Reg S(pider): Spidergoats, Spiderworms, Spiderscams Part 3 – (KBLB, GALE, CYTR, Michael McCarthy)

To recap our continuing series on Kraig Biocraft Labs (KBLB), in Part 1, we looked at the history of another spider-silk company, the originator of the field, Nexia Biotech.

In Part 2, we uncovered the involvement of filthy crim lawyer Gregg Jaclin, in foisting this penny stock onto the public markets, and the non-involvement of Kraig CEO Kim Thompson in developing any spider-silk technology whatsoever.

Today let’s explore just how, where, and from whom, Kraig gets its money.

Kraig has recently touted an “investment” from the University of Notre Dame:

However, what really happened is that KBLB didn’t have the cash to pay the school what it has owed the University for YEARS, in return for the technology the company has licensed. An agreement, by the way, that ended in 2017.

On June 6, 2012, the Company entered into a consulting agreement for intellectual property and collaborative research and development with The University of Notre Dame.  On March 4, 2015, the Company entered into a new collaborative research agreements (2015 Notre Dame Research Agreement)  extending the duration of the agreement through March 2016; in February 2016 the agreement was extended to July 31, 2016.  Under the agreement the Company will provide approximately $534,000 in financial support. In May 2017 this agreement was amended to increase the total funding by approximately $189,000 and the duration of this agreement was extended to September 30, 2017. The Company did not extend the agreement after September 30, 2017. As of December 31, 2018 no new agreement has been signed.

Not able to pay off the school, Kraig did a debt-for-equity swap. Notre Dame did increase their equity position, but this is not a vote of confidence, rather an admission that Kraig will never have the money to pay off the debt.

Although Nexia was the biggest life sciences IPO in Canadian history up until that point, and other competitors in the spider silk world, like Bolt Threads, have raised huge sums of venture financing (and a partnership with Patagonia), tiny KBLB has, instead, resorted to financing of the ugliest kind, with the most unseemly of “investors”.

Like the company’s long time benefactor, filthy death spiral-like, future-priced, schlock shop Calm Seas:

On July 17, 2009, we entered into letter agreement for an Equity Line of Credit with Calm Seas Capital, LLC, which was amended on September 14, 2009 (together, as amended, the “Letter Agreement”).
Pursuant to the Letter Agreement with Calm Seas Capital, during a 24 month period we may put to Calm Seas up to an aggregate of $1,000,000 in shares of our Class A common stock for a purchase price equal to 80% of the lowest closing “bid” price of our Class A common stock during the five consecutive trading days immediately following the date we deliver notice to Calm Seas of our election to put shares pursuant to the Letter Agreement.  We may only put shares at the beginning of each calendar month, unless Calm Seas accepts an additional put

and again:

On October 2, 2014, the Company entered into a letter agreement for an equity line of financing up to $7,500,000 (the “Letter Agreement”) with Calm Seas Capital, LLC (“Calm Seas”).
Under the Letter Agreement, over a 24 month period from the effective date of a registration statement covering shares issuable to Calm Seas (the “Effective Date”), we may put to Calm Seas up to an aggregate of $7,500,000 in shares of our Class A common stock for a purchase price equal to 80% of the lowest price of our Class A common stock during the five consecutive trading days immediately following the date we deliver notice to Calm Seas of our election to put shares pursuant to the Letter Agreement.  We may put shares bi-monthly.

Just who is Calm Seas Capital, LLC?

Who is Calm Seas? The infamous Michael McCarthy.

That’s right. Calm Seas Capital, LLC is actually one of the filthiest stock operators of the last 10 years, Michael McCarthy. Probably better known for his “Dream Team Group” alter-ago, he is a vertically integrated stock scammer. One might remember him from such bioturds as Galena (GALE now SLS) CytRx (CYTR), and Lion Bio (LBIO now IOVA).

McCarthy’s M.O.? His Calm Seas outfit invests in scam companies, getting stock a big discount and selling it off to retail suckers. Some of the money the company raises from Calm Seas is required to be spent on IR/PR services provided by none other than Michael and his cronies.

Read about how his companies would pay people to post tout pieces on the internet, most notably on Seeking Alpha. And read about how he got caught. Read about what the Feds think.

Adam Feuerstein, now at Stat, and Richard Pearson have both written extensively on GALE, CYTR, DreamTeam, McCarthy, and the scams they were pulling.

More recently, in March 2019, the company resorted to an older form of financing for scams, Reg S, which seems to be slowly coming back into vogue. Read more about Reg S scams here.

The press release from Kraig was light on details. It merely says:
Under the terms of the stock purchase agreement, the Company issued shares of its class A common stock at a price of $0.06758 per share and warrants to purchase additional shares of its class A common stock at exercise prices of $0.06 and $0.08.

One needs to dig into the filings to get any real information:

On March 9, 2019, Kraig Biocraft Laboratories, Inc. (the “Company”) entered into a purchase agreement with one investor (the “Purchase Agreement”). Pursuant to the Purchase Agreement, the Company issued the investor 14,797,278 Units at a purchase price of $0.06758 per Unit, for total gross proceeds to the Company of $1,000,000. The Units consist of 14,797,278 shares of the Company’s Class A Common Stock (the “Common Stock”) and two warrants (the “Warrants”): (i) one warrant entitles the investor to purchase up to 14,797,278 shares of Common Stock at an exercise price of $0.06 per share (the “6 Cent Warrants”) and (ii) one warrant entitles the investor to purchase up to 7,398,639 shares of Common Stock at an exercise price of $0.08 per share (the “8 Cent Warrant”). The Warrants shall be exercisable at any time from the issuance date until the following expiration dates:
● ½ of all 6 Cent Warrants shares shall expire on March 8, 2021;
● ½ of all 6 Cent Warrants shall expire on March 8, 2022;
● ½ of all 8 Cent Warrants shall expire on March 8, 2022; and,
● ½ of all 8 Cent Warrants shall expire on March 8, 2023.
The securities sold in the private placement were issued in reliance on an exemption from registration under Regulation S of the Securities Act of 1933, as amended (“Regulation S”)
Typically in these deals the “one investor” is actually a boiler room somewhere outside of the United States that then pushes these shares on retail idiots. Usually, when it is a package of shares and warrants, the shares are immediately sold off, and the warrants are kept, enabling the boiler room owner to profit handsomely. Why? Because the warrants have great value. Using Black-Scholes the 6c warrants were actually worth 4c at issuance. The 8c warrants were worth 1.5c at issuance.
In return for $1mm, the buyer received a package worth:
  • 14,797,278 shares, when the stock was trading at 6c = $887,836
  • 14,797,278 Warrants struck @ 6c (each worth 4c) = $591,891
  • 7,398,639 Warrants at struck @ 8c (each worth 1.5c) = $110,979
which equals $1,590,706, an immediate 59% profit. A profit that is substantially higher after the run in KBLB shares over the past month. The identity of the Reg S buyer is still unknown, but there are a grand total of 0 legitimate Reg S investors. Maybe Michael is hiding out overseas somewhere?
THE CONTENT CONTAINED IN THIS BLOG REPRESENTS ONLY THE OPINIONS OF THE AUTHOR. THE AUTHOR MAY HOLD EITHER LONG OR SHORT POSITIONS IN SECURITIES OF VARIOUS COMPANIES DISCUSSED IN THE BLOG. THIS COMMENTARY IN NO WAY CONSTITUTES INVESTMENT ADVICE, AND SHOULD NEVER BE RELIED ON IN MAKING AN INVESTMENT DECISION, EVER. THIS BLOG IS NOT A SOLICITATION OF BUSINESS: ALL INQUIRIES WILL BE IGNORED. THE CONTENT HEREIN IS INTENDED SOLELY FOR THE ENTERTAINMENT OF THE READER, AND THE AUTHOR.
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