Notes to Financial Statements
Note 1 – Nature of Business and Significant Accounting Policies
Nature of Business
Premier Biomedical, Inc. (“the Company”) was incorporated in the State of Nevada on May 10, 2010 (“Inception”). The Company was formed to develop and market medications and procedures that address a significant number of the most highly visible health issues currently affecting mankind. Our current focus is primarily on the development and distribution of our pain products.
These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.
Equity Method
Investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an Investee depends on an evaluation of several factors including, among others, representation on the Investee company’s board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the Investee company. Under the equity method of accounting, an Investee company’s accounts are not reflected within the Company’s Balance Sheets and Statements of Operations; however, the Company’s share of the earnings or losses of the Investee company is reflected in the caption “Equity in losses of unconsolidated entity” in the Statements of Operations. The Company’s carrying value in an equity method Investee company is typically reflected in the caption “Investment in Joint Venture.” in the Company’s Balance Sheets. As of December 31, 2017, our share of losses from the investee company exceeded our basis, therefore the investment is not currently presented on the balance sheet.
U.S. GAAP considers a change in reporting entity to include “changing specific subsidiaries that make up the group of entities for which consolidated financial statements are presented.” Circumstances may arise where a parent’s controlling financial interest (e.g., generally an ownership interest in excess of 50 percent of the outstanding voting stock) is reduced to a noncontrolling investment that still enables it to exercise significant influence over the operating and financial policies of the investee. A change that results from changed facts and circumstances (such as a partial sale of a subsidiary), where there was only one acceptable method of accounting prior to the change in circumstances (consolidation) and only one acceptable method of accounting after the change (equity method accounting), is not a change in reporting entity and is not be accounted for retrospectively. Accordingly, a change from a controlling interest to a noncontrolling investment accounted for under the equity method is accounted for prospectively from the date of change in control. When the Company’s carrying value in an equity method Investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company guaranteed obligations of the Investee company or has committed additional funding. When the Investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Premier Biomedical, Inc.
Notes to Financial Statements
Cash and Cash Equivalents
We maintain cash balances in non-interest-bearing accounts, which do not currently exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.
Patent Rights and Applications
Patent rights and applications costs include the acquisition costs and costs incurred for the filing of patents. Patent rights and applications are amortized on a straight-line basis over the legal life of the patent rights beginning at the time the patents are approved. Patent costs for unsuccessful patent applications are expensed when the application is terminated.
Fair Value of Financial Instruments
Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, prepaid expenses and accrued expenses reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments.
Basic and Diluted Loss Per Share
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Stock-Based Compensation
Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company’s stock based compensation consisted of the following during the years ended December 31, 2017 and 2016, respectively:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
$
|
84,600
|
|
|
$
|
70,621
|
|
Warrants issued for services, related parties
|
|
|
102,364
|
|
|
|
25,030
|
|
Warrants issued for services
|
|
|
9,617
|
|
|
|
14,739
|
|
Common stock issued for services on terminated offering
|
|
|
586,823
|
|
|
|
-
|
|
Total stock based compensation
|
|
$
|
783,404
|
|
|
$
|
110,390
|
|
Premier Biomedical, Inc.
Notes to Financial Statements
Revenue Recognition
Sales on fixed price contracts are recorded when services are earned, the earnings process is complete or substantially complete, and the revenue is measurable and collectability is reasonably assured. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue from sales in which payment has been received, but the earnings process has not occurred. Sales commenced on July 5, 2017 with the termination of our joint venture and are recognized upon shipment of goods, which are typically paid for at the time of order.
Advertising and Promotion
All costs associated with advertising and promoting products are expensed as incurred. These expenses were $64,108 and $82,246 for the years ended December 31, 2017 and 2016, respectively.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not, that such asset will not be recovered through future operations.
Uncertain Tax Positions
In accordance with ASC 740, “Income Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.
Premier Biomedical, Inc.
Notes to Financial Statements
Recently Issued Accounting Pronouncements
In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-09
,
Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting.
ASU 2017-09, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of
ASU 2017-9
is not expected to have a material impact on the Company’s financial statements or related disclosures.
In January 2017, the FASB issued ASU 2017-04,
Intangibles – Goodwill and Other (Topic 350)
. ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company intends to early adopt the ASU in 2017.
In January 2017, the FASB issued ASU 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business
, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for the Company in the first quarter of 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.
No other new accounting pronouncements, issued or effective during the year ended December 31, 2017, have had or are expected to have a significant impact on the Company’s financial statements.
Premier Biomedical, Inc.
Notes to Financial Statements
Note 2 – Going Concern
As shown in the accompanying financial statements, the Company has no revenues, incurred net losses from operations resulting in an accumulated deficit of $16,328,812, and had negative working capital of ($2,616,204) at December 31, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new products and services to begin generating revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful; therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.
The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3 – Related Party
Other Receivable
The Company advanced a total of $48,778 to its joint venture partner, Premier Biomedical Pain Management Solutions, LLC, and was subsequently repaid a total of $44,604 on July 5, 2017 with the termination of the joint venture, resulting in a loss of $6,232, consisting of the original investment of $2,058 and the loss on this receivable of $4,174.
Accounts Payable
The Company owed $40,195 and $46,016 as of December 31, 2017 and 2016, respectively, to entities owned by the Chairman of the Board of Directors. The amounts are related to patent costs paid by the Chairman on behalf of the Company.
The Company owed $713 and $306 as of December 31, 2017 and 2016, respectively, to the Company’s CEO for reimbursable expenses.
The Company owed $478 and $6,167 as of December 31, 2017 and 2016, respectively, amongst members of the Company’s Board of Directors for reimbursable expenses.
Notes Payable
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from the Company’s CEO. The principal and interest was repaid in full in November of 2017.
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from the Company’s Chairman of the Board. The principal and interest was repaid in full in November of 2017.
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from one of the Company’s Directors. The principal and interest was repaid in full in November of 2017.
Premier Biomedical, Inc.
Notes to Financial Statements
Preferred Stock Issuances for Exercise of Preferred Stock Warrants
On January 29, 2016, the Company issued 1,000,000 shares of series A preferred stock pursuant to the exercise of warrants by the Company’s CEO at $0.001 per share for total proceeds of $1,000.
On January 29, 2016, the Company issued 1,000,000 shares of series A preferred stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.001 per share for total proceeds of $1,000.
Common Stock Warrants Exercised
On November 22, 2017, the Company issued 7,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $70.
On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $40.
On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.00001 per share for total proceeds of $40.
Common
S
tock
Warrants Granted
On December 22, 2017, the Company granted warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (8,500,000 shares); Mitchell Felder (8,500,000 shares), Heidi Carl (6,000,000 shares), John Borza (7,250,000 shares), Jay Rosen (1,000,000 shares), Patricio Reyes (4,000,000 shares) and John Pauly (2,000,000 shares). The exercise price of the foregoing warrants is five cents ($0.005) per share. The warrants are exercisable over seven (7) years. The total fair value of the 37,250,000 common stock warrants using the Black-Scholes option-pricing model is $102,364, or $0.00275 per share, based on a volatility rate of 195%, a risk-free interest rate of 2.01% and an expected term of 3.5 years, and was expensed upon issuance.
Common Stock Issuances for Settlement of Accounts Payments
On March 28, 2016, upon the resignation of Richard Najarian as one of the members of our Board of Directors, the Company issued 600,000 shares of common stock to Mr. Najarian in settlement of $13,765 of outstanding expense reimbursements. The total fair value of the common stock was $9,120 based on the closing price of the Company’s common stock on the date of grant.
Note
4
–
Patent Rights and Applications
The Company amortizes its patent rights and applications on a straight line basis over the expected useful technological or economic life of the patents, which is typically 17 years from the legal approval of the patent applications when there is probable future economic benefits associated with the patent. The Company has elected to expense all of their patent rights and application costs due to difficulties associated with having to prove the value of their future economic benefits. All patent applications are currently pending and the Company has no patents that have yet been approved. It is the Company’s policy that it performs reviews of the carrying value of its patent rights and applications on an annual basis.
Premier Biomedical, Inc.
Notes to Financial Statements
On March 4, 2015, we entered into a Patent License Agreement (“PLA”) with the University of Texas at El Paso (“UTEP”) regarding our joint research and development of CTLA-4 Blockade with Metronomic Chemotherapy for the Treatment of Breast Cancer. This is the first PLA with UTEP following our Collaborative Agreement with them dated May 9, 2012, and memorializes the joint ownership of the applicable patent and the financial and other terms related thereto.
On June 19, 2015, we entered into Amendment No. 1 to this Agreement, pursuant to which we explicitly included Provisional Patent Application No. 62/161,116 entitled, “Anti-CTLA-4 Blockade” (the “Application”) under the definition of “Patent Rights” as set forth in the PLA. The Application was filed with the United States Patent and Trademarks Office on May 13, 2015; the underlying technology was invented by Robert Kirken and Georgialina Rodriguez, and is solely-owned by The Board of Regents of The University of Texas System.
Note 5 – Fair Value of Financial Instruments
Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.
The Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of December 31, 2017 and 2016, respectively:
|
|
Fair Value Measurements at
December 31, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
83,704
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
|
83,704
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible note payable, net of discounts
|
|
|
-
|
|
|
|
169,990
|
|
|
|
-
|
|
Derivative liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
2,255,781
|
|
Total liabilities
|
|
|
-
|
|
|
|
169,990
|
|
|
|
2,255,781
|
|
|
|
$
|
83,704
|
|
|
$
|
(169,990
|
)
|
|
$
|
(2,255,781
|
)
|
Premier Biomedical, Inc.
Notes to Financial Statements
|
|
Fair Value Measurements at
December 31, 2016
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level
3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
22,437
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
|
22,437
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible note payable, net of discounts
|
|
|
-
|
|
|
|
153,024
|
|
|
|
-
|
|
Notes payable, related parties
|
|
|
|
|
|
|
30,000
|
|
|
|
-
|
|
Derivative liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
221,822
|
|
Total liabilities
|
|
|
-
|
|
|
|
183,024
|
|
|
|
221,822
|
|
|
|
$
|
22,437
|
|
|
$
|
(183,024
|
)
|
|
$
|
(221,822
|
)
|
The fair values of our related party debts are deemed to approximate book value, and are considered Level 2 inputs as defined by ASC Topic 820-10-35.
There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the years ended December 31, 2017 or the year ended December 31, 2016.
Note 6 – Joint Venture
On September 13, 2016, we entered into an operating agreement to form a pain management joint venture company with Advanced Technologies Solutions (ATS), a company based in San Diego, California and owned by Ronald T. LaBorde, a member of our Board of Directors. The joint venture company, Premier Biomedical Pain Management Solutions, LLC, a Nevada limited liability company (PBPMS), to develop and market natural and cannabis-based generalized, neuropathic, and localized pain relief treatment products. We owned 50% of PBPMS and ATS owned the other 50%, with 89% of the profits allocated to us and the remaining 11% of profits allocated to ATS. As part of the agreement with ATS, Mr. LaBorde was appointed a member of our Board of Directors.
PBPMS was required to enter into separate license agreements with us and ATS for the use of technology previously developed by both companies. Intellectual property developed jointly by the parties will be the property of PBPMS. However, ATS and Mr. LaBorde could have developed inventions and intellectual property independently from PBPMS, and such inventions and intellectual property would have been the sole property of ATS or Mr. LaBorde. Pursuant to the terms of the PBPMS operating agreement, The Company was to tender 1,250,000 warrants, for the purchase of an equal number of shares of our common stock at a strike price of $0.05, pursuant to the license agreement between ATS and PBPMS. The Company and Mr. LaBorde did not execute the license agreement or issue these warrants, and on July 5, 2017, the Company terminated the joint venture agreement, resulting in a loss of $6,232.
Premier Biomedical, Inc.
Notes to Financial Statements
Our initial capital contribution to PBPMS was $25,000. ATS was to contribute (i) technical, labor, manufacturing information and know-how required to produce the initial product, an extended duration topical pain relief patch; (ii) $5,000 worth of primary ingredients; and (iii) $5,000 worth of other materials to produce the initial prototype pain relief patches.
PBPMS was managed by a board of managers (PBPMS Board). The PBPMS Board consisted of William A. Hartman, our President and Chief Executive Officer and member of our Board of Directors, Ronald T. LaBorde, the Founder of ATS and member of our Board of Directors, Dr. Patricio Reyes, our Chief Technology Officer and member of our Board of Directors, and John Borza, our Vice-President and member of our Board of Directors. Decisions of the PBPMS Board require unanimous approval.
The PBPMS operating agreement was subject to other common terms and ownership transfer restrictions, including a right of first refusal; however, the operating agreement and entity were dissolved upon the termination of the joint venture on July 5, 2017.
Note 7 – Subsidiary Formation
On January 1, 2018, we transferred the assets of our pain relief operations to Premier Biomedical Pain Relief Meds, LLC, a wholly-owned subsidiary formed on September 14, 2017.
Note 8 – Convertible Notes Payable
Convertible notes payable consist of the following at December 31, 2017 and 2016, respectively:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second Diamond Rock Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. Currently in default.
|
|
$
|
50,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second SEG Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $10,000 of principal was converted into 5,208,333 shares of common stock on October 31, 2017. Currently in default.
|
|
|
40,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second RDW Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $50,000 of principal was converted into an aggregate of 31,015,038 shares of common stock at various dates between November 8, 2017 and December 26, 2017.
|
|
|
-
|
|
|
|
-
|
|
Premier Biomedical, Inc.
Notes to Financial Statements
On August 8, 2017, the Company entered into an exchange agreement with Diamond Rock, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First Diamond Rock Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $15,000 of principal was converted into an aggregate of 7,812,500 shares of common stock at various dates between November 6, 2017 and November 13, 2017. Currently in default.
|
|
|
35,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On August 8, 2017, the Company entered into an exchange agreement with The Special Equities Group, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First SEG Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. Currently in default.
|
|
|
50,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On August 8, 2017, the Company entered into an exchange agreement with RDW Capital, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First RDW Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $25,000 of principal was converted into 13,157,895 shares of common stock on October 31, 2017. Currently in default.
|
|
|
25,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On October 10, 2016, the Company issued a 10% interest bearing; unsecured convertible promissory note with a face value of $300,000 (“Seventh Redwood Note”), which matures on October 10, 2017, pursuant to a Warrant Purchase Agreement by and among Redwood Management, LLC, the Company and Typenex. Pursuant to this agreement, Redwood purchased the warrants from Typenex, and Typenex provided a Satisfaction of Judgment and Release of Garnishment to release the Writ of Garnishment Typenex had placed on our transfer agent. Redwood paid installment payments to Typenex in the aggregate amount of $300,000, which were completed on, or about November 10, 2016. The principal and interest of the Seventh Redwood Note is convertible into shares of common stock at the discretion of the note holder at a price equal to the greater of (i) 60% of the lowest traded price over the 15 days prior to conversion or (ii) a fixed $0.00005 per share. The note carries liquidated damages of $1,000 per day for failure to provide certificates, and compensation for Buy-In on failure to timely deliver certificates. Principal and interest is due upon default at 50% of the lowest traded price over the previous fifteen (15) days, and an additional interest rate equal to the lesser of 2% per month (24% per annum) or the maximum rate per applicable law. This settled the dispute with Typenex. A total of $308,750, consisting of $300,000 of principal and $8,750 of interest, was converted into 135,596,882 shares of common stock on various dates between November 21, 2016 and February 24, 2017.
|
|
$
|
-
|
|
|
$
|
275,000
|
|
|
|
|
|
|
|
|
|
|
On March 11, 2016, the Company received net proceeds of $90,000 in exchange for a 10% interest bearing; unsecured convertible promissory note with a face value of $105,000 (“Fifth Redwood Note”), which matures on December 11, 2016. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to the greater of (i) 60% of the lowest traded price over the 15 days prior to conversion or (ii) a fixed $0.00005 per share. The note carries liquidated damages of $1,000 per day for failure to provide certificates, and compensation for Buy-In on failure to timely deliver certificates. Principal and interest is due upon default at 50% of the lowest traded price over the previous fifteen (15) days, and an additional interest rate equal to the lesser of 2% per month (24% per annum) or the maximum rate per applicable law. A total of $120,517, consisting of $105,000 of principal and $15,517 of interest, was converted into an aggregate of 47,820,025 shares of common stock at various dates between November 8, 2016 and March 13, 2017.
|
|
|
-
|
|
|
|
27,480
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable, currently in default
|
|
|
200,000
|
|
|
|
302,480
|
|
Less unamortized derivative discounts:
|
|
|
30,010
|
|
|
|
149,456
|
|
Convertible notes payable
|
|
|
169,990
|
|
|
|
153,024
|
|
Less: current portion
|
|
|
169,990
|
|
|
|
153,024
|
|
Convertible notes payable, less current portion
|
|
$
|
-
|
|
|
$
|
-
|
|
Premier Biomedical, Inc.
Notes to Financial Statements
The Company recognized interest expense for the years ended December 31, 2017 and 2016, respectively, as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Interest on convertible notes
|
|
$
|
8,531
|
|
|
$
|
52,720
|
|
Interest on related party loans
|
|
|
2,010
|
|
|
|
2,400
|
|
Amortization of derivative discounts
|
|
|
340,961
|
|
|
|
551,149
|
|
Amortization of loan origination costs
|
|
|
-
|
|
|
|
79,451
|
|
Amortization of beneficial conversion feature
|
|
|
-
|
|
|
|
81,648
|
|
Amortization of OID
|
|
|
-
|
|
|
|
36,914
|
|
Interest on judgment payable
|
|
|
-
|
|
|
|
13,141
|
|
Total interest expense
|
|
$
|
351,502
|
|
|
$
|
817,423
|
|
In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $221,515 and $652,433 for the variable conversion features of the convertible debts incurred during the years ended December 31, 2017 and 2016, respectively. The discounts, as recognized below, are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded $340,961 and $749,162 of interest expense pursuant to the amortization of note discounts during the years ended December 31, 2017 and 2016, respectively.
The Company recognized interest expense for the years ended December 31, 2017 and 2016, respectively, as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Derivative discounts
|
|
$
|
221,515
|
|
|
$
|
571,183
|
|
Original issue discounts
|
|
|
-
|
|
|
|
23,750
|
|
Loan origination costs
|
|
|
-
|
|
|
|
57,500
|
|
Total debt discounts
|
|
$
|
221,515
|
|
|
$
|
652,433
|
|
All of the convertible debentures carry default provisions that place a “maximum share amount” on the note holders. The maximum share amount that can be owned as a result of the conversions to common stock by the note holders is 4.99% of the Company’s issued and outstanding shares.
In accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued on the Redwood Notes represented embedded derivative features, and these are shown as derivative liabilities on the balance sheet. The Company calculated the fair value of the compound embedded derivatives associated with the convertible debentures utilizing a lattice model.
Premier Biomedical, Inc.
Notes to Financial Statements
Note 9 – Notes Payable, Related Parties
Notes payable, related parties consist of the following at December 31, 2017 and 2016, respectively:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from the Company’s CEO.
|
|
$
|
-
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from the Company’s Chairman of the Board.
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from one of the Company’s Directors.
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Total notes payable, related parties
|
|
|
-
|
|
|
|
30,000
|
|
Less: current portion
|
|
|
-
|
|
|
|
30,000
|
|
Notes payable, related parties, less current portion
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company recorded interest expense in the amount of $2,010 and $2,400 for the years ended December 31, 2017 and 2016, respectively related to notes payable, related parties.
A total of $32,010, consisting of $30,000 of principal and $2,010 of interest was repaid on various dates within November of 2017.
Note
10
– Derivative Liabilities
As discussed in Note 8 under Convertible Notes Payable, the Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.
The fair values of the Company’s derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice model. The Company recognized current derivative liabilities of $2,255,781 and $221,822 at December 31, 2017 and 2016, respectively. The change in fair value of the derivative liabilities resulted in a loss of $2,115,986 and a loss of $26,048 for the years ended December 31, 2017 and 2016, respectively, which has been reported within other expense in the statements of operations. The loss of $2,115,986 for the year ended December 31, 2017 consisted of a loss of $7,103,444 attributable to the fair value of warrants, a gain of $3,766,437 due to the subsequent exchange of the warrants, a net loss in market value of $4,767 on the convertible notes and a net gain of $1,225,788 in market value of the warrants. The loss of $26,048 for the year ended December 31, 2016 consisted of a loss of $12,232 due to the value in excess of the face value of the convertible notes and a net loss in market value of $13,816 on the convertible notes.
Premier Biomedical, Inc.
Notes to Financial Statements
The following is a summary of changes in the fair market value of the derivative liability during the years ended December 31, 2017 and 2016, respectively:
|
|
Derivative
|
|
|
|
Liability
|
|
|
|
Total
|
|
Balance, December 31, 2015
|
|
$
|
150,076
|
|
Increase in derivative value due to issuances of convertible promissory notes
|
|
|
583,415
|
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
13,816
|
|
Debt conversions
|
|
|
(525,485
|
)
|
Balance, December 31, 2016
|
|
$
|
221,822
|
|
Increase in derivative value due to issuances of convertible promissory notes
|
|
|
221,515
|
|
Increase in derivative value attributable to tainted warrants
|
|
|
7,103,444
|
|
Decrease in derivative value attributable to exchange of warrants
|
|
|
(3,766,437
|
)
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
(1,221,021
|
)
|
Debt conversions
|
|
|
(303,542
|
)
|
Balance, December 31, 2017
|
|
$
|
2,255,781
|
|
Key inputs and assumptions used to value the convertible debentures and warrants issued during the years ended December 31, 2017 and 2016:
|
·
|
Stock price ranging from $0.0081 to $0.0035 during these periods would fluctuate with projected volatility.
|
|
|
|
|
·
|
The notes convert with variable conversion prices and fixed conversion prices (tainted notes).
|
|
|
|
|
·
|
An event of default would occur -0-% of the time, increasing 2% per month to a maximum of 10%.
|
|
|
|
|
·
|
The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company in the range of 141% - 232%.
|
|
|
|
|
·
|
The Company would redeem the notes -0-% of the time, increasing 1% per month to a maximum of 5%.
|
|
|
|
|
·
|
All notes are assumed to be extended at maturity by 2 years – the time required to convert out this volume of stock.
|
|
|
|
|
·
|
The holders of the securities would automatically convert midway through to maturity on a monthly basis based on ownership and trading volume limitations.
|
|
|
|
|
·
|
A change of control and fundamental transaction would occur initially -0-% of the time and increase monthly by -0-% to a maximum of -0-%.
|
|
|
|
|
·
|
The monthly trading volume would average $1,120,620 to $1,441,388 and would increase at 1% per month.
|
Premier Biomedical, Inc.
Notes to Financial Statements
Note
11
–
Commitments and Contingencies
Collaborative Patent License Agreements
On May 9, 2012, the Company entered into a Collaborative Agreement with the University of Texas at El Paso. Pursuant to the terms of the Agreement, the Company will work jointly with the University to develop a series of research and development programs around its sequential-dialysis technology in the areas of Alzheimer’s Disease, Traumatic Brain Injury (TBI), Chronic Pain Syndrome, Fibromyalgia, Multiple Sclerosis, Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig’s disease), Blood Sepsis, Cancer, Heart Attacks and Strokes. The programs will utilize the facilities at one or more of the University of Texas’ campuses. The Company will pay the University’s actual overhead for the projects, plus a negotiated facility and administration overhead expense, and 10% of all gross revenues associated with the sale, license and/or royalties of all products and treatment procedures directly affiliated with programs. Intellectual property jointly invented and developed as a result of the projects will be owned jointly by the University and the Company. The Agreement has an initial term of five (5) years, and is renewable upon mutual agreement of the parties.
On March 4, 2015, we entered into a Patent License Agreement (PLA) with the University of Texas at El Paso (UTEP) regarding our joint research and development of CTLA-4 Blockade with Metronomic Chemotherapy for the Treatment of Breast Cancer. This is the first PLA with UTEP following our Collaborative Agreement with them dated May 9, 2012, and memorializes the joint ownership of the applicable patent and the financial and other terms related thereto.
On June 19, 2015, we entered into Amendment No. 1 to this Agreement, pursuant to which we explicitly included Provisional Patent Application No. 62/161,116 entitled, “Anti-CTLA-4 Blockade” (the “Application”) under the definition of “Patent Rights” as set forth in the PLA. The Application was filed with the United States Patent and Trademarks Office on May 13, 2015; the underlying technology was invented by Robert Kirken and Georgialina Rodriguez, and is solely-owned by The Board of Regents of The University of Texas System.
On October 31, 2017 we entered into an Agreement, Final Payment under Contract, and Release of all Claims, whereby we agreed to pay them a total of $326,336 arising out of the research and development agreements with an initial payment of $22,211, and monthly payments of varying amounts between $5,000 and $20,000 thereafter for twenty eight months until the balance is paid in full. Subject to the compliance of all terms, the intellectual property rights established and arising out of the collaborative agreements remain in full force and effect and the parties agreed to a mutual release upon the final contracted payment. The full amount of the liability has been recognized as an accounts payable as of the date of this filing.
Note
12
– Stockholders
’
Equity
Convertible Preferred Stock, Series A
The Company has 10,000,000 authorized shares of Preferred Stock, of which 2,000,000 shares of $0.001 par value Series A Convertible Preferred Stock (“Series A Preferred Stock”) have been designated. Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share into one (1) fully paid and non-assessable share of Common Stock. Each outstanding share of Series A Preferred Stock is entitled to one hundred (100) votes per share on all matters to which the shareholders of the Corporation are entitled or required to vote. The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares sufficient to effect the conversions.
Premier Biomedical, Inc.
Notes to Financial Statements
Preferred Stock Issuances for Exercise of Preferred Stock Warrants, Related Parties (2016)
On January 29, 2016, the Company issued 1,000,000 shares of series A preferred stock pursuant to the exercise of warrants by the Company’s CEO at $0.001 per share for total proceeds of $1,000.
On January 29, 2016, the Company issued 1,000,000 shares of series A preferred stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.001 per share for total proceeds of $1,000.
Common Stock
The Company has one billion authorized shares of $0.00001 par value Common Stock, as increased pursuant to an amendment to the articles of incorporation on February 9, 2016.
Securities Purchase Agreement (2017)
On March 30, 2017, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and each of The Special Equities Group, LLC, RDW Capital LLC, and DiamondRock, LLC (each a “Purchaser” and collectively, the “Purchasers”) to sell our common stock and warrants at a fixed price. Pursuant to the Purchase Agreement, we received from the Purchasers an aggregate of $300,000, net of $15,000 of offering costs, in exchange for 40,000,002 shares of our common stock, warrants to purchase up to 40,000,002 shares of our common stock at an exercise price of $0.03 (“Series A Warrants”) and warrants to purchase up to 40,000,002 shares or our common stock at an exercise price of $0.05 (“Series B Warrants”). Both the Series A Warrants and Series B Warrants issued pursuant to the Purchase Agreement are exercisable immediately upon receipt and have a term of three years. In addition, the Purchaser is entitled to a one-time price reset on the purchase price of the common stock of each tranche to the lower of (i) $0.02 or (ii) a 50% discount to the average of the three lowest closing prices in the 20 trading days prior to the reset date, which is the earlier of (i) the 7 month anniversary of the closing of each tranche of this transaction or (ii) 20 trading days after the effectiveness of each tranche. The embedded value in this reset provision is disclosed further in Note 10.
On May 30, 2017, the Purchasers bought additional shares of our common stock and warrants for $150,000 (the “Second Closing”), in exchange for 30,303,033 shares of our common stock, warrants to purchase up to 30,303,033 shares of our common stock at an exercise price of $0.03 (“Series A Warrants”) and warrants to purchase up to 30,303,033 shares or our common stock at an exercise price of $0.05 (“Series B Warrants”). Both the Series A Warrants and Series B Warrants issued pursuant to the Purchase Agreement are exercisable immediately upon receipt and have a term of three years.
The per share purchase price of the Second Closing was the lesser of (i) $0.02, subject to certain adjustments for stock splits and other similar transactions, or (ii) 50% of the closing price on the trading day immediately prior to the date of sale. The total number of shares to be sold in the Second Closing were determined by dividing the total purchase amount of each closing (i.e., $150,000) by the per share purchase price.
The Purchase Agreement limits each Purchaser to beneficial ownership of our common stock of no more than 9.99%. The Purchasers also have certain anti-dilution rights in the Purchase Agreement for a period of 12 months. These rights allow the Purchasers to exchange their shares of common stock received pursuant to the Purchase Agreement for additional shares on the same terms and conditions of a subsequent financing.
Premier Biomedical, Inc.
Notes to Financial Statements
On August 8, 2017, the Company and each of the three Purchasers also entered into exchange agreements whereby the Purchasers exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (aggregate $150,000) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.
Registration Rights Agreement (2017)
On March 30, 2017, we entered into a Registration Rights Agreement with the Purchasers in connection with the Purchase Agreement. In the Registration Rights Agreement, we agreed to prepare and file a registration statement with the Securities and Exchange Commission covering the resale of all of the shares of common stock sold to the Purchasers and the shares issuable upon exercise of the Series A Warrants and Series B Warrants. We agreed to file an initial registration statement as promptly as possible and have it declared effective no later than June 28, 2017 (or July 28, 2017 if the registration statement was reviewed by the Securities and Exchange Commission) and keep it continuously effective until the securities are sold or may be sold under Rule 144 of the Securities Act without volume or manner-of-sale restrictions. If all of the securities cannot be registered on one registration statement, we agreed to file subsequent registration statements to register the remaining securities as promptly as allowed. The registration statement was subsequently withdrawn on July 24, 2017 and the Purchase Agreement was amended on August 8, 2017 to change the terms of the third closing to an aggregate of $150,000 of convertible notes, bearing interest at 8%, convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.
Common Stock Issuances for Debt Conversions (2017)
On various dates between October 31, 2017 and December 26, 2017, the Company issued a total of 57,193,766 shares of common stock pursuant to the conversion of an aggregate of $100,000 of principal, among the First and Second RDW, SEG and Diamond Rock Notes. The notes were converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On various dates between January 10, 2017 and March 13, 2017, the Company issued a total of 142,148,242 shares of common stock pursuant to the conversion of an aggregate of $323,197, consisting of $302,480 of principal and $20,717 of interest, among the Second, Fifth and Seventh Redwood Notes. The notes were converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common Stock Issuances for Debt Conversions (2016)
On various dates between April 6, 2016 and December 22, 2016, the Company issued a total of 152,837,041 shares of common stock pursuant to the conversion of an aggregate of $675,494, consisting of $653,771 of principal and $21,723 of interest, among the Seven Redwood Notes. The notes were converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On April 19, 2016, the Company issued 3,159,944 shares of common stock pursuant to the conversion of $10,238 of principal on the First JMJ Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Premier Biomedical, Inc.
Notes to Financial Statements
On April 11, 2016, the Company issued 2,800,000 shares of common stock pursuant to the conversion of $9,744 of principal on the First JMJ Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 17, 2016, the Company issued 4,400,000 shares of common stock pursuant to the conversion of $29,040 of principal on the First JMJ Financial Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 2, 2016, the Company issued 2,000,000 shares of common stock pursuant to the conversion of $13,200 of principal on the First JMJ Financial Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common Stock Issuances on Stock Purchase Agreement (2017)
On February 13, 2017, the Company drew down $8,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 2,000,000 shares of common stock pursuant to the Seventh Put Notice.
On January 10, 2017, the Company drew down $10,323 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 3,147,110 shares of common stock pursuant to the Sixth Put Notice.
Common Stock Issuances on Stock Purchase Agreement (2016)
On December 13, 2016, the Company drew down $25,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 6,250,000 shares of common stock pursuant to the Fifth Put Notice.
On November 22, 2016, the Company drew down $25,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 6,377,551 shares of common stock pursuant to the Fourth Put Notice.
On November 8, 2016, the Company drew down $25,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 6,097,561 shares of common stock pursuant to the Third Put Notice.
On August 12, 2016, the Company drew down $39,520 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 5,200,000 shares of common stock pursuant to the Second Put Notice.
On July 21, 2016, the Company drew down $29,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 4,027,778 shares of common stock pursuant to the First Put Notice.
Common Stock Issuances for Exercise of Common Stock Warrants (2017)
On November 22, 2016, the Company issued 7,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $70.
Common Stock Issuances for Exercise of Common Stock Warrants (2016)
On December 23, 2016, the Company issued 6,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $60.
Premier Biomedical, Inc.
Notes to Financial Statements
On December 23, 2016, the Company issued 6,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.00001 per share for total proceeds of $60.
On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $40.
On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.00001 per share for total proceeds of $40.
On February 10, 2016, the Company issued 2,248,846 shares of common stock pursuant to the cashless exercise of 2,250,000 warrants by the Company’s securities attorney at $0.00001 per share.
Common Stock Issuances for Debt Financing (2016)
On February 10, 2016, the Company issued 600,000 shares of our common stock to a third-party for services rendered in connection with our recent financing transactions with Redwood Fund III, Ltd. The total fair value of the common stock was $9,600 based on the closing price of the Company’s common stock on the date of grant.
On February 10, 2016, the Company issued 2,400,000 shares of our common stock to a third-party for services rendered in connection with our recent financing transactions with Redwood Fund III, Ltd. The total fair value of the common stock was $38,400 based on the closing price of the Company’s common stock on the date of grant.
Common Stock Issuances for Settlement of Accounts Payments, Related Party (2016)
On March 28, 2016, upon the resignation of Richard Najarian as one of the members of our Board of Directors, the Company issued 600,000 shares of common stock to Mr. Najarian in settlement of $13,765 of outstanding expense reimbursements. The total fair value of the common stock was $9,120 based on the closing price of the Company’s common stock on the date of grant.
Common Stock Issuances for Services (2017)
On December 6, 2017, we agreed to issue a total of 136,470,585 shares of our common stock to The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC as compensation, of which a total of 72,794,907 shares were issued immediately with an aggregate fair value of $313,018 based on the closing price of the Company’s common stock on the date of grant, and the other 63,675,678 shares were subsequently issued on various dates between January 17, 2018 and February 13, 2018. The aggregate fair value of the shares issued subsequent to December 31, 2017 was $273,805.
On August 25, 2017, we agreed to issue 9,000,000 shares of our common stock to a third-party for consulting services rendered. The shares were subsequently issued on December 1, 2017. The total fair value of the common stock was $84,600 based on the closing price of the Company’s common stock on the date of grant.
Common Stock Issuances for Services (2016)
On November 14, 2016, we issued 2,626,867 shares of our common stock to a third-party for legal services rendered. The total fair value of the common stock was $11,821 based on the closing price of the Company’s common stock on the date of grant.
On February 12, 2016, we issued 600,000 shares of our common stock to a third-party for services rendered in connection with our recent financing transactions. The total fair value of the common stock was $10,800 based on the closing price of the Company’s common stock on the date of grant.
Premier Biomedical, Inc.
Notes to Financial Statements
Note 13 – Series A Convertible Preferred Stock Warrants
Series A Convertible Preferred Stock Warrants Granted
No series A preferred stock warrants were granted during the years ended December 31, 2017 and 2016.
Series A Preferred Stock Warrants Cancelled
No series A preferred stock warrants were cancelled during the years ended December 31, 2017 and 2016.
Series A Preferred Stock Warrants Expired
No series A preferred stock warrants were expired during the years ended December 31, 2017 and 2016.
Series A Preferred Stock Warrants Exercised
On January 29, 2016, the Company issued 1,000,000 shares of series A preferred stock pursuant to the exercise of warrants by the Company’s CEO at $0.001 per share for total proceeds of $1,000.
On January 29, 2016, the Company issued 1,000,000 shares of series A preferred stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.001 per share for total proceeds of $1,000.
No Series A Preferred Stock Warrants were outstanding at December 31, 2017.
Note 14 – Common Stock Warrants
Common Stock Warrants Granted (201
7
)
On December 22, 2017, the Company granted warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (8,500,000 shares); Mitchell Felder (8,500,000 shares), Heidi Carl (6,000,000 shares), John Borza (7,250,000 shares), Jay Rosen (1,000,000 shares), Patricio Reyes (4,000,000 shares) and John Pauly (2,000,000 shares). The exercise price of the foregoing warrants is five cents ($0.005) per share. The warrants are exercisable over seven (7) years. The total fair value of the 37,250,000 common stock warrants using the Black-Scholes option-pricing model is $102,364, or $0.00275 per share, based on a volatility rate of 195%, a risk-free interest rate of 2.01% and an expected term of 3.5 years, and was expensed upon issuance.
On December 22, 2017, we also issued warrants to purchase a total of three million five hundred thousand (3,500,000) shares of our common stock amongst three members of our Scientific Advisory Board. The exercise price of the foregoing warrants is five cents ($0.005) per share. The warrants are exercisable over seven (7) years. The total fair value of the 3,500,000 common stock warrants using the Black-Scholes option-pricing model is $9,617, or $0.00275 per share, based on a volatility rate of 195%, a risk-free interest rate of 2.01% and an expected term of 3.5 years, and was expensed upon issuance.
A total of $111,981 and $39,769 of warrants were amortized and expensed to professional fees as stock-based compensation during the years ended December 31, 2017 and 2016, respectively, including $102,364 and $25,030 during the years ended December 31, 2017 and 2016, respectively, related to warrants issued to related parties.
Premier Biomedical, Inc.
Notes to Financial Statements
Common Stock Warrants Cancelled (2016)
A total of 351,455 warrants exercisable at the lesser of (i) $0.18, and (ii) 70% of the Market Price, which is the average of the three (3) lowest VWAPs, not less than a fixed floor of $0.0001, during the twenty (20) trading day period ending on the last complete trading day prior to the date the conversion notice is delivered, or 65% if that price is less than $0.10 per share was cancelled during the year ended December 31, 2016 pursuant to the settlement reached with Typenex.
Common Stock Warrants Expired (2016)
A total of 300,000 warrants exercisable at $0.96 per share expired during year ended December 31, 2016.
Exercise of Common Stock Warrants (2016)
On February 10, 2016, the Company issued 2,248,846 shares of common stock pursuant to the cashless exercise of 2,250,000 warrants by the Company’s securities attorney at $0.00001 per share.
Exercise of Common Stock Warrants, Related Party (2017)
On November 22, 2017, the Company issued 7,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $70.
Exercise of Common Stock Warrants, Related Party (2016)
On December 23, 2016, the Company issued 6,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $60.
On December 23, 2016, the Company issued 6,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.00001 per share for total proceeds of $60.
On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $40.
On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.00001 per share for total proceeds of $40.
The following is a summary of information about the Common Stock Warrants outstanding at December 31, 2017.
|
|
Shares Underlying Warrants Outstanding
|
|
|
Shares Underlying
Warrants Exercisable
|
|
Range of
Exercise
|
|
Shares
Underlying
Warrants
|
|
|
Weighted
Average
Remaining
Contractual
|
|
Weighted
Average
Exercise
|
|
|
Shares
Underlying
Warrants
|
|
|
Weighted
Average
Exercise
|
|
Prices
|
|
Outstanding
|
|
|
Life
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.00001 – $1.45
|
|
|
64,440,000
|
|
|
6.01 years
|
|
$
|
0.1194
|
|
|
|
64,440,000
|
|
|
$
|
0.1194
|
|
Premier Biomedical, Inc.
Notes to Financial Statements
The fair value of each warrant grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants under the fixed option plan:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Average risk-free interest rates
|
|
|
1.75
|
%
|
|
N/A
|
|
Average expected life (in years)
|
|
|
9.22
|
|
|
N/A
|
|
The Black-Scholes option pricing model was developed for use in estimating the fair value of short-term traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock price volatility. Because the Company’s common stock warrants have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of its common stock warrants. During the years ended December 31, 2017 and 2016 there were no warrants granted with an exercise price below the fair value of the underlying stock at the grant date.
The weighted average fair value of warrants granted with exercise prices at the current fair value of the underlying stock was approximately $0.00275 per warrant granted during the year ended December 31, 2017.
The following is a summary of activity of outstanding common stock warrants:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
53,591,455
|
|
|
$
|
0.1463
|
|
Warrants cancelled
|
|
|
(351,455
|
)
|
|
|
(0.18
|
)
|
Warrants expired
|
|
|
(300,000
|
)
|
|
|
(0.96
|
)
|
Warrants exercised
|
|
|
(22,250,000
|
)
|
|
|
(0.00001
|
)
|
Balance, December 31, 2016
|
|
|
30,690,000
|
|
|
$
|
0.24407
|
|
Warrants granted
|
|
|
40,750,000
|
|
|
|
0.005
|
|
Warrants exercised
|
|
|
(7,000,000
|
)
|
|
|
(0.00001
|
)
|
Balance, December 31, 2017
|
|
|
64,440,000
|
|
|
$
|
0.1194
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2017
|
|
|
64,440,000
|
|
|
$
|
0.1194
|
|
Note 15 – Income Taxes
The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.
Premier Biomedical, Inc.
Notes to Financial Statements
For the years ended December 31, 2017 and 2016, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2017 and December 31, 2016, the Company had approximately $4,860,000 and $4,334,000 of federal net operating losses, respectively. The net operating loss carry forwards, if not utilized, will begin to expire in 2031.
The components of the Company’s deferred tax asset are as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
1,701,000
|
|
|
$
|
1,516,900
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
$
|
1,701,000
|
|
|
$
|
1,516,900
|
|
Less: Valuation allowance
|
|
|
(1,701,000
|
)
|
|
|
(1,516,900
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2017 and 2016, respectively.
A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Federal and state statutory rate
|
|
|
35
|
%
|
|
|
35
|
%
|
Change in valuation allowance on deferred tax assets
|
|
(35
|
)%
|
|
(35
|
)%
|
In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Premier Biomedical, Inc.
Notes to Financial Statements
Note 16 – Subsequent Events
Securities Purchase Agreement
On March 1, 2018, we received $60,000 from two investors from the sale of convertible notes. These investors have also committed to provide an additional $240,000 in the near future. The investors purchased convertible notes at the signing of a Securities Purchase Agreement for an aggregate amount of $60,000. The investors will buy additional convertible notes for an aggregate of $60,000 within five trading days of our filing a registration statement to cover the investors’ shares of common stock issuable upon conversion of the convertible notes. Within five trading days of the registration statement being declared effective, the investors will buy additional convertible notes for an aggregate of $180,000.
Common Stock Issuances for Debt Conversions
On January 29, 2018, the Company issued 26,559,426 shares of common stock pursuant to the conversion of $40,000 of principal from the Second SEG Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On January 3, 2018, the Company issued 19,230,769 shares of common stock pursuant to the conversion of $25,000 of principal from the First RDW Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common Stock Issuances on Subscriptions Payable
On various dates from January 17, 2018 through February 13, 2018, the Company issued a total of 63,675,678 shares to The Special Equities Group and DiamondRock, LLC as compensation valued at $273,805 awarded on December 6, 2017.
On January 10, 2017, the Company drew down $10,323 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 3,147,110 shares of common stock pursuant to the Sixth Put Notice.