----

----

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

| oTRANSITION 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       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| PART I Financial Information                                                                                                                                                                   |       |
|                                                                                                                                                                                                |       |
| Item 1. Financial Statements.                                                                                                                                                                       |   1   |
|                                                                                                                                                                                                |       |
| Condensed Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009 (Restated)                                                                                                      |   F-1 |
|                                                                                                                                                                                                |       |
| Condensed Statements of Operations for the three and nine months ended September 30, 2010 and 2009 (Unaudited) and for the period from April 25, 2006 (Inception) to September 30, 2010 (Unaudited) |   F-2 |
|                                                                                                                                                                                                |       |
| Condensed Statement of Changes in Stockholders’ Deficit for the period from April 25, 2006 (Inception) to September 30, 2010 (Unaudited)                                                      |   F-3 |
|                                                                                                                                                                                                |       |
| Consolidated Statements of Cash Flows for the three months ended September 30, 2010 and 2009 (Unaudited) and for the period from April 25, 2006 (Inception) to September 30, 2010 (Unaudited)       |   F-4 |
|                                                                                                                                                                                                |       |
| Notes to Condensed Financial Statements (Unaudited)                                                                                                                                                 |   F-5 |
|                                                                                                                                                                                                |       |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.                                                                                                |   2   |
|                                                                                                                                                                                                |       |
| Item 4T. Controls and Procedures                                                                                                                                                                    |   4   |
|                                                                                                                                                                                                |       |
| PART II Other Information                                                                                                                                                                      |       |
|                                                                                                                                                                                                |       |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                                 |   4   |
|                                                                                                                                                                                                |       |
| Item 5. Other Information                                                                                                                                                                           |   5   |
|                                                                                                                                                                                                |       |
| Item 6. Exhibits.                                                                                                                                                                                   |   5   |
|                                                                                                                                                                                                |       |
| Signatures                                                                                                                                                                                          |   6   |
|                                                                                                                                                                                                |       |
| Exhibits/Certifications                                                                                                                                                                             |       |

----

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

----

| Kraig Biocraft Laboratories, Inc.                                                       |   |
|-----------------------------------------------------------------------------------------|--------|
| (A Development Stage Company)                                                           |   |
| Condensed Balance Sheets                                                                |   |
|                                                                                    |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |
| ASSETS                                                                                  |   |
|                                                                                    |   |   |   |   |   |   |
|                                                                                    |   | September 30, 2010 |   |   | December 31, 2009 |   |
|                                                                                    |   | (Unaudited) |   |   | (Restated) |   |
| Current Assets                                                                          |   |   |   |   |   |   |
|   Cash                                                                        |   | $ | 11,206 |   |   | $ | 24,570 |   |
|   Prepaid Expenses                                                            |   |   | 5,000 |   |   |   | 3,124 |   |
|      Total Current Assets                                      |   |   | 16,206 |   |   |   | 27,694 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Property and Equipment, net                                                             |   |   | 844 |   |   |   | - |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Assets                                                                            |   | $ | 17,050 |   |   | $ | 27,694 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' DEFICIT                                                   |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Current Liabilities                                                                     |   |   |   |   |   |   |   |   |
|   Accounts payable                                                            |   | $ | 165,783 |   |   | $ | 111,871 |   |
|   Royalty agreement payable - related party                                   |   |   | 67,000 |   |   |   | 85,000 |   |
|   Accrued expenses  - related party                                 |   |   | 355,222 |   |   |   | 631,576 |   |
|   Derivative liability                                                        |   |   | 872,441 |   |   |   | 2,346,624 |   |
| Total Current Liabilities                                                               |   |   | 1,460,446 |   |   |   | 3,175,071 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Long Term Liabilities                                                                   |   |   |   |   |   |   |   |   |
|   Convertible note payable - net of debt discount                             |   |   | 5,000 |   |   |   | 27,400 |   |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Liabilities                                                                       |   |   | 1,465,446 |   |   |   | 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, |   |   |   |   |   |   |   |   |
| 546,850,250 and 502,495,099 shares issued and outstanding, respectively                 |   |   | 1,649,082 |   |   |   | 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                                                  |   |   | 2,812,267 |   |   |   | 42,060 |   |
| Deferred Compensation                                                                   |   |   | (110,000 | ) |   |   | (103,333 | ) |
|   Deficit accumulated during the development stage                            |   |   | (5,821,745 | ) |   |   | (4,156,554 | ) |
|                                                                                    |   |   | . |   |   |   |   |   |
| Total Stockholders' Deficit                                                             |   |   | (1,448,396 | ) |   |   | (3,174,777 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |
| Total Liabilities and Stockholders' Deficit                                             |   | $ | 17,050 |   |   | $ | 27,694 |   |
|                                                                                    |   |   |   |   |   |   |   |   |

----

| Kraig Biocraft Laboratories, Inc.                                   |   |
|---------------------------------------------------------------------|--------|
| (A Development Stage Company)                                       |   |
| Condensed Statements of Operations                                  |   |
| (Unaudited)                                                         |   |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                |   | For the Three Months Ended |   |   | For the Nine Months Ended |   |   | For the Period from April 25, 2006(Inception) to |   |
|                                                                |   | September 30. |   |   | September 30, |   |   | September 30, |   |   | September 30, |   |   | September 30, |   |
|                                                                |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |   | 2010 |   |
|                                                                |   |   |   |   | (Restated) |   |   |   |   |   | (Restated) |   |   |   |   |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                                                             |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Expenses                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General and Administrative                                          |   |   | 406,053 |   |   |   | 12,785 |   |   |   | 454,533 |   |   |   | 38,235 |   |   |   | 636,780 |   |
| Public Relations                                                    |   |   | 2,780 |   |   |   | - |   |   |   | 106,728 |   |   |   | - |   |   |   | 211,175 |   |
| Amrotization of Debt Discount                                       |   |   | - |   |   |   | - |   |   |   | 92,600 |   |   |   | - |   |   |   | 120,000 |   |
| Professional Fees                                                   |   |   | 68,227 |   |   |   | 6,785 |   |   |   | 93,513 |   |   |   | 22,824 |   |   |   | 217,517 |   |
| Officer's Salary                                                    |   |   | 58,390 |   |   |   | 55,154 |   |   |   | 175,169 |   |   |   | 173,935 |   |   |   | 1,068,005 |   |
| Contract Settlement                                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 107,143 |   |
| Research and Development                                            |   |   | 51,099 |   |   |   | 5,946 |   |   |   | 75,216 |   |   |   | 63,854 |   |   |   | 520,024 |   |
| Total Operating Expenses                                            |   |   | 586,549 |   |   |   | 80,670 |   |   |   | 997,759 |   |   |   | 298,848 |   |   |   | 2,880,644 |   |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from Operations                                                |   |   | (586,549 | ) |   |   | (80,670 | ) |   |   | (997,759 | ) |   |   | (298,848 | ) |   |   | (2,880,644 | ) |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Income/(Expenses)                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income                                                        |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,781 |   |
| Amortization of Debt Discount                                       |   |   | - |   |   |   | (4,059 | ) |   |   | - |   |   |   | (4,059 | ) |   |   |   |   |
| Change in fair value of embedded derivative liability               |   |   | (756,073 | ) |   |   | (131,729 | ) |   |   | (748,097 | ) |   |   | (131,729 | ) |   |   | (2,974,719 | ) |
| Change in fair value of embedded derivative liability-related party |   |   | (44,170 | ) |   |   | 543,456 |   |   |   | 119,485 |   |   |   | (1,668,239 | ) |   |   | 119,485 |   |
| Interest expense                                                    |   |   | (13,876 | ) |   |   | (10,898 | ) |   |   | (38,820 | ) |   |   | (29,090 | ) |   |   | (88,648 | ) |
| Total Other Income/(Expenses)                                       |   |   | (814,119 | ) |   |   | 396,770 |   |   |   | (667,432 | ) |   |   | (1,833,117 | ) |   |   | (2,941,101 | ) |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (Income) Loss before Provision for Income Taxes                 |   |   | (1,400,668 | ) |   |   | 316,100 |   |   |   | (1,665,191 | ) |   |   | (2,131,965 | ) |   |   | (5,821,745 | ) |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for Income  Taxes                               |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income (Loss)                                                   |   | $ | (1,400,668 | ) |   | $ | 316,100 |   |   | $ | (1,665,191 | ) |   | $ | (2,131,965 | ) |   | $ | (5,821,745 | ) |
|                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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                   |   |   | 533,186,501 |   |   |   | 502,998,686 |   |   |   | 522,009,574 |   |   |   | 500,837,646 |   |   |   |   |   |

----

| Kraig Biocraft Laboratories, Inc.                                              |   |
|--------------------------------------------------------------------------------|--------|
| (A Development Stage Company)                                                  |   |
| Statement of Changes in Stockholders Deficit                                   |   |
| Condensed For the period from April 25, 2006 (inception) to September 30, 2010 |   |
| (Unaudited)                                                                    |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Common Stock - |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Class A Shares |   |   |   |   |   |   |   |   |   | Deficit |   |   |   |   |
|                                                                           |   | Preferred Stock |   |   | Common Stock - Class A |   |   |   | Common Stock - Class B |   |   | To be issued |   |   |   |   |   | Deffered |   |   |   | Accumulated duringDevelopment |   |   |   |   |
|                                                                           |   | Shares |   |   | Par |   |   | Shares |   |   | Par |   |   |   | Shares |   |   | Par |   |   | Shares |   |   | Par |   |   | APIC |   |   | Compensation |   |   |   |  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 ($.01/share)                                         |   |   | - |   |   |   | - |   |   |   | 540,000 |   |   |   | 5,400 |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (5,000 | ) |   |   |   | - |   |   |   | 400 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for services ($.02/share)                                         |   |   | - |   |   |   | - |   |   |   | 17,885,915 |   |   |   | 334,000 |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | 334,000 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for services ($.08/share)                                         |   |   | - |   |   |   | - |   |   |   | 387,500 |   |   |   | 31,000 |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | 31,000 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for services ($.15/share)                                         |   |   | - |   |   |   | - |   |   |   | 200,000 |   |   |   | 30,000 |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | 30,000 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for services ($.05/share)                                         |   |   | - |   |   |   | - |   |   |   | 280,000 |   |   |   | 14,000 |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | 14,000 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warrants issued for services                                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 168,000 |   |   |   | (168,000 | ) |   |   |   | - |   |   |   | - |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 ($.02/share)                                             |   |   | - |   |   |   | - |   |   |   | 10,000,000 |   |   |   | 200,000 |   |   |   |   | - |   |   |   | - |   |   |   | (10,000,000 | ) |   |   | (200,000 | ) |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | - |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.01/share)                                             |   |   | - |   |   |   | - |   |   |   | 4,000,000 |   |   |   | 28,632 |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | 28,632 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock issued for cash ($.02/share)                                             |   |   | - |   |   |   | - |   |   |   | 4,513,116 |   |   |   | 70,000 |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | 70,000 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deferred compensation realized                                                 |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 166,333 |   |   |   |   | - |   |   |   | 166,333 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Forgiveness of accrued payable to related party                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 499,412 |   |   |   |   |   |   |   |   |   |   |   |   | 499,412 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Forgiveness of derivative liability to related party                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,102,795 |   |   |   |   |   |   |   |   |   |   |   |   | 2,102,795 |   |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the nine months ended September 30, 2010                          |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   | (1,665,191 | ) |   |   | (1,665,191 | ) |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, September 30, 2010                                                    |   |   | - |   |   |   | - |   |   |   | 546,850,250 |   |   | $ | 1,649,082 |   |   |   |   | - |   |   |   | - |   |   |   | 1,122,311 |   |   | $ | 22,000 |   |   | $ | 2,812,267 |   |   | $ | (110,000 | ) | # |   | $ | (5,821,745 | ) |   | $ | (1,448,396 | ) |
|                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Kraig Biocraft Laboratories, Inc.                                                                    |   |
|------------------------------------------------------------------------------------------------------|--------|
| (A Development Stage Company)                                                                        |   |
| Condensed Statements of Cash Flows                                                                   |   |
| (Unaudited)                                                                                          |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |
|                                                                                                 |   | For the Nine Months Ended |   |   | For the Period from April 25, 2006(Inception) to |   |
|                                                                                                 |   |  September 30, |   |   | September 30, |   |
|                                                                                                 |   | 2010 |   |   | 2009 |   |   |  2010 |   |
|                                                                                                 |   |   |   |   | (Restated) |   |   |   |   |
| Cash Flows From Operating Activities:                                                                |   |   |   |   |   |   |   |   |   |
| Net Loss                                                                                             |   | $ | (1,665,191 | ) |   | $ | (2,131,965 | ) |   | $ | (5,821,745 | ) |
|   Adjustments to reconcile net loss to net cash used in operations                         |   |   |   |   |   |   |   |   |   |   |   |   |
|       Depreciation expense                                             |   |   | 67 |   |   |   | - |   |   |   | 67 |   |
|       Stock issuable for services                                      |   |   | - |   |   |   | 18,000 |   |   |   | 22,000 |   |
|       Change in Fair Value of Derivative Liability                     |   |   | 628,613 |   |   |   | 1,799,968 |   |   |   | 2,975,237 |   |
|       Stock issued for services                                        |   |   | 414,000 |   |   |   | 14,000 |   |   |   | 596,180 |   |
|       Amortization of debt discount                                    |   |   | 92,600 |   |   |   | 4,059 |   |   |   | - |   |
|       Warrants issued to employees                                     |   |   | 168,000 |   |   |   | - |   |   |   | 126,435 |   |
|       Warrants issued to consultants                                   |   |   | - |   |   |   | - |   |   |   | 168,000 |   |
|       Deferred compensation realized                                   |   |   | (6,666 | ) |   |   | - |   |   |   | 90,000 |   |
|   Changes in operating assets and liabilities:                                             |   |   |   |   |   |   |   |   |   |   |   |   |
|       (Increase)Decrease in prepaid expenses                           |   |   | (1,876 | ) |   |   | (2,521 | ) |   |   | (5,000 | ) |
|       (Increase)Decrease in other receivables                          |   |   | - |   |   |   | (23,900 | ) |   |   | - |   |
|       Increase in accrued expenses and other payables - related party  |   |   | 225,794 |   |   |   | 203,041 |   |   |   | 857,371 |   |
|       (Decrease) Increase in royalty agreement payable - related party |   |   | (18,000 | ) |   |   | (15,000 | ) |   |   | 67,000 |   |
|       Increase in accounts payable                                     |   |   | 51,174 |   |   |   | 10,900 |   |   |   | 163,045 |   |
| Net Cash Used In Operating Activities                                                                |   |   | (111,485 | ) |   |   | (123,418 | ) |   |   | (761,410 | ) |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 issuance of convertible note                                                           |   |   | - |   |   |   | 120,000 |   |   |   | 120,000 |   |
| Proceeds from issuance of common stock                                                               |   |   | 99,032 |   |   |   | 28,000 |   |   |   | 653,527 |   |
| Net Cash Provided by Financing Activities                                                            |   |   | 99,032 |   |   |   | 148,000 |   |   |   | 773,527 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Increase (Decrease) in Cash                                                                      |   |   | (13,364 | ) |   |   | 24,582 |   |   |   | 11,206 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash at Beginning of Period                                                                          |   |   | 24,570 |   |   |   | 9,537 |   |   |   | - |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash at End of Period                                                                                |   | $ | 11,206 |   |   | $ | 34,119 |   |   | $ | 11,206 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| 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). |
| amount of $84,375 ($0.003/share).                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| During the quarter ended September 30, 2010 the principal stockholder forgave $499,412 in accrued compensation.  Attached to the accrued compensation was an embedded derivative liability, which was also forgiven.  The derivative liability had a fair value of $2,102,795 at the date of forgiveness.                                                                                                                                       |

----

----

----

----

----

| Table 1                       |   | Black Scholes Inputs for the ConvertibleDebt and DerivativeFinancial Instruments |    |
|-------------------------------|--------|----------------------------------------------------------------------------------|---------|
| Warrants                      |   |                                                                             |    |   |   |   |
|                          |   | As of December 31, 2009                                                     |    |   | As of September 30, 2010 |   |
| Expected Volatility           |   |                                                                             | 448.62  | % |   |   | 448.62 | % |
| Expected Term                 |   |                                                                             | 2 years |   |   |   | 1.25 years |   |
| Expected Dividends            |   |                                                                             | 0       | % |   |   | 0 | % |
| Risk Free Interest Rate  |   |                                                                             | 1.45    | % |   |   | 1.45 | % |

| Embedded Conversion Options  |   | As of December 31, 2009 |   |   | As of September 30, 2010 |          |
|-----------------------------------|--------|-------------------------|--------|--------|------------------------------------|---------------|
| Volatility                        |   |                    | 448.66 | %      |                               |          | 448.62 | % |
| Expected Term                     |   | 1 year                  |   |   |                               | .5 years |   |
| Expected Dividends                |   |                    | 0      | %      |                               |          | 0 | % |
| Risk Free Interest Rate      |   |                    | 1.45   | %      |                               |          | 1.45 | % |

----

|                                    |   | Conventional Debt |    |
|-----------------------------------------|--------|-------------------|---------|
| Conventional debt                       |   | $                 | 120,000 |   |
| Less: debt conversion                   |   | $                 | 115,000 |   |
| Less: debt discount                     |   | $                 | 0       |   |
| Conventional debt, net of debt discount |   | $                 | 5,000   |   |

----

----

----

----

| 2010 Warrants Outstanding |                                                                                     |   | Options Exercisable                    |   |
|---------------------------|------------------------------------------------------------------------------------------|--------|----------------------------------------|--------|
| Range of Exercise Price   |                                                                                     |   | NumberOutstanding atSeptember 30, 2010 |   |   | Weighted Average Remaining Contractual Life |   |   | Weighted Average Exercise Price |   |   | NumberExercisable atSeptember 30, 2010 |   |   | Weighted Average Exercise Price |   |
| $                         | 0.02                                                                                     |   |                                   |   | 6,000,000 |   |   |   | 1.25 |   |   | $ | 0.02 |   |   |   | 6,000,000 |   |   | $ | 0.02 |   |
| $                         |               0.00 |   |                                   |   | 20,000,000 |   |   |   | 1.83 |   |   |   | 0.00 |   |   |   | 20,000,000 |   |   |   | 0.00 |   |

| 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 |   |   |   | 2.25 |   |   | $ | 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 |
|--------------------|----------------------------------------------------------------------|

----

----

----

----

| » | We expect to spend approximately $35,000 per quarter through September 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 textile arena, in order to broaden our financial base and facilitate the commercialization of our products. We expect to use a combination of stock and cash for any such purchase.                                                                                                                                                                                                                                                                                                               |
| » | We will also actively consider pursuing collaborative research opportunities with both private and university laboratories in areas of research which overlap the company’s existing research and development. One such potential area for collaborative research which the company is considering is protein expression platforms. If our financing will allow, management will give strong consideration to increasing the breadth of our research to include protein expression platform technologies.                                                                              |
| » | We plan to actively pursue collaborative product testing, manufacturing and marketing opportunities with companies in the textile industry.                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

----

----

----

|   | 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.                                                                 |

----

|   | 31.1 | Certifications by the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.1 | Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                    | KRAIG BIOCRAFT LABORATORIES, INC. |
|-------------------------|-----------------------------------|
|                    |                              |
| Date: November 17, 2010 | By:                     | /s/ Kim Thompson |
|                    |                              | Kim ThompsonChief Executive Officer and Chief Financial Officer |

----