----

----

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

----

|   | Wyoming                        |   | 83-0459707          |   |
|--------|------------------------------------------|--------|---------------------|--------|
|   | (State or other jurisdiction   |   | (I.R.S. Employer    |   |
|   | of incorporation or organization)   |   | Identification No.) |   |

----

----

----

----

|                              |   |                                                            |         |                                |   |   |
|-----------------------------------|--------|-----------------------------------------------------------------|--------------|-------------------------------------|--------|--------|
| Large accelerated filer |   |  ̈                                                          |    | Accelerated filer              |   |  ̈ |
|                              |   |                                                            |         |
| Non-accelerated filer             |   |  ̈  (Do not check if a smaller reporting company) |    | Smaller reporting company |   | x      |

----

| PAGE   | 1      | CONDENSED BALANCE SHEETS AS OF JUNE 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009 (RESTATED).                                                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                |
| PAGE   | 2      | CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (RESTATED) AND FOR THE PERIOD APRIL 25, 2006 (INCEPTION) TO JUNE 30, 2010 (UNAUDITED). |
|   |   |                                                                                                                                                                                |
| PAGES  | 3      | CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE PERIOD FROM APRIL 25, 2006 (INCEPTION) TO JUNE 30, 2010 (UNAUDITED).                                          |
|   |   |                                                                                                                                                                                |
| PAGE   | 4      | CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 2010 AND 2009 (RESTATED) AND FOR THE PERIOD APRIL 25, 2006 (INCEPTION) TO JUNE 30, 2010 (UNAUDITED) .        |
|   |   |                                                                                                                                                                                |
| PAGES  | 5 - 21 | NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED).                                                                                                                                |
|   |   |                                                                                                                                                                                |

----

| Kraig Biocraft Laboratories, Inc.                                                       |   |
|-----------------------------------------------------------------------------------------|--------|
| (A Development Stage Company)                                                           |   |
| Condensed Balance Sheets                                                                |   |
|                                                                                    |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |
| ASSETS                                                                                  |   |
|                                                                                    |   |   |   |   |   |   |
|                                                                                    |   | June 30, 2010 |   |   | December 31, 2009 |   |
|                                                                                    |   | (Unaudited) |   |   | (Restated) |   |
| Current Assets                                                                          |   |   |   |   |   |   |
| Cash                                                                                    |   | $ | 7,763 |   |   | $ | 24,570 |   |
| Prepaid Expenses                                                                        |   |   | - |   |   |   | 3,124 |   |
| Total Current Assets                                                                    |   |   | 7,763 |   |   |   | 27,694 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Property and Equipment, net                                                             |   |   | 890 |   |   |   | - |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Assets                                                                            |   | $ | 8,653 |   |   | $ | 27,694 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' DEFICIT                                                   |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Current Liabilities                                                                     |   |   |   |   |   |   |   |   |
| Accounts payable                                                                        |   | $ | 161,730 |   |   | $ | 111,871 |   |
| Note payable                                                                            |   |   | 6,990 |   |   |   | - |   |
| Royalty agreement payable - related party                                               |   |   | 75,000 |   |   |   | 85,000 |   |
| Accrued Expenses  - related party                                             |   |   | 778,861 |   |   |   | 631,576 |   |
| Derivative Liability - Related Party                                                    |   |   | 2,058,625 |   |   |   | - |   |
| Derivative Liability                                                                    |   |   | 116,368 |   |   |   | 2,346,624 |   |
| Total Current Liabilities                                                               |   |   | 3,197,574 |   |   |   | 3,175,071 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Long Term Liabilities                                                                   |   |   |   |   |   |   |   |   |
| Convertible note payable - net of debt discount                                         |   |   | 5,000 |   |   |   | 27,400 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Liabilities                                                                       |   |   | 3,202,574 |   |   |   | 3,202,471 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Commitments and Contingencies                                                           |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Stockholders' Deficit                                                                   |   |   |   |   |   |   |   |   |
|   Preferred stock, no par value; unlimited shares authorized,                 |   |   |   |   |   |   |   |   |
| none issued  and outstanding                                                  |   |   | - |   |   |   | - |   |
|   Common stock Class A,  no par value; unlimited shares authorized, |   |   |   |   |   |   |   |   |
| 523,583,719 and 502,495,099 shares issued and outstanding, respectively                 |   |   | 1,163,092 |   |   |   | 821,050 |   |
|   Common stock Class B,  no par value; unlimited shares authorized, |   |   |   |   |   |   |   |   |
| no shares issued and outstanding                                                        |   |   | - |   |   |   | - |   |
|   Common Stock Issuable, 1,122,311 and 11,122,311 shares, respectively        |   |   | 22,000 |   |   |   | 222,000 |   |
|   Additional paid-in capital                                                  |   |   | 42,060 |   |   |   | 42,060 |   |
| Deferred Compensation                                                                   |   |   | - |   |   |   | (103,333 | ) |
|   Deficit accumulated during the development stage                            |   |   | (4,421,073 | ) |   |   | (4,156,554 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Stockholders' Deficit                                                             |   |   | (3,193,921 | ) |   |   | (3,174,777 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Liabilities and Stockholders' Deficit                                             |   | $ | 8,653 |   |   | $ | 27,694 |   |

----

| Kraig Biocraft Laboratories, Inc.                          |   |
|------------------------------------------------------------|--------|
| (A Development Stage Company)                              |   |
| Condensed Statements of Operations                         |   |
| (Unaudited)                                                |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                       |   | For the Three Months Ended |   |   | For the Six Months Ended |   |   | For the Period from April 25, 2006 |   |
|                                                       |   | June 30. |   |   | June 30, |   |   | June 30, |   |   | June 30, |   |   | (Inception) to |   |
|                                                       |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |   | June 30, 2010 |   |
|                                                       |   |   |   |   | (Restated) |   |   |   |   |   | (Restated) |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                                                    |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Expenses                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General and Administrative                                 |   |   | 30,340 |   |   |   | 18,599 |   |   |   | 48,476 |   |   |   | 34,060 |   |   |   | 230,723 |   |
| Public Relations                                           |   |   | 3,948 |   |   |   | - |   |   |   | 103,948 |   |   |   | - |   |   |   | 208,395 |   |
| Amrotization of Debt Discount                              |   |   | 1,473 |   |   |   | - |   |   |   | 92,600 |   |   |   | - |   |   |   | 120,000 |   |
| Professional Fees                                          |   |   | 20,309 |   |   |   | 13,039 |   |   |   | 25,286 |   |   |   | 16,039 |   |   |   | 149,290 |   |
| Officer's Salary                                           |   |   | 58,390 |   |   |   | 55,084 |   |   |   | 116,779 |   |   |   | 110,169 |   |   |   | 1,009,615 |   |
| Contract Settlement                                        |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 107,143 |   |
| Research and Development                                   |   |   | 15,876 |   |   |   | 51,963 |   |   |   | 24,117 |   |   |   | 57,908 |   |   |   | 468,925 |   |
| Total Operating Expenses                                   |   |   | 130,336 |   |   |   | 138,685 |   |   |   | 411,206 |   |   |   | 218,176 |   |   |   | 2,294,091 |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from Operations                                       |   |   | (130,336 | ) |   |   | (138,685 | ) |   |   | (411,206 | ) |   |   | (218,176 | ) |   |   | (2,294,091 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Income/(Expenses)                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income                                               |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,781 |   |
| Change in fair value of embedded derivative liability      |   |   | (37,950 | ) |   |   | 1,930,017 |   |   |   | 171,631 |   |   |   | (2,211,695 | ) |   |   | (2,054,991 | ) |
| Interest expense                                           |   |   | (12,783 | ) |   |   | (10,248 | ) |   |   | (24,944 | ) |   |   | (18,192 | ) |   |   | (74,772 | ) |
| Total Other Income/(Expenses)                              |   |   | (50,733 | ) |   |   | 1,919,769 |   |   |   | 146,687 |   |   |   | (2,229,887 | ) |   |   | (2,126,982 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (Income) Loss before Provision for Income Taxes        |   |   | (181,069 | ) |   |   | 1,781,084 |   |   |   | (264,519 | ) |   |   | (2,448,063 | ) |   |   | (4,421,073 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for Income  Taxes                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income (Loss)                                          |   | $ | (181,069 | ) |   | $ | 1,781,084 |   |   | $ | (264,519 | ) |   | $ | (2,448,063 | ) |   | $ | (4,421,073 | ) |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income (Loss) Per Share  - Basic and Diluted |   | $ | (0.00 | ) |   | $ | 0.00 |   |   | $ | (0.00 | ) |   | $ | (0.00 | ) |   |   |   |   |
|                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares outstanding              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   during the period - Basic and Diluted          |   |   | 518,689,550 |   |   |   | 501,035,313 |   |   |   | 507,326,749 |   |   |   | 500,196,566 |   |   |   |   |   |

----

| Kraig Biocraft Laboratories, Inc.                                         |   |
|---------------------------------------------------------------------------|--------|
| (A Development Stage Company)                                             |   |
| Statement of Changes in Stockholders Deficit                              |   |
| Condensed For the period from April 25, 2006 (inception) to June 30, 2010 |   |
| (Unaudited)                                                               |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Common Stock - |   |   |   |   |   |   |   |   | Deficit |   |   |   |   |
|                                                                      |   | Preferred Stock |   |   | Common Stock - Class A |   |   | Common Stock - Class B |   |   | Class A SharesTo be issued |   |   |   |   |   | Deffered |   |   | Accumulated during |   |   |   |   |
|                                                                      |   | Shares |   |   | Par |   |   | Shares |   |   | Par |   |   | Shares |   |   | Par |   |   | Shares |   |   | Par |   |   | APIC |   |   | Compensation |   |   | Development Stage |   |   | Total |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, April 25, 2006                                                   |   |   | - |   |   | $ | - |   |   |   | - |   |   | $ | - |   |   |   | - |   |   | $ | - |   |   |   | - |   |   | $ | - |   |   | $ | - |   |   |   | - |   |   | $ | - |   |   | $ | - |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued to founder                                                   |   |   | - |   |   |   | - |   |   |   | 332,292,000 |   |   |   | 180 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 180 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for services ($.01/share)                                    |   |   | - |   |   |   | - |   |   |   | 17,500,000 |   |   |   | 140,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 140,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for services ($.01/share)                                    |   |   | - |   |   |   | - |   |   |   | 700,000 |   |   |   | 5,600 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,600 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock contributed by shareholder                                          |   |   | - |   |   |   | - |   |   |   | (11,666,500 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.05/share)                                        |   |   | - |   |   |   | - |   |   |   | 4,000 |   |   |   | 200 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 200 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.05/share)                                        |   |   | - |   |   |   | - |   |   |   | 4,000 |   |   |   | 200 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 200 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair value of warrants issued                                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 126,435 |   |   |   | - |   |   |   | - |   |   |   | 126,435 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Loss                                                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (530,321 | ) |   |   | (530,321 | ) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2006                                                |   |   | - |   |   |   | - |   |   |   | 338,833,500 |   |   |   | 146,180 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 126,435 |   |   |   | - |   |   |   | (530,321 | ) |   |   | (257,706 | ) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.01/share)                                        |   |   | - |   |   |   | - |   |   |   | 1,750,000 |   |   |   | 15,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 15,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.01/share)                                        |   |   | - |   |   |   | - |   |   |   | 12,000,000 |   |   |   | 103,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 103,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.0003/share)                                      |   |   | - |   |   |   | - |   |   |   | 9,000,000 |   |   |   | 3,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.01/share)                                        |   |   | - |   |   |   | - |   |   |   | 1,875,000 |   |   |   | 15,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 15,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.01/share)                                        |   |   | - |   |   |   | - |   |   |   | 1,875,000 |   |   |   | 15,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 15,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| Stock issued for services ($.01/share)                                    |   |   | - |   |   |   | - |   |   |   | 2,000,000 |   |   |   | 16,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 16,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.01/share)                                        |   |   | - |   |   |   | - |   |   |   | 13,125,000 |   |   |   | 105,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 105,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.003/share)                                       |   |   | - |   |   |   | - |   |   |   | 80,495,000 |   |   |   | 241,485 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 241,485 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.003/share)                                       |   |   | - |   |   |   | - |   |   |   | 200,000 |   |   |   | 600 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 600 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.003/share)                                       |   |   | - |   |   |   | - |   |   |   | 8,300,000 |   |   |   | 24,900 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 24,900 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.003/share)                                       |   |   | - |   |   |   | - |   |   |   | 25,000 |   |   |   | 75 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 75 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.003/share)                                       |   |   | - |   |   |   | - |   |   |   | 120,000 |   |   |   | 360 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 360 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.003/share)                                       |   |   | - |   |   |   | - |   |   |   | 1,025,000 |   |   |   | 3,075 |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,075 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued in connection to cash offering                               |   |   | - |   |   |   | - |   |   |   | 28,125,000 |   |   |   | 84,375 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (84,375 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for services ($.01/share)                                    |   |   | - |   |   |   | - |   |   |   | 600,000 |   |   |   | 6,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 6,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss, for the year ended December 31, 2007                            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (472,986 | ) |   |   | (472,986 | ) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2007                                                |   |   | - |   |   |   | - |   |   |   | 499,348,500 |   |   |   | 779,050 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 42,060 |   |   |   | - |   |   |   | (1,003,307 | ) |   |   | (182,197 | ) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issuable for services ($.01/share)                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 400,000 |   |   |   | 4,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 4,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss, for the year ended December 31, 2008                            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,721,156 | ) |   |   | (1,721,156 | ) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008                                                |   |   | - |   |   |   | - |   |   |   | 499,348,500 |   |   |   | 779,050 |   |   |   | - |   |   |   | - |   |   |   | 400,000 |   |   |   | 4,000 |   |   |   | 42,060 |   |   |   | - |   |   |   | (2,724,463 | ) |   |   | (1,899,353 | ) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Stock issued for cash ($.01/share)                                  |   |   | - |   |   |   | - |   |   |   | 2,500,000 |   |   |   | 25,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 25,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Stock issued for cash ($.008/share)                                 |   |   | - |   |   |   | - |   |   |   | 366,599 |   |   |   | 3,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 3,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Stock issued for services                                           |   |   | - |   |   |   | - |   |   |   | 280,000 |   |   |   | 14,000 |   |   |   | - |   |   |   | - |   |   |   | 722,311 |   |   |   | 18,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 32,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Stock issued for services                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 10,000,000 |   |   |   | 200,000 |   |   |   | - |   |   |   | (103,333 | ) |   |   | - |   |   |   | 96,667 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the year ended December 31, 2009                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (1,432,091 | ) |   |   | (1,432,091 | ) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009                                                |   |   | - |   |   |   | - |   |   |   | 502,495,099 |   |   |   | 821,050 |   |   |   | - |   |   |   | - |   |   |   | 11,122,311 |   |   |   | 222,000 |   |   |   | 42,060 |   |   |   | (103,333 | ) |   |   | (4,156,554 | ) |   |   | (3,174,777 | ) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for services                                                 |   |   | - |   |   |   | - |   |   |   | 500,000 |   |   |   | 5,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (5,000 | ) |   |   | - |   |   |   | - |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for services                                                 |   |   | - |   |   |   | - |   |   |   | 40,000 |   |   |   | 400 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 400 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued in connection with convertible note conversion               |   |   |   |   |   |   | - |   |   |   | 5,694,451 |   |   |   | 100,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 100,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued in connection with convertible note conversion               |   |   | - |   |   |   | - |   |   |   | 854,169 |   |   |   | 15,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 15,000 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash                                                     |   |   | - |   |   |   | - |   |   |   | 4,000,000 |   |   |   | 21,642 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 21,642 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued                                                              |   |   |   |   |   |   |   |   |   |   | 10,000,000 |   |   |   | 200,000 |   |   |   | - |   |   |   | - |   |   |   | (10,000,000 | ) |   |   | (200,000 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred compensation realized                                            |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 108,333 |   |   |   | - |   |   |   | 108,333 |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the six months ended June 30, 2010                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (264,519 | ) |   |   | (264,519 | ) |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, June 30, 2010                                                    |   |   | - |   |   |   | - |   |   |   | 523,583,719 |   |   | $ | 1,163,092 |   |   |   | - |   |   |   | - |   |   |   | 1,122,311 |   |   | $ | 22,000 |   |   | $ | 42,060 |   |   | $ | - |   |   | $ | (4,421,073 | ) |   | $ | (3,193,921 | ) |

----

| Kraig Biocraft Laboratories, Inc.                                                                    |   |
|------------------------------------------------------------------------------------------------------|--------|
| (A Development Stage Company)                                                                        |   |
| Condensed Statements of Cash Flows                                                                   |   |
| (Unaudited)                                                                                          |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                                                 |   | For the Six Months Ended June 30, |   |   | For the Period from April 25, 2006 |   |
|                                                                                                 |   |   |   |   |   |   |   | (Inception) to |   |
|                                                                                                 |   | 2010 |   |   | 2009 |   |   | June 30, 2010 |   |
|                                                                                                 |   |   |   |   | (Restated) |   |   |   |   |
| Cash Flows From Operating Activities:                                                                |   |   |   |   |   |   |   |   |   |
| Net Loss                                                                                             |   | $ | (264,519 | ) |   | $ | (2,448,063 | ) |   | $ | (4,421,073 | ) |
|   Adjustments to reconcile net loss to net cash used in operations                         |   |   |   |   |   |   |   |   |   |   |   |   |
|       Depreciation expense                                             |   |   | 21 |   |   |   |   |   |   |   | 21 |   |
|       Stock issuable for services                                      |   |   | - |   |   |   | - |   |   |   | 22,000 |   |
|       Change in Fair Value of Derivative Liability                     |   |   | (171,632 | ) |   |   | 2,211,695 |   |   |   | 2,054,993 |   |
|       Stock issued for services                                        |   |   | 5,000 |   |   |   | - |   |   |   | 187,180 |   |
|       Amortization of debt discount                                    |   |   | 92,600 |   |   |   | - |   |   |   | 120,000 |   |
|       Warrants issued to employees                                     |   |   | - |   |   |   | - |   |   |   | 126,435 |   |
|       Deferred compensation realized                                   |   |   | 103,334 |   |   |   | - |   |   |   | 200,000 |   |
|   Changes in operating assets and liabilities:                                             |   |   |   |   |   |   |   |   |   |   |   |   |
|       (Increase)Decrease in prepaid expenses                           |   |   | 3,124 |   |   |   | (5,042 | ) |   |   | - |   |
|       Increase in accrued expenses and other payables - related party  |   |   | 159,060 |   |   |   | 131,653 |   |   |   | 705,636 |   |
|       (Decrease) Increase in royalty agreement payable - related party |   |   | (10,000 | ) |   |   | - |   |   |   | 75,000 |   |
|       Increase in accounts payable                                     |   |   | 38,084 |   |   |   | 80,622 |   |   |   | 234,955 |   |
| Net Cash Used In Operating Activities                                                                |   |   | (44,928 | ) |   |   | (29,135 | ) |   |   | (694,853 | ) |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash Flows From Investing Activities:                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Purchase of Fixed Assets and Domain Name                                                             |   |   | (911 | ) |   |   | - |   |   |   | (911 | ) |
| Net Cash Used In Investing Activities                                                                |   |   | (911 | ) |   |   | - |   |   |   | (911 | ) |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash Flows From Financing Activities:                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from Notes Payable - Stockholder                                                            |   |   | - |   |   |   | - |   |   |   | 10,000 |   |
| Repayments of Notes Payable - Stockholder                                                            |   |   | - |   |   |   | - |   |   |   | (10,000 | ) |
| Proceeds from note payable                                                                           |   |   | 6,990 |   |   |   | - |   |   |   | 6,990 |   |
| Proceeds from issuance of convertible note                                                           |   |   | - |   |   |   | - |   |   |   | 120,000 |   |
| Proceeds from issuance of common stock                                                               |   |   | 22,042 |   |   |   | 25,000 |   |   |   | 576,537 |   |
| Net Cash Provided by Financing Activities                                                            |   |   | 29,032 |   |   |   | 25,000 |   |   |   | 703,527 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Increase (Decrease) in Cash                                                                      |   |   | (16,807 | ) |   |   | (4,135 | ) |   |   | 7,763 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash at Beginning of Period                                                                          |   |   | 24,570 |   |   |   | 9,537 |   |   |   | - |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash at End of Period                                                                                |   | $ | 7,763 |   |   | $ | 5,402 |   |   | $ | 7,763 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of cash flow information:                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid for interest                                                                               |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Cash paid for taxes                                                                                  |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of non-cash investing and financing activities:                              |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued in connection with convertible note payable                                            |   | $ | 115,000 |   |   | $ | - |   |   | $ | 115,000 |   |
| Beneficial conversion feature on convertible notes and related debt discount                         |   | $ | 120,000 |   |   | $ | - |   |   | $ | 120,000 |   |

| SUPPLEMENTAL DISCLOSURE OF NON CASH ITEMS                                                                                                                                                                                                                                                                                                                                                                                                                           |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| During the period ended December 31, 2006, the principal stockholder contributed 11,666,500 shares of common stock to the Company as an in kind contribution of stock.  The shares were retired by the Company.                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 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 has issued 28,125,000 additional shares through September 2007 as a result of the subsequent stock issuances  in the amount of $84,375 ($0.003/share). |

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| Table 1                 |   | Black Scholes Inputs for the Convertible Debt and Derivative Financial Instruments |   |
|-------------------------|--------|------------------------------------------------------------------------------------|--------|
| Warrants                |   |                                                                               |   |   |   |   |
|                    |   | As of December 31, 2009                                                       |   |   | As of June 30, 2010 |   |
| Expected Volatility     |   |                                                                               | 448.62 | % |   |   | 448.62 | % |
| Expected Term           |   | 2 years                                                                            |   |   | 1.50 years |   |
| Expected Dividends      |   |                                                                               | 0      | % |   |   | 0 | % |
| Risk Free Interest Rate |   |                                                                               | 1.45   | % |   |   | 1.45 | % |

|                        |   | As of December 31, 2009 |   |   | As of June 30, 2010 |   |
|-----------------------------|--------|-------------------------|--------|--------|-------------------------------|--------|
| Embedded Conversion Options |   |                    |   |   |                          |   |
| Volatility                  |   |                    | 448.66 | %      |                          |   | 448.62 | % |
| Expected Term               |   | 1 year                  |   |   | .75 years                     |   |
| Expected Dividends          |   |                    | 0      | %      |                          |   | 0 | % |
| Risk Free Interest Rate     |   |                    | 1.45   | %      |                          |   | 1.45 | % |

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|                                    |   | Conventional Debt |    |
|-----------------------------------------|--------|-------------------|---------|
| Conventional debt                       |   | $                 | 120,000 |   |
| Less: debt conversion                   |   | $                 | 100,000 |   |
| Less: debt discount                     |   | $                 | 20,000  |   |
| Conventional debt, net of debt discount |   | $                 | 0       |   |

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| 2010 Warrants Outstanding |   |   | Options Exercisable               |   |
|---------------------------|--------|--------|-----------------------------------|--------|
| Range of Exercise Price   |   |   | NumberOutstanding atJune 30, 2010 |   |   | Weighted Average Remaining Contractual Life |   |   | Weighted Average Exercise Price |   |   | NumberExercisable atJune 30, 2010 |   |   | Weighted Average Exercise Price |   |
| $                         | 0.02   |   |                              |   | 6,000,000 |   |   |   | 1.50 |   |   | $ | 0.02 |   |   |   | 6,000,000 |   |   | $ | 0.02 |   |
|                      |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| 2009 Warrants Outstanding |   |   | Options Exercisable                   |   |
|---------------------------|--------|--------|---------------------------------------|--------|
| Range of Exercise Price   |   |   | NumberOutstanding atDecember 31, 2009 |   |   | Weighted Average Remaining Contractual Life |   |   | Weighted Average Exercise Price |   |   | NumberExercisable atDecember 31, 2009 |   |   | Weighted Average Exercise Price |   |
| $                         | 0.02   |   |                                  |   | 6,000,000 |   |   |   | 2.00 |   |   | $ | 0.02 |   |   |   | 6,000,000 |   |   | $ | 0.02 |   |
|                      |   |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| ·   | Common stock Class A, unlimited number of shares authorized, no par value |
|--------------------|---------------------------------------------------------------------------|

| ·   | Common stock Class B, unlimited number of shares authorized, no par value |
|--------------------|---------------------------------------------------------------------------|

| ·   | Preferred stock, unlimited number of shares authorized, no par value |
|--------------------|----------------------------------------------------------------------|

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| 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 protein, 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. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Date                                            |   | Accrued Salary |    |      | Conversion Rate |   |   | Derivative Liability |   |
|-------------------------------------------------|--------|----------------|---------|-----------|-----------------|--------|--------|----------------------|--------|
|                                            |   |           |    |      |            |   |   |                 |   |
| 3/1/2009                                        |   | $              | 388,718 |      |            | $      | 0.002  |                 |   | $ | 1,846,411 |   |
|                                            |   |           |    |      |            |   |   |                 |   |   |   |   |
| 3/1/09-6/30/10                                  |   | $              | 341,178 |      |            | $      | 0.007  |                 |   | $ | 212,214 |   |
|                                            |   |           |    |      |            |   |   |                 |   |   |   |   |
| Total Derivative Liability Less Accrued Salary: |   |           | $       | 2,058,625 |            |

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| » | We expect to spend up to $35,000 per quarter through June 2011 on collaborative research and development of high strength polymers at the University of Notre Dame. 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 $13,700 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.                                                                                               |

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|   | 1. | We will continue to educate our management personnel to comply with the disclosure requirements of Securities Exchange Act of 1934 and Regulation S-K; and |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 2. | We will increase management oversight of accounting and reporting functions in the future.                                                                 |

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|                  | KRAIG BIOCRAFT LABORATORIES, INC. |
|-----------------------|-----------------------------------|
|                  |                              |
| Date: August 20, 2010 | By:                     | /s/ Kim Thompson |
|                  |                              | Kim ThompsonChief Executive Officer |