Notes to Financial
Statements
Note 1 – Nature of Business and Significant Accounting
Policies
Nature of
Business
Premier
Biomedical, Inc. (“the Company”) was incorporated in
the State of Nevada on May 10, 2010 (“Inception”). The
Company was formed to develop and market medications and procedures
that address a significant number of the most highly visible health
issues currently affecting mankind. Our current focus is primarily
on the development and distribution of our pain
products.
These
statements reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary for
fair presentation of the information contained
therein.
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.
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.
Premier
Biomedical, Inc.
Notes to Financial
Statements
Stock-Based
Compensation
Under
FASB ASC 718-10-30-2, all share-based payments to employees,
including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure
is no longer an alternative. The Company’s stock-based
compensation consisted of the following during the years ended
December 31, 2018 and 2017,
respectively:
|
|
|
|
|
|
|
|
|
Common stock issued
for services
|
$
-
|
$
84,600
|
Warrants issued for
services, related parties
|
272,585
|
102,364
|
Warrants issued for
services
|
24,359
|
9,617
|
Common stock issued
for services on terminated offering
|
-
|
586,823
|
Total stock based
compensation
|
$
296,944
|
$
783,404
|
Revenue
Recognition
On January 1, 2018, we adopted Accounting Standards Update No.
2014-09, Revenue from Contracts with Customers (Topic 606), which
supersedes the revenue recognition requirements in Accounting
Standards Codification (ASC) Topic 605, Revenue Recognition (Topic
605). Results for reporting periods beginning after January 1, 2018
are presented under Topic 606. The impact of adopting the new
revenue standard was not material to our financial statements and
there was no adjustment to beginning retained earnings on January
1, 2018.
Under Topic 606, revenue is recognized when control of the promised
goods or services is transferred to our customers, in an amount
that reflects the consideration we expect to be entitled to in
exchange for those goods or services.
We determine revenue recognition through the following
steps:
●
identification
of the contract, or contracts, with a customer;
●
identification
of the performance obligations in the contract;
●
determination
of the transaction price;
●
allocation
of the transaction price to the performance obligations in the
contract; and
●
recognition
of revenue when, or as, we satisfy a performance
obligation.
Sales are recorded when the earnings process is complete or
substantially complete, and the revenue is measurable and
collectability is reasonably assured, which is typically when
products are shipped. 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 been completed. Sales
commenced on July 5, 2017 with the termination of our joint
venture.
Advertising and
Promotion
All
costs associated with advertising and promoting products are
expensed as incurred. These expenses were $66,244 and $64,108 for
the years ended December 31, 2018 and 2017,
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 Financial
Statements
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.
Recently Issued Accounting
Pronouncements
In
August 2018, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) 2018-13,
Fair
Measurement (Topic 820): Disclosure Framework – Changes to
the Disclosure Requirements for Fair Value Measurement
,
which modify the disclosure requirements of Topic 820. The new
guidance is effective for all entities for annual periods, and
interim periods within those annual periods, beginning after
December 15, 2019, with early adoption permitted. The Company does
not expect the adoption of this ASU to have a material impact on
its consolidated financial statements.
In June
2018, the FASB issued ASU 2018-07,
Compensation-Stock Compensation (Topic 718):
Improvements to Nonemployee Share-Based Payment Accounting
,
which expands the scope of Topic 718 to include share-based payment
transactions for acquiring goods and services from nonemployees. An
entity should apply the requirements of Topic 718 to nonemployee
awards except for specific guidance on inputs to an option pricing
model and the attribution of cost (that is, the period of time over
which share-based payment awards vest and the pattern of cost
recognition over that period). The new guidance is effective for
all entities for annual periods, and interim periods within those
annual periods, beginning after December 15, 2017, with early
adoption permitted. The Company does not expect the adoption of
this ASU to have a material impact on its consolidated financial
statements.
In
March 2018, the FASB issued ASU No. 2018-05,
Income Taxes (Topic 740) - Amendments to SEC
Paragraphs Pursuant to SEC Staff Accounting Bulletin No.
118
. The amendment provides guidance on accounting for the
impact of the Tax Cuts and Jobs Act (the “Tax Act”) and
allows entities to complete the accounting under ASC 740 within a
one-year measurement period from the Tax Act enactment date. This
standard is effective upon issuance. The Tax Act has several
significant changes that impact all taxpayers, including a
transition tax, which is a one-time tax charge on accumulated,
undistributed foreign earnings. The calculation of accumulated
foreign earnings requires an analysis of each foreign
entity’s financial results going back to 1986. The Company
does not expect the adoption of this ASU to have a material impact
on its consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02,
Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive
Income
. The guidance permits
entities to reclassify tax effects stranded in Accumulated Other
Comprehensive Income as a result of tax reform to retained
earnings. This new guidance is effective for annual and interim
periods in fiscal years beginning after December 15, 2018. Early
adoption is permitted in annual and interim periods and can be
applied retrospectively or in the period of adoption. The Company
is currently in the process of evaluating the impact of adoption on
its consolidated financial statements.
Premier
Biomedical, Inc.
Notes to Financial
Statements
Effective
January 1, 2018, the Company adopted ASC 606 — Revenue from
Contracts with Customers. Under ASC 606, the Company recognizes
revenue from the commercial sales of products, licensing agreements
and contracts to perform pilot studies by applying the following
steps: (1) identify the contract with a customer; (2) identify the
performance obligations in the contract; (3) determine the
transaction price; (4) allocate the transaction price to each
performance obligation in the contract; and (5) recognize revenue
when each performance obligation is satisfied. For the comparative
periods, revenue has not been adjusted and continues to be reported
under ASC 605 — Revenue Recognition. Under ASC 605, revenue
is recognized when the following criteria are met: (1) persuasive
evidence of an arrangement exists; (2) the performance of service
has been rendered to a customer or delivery has occurred; (3) the
amount of fee to be paid by a customer is fixed and determinable;
and (4) the collectability of the fee is reasonably assured.
There was no impact on the
Company’s financial statements as a result of adopting Topic
606 for the years ended December 31, 2018 and
2017.
No
other new accounting pronouncements, issued or effective during the
year ended December 31, 2018, have had or are expected to have a
significant impact on the Company’s financial
statements.
Note 2 – Going Concern
As
shown in the accompanying financial statements, the Company has no
revenues, incurred net losses from operations resulting in an
accumulated deficit of $16,727,698, and had negative working
capital of ($2,152,595) at December 31, 2018. These
factors raise substantial doubt about the Company’s ability
to continue as a going concern. Management is actively pursuing new
products and services to begin generating revenues. In addition,
the Company is currently seeking additional sources of capital to
fund short term operations. The Company, however, is dependent upon
its ability to secure equity and/or debt financing and there are no
assurances that the Company will be successful; therefore, without
sufficient financing it would be unlikely for the Company to
continue as a going concern.
The
financial statements do not include any adjustments that might
result from the outcome of any uncertainty as to the
Company’s ability to continue as a going concern. The
financial statements also do not include any adjustments relating
to the recoverability and classification of recorded asset amounts,
or amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going
concern.
Note 3 – Related Party
Accounts Payable
The
Company owed $24,116 and $39,116 as of December 31, 2018 and 2017,
respectively, to entities owned by the Chairman of the Board of
Directors. The amounts are related to patent costs paid by the
Chairman on behalf of the Company.
The
Company owed $753 and $713 as of December 31, 2018 and 2017,
respectively, to the Company’s CEO for reimbursable
expenses.
The
Company owed $1,075 and $1,553 as of December 31, 2018 and 2017,
respectively, amongst members of the Company’s Board of
Directors for reimbursable expenses.
Notes Payable
On July
6, 2015, the Company received an unsecured loan in the amount of
$10,000, due on demand, bearing interest at a simple interest rate
of 8%, from the Company’s CEO. The principal and interest was
repaid in full in November of 2017.
On July
6, 2015, the Company received an unsecured loan in the amount of
$10,000, due on demand, bearing interest at a simple interest rate
of 8%, from the Company’s Chairman of the Board. The
principal and interest was repaid in full in November of
2017.
On July
6, 2015, the Company received an unsecured loan in the amount of
$10,000, due on demand, bearing interest at a simple interest rate
of 8%, from one of the Company’s Directors. The principal and
interest was repaid in full in November of 2017.
Premier
Biomedical, Inc.
Notes to Financial
Statements
Common Stock Warrants Exercised
On
November 5, 2018, the Company issued 12,000 shares of common stock
pursuant to the exercise of warrants by the Company’s
Chairman of the Board at $0.0025 per share for total proceeds of
$30.
On
November 22, 2017, the Company issued 28,000 shares of common stock
pursuant to the exercise of warrants by the Company’s CEO at
$0.0025 per share for total proceeds of $70.
Common Stock Warrants Granted
On
December 15, 2018, 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 (842,000
shares); Mitchell Felder (842,000 shares), Heidi Carl (500,000
shares), John Borza (579,000 shares), Jay Rosen (52,500 shares),
Patricio Reyes (500,000 shares) and John Pauly (52,500 shares). The
exercise price of the foregoing warrants is nine cents ($0.09) per
share. The warrants are exercisable over seven (7) years. The total
fair value of the 3,368,000 common stock warrants using the
Black-Scholes option-pricing model is $272,585, or $0.08093 per
share, based on a volatility rate of 211%, a risk-free interest
rate of 2.72% and an expected term of 3.5 years, and was expensed
upon issuance.
On
December 22, 2017, the Company granted warrants to the following
officers and directors, which will allow them to purchase shares of
our common stock in the amounts indicated: William Hartman (34,000
shares); Mitchell Felder (34,000 shares), Heidi Carl (24,000
shares), John Borza (29,000 shares), Jay Rosen (4,000 shares),
Patricio Reyes (16,000 shares) and John Pauly (8,000 shares). The
exercise price of the foregoing warrants is one dollar and
twenty-five cents ($1.25) per share. The warrants are exercisable
over seven (7) years. The total fair value of the 149,000 common
stock warrants using the Black-Scholes option-pricing model is
$102,364, or $0.68699 per share, based on a volatility rate of
195%, a risk-free interest rate of 2.01% and an expected term of
3.5 years, and was expensed upon issuance.
Loss on Joint Venture
The
Company advanced a total of $48,778 to its joint venture partner,
Premier Biomedical Pain Management Solutions, LLC, and was
subsequently repaid a total of $44,604 on July 5, 2017 with the
termination of the joint venture, resulting in a loss of $6,232,
consisting of the original investment of $2,058 and the loss on
this receivable of $4,174, for the year ended December 31,
2017.
Note 4 – Joint Venture
On
September 13, 2016, we entered into an operating agreement to form
a pain management joint venture company with Advanced Technologies
Solutions (ATS), a company based in San Diego, California and owned
by Ronald T. LaBorde, a member of our Board of Directors. The joint
venture company, Premier Biomedical Pain Management Solutions, LLC,
a Nevada limited liability company (PBPMS), to develop and market
natural and cannabis-based generalized, neuropathic, and localized
pain relief treatment products. We owned 50% of PBPMS and ATS owned
the other 50%, with 89% of the profits allocated to us and the
remaining 11% of profits allocated to ATS. As part of the agreement
with ATS, Mr. LaBorde was appointed a member of our Board of
Directors.
PBPMS
was required to enter into separate license agreements with us and
ATS for the use of technology previously developed by both
companies. Intellectual property developed jointly by the parties
will be the property of PBPMS. However, ATS and Mr. LaBorde could
have developed inventions and intellectual property independently
from PBPMS, and such inventions and intellectual property would
have been the sole property of ATS or Mr. LaBorde. Pursuant to the
terms of the PBPMS operating agreement, The Company was to tender
1,250,000 warrants, for the purchase of an equal number of shares
of our common stock at a strike price of $0.05, pursuant to the
license agreement between ATS and PBPMS. The Company and Mr.
LaBorde did not execute the license agreement or issue these
warrants, and on July 5, 2017, the Company terminated the joint
venture agreement, resulting in a loss of $6,232.
Premier
Biomedical, Inc.
Notes to Financial
Statements
Our
initial capital contribution to PBPMS was $25,000. ATS was to
contribute (i) technical, labor, manufacturing information and
know-how required to produce the initial product, an extended
duration topical pain relief patch; (ii) $5,000 worth of primary
ingredients; and (iii) $5,000 worth of other materials to produce
the initial prototype pain relief patches.
PBPMS
was managed by a board of managers (PBPMS Board). The PBPMS Board
consisted of William A. Hartman, our President and Chief Executive
Officer and member of our Board of Directors, Ronald T. LaBorde,
the Founder of ATS and member of our Board of Directors, Dr.
Patricio Reyes, our Chief Technology Officer and member of our
Board of Directors, and John Borza, our Vice-President and member
of our Board of Directors. Decisions of the PBPMS Board require
unanimous approval.
The
PBPMS operating agreement was subject to other common terms and
ownership transfer restrictions, including a right of first
refusal; however, the operating agreement and entity were dissolved
upon the termination of the joint venture on July 5,
2017.
Note 5 – Subsidiary Formation
On
September 14, 2017, we formed Premier Biomedical Pain Relief Meds,
LLC as a wholly-owned Nevada limited liability company. On January
1, 2018, we contributed our pain management assets to this entity
and continued our pain management operations within this new
subsidiary.
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.
The
following schedule summarizes the valuation of financial
instruments at fair value on a recurring basis in the balance
sheets as of December 31, 2018 and 2017, respectively:
|
Fair Value
Measurements at December 31, 2018
|
|
|
|
|
Assets
|
|
|
|
Cash
|
$
86,827
|
$
-
|
$
-
|
Total
assets
|
86,827
|
-
|
-
|
Liabilities
|
|
|
|
Convertible note
payable
|
-
|
309,637
|
-
|
Derivative
liabilities
|
-
|
-
|
1,690,304
|
Total
liabilities
|
-
|
309,637
|
1,690,304
|
|
$
86,827
|
$
(309,637
)
|
$
(1,690,304
)
|
Premier
Biomedical, Inc.
Notes to Financial
Statements
|
Fair Value
Measurements at December 31, 2017
|
|
|
|
|
Assets
|
|
|
|
Cash
|
$
83,704
|
$
-
|
$
-
|
Total
assets
|
83,704
|
-
|
-
|
Liabilities
|
|
|
|
Convertible note
payable, net of discounts
|
-
|
169,990
|
-
|
Derivative
liabilities
|
-
|
-
|
2,255,781
|
Total
liabilities
|
-
|
169,990
|
2,255,781
|
|
$
83,704
|
$
(169,990
)
|
$
(2,255,781
)
|
The
fair values of our related party debts are deemed to approximate
book value, and are considered Level 2 inputs as defined by
ASC Topic 820-10-35.
There
were no transfers of financial assets or liabilities between Level
1, Level 2 and Level 3 inputs for the years ended December 31, 2018
or the year ended December 31, 2017.
Note 7 – 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 are 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.
Premier
Biomedical, Inc.
Notes to Financial
Statements
Note 8 – Convertible Notes Payable
Convertible
notes payable consists of the following at
December 31, 2018 and 2017,
respectively:
|
|
|
|
|
|
|
|
|
On July 11, 2018,
the Company received proceeds of $120,000 in exchange for an 8%
interest bearing; unsecured convertible promissory note maturing on
October 31, 2018 (“Third Red Diamond Note”). The
note is convertible at 60% of the lowest traded price of the Common
Stock in the fifteen (15) Trading Days prior to the Conversion
Date. A total of $25,920 of principal was converted into 348,667
shares of common stock over various dates between
July 27, 2018 and August 23, 2018.
|
$
94,080
|
$
-
|
|
|
|
On July 11, 2018,
the Company received proceeds of $60,000 in exchange for an 8%
interest bearing; unsecured convertible promissory note maturing on
October 31, 2018 (“Third SEG-RedaShex Note”). The
note is convertible at 60% of the lowest traded price of the Common
Stock in the fifteen (15) Trading Days prior to the Conversion
Date.
|
60,000
|
-
|
|
|
|
On April 24, 2018,
the Company received proceeds of $30,000 in exchange for an 8%
interest bearing; unsecured convertible promissory note maturing on
July 31, 2018 (“Second Red Diamond Note”). The
note is convertible at 60% of the lowest traded price of the Common
Stock in the fifteen (15) Trading Days prior to the Conversion
Date.
|
30,000
|
-
|
|
|
|
On April 24, 2018,
the Company received proceeds of $30,000 in exchange for an 8%
interest bearing; unsecured convertible promissory note maturing on
July 31, 2018 (“Second SEG-RedaShex Note”). The
note is convertible at 60% of the lowest traded price of the Common
Stock in the fifteen (15) Trading Days prior to the Conversion
Date.
|
30,000
|
-
|
|
|
|
On March 1, 2018,
the Company received proceeds of $30,000 in exchange for an 8%
interest bearing; unsecured convertible promissory note maturing on
May 31, 2018 (“First SEG-RedaShex Note”). The note
is convertible at 60% of the lowest traded price of the Common
Stock in the fifteen (15) Trading Days prior to the Conversion
Date.
|
30,000
|
-
|
|
|
|
On March 1, 2018,
the Company received proceeds of $30,000 in exchange for an 8%
interest bearing; unsecured convertible promissory note maturing on
May 31, 2018 (“First Red Diamond Note”). The note
is convertible at 60% of the lowest traded price of the Common
Stock in the fifteen (15) Trading Days prior to the Conversion
Date. A total of $30,000 of principal was converted into 387,815
shares of common stock over various dates between
September 5, 2018 and
October 3, 2018.
|
-
|
-
|
|
|
|
On October 30,
2017, the Company received proceeds of $50,000 in exchange for an
8% interest bearing; unsecured convertible promissory note maturing
on January 31, 2018 (“Second Diamond Rock Note”).
The note is convertible at 60% of the lowest traded price of the
Common Stock in the fifteen (15) Trading Days prior to the
Conversion Date. A $15,000 loss was recognized during the fourth
quarter of 2018 due to the enactment of default provision. A total
of $9,943 of principal was converted into 496,960 shares of common
stock over various dates between December 12, 2018 and
December 31, 2018, and 276,960 of those shares were
subsequently issued on January 1, 2019.
|
55,057
|
50,000
|
|
|
|
On October 30,
2017, the Company received proceeds of $50,000 in exchange for an
8% interest bearing; unsecured convertible promissory note maturing
on January 31, 2018 (“Second SEG Note”). The note
is convertible at 60% of the lowest traded price of the Common
Stock in the fifteen (15) Trading Days prior to the Conversion
Date. A total of $10,000 of principal was converted into 20,833
shares of common stock on October 31, 2017, and the
remaining $40,000 of principal was converted into 106,238 shares of
common stock on January 29, 2018.
|
-
|
40,000
|
|
|
|
On August 8, 2017,
the Company entered into an exchange agreement with Diamond Rock,
LLC whereby they exchanged (i) the 13,333,334 Series A Warrants
purchased in the First Closing, (ii) the 13,333,334 Series B
Warrants purchased in the First Closing, and (iii) the 10,101,011
shares of common stock purchased in the Second Closing (the
“Exchange Securities”) for a $50,000 convertible note
(“First Diamond Rock Note”) issued by the Company,
bearing interest at 8% interest and maturing on November 30, 2017.
The notes are convertible at 50% of the lowest traded price of the
Common Stock in the fifteen (15) Trading Days prior to the
Conversion Date. A $10,500 loss was recognized during the fourth
quarter of 2018 due to the enactment of default provision. A total
of $15,000 of principal was converted into an aggregate of 31,250
shares of common stock at various dates between
November 6, 2017 and November 13, 2017, and
another $35,000 of principal was converted into an aggregate of
751,550 shares of common stock at various dates between
October 12, 2018 and
November 30, 2018.
|
10,500
|
35,000
|
|
|
|
On August 8, 2017,
the Company entered into an exchange agreement with The Special
Equities Group, LLC whereby they exchanged (i) the 13,333,334
Series A Warrants purchased in the First Closing, (ii) the
13,333,334 Series B Warrants purchased in the First Closing, and
(iii) the 10,101,011 shares of common stock purchased in the Second
Closing (the “Exchange Securities”) for a $50,000
convertible note (“First SEG Note”) issued by the
Company, bearing interest at 8% interest and maturing on November
30, 2017. The notes are convertible at 50% of the lowest traded
price of the Common Stock in the fifteen (15) Trading Days prior to
the Conversion Date. A total of $49,756, consisting of $43,250 of
principal and $6,506 of interest, was converted into 943,071 shares
of common stock over various dates between
August 20, 2018 and December 12, 2018. An
additional $6,750 of principal was forgiven on the
note.
|
-
|
50,000
|
|
|
|
On August 8, 2017,
the Company entered into an exchange agreement with RDW Capital,
LLC whereby they exchanged (i) the 13,333,334 Series A Warrants
purchased in the First Closing, (ii) the 13,333,334 Series B
Warrants purchased in the First Closing, and (iii) the 10,101,011
shares of common stock purchased in the Second Closing (the
“Exchange Securities”) for a $50,000 convertible note
(“First RDW Note”) issued by the Company, bearing
interest at 8% interest and maturing on November 30, 2017. The
notes are convertible at 50% of the lowest traded price of the
Common Stock in the fifteen (15) Trading Days prior to the
Conversion Date. A total of $25,000 of principal was converted into
52,632 shares of common stock on October 31, 2017, and
the remaining $25,000 of principal was converted into 76,923 shares
of common stock on January 3, 2018.
|
-
|
25,000
|
|
|
|
Total convertible
notes payable, currently in default
|
309,637
|
200,000
|
Less unamortized
derivative discounts:
|
-
|
30,010
|
Convertible notes
payable
|
309,637
|
169,990
|
Less: current
portion
|
309,637
|
169,990
|
Convertible notes
payable, less current portion
|
$
-
|
$
-
|
Premier
Biomedical, Inc.
Notes to Financial
Statements
In
accordance with ASC 470-20 Debt with Conversion and Other Options,
the Company recorded total discounts of $300,000 and $221,515 for
the variable conversion features of the convertible debts incurred
during the years ended December 31, 2018 and 2017,
respectively. The discounts are being amortized to interest expense
over the term of the debentures using the effective interest
method. The Company recorded $366,653 and $340,961 of interest
expense pursuant to the amortization of note discounts during the
years ended December 31, 2018 and 2017,
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.
The
Company recognized interest expense for the years ended
December 31, 2018 and 2017, respectively, as
follows:
|
|
|
|
|
|
|
|
|
Interest on
convertible notes
|
$
22,765
|
$
8,531
|
Interest on related
party loans
|
-
|
2,010
|
Amortization of
derivative discounts
|
366,653
|
340,961
|
Loss on default
provisions
|
25,500
|
-
|
Interest on credit
cards
|
369
|
-
|
Total interest
expense
|
$
415,287
|
$
351,502
|
Note 9 – Derivative Liabilities
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 $1,690,304 and $2,255,781
at December 31, 2018 and 2017, respectively. The
change in fair value of the derivative liabilities resulted in a
gain of $702,493 and a loss of $2,115,986 for the years ended
December 31, 2018 and 2017, respectively, which has
been reported within other expense in the statements of operations.
The gain of $702,493 for the year ended December 31, 2018
consisted of a net loss in market value of $64,139 on the
convertible notes and a net gain of $766,632 in market value of the
warrants. The loss of $2,115,986 for the year ended
December 31, 2017 consisted of a loss of $7,103,444
attributable to the fair value of warrants, a gain of $3,766,437
due to the subsequent exchange of the warrants, a net loss in
market value of $4,767 on the convertible notes and a net gain of
$1,225,788 in market value of the warrants.
Premier
Biomedical, Inc.
Notes to Financial
Statements
The
following is a summary of changes in the fair market value of the
derivative liability during the
years
ended December 31, 2018 and 2017,
respectively
:
|
|
|
|
|
|
Balance, December
31, 2016
|
$
221,822
|
Increase
in derivative value due to issuances of convertible promissory
notes
|
221,515
|
Increase
in derivative value attributable to tainted warrants
|
7,103,444
|
Decrease
in derivative value attributable to exchange of
warrants
|
(3,766,437
)
|
Change
in fair market value of derivative liabilities due to the mark to
market adjustment
|
(1,221,021
)
|
Debt
conversions
|
(303,542
)
|
Balance, December
31, 2017
|
$
2,255,781
|
Increase
in derivative value due to issuances of convertible promissory
notes
|
336,643
|
Change
in fair market value of derivative liabilities due to the mark to
market adjustment
|
(702,493
)
|
Debt
conversions
|
(199,627
)
|
Balance,
December 31, 2018
|
$
1,690,304
|
Key inputs and assumptions used to value the convertible debentures
and warrants issued during the years ended
December 31, 2018 and 2017:
●
Stock
price
ranging from $0.19 to $0.0812 during these periods would fluctuate
with projected volatility
.
●
The
notes convert with variable conversion prices and fixed conversion
prices (tainted notes).
●
An
event of default would occur -0-% of the time, increasing 2% per
month to a maximum of 10%.
●
The
projected annual volatility curve for each valuation period was
based on the historical annual volatility of the company in the
range of 208.5% - 289.6%.
●
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 $868,383 to $798,331 and would
increase at 1% per month.
●
The stock price
would fluctuate with the Company projected volatility using a
random sampling (500,000 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 one trading day as they become
exercisable (at issuance) at target prices of 3 to 5 times the
projected reset price or higher.
●
Reset events were
projected to occur by 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 226.2% - 226.2%.
●
The Holder would
exercise the warrant at maturity in 2020 if the stock price was
above the reset exercise price.
Premier
Biomedical, Inc.
Notes to Financial
Statements
Note 10 – Commitments and Contingencies
Collaborative Patent License Agreements
On May
9, 2012, the Company entered into a Collaborative Agreement with
the University of Texas at El Paso. Pursuant to the terms of the
Agreement, the Company will work jointly with the University to
develop a series of research and development programs around its
sequential-dialysis technology in the areas of Alzheimer's Disease,
Traumatic Brain Injury (TBI), Chronic Pain Syndrome, Fibromyalgia,
Multiple Sclerosis, Amyotrophic Lateral Sclerosis (ALS or Lou
Gehrig's disease), Blood Sepsis, Cancer, Heart Attacks and Strokes.
The programs will utilize the facilities at one or more of the
University of Texas’ campuses. The Company will pay the
University’s actual overhead for the projects, plus a
negotiated facility and administration overhead expense, and 10% of
all gross revenues associated with the sale, license and/or
royalties of all products and treatment procedures directly
affiliated with programs. Intellectual property jointly invented
and developed as a result of the projects will be owned jointly by
the University and the Company. The Agreement has an initial term
of five (5) years, and is renewable upon mutual agreement of the
parties.
On
March 4, 2015, we entered into a Patent License Agreement (PLA)
with the University of Texas at El Paso (UTEP) regarding our joint
research and development of CTLA-4 Blockade with Metronomic
Chemotherapy for the Treatment of Breast Cancer. This is the first
PLA with UTEP following our Collaborative Agreement with them dated
May 9, 2012, and memorializes the joint ownership of the
applicable patent and the financial and other terms related
thereto.
On June
19, 2015, we entered into Amendment No. 1 to this Agreement,
pursuant to which we explicitly included Provisional Patent
Application No. 62/161,116 entitled, “Anti-CTLA-4
Blockade” (the “Application”) under the
definition of “Patent Rights” as set forth in the PLA.
The Application was filed with the United States Patent and
Trademarks Office on May 13, 2015; the underlying
technology was invented by Robert Kirken and Georgialina Rodriguez,
and is solely-owned by The Board of Regents of The University of
Texas System.
On
October 31, 2017 we entered into an Agreement, Final Payment under
Contract, and Release of all Claims, whereby we agreed to pay them
a total of $326,336 arising out of the research and development
agreements with an initial payment of $22,211, and monthly payments
of varying amounts between $5,000 and $20,000 thereafter for twenty
eight months until the balance is paid in full. Subject to the
compliance of all terms, the intellectual property rights
established and arising out of the collaborative agreements remain
in full force and effect and the parties agreed to a mutual release
upon the final contracted payment. The full amount of the liability
has been recognized as accounts payable, with $225,024 outstanding
as of the date of this filing, which is currently in
default.
Note 11 – Stockholders’ Equity
Reverse Stock Split
On June 27, 2018, the Company effected a 1-for-250
reverse
stock split (the “Reverse Stock Split”)
.
No fractional shares were issued, and no
cash or other consideration was paid in connection with the Reverse
Stock Split. Instead, the Company issued one whole share of the
post-Reverse Stock Split common stock to any stockholder who
otherwise would have received a fractional share as a result of the
Reverse Stock Split. The Company was authorized to issue
1,000,000,000 shares of common stock prior to the Reverse Stock
Split, which remains unaffected. The Reverse Stock Split did not
have any effect on the stated par value of the common stock, or the
Company’s authorized preferred stock. Unless otherwise
stated, all share and per share information in this Annual Report
on Form 10-K has been retroactively adjusted to reflect the Reverse
Stock Split.
Premier
Biomedical, Inc.
Notes to Financial
Statements
Convertible Preferred Stock
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, and another 1,000,000 shares of $0.001 par value Series
B Convertible Preferred Stock (“Series B Preferred
Stock”) were designated on November 23, 2018. 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, and agreed to reserve no less than 225 million
shares.
Convertible Preferred Stock, Series A
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.
Convertible Preferred Stock, Series B
Each
share of Series B Preferred Stock is convertible, at the option of
the holder thereof, at any time after the issuance of such share
into that number of fully paid and
nonassessable shares of our common stock equal to the quotient of
the Conversion Principal Amount divided by the lesser of (a) the
Fixed Conversion Price established by our Board of Directors on the
date of conversion, and (b) the Fair Market Value. The Certificate
of Designation defines Fair Market Value as 60% of the lowest
Traded Price for the common stock for the previous fifteen (15)
trading days prior to the Conversion Date on the market or exchange
where our common stock is trading. The Conversion Principal Amount
is equal to the Original Issue Price ($1.00) divided by nine-tenths
(0.9). The Fixed Conversion Price is the price set by our Board of
Directors upon conversion but in no event less than the last Traded
Price of our common stock. Traded Price is defined as the price at
which our common stock changes hands on the designated exchange or
market
.
Conversion of the
Series B Preferred Stock is subject to a Beneficial Ownership
Limitation that prohibits the conversion of the Series B Preferred
Stock if the conversion would result in beneficial ownership by the
holder and its affiliates of more than 4.99% of our outstanding
shares of common stock. A holder of Series B Preferred Stock may
increase its Beneficial Ownership Limitation up to 9.99% but only
after 61 days have passed since the holder gave notice to the
Company.
The Series B Preferred
Stock has no voting rights. The rights of the Series B Preferred
Stock survive any reorganization, merger or sale of the
Company.
The holders of Series B Preferred Stock shall receive noncumulative
dividends on an as-converted basis in the same form as any
dividends to be paid out on shares of our common stock. Any
dividends paid will first be paid to the holders of Series B
Preferred Stock prior and in preference to any payment or
distribution to holders of common stock. Other than as set forth in
the previous sentence, the Certificate of Designation provides that
no other dividends shall be paid on Series B Preferred Stock.
Dividends on the Series B Preferred Stock are not mandatory or
cumulative. There are no sinking fund provisions applicable to the
Series B Preferred Stock, and the holders of Series B Preferred
Stock have no redemption rights. The Corporation may redeem the
Series B Preferred Stock upon 30 days’ prior notice at a
price equal to the sum of 133% of the Original Issue Price plus the
amount of any unpaid dividends on the shares to be
redeemed.
As long as any shares of Series B Preferred Stock remain
outstanding, the Certificate of Designation provides that without
the approval of 75% of the holders of the outstanding Series B
Preferred Stock, we may not (i) alter or change the rights,
preferences, or privileges of the Series B Convertible Preferred
Stock, (ii) increase or decrease the number of authorized shares of
Series B Convertible Preferred Stock, or (iii) authorize the
issuance of securities having a preference over or on par with the
Series B Preferred Stock.
Sale of Convertible Preferred Stock, Series B (2018)
On November 23, 2018, we sold 75,000 shares of Series B
Convertible Preferred Stock to
RedDiamond Partners LLC, and another 75,000 shares
of Series B
Convertible Preferred Stock to
SEG-RedaShex, LLC for $150,000 in total. Pursuant
to the sale, the purchasers have the right to participate in any
future financing up to 100% of the financing for the next 12
months. We also agreed to refrain from issuing any shares of common
stock or equivalents for 30 days after the sale. The agreement also
prohibits the Company from entering into any agreement involving a
Variable Rate Transaction for eight months after the sale. In
addition, we agreed to grant the purchasers a most-favored nation
provision whereby the purchasers may exchange their shares of
Series B Preferred Stock for securities issued in a subsequent
financing on the same terms and conditions. The purchasers also
have anti-dilution rights that allow them to acquire shares of
common stock at a lower conversion price if a person acquires
shares of our common stock or equivalents at a price per share
lower than the conversion price of the Series B Preferred
Stock.
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 Warrants Exercised (2018)
On
November 5, 2018, the Company issued 12,000 shares of common stock
pursuant to the exercise of warrants by the Company’s
Chairman of the Board at $0.0025 per share for total proceeds of
$30.
Common Stock Warrants Exercised (2017)
On
November 22, 2017, the Company issued 28,000 shares of common stock
pursuant to the exercise of warrants by the Company’s CEO at
$0.0025 per share for total proceeds of $70.
Securities Purchase Agreement (2017)
On
March 30, 2017, we entered into a Securities Purchase Agreement
(the “Purchase Agreement”) by and between the Company
and each of The Special Equities Group, LLC, RDW Capital LLC, and
DiamondRock, LLC (each a “Purchaser” and collectively,
the “Purchasers”) to sell our common stock and warrants
at a fixed price. Pursuant to the Purchase Agreement, we received
from the Purchasers an aggregate of $300,000, net of $15,000 of
offering costs, in exchange for 160,000 shares of our common stock,
warrants to purchase up to 160,000 shares of our common stock at an
exercise price of $7.50 (“Series A Warrants”) and
warrants to purchase up to 160,000 shares or our common stock at an
exercise price of $12.50 (“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) $5.00 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 8.
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 121,212 shares of our common stock at an exercise
price of $7.50 (“Series A Warrants”) and warrants to
purchase up to 121,212 shares or our common stock at an exercise
price of $12.50 (“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)
$5.00, 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 53,333 Series A Warrants purchased in the First Closing,
(ii) the 53,333 Series B Warrants purchased in the First Closing,
and (iii) the 40,404 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.
Premier
Biomedical, Inc.
Notes to Financial
Statements
Registration Rights Agreement (2017)
On
March 30, 2017, we entered into a Registration Rights Agreement
with the Purchasers in connection with the Purchase Agreement. In
the Registration Rights Agreement, we agreed to prepare and file a
registration statement with the Securities and Exchange Commission
covering the resale of all of the shares of common stock sold to
the Purchasers and the shares issuable upon exercise of the Series
A Warrants and Series B Warrants. We agreed to file an initial
registration statement as promptly as possible and have it declared
effective no later than June 28, 2017 (or July 28, 2017 if the
registration statement was reviewed by the Securities and Exchange
Commission) and keep it continuously effective until the securities
are sold or may be sold under Rule 144 of the Securities Act
without volume or manner-of-sale restrictions. If all of the
securities cannot be registered on one registration statement, we
agreed to file subsequent registration statements to register the
remaining securities as promptly as allowed. The registration
statement was subsequently withdrawn on July 24, 2017 and the
Purchase Agreement was amended on August 8, 2017 to change the
terms of the third closing to an aggregate of $150,000 of
convertible notes, bearing interest at 8%, convertible at 50% of
the lowest traded price of the Common Stock in the fifteen (15)
Trading Days prior to the Conversion Date.
Common Stock Issuances for Debt Conversions (2018)
On
December 31, 2018, the Company granted 276,960 shares of common
stock pursuant to the conversion of $5,345 of principal from the
Second Diamond Rock Note. The shares were subsequently issued on
January 1, 2019. As such, the $5,345 was presented as a
subscription payable at December 31, 2018. The note was
converted in accordance with the conversion terms; therefore, no
gain or loss has been recognized.
On
December 12, 2018, the Company issued 258,193 shares of common
stock pursuant to the conversion of $6,506 of interest from the
First SEG Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
December 12, 2018, the Company issued 220,000 shares of common
stock pursuant to the conversion of $4,598 of principal from the
Second Diamond Rock Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been
recognized.
On
November 30, 2018, the Company issued 211,550 shares of common
stock pursuant to the conversion of $8,462 of principal from the
First Diamond Rock Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been
recognized.
On
November 12, 2018, the Company issued 150,000 shares of common
stock pursuant to the conversion of $7,650 of principal from the
First SEG Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
November 5, 2018, the Company issued 190,000 shares of common stock
pursuant to the conversion of $8,075 of principal from the First
Diamond Rock Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
October 25, 2018, the Company issued 175,000 shares of common stock
pursuant to the conversion of $8,750 of principal from the First
Diamond Rock Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
October 16, 2018, the Company issued 202,702 shares of common stock
pursuant to the conversion of $13,500 of principal from the First
SEG Note. The note was converted in accordance with the conversion
terms; therefore, no gain or loss has been recognized.
On
October 12, 2018, the Company issued 175,000 shares of common stock
pursuant to the conversion of $9,712 of principal from the First
Diamond Rock Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
October 3, 2018, the Company issued 111,940 shares of common stock
pursuant to the conversion of $7,500 of principal from the First
Diamond Rock 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 24, 2018, the Company issued 172,176 shares of common
stock pursuant to the conversion of $12,500 of principal from the
First SEG Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
September 18, 2018, the Company issued 136,986 shares of common
stock pursuant to the conversion of $10,000 of principal from the
First Red Diamond Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been
recognized.
On
September 5, 2018, the Company issued 138,889 shares of common
stock pursuant to the conversion of $12,500 of principal from the
First Red Diamond Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been
recognized.
On
August 23, 2018, the Company issued 82,001 shares of common stock
pursuant to the conversion of $4,920 of principal from the Third
Red Diamond Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
August 20, 2018, the Company issued 160,000 shares of common stock
pursuant to the conversion of $9,600 of principal from the First
SEG Note. The note was converted in accordance with the conversion
terms; therefore, no gain or loss has been recognized.
On
August 15, 2018, the Company issued 100,000 shares of common stock
pursuant to the conversion of $6,000 of principal from the Third
Red Diamond Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
August 9, 2018, the Company issued 83,333 shares of common stock
pursuant to the conversion of $5,000 of principal from the Third
Red Diamond Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On July
27, 2018, the Company issued 83,333 shares of common stock pursuant
to the conversion of $10,000 of principal from the Third Red
Diamond Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
January 29, 2018, the Company issued 106,238 shares of common stock
pursuant to the conversion of $40,000 of principal from the Second
SEG Note. The note was converted in accordance with the conversion
terms; therefore, no gain or loss has been recognized.
On
January 3, 2018, the Company issued 76,923 shares of common stock
pursuant to the conversion of $25,000 of principal from the First
RDW Note. The note was converted in accordance with the conversion
terms; therefore, no gain or loss has been recognized.
Common Stock Issuances for Debt Conversions (2017)
On
various dates between October 31, 2017 and December 26, 2017, the
Company issued a total of 228,775 shares of common stock pursuant
to the conversion of an aggregate of $100,000 of principal, among
the First and Second RDW, SEG and Diamond Rock Notes. The notes
were converted in accordance with the conversion terms; therefore
no gain or loss has been recognized.
On
various dates between January 10, 2017 and March 13, 2017, the
Company issued a total of 568,593 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.
Premier
Biomedical, Inc.
Notes to Financial
Statements
Common Stock Issuances on Stock Purchase Agreement
(2017)
On
February 13, 2017, the Company drew down $8,000 on their Stock
Purchase Agreement entered into on May 27, 2016, with Redwood and
issued 8,000 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 12,588 shares of common stock pursuant to the Sixth Put
Notice.
Common Stock Issuances for Services (2017)
On December 6, 2017, we agreed to issue a total of 545,882 shares
of our common stock to The Special Equities Group, LLC, RDW
Capital, LLC and DiamondRock, LLC as compensation, of which a total
of 291,180 shares were issued immediately with an aggregate fair
value of $313,018 based on t
he closing price of the
Company’s common stock on the date of grant, and the other
254,703 shares were subsequently issued on various dates between
January 17, 2018 and February 13, 2018.
The aggregate fair value of the shares issued
subsequent to December 31, 2017 was $273,805.
On August 25, 2017, we agreed to issue 36,000 shares of our common
stock to a third-party for consulting services rendered. The shares
were subsequently issued on December 1, 2017.
The total fair
value of the common stock was $84,600 based on the closing price of
the Company’s common stock on the date of grant.
Common Stock Issuances on Subscriptions Payable (2018)
On
various dates from January 17, 2018 through February 13, 2018, the
Company issued a total of 254,703 shares
to The Special Equities Group and DiamondRock, LLC
as compensation
valued at $273,805 awarded on
December 6, 2017.
Note 12 – Common Stock Warrants
Common Stock Warrants Granted (2018)
On
December 15, 2018, 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 (842,000
shares); Mitchell Felder (842,000 shares), Heidi Carl (500,000
shares), John Borza (579,000 shares), Jay Rosen (52,500 shares),
Patricio Reyes (500,000 shares) and John Pauly (52,500 shares). The
exercise price of the foregoing warrants is nine cents ($0.09) per
share. The warrants are exercisable over seven (7) years. The total
fair value of the 3,368,000 common stock warrants using the
Black-Scholes option-pricing model is $272,585, or $0.08093 per
share, based on a volatility rate of 211%, a risk-free interest
rate of 2.72% and an expected term of 3.5 years, and was expensed
upon issuance.
On
December 15, 2018, we also issued warrants to purchase a total of
two hundred and eighty-eight thousand (288,000) shares of our
common stock amongst four members of our Scientific Advisory Board.
The exercise price of the foregoing warrants is nine cents ($0.09)
per share. The warrants are exercisable over seven (7) years. The
total fair value of the 288,000 common stock warrants using the
Black-Scholes option-pricing model is $24,359, or $0.08458 per
share, based on a volatility rate of 211%, a risk-free interest
rate of 2.81% and an expected term of 7 years, and was expensed
upon issuance.
Common Stock Warrants Granted (2017)
On
December 22, 2017, the Company granted warrants to the following
officers and directors, which will allow them to purchase shares of
our common stock in the amounts indicated: William Hartman (34,000
shares); Mitchell Felder (34,000 shares), Heidi Carl (24,000
shares), John Borza (29,000 shares), Jay Rosen (4,000 shares),
Patricio Reyes (16,000 shares) and John Pauly (8,000 shares). The
exercise price of the foregoing warrants is one dollar and
twenty-five cents ($1.25) per share. The warrants are exercisable
over seven (7) years. The total fair value of the 149,000 common
stock warrants using the Black-Scholes option-pricing model is
$102,364, or $0.68699 per share, based on a volatility rate of
195%, a risk-free interest rate of 2.01% and an expected term of
3.5 years, and was expensed upon issuance.
Premier
Biomedical, Inc.
Notes to Financial
Statements
On
December 22, 2017, we also issued warrants to purchase a total of
fourteen thousand (14,000) shares of our common stock amongst three
members of our Scientific Advisory Board. The exercise price of the
foregoing warrants is one dollar and twenty-five cents ($1.25) per
share. The warrants are exercisable over seven (7) years. The total
fair value of the 14,000 common stock warrants using the
Black-Scholes option-pricing model is $9,617, or $0.68699 per
share, based on a volatility rate of 195%, a risk-free interest
rate of 2.01% and an expected term of 7 years, and was expensed
upon issuance.
A total of $296,944 and $111,981 of warrants were amortized and
expensed to professional fees as stock-based compensation during
the years ended December 31, 2018 and 2017,
respectively, including $272,585 and $102,364 during the years
ended December 31, 2018 and 2017, respectively,
related to warrants issued to related parties.
Exercise of Common Stock Warrants, Related Party
(2018)
On
November 5, 2018, the Company issued 12,000 shares of common stock
pursuant to the exercise of warrants by the Company’s
Chairman of the Board at $0.0025 per share for total proceeds of
$30.
Exercise of Common Stock Warrants, Related Party
(2017)
On
November 22, 2017, the Company issued 28,000 shares of common stock
pursuant to the exercise of warrants by the Company’s CEO at
$0.0025 per share for total proceeds of $70.
The
following is a summary of information about the Common Stock
Warrants outstanding at December 31, 2018.
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
$1.25
– $362.50
|
|
3,901,760
|
|
6.85
years
|
|
$2.05
|
|
3,901,760
|
|
$2.05
|
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:
|
|
|
|
|
|
|
|
|
Average risk-free
interest rates
|
2.73
%
|
1.75
%
|
Average expected
life (in years)
|
3.78
|
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, 2018 and 2017 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 $0.08122 per warrant granted during the year ended
December 31, 2018.
Premier
Biomedical, Inc.
Notes to Financial
Statements
The
following is a summary of activity of outstanding common stock
warrants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2016
|
122,760
|
$
61.0175
|
Warrants
granted
|
163,000
|
1.25
|
Warrants
exercised
|
(28,000
)
|
(0.0025
)
|
Balance, December
31, 2017
|
257,760
|
$
29.85
|
Warrants
granted
|
3,656,000
|
0.09
|
Warrants
exercised
|
(12,000
)
|
(0.0025
)
|
Balance, December
31, 2018
|
3,901,760
|
$
2.05
|
|
|
|
Exercisable,
December 31, 2018
|
3,901,760
|
$
2.05
|
Note 13 – 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, 2018 and 2017, 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, 2018 and December 31, 2017, the
Company had approximately $5,277,000 and $4,860,000 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:
|
|
|
|
|
|
Deferred tax
assets:
|
|
|
Net operating loss
carry forwards
|
$
1,108,170
|
$
1,701,000
|
|
|
|
Net deferred tax
assets before valuation allowance
|
$
1,108,170
|
$
1,701,000
|
Less: Valuation
allowance
|
(1,108,170
)
|
(1,701,000
)
|
Net deferred tax
assets
|
$
-
|
$
-
|
Based
on the available objective evidence, including the Company’s
history of losses, management believes it is more likely than not
that the net deferred tax assets will not be fully realizable.
Accordingly, the Company provided for a full valuation allowance
against its net deferred tax assets at December 31, 2018
and 2017, 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:
|
|
|
|
|
|
|
|
|
Federal and state
statutory rate
|
21
%
|
35
%
|
Change in valuation
allowance on deferred tax assets
|
(21
%)
|
(35
%)
|
In
accordance with FASB ASC 740, the Company has evaluated its tax
positions and determined there are no uncertain tax
positions.
Premier
Biomedical, Inc.
Notes to Financial
Statements
Note 14 – Subsequent Events
Convertible Debt Financing
On
March 26, 2019, the Company received proceeds of $68,000 in
exchange for a 10% interest bearing; unsecured convertible
promissory note maturing on March 26, 2020 (“First Power
Up Lending Note”). The note is convertible 180 days from the
date of the note at 61% of the average of the two lowest closing
bid prices of the Common Stock in the twenty (20) Trading Days
prior to the Conversion Date.
Common Stock Issuances for Debt Conversions
On
March 22, 2019, the Company issued 386,000 shares of common stock
pursuant to the conversion of $6,369, consisting of $2,136 of
principal and $4,233 of interest, from the Second Diamond Rock
Note. The note was converted in accordance with the conversion
terms; therefore, no gain or loss has been recognized.
On
March 6, 2019, the Company issued 370,000 shares of common stock
pursuant to the conversion of $5,739 of principal from the Second
Diamond Rock Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
February 26, 2019, the Company issued 349,463 shares of common
stock pursuant to the conversion of $6,500 of principal from the
First SEG-RedaShex Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been
recognized.
On
February 26, 2019, the Company issued 340,000 shares of common
stock pursuant to the conversion of $5,273 of principal from the
Second Diamond Rock Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been
recognized.
On
February 12, 2019, the Company issued 346,200 shares of common
stock pursuant to the conversion of $6,924 of principal from the
Second Diamond Rock Note. The note was converted in accordance with
the conversion terms; therefore, no gain or loss has been
recognized.
On
February 1, 2019, the Company issued 315,000 shares of common stock
pursuant to the conversion of $7,875 of principal from the Second
Diamond Rock Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
January 23, 2019, the Company issued 260,000 shares of common stock
pursuant to the conversion of $6,513 of principal from the Second
Diamond Rock Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
January 11, 2019, the Company issued 280,000 shares of common stock
pursuant to the conversion of $5,597 of principal from the Second
Diamond Rock Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
On
January 2, 2019, the Company issued 281,385 shares of common stock
pursuant to the conversion of $6,500 of principal from the First
SEG-RedaShex Note. The note was converted in accordance with the
conversion terms; therefore, no gain or loss has been
recognized.
Common Stock Issuances on Subscriptions Payable
On
January 1, 2019, the Company issued 276,960 shares
to DiamondRock, LLC for the conversion of
$5,345 of debt on December 31, 2018.