Convertible notes payable consist of the following at December 31, 2016 and 2015, respectively:
The Company recognized interest expense for the years ended December 31, 2016 and 2015, respectively, as follows:
In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $652,433 and $346,798 for the variable conversion features of the convertible debts incurred during the years ended December 31, 2016 and 2015, 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 $749,162 and $175,707 of interest expense pursuant to the amortization of note discounts during the years ended December 31, 2016 and 2015, respectively.
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.
Note 9 – Notes Payable, Related Parties
Notes payable, related parties consist of the following at December 31, 2016 and 2015, respectively:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
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
|
|
|
$
|
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
|
|
|
|
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
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Total notes payable, related parties
|
|
|
30,000
|
|
|
|
30,000
|
|
Less: current portion
|
|
|
30,000
|
|
|
|
30,000
|
|
Notes payable, related parties, less current portion
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company recorded interest expense in the amount of $2,400 and $1,170 for the years ended December 31, 2016 and 2015, respectively related to notes payable, related parties.
Accrued interest of $3,570 was outstanding on these notes as of December 31, 2016.
Note 1
0
– 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 $221,822 and $150,076 at December 31, 2016 and 2015, respectively. The change in fair value of the derivative liabilities resulted in a loss of $26,048 and a loss of $20,076 for the years ended December 31, 2016 and 2015, respectively, which has been reported within other expense in the statements of operations. 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. The loss of $20,076 for the year ended December 31, 2015 consisted of a loss of $14,748 due to the value in excess of the face value of the convertible notes and a net loss in market value of $5,328 on the convertible notes.
The following is a summary of changes in the fair market value of the derivative liability during the years ended December 31, 2016 and 2015, respectively:
|
|
Derivative
|
|
|
|
Liability
|
|
|
|
Total
|
|
Balance, December 31, 2014
|
|
$
|
-
|
|
Increase in derivative value due to issuances of convertible promissory notes
|
|
|
144,748
|
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
5,328
|
|
Debt conversions
|
|
|
-
|
|
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
|
|
Premier Biomedical, Inc.
Notes to Financial Statements
Key inputs and assumptions used to value the convertible debentures and warrants issued during the years ended December 31, 2016 and 2015:
|
·
|
Stock price ranging from $0.0435 to $0.0050 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 1% per month to a maximum of 20%.
|
|
·
|
The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company in the range of 145% - 385%.
|
|
·
|
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 $556,020 to $911,155 and would increase at 1% per month.
|
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.
Premier Biomedical, Inc.
Notes to Financial Statements
Common Stock Commitments
On May 27, 2016, we entered into a Stock Purchase Agreement with Redwood Management, LLC, pursuant to which we agreed to sell, and Redwood, or its assigns, agreed to purchase, up to Two Million Dollars ($2,000,000) of our common stock. Pursuant to the terms of the Purchase Agreement, we may issue a purchase notice directing Redwood to purchase our common stock at a 20% discount to the lowest sale price of our common stock during the five (5) previous business days and in an amount of the lesser of (i) $150,000 or (ii) 100% of the average daily trading volume of our common stock in the ten (10) business days immediately preceding the date we give notice to Redwood. We may issue multiple purchase notices to Redwood, subject to these limitations, but we may not issue such a purchase notice to Redwood within ten (10) business days of the completion of funding under the prior purchase notice. We must have a registration statement in effect under the Securities Act that covers the resale of any shares of common stock sold to Redwood pursuant to the Purchase Agreement. We issued five purchase notices and received aggregate proceeds of $143,520 pursuant to the issuance of 27,952,890 shares of common stock over various dates between July 21, 2016 and December 13, 2016.
Typenex Judgment
On July 28, 2016, the Third Judicial District Court of Salt Lake County in the State of Utah awarded Typenex Co-Investment, LLC a Default Judgment in the amount of $340,647, pursuant to a dispute over the number of warrants that Typenex was awarded with their convertible note entered into on November 25, 2014. The outstanding judgment award carries an interest rate of 22% until the judgment amount is paid in full. The Company had accrued the potential liability, and on October 10, 2016, we entered into 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 through November of 2016 to settle the judgment. In conjunction with this transaction, we entered into an Exchange Agreement with Redwood whereby, in exchange for the warrants that Redwood purchased from Typenex, we issued a 10% Convertible Promissory Note to Redwood with a principal amount of $300,000. This settled the dispute with Typenex upon satisfaction of the payments to Typenex over various dates in October and November of 2016, and the warrants were cancelled. A total of $13,141 of interest had been accrued, which together with the $340,647 default judgment, resulted in a gain on extinguishment of $53,788.
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.
Preferred Stock Issuances for Exercise of Preferred Stock Warrants, Related Parties
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.
Premier Biomedical, Inc.
Notes to Financial Statements
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.
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.
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 (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.
Premier Biomedical, Inc.
Notes to Financial Statements
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.
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 (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
Common Stock Issuances for Debt Conversions (2015)
On December 15, 2015, the Company issued 1,762,516 shares of common stock pursuant to the conversion of $16,039, consisting of $15,000 of principal and $1,039 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On December 8, 2015, the Company issued 2,794,392 shares of common stock pursuant to the conversion of $18,094, consisting of $16,946 of principal and $1,148 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On December 4, 2015, the Company issued 1,526,070 shares of common stock pursuant to the conversion of $3,258, consisting of $3,054 of principal and $204 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On December 2, 2015, the Company issued 3,022,017 shares of common stock pursuant to the conversion of $5,183, consisting of $4,860 of principal and $323 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On December 1, 2015, the Company issued 4,441,702 shares of common stock pursuant to the conversion of $7,413, consisting of $559 of principal and $6,854 of interest, on the First Typenex Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 25, 2015, the Company issued 3,003,665 shares of common stock pursuant to the conversion of $4,941, consisting of $4,640 of principal and $301 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 17, 2015, the Company issued 2,261,963 shares of common stock pursuant to the conversion of $3,721, consisting of $3,500 of principal and $221 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 16, 2015, the Company issued 3,000,000 shares of common stock pursuant to the conversion of $5,007 of principal on the First Typenex Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 12, 2015, the Company issued 2,400,940 shares of common stock pursuant to the conversion of $4,370, consisting of $2,115 of principal and $2,255 of interest, on the First Adar Bay Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 11, 2015, the Company issued 2,259,167 shares of common stock pursuant to the conversion of $3,716, consisting of $3,500 of principal and $216 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 11, 2015, the Company issued 2,375,275 shares of common stock pursuant to the conversion of $4,323 of principal on the First Adar Bay 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 November 9, 2015, the Company issued 2,375,000 shares of common stock pursuant to the conversion of $4,322 of principal on the First Adar Bay Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 9, 2015, the Company issued 3,510,000 shares of common stock pursuant to the conversion of $6,234 of principal on the First Typenex Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 6, 2015, the Company issued 1,979,568 shares of common stock pursuant to the conversion of $3,256, consisting of $3,070 of principal and $186 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On November 2, 2015, the Company issued 2,168,067 shares of common stock pursuant to the conversion of $5,160 of principal on the First Adar Bay Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On October 27, 2015, the Company issued 1,839,530 shares of common stock pursuant to the conversion of $4,700 of principal on the First Adar Bay Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On October 26, 2015, the Company issued 1,620,522 shares of common stock pursuant to the conversion of $3,630, consisting of $3,430 of principal and $200 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On October 26, 2015, the Company issued 1,753,425 shares of common stock pursuant to the conversion of $4,480 of principal on the First Adar Bay Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On October 26, 2015, the Company issued 3,091,128 shares of common stock pursuant to the conversion of $7,700 of principal on the First Typenex Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On October 19, 2015, the Company issued 1,284,109 shares of common stock pursuant to the conversion of $6,000 of principal on the First Adar Bay Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On October 13, 2015, the Company issued 1,076,992 shares of common stock pursuant to the conversion of $4,222, consisting of $4,000 of principal and $222 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On October 8, 2015, the Company issued 1,116,799 shares of common stock pursuant to the conversion of $6,000 of principal on the First Adar Bay Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On October 1, 2015, the Company issued 2,344,032 shares of common stock pursuant to the conversion of $13,000 of principal on the First Typenex 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 September 18, 2015, the Company issued 681,800 shares of common stock pursuant to the conversion of $6,300, consisting of $6,000 of principal and $300 of interest on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On September 3, 2015, the Company issued 459,242 shares of common stock pursuant to the conversion of $7,000 of principal on the First Adar Bay Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On August 26, 2015, the Company issued 446,711 shares of common stock pursuant to the conversion of $6,270, consisting of $6,000 of principal and $270 of interest on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On August 25, 2015, the Company issued 823,121 shares of common stock pursuant to the conversion of $13,500 of principal on the First Typenex Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On August 17, 2015, the Company issued 371,556 shares of common stock pursuant to the conversion of $5,215, consisting of $5,000 of principal and $215 of interest on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On August 4, 2015, the Company issued 292,181 shares of common stock pursuant to the conversion of $3,835, consisting of $3,687 of principal and $148 of interest, on the First LG Capital Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On July 23, 2015, the Company issued 260,866 shares of common stock pursuant to the conversion of $13,000 of principal on the First Typenex Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On June 25, 2015, the Company issued 208,719 shares of common stock pursuant to the conversion of $15,000 of principal on the First Typenex Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On June 3, 2015, the Company issued 172,812 shares of common stock pursuant to the conversion of $12,500 of principal on the First Typenex Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common Stock Issuances for Exercise of Warrants, Related Party (2015)
On October 1, 2015, the Company issued 3,000,000 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 $30.
On September 10, 2015, the Company issued 1,000,000 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 $10.
Premier Biomedical, Inc.
Notes to Financial Statements
Common Stock Cancellations (2015)
On August 12, 2015, the Company cancelled and returned to treasury a total of 150,000 shares of common stock previously issued to a consultant for services provided.
Beneficial Conversion Feature
On December 24, 2015, the Company entered into a convertible promissory note with JMJ Financial. The beneficial conversion feature discount resulting from the conversion price that was $0.03262 below the market price of $0.034 on the origination date of December 24, 2015, resulted in a debt discount value of $25,000 that was recognized as additional paid in capital and was amortized on a straight line basis over the life of the loan.
On September 21, 2015, the Company entered into a convertible promissory note with Vis Vires Group, Inc. The beneficial conversion feature discount resulting from the conversion price that was $0.00747 below the market price of $0.016 on the origination date of September 21, 2015, resulted in a debt discount value of $39,448 that was recognized as additional paid in capital and was amortized on a straight line basis over the life of the loan.
On September 2, 2015, the Company entered into a convertible promissory note with JMJ Financial. The beneficial conversion feature discount resulting from the conversion price that was $0.0194 below the market price of $0.032 on the origination date of September 2, 2015, resulted in a debt discount value of $50,000 that was recognized as additional paid in capital and was amortized on a straight line basis over the life of the loan.
On February 24, 2015, the Company entered into a convertible promissory note with Adar Bays, LLC. The beneficial conversion feature discount resulting from the conversion price that was $0.0473 below the market price of $0.14 on the origination date of February 24, 2015, resulted in a debt discount value of $20,420 that was recognized as additional paid in capital and was amortized on a straight line basis over the life of the loan.
On January 30, 2015, the Company entered into a convertible promissory note with LG Capital Funding, LLC. The beneficial conversion feature discount resulting from the conversion price that was $0.042 below the market price of $0.14 on the origination date of January 30, 2015, resulted in a debt discount value of $32,143 that was recognized as additional paid in capital and was amortized on a straight line basis over the life of the loan.
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, 2016 and 2015.
Series A Preferred Stock Warrants Cancelled
No series A preferred stock warrants were cancelled during the years ended December 31, 2016 and 2015.
Series A Preferred Stock Warrants Expired
No series A preferred stock warrants were expired during the years ended December 31, 2016 and 2015.
Premier Biomedical, Inc.
Notes to Financial Statements
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 exercised during the year ended December 31, 2015.
No Series A Preferred Stock Warrants were outstanding at December 31, 2016.
The following is a summary of activity of outstanding series A preferred stock warrants:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
|
2,000,000
|
|
|
$
|
0.001
|
|
Warrants expired
|
|
|
-
|
|
|
|
-
|
|
Warrants granted
|
|
|
-
|
|
|
|
-
|
|
Warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
2,000,000
|
|
|
$
|
0.001
|
|
Warrants expired
|
|
|
-
|
|
|
|
-
|
|
Warrants granted
|
|
|
-
|
|
|
|
-
|
|
Warrants exercised
|
|
|
(2,000,000
|
)
|
|
|
(0.001
|
)
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
Note 14 – Common Stock Warrants
Common Stock Warrants Granted (201
5
)
On October 7, 2015, 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 (1,000,000 shares); Mitchell Felder (1,000,000 shares), Heidi Carl (750,000 shares), John Borza (600,000 shares), Richard Najarian (200,000 shares), and Jay Rosen (200,000 shares). The exercise price of the foregoing warrants is five cents ($0.05) per share. The warrants are exercisable over ten (10) years. The total fair value of the 3,750,000 common stock warrants using the Black-Scholes option-pricing model is $31,109, or $0.0083 per share, based on a volatility rate of 232%, a risk-free interest rate of 1.75% and an expected term of 10 years, and is being amortized over the implied service term, or vesting period, of the warrants. One half of the shares underlying each of the respective warrants vest on June 15, 2016, with the balance vesting on December 15, 2016. In order for the warrants to vest on each of the foregoing dates, however, the holders must be serving in the same capacity on behalf of the Company as he or she was serving on October 21, 2015. The issuance of the warrants was fully approved by our Board of Directors on October 21, 2015, the date a fully executed resolution authorizing the issuance was delivered. The Company recognized a total of $25,030 and $6,079 of professional fee expense during the years ended December 31, 2016 and 2015, respectively.
Premier Biomedical, Inc.
Notes to Financial Statements
On October 7, 2015, we also issued warrants to purchase a total of one million eight hundred thousand (1,800,000) shares of our common stock amongst six members of our Scientific Advisory Board. The exercise price of the foregoing warrants is five cents ($0.05) per share. The warrants are exercisable over ten (10) years. The total fair value of the 1,800,000 common stock warrants using the Black-Scholes option-pricing model is $14,931, or $0.0083 per share, based on a volatility rate of 232%, a risk-free interest rate of 1.75% and an expected term of 10 years. In accordance with Accounting Standards Codification (“ASC”) 505-50, non-employee stock based compensation awards are re-measured at each period. One half of the shares underlying each of the respective warrants vest on June 15, 2016, with the balance vesting on December 15, 2016. In order for the warrants to vest on each of the foregoing dates, however, the holders must be serving in the same capacity on behalf of the Company as he or she was serving on October 21, 2015. The issuance of the warrants was fully approved by our Board of Directors on October 21, 2015, the date a fully executed resolution authorizing the issuance was delivered. The Company recognized a total of $14,739 and $14,421 of professional fee expense during the years ended December 31, 2016 and 2015, respectively.
On July 25, 2015, the Company granted cashless common stock warrants to an independent contractor to purchase a total of 500,000 shares of common stock at $0.10 per share for advisory services. The warrants are exercisable over seven (7) years from July 25, 2015. The warrants vest in full on December 1, 2015. The initial estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 204% and a call option value of $0.0497, was $24,872. In accordance with Accounting Standards Codification (“ASC”) 505-50, non-employee stock based compensation awards are re-measured at each period. The total fair value of the 500,000 common stock warrants using the Black-Scholes option-pricing model was re-measured at $4,720, or $0.0094 per share as of September 30, 2015, based on a volatility rate of 232%, a risk-free interest rate of 1.75% and an expected term of 7 years. The Company recognized a total of $-0- and $11,943 of professional fee expense during the years ended December 31, 2016 and 2015, respectively.
On May 30, 2015, the Company granted cashless common stock warrants to an independent contractor to purchase a total of 500,000 shares of common stock at $0.25 per share for advisory services. The warrants are exercisable over seven (7) years from May 30, 2015. The warrants vest in full on December 1, 2015. The initial estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 199% and a call option value of $0.13751, was $68,756. In accordance with Accounting Standards Codification (“ASC”) 505-50, non-employee stock based compensation awards are re-measured at each period. The total fair value of the 500,000 common stock warrants using the Black-Scholes option-pricing model was re-measured at $4,706, or $0.0094 per share as of September 30, 2015, based on a volatility rate of 232%, a risk-free interest rate of 1.75% and an expected term of 7 years. The Company recognized a total of $-0- and $11,939 of professional fee expense during the years ended December 31, 2016 and 2015, respectively.
Premier Biomedical, Inc.
Notes to Financial Statements
On March 20, 2015, the Company granted cashless common stock warrants to an independent contractor to purchase a total of 500,000 shares of common stock at $0.20 per share for investor relation services. The warrants are exercisable over five (5) years from March 20, 2015. The warrants vest in accordance with the schedule presented below, whereby the price per share is defined by the closing bid price over three consecutive trading days:
|
·
|
125,000 warrants will vest at $0.20 per share
|
|
·
|
125,000 warrants will vest at $0.30 per share
|
|
·
|
125,000 warrants will vest at $0.40 per share
|
|
·
|
125,000 warrants will vest at $0.50 per share
|
The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 204% and a call option value of $0.1166, was $58,301. The vesting period is indeterminate, therefore, the Company recognized the entire $58,301 of stock based compensation expense during the year ended December 31, 2015.
A total of $39,769 and $1,849,169 of warrants were amortized and expensed to professional fees as stock-based compensation during the years ended December 31, 2016 and 2015, respectively, including $25,030 and $1,529,182 during the years ended December 31, 2016 and 2015, respectively, related to warrants issued to related parties.
Common Stock Warrants Cancelled
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.
No warrants were cancelled during the year ended December 31, 2015.
Common Stock Warrants Expired
A total of 300,000 and 50,000 warrants exercisable at $0.96 and $0.25 per share expired during years ended December 31, 2016 and 2015, respectively.
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 (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.
Premier Biomedical, Inc.
Notes to Financial Statements
Common Stock Issuances for Exercise of Warrants, Related Party (2015)
On October 1, 2015, the Company issued 3,000,000 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 $30.
On September 10, 2015, the Company issued 1,000,000 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 $10.
The following is a summary of information about the Common Stock Warrants outstanding at December 31, 2016.
|
|
|
Shares Underlying
|
|
Shares Underlying Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Average
|
|
Weighted
|
|
|
Shares
|
|
|
Weighted
|
|
Range of
|
|
Underlying
|
|
|
Remaining
|
|
Average
|
|
|
Underlying
|
|
|
Average
|
|
Exercise
|
|
Warrants
|
|
|
Contractual
|
|
Exercise
|
|
|
Warrants
|
|
|
Exercise
|
|
Prices
|
|
Outstanding
|
|
|
Life
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.00001 – $1.45
|
|
|
30,690,000
|
|
|
4.91 years
|
|
$
|
0.24407
|
|
|
|
30,690,000
|
|
|
$
|
0.24407
|
|
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,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Average risk-free interest rates
|
|
|
N/A
|
|
|
|
1.75
|
%
|
Average expected life (in years)
|
|
|
N/A
|
|
|
|
9.22
|
|
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, 2016 and 2015 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 $0.0784 per warrant granted during the year ended December 31, 2015.
Premier Biomedical, Inc.
Notes to Financial Statements
The following is a summary of activity of outstanding common stock warrants:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
|
50,591,455
|
|
|
$
|
0.1443
|
|
Warrants expired
|
|
|
(50,000
|
)
|
|
|
(0.25
|
)
|
Warrants granted
|
|
|
7,050,000
|
|
|
|
0.0784
|
|
Warrants exercised
|
|
|
(4,000,000
|
)
|
|
|
(0.00001
|
)
|
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
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2016
|
|
|
30,690,000
|
|
|
$
|
0.24407
|
|
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.
For the years ended December 31, 2016 and 2015, 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, 2016 and December 31, 2015, the Company had approximately $4,334,000 and $2,663,000 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,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
1,516,900
|
|
|
$
|
932,050
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
$
|
1,516,900
|
|
|
$
|
932,050
|
|
Less: Valuation allowance
|
|
|
(1,516,900
|
)
|
|
|
(932,050
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Premier Biomedical, Inc.
Notes to Financial Statements
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, 2016 and 2015, 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,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
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.
Note 16 – Subsequent Events
Securities Purchase Agreement
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 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.
The Purchasers will buy additional shares of our common stock and warrants for $150,000 within five trading days of our filing a registration statement to cover the Purchasers’ shares of common stock purchased pursuant to the Purchase Agreement, including shares of common stock issued or issuable upon exercise of the warrants (the “Second Closing”). Within five trading days of the registration statement being declared effective, we will receive another $150,000 from the Purchasers in exchange for shares or our common stock and warrants (the “Third Closing”).
The per share purchase price of the Second Closing and Third Closing will be 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 and Third Closing will be determined by dividing the total purchase amount of each closing (i.e., $150,000) by the per share purchase price.
In each of the Second Closing and Third Closing, Series A Warrants and Series B Warrants will be issued to the Purchasers, both in an amount equal to the number of shares of common stock issued in the closing.
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
Registration Rights Agreement
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 is 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.
Common Stock Issuances for Debt Conversions
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 on Stock Purchase Agreement
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.
PREMIER BIOMEDICAL, INC.
|
CONDENSED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
Cash
|
|
$
|
125,341
|
|
|
$
|
22,437
|
|
Other current assets
|
|
|
141,521
|
|
|
|
11,430
|
|
Total current assets
|
|
|
266,862
|
|
|
|
33,867
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
6,603
|
|
|
|
5,100
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
273,465
|
|
|
$
|
38,967
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
163,087
|
|
|
$
|
220,740
|
|
Accounts payable, related parties
|
|
|
53,436
|
|
|
|
52,489
|
|
Accrued interest
|
|
|
-
|
|
|
|
18,026
|
|
Accrued interest, related parties
|
|
|
4,770
|
|
|
|
3,570
|
|
Convertible notes payable, net of discounts of $-0- and $149,456
|
|
|
|
|
|
|
|
|
at June 30, 2017 and December 31, 2016, respectively
|
|
|
-
|
|
|
|
153,024
|
|
Notes payable, related parties
|
|
|
30,000
|
|
|
|
30,000
|
|
Derivative liabilities
|
|
|
6,253,880
|
|
|
|
221,822
|
|
Total current liabilities
|
|
|
6,505,173
|
|
|
|
699,671
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
6,505,173
|
|
|
|
699,671
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 10,000,000 shares
|
|
|
|
|
|
|
|
|
authorized, 2,000,000 and -0- shares issued and outstanding
|
|
|
|
|
|
|
|
|
at June 30, 2017 and December 31, 2016, respectively
|
|
|
2,000
|
|
|
|
2,000
|
|
Common stock, $0.00001 par value, 1,000,000,000 shares
|
|
|
|
|
|
|
|
|
authorized, 522,155,037 and 304,556,650 shares issued and
|
|
|
|
|
|
|
|
|
outstanding at June 30, 2017 and December 31, 2016, respectively
|
|
|
5,222
|
|
|
|
3,046
|
|
Additional paid in capital
|
|
|
12,902,891
|
|
|
|
11,899,504
|
|
Accumulated deficit
|
|
|
(19,141,821
|
)
|
|
|
(12,565,254
|
)
|
Total stockholders' equity (deficit)
|
|
|
(6,231,708
|
)
|
|
|
(660,704
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
273,465
|
|
|
$
|
38,967
|
|
See accompanying notes to financial statements.
PREMIER BIOMEDICAL, INC.
|
CONDENSED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Six Months
|
|
|
|
Ended June 30,
|
|
|
Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
(Restated)
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
-
|
|
|
|
49,545
|
|
|
|
-
|
|
|
|
59,686
|
|
General and administrative
|
|
|
40,246
|
|
|
|
41,981
|
|
|
|
73,305
|
|
|
|
91,466
|
|
Professional fees
|
|
|
45,609
|
|
|
|
87,511
|
|
|
|
86,756
|
|
|
|
225,959
|
|
Total operating expenses
|
|
|
85,855
|
|
|
|
179,037
|
|
|
|
160,061
|
|
|
|
377,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
|
(85,855
|
)
|
|
|
(179,037
|
)
|
|
|
(160,061
|
)
|
|
|
(377,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(600
|
)
|
|
|
(235,524
|
)
|
|
|
(153,347
|
)
|
|
|
(408,811
|
)
|
Other expense
|
|
|
-
|
|
|
|
(340,647
|
)
|
|
|
-
|
|
|
|
(340,647
|
)
|
Change in derivative liabilities
|
|
|
(1,161,010
|
)
|
|
|
(189,191
|
)
|
|
|
(6,261,101
|
)
|
|
|
(87,862
|
)
|
Equity in losses of investment in joint venture
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,058
|
)
|
|
|
-
|
|
Total other income (expense)
|
|
|
(1,161,610
|
)
|
|
|
(765,362
|
)
|
|
|
(6,416,506
|
)
|
|
|
(837,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,247,465
|
)
|
|
$
|
(944,399
|
)
|
|
$
|
(6,576,567
|
)
|
|
$
|
(1,214,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding - basic and fully diluted
|
|
|
502,175,015
|
|
|
|
115,678,161
|
|
|
|
452,007,980
|
|
|
|
101,225,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and fully diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
See accompanying notes to financial statements.
PREMIER BIOMEDICAL, INC.
|
CONDENSED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
For the Six Months
|
|
|
|
Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
(Restated)
|
|
Net loss
|
|
$
|
(6,576,567
|
)
|
|
$
|
(1,214,431
|
)
|
Adjustments to reconcile net loss
|
|
|
|
|
|
|
|
|
to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,191
|
|
|
|
1,026
|
|
Equity in profit of joint venture investment
|
|
|
2,058
|
|
|
|
-
|
|
Change in fair market value of derivative liabilities
|
|
|
6,261,101
|
|
|
|
87,862
|
|
Amortization of debt discounts
|
|
|
149,456
|
|
|
|
372,563
|
|
Stock based compensation, related parties
|
|
|
-
|
|
|
|
13,014
|
|
Stock based compensation
|
|
|
-
|
|
|
|
75,866
|
|
Decrease (increase) in assets:
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
(130,091
|
)
|
|
|
(2,379
|
)
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(57,653
|
)
|
|
|
(44,562
|
)
|
Accounts payable, related parties
|
|
|
947
|
|
|
|
10,395
|
|
Accrued interest
|
|
|
2,691
|
|
|
|
35,048
|
|
Accrued interest, related parties
|
|
|
1,200
|
|
|
|
1,200
|
|
Judgment payable
|
|
|
-
|
|
|
|
340,647
|
|
Net cash used in operating activities
|
|
|
(345,667
|
)
|
|
|
(323,751
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(2,694
|
)
|
|
|
(3,536
|
)
|
Investment in joint venture
|
|
|
(2,058
|
)
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(4,752
|
)
|
|
|
(3,536
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from sale of stock, net of offering costs
|
|
|
435,000
|
|
|
|
-
|
|
Proceeds from sale of stock on equity line of credit
|
|
|
18,323
|
|
|
|
-
|
|
Proceeds from exercise of warrants, related party
|
|
|
-
|
|
|
|
2,000
|
|
Proceeds from convertible notes payable
|
|
|
-
|
|
|
|
417,500
|
|
Repayments of convertible notes payable
|
|
|
-
|
|
|
|
(89,039
|
)
|
Net cash provided by financing activities
|
|
|
453,323
|
|
|
|
330,461
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
|
102,904
|
|
|
|
3,174
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
22,437
|
|
|
|
35,414
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
|
$
|
125,341
|
|
|
$
|
38,588
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
13,539
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Value of derivative adjustment due to debt conversions
|
|
$
|
229,043
|
|
|
$
|
110,583
|
|
Value of shares issued for conversion of debt
|
|
$
|
323,197
|
|
|
$
|
200,338
|
|
Common stock issued for settlement of accounts payable, related party
|
|
$
|
-
|
|
|
$
|
13,765
|
|
Cashless exercise of common stock warrants, 2,250,000 warrants exercised
|
|
$
|
-
|
|
|
$
|
22
|
|
See accompanying notes to financial statements.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note 1 – Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited, condensed financial statements of Premier Biomedical, Inc. (“the Company”) have been prepared pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. However, 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. It is suggested that these statements be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
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 June 30, 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.
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.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
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 six months ended June 30, 2017 and 2016, respectively:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
$
|
-
|
|
|
$
|
58,800
|
|
Warrants issued for services, related parties
|
|
|
-
|
|
|
|
13,014
|
|
Warrants issued for services
|
|
|
-
|
|
|
|
17,066
|
|
Total stock based compensation
|
|
$
|
-
|
|
|
$
|
88,880
|
|
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 have not yet commenced, other than sales through our joint venture, which our recognized by our joint venture upon shipment of goods, which are 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 $25,413 and $51,710 for the six months ended June 30, 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.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
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.
Recent Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 six months ended June 30, 2017, have had or are expected to have a significant impact on the Company’s financial statements.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
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 $19,141,821, and had negative working capital of ($6,238,311) at June 30, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern. 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 – Restatement
The Company is restated its December 31, 2015 financial statements and is restating the interim financial statements for the three months ended March 31, 2016, the six months ended June 30, 2016 and nine months ended September 30, 2016 in order to account for embedded derivatives within the Redwood Notes, rather than beneficial conversion feature discounts. The financial statements will be restated prospectively during 2017.
The Company determined that it had not properly recognized embedded derivative liabilities within the Redwood Notes that originated on various dates between December 28, 2015 and May 27, 2016. The Company has recognized a derivative liability in lieu of the previously recognized beneficial conversion feature and the related change in derivative liabilities and amortization of the debt discount expenses have been adjusted to correct this error.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following adjustments were made to the June 30, 2016 Restated Balance Sheet:
PREMIER BIOMEDICAL, INC.
|
|
BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
|
|
June 30,
|
|
|
|
|
|
June 30,
|
|
|
|
2016
|
|
|
Adjustments
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
38,588
|
|
|
$
|
-
|
|
|
$
|
38,588
|
|
Prepaid expenses
|
|
|
11,545
|
|
|
|
-
|
|
|
|
11,545
|
|
Total current assets
|
|
|
50,133
|
|
|
|
-
|
|
|
|
50,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
6,157
|
|
|
|
-
|
|
|
|
6,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
56,290
|
|
|
$
|
-
|
|
|
$
|
56,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
143,703
|
|
|
$
|
-
|
|
|
$
|
143,703
|
|
Accounts payable, related parties
|
|
|
51,298
|
|
|
|
-
|
|
|
|
51,298
|
|
Accrued interest
|
|
|
22,079
|
|
|
|
-
|
|
|
|
22,079
|
|
Accrued interest, related parties
|
|
|
2,370
|
|
|
|
-
|
|
|
|
2,370
|
|
Judgment payable
|
|
|
340,647
|
|
|
|
-
|
|
|
|
340,647
|
|
Convertible notes payable, net of discounts of $334,869
|
|
|
210,548
|
|
|
|
(27,283
|
)
|
|
|
183,265
|
|
Notes payable, related parties
|
|
|
30,000
|
|
|
|
-
|
|
|
|
30,000
|
|
Derivative liabilities
|
|
|
-
|
|
|
|
507,352
|
|
|
|
507,352
|
|
Total current liabilities
|
|
|
800,645
|
|
|
|
480,069
|
|
|
|
1,280,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
800,645
|
|
|
|
480,069
|
|
|
|
1,280,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 2,000,000 shares issued and outstanding
|
|
|
2,000
|
|
|
|
-
|
|
|
|
2,000
|
|
Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 125,714,852 shares issued and outstanding
|
|
|
1,257
|
|
|
|
-
|
|
|
|
1,257
|
|
Additional paid in capital
|
|
|
11,167,420
|
|
|
|
(383,637
|
)
|
|
|
10,783,783
|
|
Accumulated deficit
|
|
|
(11,915,032
|
)
|
|
|
(96,432
|
)
|
|
|
(12,011,464
|
)
|
Total stockholders' equity (deficit)
|
|
|
(744,355
|
)
|
|
|
(480,069
|
)
|
|
|
(1,224,424
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
$
|
56,290
|
|
|
$
|
-
|
|
|
$
|
56,290
|
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following adjustments were made to the Six Months Ended June 30, 2016 Restated Statement of Operations:
PREMIER BIOMEDICAL, INC.
|
STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
|
|
June 30,
|
|
|
|
|
|
June 30,
|
|
|
|
2016
|
|
|
Adjustments
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
59,686
|
|
|
|
-
|
|
|
|
59,686
|
|
General and administrative
|
|
|
91,466
|
|
|
|
-
|
|
|
|
91,466
|
|
Professional fees
|
|
|
225,959
|
|
|
|
-
|
|
|
|
225,959
|
|
Total operating expenses
|
|
|
377,111
|
|
|
|
-
|
|
|
|
377,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
|
(377,111
|
)
|
|
|
-
|
|
|
|
(377,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(419,477
|
)
|
|
|
10,666
|
|
|
|
(408,811
|
)
|
Other expense
|
|
|
(340,647
|
)
|
|
|
-
|
|
|
|
(340,647
|
)
|
Change in derivative liabilities
|
|
|
-
|
|
|
|
(87,862
|
)
|
|
|
(87,862
|
)
|
Total other expenses
|
|
|
(760,124
|
)
|
|
|
(77,196
|
)
|
|
|
(837,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,137,235
|
)
|
|
$
|
(77,196
|
)
|
|
$
|
(1,214,431
|
)
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following adjustments were made to the Three Months Ended June 30, 2016 Restated Statement of Operations:
PREMIER BIOMEDICAL, INC.
|
STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
|
|
June 30,
|
|
|
|
|
|
June 30,
|
|
|
|
2016
|
|
|
Adjustments
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
49,545
|
|
|
|
-
|
|
|
|
49,545
|
|
General and administrative
|
|
|
41,981
|
|
|
|
-
|
|
|
|
41,981
|
|
Professional fees
|
|
|
87,511
|
|
|
|
-
|
|
|
|
87,511
|
|
Total operating expenses
|
|
|
179,037
|
|
|
|
-
|
|
|
|
179,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
|
(179,037
|
)
|
|
|
-
|
|
|
|
(179,037
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(202,402
|
)
|
|
|
(33,122
|
)
|
|
|
(235,524
|
)
|
Other expense
|
|
|
(340,647
|
)
|
|
|
-
|
|
|
|
(340,647
|
)
|
Change in derivative liabilities
|
|
|
-
|
|
|
|
(189,191
|
)
|
|
|
(189,191
|
)
|
Total other expenses
|
|
|
(543,049
|
)
|
|
|
(222,313
|
)
|
|
|
(765,362
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(722,086
|
)
|
|
$
|
(222,313
|
)
|
|
$
|
(944,399
|
)
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following adjustments were made to the June 30, 2016 Restated Statement of Cash Flows:
PREMIER BIOMEDICAL, INC.
|
STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
|
|
June 30,
|
|
|
|
|
|
June 30,
|
|
|
|
2016
|
|
|
Adjustments
|
|
|
2016
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,137,235
|
)
|
|
$
|
(77,196
|
)
|
|
$
|
(1,214,431
|
)
|
Adjustments to reconcile net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,026
|
|
|
|
-
|
|
|
|
1,026
|
|
Change in fair market value of derivative liabilities
|
|
|
-
|
|
|
|
87,862
|
|
|
|
87,862
|
|
Amortization of debt discounts
|
|
|
383,229
|
|
|
|
(10,666
|
)
|
|
|
372,563
|
|
Stock based compensation, related parties
|
|
|
13,014
|
|
|
|
-
|
|
|
|
13,014
|
|
Stock based compensation
|
|
|
75,866
|
|
|
|
-
|
|
|
|
75,866
|
|
Decrease (increase) in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(2,379
|
)
|
|
|
-
|
|
|
|
(2,379
|
)
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
(44,562
|
)
|
|
|
-
|
|
|
|
(44,562
|
)
|
Accounts payable, related parties
|
|
|
10,395
|
|
|
|
-
|
|
|
|
10,395
|
|
Accrued interest
|
|
|
35,048
|
|
|
|
-
|
|
|
|
35,048
|
|
Accrued interest, related parties
|
|
|
1,200
|
|
|
|
-
|
|
|
|
1,200
|
|
Judgment payable
|
|
|
340,647
|
|
|
|
-
|
|
|
|
340,647
|
|
Net cash used in operating activities
|
|
|
(323,751
|
)
|
|
|
-
|
|
|
|
(323,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(3,536
|
)
|
|
|
-
|
|
|
|
(3,536
|
)
|
Net cash used in investing activities
|
|
|
(3,536
|
)
|
|
|
-
|
|
|
|
(3,536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants, related party
|
|
|
2,000
|
|
|
|
-
|
|
|
|
2,000
|
|
Proceeds from convertible notes payable
|
|
|
417,500
|
|
|
|
-
|
|
|
|
417,500
|
|
Repayments from convertible notes payable
|
|
|
(89,039
|
)
|
|
|
-
|
|
|
|
(89,039
|
)
|
Net cash provided by financing activities
|
|
|
330,461
|
|
|
|
-
|
|
|
|
330,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
|
3,174
|
|
|
|
-
|
|
|
|
3,174
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
35,414
|
|
|
|
-
|
|
|
|
35,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
|
$
|
38,588
|
|
|
$
|
-
|
|
|
$
|
38,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
13,539
|
|
|
$
|
-
|
|
|
$
|
13,539
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount on beneficial conversion feature on convertible note
|
|
$
|
364,220
|
|
|
$
|
(364,220
|
)
|
|
$
|
-
|
|
Value of debt discounts
|
|
$
|
-
|
|
|
$
|
110,583
|
|
|
$
|
110,583
|
|
Value of shares issued for conversion of debt
|
|
$
|
200,338
|
|
|
$
|
-
|
|
|
$
|
200,338
|
|
Cashless exercise of common stock warrants
|
|
$
|
22
|
|
|
$
|
-
|
|
|
$
|
22
|
|
Common stock issued for settlement of accounts payable
|
|
$
|
13,765
|
|
|
$
|
-
|
|
|
$
|
13,765
|
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note 4 – Related Parties
Other Receivable
The Company advanced a total of $48,778 to its joint venture partner, Premier Biomedical Pain Management Solutions, LLC, as of June 30, 2017. The advance was subsequently repaid on July 5, 2017.
Accounts Payable
The Company owed $46,016 and $46,016 as of June 30, 2017 and December 31, 2016, respectively, to entities owned by the Chairman of the Board of Directors. The amounts are related to patent costs and reimbursable expenses paid by the Chairman on behalf of the Company.
The Company owed $1,192 and $306 as of June 30, 2017 and December 31, 2016, respectively, to the Company’s CEO for reimbursable expenses.
The Company owed $6,228 and $6,167 as of June 30, 2017 and December 31, 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.
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.
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.
Accrued interest of $4,770 was outstanding on these notes as of June 30, 2017.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note
5
–
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.
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 6 – 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.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of June 30, 2017 and December 31, 2016, respectively:
|
|
Fair Value Measurements at
June 30, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
Cash
|
|
$
|
125,341
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
|
125,341
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
Notes payable, related parties
|
|
|
-
|
|
|
|
30,000
|
|
|
|
-
|
|
Derivative liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
6,253,880
|
|
Total liabilities
|
|
|
-
|
|
|
|
30,000
|
|
|
|
6,253,880
|
|
|
|
$
|
125,341
|
|
|
$
|
(30,000
|
)
|
|
$
|
(6,253,880
|
)
|
|
|
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 six months ended June 30, 2017 or the year ended December 31, 2016.
Note 7 – 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), will develop and market natural and cannabis-based generalized, neuropathic, and localized pain relief treatment products. We own 50% of PBPMS and ATS owns 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 must 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 may develop inventions and intellectual property independently from PBPMS, and such inventions and intellectual property will be the sole property of ATS or Mr. LaBorde. Pursuant to the terms of the PBPMS operating agreement, we will 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. As of June 30, 2017, we had not yet executed the license agreement or issued these warrants, and on July 5, 2017, we informed ATS that we have opted to terminate the joint venture company agreement.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Our initial capital contribution to PBPMS was $25,000. ATS will 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 is managed by a board of managers (PBPMS Board). Initially, the PBPMS Board consists 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 is subject to other common terms and ownership transfer restrictions, including a right of first refusal; however, we anticipate signing a more detailed and complete operating agreement to better clarify the terms of the joint venture as summarized above. During the six months ending June 30, 2017, we recognized $2,058 of equity in losses from our investment in the joint venture, and our share of the joint venture’s losses have exceeded our investment.
Note 8 – Other Current Assets
Other current assets included the following as of June 30, 2017 and December 31, 2016, respectively:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Deposit on inventory purchase
|
|
$
|
52,100
|
|
|
$
|
-
|
|
Other receivable, related party
|
|
|
48,778
|
|
|
|
-
|
|
Prepaid expenses
|
|
|
17,743
|
|
|
|
11,430
|
|
|
|
$
|
141,521
|
|
|
$
|
11,430
|
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note 9 – Convertible Notes Payable
Convertible notes payable consist of the following at June 30, 2017 and December 31, 2016, respectively:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
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
|
|
|
-
|
|
|
|
302,480
|
|
Less unamortized derivative discounts:
|
|
|
-
|
|
|
|
149,456
|
|
Convertible notes payable
|
|
|
-
|
|
|
|
153,024
|
|
Less: current portion
|
|
|
-
|
|
|
|
153,024
|
|
Convertible notes payable, less current portion
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company recognized interest expense for the six months ended June 30, 2017 and 2016, respectively, as follows:
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Interest on convertible notes
|
|
$
|
2,691
|
|
|
$
|
35,048
|
|
Interest on related party loans
|
|
|
1,200
|
|
|
|
1,200
|
|
Amortization of beneficial conversion feature
|
|
|
-
|
|
|
|
81,648
|
|
Amortization of OID
|
|
|
-
|
|
|
|
20,647
|
|
Amortization of loan origination costs
|
|
|
-
|
|
|
|
44,811
|
|
Derivative discounts
|
|
|
149,456
|
|
|
|
225,457
|
|
Total interest expense
|
|
$
|
153,347
|
|
|
$
|
408,811
|
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note 10 – Notes Payable, Related Parties
Notes payable, related parties consist of the following at June 30, 2017 and December 31, 2016, respectively:
|
|
June 30,
|
|
|
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
|
|
|
$
|
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
|
|
|
|
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
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Total notes payable, related parties
|
|
|
30,000
|
|
|
|
30,000
|
|
Less: current portion
|
|
|
30,000
|
|
|
|
30,000
|
|
Notes payable, related parties, less current portion
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company recorded interest expense in the amount of $1,200 and $1,200 for the six months ended June 30, 2017 and 2016, respectively related to notes payable, related parties.
Note 1
1
– 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 $6,253,880 and $221,822 at June 30, 2017 and December 31, 2016, respectively. The change in fair value of the derivative liabilities resulted in a loss of $6,261,101 and a gain of $87,892 for the six months ended June 30, 2017 and 2016, respectively, which has been reported within other expense in the statements of operations. The loss of $6,261,101 for the six months ended June 30, 2017 consisted of a loss of $7,103,444 due to the value attributable to the warrants, a gain of $849,564 in market value of the warrants and a net loss in market value of $7,221 on the convertible notes. The loss of $87,862 for the six months ended June 30, 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 $75,630 on the convertible notes.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following is a summary of changes in the fair market value of the derivative liability during the six months ended June 30, 2017 and the year ended December 31, 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 warrants
|
|
|
7,103,444
|
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
(842,343
|
)
|
Debt conversions
|
|
|
(229,043
|
)
|
Balance, June 30, 2017
|
|
$
|
6,253,880
|
|
Key inputs and assumptions used to value the convertible debentures and warrants issued during the six months ended June 30, 2017:
|
·
|
Stock price ranging from $0.0435 to $0.0050 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 1% per month to a maximum of 20%.
|
|
·
|
The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company in the range of 145% - 385%.
|
|
·
|
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 $556,020 to $911,155 and would increase at 1% per month.
|
|
·
|
The stock price would fluctuate with the Company projected volatility using a random sampling (450,000 iterations for each valuation) from a normal distribution. The stock price of the underlying instrument is modelled such that it follows a geometric Brownian motion with constant drift and volatility.
|
|
·
|
The Holder would exercise the warrants after 1 trading day as they become exercisable (at issuance) at target prices of 3 times the projected reset price or higher.
|
|
·
|
Reset events were projected to occur by 12/31/17 and 12/31/18 – the reset provision ends 3/30/19 and the option expires 3/30/20.
|
|
·
|
The stock price would fluctuate with an annual volatility. The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company and the term remaining in the range 261.86% - 261.99%.
|
|
·
|
The Holder would exercise the warrant at maturity 3/30/20 if the stock price was above the reset exercise price.
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note
12
–
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.
Note
13
–
Changes in
Stockholders
’
Equity
(Deficit)
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.
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
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.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
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.
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
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
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 on Stock Purchase Agreement
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.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note 14 – 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.
For the six months ended June 30, 2017, and the year ended December 31, 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 June 30, 2017, and December 31, 2016, the Company had approximately $4,656,000 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:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
1,629,600
|
|
|
$
|
1,516,900
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
$
|
1,629,600
|
|
|
$
|
1,516,900
|
|
Less: Valuation allowance
|
|
|
(1,629,600
|
)
|
|
|
(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 June 30, 2017, and December 31, 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:
|
|
June 30,
|
|
|
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.
Note 15 – Subsequent Events
Convertible Notes Exchanged for Previously Issued Shares of Common Stock and Warrants
On August 8, 2017, the Company and each of the three Purchasers 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.
Termination of Joint Ventue
On July 5, 2017, we informed Advanced Technologies Solutions (ATS), owned by Ronald T. La Borde, a member of our Board of Directors, that we have opted to terminate the joint venture company agreement.
PART II – INFORMATION NOT REQUIRED IN PROSPECTUS