Notes to Condensed Financial Statements
(Unaudited)
Note 1 – Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited, condensed financial statements of Premier Biomedical, Inc. (“the Company”) have been prepared pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. However, these statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. It is suggested that these statements be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
Equity Method
Investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an Investee depends on an evaluation of several factors including, among others, representation on the Investee company’s board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the Investee company. Under the equity method of accounting, an Investee company’s accounts are not reflected within the Company’s Balance Sheets and Statements of Operations; however, the Company’s share of the earnings or losses of the Investee company is reflected in the caption “Equity in losses of unconsolidated entity” in the Statements of Operations. The Company’s carrying value in an equity method Investee company is typically reflected in the caption “Investment in Joint Venture.” in the Company’s Balance Sheets. As of September 30, 2017, our share of losses from the investee company exceeded our basis, therefore the investment is not currently presented on the balance sheet.
U.S. GAAP considers a change in reporting entity to include “changing specific subsidiaries that make up the group of entities for which consolidated financial statements are presented.” Circumstances may arise where a parent’s controlling financial interest (e.g., generally an ownership interest in excess of 50 percent of the outstanding voting stock) is reduced to a noncontrolling investment that still enables it to exercise significant influence over the operating and financial policies of the investee. A change that results from changed facts and circumstances (such as a partial sale of a subsidiary), where there was only one acceptable method of accounting prior to the change in circumstances (consolidation) and only one acceptable method of accounting after the change (equity method accounting), is not a change in reporting entity and is not be accounted for retrospectively. Accordingly, a change from a controlling interest to a noncontrolling investment accounted for under the equity method is accounted for prospectively from the date of change in control. When the Company’s carrying value in an equity method Investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company guaranteed obligations of the Investee company or has committed additional funding. When the Investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
We maintain cash balances in non-interest-bearing accounts, which do not currently exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.
Patent Rights and Applications
Patent rights and applications costs include the acquisition costs and costs incurred for the filing of patents. Patent rights and applications are amortized on a straight-line basis over the legal life of the patent rights beginning at the time the patents are approved. Patent costs for unsuccessful patent applications are expensed when the application is terminated.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Fair Value of Financial Instruments
Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, prepaid expenses and accrued expenses reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments.
Basic and Diluted Loss Per Share
The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Stock-Based Compensation
Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company’s stock based compensation consisted of the following during the nine months ended September 30, 2017 and 2016, respectively:
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
$
|
-
|
|
|
$
|
58,800
|
|
Warrants issued for services, related parties
|
|
|
-
|
|
|
|
19,595
|
|
Warrants issued for services
|
|
|
-
|
|
|
|
16,032
|
|
Total stock based compensation
|
|
$
|
-
|
|
|
$
|
94,427
|
|
Revenue Recognition
Sales on fixed price contracts are recorded when services are earned, the earnings process is complete or substantially complete, and the revenue is measurable and collectability is reasonably assured. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue from sales in which payment has been received, but the earnings process has not occurred. Sales commenced on July 5, 2017 with the termination of our joint venture and are recognized upon shipment of goods, which are typically paid for at the time of order.
Advertising and Promotion
All costs associated with advertising and promoting products are expensed as incurred. These expenses were $42,793 and $67,216 for the nine months ended September 30, 2017 and 2016, respectively.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not, that such asset will not be recovered through future operations.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Uncertain Tax Positions
In accordance with ASC 740, “Income Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.
The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.
Recent Accounting Pronouncements
In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-09
,
Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting.
ASU 2017-09, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of
ASU 2017-9
is not expected to have a material impact on the Company’s financial statements or related disclosures.
In January 2017, the FASB issued ASU 2017-04,
Intangibles – Goodwill and Other (Topic 350)
. ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company intends to early adopt the ASU in 2017.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
In January 2017, the FASB issued ASU 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business
, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for the Company in the first quarter of 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.
No other new accounting pronouncements, issued or effective during the nine months ended September 30, 2017, 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 $15,420,260, and had negative working capital of ($2,666,087) at September 30, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently seeking additional sources of capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful; therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.
The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 3 – Restatement
The Company is restated its December 31, 2015 financial statements and is restating the interim financial statements for the three months ended March 31, 2016, the six months ended June 30, 2016 and nine months ended September 30, 2016 in order to account for embedded derivatives within the Redwood Notes, rather than beneficial conversion feature discounts. The financial statements will be restated prospectively during 2017.
The Company determined that it had not properly recognized embedded derivative liabilities within the Redwood Notes that originated on various dates between December 28, 2015 and May 27, 2016. The Company has recognized a derivative liability in lieu of the previously recognized beneficial conversion feature and the related change in derivative liabilities and amortization of the debt discount expenses have been adjusted to correct this error.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following adjustments were made to the September 30, 2016 Restated Balance Sheet:
PREMIER BIOMEDICAL, INC.
|
|
BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
2016
|
|
|
Adjustments
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
27,821
|
|
|
$
|
-
|
|
|
$
|
27,821
|
|
Prepaid expenses
|
|
|
13,045
|
|
|
|
-
|
|
|
|
13,045
|
|
Total current assets
|
|
|
50,133
|
|
|
|
-
|
|
|
|
50,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
5,629
|
|
|
|
-
|
|
|
|
5,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
46,495
|
|
|
$
|
-
|
|
|
$
|
46,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
210,055
|
|
|
$
|
-
|
|
|
$
|
210,055
|
|
Accounts payable, related parties
|
|
|
52,244
|
|
|
|
-
|
|
|
|
52,244
|
|
Accrued interest
|
|
|
43,330
|
|
|
|
-
|
|
|
|
43,330
|
|
Accrued interest, related parties
|
|
|
2,970
|
|
|
|
-
|
|
|
|
2,970
|
|
Judgment payable
|
|
|
340,647
|
|
|
|
-
|
|
|
|
340,647
|
|
Convertible notes payable, net of discounts of $74,287
|
|
|
184,470
|
|
|
|
(28,837
|
)
|
|
|
155,633
|
|
Notes payable, related parties
|
|
|
30,000
|
|
|
|
-
|
|
|
|
30,000
|
|
Derivative liabilities
|
|
|
-
|
|
|
|
184,583
|
|
|
|
184,583
|
|
Total current liabilities
|
|
|
863,716
|
|
|
|
155,746
|
|
|
|
1,019,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
863,716
|
|
|
|
155,746
|
|
|
|
1,019,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 2,000,000 shares issued and outstanding
|
|
|
2,000
|
|
|
|
-
|
|
|
|
2,000
|
|
Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 185,858,819 shares issued and outstanding
|
|
|
1,859
|
|
|
|
-
|
|
|
|
1,859
|
|
Additional paid in capital
|
|
|
11,529,099
|
|
|
|
(124,296
|
)
|
|
|
11,404,803
|
|
Accumulated deficit
|
|
|
(12,350,179
|
)
|
|
|
(31,450
|
)
|
|
|
(12,381,629
|
)
|
Total stockholders’ equity (deficit)
|
|
|
(817,221
|
)
|
|
|
(155,746
|
)
|
|
|
(972,967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity (deficit)
|
|
$
|
46,495
|
|
|
$
|
-
|
|
|
$
|
46,495
|
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following adjustments were made to the Nine Months Ended September 30, 2016 Restated Statement of Operations:
PREMIER BIOMEDICAL, INC.
|
STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
2016
|
|
|
Adjustments
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
105,742
|
|
|
|
-
|
|
|
|
105,742
|
|
General and administrative
|
|
|
128,032
|
|
|
|
-
|
|
|
|
128,032
|
|
Professional fees
|
|
|
294,496
|
|
|
|
-
|
|
|
|
294,496
|
|
Total operating expenses
|
|
|
528,270
|
|
|
|
-
|
|
|
|
528,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
|
(528,270
|
)
|
|
|
-
|
|
|
|
(528,270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(703,465
|
)
|
|
|
12,220
|
|
|
|
(691,245
|
)
|
Other expense
|
|
|
(340,647
|
)
|
|
|
-
|
|
|
|
(340,647
|
)
|
Change in derivative liabilities
|
|
|
-
|
|
|
|
(24,434
|
)
|
|
|
(24,434
|
)
|
Total other expenses
|
|
|
(1,044,112
|
)
|
|
|
(12,214
|
)
|
|
|
(1,056,326
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,572,382
|
)
|
|
$
|
(12,214
|
)
|
|
$
|
(1,584,596
|
)
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following adjustments were made to the Three Months Ended September 30, 2016 Restated Statement of Operations:
PREMIER BIOMEDICAL, INC.
|
STATEMENT OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
2016
|
|
|
Adjustments
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
46,056
|
|
|
|
-
|
|
|
|
46,056
|
|
General and administrative
|
|
|
36,566
|
|
|
|
-
|
|
|
|
36,566
|
|
Professional fees
|
|
|
68,537
|
|
|
|
-
|
|
|
|
68,537
|
|
Total operating expenses
|
|
|
151,159
|
|
|
|
-
|
|
|
|
151,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss
|
|
|
(151,159
|
)
|
|
|
-
|
|
|
|
(151,159
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(283,988
|
)
|
|
|
1,554
|
|
|
|
(282,434
|
)
|
Change in derivative liabilities
|
|
|
-
|
|
|
|
63,428
|
|
|
|
-
|
|
Total other expenses
|
|
|
(283,988
|
)
|
|
|
64,982
|
|
|
|
(219,006
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(435,147
|
)
|
|
$
|
64,982
|
|
|
$
|
(370,165
|
)
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following adjustments were made to the September 30, 2016 Restated Statement of Cash Flows:
PREMIER BIOMEDICAL, INC.
|
STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
|
|
|
As Restated
|
|
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
2016
|
|
|
Adjustments
|
|
|
2016
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,572,382
|
)
|
|
$
|
(12,214
|
)
|
|
$
|
(1,584,596
|
)
|
Adjustments to reconcile net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,554
|
|
|
|
-
|
|
|
|
1,554
|
|
Change in fair market value of derivative liabilities
|
|
|
-
|
|
|
|
24,434
|
|
|
|
24,434
|
|
Amortization of debt discounts
|
|
|
645,365
|
|
|
|
(12,220
|
)
|
|
|
633,145
|
|
Stock based compensation, related parties
|
|
|
19,595
|
|
|
|
-
|
|
|
|
19,595
|
|
Stock based compensation
|
|
|
74,832
|
|
|
|
-
|
|
|
|
74,832
|
|
Decrease (increase) in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(3,879
|
)
|
|
|
-
|
|
|
|
(3,879
|
)
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
21,790
|
|
|
|
-
|
|
|
|
21,790
|
|
Accounts payable, related parties
|
|
|
11,341
|
|
|
|
-
|
|
|
|
11,341
|
|
Accrued interest
|
|
|
56,299
|
|
|
|
-
|
|
|
|
56,299
|
|
Accrued interest, related parties
|
|
|
1,800
|
|
|
|
-
|
|
|
|
1,800
|
|
Judgment payable
|
|
|
340,647
|
|
|
|
-
|
|
|
|
340,647
|
|
Net cash used in operating activities
|
|
|
(403,038
|
)
|
|
|
-
|
|
|
|
(403,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(3,536
|
)
|
|
|
-
|
|
|
|
(3,536
|
)
|
Net cash used in investing activities
|
|
|
(3,536
|
)
|
|
|
-
|
|
|
|
(3,536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants, related party
|
|
|
2,000
|
|
|
|
-
|
|
|
|
2,000
|
|
Proceeds from sale of stock on equity line of credit
|
|
|
68,520
|
|
|
|
-
|
|
|
|
68,520
|
|
Proceeds from convertible notes payable
|
|
|
417,500
|
|
|
|
-
|
|
|
|
417,500
|
|
Repayments from convertible notes payable
|
|
|
(89,039
|
)
|
|
|
-
|
|
|
|
(89,039
|
)
|
Net cash provided by financing activities
|
|
|
398,981
|
|
|
|
-
|
|
|
|
398,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH
|
|
|
(7,593
|
)
|
|
|
-
|
|
|
|
(7,593
|
)
|
CASH AT BEGINNING OF PERIOD
|
|
|
35,414
|
|
|
|
-
|
|
|
|
35,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
|
$
|
27,821
|
|
|
$
|
-
|
|
|
$
|
27,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
13,539
|
|
|
$
|
-
|
|
|
$
|
13,539
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount on beneficial conversion feature on convertible note
|
|
$
|
364,220
|
|
|
$
|
(364,220
|
)
|
|
$
|
-
|
|
Value of debt discounts
|
|
$
|
-
|
|
|
$
|
369,924
|
|
|
$
|
369,924
|
|
Value of shares issued for conversion of debt
|
|
$
|
488,552
|
|
|
$
|
-
|
|
|
$
|
488,552
|
|
Cashless exercise of common stock warrants
|
|
$
|
22
|
|
|
$
|
-
|
|
|
$
|
22
|
|
Common stock issued for settlement of accounts payable
|
|
$
|
13,765
|
|
|
$
|
-
|
|
|
$
|
13,765
|
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note 4 – Related Parties
Other Receivable
The Company advanced a total of $48,778 to its joint venture partner, Premier Biomedical Pain Management Solutions, LLC, and was subsequently repaid a total of $44,604 on July 5, 2017 with the termination of the joint venture, resulting in a loss of $6,232, consisting of the original investment of $2,058 and the loss on this receivable of $4,174.
Accounts Payable
The Company owed $46,016 and $46,016 as of September 30, 2017 and December 31, 2016, respectively, to entities owned by the Chairman of the Board of Directors. The amounts are related to patent costs and reimbursable expenses paid by the Chairman on behalf of the Company.
The Company owed $605 and $306 as of September 30, 2017 and December 31, 2016, respectively, to the Company’s CEO for reimbursable expenses.
The Company owed $5,623 and $6,167 as of September 30, 2017 and December 31, 2016, respectively, amongst members of the Company’s Board of Directors for reimbursable expenses.
Notes Payable
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from the Company’s CEO.
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from the Company’s Chairman of the Board.
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from one of the Company’s Directors.
Accrued interest of $5,370 was outstanding on these notes as of September 30, 2017.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note
5
–
Patent Rights and Applications
The Company amortizes its patent rights and applications on a straight line basis over the expected useful technological or economic life of the patents, which is typically 17 years from the legal approval of the patent applications when there is probable future economic benefits associated with the patent. The Company has elected to expense all of their patent rights and application costs due to difficulties associated with having to prove the value of their future economic benefits. All patent applications are currently pending and the Company has no patents that have yet been approved. It is the Company’s policy that it performs reviews of the carrying value of its patent rights and applications on an annual basis.
On March 4, 2015, we entered into a Patent License Agreement (“PLA”) with the University of Texas at El Paso (“UTEP”) regarding our joint research and development of CTLA-4 Blockade with Metronomic Chemotherapy for the Treatment of Breast Cancer. This is the first PLA with UTEP following our Collaborative Agreement with them dated May 9, 2012, and memorializes the joint ownership of the applicable patent and the financial and other terms related thereto.
On June 19, 2015, we entered into Amendment No. 1 to this Agreement, pursuant to which we explicitly included Provisional Patent Application No. 62/161,116 entitled, “Anti-CTLA-4 Blockade” (the “Application”) under the definition of “Patent Rights” as set forth in the PLA. The Application was filed with the United States Patent and Trademarks Office on May 13, 2015; the underlying technology was invented by Robert Kirken and Georgialina Rodriguez, and is solely-owned by The Board of Regents of The University of Texas System.
Note 6 – Fair Value of Financial Instruments
Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.
The Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of September 30, 2017 and December 31, 2016, respectively:
|
|
Fair Value Measurements at
September 30, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
Cash
|
|
$
|
102,517
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
|
102,517
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
Convertible notes payable
|
|
|
|
|
|
|
69,150
|
|
|
|
|
|
Notes payable, related parties
|
|
|
-
|
|
|
|
30,000
|
|
|
|
-
|
|
Derivative liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
2,376,295
|
|
Total liabilities
|
|
|
-
|
|
|
|
99,150
|
|
|
|
2,376,295
|
|
|
|
$
|
102,517
|
|
|
$
|
(99,150
|
)
|
|
$
|
(2,376,295
|
)
|
|
|
Fair Value Measurements at
December 31, 2016
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets
|
Cash
|
|
$
|
22,437
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total assets
|
|
|
22,437
|
|
|
|
-
|
|
|
|
-
|
|
Liabilities
|
Convertible note payable, net of discounts
|
|
|
-
|
|
|
|
153,024
|
|
|
|
-
|
|
Notes payable, related parties
|
|
|
|
|
|
|
30,000
|
|
|
|
-
|
|
Derivative liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
221,822
|
|
Total liabilities
|
|
|
-
|
|
|
|
183,024
|
|
|
|
221,822
|
|
|
|
$
|
22,437
|
|
|
$
|
(183,024
|
)
|
|
$
|
(221,822
|
)
|
The fair values of our related party debts are deemed to approximate book value, and are considered Level 2 inputs as defined by ASC Topic 820-10-35.
There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the nine months ended September 30, 2017 or the year ended December 31, 2016.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Note 7 – Joint Venture
On September 13, 2016, we entered into an operating agreement to form a pain management joint venture company with Advanced Technologies Solutions (ATS), a company based in San Diego, California and owned by Ronald T. LaBorde, a member of our Board of Directors. The joint venture company, Premier Biomedical Pain Management Solutions, LLC, a Nevada limited liability company (PBPMS), 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.
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 8 – Subsidiary Formation
On September 14, 2017, we formed Premier Biomedical Pain Relief Meds, LLC as a wholly-owned subsidiary. No activity has been conducted within this entity as of the date of this filing.
Note 9 – Convertible Notes Payable
Convertible notes payable consist of the following at September 30, 2017 and December 31, 2016, respectively:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
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.
|
|
$
|
50,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
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.
|
|
|
50,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
On October 10, 2016, the Company issued a 10% interest bearing; unsecured convertible promissory note with a face value of $300,000 (“Seventh Redwood Note”), which matures on October 10, 2017, pursuant to a Warrant Purchase Agreement by and among Redwood Management, LLC, the Company and Typenex. Pursuant to this agreement, Redwood purchased the warrants from Typenex, and Typenex provided a Satisfaction of Judgment and Release of Garnishment to release the Writ of Garnishment Typenex had placed on our transfer agent. Redwood paid installment payments to Typenex in the aggregate amount of $300,000, which were completed on, or about November 10, 2016. The principal and interest of the Seventh Redwood Note is convertible into shares of common stock at the discretion of the note holder at a price equal to the greater of (i) 60% of the lowest traded price over the 15 days prior to conversion or (ii) a fixed $0.00005 per share. The note carries liquidated damages of $1,000 per day for failure to provide certificates, and compensation for Buy-In on failure to timely deliver certificates. Principal and interest is due upon default at 50% of the lowest traded price over the previous fifteen (15) days, and an additional interest rate equal to the lesser of 2% per month (24% per annum) or the maximum rate per applicable law. This settled the dispute with Typenex. A total of $308,750, consisting of $300,000 of principal and $8,750 of interest, was converted into 135,596,882 shares of common stock on various dates between November 21, 2016 and February 24, 2017.
|
|
$
|
-
|
|
|
$
|
275,000
|
|
|
|
|
|
|
|
|
|
|
On March 11, 2016, the Company received net proceeds of $90,000 in exchange for a 10% interest bearing; unsecured convertible promissory note with a face value of $105,000 (“Fifth Redwood Note”), which matures on December 11, 2016. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to the greater of (i) 60% of the lowest traded price over the 15 days prior to conversion or (ii) a fixed $0.00005 per share. The note carries liquidated damages of $1,000 per day for failure to provide certificates, and compensation for Buy-In on failure to timely deliver certificates. Principal and interest is due upon default at 50% of the lowest traded price over the previous fifteen (15) days, and an additional interest rate equal to the lesser of 2% per month (24% per annum) or the maximum rate per applicable law. A total of $120,517, consisting of $105,000 of principal and $15,517 of interest, was converted into an aggregate of 47,820,025 shares of common stock at various dates between November 8, 2016 and March 13, 2017.
|
|
|
-
|
|
|
|
27,480
|
|
|
|
|
|
|
|
|
|
|
Total convertible notes payable
|
|
|
150,000
|
|
|
|
302,480
|
|
Less unamortized derivative discounts:
|
|
|
80,850
|
|
|
|
149,456
|
|
Convertible notes payable
|
|
|
69,150
|
|
|
|
153,024
|
|
Less: current portion
|
|
|
69,150
|
|
|
|
153,024
|
|
Convertible notes payable, less current portion
|
|
$
|
-
|
|
|
$
|
-
|
|
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The Company recognized interest expense for the nine months ended September 30, 2017 and 2016, respectively, as follows:
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Interest on convertible notes
|
|
$
|
4,434
|
|
|
$
|
35,048
|
|
Interest on related party loans
|
|
|
1,800
|
|
|
|
1,200
|
|
Amortization of beneficial conversion feature
|
|
|
-
|
|
|
|
81,648
|
|
Amortization of OID
|
|
|
-
|
|
|
|
20,647
|
|
Amortization of loan origination costs
|
|
|
-
|
|
|
|
44,811
|
|
Derivative discounts
|
|
|
184,237
|
|
|
|
225,457
|
|
Total interest expense
|
|
$
|
190,471
|
|
|
$
|
408,811
|
|
Note 10 – Notes Payable, Related Parties
Notes payable, related parties consist of the following at September 30, 2017 and December 31, 2016, respectively:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from the Company’s CEO.
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from the Company’s Chairman of the Board.
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from one of the Company’s Directors.
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Total notes payable, related parties
|
|
|
30,000
|
|
|
|
30,000
|
|
Less: current portion
|
|
|
30,000
|
|
|
|
30,000
|
|
Notes payable, related parties, less current portion
|
|
$
|
-
|
|
|
$
|
-
|
|
The Company recorded interest expense in the amount of $1,800 and $1,800 for the nine months ended September 30, 2017 and 2016, respectively related to notes payable, related parties.
Note 1
1
– Derivative Liabilities
As discussed in Note 9 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.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
The fair values of the Company’s derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice model. The Company recognized current derivative liabilities of $2,376,295 and $221,822 at September 30, 2017 and December 31, 2016, respectively. The change in fair value of the derivative liabilities resulted in a loss of $2,267,885 and $24,434 for the nine months ended September 30, 2017 and 2016, respectively, which has been reported within other expense in the statements of operations. The loss of $2,267,885 for the nine months ended September 30, 2017 consisted of a loss of $3,337,007 due to the value attributable to the warrants, a gain of $1,052,505 in market value of the warrants and a net gain in market value of $16,617 on the convertible notes. The loss of $24,434 for the nine months ended September 30, 2016 consisted of a loss of $125,763 due to the value in excess of the face value of the convertible notes and a net gain in market value of $101,329 on the convertible notes.
The following is a summary of changes in the fair market value of the derivative liability during the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively:
|
|
Derivative
|
|
|
|
Liability
|
|
|
|
Total
|
|
Balance, December 31, 2015
|
|
$
|
150,076
|
|
Increase in derivative value due to issuances of convertible promissory notes
|
|
|
583,415
|
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
13,816
|
|
Debt conversions
|
|
|
(525,485
|
)
|
Balance, December 31, 2016
|
|
$
|
221,822
|
|
Increase in derivative value due to issuances of convertible promissory notes
|
|
|
115,631
|
|
Increase in derivative value due to issuances of warrants
|
|
|
3,337,007
|
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
(1,069,122
|
)
|
Debt conversions
|
|
|
(229,043
|
)
|
Balance, September 30, 2017
|
|
$
|
2,376,295
|
|
Key inputs and assumptions used to value the convertible debentures and warrants issued during the nine months ended September 30, 2017:
|
·
|
Stock price ranging from $0.009 to $0.0081 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 20%.
|
|
·
|
The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company in the range of 199% - 187%.
|
|
·
|
The Company would redeem the notes -0-% of the time, increasing 1% per month to a maximum of 5%.
|
|
·
|
All notes are assumed to be extended at maturity by 2 years – the time required to convert out this volume of stock.
|
|
·
|
The holders of the securities would automatically convert midway through to maturity on a monthly basis based on ownership and trading volume limitations.
|
|
·
|
A change of control and fundamental transaction would occur initially -0-% of the time and increase monthly by -0-% to a maximum of -0-%.
|
|
·
|
The monthly trading volume would average $1,396,213 to $1,417,040 and would increase at 1% per month.
|
|
·
|
The stock price would fluctuate with the Company projected volatility using a random sampling (450,000 iterations for each valuation) from a normal distribution. The stock price of the underlying instrument is modelled such that it follows a geometric Brownian motion with constant drift and volatility.
|
|
·
|
The Holder would exercise the warrants after 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 12/31/17 and 12/31/18 – the reset provision ends 3/30/19 and the option expires 3/30/20.
|
|
·
|
The stock price would fluctuate with an annual volatility. The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company and the term remaining in the range 258% - 257%.
|
|
·
|
The Holder would exercise the warrant at maturity in 2020 if the stock price was above the reset exercise price.
|
Note
12
–
Commitments and Contingencies
Collaborative Patent License Agreements
On May 9, 2012, the Company entered into a Collaborative Agreement with the University of Texas at El Paso. Pursuant to the terms of the Agreement, the Company will work jointly with the University to develop a series of research and development programs around its sequential-dialysis technology in the areas of Alzheimer’s Disease, Traumatic Brain Injury (TBI), Chronic Pain Syndrome, Fibromyalgia, Multiple Sclerosis, Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig’s disease), Blood Sepsis, Cancer, Heart Attacks and Strokes. The programs will utilize the facilities at one or more of the University of Texas’ campuses. The Company will pay the University’s actual overhead for the projects, plus a negotiated facility and administration overhead expense, and 10% of all gross revenues associated with the sale, license and/or royalties of all products and treatment procedures directly affiliated with programs. Intellectual property jointly invented and developed as a result of the projects will be owned jointly by the University and the Company. The Agreement has an initial term of five (5) years, and is renewable upon mutual agreement of the parties.
On March 4, 2015, we entered into a Patent License Agreement (PLA) with the University of Texas at El Paso (UTEP) regarding our joint research and development of CTLA-4 Blockade with Metronomic Chemotherapy for the Treatment of Breast Cancer. This is the first PLA with UTEP following our Collaborative Agreement with them dated May 9, 2012, and memorializes the joint ownership of the applicable patent and the financial and other terms related thereto.
On June 19, 2015, we entered into Amendment No. 1 to this Agreement, pursuant to which we explicitly included Provisional Patent Application No. 62/161,116 entitled, “Anti-CTLA-4 Blockade” (the “Application”) under the definition of “Patent Rights” as set forth in the PLA. The Application was filed with the United States Patent and Trademarks Office on May 13, 2015; the underlying technology was invented by Robert Kirken and Georgialina Rodriguez, and is solely-owned by The Board of Regents of The University of Texas System.
On October 31, 2017 we entered into an Agreement, Final Payment under Contract, and Release of all Claims, whereby we agreed to pay them a total of $326,336 arising out of the research and development agreements with an initial payment of $22,211, and monthly payments of varying amounts between $5,000 and $20,000 thereafter for twenty eight months until the balance is paid in full. Subject to the compliance of all terms, the intellectual property rights established and arising out of the collaborative agreements remain in full force and effect and the parties agreed to a mutual release upon the final contracted payment. The full amount of the liability has been recognized as an accounts payable as of the date of this filing.
Note
13
–
Changes in
Stockholders
’
Equity
(Deficit)
Convertible Preferred Stock, Series A
The Company has 10,000,000 authorized shares of Preferred Stock, of which 2,000,000 shares of $0.001 par value Series A Convertible Preferred Stock (“Series A Preferred Stock”) have been designated. Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share into one (1) fully paid and non-assessable share of Common Stock. Each outstanding share of Series A Preferred Stock is entitled to one hundred (100) votes per share on all matters to which the shareholders of the Corporation are entitled or required to vote. The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares sufficient to effect the conversions.
Common Stock
The Company has one billion authorized shares of $0.00001 par value Common Stock, as increased pursuant to an amendment to the articles of incorporation on February 9, 2016.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
Securities Purchase Agreement
On March 30, 2017, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and each of The Special Equities Group, LLC, RDW Capital LLC, and DiamondRock, LLC (each a “Purchaser” and collectively, the “Purchasers”) to sell our common stock and warrants at a fixed price. Pursuant to the Purchase Agreement, we received from the Purchasers an aggregate of $300,000, net of $15,000 of offering costs, in exchange for 40,000,002 shares of our common stock, warrants to purchase up to 40,000,002 shares of our common stock at an exercise price of $0.03 (“Series A Warrants”) and warrants to purchase up to 40,000,002 shares or our common stock at an exercise price of $0.05 (“Series B Warrants”). Both the Series A Warrants and Series B Warrants issued pursuant to the Purchase Agreement are exercisable immediately upon receipt and have a term of three years. In addition, the Purchaser is entitled to a one-time price reset on the purchase price of the common stock of each tranche to the lower of (i) $0.02 or (ii) a 50% discount to the average of the three lowest closing prices in the 20 trading days prior to the reset date, which is the earlier of (i) the 7 month anniversary of the closing of each tranche of this transaction or (ii) 20 trading days after the effectiveness of each tranche. The embedded value in this reset provision is disclosed further in Note 10.
On May 30, 2017, the Purchasers bought additional shares of our common stock and warrants for $150,000 (the “Second Closing”), in exchange for 30,303,033 shares of our common stock, warrants to purchase up to 30,303,033 shares of our common stock at an exercise price of $0.03 (“Series A Warrants”) and warrants to purchase up to 30,303,033 shares or our common stock at an exercise price of $0.05 (“Series B Warrants”). Both the Series A Warrants and Series B Warrants issued pursuant to the Purchase Agreement are exercisable immediately upon receipt and have a term of three years.
The per share purchase price of the Second Closing was the lesser of (i) $0.02, subject to certain adjustments for stock splits and other similar transactions, or (ii) 50% of the closing price on the trading day immediately prior to the date of sale. The total number of shares to be sold in the Second Closing were determined by dividing the total purchase amount of each closing (i.e., $150,000) by the per share purchase price.
The Purchase Agreement limits each Purchaser to beneficial ownership of our common stock of no more than 9.99%. The Purchasers also have certain anti-dilution rights in the Purchase Agreement for a period of 12 months. These rights allow the Purchasers to exchange their shares of common stock received pursuant to the Purchase Agreement for additional shares on the same terms and conditions of a subsequent financing.
On August 8, 2017, the Company and each of the three Purchasers also entered into exchange agreements whereby the Purchasers exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (aggregate $150,000) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.
Registration Rights Agreement
On March 30, 2017, we entered into a Registration Rights Agreement with the Purchasers in connection with the Purchase Agreement. In the Registration Rights Agreement, we agreed to prepare and file a registration statement with the Securities and Exchange Commission covering the resale of all of the shares of common stock sold to the Purchasers and the shares issuable upon exercise of the Series A Warrants and Series B Warrants. We agreed to file an initial registration statement as promptly as possible and have it declared effective no later than June 28, 2017 (or July 28, 2017 if the registration statement was reviewed by the Securities and Exchange Commission) and keep it continuously effective until the securities are sold or may be sold under Rule 144 of the Securities Act without volume or manner-of-sale restrictions. If all of the securities cannot be registered on one registration statement, we agreed to file subsequent registration statements to register the remaining securities as promptly as allowed. The registration statement was subsequently withdrawn on July 24, 2017 and the Purchase Agreement was amended on August 8, 2017 to change the terms of the third closing to an aggregate of $150,000 of convertible notes, bearing interest at 8%, convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.
Common Stock Issuances for Debt Conversions
On various dates between January 10, 2017 and March 13, 2017, the Company issued a total of 142,148,242 shares of common stock pursuant to the conversion of an aggregate of $323,197, consisting of $302,480 of principal and $20,717 of interest, among the Second, Fifth and Seventh Redwood Notes. The notes were converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Premier Biomedical, Inc.
Notes to Condensed Financial Statements
(Unaudited)
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.
Note 14 – Income Taxes
The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.
For the nine months ended September 30, 2017, and the year ended December 31, 2016, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At September 30, 2017, and December 31, 2016, the Company had approximately $4,917,000 and $4,334,000 of federal net operating losses, respectively. The net operating loss carry forwards, if not utilized, will begin to expire in 2031.
The components of the Company’s deferred tax asset are as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
1,720,950
|
|
|
$
|
1,516,900
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
$
|
1,720,950
|
|
|
$
|
1,516,900
|
|
Less: Valuation allowance
|
|
|
(1,720,950
|
)
|
|
|
(1,516,900
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at September 30, 2017, and December 31, 2016, respectively.
A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and state statutory income tax rate to pre-tax loss is as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Federal and state statutory rate
|
|
|
35
|
%
|
|
|
35
|
%
|
Change in valuation allowance on deferred tax assets
|
|
(35
|
%)
|
|
(35
|
%)
|
In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Note 15 – Subsequent Events
Common Stock Issuances for Debt Conversions
On various dates between October 31, 2017 and November 17, 2017, the Company issued a total of 39,336,623 shares of common stock pursuant to the conversion of an aggregate of $75,000 of principal, among the First RDW, SEG and Diamond Rock Notes. The notes were converted in accordance with the conversion terms; therefore no gain or loss has been recognized.