of the Board of directors, however called, noticed, or wherever held, shall be as valid as though had at a meeting duly held after the regular call and notice if a quorum be present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof, Waiver of notices or consents need not specify the purpose of the meeting. All such waivers, consents and approvals shall be filed with the corporate records or made part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting at its commencement the lack of notice. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as otherwise provided in these bylaws.
 
Section 16.   Effect of quorum. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum was present shall be regarded as the act of the board of directors.

 
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Section 17. Adjournment. A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place. Notice of the time and place of the holding of an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of such time and place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment.
 
Section 18. Action by unanimous consent. Any action required or permitted to be taken by the board of directors, may be taken with the same force and effect as if taken by unanimous vote of directors, if authorized by a writing signed individually or collectively by all members of the board. Such consent shall be filed with the regular minutes of the board, A signature by facsimile or electronic transmission shall have the same force and effect as an original signature
 
Section 19. Director serving as an officer. Nothing in these bylaws shall be construed to preclude any director from serving the corporation in any other capacity, including without limitation, as an officer, employee, consultant or otherwise, and receiving compensation for such services,
 
ARTICLE XIII.       DIVIDENTS
 
Section 1. Dividends. Subject to provisions of pertinent law and the Certificate of Incorporation, dividends, if any, declared respecting any class of shares of the Corporation's capital stock may be declared by the Board of Directors. Dividends may be paid in cash or, if the declaration thereof so provides, in property, including shares of the Corporation. There may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repair or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall deem conducive to the interest of the Corporation, and the Board of Director's may also abolish any such reserve.
 
ARTICLE IX.       OFFICERS OF THE CORPORATION
 
Section 1.   Primary executive offices. The primary executive officers of the corporation shall be a Chief Executive Officer who may also be called President, a Corporate Secretary, and a Chief Financial Officer who may also be called Treasurer, The corporation may also have, at the discretion of the board of directors such other "non-primary" executive officers as they may deem necessary or beneficial. One person may hold more than one office, without limitation.
 
Section 2.   Officers are chosen by the Board. The executive officer's of the corporation shall be chosen by the board of directors, and each shall serve at the pleasure of the board of directors, subject to the rights, if any, of an officer under any contract of employment.
 
Section 3.   Delegation of appointment power to Chief Executive Officer. The board of directors may empower the Chief Executive Officer to appoint and remove such officers,
 

 
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including other primary executive officers, the proceeding paragraph not withstanding, as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the bylaws or as the board of directors, or the Chief Executive Officer acting on the board's authority, may from time to time determine.
 
Section 4.   Removal of an Officer. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by a majority of the directors at that time in office or by any officer upon whom such power of removal may be conferred by the board of directors,
 
Section 5.   President/Chief Executive Officer. The President shall be the Chief Executive Officer of the corporation; he shall have general and active management of the business of the corporation, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer, officers or agents of the corporation. He or she shall preside at all the meetings of the shareholders and, in the absence of the Chairman of the board, at all meetings of the board of directors, He shall have the general power and duties of supervision and management usually vested in the office of President of a corporation, and shall have such other authority as is delegated to him by the board of directors,
 
Section 6.   Corporate Secretary. The Secretary shall attend all sessions of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose; and shall perform like duties for all committees of the Board of Directors when required. He or she shall give, or cause to be given, all required notices of all meetings of the shareholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer, under whose supervision he shall be. He or she shall be responsible for keeping in safe custody the seal of the Corporation, and when such is proper, he or she shall affix the same to any instrument requiring .
 
Section 7.   Chief Financial Officer/ Treasurer. Unless determined otherwise by the board of directors, The Chief Financial Officer/ Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall keep the moneys of the corporation in separate accounts to the credit of the corporation. He shall disburse the funds of the corporation as may be ordered by the Board, and shall render to the President and directors, at the regular meetings of the Board, 01 whenever they may require it, an account of all his transactions as Chief Financial Officer and of the financial condition of the corporation.
 
ARTICLE X.       VACANCIES RESIGNATIONS AND SALORIES
 
Section 1.    Vacancy. Any vacancy occurring in any office of the corporation, or in the board of directors, by death, resignation, removal or otherwise, shall be filled by the board of directors. Vacancies and newly created directorShips resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although not fess than a quorum, or by a sole remaining director.
 
 
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If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any shareholder or an executor, administrator, trustee or guardian of a shareholder, or other fiduciary entrusted with like responsibility for the person or estate of shareholder, may call a special meeting of shareholders in accordance with the provisions of these bylaws.
 
Section 2.   Resignations. Any director or officer may resign at anytime, such resignation to be in writing, and to take effect from the time of its receipt by the corporation, unless some time be fixed in the resignation and then from that date. The acceptance of a resignation shall not be required to make it effective. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective.
 
Section 3.   Officer salaries. The salaries of all officers of the Corporation and of its wholly owned subsidiaries, shall be determined by the Chief Executive Officer but shall be reviewed from time to time by the Board of Directors. The salary and compensation of the Chief Executive Officer shall be determined by the Board of Directors.
 
ARTICLE XI.       LIMITATION OF LIABILITY FOR DIRECTORS AND EXECUTIVE OFFICERS.
 
Section 1.   Limitation of liability. Neither any director or any primary executive officer or incorporator of the corporation shall have any liability to the corporation or its shareholders for money damages for any action taken, or any failure to take any action, as a director or primary executive officer or incorporator, except liability which may not be waved as specified in the Wyoming Business Corporation Act.
 
Section 2.   Notice requirement for recovery of compensation. Neither any director or any primary executive officer or incorporator of the corporation shall have any liability to the corporation or its shareholders for any salary, bonus, benefits, rights or other compensation received by such person from the corporation unless notice of any legal right to dispute such compensation is provided to such director, primary executive officer or incorporator in a writing, signed by an officer, director, or shareholder of the Corporation, specifying the factual and full legal basis for such dispute within one year of the payment or vesting of such compensation, or within sixty days of the date that the noticing party knew or should reasonably have known of the essential facts giving rise to the dispute, whichever is earlier. This time limitation shall not be exclusive of, nor be deemed to expand the period of time for providing such a notice that may otherwise be required by a contract, by another section of these bylaws, the articles of incorporation, or as a matter of law. A notice provided under this section shall not be deemed as the commencement of suit, nor shall it be sufficient, unless it otherwise meets the relevant statutory criteria, for providing compliance with any applicable statute of limitations.
 
 
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Section 3.   Notice requirement for other actions. No proceeding, derivative or otherwise, shall be commenced or maintained in regard to any alleged liability of any director, primary executive officer or incorporator, or seeking damages from any director, primary executive officer or incorporator of the Corporation, or seeking to compel suit against any such person unless notice of any alleged legal right to bring or request such a proceeding is provided to such director, primary executive officer or incorporator in a writing, signed by an officer, director, or shareholder of the Corporation, specifying the factual and full regal basis for such dispute within two hundred and ten days of the action or omission which is alleged to give rise to any such liability, or within sixty days of the date that the noticing party knew or should reasonably have known of the essential facts giving rise to the dispute, whichever is earlier. If the act or omission complained of consist of a series of acts or omissions, then the notice date shall be determined form the date of the earliest of the acts or omissions complained of.
 
This time limitation shall not be exclusive of, nor be deemed to expand the period of time for providing such a notice that may otherwise be required by a contract, by another section of these bylaws, the articles of incorporation, or as a matter of law. This notice requirement is in addition to the notice and demand requirement of the Wyoming Business Corporation Act 17-16-742. This Section 3 does not require that the demand described in the Wyoming Business Corporation Act 17-16-742 be made before notice under this Section 3 is given.
 
A notice provided under this section shall not be deemed as the commencement of suit, nor shall it be sufficient, unless it otherwise meets the relevant statutory criteria, for providing compliance with any applicable statute of limitations. Neither any director or any primary executive officer or incorporator of the corporation shall have any liability to the corporation or its shareholders for money damages for any action taken, or any failure to take any action, as a director or primary executive officer or incorporator unless the notice provisions of this section have been complied with.
 
Section 4. The provisions of this Article shall be deemed to be a contract between the Corporation, its shareholders and each director or primary executive officer who serves in such capacity at any time while this bylaw is in effect.
 
Section 5. Nothing in this Article XI or in Article Xii shall be deemed or interpreted to create, expand, or extend the liability of any director, primary executive officer or incorporator, under the law or otherwise,
 
ARTICLE XII.       INDEMNIFICATION OF EXECUTIVE OFFICERS AND DIRECTORS.
 
Section 1.   Indemnification. The corporation will to the maximum extent permitted by the laws of the State of Wyoming indemnify each of its primary executive officers and directors and incorporators against expenses (including legal fees), judgments, fines, settlements, threatened or pending suits or proceedings, and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact that such person is or was an officer or director of the corporation.
 
Section 2.   Survivability and payment in advance. Rights to indemnification shall extend to the heirs, beneficiaries, and estate of any person whom the Corporation is obligated to indemnify. Indemnity Expenses shall be paid by the Corporation in advance as shall be appropriate to permit Indemnitee to defray such expenses as incurred and so as to enable Indemnitee to mount a legal defense.
 
 
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Section 3.   Amendment or repeal of this bylaw. Any amendment, repeal or modification of these bylaws. the Corporation's Certificate of Incorporation, or any other instrument, which eliminates or diminishes the indemnification rights provided for in these bylaws shall be ineffective as against an Indemnitee with respect to any legal action based upon actions taken or not taken by the Indemnitee prior to such repeal or the adoption of such modification or amendment. The provisions of this bylaw shall be applicable to all legal actions made or commenced after the adoption hereof, whether arising from acts or omissions to act occurring before or after its adoption.
 
Section 4.  Contract for indemnification. The provisions of this article shall be deemed to be a contract between the Corporation, its shareholders and each director or primary executive officer who serves in such capacity at any time while this bylaw is in effect.
 
Section 5.  Articles XI and XII do not limit the rights of officers, directors or incorporators, The rights of indemnification, notice, limitation of liability and otherwise provided in this Article XII and in Article XI shall neither be exclusive of, nor be deemed in limitation of, any rights to which an officer or director or incorporator may otherwise be entitled or permitted by contract, the bylaws, the articles of incorporation, vote of shareholders or directors or otherwise, or as a mailer of law both as to actions in such person's official capacity and actions in any other capacity while holding such office. Furthermore, it is the policy of the Corporation that indemnification of any person whom the Corporation is obligated to indemnify pursuant to this bylaw shall be made to the fullest extent permitted by law.
 
ARTICAL XIII .       BOOKS AND RECORDS
 
Section 1.  Corporate records. The Board of Directors shall determine from time to time whether, and, if allowed, when, where, and under what conditions and regulations the accounts and books of the Corporation (except such as may by statute be specifically open to inspection), or any of them, shall be open to the inspection of the shareholders, and the shareholders' rights in this respect are and shall be restricted and limited accordingly.
 
Section 2.  Record of shareholders. The corporation shall keep at its principal office, or at the office of its transfer agent or registrar, if either be appointed, or at such other location as determined by resolution of the board of directors, a record of its shareholders and the number and class of shares held by each shareholder.
 
Section 3.  Bylaws. The corporation shall keep at its principal office, or at such other location as determined by resolution of the board of directors, a copy of the bylaws amended to date, which shall be open to inspection by the shareholders at all reasonable times, and upon reasonable notice.
 
ARTICLE XIV.       MISCELLANEOUS PROVISIONS
 
Section 1, Fiscal Year. The fiscal year shall begin on the first day of January of each year.
 
 
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Section 2. Notice. Whenever written notice is required to be given to any person by the corporation under thee bylaws, it may be given to such person, either personally or by sending a copy thereof through the mail, by fax or to his electronic mail or other electronic address, as his address or contact information appears on the books of the corporation, or supplied by him to the corporation for the purpose of notice. If the notice is sent by mail, fax or by electronic mail, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail, faxed or transmitted to such person. Such notice shall specify the place, day and hour of the meeting and, in the case of a special meeting of shareholders, the general nature of the business to be transacted. In the sole discretion of the board of directors, and to the extent not disallowed by the law of Wyoming, notice of any meeting of the shareholders may also be given by posting such notice on a section of the Corporation's internet web page. The shareholders are hereby deemed to have agreed to such [Memel based notice.
 
Section 3. Waiver of Notice. Whenever any written notice is required by statute, or by the Certificate or the bylaws of this corporation a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time staled therein, shall be deemed equivalent to the giving of such notice. Except in the case of a special meeting of shareholders, neither the business to be transacted at nor the purpose of the meeting need be specified in the waiver of notice of such meeting, Attendance of a person either in person or by proxy, at arty meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened, so long as such objection is made at the beginning of said meeting.
 
Section 4. Power to bind the corporation. The board of directors may, at its discretion, authorize an officer or officers, agent or agents, to enter into contracts or execute any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. No officer, agent or employee, nor any person shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or to any amount, or to sign any check, note or authorization of payment, unless authorized by a grant of power from the board of directors, or unless said action is subsequently ratified by the board of directors.
 
Section 5. Options and warrants. The corporation may issue rights, options, or warrants for the purchase of shares of the corporation. The board of directors shall determine the terms upon which the rights, options, or warrants are issued, their form and content, and the consideration for which the shares are to be issued.
 
Section 6. Corporate seal. The corporate seal, if one is adopted by the board of directors, shall be in such form as may be adopted by the board of directors.
 
Section 7. The failure of a provision does not affect the remainder of these bylaws. If any Section or provision within a Section of these bylaws shall be found to be invalid, illegal, unenforceable or limited in application by reason of any law or regulation, it shall not affect the validity, legality and enforceability of the remaining sections or provisions hereof.

 
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ARTICLE XV.       AMENDMENTS TO THESE BYLAWS
 
Section 1. Amendment. These bylaws may be altered or amended or repealed, in whole or in part: By the affirmative vote of the holders of a majority of the stock issued and outstanding and entitled to a vote thereat, at any regular or special meeting of the shareholders, or by the affirmative vote of a majority of the Board of Directors; provided, however, that, notwithstanding any other provisions of these bylaws or any provision of law which might otherwise permit a lesser vote of the shareholders, the affirmative vote of the holders of at feast sixty six (66%) percent of the voting power of all shares of the Corporation entitled to vote generally in the election of directors, shall be required in order for the shareholders or the board of directors to make any amendment that increases the liability of, or reduces the rights of indemnification or rights to a notice of dispute of, any director, primary executive officer, or incorporator of the Corporation.
 
CERTIFICATE
 
I, Kim Thompson, hereby certify that I am the Secretary of the initial meeting of The Board of Directors of Kraig Biocraft laboratories, Inc.
 
The foregoing bylaws, consisting of 16 pages, are a true and correct copy of the bylaws of the corporation.
 
IN WITNESS WHEREOF, I have hereunto set my hand this 26 th day of April, 2006.
 
/s/Kim Thompson
 
 
 
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September 25, 2007
 
Kraig Biocraft Laboratories, Inc.
120 N. Washington Square, Suite 805
Lansing, Michigan 48933

Gentlemen:
 
You have requested our opinion, as counsel for Kraig Biocraft Laboratories, Inc. a Wyoming corporation (the “Company”), in connection with the registration statement on Form SB-2 (the “Registration Statement”), under the Securities Act of 1933 (the “Act”), being filed by the Company with the Securities and Exchange Commission.
 
The Registration Statement relates to an offering of  16,981,800 shares of the Company’s common stock.
 
We have examined such records and documents and made such examination of laws as we have deemed relevant in connection with this opinion. It is our opinion that the shares of common stock to be sold by the selling shareholders have been duly authorized and will be legally issued, fully paid and non-assessable.
 
No opinion is expressed herein as to any laws other than the State of Wyoming of the United States. This opinion opines upon Wyoming law including the statutory provisions, all applicable provisions of the Wyoming Constitution and reported judicial decisions interpreting those laws.
 
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption “Experts” in the Registration Statement. In so doing, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act and the rules and regulations of the Securities and Exchange Commission promulgated thereunder.
 
Very truly yours,
 
ANSLOW & JACLIN, LLP
 
 
By:   
/ s/   Gregg E. Jaclin                  
GREGG E. JACLIN
KRAIG BIOCRAFT LABORATORIES, INC.
 
ADDENDUM TO THE
 
EMPLOYMENT CONTRACT: KIM K. THOMPSON
 
THIS ADDENDUM to the EMPLOYMENT CONTRACT ("Agreement") dated the April
26, 2006, between Kraig Biocraft Laboratories, inc., a Wyoming corporation (the
"Company") and Km Thompson, an individual ("Executive", "Employee" or "Mr.
Thompson") is dated November 6, 2006,
 
The Board of Directors of the Company (the "Board") and Executive each desires that the EMPLOYMENT CONTRACT be modified and amended by this ADDENDUM as described below. \
 
NOW, THEREFORE, in consideration of the mutual promises and undertakings contained in this ADDENDUM , and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
 
Section 4, subsection C of the EMPLOYMENT CONTRACT, titled Stock and Warrants, shall be deleted, and no stock warrants or stock options shall be issued or owing to Mr. 'Thompson pursuant to former section 4(c). Pursuant to the deletion of said paragraph 4 (c), all references to the granting or vesting of stock warrants in section 4 (g), or otherwise in the Employment Contract, are rendered meaningless and void, and such is the intention of the parties entering into this addendum.
 
Section 8. titled Termination by Company, shall be amended to increase the referenced severance allowance to $600,000, or seventy five percent (75%) of the total salary compensation Executive would have been entitled to for the remainder of his   Term of employment, whichever is greater,
 
Section 9. titled Notice of Termination shall be amended to require that any notice of termination must, in order to be effective, be accompanied by a tendering of the severance allowance specified in Section 8.
 
Section 12. titled Death Benefit shall be amended to increase the referenced death benefit to three hundred thousand dollars ($300,000) or thirty percent (35%) of the total salary compensation Executive would have been entitled to for the remainder of his Term of employment, whichever is greater.

 
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IN WITNESS WHEREOF, the parties hereto have executed this Addendum under seal the dayand year above first written.
 
Executive
Company
   
   
/s/  Kim Thompson
/s/  Kim Thompson
Kim Kraig Thompson
Kim Kraig Thompson
  C.E.O.
  On behalf of Kraig Biocraft Laboratories, Inc.

 
 
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KRAIG BIOCRAFT LABORATORIES, INC.
 
EMPLOYMENT CONTRACT: KIM K. THOMPSON
 
THIS EMPLOYMENT CONTRACT ("Agreement") is dated as of the 26th day of April, 2006, by and between Kraig Biocraft Laboratories, Inc., a Wyoming corporation (the "Company') and Kim Thompson, an individual ("Executive'', "Employee" or “ Mr.   Thompson").
 
The Board of Directors of the Company (the "Board") and Executive each desires that Executive furnish services to the Company on the terms and conditions hereinafter set forth. The parties enter into this agreement setting forth the terms and conditions of the employment of the Executive with the Company,
 
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and undertakings contained in this Employment Contract, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
 
1.    Employment. The Company hereby agrees to employ the Executive, and the Executive hereby accepts such employment, on the terms and conditions hereinafter set forth.
 
2.    Term.   The term of Executive's employment under this Agreement shall be for a period of five (5) years, commencing on May 1, 2006 and ending on April 30, 2011, unless further extended or sooner terminated as hereinafter provided.
 
On April 30, 2007 and on the last day of April of each year thereafter, the Term shall be automatically extended for five (5) years, so that at all times, the Term on each April 30 during the duration of this Agreement shall be an unexpired period of five (5) years. The last day of the Term, as from time to time extended, is hereinafter referred to as the "Expiration Date." The Company or Executive may elect to terminate the automatic extension of the Term set forth in   this section by giving written notice of such election on or before April 30 of any calendar year Upon the giving of such notice, Executive's employment under this Agreement shall terminate on the Expiration Date (as last extended).
 
3.    Position and Duties. During the Term of this Agreement, Executive shall be employed as Chief Executive Officer of the Company. Inthis capacity Executive shall have overall authority for the management of the business of the Company and the subsidiaries and affiliates of the Company of which he serves as Chief Executive Officer, Executive hereby accepts such employment and agrees to perform the customary duties of a Chief Executive Officer and accepts such other duties as may be set forth herein,
 
4.    Compensation and Related Matters.
 
a. Base Salary. As compensation for the performance by the Executive of his duties hereunder, the Company shall pay the Executive a annual base salary of $185,000 for the period commencing May 1, 2006 through and including December 31, 2006, which base pay shall be increased each January 1 st for the subsequent twelve (12) month periods by six percent (6%). Company acknowledges that the base salary is less than Mr. Thompson's customary remuneration and that Mr. Thompson is entering into this agreement in part due his perception of the future value of warrants and deferred, delayed and bonus compensation. Mr. Thompson informs the Company, and the company hereby acknowledges that Mr. Thompson is entering into this agreement and will be performing the services to the Company as contemplated herein, in reliance on the promises and representations of the Company as described in this Agreement. Company further acknowledges that it is the Company's intention that Mr. Thompson so rely upon these promises and that this Agreement is offered by the Company as an inducement for Mr. Thompson to take on the role of Chief Executive Officer.
 
 
 
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b.    Annual Bonus/Incentive Compensation. In addition to the compensation described in subparagraph a. above, Executive may receive such additional compensation, if any, in the form of an annual incentive bonus, as may be approved by the Company's Board of Directors.
 
c.    Stock and Warrants. Executive will receive additional compensation in the form of warrants on the Company stock as a performance incentive. Executive will receive: 1) a five year warrant On 700,000 shares of the   Company's common stock at an aggregate exercise price of $150,000; 2) a eight year warrant on $1,500,000 shares of the Company's common stock at an aggregate exercise price of $500,000: 3) a nine year warrant On 2.000,000 shares of the Company's common stock at an aggregate exercise price of $800,000 Those warrants are fully vested as of the date of this agreement.
 
d.    Life and Disability Insurance Premium. COMPANY shall pay Executive's premium on his personal life insurance policy for the period [he or she] performs the duties of EXECUTIVE. EXECUTIVE shall receive disability insurance in an amount which is reasonable and commercially customary.
 
e.    Vacation and sick leave. Paid vacation of four (4) weeks per year, which vacation shall be taken at such times as are mutually convenient to Executive and the Company. Paid sick leave for up to 21 days per year.
 
f.    Medical and Dental Insurance. COMPANY shall either provide to EXECUTIVE and pay the full premium for a comprehensive family health medical and dental insurance policy or if EXECUTIVE elects to provide [his or her] own hearth insurance, pay to EXECUTIVE an amount equal to the cost of providing said comprehensive family health insurance policy.
 
g.    Performance Bonus Compensation. In addition to any other compensation paid to EXECUTIVE, COMPANY shall pay EXECUTIVE the following compensation and bonuses in accordance with the criteria set Forth below;
 
 
1. Upon the Company's successful laboratory development of a new silk   fiber composed of one or more proteins that are exogenous to a host and one or more proteins that are endogenous to a host, the company will: 1) Release Executive from the condition subsequent on a eight year warrant on 500,000 shares of the company stock at an aggregate exercise price of $100,000 and, 2) raise Executive's base pay by 14%.
 
 
2. Upon the Company's successful laboratory development of a new silk fiber composed of two or more proteins that are exogenous to a host, whether or not combined with one or more proteins that are endogenous to a host, the company will: 1) Release Executive from the condition subsequent on a eight year warrant on 600.000 shares of the company stock at an aggregate exercise price of $110,000, and: 2) raise Executive's base pay by 15%.
 
 
3.   Upon the Company's successful laboratory development of a new silk fiber composed, at least in part, of one or more synthetic proteins, the company will 1) Release Executive from the condition subsequent on a eight year warrant on 900,000 shares of the company stock at an aggregate exercise price of $160,000, and; 2) raise Executive's base pay by 18%.
 
 
4.   Upon the Company's successful laboratory development of a new silk fiber composed, at [east in part, of one or more proteins that are genetic modifications or induced mutations of a host silk proteins, the company will raise Executive's base pay by 8%.
 
 
5. Upon the Company's successful laboratory development of two out of three of the silk fibers referenced in subsections 1, 2 and 3 above, rite Board of Directors meet (within 60 days of said event) and consider what bonus compensation would be appropriate and suitably rewarding to Executive under the totality of the circumstances.
 
 
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6. Upon the Company's becoming either a registered company (in the United States or any foreign jurisdiction) or upon its stock being traded on the pink sheets or the OTC Bulletin Board, and upon the Company's achieving an average market capitalization over a 120 calendar day period, in excess of $35,000,000 the company will raise Executive's base pay to $225,000, It Executive's base pay is less than that amount at the time.
 
 
7. Upon the Company's becoming either a registered company (in the United States or any foreign jurisdiction) or upon its stock being traded on the pink sheets or the OTC Bulletin Board, and upon the Company's achieving en average market capitalization over a 91 calendar day period, in excess of 565,000,000 the company will raise Executive's base pay to $260,000, if Executive's base pay is less than that amount at the time.
 
 
8. Upon the Company's becoming either a registered company (in the United States or any foreign jurisdiction) or upon its stock being traded on the pink sheets or the OTC Bulletin Board, and upon the Company's achieving an average market capitalization over a 91 calendar day period, in excess of $100,000,000 the company will raise Executive's base pay to $290,000, if Executive's base pay is loss than that amount at the time.
 
 
9.   Upon the Company's becoming either a registered company (in the United States or any foreign jurisdiction) or upon its stock being traded on the pink sheets or the OTC Bulletin Board, and upon the Company's achieving an average market capitalization over a 120 calendar day period, in excess of $200,000,000 the company will raise Executive's base pay to $365,000, if Executive's base pay is less than that amount at the time.
 
 
10. Upon the Company's becoming either a registered company (in the United States or any foreign jurisdiction) or upon its stock being traded on the pink sheets or the OTC Bulletin Board, and upon the Company's achieving an average market capitalization over a 150 calendar day period, in excess of $350,000,000 the company will raise Executive's base pay to $420,000, if Executive's base pay is less than that amount at the time.
 
The warrants described in this subsection (9) are in addition to any warrants issued outside of this subsection (g) and are fully vested as of the date of this agreement, but their exercise, in the absence of satisfying the respective criteria set forth above, is subject to the following conditions subsequent: 11 Executive exercises the warrants described in this subsection (g) without first satisfying the above described criteria, the exercise shall be subject to the condition that Executive First provide the Company with a written right to redeem any such shares at the exercise price. Such a right of redemption shall be for a period of seven years. The criteria will be deemed not to have been met, if not met within 120 days of the termination of Executives employment, for any reason.
 
The events referenced in subsections I, 2 and/or 3 above will be deemed to have occurred and the criteria satisfied when verified in an opinion letter from any one of the following: Dr. Macomb Fraser, Dr, Randolph Lewis, or an independent laboratory of Company's choosing.
 
h. Retirement Plan. The Company will make reasonable commercial efforts to adopt   a retirement benefit plan, which will include Executive, which is reasonable and comparable to such plans as are customary in Company's industry.
 
5. Reimbursement of Expenses .   The Executive may incur reasonable expenses for furthering the Company's business, including expenses for entertainment, travel, meals, and similar items. The Company shall reimburse Executive for all business expenses after the Executive presents an itemized account of expenditures, pursuant to Company policy. The company will cause to be issued a corporate credit card which Executive can use for company business. Executive agrees that he will reimburse the company for an charges he makes on said credit account to the extent that such are not reasonably connected to the company's business as contemplated herein. The Company will make any request for reimbursement from Executive in writing and within fifty (50) days of the disputed expenditure. Any request or demand by the Company to Executive for reimbursement of expenditures is waved if not made within fifty days of the date the expenditure was made. No action will be brought or maintained by the Company against Executive, either in a court of law or in arbitration, or otherwise, to recover expenses, if the Company has not complied with this section 5.
 
 
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6.    Devotion to Company. The Executive will devote substantially his furl time, attention, and energies to the business of the Company, its affiliates and subsidiaries during this employment. The Company understands that Executive is engaged in other business, and Executive is not prohibited from an active involvement in the operation of said business, however the parties do anticipate that Executive will devote substantially his full time not less than 70% of his work time) to Company.
 
7.    Termination by Executive. Executive may terminate his employment hereunder by   giving thirty clays written notice to the Company, in which event such termination shall become effective at the end of the notice period, or earlier as may be specified by the Company after receipt of Executive's Notice of Termination.
 
8.    Termination by Company. With or without cause, the Company may terminate Executive's employment at any time prior to the expiration of the five year term upon 60 days' written notice to the Executive. The Executive will be paid his/her regular salary up to the date of termination. In addition, the Company will pay the Executive on the date of the termination a severance allowance of $400,000, or sixty five percent (65%) of the total salary compensation Executive would have been entitled to for the remainder of his Term of employment, whichever is greater. The Company will pay any required withholding tax on said severance allowance without deducting the same from the amount to be paid to Executive, If two out of the three conditions set fourth in section 4 (g) sub parts 3, 4 and 5 have been met   by the time of said termination, or are met within 120 days subsequent to such termination, the severance allowance will be increase by $100,000.
 
9.    Notice of Termination. Any purported termination of the Executive's employment shall be communicated by written Notice of Termination to the other party hereto. If such notice is served by the Company on the Executive, to be effective, it must include the signatures of the majority of the board of directors approving such termination and thanking Executive for his service to date.
 
10.   Termination Benefits, Upon the expiration or termination of this Agreement or Executives employment, by either party for any reason, Company shall continue to provide Executive with life and disability insurance and family health insurance described above for a period of thirty six (36) months from said termination/expiration. Company will make all reasonable efforts to allow Executive to continue such coverage thereafter at Executives own expense, This provision is in addition to the health benefits provided in section 11 below. This provision shall survive the expiration or termination of this agreement for any reason.
 
11.    Health Benefit . During the life of Executive and also during the life of his spouse, Company shall provide Executive and his spouse accident and health insurance policies or programs reasonably comparable to those in effect on the date of termination. or Executive and his spouse shall be entitled to be paid an amount equal to the premiums which would be incurred for the purchase of accident and health insurance coverage comparable to that in effect on the Date of Termination. In addition, Company shall provide Executive with life and disability insurance policies in an amount not less than that in effect on the Date of Termination or Executive shall be entitled to be paid an amount equal to the premiums which would be incurred for the purchase of comparable coverage_ This provision shall survive the expiration or termination of this agreement for any reason.
 
12.       Death Benefit. Should Executive die during the term of employment, the Company shall pay to Executive's designee, the greater of eighty thousand dollars ($80,000) or thirty percent (26%) of the total salary compensation Executive would have been entitled to for the remainder of his Term of employment, whichever is greater, Company will also continue to pay the medical and health benefits for Executive's family for a period of eight (B) years, in addition to the benefits to Executives spouse, provided in section 11 above.
 
13.        Consulting Agreement.

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a.               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 six (6) years and at a rate of 54,000 per month, with a rate increase on January 1 *I. 2009, and each January thereafter of three percent (3%). In his capacity as consultant, Executive will make himself available, as may be required by the Company, for up to 8 hours per month at such times and dates as are mutually convenient. Executive may perform these services by telecommunications from such locations as are convenient to him. In the event of the death of Executive, Executive's designee shall receive a monthly death benefit, from Company, equal to the amount of such consultancy, and for the full term or remainder of the term of the consultancy. Executive may resign from said consultancy position upon providing Company with thirty (30) days written notice. This provision shall survive the expiration or termination of this a greement for any reason.
 
b.               In the event that Company achieves gross sales of ten million dollars ($10,000,000) or more, or one million dollars ($1,000,000) or more in net income, in any two years within ten (10) years of the date of this agreement, or upon the Company's achieving an average market capitalization over a 180 calendar day period, in excess of $45,000,000 within six (6) years of the date of this agreement, then the consulting period will be for ten (10) years (with payments guaranteed for the full 10 years to designee in the event of Executive's death during the term thereof), This provision shall survive the expiration or termination of this agreement for any reason.
 
c                In the event that Company achieves gross sales of nineteen million dollars ($19,000,000) or more, or three million dollars ($3,000,000) or more in net income, in any two years within twelve (12) years of the date of this agreement, or upon the Company's achieving an average market capitalization over a 180 calendar day period, in excess of $65,000,000 within six (6) years of the date of this agreement, then the consulting period will be for the life time of Executive and his spouse (joint life with payments guaranteed for 20 years to designee in the event both predecease the twenty year period), and the consulting rate will be increased to $0,500 per month, with a three
percent (3%) increase on January 1 st  2009, and each January 1 st   thereafter, This provision shall survive the expiration or termination of this agreement for any reason.
 
d.               In the event that Company achieves gross sales of thirty eight million dollars ($38,000,000) or more, or six million dollars ($6,000,000) or more in net income, in any two years within twelve (12) years of the date of this agreement, or upon the Company's achieving an average market capitalization over a 180 calendar day period, in excess of $120,000,000 within six (6) years of the date of this agreement, then the consulting period will be for the life time of Executive and his spouse (joint life with payments guaranteed for 20 years to designee in the event both predecease the twenty year period), and the consulting rate will be increased to 510,000 per month, with a three percent (3%) increase on January l st 2009, and each January 1 st thereafter. This provision shall survive the expiration or termination of this agreement for any reason.
 
e.               In the event that Company achieves gross sales of fifty nine million dollars ($59,000,000) or more, or nine million dollars ($9,000,000) or more in net income, in any year within twelve (12) years of the date of this agreement, or upon the Company's achieving an average market capitalization over a 180 calendar day period, in excess of $210,000,000 within six (6) years of The date of this agreement, then the consulting period will be for the life time of Executive and his spouse (joint life with payments guaranteed for 20 years to designee in the event both predecease the twenty year period), and the consulting rate will be increased to $15,000 per month, with a three percent (3%) increase on January 1 st. 2009, and each January 1 st thereafter, This provision shall survive the expiration or termination of this agreement for any reason.
 
f.               In the event that Company achieves gross sales of seventy eight million dollars ($78,000,000) or more, or twelve million dollars ($12,000,000) or more in net income, in any year within twelve (12) years of the date of this agreement, or upon the Company's achieving an average market capitalization over a 150 calendar day period, in excess of $320,000,000 within six (6) years of to date of This agreement, then the consulting period will be   for The life time of Executive and his spouse (joint life with payments guaranteed for 20 years to designee in the event both predecease the twenty year period), and the consulting rate will be increased to $20,000 per month, with a three percent (3%) increase on January 1 st 2009, and each January 1 st thereafter. This provision shall survive the expiration or termination of this agreement for any reason.
 
5
 
g.    The Company agrees that as it becomes commercially reasonable to do so, Company will fund this provision through the purchase of annuities, which shaft name Executive and his spouse as joint life beneficiaries and his designees as the alternative beneficiaries.
 
h.    Net income as used in this section refers to net income as defined by the generally accepted accounting practices then in   place in the United States of America, or cash flow, whichever is greater.
 
i.        Executive's rights to this consulting provision and the benefits thereof are fully vested as of the date of this Agreement, and any conditional event as described in this section, including Company's gross sales or net income events shall be interpreted as conditions subsequent to the vesting of the relevant benefits.
 
14.    CHOICE OF LAW.  It is the intention of the parties to this Agreement that this Agreement and the performance under this Agreement, and all suits and special proceedings under this Agreement, be construed in accordance with and under the Laws of the State of Michigan.
 
15.    DISPUTED COMPENSATION. In the event that the Company should at any time dispute any payment or vesting of compensation as provided herein to executive, Company agrees that it will provide Executive with a timely and immediate written notice of such dispute detailing the specific compensation that it disputes and detailing all of the legal reasons and the detailed factual basis for its objection thereto. Such written notice will be provided to Executive in advance of the payment or vesting of any such disputed payment to Executive. Providing such a notice does not eliminate or obviate the Company's responsibility to make such a payment of compensation, its dispute or objection notwithstanding.
 
In the event that the reasons for the dispute or objection arise after the disbursement or vesting of such compensation to Executive, then Company agrees that it will provide notice to Executive at the earlier of twenty one (21) days from the date of any such disbursement or vesting if Company knew or reasonably should have known of the basis for such an objection within seven (7) days of such disbursement or vesting, or if Company did not know or reasonably could not be expected to known of the basis for such an objection, within one hundred and thirty one (131) days of the disbursement, payment or vesting of such benefit. Any request or demand by the Company for reimbursement of compensation paid to Executive pursuant to this agreement is waved if not made within the limitation period described in this paragraph. No action will be brought or maintained by the Company against Executive, either in a court of law or in arbitration, or otherwise, to recover compensation paid to executive if the Company has not complied with this section 15.
 
Under no circumstances will any action will be brought or maintained by the company against executive, either in a court of law or in arbitration, or otherwise, to recover compensation already vested or paid to executive, even if prior notice of the dispute or objection as described above has been served, if more   than three hundred and sixty five (365) days have passed since the payment or vesting which the company would otherwise seek to recover or overturn.
 
This section 15 shall not apply to any compensation that Executive should receive that is over and above the compensation specifically described in this Agreement.
 
16.         NO WAIVER. The failure of either party to this Agreement to insist upon the performance of any of the terms and conditions of this Agreement, or the waiver of any breach of any of the terms and conditions of this Agreement, shall not be construed as thereafter waiving any such terms and conditions, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred.

 
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17.    PARAGRAPH HEADINGS. The titles to the paragraphs of this Agreement are solely for the convenience of the parties and shall not be used to explain, modify, simplify, or aid in the interpretation of the provisions of this Agreement.
 
18.    COMPLETE AGREEMENT, This Agreement contains the complete agreement concerning the employment arrangement between the parties. The parties stipulate that neither of them has made any representation with respect to the subject matter of this Agreement or any representation including the execution and delivery of this Agreement except such representations as are specifically set forth in this Agreement and each of the parties acknowledges that [he or she] or it has relied on its own judgment in entering into this Agreement. The parties further acknowledge that any representations that may have been made by either of them to the other prior to the date of executing this Agreement are of no effect and that neither of them has relied thereon in connection with [his or her] dealings with the other.
 
19.    INDEMNIFICATION. Company shall indemnify Executive against any and all expenses, including amounts paid upon judgments, counsel fees, environmental penalties and fines, and amounts paid in settlement (before or after suit is commenced),incurred by the Executive in connection with [his or her] defense or settlement of any claim, action, suit or proceeding in which [he or she] is made a party or which may be asserted against [him or her} by reason of [his or her]   employment or the performance of duties in this Agreement or as an officer ordirector of the Company or otherwise in connection to the Company.  Such indemnification shall be in addition to any or rights to which Executive may be entitled under any law, the articles of incorporation, the bylaws, any agreement, or otherwise. This provision shall survive the expiration or termination of this agreement for any reason,
 
20.    Assumption of Agreement by Company's Successors and Assignees. The Company's rights and obligations under this agreement will inure to the benefit and be binding upon the Company's successors and assignees.
 
21.       Legal Fees. Inthe event of any dispute or proceeding arising under this Agreement where the Executive is ultimately the substantially prevailing party, the Company shall promptly reimburse Executive for all costs, including without limitation, the reasonable attorneys' fees of any attorney of the Executive's choosing, incurred by the Executive in any such dispute or proceeding arising under this Agreement.
 
22.       Assignment. This Agreement shall not be assignable by either party without the prior written consent or the other party, However:
 
(1)    It may be assigned by the Company to any person or entity acquiring all or substantially all of the assets thereof, however Company will remain as a guarantor of obligations hereunder: and
 
(2)    It may be assigned by Executive as to his right to payment, but not as to any of his obligations hereunder; and
 
23,    Severability of Provisions. If any of the provisions of this Agreement or the application of any such provision shall for any reason be held invalid by a court of competent jurisdiction, such invalidity shall not affect or impair any other provision, it being the intention of the parties that such other provisions shall be and remain in   full force and effect.
 
24,    Notices. Ali notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall deemed to have been given at the time when mailed at any office of the United   States Postal Service enclosed in a certified postage-paid envelope addressed to the respective party at the addresses set forth below (together with an   electronic copy to the designated e-mail addresses listed below if notice is being served on Executive) or to such changed address as such party may have fixed by notice to the other party, provided, however, that any notice or change of address shall be affected only upon receipt and further provided that any notice may be personally delivered to the respective party by the party giving notice in lieu of being mailed.
 
7

If to Company:
 
Kraig Biocraft Laboratories, inc. Attention: CORP 95
109 E 17 th Street, Suite 7
Cheyenne, WY 82001
 
If to Executive:
 
Either party may waive this notice provision by providing a written acknowledgement to the other party that the first party has received effective notice.
 
25.        Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the Company, its successors and assigns, and any corporation which may acquire all or substantially all of the Company's assets or into which the Company may be consolidated or merged, and shall inure to the benefit of Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. Upon the Executive's death, all amounts, warrants, and other compensation, to which he is entitled hereunder, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's designee, or, if there be no such designee, to the Executive's estate.
 
26.    Exercise of Warrants. Ail warrants described herein shall contain customary cashless exercise and net issue features allowing the exercise price to be paid by a deduction of the number of shares, which is equivalent in value to the aggregate exercise price, from the equity to be received on exchange, The Company will also authorize Executive the alternative or tendering a six year promissory note as payment for such exercise price. Such note shall be secured entirely by a security interest in the stock which is received in exchange, and Company's recourse shall be limited to said security interest. Said note will allow interest to accrue, until maturation, at the annual rate of 6.1%. All such stock issued shall have the same registration rights, if any, of the Company's founder's stock.
 
27.    Effect of Prior Agreements, This agreement does not supersede, nor shall it be interpreted as conflicting with, the Stock Purchase and intellectual Property Agreement entered into between the parties and dated April 26, 2006.
 
28.    Settlement by Binding Arbitration. Any claim or controversy that arises out of or relates to this agreement, or the breach of it, shall be settled by binding arbitration in accordance with the rules of JAMS. Said arbitration shall be before a single arbitrator whose decision shall be binding and final. Unless the parties agree otherwise, the arbitration shall be held in the JAMS offices in Chicago, Illinois. Judgment upon the award rendered may be entered in any court with jurisdiction. In the event that the dispute involves the withholding by the Company or the refusal to pay by the Company of any compensation due under the provisions of this agreement to Executive, his spouse, family or designee, and such Executive, his spouse, family or designee are the prevailing or substantially prevailing parties, the Arbitrator shall award pm judgment interest on any such compensation at the annual rate of 14% or the maximum amount allowable under the law if less than /4%.
 
29. Vesting of compensation and benefits. Executive's (and where applicable Executive’s Spouse's and Designee's) right(s) to the compensation and benefits described in this Agreement are fully vested as of the date of this Agreement. The conditional events described in numbered paragraphs 4 (g) and 13 shall be interpreted as conditions subsequent, and shall not be interpreted as providing any conditionality and the immediate vesting of the benefit as of the date of this Agreement.
 
 
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30.    Bankruptcy, Security and Liens. It is the intention of the parties that to the greatest extent allowable under the law, the rights and obligations of this employment agreement shall not be waved or subordinated by any bankruptcy. The parties further agree that the obligations of Company hereunder are secured by the Company's assets including its intellectual property. In furtherance of this provision, the Company will, upon request from Employee, file or cause to be filed such liens and notices of Employees security interests in said assets.
 
31.        No Attorney—Client Relationship. No Attorney—Client Confidentiality. Company's Waiver Of Conflicts. It is not the intention of the parties to create by this Agreement or through the employment relationship between them any attorney–client relationship, and Company specially disavows and rejects any such relationship. Executive will be employed in the capacity of Chief Executive Officer of the Company, and will use his skills and talents on the Company's behalf in his capacity as C.E.O. Nothing in this Agreement, in the employment relationship or in Executive's performance of his duties shall be deemed to create an attorney-client relationship with the Company, its shareholders, or its Board of Directors. Company specifically waves any such attorney client relationship. Company has no expectation of attorney client confidentiality in regard to this relationship and specifically waves any such attorney–client confidentiality with Executive. Executive is not an attorney for the Company, and his actions as an officer or director or shareholder shall not be interpreted as the actions of the Company's attorney.
 
Similarly, Company has no expectation that the rules pertaining to conflicts of interests of attorneys, or any other rules relating to the engagement of attorneys apply to this employment relationship. The Company specifically waves any and all such conflicts. Neither will Executives performance of his duties, including without limitation, his role in advising, negotiating, drafting of documents and contracts, preparing and filing governmental notices, documents or fillings, recommending or taking action on behalf of the Company, appearing in pro say on behalf of the   company, or any other service which is performed in his capacity as an officer or director of the company be deemed to constitute the giving of legal advice. Company acknowledges that if it is at any time in need of, or desires, legal advice or legal services it must retain outside attorneys to render such advice or service. This provision may only be waved in a writing signed by both parties which explicitly and conspicuously states both the party's intention to waive this numbered paragraph 31.
 
32.    Execution in Counterparts. This Agreement may be executed by the parties hereto signing the same instrument, or by each party hereto signing a separate counterpart or counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument The parties agree that documents executed by facsimile or electronic transmission shall be acceptable in this   transaction, and the signatures thereof shall have the same force and effect as original signatures.
 
33.    Waiver. The failure of any party to insist in any one or more Instances upon performance of any terms or conditions of this Agreement shall not be construed as a waiver of future performance of any such term, covenant or conditions, but the obligations of either party with respect thereto shall continue in full force and effect.
 
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal the day and year above first written.
 
 
 
Executive
Company
   
   
/s/  Kim Thompson
/s/  Kim Thompson
Kim Kraig Thompson
Kim Kraig Thompson
  C.E.O.
  On behalf of Kraig Biocraft Laboratories, Inc.

9

STOCK PURCHASE AND INVESTOR RIGHTS AGREEMENT

This Stock Purchase and Investor Rights Agreement (this "Agreement") is made and entered into as of December 29, 2006 by and among Worth Equity Fund, L.P., a Delaware Limited Partnership with offices at Wachovia Financial Center, 51st Floor, Suite 5120, 200 South Biscayne Blvd., Miami, FL 33131-2310 ("Worth" or "Purchaser") and Kraig Biocraft Laboratories, Inc., a Wyoming corporation with offices at 120 North Washington Square, Suite 805, 'Lansing, Michigan 48933 (the "Company' or “Kraig") (Worth and the Company are collectively referenced herein as, the "Parties").

PRELIMINARY STATEMENTS

 
A.    The Company is in the business of developing recombinant fiber (the "Business").
 
B.   The Company desires to issue and sell to the Purchaser, and the Purchaser desires to subscribe for and acquire from the Company, an equity interest in the Company upon the terms and conditions herein attar set forth, and conditioned upon the rights granted to it hereunder. hereunder.

NOW, THERFFORE, in the Parties agree as follows:

1.            Agreement to Purchase and Sell the Stock . The Company will sell to Purchaser, and Purchaser  Agrees to purchase no par value common stock (the "Stock") of the Company as set forth below:

 
1.1
175,000 shares of Stock for S15,000 within five (5) business days of execution of this Agreement;

 
1.2
1,750,000 shares of Stock for $150,000 within thirty (30) business days of
 
execution of this Agreement;

 
1.3
1,166,650 shares of Steele for $100„000 within one hundred and eighty (130) days of execution of this Ageement and

 
1.4
At Purchaser's option, up to 10;908,350 additional shares of Stock for $0.085714 per share on or before a date that is one year from the execution of this Agreement (the "Additional Purchase").

2.
Closing and Payments . Subject to the terms and conditions hereof, and in 'reliance: upon The written representations and warranties of the Company, Purchaser will purchase, at closing on the dates set forth in Section 1, the Stock as set forth in Section 1 (the "Closings"). The Closings shall be held at the offices of Guzov Ofsink, LLC, 600 Madison Avenue 14 th floor, New York, New York 10022. At the Closings, the Company will deliver to TV-chaser original stock certificates evidencing the Stock to be purchased hereunder and Purchaser will deliver to Sellers the purchase price by wire transfer, cashier's check, or by such cattier moans as the Parties may agree upon in writing.



3.
Representations, Warranties and Covenants of the Company . The Company hereby represents, warrants and covenants to Purchaser that the statements in the following paragraphs of this Section 3 are an true and complete as of the date hereof

 
3.1
Authority; Due Authorization . This Agreement has been duly and validly executed and delivered by the Company, and upon the execution and delivery by Purchaser of this Agreement and the performance by Purchaser of its obligations herein, will constitute, a legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, except as such enforcement may be limited by bankruptcy or insolvency laws or other laws affecting enforcement of creditors' rights or by general principles of equity.

 
3.2
No Conflicts . The execution and delivery by the Company of this Agreement does not and the- performance by the Company of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not, conflict with or result in a violation or breach of any of the terms, conditions or provisions of any other agreement to which the company is a party.

 
3.3
Valid issue . The Stock being purchased by the Purchaser hereunder shall be at the Closings, duly and validly issued, fully paid, and non-assessable and in each instance have been issued in accordance with the registration requirements or applicable securities laW:4, including, without limitation, the Securities Act of 1933, as amended (the “Act”), or valid exemptions there from.

 
3.4
Corporate Documents . The Company's current certificate of incorporation and
 
bylaws, as of the date hereof and arc in the form attached hereto as attachment A.

 
3.5
The Company . The Company, and its subsidiaries, are corporations duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation.

 
3.6
Capitalization of the Company . Immediately prior to the first Closing, the authorized capital stock of the Company shall consist of a total of 60,000,000 shares of Class A Common Stock, no par value, 25,000,000 shares of Class B Common Stock, no par value, and 10,000,000 shares of Preferred Stock, no par value. Immediately prior to the Closings there will be no shares of preferred stock outstanding, no shares of Class B Common Stock outstanding and no more than 35,050,000 shares of Common Stock outstanding.
 
 
 
 
There are no commitments to issue, and there are no outstanding warrants, options, convertible securities or debt, preferred stock, or any other securities. In addition, there are no conversion or exchange privileges, preemptive rights, or other rights or agreements to purchase or otherwise acquire or issue any securities of the Company, and there is no agreement or understanding between any persons and/or entities, which affects or relates to the voting or giving of written consents with respect to any security of the Company or any instrument or security exercisable or exchangeable for, or convertible into any security of the Company.

The Company has entered into an agreement with its founder whereby the founder has surrendered rights to royalties and has further  surrendered a curve out for certain applications of the Company's intellectual property in exchange for the company’s promise to use its best reasonable efforts to issue to the founder 200,000 shares of the Company's preferred stock. Said stock shall be issued without any right to receive any dividend. The preferred shares will however have super voting rights equivalent to 100 votes or Cass A Common shares per share of preferred, such that the total issuance of preferred shares to the founder shall have the voting power of 20,000,000 Class A shares,

 
3.7
Subsidiaries . The Company is not own, directly or indirectly, any capital stock or other equity securities of any other corporation, partnership, limited liability company, association or other business entity. The Company is not a participant in any joint venture, partnership or similar arrangement.

 
3.8
Financial Statements . The Company's financial statements annexed hereto as Attachment 13 (the "Financial Statements") fairly present the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments. Except as set forth in the Financial Statements, the Company has no material liabilities (contingent or otherwise). Except as disc1osed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation. The Company intends to maintain a standard system of accounting established and administered in accordance with U.S. GAAP.

 
3.9
No Conflicts . Neither the Company, nor any subsidiary, is in violation of in conflict with, in breach of or in default under any term or provision of, and no right or any party to accelerate, terminate, modify or cancel has come into existence under. (i) its Certificate of Incorporation or By-laws (each as may have been amended, supplemented or restated), (ii) any provision of any judgment, writ, injunction, decree; or order to which the any of then is a party; or (iii) any law, statute, rule or regulation applicable to any or them.

 
3.10
Litigation . There is no action, suit, proceeding; or investigation pending or, to the best knowledge of the Company, currently threatened against the Company or any subsidiary that may affect the validity of this Agreement or the right of the company to enter into this Agreement or to consummate the transactions contemplated hereby.
 
 
 
 
There is no action, suit, proceeding or investigation pending or, to the best knowledge of the Company currently threatened against the Company or its subsidiaries, before any court or by or before any governmental body or any arbitration board or tribunal, nor is there any judgment, decree, injunction or order of any court, governmental department, commission, agency, instrumental at arbitrator against the Company or any of its subsidiaries. The Company and its subsidiaries are not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company or any subsidiary currently pending or which the Company intends to initiate. When any reference to the "knowledge" or "best knowledge" or the Company is made in this Agreement, such terms shall mean the knowledge that would he gained from due inquiry into the matters referenced.

 
3.11
Brokers’ Fees and Commissions . Neither the Company nor any of its officers, directors, employees, stockholders, agents or representatives, have employed any investment banker, broker, or finder in connection with the transactions contemplated by this Agreement and no such person or entity is entitled to a fee with respect to the transactions contemplated by this Agreement.

 
3.12
Applicable Law . The Company has complied in all respects with applicable federal and state laws, rules and regulations applicable to it and all shares of capital stock of the Company have been issued in accordance with applicable federal and state securities laws, rules and regulations.

 
3.13
Books and Financial Records . All the accounts, books, resisters, ledgers, Board minutes and financial and other material records of whatsoever kind of each of the Company arid its subsidiaries have been fully properly and accurately kept and completed; there are no material inaccuracies or discrepancies of any kind contained or reflected therein; and they give and reflect a true and fair view of the financial, contractual and legal position of each company.

 
3.14
Employee Benefit Plans . The Company does net have any "Employee Benefit Plan" as defined in the U.S. Employee Retirement Income Security Act of 1974 or similar plans under applicable laws.

 
3.15
Tax Returns, Payment and Elections . Each of the Company and its subsidiaries has timely filed all Tax (as defined below) returns, statements, reports, declarations and other forms and documents (including, without limitation estimated Tax returns and reports and material information returns and reports) ("Tax. Returns") required pursuant to applicable law to he filed with any Tax Authority (as defined below), all such Tax Returns are accurate, complete and correct in all material respects, and each Company has timely paid all Taxes due.
 
 
 
Each of the Company and its subsidiaries has withheld or collected from each payment made to each of its employees, the amount of all Taxes (including, but not limited to, United States income taxes and other foreign taxes) required to be withheld or collected therefrom, and has paid the same to the proper Tax Authority, For purposes of this Agreement, the following terms have the following meanings:  "Tax" (and, with correlative meaning, "Taxes and "Taxable") Means any and all taxes including, without limitation, (i) any act income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, value added, net worth, license, withholding payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom. duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any United States, local or Foreign governmental authority or regulatory body responsible for the imposition of any such tax (domestic or foreign) (a "Tax Authority"), (ii) any liability for the payment of any amounts of the type described in (I) as a result of being a member of an affiliated , consolidated, combined or unitary group for any taxable period or as the result of being a transferee or successor thereof and (iii) any liability for the payment of any amounts of the type described in (i) or (ii) as a result of any express or implied obligation to indemnify any other person..

 
3.16
Minute Books . The minute books of each of the Company and its subsidiaries contain at complete summary of all meetings of directors and stockholders since the time of incorporation of such company and reflect all transactions referred to in such minutes accurately in all material respects.

 
3.17
Labor Agreements and Actions: Employee Compensation . Neither the Company, nor any of its subsidiaries is bound by or subject to (and none of its assets or properties is bound by or subject to any written or oral, express or implied, contract., commitment or arrangement with any labor union, and no labor union has requested nor has sought to represent any of the employees, representatives or agents of any such company.

 
3.18
Investment Company .  The Company is not an "investment company" or a company "controlled" by an "investment company," within the meaning of the investment Company Act: of 1940, as amended.

4.
Representations and Warranties of Purchaser . Purchaser hereby represents and warrants to the Company that the statements in the following paragraphs of this Section 4 are all true and complete as or the date hereof:
 
 
 
 
4.1
Exempt Transaction . Purchaser understands that the offering and sale of the Stock is intended to be exempt from registration under the Act and exempt from registration or qualification under any state law.

 
4.2
Authorization. Purchaser represents that it has full power and authority to enter into this Agreement. This Agreement has been duly and validly executed and delivered by Purchaser, and upon the execution and delivery by Sellers or this Agreement and the performance by Sellers of their obligations herein, will constitute, a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms, except as such enforcement may be limited by bankruptcy or insolvency laws or other laws affecting enforcement of creditors' rights or by general principles of equity.

 
4.3
Purchase for Own Account. The Stock to he purchased by Purchaser hereunder will be acquired for investment for Purchaser's own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof, and Purchaser has no present intention of selling, granting- any participation in, or otherwise distributing the same.

 
4.4
Investment Experience- The Purchaser understands that the purchase of the Stock involves substantial risk and understands the risk disclosures set forth in Attachment C. Purchaser understands that the securities which are offered hereby are highly speculative and involve a high degree of risk and are only suitable for those persons who, like the Purchaser, can afford to bear the full risk of losing their entire investment. The Purchaser has carefully considered the numerous risks that face a new business venture and especially a new enterprise which is involved in highly speculative scientific and biological laboratory research.

5.
Conditions to the Purchaser's Obligations at the Closing
 
 
5.1
Conditions to Each Closing. Subject to the terms hereof, the obligation of the Purchaser to purchase Stock at a Closing is subject to the fulfillment, prior to the Closing to the satisfaction of the Purchaser, of the following conditions, the waiver of which shall not be effective against Purchaser without written consent thereto.
 
 
5.1.1
Representations and Warranties True and Correct . The representations and warranties made by the Company in Section 3 hereof shall be true and correct and complete as of the date hereof and shall be true and correct and complete as of the date of the Closing with the same force and effect as if they had been made on and as of such date.
 
 
5.1.2
Performance of Obligations . The Company shall have performed end complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before a Closing, or after a Closing.
 
 
 
 
 
5.1.3
Securities Laws. The offer and sale of the Stock to the Purchaser pursuant to this Agreement shall be exempt from the registration trod or qualification requirements or all applicable securities laws.
 
6.
Conditions to the Company's Obligations at the Closings.
 
 
6.1
The obligations of the Purchaser under this Agreement are subject to the fulfillment at or before each Closing of the following conditions:
 
 
6.1.1
Representations and Warranties . The representations and warranties of the Purchaser contained in Section 4 hereof shall be true and correct as of such Closing.
 
 
6.1.2
Payment of Purchase Price . Purchaser shall have delivered to the Sellers the applicable purchase price.
 
7.
Additional Agreements and Investor Rights.
 
 
 
7.1
Company Agreements .
 
 
7.1.1
Registration Rights .
 
 
7.1.1.1
Filing of Registration Statement . The Company shall file a registration statement with the SEC under the Securities Act on an appropriate form for the registration of the resale of the Stock by the Purchaser or its designees within sixty (60) days or a written request by the Purchaser. In the event additional shares of Stock are issuable pursuant to Section 7.1.5, the Company shall file registration statement (or a post-effective amendment to the registration required by this Section to register such additional Stock) with the SEC under the Securities Act For the registration of the Stock within sixty (60) days of a written request by Purchaser. This provision 7.1.1 and its subsections are conditioned on the Purchaser having fully or substantially exercised its option under Section 1.4 for the Additional Investment.
 
 
7.1.1.2
Effective Registration Statement . The Company shall use reasonable efforts to cause a. registration statement required pursuant to this Section 7.1.1 to be declared effective by the SEC. A registration statement shall not be deemed to have been effected unless the registration statement has been declared effective by the SEC and has remained effective in compliance with the provisions of the Securities Act with respect to the disposition of all of the Stock covered by such registration statement until such time as all of the Stock has been disposed or in accordance with the intended methods of disposition by each selling stockholder set forth in such registration statement (unless the failure to so dispose of such Shares shall be caused solely by reason of a failure on the part of the selling stockholders).
 
 
 
 
7.1.1.3
Expenses . All expenses (other than fees of counsel to the Purchaser) incurred in connection with registration, filings or qualifications of Shares pursuant to this Sec(ion 7.1.1, including (without limitation) all registration, filing, and qualification fees, printers' and accounting fees, fees and disbursement of counsel for the Company, shall be borne by the Company.
 
 
7.1.1.4
Registration Procedures. The Company shall, as expeditiously as possible:
 
 
 
7.1.1.4.1
use its best efforts to cause, the registration statement filed pursuant to this Section to be declared elective by the SEC within 150 days from the date of the initial filing;
 
 
 
7.1.1.4.2
with regard to Section 7.1.1.4.1, after the 180 th day after the date of the initial filing, and for each 30-calendar day period thereafter in which the registration statement fails to be declared effective:, the Company shall issue to purchaser a number or shares of Stock equal to 2% of Purchaser's Stock covered by such registration statement at that time, up to a maximum of 10%, which Stock shall be included in the registration statement;
 
 
 
7.1.1.4.3
prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all the Stock covered by such registration statement until the earlier of the time as all of such Stock have been disposed of in accordance with the intended methods of disposition by the Investors set forth in such registration statement or the date that the Shares are eligible for resale pursuant to the provisions of Rule 144 under the Securities Act;
 
 
 
 
 
7.1.1.4.4
furnish to the investors' counsel copies of any correspondence between the Company and the SEC with respect to such registration statement or amendments or supplements thereto filed;
 
 
 
7.1.1.4.5
use its reasonable best efforts to (A) register or qualify the Shock under such other securities or blue sky laws of such states and jurisdictions where an exemption is not available and as the investors shall reasonably request, (B) keep such registration or qualification in effect. for so long as such registration statement remains in effect, and (C.) take any other action which may be reasonably necessary or advisable to enable the Investors to consummate the disposition in such jurisdictions of the securities to be sold by the Investors, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this subdivision (vii) be obligated to be so qualified or to consent to general service of process in any such jurisdiction;
 
 
 
7.1.1.4.6
notify the Purchaser at any time when a prospectus relating thereto, is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and at the request of the Investors promptly prepare and furnish to it a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, vet) prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to he stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made; and
 
 
 
7.1.1.4.7
otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC.
 
 
 
 
 
7.1.1.5
Indemnification by the Company . With regard to any registration Statement, the Company will and hereby does, indemnify and hold harmless Purchaser and its directors, officers, partners, agents and affiliates, against any losses whatsoever, joint or several, to which Purchaser or any, such director, officer, partner, agent, affiliate or controlling person may become subject under the Securities Act or otherwise, including, without limitation, the Fees and expenses of legal counsel, insofar as such any losses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged emission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, and the Company will reimburse such Purchaser and each such director, officer, partner, agent, affiliate and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such any claims. Such indemnity shall remain in full force area effect regardless Of any investigation made by or on behalf of such Purchaser or any such director, officer, partner, agent, affiliate or controlling person and shall survive the transfer of such securities by the Purchaser. The indemnification and contribution required by this Section shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or losses are incurred.
 
 
7.1.2
[Intentionally Omitted]
 
 
7.1.3
Rule 144 . The Company agrees that in the event Purchaser, or any of its direct transfers wish to sell their Stock pursuant to Rule 144 under the Securities Act, the Company shall use its best efforts to remove any restrictive legend from such Stock or otherwise facilitate such holder's being able to sell the stock and in no event shall take more than three (3) business days to remove a restrictive legend from stock upon the presentation of proper representation letters and a Form 144 (if necessary). In the event of breach of this Section 7.1.3, the Company shall repurchase the Stock, at the holder's option, at the highest price during the thirty (30) days following the breach.
 
 
 
 
7.1.4
Access to Books and Records. For a period of twenty four (24) month after the date of this Agreement, the Company shall grant to Purchaser, upon at least two (2) business days written notice, access to all of its corporate books and records.
 
 
7.1.5
Anti-Dilution .
 
 
7.1.5.1
Subject to Section 7.1.52, in the event that a Closing under Section 1.3 shall occur and during the twenty four (24) months after the date of this Agreement, the Company shall sell or issue to any person or entity Stock at a price or valuation of less than $0.085714 per share (as may be adjusted for any stock splits or other events)(a "Dilutive Issuance"), then the Company shall as soon as practicable issue to the Purchaser a number of additional shares of Stock yielded by the following formula:
 
(((B/A)*C)-C)* (E-D)/E

Where:

A- price at which securities are sold
B-$0.085714
C- the number of shares of Stock purchased under this Agreement.
D- the number of shares outstanding prior to a Dilutive issuance.
E- the number of shares outstanding after a Dilutive Issuance.
 
 
7.1.5.2
In the event that a Closing is held for the Additional Investment and during the twenty four (24) months after the date of this Agreement the Company shall effect a Dilutive Issuance, then the Company shall, as soon as practicable issue to the Purchaser a number of shares of Stock yielded by the following formula. When and if this Section becomes effective, Section 7.1.5.1 shall no longer be effective:
 
((B/A)*C)-C-D

Where A, B and C have the definitions contained in Section 7.3.5.1 and where D= the number of shares previously issued under Section 7.1.5.1 with respect to a Dilutive Issuance.
 
 
7.1.5.3
Excepted Issuance . Notwithstanding the foregoing provisions of this Section 7.1.5:
 
 
 
 
 
a) within sixty (60) days of this Agreement, the Company may issue to purchasers of 1,166,650 shares of Stock who pay at least $0.085714 per such share, up to 1,166,650 additional shares of Stock at any price without the same being subject to this section 7.1.5, alt the condition that Kim Thompson shall return to the Company for cancellation, and the Company shall have canceled, 1,166,650 of his shares of Stock.
 
 
 
b) the Company may issue to employees or university' research personnel shares of Stock as employee incentives and bonuses, without the same being subject to this section 7.1.5.
 
 
7.1.6
Stock Splits . For a period or twenty four (24) months after the execution of this Agreement, the Company shall not, without the written consent of the Purchaser, affect any stock split. This provision is conditioned on the Purchaser having fully or substantially exercised its option under provision 1.4 above and having otherwise satisfactorily meet its obligations under this agreement.

 
7.1.7
Provision of Shell Company . The Company hereby agrees that within six (6) months of the date of' this Agreement it shall purchase from Purchaser a majority interest in a publicly held "shell" company which it shall use for a reverse merger transaction for the Company. Worth will consult with and coordinate with Company concerning the above described purchase of a publicly held corporate entity. The Company shall have the right to approve any such purchase and the resulting, reverse merger. This provision is subject to the Company's reasonable due diligence on the proposed shell and upon the parties good faith negotiation ever the purchase price of each shell. This provision is conditioned on the Purchaser having fully or substantially exercised its option tinder provision 1.4 above.

8.            General Provisions .

Successors and Assigns . The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.

 
8.1
Governing Law: Jurisdiction . Any dispute, disagreement, conflict of interpretation or claim arising out of or relating to this Agreement, or its enforcement, shall be governed by the laws of the State of Florida. Sellers and Purchaser hereby irrevocably and unconditionally submit, for themselves and their property, to the nonexclusive Jurisdiction  of the State courts of the State of Florida and of the United States District Court of the Southern District of Florida, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any Such action or proceeding between the two of them may be heard and determined in such Florida State or, to the extent permitted by law, in such Federal court.
 
 

 
Each of the parties hereto, agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced  in other jurisdictions by on the judgment or in any other manner provided by law. Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may new or hereafter have to the laying of venue of any suit, action or proceeding arising, out of or relating to this Agreement in any court referred above. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices below. Nothing in this Agreement will affect the right of any party to this agreement to serve process in any other manner permitted by law. EACH  PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL. PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OROTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
 
 
8.2
Counterparts. This Agreement may be executed in two or more counterparts, with facsimile signatures, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. A telefaxed copy  of this Agreement shall be deemed an original.
 
 
8.3
Headings. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs Hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference.
 
 
 
 
8.4
Cost, Expenses. Each party hereto shall bear its own costs in connection  with the preparation, execution and delivery of this Agreement.
 
 
8.5
Amendments and Waivers. Any term of this Agreement may be amended and the observance  of any term of this agreement may he waived (either generally or in a particular instance and either retroactively  or prospectively), only with the written, consent of the Parties. No delay or omission to exercise any right, power, or remedy accruing to Purchaser, upon any breach, default or noncompliance of the Company under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. All remedies, either under this Agreement, by law, or otherwise afforded to Purchaser, shall be cumulative and not alternative.
 
 
8.6
Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall he enforceable in accordance with its terms.
 
 
8.7
Entire Agreement. This Agreement, together with all attachments and schedules hereto, constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings duties or obligations between the parties with respect to the subject matter hereof. There are no oral agreements representations or warranties between the parties, neither is any party relying upon any prior or contemporaneous oral representations.

 
 
8.8
Further Assurances. From and after the date of this Agreement, upon the request of a Party, the other Parties shall execute and deliver such instruments, documents or other writings as may he reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.
 
 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

WORTH EQUITY FUND, L.P.
By: SPIDER INVESTMENTS, LLC, General Partner


By:   / s/  Edward Defeudis
Edward Defeudis

KRAIG BlOCRAFT LABORATORIES, INC.


By:   /s/  Kim Thompson
Kim Thompson
CEO
 
 
 
MUTUAL RELEASE
 
TO ALL TO WHOM THESE PRESENTS SHALL COME OR MAY CONCERN, KNOW THAT WORTH EQUITY FUND LP (Worth) and KRAIG BIOCRAFT LABORATORIES, INC., (Kraig),  (collectively Worth and Kraig are referred to herein as PARTIES or RELEASORS) for themselves and their respective successors and assigns, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, hereby releases and discharges each other and their respective heirs, executors, administrators, agents, attorneys, successors and assigns, from all actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, covenants, contracts, controversies, agreements, promises, or obligations stemming from that certain stock purchase agreement entered into between the PARTIES  and which is dated December 29, 2006.
 
Pursuant to that agreement, Worth purchased 175,000 shares of the common stock of Kraig Biocraft Laboratories.  Kraig hereby releases Worth from any obligation to purchase additional securities pursuant to said agreement and releases Worth from all other obligations pursuant to said agreement except the agreement of Worth to comply with the relevant securities regulations in regard to said 175,000 shares.  Worth hereby releases Kraig from any obligation to sell any securities to Worth over and above the 175,000 shares of stock that have been transferred to Worth as of this date, and releases Kraig from all other obligations pursuant to said agreement including, without limitation, the anti-dilution provisions of said agreement.  It is the intention of the PARTIES  that as of the execution of this mutual release, neither party will have any continuing contractual obligation to the other.
 
The PARTIES each wave any variances, trespasses, damages, judgments, extents, executions, claims and demands, damages and obligations whatsoever, whether known or unknown, in law, admiralty or equity against the other PARTY, its successors and assigns ever had, now have, or hereafter can, shall or may have for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the day of the date of this RELEASE.
 
Both Kraig. and Worth represent and warrant that they have not heretofore assigned to any person or entity any claim against the other party being released hereunder.
 
Both Kraig and Worth covenant not to sue one another or bring any action or proceeding (or participate in or join in or otherwise act in concert with any action) against the other party with respect to the matters released hereunder.
 
It is RELEASORS’ intention that the execution of this Release will forever bar claims against RELEASORS, to the extent provided herein.
 
This RELEASE shall be governed by the laws of the State of Michigan.  This RELEASE shall inure to the benefit of RELEASORS and RELEASORS successors and assigns.
 
This RELEASE may not be changed orally.
 
IN WITNESS WHEREOF, RELEASORS have executed this RELEASE by their duly authorized officer, as of May 23, 2007.
 
 
WORTH EQUITY FUND LP
 
By:                                                           


KRAIG BIOCRAFT LABORATORIES, INC.


By:                                                           

STOCK PURCHASE AND INVESTOR RIGHTS AGREEMENT
KRAIG BIOCRAFT LABORATORIES, INC.
 
 
This Stock Purchase and Investor Rights Agreement (this “Agreement”) is made and entered into as of May 23, 2007.

By and among Lion Equity, an individual (“Purchaser” or “Subscriber”) and Kraig Biocraft Laboratories, Inc., a Wyoming corporation (the “Company” or “Kraig”).  Purchaser and the Company are collectively referenced herein as the “Parties”.

PRELIMINARY STATEMENTS
 
     A.      The Company is in the business of developing recombinant fiber (the “Business”).
 
     B.       The Company desires to issue and sell to the Purchaser, and the Purchaser desires to subscribe for and acquire from the Company, an equity interest in the Company upon the terms and conditions hereinafter set forth, and conditioned upon the rights granted to it hereunder.
 
     C.       Time  is of the essence, as the Company requires the capital contribution described herin to continue its operations forthwith.
 
     NOW, THEREFORE, in the Parties agree as follows:
 
 
1.       Agreement to Purchase and Sell the Stock .  The Company will sell to Purchaser, and Purchaser agrees to purchase, no par value, class “A” common stock (the “Stock”) of the Company as set forth below:
 
    1.1       1,687,500 shares of Stock, at eight cents ($0.08) per share, for a total purchase price of  $135,000.00, within seven (7) days of execution of this Agreement.
 
 
2.        Representations, Warranties and Covenants of the Company .  The Company hereby represents, warrants and covenants to Purchaser that the statements in the following paragraphs of this Section 3 are all true and complete as of the date hereof:
 
    2.1       Authority; Due Authorization .  This Agreement, when signed by the Company’s CEO, will have been duly and validly executed and delivered by the Company, and upon the execution and delivery by Purchaser of this Agreement and the performance by Purchaser of its obligations herein, will constitute, a legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, except as such enforcement may be limited by bankruptcy or insolvency laws or other laws affecting enforcement of creditors’ rights or by general principles of equity.
 
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    2.2       No Conflicts .  The execution and delivery by the Company of this Agreement does not, and the performance by the Company of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not, conflict with or result in a violation or breach of any of the terms, conditions or provisions of any other agreement to which the Company is a party.
 
    2.3       Valid Issuance .  The Stock being purchased by the Purchaser hereunder shall be at the Closing, duly and validly issued, fully paid, and non-assessable.
 
    2.4       The Company . The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the state of Wyoming. 

    2.5       Capitalization of the Company . Immediately prior to the Closing, the authorized capital stock of the Company shall consist of a total of 60,000,000 shares of Class A Common Stock, no par value, 25,000,000 shares of Class B Common Stock, no par value and 10,000,000 shares of Preferred Stock, no par value.  Immediately prior to the Closing there will be no more that 200,000 shares of preferred stock outstanding, as described immediately below, no shares of Class B Common Stock outstanding,  and no more than 50,000,000 shares of Common Stock outstanding.  There are no conversion or exchange privileges, preemptive rights, or other rights or agreements to purchase or otherwise acquire or issue any securities of the Company other than have been disclosed to purchaser, and there is no agreement or understanding between any persons and/or entities, which affects or relates to the voting or giving of written consents with respect to any security of the Company or any instrument or security exercisable or exchangeable for, or convertible into any security of the Company.
 
The Company has entered into an agreement with its founder whereby the founder has surrendered  rights to royalties and has further surrendered a carve out for certain applications of the Company’s intellectual property in exchange for the Company’s agreement to issue to the founder 200,000 shares of the Company’s preferred stock.  Said stock shall be issued without any right to receive any dividend.  The preferred shares will however have super voting rights equivalent to 100 votes of Class A Common shares per share of preferred, such that the total issuance of preferred shares to the founder shall have the voting power of 20,000,000 Class A shares.
 
The Company has an obligation to issue additional shares to its employees and/or consultants upon the happening of certain triggering events, specifically the successful completion of certain research benchmarks.
 
 
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    2.6       No Conflicts . Neither the Company, nor any subsidiary, is in violation of, in conflict with, in breach of or in default under any term or provision of, (i) its Certificate of Incorporation or By-laws (each as may have been amended, supplemented or restated), (ii) any provision of any judgment, writ, injunction, decree or order to which the any of them is a party.

          Litigation .      There is no action, suit, proceeding or investigation pending or, to the best knowledge of the Company, currently threatened against the Company or any subsidiary that may affect the validity of this Agreement or the right of the Company to enter into this Agreement or to consummate the transactions contemplated hereby.  There is no action, suit, proceeding or investigation pending or, to the best knowledge of the Company , currently threatened against the Company or its subsidiaries, before any court or by or before any governmental body or any arbitration board or tribunal, nor is there any judgment, decree, injunction or order of any court, governmental department, commission, agency, instrumentality or arbitrator against the Company or any of its subsidiaries.  The Company and its subsidiaries are not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency.
 
    2.7       Brokers’ Fees and Commissions . Neither the Company nor any of its officers, directors, employees, stockholders, agents or representatives, have employed any investment banker, broker, or finder in connection with the transactions contemplated by this Agreement and no such person or entity is entitled to a fee with respect to the transactions contemplated by this Agreement, unless purchaser has otherwise received a disclosure to such effect.
 
    2.8       Applicable Laws .   The Company has complied in all respects with applicable federal and state laws, rules and regulations applicable to it and all shares of capital stock of the Company have been issued in accordance with applicable federal and state securities laws, rules and regulations.
 
    2.9       Books and Financial Records .  All the accounts, books, registers, ledgers, Board minutes and financial and other material records of whatsoever kind of each of the Company and its subsidiaries have been fully properly and accurately kept and completed; there are no material inaccuracies or discrepancies of any kind contained or reflected therein; and they give and reflect a true and fair view of the financial, contractual and legal position of each company. 
 
    2.10     Tax Returns, Payments and Elections . Each of the Company and its subsidiaries has timely filed all Tax (as defined below) returns, statements, reports, declarations and other forms and documents (including, without limitation, estimated Tax returns and reports and material information returns and reports) (“Tax Returns”) required pursuant to applicable law to be filed with any Tax Authority (as defined below), all such Tax Returns are accurate, complete and correct in all material respects, and each Company has timely paid all Taxes due.  

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    2.11     Minute Books .  The minute books of each of the Company and its subsidiaries contain a complete summary of all meetings of directors and stockholders since the time of incorporation of such company and reflect all transactions referred to in such minutes accurately in all material respects.  
 
    2.12     Labor Agreements and Actions; Employee Compensation .  Neither the Company, nor any of its subsidiaries is bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or has sought to represent any of the employees, representatives or agents of any such company.  
 
    2.13     Investment Company .  The Company is not an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.  
 
3.       Representations and Warranties of Purchaser .  Purchaser hereby represents and warrants to the Company that the statements in the following paragraphs of this Section 4 are all true and complete as of the date hereof:
 
    3.1       Exempt Transaction . Purchaser understands that the offering and sale of the Stock is intended to be exempt from registration under the Act and exempt from registration or qualification under any state law.  
 
    3.2       Authorization .  Purchaser represents that it has full power and authority to enter into this Agreement. This Agreement has been duly and validly executed and delivered by Purchaser, and upon the execution and delivery by Sellers of this Agreement and the performance by Sellers of their obligations herein, will constitute, a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms, except as such enforcement may be limited by bankruptcy or insolvency laws or other laws affecting enforcement of creditors’ rights or by general principles of equity. 

    3.3       Purchase for Own Account .The Stock to be purchased by Purchaser hereunder will be acquired for investment for Purchaser’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof, and Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same.  
 
    3.4        Investment Experience .  The Purchaser understands that the purchase of the Stock involves substantial risk and understands the risk disclosures set forth in Attachment C. Purchaser understands that the securities which are offered hereby are highly speculative and involve a high degree of risk and are only suitable for those persons who, like the Purchaser, can afford to bear the full risk of losing their entire investment.  The Purchaser has carefully considered the numerous risks that face a new business venture and especially a new enterprise which is involved in highly speculative scientific and biological laboratory research.  
 
 
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4.       Conditions to the Purchaser’s Obligations at the Closings .
 
 
    4.1       Conditions to Each Closing .  Subject to the terms hereof, the obligation of the Purchaser to purchase Stock at a Closing is subject to the fulfillment, prior to the Closing to the satisfaction of the Purchaser, of the following conditions, the waiver of which shall not be effective against Purchaser without written consent thereto:  
 
              4.1.1       Representations and Warranties True and Correct . The representations and warranties made by the Company in Section 3 hereof shall be true and correct and complete as of the date hereof, and shall be true and correct and complete as of the date of the Closing with the same force and effect as if they had been made on and as of such date.
 
             4.1.2       Performance of Obligations . The Company shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by it on or before a Closing, or after a Closing. 
 
5.       Conditions to the Company’s Obligations at the Closings.
 
    5.1      The obligations of the Purchaser under this Agreement are subject to the fulfillment at or before each Closing of the following conditions: 

           5.1.1       Representations and Warranties . The representations and warranties of the Purchaser contained in Section 4 hereof shall be true and correct as of such Closing. 
 
              5.1.2       Payment of Purchase Price .  Purchaser shall have delivered to the Sellers the applicable purchase price.

6.        Additional Agreements and Investor Rights . 
 

 
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          6.1.1       Anti-Dilution .  

                       6.1.1.1   In the event that during the twelve (12) months after the date of this Agreement, the Company shall sell or issue to any person or entity Stock at a price or valuation of less than $0.08 per share (as may be adjusted for any stock splits or other events)(a “Dilutive Issuance”), then the Company shall as soon as practicable issue to the Purchaser a number of additional shares of Stock so that the total number of shares issued to Purchaser pursuant to this agreement shall be such that the Purchaser will receive the benefit of the lower issuance price, the issuance of such additional shares will be yielded by the following formula:
 
                      (B/A)-C                                           Where:
 
                      A= price at which securities are sold
                   B= $135,000 (the consideration for this agreement)
                      C=1,687,500 (the number of shares purchased under this Agreement).
 
                     6.1.1.2   Excepted Issuances . Notwithstanding the foregoing provisions of this Section 6, the Company may issue to employees or university research personnel, or consultants, shares of Stock as incentives and bonuses,  without the same being subject to this section,
 
        Rule 144 .  The Purchaser agrees that he will transfer these securities only in accordance with rule 144.
 
7.       General Provisions . 
 
        Successors and Assigns .  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties.
 
    7.1       Governing Law; Jurisdiction .   Any dispute, disagreement, conflict of interpretation or claim arising out of or relating to this Agreement, or its enforcement, shall be governed by the laws of the State of Michigan.  Sellers and Purchaser hereby irrevocably and unconditionally submit, for themselves and their property, to the nonexclusive jurisdiction of the State courts of the State of Michigan and of the United States District Court in Grand Rapids Michigan, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding between the two of them may be heard and determined in such Michigan State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
 
 
 
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                    Each party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to above.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.  Each party to this Agreement irrevocably consents to service of process in the manner provided for notices below.  Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.   EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
 
    7.2       Counterparts .  This Agreement may be executed in two or more counterparts, with facsimile signatures, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement.  A telefaxed copy of this Agreement shall be deemed an original.   
 
    7.3       Headings .  The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.  All references in this Agreement to sections, paragraphs, exhibits and schedules shall, unless otherwise provided, refer to sections and paragraphs hereof and exhibits and schedules attached hereto, all of which exhibits and schedules are incorporated herein by this reference.  

    7.4       Costs, Expenses .  Each party hereto shall bear its own costs in connection with the preparation, execution and delivery of this Agreement.   

    7.5       Amendments and Waivers .  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Parties.  
 
 
 
 
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                    No delay or omission to exercise any right, power, or remedy accruing to Purchaser, upon any breach, default or noncompliance of the Company under this Agreement shall impair any such right, power, or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring.  All remedies, either under this Agreement, by law, or otherwise afforded to Purchaser, shall be cumulative and not alternative.   
 
    7.6       Severability .  If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.   
 
    7.7       Entire Agreement .  This Agreement, together with all attachments and schedules hereto, constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes any and all prior negotiations, correspondence, agreements, understandings duties or obligations between the parties with respect to the subject matter hereof.  There are no oral agreements representations or warranties between the parties, neither is any party relying upon any prior or contemporaneous oral representation.   
 
    7.8       Further Assurances .  From and after the date of this Agreement, upon the request of a Party, the other Parties shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

 
In Witness Whereof , the parties hereto have executed this Agreement as of the date first written above.


PURCHASER


By:________________________



KRAIG BIOCRAFT LABORATORIES, INC.



By :/s/Kim Thompson                        
      Kim Thompson
      CEO
 
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LIST OF SUBSIDIARIES
 
 
 
None
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



We hereby consent to the use in this Registration Statement on Form SB-2 of our report dated August 20, 2007 except for Note 6, to which the date is September 5, 2007 relating to the December 31, 2006 financial statements of Kraig Biocraft Laboratories, Inc.

We also consent to the reference to our Firm under the caption "Experts" in the Registration Statement.

 
WEBB & COMPANY, P.A.
Certified Public Accountants


Boynton Beach, Florida
September 26, 2007