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.
PART II – INFORMATION NOT REQUIRED IN PROSPECTUS