BIEI Premier Biomedical Inc (PK)

As filed with the Securities and Exchange Commission on December 9, 2019

 

Registration No.

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

Premier Biomedical, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada	2836	27-2635666
(State or other jurisdiction of incorporation or organization	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

 

 

P.O. Box 25 Jackson Center, PA 16133	(814) 786-8849
(Address, including zip code, of registrant’s principal executive offices)	(Telephone number, including area code)

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered	Amount to be Registered (1)	Proposed Maximum Offering Price Per Share (2)	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee (3)
Shares of Common Stock, par value $0.00001 per share	1,000,000,000	$0.0006	$600,000	$77.88

 

(1) 

We are registering 1,000,000,000 shares of our common stock that we will sell to Green Coast Capital International SA pursuant to an Equity Purchase Agreement dated October 3, 2019, which together shall have an aggregate initial offering price not to exceed $5,000,000. In the event the maximum aggregate offering price is reached, any remaining unsold shares shall be removed from registration.  The proposed maximum offering price per share will be determined by the registrant in connection with the issuance by the registrant of the securities registered hereunder.

(2) 

Estimated solely for the purpose of computing the registration fee pursuant to Rule 457(c) of the Securities Act of 1933, as amended. Price per share is based on the average of the high and low prices per share of our common stock reported in the consolidated reporting system as reported on the Pink Sheets Current Marketplace maintained by OTC Markets, Inc. on December 3, 2019.

(3) 

Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

The information in this Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the SEC is effective. This Prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Preliminary Prospectus

Subject to Completion

Dated [•], 2019

 

PROSPECTUS

 

Up to 1,000,000,000 shares of common stock

 

We are hereby registering 1,000,000,000 shares, representing 50% of our authorized common stock1, for sale by Green Coast Capital International SA, a Panama corporation and an underwriter in this offering, pursuant to an Equity Purchase Agreement. The agreement allows us to require Green Coast to purchase up to $5,000,000 of our common stock.

 

We are not selling any shares of common stock in the resale offering.  We, therefore, will not receive any proceeds from the sale of the shares by the selling shareholder.  We will, however, receive proceeds from the sale of securities to Green Coast pursuant to Put Notice(s) under the Equity Purchase Agreement.

 

This offering will terminate on the earlier of (i) when all 1,000,000,000 shares are sold, (ii) when the maximum offering amount of $5,000,000 has been achieved, or (iii) on January [•], 2022, unless we terminate it earlier.

 

Investing in the common stock involves risks. Premier Biomedical, Inc. has limited operations, limited income, and limited assets, and you should not invest unless you can afford to lose your entire investment. See “Risk Factors” beginning on page 5. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Our common stock is governed under The Securities Enforcement and Penny Stock Reform Act of 1990, and as a result you may be limited in your ability to sell our stock.

 

Our common stock is registered under Section 12(g) of the Securities Exchange Act of 1934 and is quoted on the Pink Sheets Current Marketplace maintained by OTC Markets, Inc. under the symbol “BIEI.” The closing price of our common stock as reported on the Pink Sheets Current on December 3, 2019 was $0.0006.

 

1 An increase in our authorized common stock has been approved by our shareholders and is anticipated to be effective on or about December 19, 2019.

 

 

i

 

 

These shares will be sold by Green Coast from time to time whenever the person or persons who exercise voting control over Green Coast deem it appropriate and for whatever reason the person or persons who exercise voting control over Green Coast deem it appropriate in the over-the-counter market or other national securities exchange or automated interdealer quotation system on which our common stock is then listed or quoted, through negotiated transactions or otherwise at market prices prevailing at the time of sale or at negotiated prices. We provide more information about how the Selling Shareholders may sell their shares of common stock in the section of this prospectus entitled “Plan of Distribution” beginning on page 25.

 

We will bear all costs associated with this registration statement.

 

Green Coast, and any participating broker-dealers, will be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, or the “Securities Act,” and any commissions or discounts given to any such broker-dealer may be regarded as underwriting commissions or discounts under the Securities Act. Green Coast will purchase the shares of our common stock for ninety percent (90%) of the lowest closing trade price of the common stock during the five (5) trading days immediately following the date Green Coast receives shares of our common stock pursuant to a put notice issued under the Equity Purchase Agreement. Green Coast has informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute their common stock.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Our common stock is governed under The Securities Enforcement and Penny Stock Reform Act of 1990, and as a result you may be limited in your ability to sell our stock.

 

The date of this Prospectus is [•], 2019.

 

 

ii

 

Table of Contents

 

		Page
Part I
Prospectus Summary		1
Risk Factors		4
Use of Proceeds		20
Determination of Offering Price
Dilution
Selling Security Holders		21
Plan of Distribution		22
Description of Securities to be Registered		24
Interests of Named Experts and Counsel		25
Description of Business		26
Description of Property		35
Legal Proceedings		35
Selected Financial Data		36
Management’s Discussion and Analysis		37
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		48
Directors, Executive Officers, Promoters, and Control Persons		49
Executive Compensation		52
Security Ownership of Certain Beneficial Owners and Management		55
Certain Relationships and Related Transactions		56
Disclosure of Commission Position on Indemnification for Securities Act Liabilities		58
Where You Can Find More Information		59
Experts		60
Index to Financial Statements		F-1

 

 

iii

 

ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement that we filed on behalf of the Selling Shareholders with the Securities and Exchange Commission (the “Commission”) to permit the Selling Shareholders to sell the shares described in this prospectus in one or more transactions. The Selling Shareholders and the plan of distribution of the shares being offered by them are described in this prospectus under the headings “Selling Shareholders” and “Plan of Distribution.”

 

You should rely only on the information that is contained in this prospectus. We and the Selling Shareholders have not authorized anyone to provide you with information that is in addition to or different from that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it.

 

The shares of common stock offered by this prospectus are not being offered in any jurisdiction where the offer or sale of such common stock is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date of this prospectus regardless of the date of delivery of this prospectus or any sale of the common stock offered by this prospectus. Our business, financial condition, liquidity, results of operations and prospects may have changed since those dates. The rules of the Commission may require us to update this prospectus in the future.

  

 

 

iv

 

 

PROSPECTUS SUMMARY

 

PREMIER BIOMEDICAL, INC.

 

This summary highlights selected information contained in greater detail elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our common stock. You should read the entire prospectus, including our financial statements and related notes and the information set forth under the heading “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before investing in our common stock. In this prospectus, the “Company,” “we,” “us,” and “our” refer to Premier Biomedical, Inc.

 

We were strictly a research-based company that intended to discover cures for PTSD, cancer and various other diseases. In order to fund on-going research and development in these areas, we developed a line of topical hemp oil pain relief products. We began selling these pain relief products in January of 2017 with a single product and currently have eight topical pain relief products.

 

Through our continued development and expansion of proprietary drugs and treatments, we have reorganized the company into six technology centers: (1) extra-corporeal treatment of disease, (2) PTSD treatment, (3) anti-breast cancer drugs, (4) hemp oil/CBD pain relief products, (5) anti-aging treatments, and (6) chemical and alcohol addiction treatment.

 

Pain Management Products

 

We have developed and are now marketing all-natural, hemp-oil based products that are pesticide and solvent free. These products provide generalized, neuropathic and localized topical pain relief.

 

We offer alternatives to dangerous and addictive opioid pain killers, which are currently the principal contributors to roughly 200 drug overdose deaths per day in the United States. In the past year we have rapidly expanded our product offerings, and we now offer eight pain relief products that are leaders in the pain-relief field:

 

1.

96-hour pain relief patch with 50 mg of hemp oil extract, the highest level of pain relief ingredient available in the industry;

 

2.

120 mg/ 10 ml water-based roll-on applicator;

 

3.

150 mg/ 10 ml oil-based roll-on applicator;

 

4.

150 mg/ 30 ml oil-based pump spray applicator;

 

5.

150 mg/ 2 oz. ointment;

 

6.

200 mg/10 ml oil-based roll-on applicator;

 

7.

500 mg/ 30 ml oil-based pump spray applicator; and

 

8.

500 mg/ 1 oz. ointment.

 

 

1

 

 

We believe that this eight-product array positions us favorably in the topical pain relief marketplace. The topical pain relief market is expected to grow rapidly in the next few years, due to the focus on reduction of opioid pain medication use, and we intend to be a major player in that expanding market.

 

Now that we have completed the product design and development phase, we are aggressively embarking on the product distribution and sales phase by:

 

1.

Expanding our online sales beyond our web site at: www.painreliefmeds.com;

 

2.

Securing the services of a social media coordinator to ensure that we optimize that promotional tool;

 

3.

Recruiting a National Sales Director to coordinate our growing field of sales representatives and distributors;

 

4.

Securing the services of a sales organization with expertise in marketing to the government and senior care facilities;

 

5.

Engaging an investor relations firm to facilitate television appearances designed to gain optimum exposure for our company and its products;

 

6.

Appearing in radio and television broadcasts, and podcasts, via Uptick Newswire periodically to ensure that our story gets out to the public; and

 

7.

Retaining the services of marketing firms to promote the Company and its products through social media.

 

8.

Establishing relationships with major distributors who will blanket specialized sales outlets such as pharmacies, doctors’ offices, convenience stores, long-term care facilities, large retail facilities, etc.

 

In addition, we are in the process of seeking potential partnerships outside the United States to manufacture and market our products worldwide. We anticipate that these partnerships will make new markets available to us and allow us to rapidly increase our sales and profitability through favorable manufacturing arrangements.

 

Customers indicate that they were able to achieve pain relief from our products and stop the use of opioid painkillers. Public awareness of the harmful side effects of opioid painkillers has grown significantly, and many states have initiated litigation against drug makers claiming they misrepresented the risks of opioid painkillers.2 As patients seek to cut back their use of opioid painkillers and look for alternatives, we believe demand for our products will see a significant increase. We intend to petition national insurance agencies to urge them to consider covering the use of our all-natural pain relief products as a safe alternative to opioid painkillers.

 

Corporate Information

 

We were incorporated on May 10, 2010 in the State of Nevada. We have two wholly-owned subsidiaries, Premier Biomedical Pain Relief Meds, LLC, a Nevada limited liability company organized on September 14, 2017, and Health Stations, LLC, a Nevada limited liability company organized on August 28, 2019.

 

Our corporate headquarters are located in Jackson Center, PA. Our mailing address is P.O. Box 25, Jackson Center, PA 16133, and our telephone number is (724) 633-7033. We have offices virtually in the homes of our management team who reside in Pennsylvania, Michigan and various other states. Our websites are www.premierbiomedical.com and www.painreliefmeds.com. Information contained on our website is not incorporated into, and does not constitute any part of, this Prospectus.

 

2 See Oklahoma Sues Opioid Drugmakers; New Hampshire Presses Epidemic Probe, by Heide Brandes and Nate Raymond, Reuters, available at https://www.reuters.com/article/us-oklahoma-drugs-idUSKBN19L2HJ.

 

 

2

 

The Offering

 

We are registering up to 1,000,000,000 shares of our common stock for resale by Green Coast Capital International SA, a Panama corporation and an underwriter in this offering, pursuant to an Equity Purchase Agreement. The agreement allows us to require Green Coast to purchase up to $5,000,000 of our common stock.

 

These shares will be sold by Green Coast from time to time whenever and for whatever reason the person or persons who exercise voting control over Green Coast deem it appropriate in the over-the-counter market or other national securities exchange or automated interdealer quotation system on which our common stock is then listed or quoted, through negotiated transactions or otherwise at market prices prevailing at the time of sale or at negotiated prices.

 

Green Coast will purchase the shares of our common stock for ninety percent (90%) of the lowest closing bid price of the common stock during the five consecutive trading days immediately following following the Clearing Date associated with our Put Notice. Green Coast received a convertible promissory note in the principal amount of $150,000, for which they paid $25,000 cash, as a commitment for the investment. The shares of our common stock issuable upon conversion of the note are not included in this registration statement. Green Coast has informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute our common stock.

 

We will not be permitted to submit a Put Notice to Green Coast, or draw down any funds from the financing arrangement, if the shares issued to Green Coast would cause them to beneficially own more than 4.99% of our outstanding common stock on the date of the issuance of the shares. The 1,000,000,000 shares being registered represent a good faith estimate of the number of shares of common stock that will be issuable pursuant to the agreement.

 

On any Closing Date, we shall deliver to Green Coast the number of shares of the Common Stock registered in the name of Green Coast as specified in the Put Notice. In addition, we must deliver the other required documents, instruments and writings required. Green Coast is not required to purchase the shares unless:

 

●

Our Registration Statement with respect to the resale of the shares of Common Stock delivered in connection with the applicable put shall have been declared effective;

●

We shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of the Registrable Securities; and

●

We shall have filed with the SEC in a timely manner all reports, notices and other documents required.

 

Green Coast has agreed that neither it nor its affiliates will engage in any short selling of the common stock.

 

All of the common stock registered by this Prospectus will be sold by Green Coast at the prevailing market prices at the time they are sold. We currently have 186,961,480 shares of common stock outstanding, and if all of the shares included in the registration statement of which this Prospectus is a part are issued, and all outstanding warrants are exercised, we will have over 1.2 billion shares of common stock outstanding.

 

 

 

3

 

RISK FACTORS

 

Any investment in our common stock involves a high degree of risk. You should consider carefully the following information, together with the other information contained in this Annual Report, before you decide to buy our common stock. If one or more of the following events actually occurs, our business will suffer, and as a result our financial condition or results of operations will be adversely affected. In this case, the market price, if any, of our common stock could decline, and you could lose all or part of your investment in our common stock.

 

Currently, our focus is on the development and distribution of our pain products. We are also developing medical treatments for Alzheimer’s disease, multiple sclerosis, amyotrophic lateral sclerosis, fibromyalgia, traumatic brain injury, blood sepsis and viremia, and cancer. We face risks in developing our product candidates and services and eventually bringing them to market. We also face risks that our business model may become obsolete. The following risks are material risks that we face. If any of these risks occur, our business, our ability to achieve revenues, our operating results and our financial condition could be seriously harmed.

Risk Factors Related to the Offering

 

Existing stockholders may experience significant dilution from the sale of our common stock pursuant to the Green Coast Equity Purchase Agreement.

 

The sale of our common stock to Green Coast Capital International SA in accordance with the Equity Purchase Agreement may have a dilutive impact on our shareholders. As a result, our net income per share could decrease in future periods and the market price of our common stock could decline. In addition, the lower our stock price is at the time we exercise our put options, the more shares of our common stock we will have to issue to Green Coast in order to exercise a put under the Equity Purchase Agreement. If our stock price decreases, then our existing shareholders would experience greater dilution for any given dollar amount raised through the Offering.

 

The perceived risk of dilution may cause our stockholders to sell their shares, which may cause a decline in the price of our common stock. Moreover, the perceived risk of dilution and the resulting downward pressure on our stock price could encourage investors to engage in short sales of our common stock. By increasing the number of shares offered for sale, material amounts of short selling could further contribute to progressive price declines in our common stock.

 

The issuance of shares pursuant to the Green Coast Equity Purchase Agreement may have a significant dilutive effect.

 

Depending on the number of shares we issue pursuant to the Green Coast Equity Purchase Agreement, it could have a significant dilutive effect upon our existing shareholders. Although the number of shares that we may issue pursuant to the Equity Purchase Agreement will vary based on our stock price (the higher our stock price, the less shares we have to issue) the information set out below indicates the potential dilutive effect to our shareholders, based on different potential future stock prices, if the full amount of the Equity Purchase Agreement is realized.

 

Dilution based upon common stock put to Green Coast and the stock price discounted to Green Coast’s purchase price of 90% of the lowest closing bid price of the common stock during the five consecutive trading days immediately following the Clearing Date associated with our Put Notice. The example below illustrates dilution based upon a $0.0006 market price/$0.00054 purchase price and other increased/decreased prices (without regard to Green Coast’s 4.99% ownership limit):

 

 

4

 

 

$5,000,000 Put

 

Stock Price (Green Coast Purchase Price)	Shares Issued	Percentage of Outstanding Shares (1)
$0.00075 ($0.000675) +25%	7.4 billion	97%
$0.0006 ($0.00054)	9.3 billion	98%
$0.00045 ($0.000405) -25%	12.3 billion	99%

 

(1)	Based on 200,000,000 shares outstanding before the first Put, as of December 3, 2019.

 

Green Coast Capital Group, LLC will pay less than the then-prevailing market price of our common stock which could cause the price of our common stock to decline.

 

Our common stock to be issued to Green Coast under the Equity Purchase Agreement will be purchased at a ten percent (10%) discount or ninety percent (90%) of the lowest closing bid price of the common stock during the five consecutive trading days immediately following the Clearing Date associated with our Put Notice.

 

Green Coast has a financial incentive to sell our shares immediately upon receiving the shares to realize the profit between the discounted price and the market price. If Green Coast sells our shares, the price of our common stock may decrease. If our stock price decreases, Green Coast may have a further incentive to sell such shares. Accordingly, the discounted sales price in the Equity Purchase Agreements may cause the price of our common stock to decline.

 

Green Coast Capital International SA has entered into similar agreements with other public companies and may not have sufficient capital to meet our put notices.

 

Green Coast has entered into similar investment agreements with other public companies, and some of those companies have filed registration statements with the intent of registering shares to be sold to Green Coast pursuant to investment agreements. We do not know if management at any of the companies who have or will have effective registration statements intend to raise funds now or in the future, what the size or frequency of each put request would be, if floors will be used to restrict the amount of shares sold, or if the investment agreement will ultimately be cancelled or expire before the entire amount of shares are put to Green Coast. Since we do not have any control over the requests of these other companies, if Green Coast receives significant requests, it may not have the financial ability to meet our requests. If so, the amount of available funds may be significantly less than we anticipate.

 

We are registering an aggregate of 1,000,000,000 shares of common stock to be issued under the Green Coast Equity Purchase Agreement. The sale of such shares could depress the market price of our common stock.

 

We are registering an aggregate of 1,000,000,000 shares of common stock under the registration statement of which this Prospectus forms a part for issuance pursuant to the Green Coast Equity Purchase Agreement. The sale of these shares into the public market by Green Coast could depress the market price of our common stock.

 

 

5

 

Risk Factors Related to the Business of the Company

 

We have a limited operating history and our financial results are uncertain.

 

We have a limited history and face many of the risks inherent to a new business. As a result of our limited operating history, it is difficult to accurately forecast our potential revenue. We were incorporated in Nevada in 2010. Our revenue and income potential is unproven and our business model is still emerging. Therefore,there can be no assurance that we will provide a return on investment in the future. An investor in our common stock must consider the challenges, risks and uncertainties frequently encountered in the establishment of new technologies, products and processes in emerging markets and evolving industries. These challenges include our ability to:

 

●

execute our business model;

●

create brand recognition;

●

manage growth in our operations;

●

create a customer base in a cost-effective manner;

●

retain customers;

●

access additional capital when required; and

●

attract and retain key personnel.

 

There can be no assurance that our business model will be successful or that it will successfully address these and other challenges, risks and uncertainties.

 

We will need additional funding in the future, and if we are unable to raise capital when needed, we may be forced to delay, reduce or eliminate our product candidate development programs, commercial efforts, or sales efforts.

 

Developing products and methods and procedures of treatment and marketing developed products is costly. We will need to raise substantial additional capital in the future in order to execute our business plan and help us and our collaboration partners fund the development and commercialization of our product candidates.

 

In 2014 and through 2019, we raised funds through public and private equity offerings. We may need to finance future cash needs through public or private equity offerings, debt financings or strategic collaboration and licensing arrangements. To the extent that we raise additional funds by issuing equity securities, our shareholders may experience additional dilution, and debt financing, if available, may involve restrictive covenants and may result in high interest expense. If we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our product candidates, processes and technologies or our development projects or to grant licenses on terms that are not favorable to us. We cannot be certain that additional funding will be available on acceptable terms, or at all. If adequate funds are not available from the foregoing sources, we may consider additional strategic financing options, including sales of assets, or we may be requiredto delay, reduce the scope of, or eliminate one or more of our research or development programs or curtail some of our commercialization efforts of our operations. We may seek to access the public or private equity markets whenever conditions are favorable, even if we do not have an immediate need for additional capital.

 

 

6

 

 

Negative public perception of hemp and cannabis-related businesses, misconceptions about the nature of our business and regulatory uncertainties could have a material adverse effect on our business, financial condition, and results of operations.

 

The hemp plant and the cannabis/marijuana plant are both part of the same cannabis sativa genus species of plant, except that hemp, by definition, has less than 0.3% tetrahydrocannabinol (“THC”) content and is legal under federal and state laws, but the same plant with a higher THC content is cannabis/marijuana, which is legal under certain state laws, but which is not legal under federal law. The similarities between these plants can cause confusion, and our activities with legal hemp may be incorrectly perceived as us being involved in federally illegal cannabis/marijuana. Also, despite growing support for the cannabis/marijuana industry and legalization of cannabis/marijuana in certain U.S. states, many individuals and businesses remain opposed to the cannabis/marijuana industry. Any negative press resulting from any incorrect perception that we have entered into the cannabis/marijuana space could result in a loss of current or future business. It could also adversely affect the public’s perception of us and lead to reluctance by new parties to do business with us or to own our common stock.

 

Certain retailers, like Amazon, do not allow the sale of products containing CBD. Other platforms such as Facebook and Google have policies that restrict advertising of CBD products. Until regulators provide more definitive and consistent rules for CBD products, many retailers, distributors and business partners tend to avoid getting involved in CBD businesses because of the uncertainty of what regulators may do. Misunderstandings about the legal nature of our business and the difference between CBD and marijuana may also discourage some business partners and customers from working with us or purchasing our products.

 

We cannot assure you that additional business partners, including but not limited to online retailers, distributors, financial institutions and customers, will not attempt to end or curtail their relationships with us. Any such negative press or cessation of business could have a material adverse effect on our business, financial condition, and results of operations.

 

U.S. federal, state and foreign regulation and enforcement of laws relating to cannabis and its derivatives may adversely affect our ability to sell our products and our revenue.

 

There are (i) thirty-three (33) states in the United States, the District of Columbia, Guam and Puerto Rico have approved comprehensive public medical marijuana/cannabis programs. Approved Efforts in another thirteen (13) states allow use of low THC, high CBD products for medical reasons in limited situations or as a legal defense. Ten (10) of these states and the District of Columbia have legalized cannabis/marijuana for adult recreational use. This leaves only four states (Idaho, Kansas, Conversely, under the federal Controlled Substances Act (the “CSA”), the policies and regulations of the federal government and its agencies are that cannabis/marijuana has no medical benefit and a range of activities are prohibited, including cultivation, possession, personal use, and interstate distribution of cannabis/marijuana. In the event the U.S. Department of Justice (the “DOJ”) begins strict enforcement of the CSA in states that have laws legalizing medical and/or adult recreational cannabis/marijuana, there may be a direct and adverse impact to any future business or prospects that we may have in the cannabis/marijuana business. Even in those jurisdictions in which the manufacture and useof medical cannabis/marijuana has been legalized at the state level, the possession, use, and cultivation of cannabis/marijuana all remain violations of federal law that are punishable by imprisonment and substantial fines. Moreover, individuals and entities may violate federal law if they intentionally aid and abet another in violating these federal controlled substance laws, or conspire with another to violate them.

 

 

7

 

 

For example, the California Bureau of Cannabis Control sent nine hundred (900) warning letters to marijuana shops suspected of operating without a state license. The Bureau also issued a cease-and-desist letter to the operator of an online directory of marijuana dispensaries, products, and delivery services. The letter threatened fines and criminal penalties if the company did not remove the listings for unlicensed marijuana businesses. Likewise, if we unknowingly do business with unlicensed entities or list them on our website, we may be subject to similar regulatory action that would halt our operations and affect our financial performance.

 

Local, state, federal, and international hemp and cannabis/marijuana laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance requirements. In addition, violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our operations. In addition, it is possible that cannabinoid-related regulations may be enacted in the future that will be directly applicable to our business. It is also possible that the federal government will begin strictly enforcing existing laws, which may limit the legal uses of the hemp plant and its derivatives and extracts, such as cannabinoids. However, our work in hemp would continue since hemp research, development, and commercialization activities are permitted under applicable federal and state laws, rules, and regulations. Until Congress amends the CSA or the executive branch deschedules or reschedules cannabis under it, there is a risk that federal authorities may enforce current federal law. Enforcement of the CSA by federal authorities could impair the Company’s revenue and profit, and it could even force the Company to cease manufacturing its products. The risk of strict federal enforcement of the CSA in light of congressional activity, judicial holdings, and stated federal policy, including enforcement priorities, remains uncertain.

 

Until such time as the federal government reclassifies marijuana from a Schedule 1 narcotic, we do not intend to pursue any involvement in the marijuana business. At this time, we intend to continue only in the federally legal hemp product business. When Congress approved the 2018 Farm Bill, it defined hemp as an agricultural product and differentiated it from marijuana. This means hemp is not a controlled substance, and may be more broadly cultivated. Hemp-derived products may now be transferred across state lines for commercial purposes. The new law also allows for the sale, transport, or possession of hemp-derived products, so long as those items are produced in a manner consistent with the law. There are several restrictions that apply to those who cultivate hemp and produce hemp-derived products. Key among these restrictions is that hemp cannot contain more than 0.3 percent THC.

 

While the 2018 Farm Bill legalized the cultivation of hemp and removed hemp-derived substances from Schedule 1 of the CSA, it does not legalize CBD generally. The FDA and DOJ continue to exercise control over CBD and there is still some lack of clarity as to exactly how CBD will be regulated going forward.

 

CBD has been deemed relatively safe and, from now on, should not be subject to international illicit drug scheduling according to a World Health Organization (“WHO”) comprehensive review published in July 2018. The WHO has formally submitted its conclusion to United Nations Secretary-General António Guterres, a prelude to this officially becoming the case.

 

On June 25, 2018, the U.S. Food and Drug Administration (“FDA”) approved CBD-based Epidiolex to treat severe forms of epilepsy. This marked the groundbreaking admission by the FDA that cannabis has medical value. On October 1, 2018, the DOJ placed “FDA-approved drugs that contain CBD derived from cannabis and no more than 0.1 percent THC” to Schedule 5 of the CSA. This action is narrowly tailored to reschedule Epidiolex off of Schedule 1 because the DOJ’s ability to remove all restrictions from cannabis extracts, including CDB, is restricted by the Single Convention on Narcotic Drugs, 1961.

 

 

8

 

 

Our product candidates are not approved by the FDA or other regulatory authority, and we face risks of unforeseen medical problems, and up to a complete ban on the sale of our product candidates.

 

The efficacy and safety of pharmaceutical products is established through a process of clinical testing under FDA oversight. Our products have not gone through this process because we believe that the topical products we sell are not subject to this process. However, if an individual were to use one of our products in an improper manner, we cannot predict the potential medical harm to that individual. If such an event were to occur, the FDA or similar regulatory agency might impose a complete ban on the sale or use of our products.

 

The FDA might not approve our product candidates for marketing and sale.

 

We intend to enter into agreements with larger pharmaceutical companies as collaboration partners, in part to help cover the cost of seeking regulatory approvals for our pharmaceutical and medical product candidates. We believe that FDA approval of some of our product candidates will need to undergo a full investigational new drug (IND) application with the FDA, including clinical trials. There can be no assurance that the FDA will approve our IND application or any other applications. Failure to obtain the necessary FDA approval will have a material negative affect on our operations. While we intend to license our Feldetrex® product to a larger pharmaceutical company, they in turn, may not be able to obtain the necessary approval to market and sale the product.

 

New regulations governing the introduction, marketing and sale of our products to consumers could harm our business.

 

Our pain management products have not been approved by the FDA or any other regulatory agency, and the FDA does not have a pre-market approval system for our pain management products. However, our operations could be harmed if new laws or regulations are enacted that restrict our ability to market or distribute our products or impose additional burdens or requirements on us in order to continue selling our products. In addition, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant compliance costs or discontinuation of product sales and may impair the marketability of our products, resulting in significant loss of net sales.

 

We have observed a general increase in regulatory activity and activism in the United States and the regulatory landscape is becoming more complex with increasingly strict requirements. If this trend continues, we may find it necessary to alter some of the ways we have traditionally marketed our products in order to stay in compliance with a changing regulatory landscape and this could add to the costs of our operations and/or have an adverse impact on our business.

 

We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental regulations or administrative orders, when and if promulgated, would have on our business. Future changes could include requirements to make certain changes to our products to meet new standards, the recall or discontinuation of certain products that cannot be changed, additional record keeping, expanded documentation of the properties of certain products, expanded or different labeling, and additional scientific substantiation. Any or all of these requirements could have a material adverse effect on our business, financial condition, and operating results.

 

 

9

 

 

We may fail to deliver commercially successful new product candidates, methods and procedures of treatment, and treatments.

 

Our technology is at an early stage of research and development. We are also actively engaged in research and development of new products.

 

The development of commercially viable new products and methods and procedures of treatment, as well as the development of additional uses for existing products and methods and procedures of treatment, is critical to our ability to generate sales and/or sell the rights to manufacture and distribute our product and process candidates to another firm. Developing new products and methods and procedures of treatment is a costly, lengthy and uncertain process. A new product or process candidate can fail at any stage of the development or commercialization, and one or more late-stage product or process candidates could fail to receive regulatory approval.

 

New product and process candidates may appear promising in development, but after significant investment, fail to reach the market or have only limited commercial success. This, for example, could be as a result of efficacy or safety concerns, inability to obtain necessary regulatory approvals, difficulty or excessive costs to manufacture, erosion of patent term as a result of a lengthy development period, infringement of third-party patents or other intellectual property rights of others or inability to differentiate the product or process adequately from those with which it competes.

 

The commercialization of product and process candidates under development may not be profitable.

 

In order for the commercialization of our product candidates to be profitable, our product and process candidates must be cost-effective and economical to manufacture on a commercial scale. Furthermore, if our product candidates and methods and procedures of treatment do not achieve market acceptance, we may not be profitable. Subject to regulatory approval, we expect to incur significant development, sales and marketing expenses in connection with the commercialization of our new product and process candidates. Even if we receive additional financing, we may not be able to complete planned development and marketing of any or all of our product or process candidates. Our future profitability may depend on many factors, including, but not limited to:

 

●

the terms and timing of any collaborative, licensing and other arrangements that we may establish;

●

the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

●

the costs of establishing manufacturing and production, sales, marketing and distribution capabilities; and

●

the effect of competing technological and market developments.

 

Even if our collaboration partners receive regulatory approval for our product and process candidates, we may not earn significant revenues from such product or process candidates. With respect to the product and methods and procedures of treatment candidates in our development pipeline that are being developed by or in close conjunction with third parties, our ability to generate revenues from such product and process candidates will depend in large part on the efforts of such third parties. To the extent that our collaboration partners are not successful in commercializing our product or process candidates, our revenues will suffer, we will incur significant additional losses and the price of our common stock will be negatively affected.

 

 

10

 

 

We may engage in strategic transactions that fail to enhance shareholder value.

 

From time to time, we may consider possible strategic transactions, including the potential acquisitions or licensing of products or technologies or acquisition of companies, and other alternatives with the goal of maximizing shareholder value. We may never complete a strategic transaction, and in the event that we do complete a strategic transaction, implementation of such transactions may impair shareholder value or otherwise adversely affect our business. Any such transaction may require us to incur non-recurring or other charges and may pose significant integration challenges and/or management and business disruptions, any of which could harm our results of operation and business prospects.

 

Our business is heavily regulated by governmental authorities, and failure to comply with such regulation or changes in such regulations could negatively impact our financial results.

 

We must comply with a broad range of regulatory controls on the testing, approval, manufacturing and marketing of our product candidates, procedures and other treatments, particularly in the United States and countries of the European Union, that affect not only the cost of product development but also the time required to reach the market and the uncertainty of successfully doing so. Health authorities have increased their focus on safety when assessing the benefit risk/balance of drugs in the context of not only initial product approval but also in the context of approval of additional indications and review of information regarding marketed products. Stricter regulatory controls also heighten the risk of changes in product profile or withdrawal by regulators on the basis of post-approval concerns over product safety, which could reduce revenues and can result in product recalls and product liability lawsuits. There is also greater regulatory scrutiny, especially in the United States, on advertising and promotion and in particular on direct-to-consumer advertising.

 

The regulatory process is uncertain, can take many years, and requires the expenditure of substantial resources. In particular, proposed human pharmaceutical therapeutic product requirements set by the FDA in the United States, and similar health authorities in other countries, require substantial time and resources to satisfy. We may never obtain regulatory approval for our product and process candidates.

 

We may not be able to gain or sustain market acceptance for our services and product candidates.

 

Failure to establish a brand and presence in the marketplace on a timely basis could adversely affect our financial condition and results of operations. Moreover, there can be no assurance that we will successfully complete our development and introduction of new products or product enhancements, or methods and procedures of treatment or that any such product candidates or methods and procedures of treatment will achieve acceptance in the marketplace. We may also fail to develop and deploy new products and product enhancements on a timely basis.

 

The market for pain management products is highly competitive, and we may not be able to compete successfully.

 

We intend to operate in highly competitive markets. We will likely face competition both from proprietary products of large international manufacturers and producers of generic pain management products. Most of the competitors in the industry have longer operating histories and significantly greater financial, technical, marketing and other resources than us, and may be able to respond more quickly than we can to new or changing opportunities and customer requirements. Also, many competitors have greater name recognition and more extensive customer bases that they can leverage to gain market share. Such competitors are able to undertake more extensive promotional activities, adopt more aggressive pricing policies and offer more attractive terms to purchasers than we can.

 

 

11

 

 

Significant product innovations, technical advances or the intensification of price competition by competitors could adversely affect our operating results. We cannot predict the timing or impact of competitive products or their potential impact on sales of our products under development.

 

If any of our major pain management products were to become subject to a problem such as unplanned loss of patent protection, unexpected side effects, regulatory proceedings, publicity affecting doctor or consumer confidence or pressure from competitive products, or if a new, more effective alternative should be introduced, the adverse impact on our revenues and operating results could be significant.

 

The market for products, methods and procedures of treatment and services in the pharmaceuticals industry is highly competitive, and we may not be able to compete successfully.

 

We intend to operate in highly competitive markets. We will likely face competition both from proprietary products of large international manufacturers and producers of generic pharmaceuticals. Most of the competitors in the industry have longer operating histories and significantly greater financial, technical, marketing and other resources than us, and may be able to respond more quickly than we can to new or changingopportunities and customer requirements. Also, many competitors have greater name recognition and more extensive customer bases that they can leverage to gain market share. Such competitors are able to undertake more extensive promotional activities, adopt more aggressive pricing policies and offer more attractive terms to purchasers than we can.

 

Significant product innovations, technical advances or the intensification of price competition by competitors could adversely affect our operating results. We cannot predict the timing or impact of competitive products or their potential impact on sales of our product candidates.

 

If any of our major product candidates or methods and procedures of treatment were to become subject to a problem such as unplanned loss of patent protection, unexpected side effects, regulatory proceedings, publicity affecting doctor or patient confidence or pressure from competitive products and methods and procedures of treatment, or if a new, more effective treatment should be introduced, the adverse impact on our revenues and operating results could be significant.

 

We are dependent on the services of key personnel and failure to attract qualified management could limit our growth and negatively impact our results of operations.

 

We are highly dependent on the principal members of our management and scientific staff and certain key consultants, including our Chief Executive Officer and the Chairman of our Board of Directors. We will continue to depend on operations management personnel with pharmaceutical and scientific industry experience. At this time, we do not know of the availability of such experienced management personnel or how much it may cost to attract and retain such personnel. The loss of the services of any member of senior management or the inability to hire experienced operations management personnel could have a material adverse effect on our financial condition and results of operations.

 

 

12

 

 

If physicians and patients do not accept our current or future product candidates or methods and procedures of treatment, we may be unable to generate significant additional revenue, if any.

 

The products and methods and procedures of treatment that we may develop or acquire in the future may fail to gain market acceptance among physicians, health care payors, patients and the medical community. Physicians may elect not to recommend these treatments for a variety of reasons, including:

 

●

timing of market introduction of competitive drugs;

●

lower demonstrated clinical safety and efficacy compared to other drugs or treatments;

●

lack of cost-effectiveness;

●

lack of availability of reimbursement from managed care plans and other third-party payors;

●

lack of convenience or ease of administration;

●

prevalence and severity of adverse side effects;

●

other potential advantages of alternative treatment methods; and

●

ineffective marketing and distribution support.

 

If our product candidates and processes fail to achieve market acceptance, we would not be able to generate significant revenue.

 

We are exposed to the risk of liability claims, for which we may not have adequate insurance.

 

Since we participate in the CBD, pain management and pharmaceutical industries, we may be subject to liability claims by employees, customers, end users and third parties. We do not currently have product liability insurance. We intend to have proper insurance in place; however, there can be no assurance that any liability insurance we purchase will be adequate to cover claims asserted against us or that we will be able to maintain such insurance in the future. We intend to adopt prudent risk management programs to reduce these risks and potential liabilities; however, we have not taken any steps to create these programs and have no estimate as to the cost or time required to do so and there can be no assurance that such programs, if and when adopted, will fully protect us. We may not be able to put risk management programs in place, or obtain insurance, if we are unable to retain the necessary expertise and/or are unsuccessful in raising necessary capital in the future. Adverse rulings in any legal matters, proceedings and other matters could have a material adverse effect on our business.

 

Pre-clinical and clinical trials are conducted during the development of potential products and other treatments to determine their safety and efficacy for use by humans. Notwithstanding these efforts, when our treatments are introduced into the marketplace, unanticipated side effects may become evident. Manufacturing, marketing, selling and testing our product candidates under development or to be acquired or licensed, entails a risk of product liability claims. We could be subject to product liability claims in the event that our product candidates, processes, or products under development fail to perform as intended. Even unsuccessful claims could result in the expenditure of funds in litigation and the diversion of management time and resources, and could damage our reputation and impair the marketability of our product candidates and processes. While we plan to maintain liability insurance for product liability claims, we may not be able to obtain or maintain such insurance at a commercially reasonable cost. If a successful claim were made against us, and we don’t have insurance or the amount of insurance was inadequate to cover the costs of defending against or paying such a claim or the damages payable by us, we would experience a material adverse effect on our business, financial condition and results of operations.

 

 

13

 

 

Other companies may claim that we have infringed upon their intellectual property or proprietary rights.

 

We do not believe that our product candidates and methods and procedures violate third-party intellectual property rights; however, we have not had an independent party conduct a study of possible patent infringements. Nevertheless, we cannot guarantee that claims relating to violation of such rights will not be asserted by third parties. If any of our product candidates or methods and procedures of treatment are found to violate third-party intellectual property rights, we may be required to expend significant funds to re-engineer or cause to be re-engineered one or more of those product candidates or methods and procedures of treatment to avoid infringement, or seek to obtain licenses from third parties to continue offering our product candidates or methods and procedures of treatment without substantial re-engineering, and such efforts may not be successful.

 

In addition, future patents may be issued to third parties upon which our product candidates and methods and procedures of treatment may infringe. We may incur substantial costs in defending against claims under any such patents. Furthermore, parties making such claims may be able to obtain injunctive or other equitable relief, which effectively could block our ability to further develop or commercialize some or all of our products or methods and procedures of treatment in the United States or abroad, and could result in the award of substantial damages against us. In the event of a claim of infringement, we may be required to obtain one or more licenses from third parties. There can be no assurance that we will be able to obtain such licenses at a reasonable cost, if at all. Defense of any lawsuit or failure to obtain any such license could be costly and have a material adverse effect on our business.

 

Our success depends on our ability to protect our proprietary technology.

 

Our success depends, to a significant degree, upon the protection of our proprietary technology, and that of any licensors. Legal fees and other expenses necessary to obtain and maintain appropriate patent protection could be material. Insufficient funding may inhibit our ability to obtain and maintain such protection. Additionally, if we must resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome and expensive, and could involve a high degree of risk to our proprietary rights if we are unsuccessful in, or cannot afford to pursue, such proceedings.

 

Our licensors have been granted three U.S. patents: Sequential Extracorporeal Treatment of Bodily Fluids, U.S. Patent No. 9,216,386; Utilization of Stents for the Treatment of Blood Borne Carcinomas, U.S. Patent No. 8,758,287; and Medication and Treatmentfor Disease, U.S. Patent No. 8,865,733, in the areas of cancer, sepsis, and multiple sclerosis. We expect these patents to cover the medical treatments for multiple sclerosis, blood sepsis, and cancer and be effective until 2029. Our licensors have licensed these technologies to us pursuant to the terms of the license agreements. We anticipate that other technologies that derive from these patents will also belong to us and are covered by the license agreements. However, we have not conducted thorough prior art or novelty studies, but we are not aware of existing prior art that would prevent us from obtaining patents on our product candidates or methods and procedures of treatment. Prior art preventing us from obtaining broad patent protection is a possibility. Inability to obtain valid and enforceable patent protection would have a material negative impact on our business opportunities and success. Because the patent positions of pharmaceutical and biotechnology companies are highly uncertain and involve complex legal and factual questions, the patents may not be granted on our applications, and any future patents owned and licensed by us may not prevent other companies from developing competing products or ensure that others will not be issued patents that may prevent the sale of our products or require licensing and the payment of significant fees or royalties. Furthermore, to the extent that: (i) any of our future products or methods are not patentable; (ii) such products or methods infringe upon the patents of third parties; or (iii) our patents or future patents fail to give us an exclusive position in the subject matter to which such patents relate, our business will be adversely affected. We may be unable to avoid infringement of third-party patents and may have to obtain a license, or defend an infringement action and challenge the validity of such patents in court. A license may be unavailable on terms and conditions acceptable to us, if at all. Patent litigation is costly and time consuming, and we may be unable to prevail in any such patent litigation or devote sufficient resources to even pursue such litigation. If we do not obtain a license under such patents, are found liable for infringement and are not able to have such patents declared invalid, we may be liable for significant monetary damages, encounter significant delays in bringing products to market or may be precluded from participating in the manufacture, use or sale of products or methods of treatment requiring such licenses.

 

 

14

 

 

We may also rely on trademarks, trade secrets and contract law to protect certain of our proprietary technology. There can be no assurance that any trademarks will be approved, that such contract will not be breached, or that if breached, we will have adequate remedies. Furthermore, there can be no assurance that any of our trade secrets will not become known or independently discovered by third parties.

 

Additionally, we may, from time to time, support and collaborate in research conducted by universities and governmental research organizations. There can be no assurance that we will have or be able to acquire title or exclusive rights to the inventions or technical information derived from such collaborations, or that disputes will not arise with respect to rights in derivative or related research programs conducted by us or such collaborators.

 

Our future growth may be inhibited by the failure to implement new technologies.

 

Our future growth is partially tied to our ability to improve our knowledge and implementation of medical and pharmaceutical technologies. The inability to successfully implement commercially viable medical and pharmaceutical technologies in response to market conditions in a manner that is responsive to our customers’ requirements could have a material adverse effect on our business.

 

We do not own certain of our technologies, they are owned by, and licensed from, entities that are under the control of the Chairman of our Board of Directors.

 

We do not currently own the certain technologies necessary to conduct our operations. The patents necessary to pursue our intended business plan are under the control of our Chairman of the Board of Directors. As consideration for the two licenses, we agreed to (i) pay a royalty of five percent (5%) of any sales of products using the technology, with no minimum royalty and (ii) reimburse the licensor for any costs incurred in pursuing its proprietary rights in the licensed technology and pay any costs incurred for maintaining or obtaining the licensors’ proprietary rights in the licensed technology in the U.S. and in extending the intellectual property to other countries around the world. The licensor has the sole discretion to select other countries into which exclusive rights in the licensed technology may be pursued, and if we decline to pay those expenses, then the licensor may pay said expenses and our licensed rights in those countries will revert to the licensor. The license agreements contain provisions that require us to indemnify thelicensor for any claims, including costs of litigation, brought against them related to the licenses, and require us to maintain insurance that may be burdensome. In the event of a breach of our obligations under the license agreements, the licensors are entitled to various damages and remedies, up to and including termination of said license agreements. The licensors are entities under the control of Dr. Mitchell S. Felder, the Chairman of our Board of Directors. While Dr. Felder is one of our Company’s founders and the Chairman of our Board of Directors, there can be no assurance that he will extend the offer to license these technologies to us in the future as currently contemplated.

 

We do not intend to take our Feldetrex® product candidate past the development stage, but instead intend to enter into collaboration agreements with collaboration partners. If we are unable to enter into an agreement with collaboration partners, our Feldetrex® product candidate cannot be marketed, and it will not generate revenue for us.

 

We do not intend to conduct clinical trials on our Feldetrex® product candidate. We instead intend to enter into one or more collaboration agreements with third parties to do so. However, we have not entered into any such agreements, or discussions for any such agreements, and we cannot guarantee that we will be successful in doing so. If we do not find a collaboration partner, the Feldetrex® product candidate cannot be marketed, and it will not generate any revenue for us.

 

 

15

 

 

The failure to generate revenue from our Feldetrex® product candidate will have a materially adverse effect on our overall revenues, profitability.

 

Risks Related To Our Common stock

 

The market price of our common stock may be volatile and may be affected by market conditions beyond our control.

 

The market price of our common stock is subject to significant fluctuations in response to, among other factors:

 

●

variations in our operating results and market conditions specific to Biomedical Industry companies;

●

changes in financial estimates or recommendations by securities analysts;

●

announcements of innovations or new products or services by us or our competitors;

●

the emergence of new competitors;

●

operating and market price performance of other companies that investors deem comparable;

●

changes in our board or management;

●

sales or purchases of our common stock by insiders;

●

commencement of, or involvement in, litigation;

●

changes in governmental regulations; and

●

general economic conditions and slow or negative growth of related markets.

 

In addition, if the market for stocks in our industry or the stock market in general, experiences a loss of investor confidence, the market price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause the price of our common stock to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to the board of directors and management.

 

If we default on our convertible notes and are unable to repay the notes, we will not have the funds we need to operate our business and may lose access to additional financing.

 

We are currently in default on the Note issued on August 8, 2017 because the Maturity Date has passed. Per the terms of the Notes, the Selling Shareholders have the option to demand payment of 130% of the outstanding principal amount of a Note and any accrued and unpaid interest thereon. We are currently unable to pay these amounts in full. If the Selling Shareholders elect to exercise this right rather than convert the Notes, we could possibly face litigation. If we repay the Notes or any part thereof, we may not be able to satisfy the obligations we have to other business partners and may be forced to cease our business operations. Any action by the Selling Shareholders would adversely affect our financial position and ability to operate.

 

If we are unable to pay the costs associated with being a public, reporting company, we may be forced to discontinue operations.

 

We expect to have significant costs associated with being a public, reporting company, which may raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend on positive cash flow, if any, from future operations and on our ability to raise additional funds through equity or debt financing. If we are unable to achieve the necessary product sales or raise or obtain needed funding to cover the costs of operating as a public, reporting company, we may be forced to discontinue operations.

 

 

16

 

 

If we do not continue to meet the eligibility requirements of the Pink Sheets Current tier, our common stock may be removed from Pink Sheets Current and moved for quotation on a lower tier of the marketplace maintained by OTC Markets Group, Inc., which may make it more difficult for investors to resell their shares due to suitability requirements.

 

Our common stock is currently quoted on the Pink Sheets Current tier of the marketplace maintained by OTC Markets Group, Inc. The Pink Sheets Current tier does not require a minimum bid price. If we are removed from the Pink Sheets Current tier, our stock will be quoted on a lower tier. Broker-dealers often decline to trade in over-the-counter stocks that are quoted on the OTC Pink tier, or a lower tier, given the market for such securities are often limited, the stocks are more volatile, and the risk to investors is greater. These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of their shares. This could cause our stock price to decline.

 

If we move down from the OTC Pink Current tier, we may be unable to restore eligibility for quotation of our common stock on the Pink Sheets Current tier or the OTCQB tier, and this will have a negative impact on our market price. The lower tiers maintained by OTC Markets, Inc. does not provide as much liquidity as the Pink Sheets Current tier or the OTCQB tier. Many broker-dealers will not trade or recommend OTC Pink stocks for their clients. 

 

Our principal shareholders have the ability to exert significant control in matters requiring shareholder approval and could delay, deter, or prevent a change in control of our company.

 

William A. Hartman and Dr. Mitchell S. Felder collectively own 157,031 shares of our outstanding common stock, 2,000,000 shares of our Series A Convertible Preferred Stock (which is convertible into an aggregate of 2,000,000 shares of our common stock), and through the exercise of warrants could acquire another 1,782,040 shares of our common stock. The shares of our preferred stock have 100 votes per share, giving these two shareholders approximately 51% of our current voting securities. As a result, they have the ability to influence matters affecting our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because they control such shares, investors may find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by these shareholders could result in management making decisions that are in the best interest of those shareholders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock. Investors who purchase our common stock should be willing to entrust all aspects of operational control to our current management team.

 

We do not intend to pay dividends in the foreseeable future.

 

We do not intend to pay any dividends in the foreseeable future. We do not plan on making any cash distributions in the manner of a dividend or otherwise. Our Board presently intends to follow a policy of retaining earnings, if any.

 

 

17

 

 

We have the right to issue additional common stock and preferred stock without consent of shareholders. This would have the effect of diluting investors’ ownership and could decrease the value of their investment.

 

Following an amendment to our articles of incorporation, which has already been approved by our shareholders and is anticipated to take effect on or about December 19, 2019, we will be authorized to issue up to 2,000,000,000 shares of common stock, of which there were 186,961,480 shares issued and outstanding as of November 12, 2019. An additional 3,570,600 shares may be issued and outstanding if all of our currently outstanding preferred stock and warrants were exercised and converted into common stock. Our outstanding convertible notes require a reserve of approximately 220 million shares.

 

In addition, our certificate of incorporation authorizes the issuance of shares of preferred stock, the rights, preferences, designations and limitations of which may be set by the Board of Directors. Our certificate of incorporation has authorized the issuance of up to 10,000,000 shares of preferred stock in the discretion of our Board. The shares of authorized but undesignated preferred stock may be issued upon filing of an amended certificate of incorporation and the payment of required fees; no further shareholder action is required. If issued, therights, preferences, designations and limitations of such preferred stock would be set by our Board and could operate to the disadvantage of the outstanding common stock. Such terms could include, among others, preferences as to dividends and distributions on liquidation. We have designated a series of convertible preferred stock, the Series A Convertible Preferred Stock. Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such shareinto 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. As of the date hereof, there were 2,000,000 shares of Series A Convertible Preferred Stock issued and outstanding.

 

Our officers and directors can sell some of their stock, which may have a negative effect on our stock price and ability to raise additional capital, and may make it difficult for investors to sell their stock at any price.

 

Our officers and directors, as a group, are the owners of 169,845 shares of our common stock, and with convertible preferred stock, options and warrants to acquire another 3,570,600 shares of our common stock, representing approximately 2% of our total issued and outstanding shares of common stock. Each individual officer and director may be able to sell up to 1% of our outstanding common stock (currently approximately 1.8 million shares) every ninety (90) days in the open market pursuant to Rule 144, which may have a negative effect on our stock price and may prevent us from obtaining additional capital. In addition, if our officers and directors are selling their stock into the open market, it may make it difficult or impossible for investors to sell their stock at any price.

 

Our common stock is governed under The Securities Enforcement and Penny Stock Reform Act of 1990.

 

The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on NASDAQ and any equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for three years; (ii) net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years; or (iii) average annual revenue of at least $6,000,000, if such issuer has been in continuous operation for less than three years. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

 

 

18

 

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

We have made forward-looking statements in this Annual Report, including the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions. These statements are only predictions and involve known and unknown risks and uncertainties, including the risks outlined under “Risk Factors” and elsewhere in this Annual Report.

 

Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievement. We are not under any duty to update any of the forward-looking statements after the date of this annual report to conform these statements to actual results, unless required by law.

 

 

 

 

19

 

USE OF PROCEEDS

 

This Prospectus relates to shares of our common stock that may be offered and sold from time to time by the selling stockholders. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders in this offering. We will pay for expenses of this offering, except that the selling stockholders will pay any broker discounts or commissions or equivalent expenses applicable to the sale of their shares.

 

However, we will receive up to $5,000,000 from the sale of common stock to Green Coast Capital International SA under the Equity Purchase Agreement. These proceeds would be received from time-to-time as Put Notices are delivered to Green Coast, and we will use these proceeds for working capital needs.

 

Our allocation of proceeds represents our best estimate based upon the expected requirements of our proposed business and marketing plan. If any of these factors change, we may reallocate some of the net proceeds. The portion of any net proceeds not immediately required will be invested in certificates of deposit or similar short-term interest bearing instruments.

 

INVESTMENT AGREEMENT

 

On October 4, 2019, we entered into the Equity Purchase Agreement and a Registration Rights Agreement with Green Coast Capital International SA in order to establish a possible source of funding for us.

 

Under the Equity Purchase Agreement, Green Coast has agreed to provide us with up to $5,000,000 of funding upon effectiveness of this prospectus; for which 1,000,000,000 shares of our common stock are being registered pursuant to this prospectus. During this period, we can deliver a put under the Equity Purchase Agreement by selling shares of our common stock to Green Coast and Green Coast will be obligated to purchase the shares. A put transaction must close before we can deliver another put notice to Green Coast.

 

We may request a put by sending a put notice to Green Coast, stating the amount of the put. During the five trading days following a notice, we will calculate the amount of shares we will sell to Green Coast and the purchase price per share. The number of shares of Common Stock that Green Coast shall purchase pursuant to each put notice shall be determined by dividing the amount of the put by the purchase price.

 

The purchase price per share of common stock will be set at ninety percent (90%) of the lowest closing bid price of the common stock during the five consecutive trading days immediately following the Clearing Date associated with our Put Notice.

 

There is no minimum amount we can put to Green Coast at any one time. Upon effectiveness of the Registration Statement, the Company shall deliver instructions to its transfer agent to issue shares of Common Stock to Green Coast free of restrictive legends on or before each closing date.

 

Pursuant to the Equity Purchase Agreement, Green Coast and its affiliates shall not be issued shares of our common stock that would result in its beneficial ownership equaling more than 4.99% of our outstanding common stock.

 

 

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Green Coast will not enter into any short selling or any other hedging activities during the pricing period. On October 4, 2019, we entered into a Registration Rights Agreement with Green Coast requiring, among other things, that we prepare and file with the SEC a Registration Statement on Form S-1 covering the shares issuable to Green Coast under the Equity Purchase Agreement. As per the Equity Purchase Agreement, none of Green Coast’s obligations thereunder are transferrable and may not be assigned to a third party.

SELLING SECURITY HOLDERS

 

The Selling Shareholder is Green Coast Capital International SA, a Panama corporation and an underwriter in this offering. Kevin Bobryk, President, has the sole voting and dispositive power with respect to shares of stock beneficially owned by Green Coast. Pursuant to the terms of an Equity Purchase Agreement, at our election we may sell to Green Coast up to $5,000,000 worth of our common stock at a price equal to ninety percent (90%) of the lowest closing bid price of the common stock during the five consecutive trading days immediately following the date of our notice to Green Coast of our election to put shares pursuant to the Equity Purchase Agreement.

 

In connection with the Equity Purchase Agreement, we (i) issued to Green Coast a convertible promissory note in the principal amount of $150,000, for which they paid $25,000, and (ii) will pay to Green Coast a cash fee of $10,000 out of the proceeds from the first Put Notice.

 

As of the date of this Prospectus, assuming a closing bid price of $0.75 per share, our sales price to Green Coast would be $0.5625 per share and we would have to issue approximately 8,888,888 shares of our common stock to receive all $5,000,000.

 

As of the date of this Prospectus, there are approximately 186 million shares of our common stock held by or currently issuable to non-affiliates, representing approximately 99% of the outstanding common stock prior to any sales to Green Coast. The 1,000,000,000 shares we are registering for resale by Green Coast represents approximately 50% of the total authorized common stock.

 

We cannot sell shares to Green Coast if such shares would cause Green Coast to own more than 4.99% of our common stock. As a result, as of the date of this Prospectus, Green Coast cannot own more than approximately 95 million shares after giving effect to that issuance to Green Coast. If our total number of outstanding shares of common stock increases, as it will as we sell shares to Green Coast under the Equity Purchase Agreement, then we would be able to sell more shares to Green Coast before reaching the 4.99% threshold. In the event gross proceeds reach $5,000,000 from the sale of less than 1,000,000,000 shares, the offering will end with no further shares sold. Our limited trading volume and price volatility is likely to inhibit Green Coast’s ability to resell shares we sell to them, which will negatively impact our ability to sell more shares to them. It is also likely that each sale will decrease our stock price which means subsequent sale may provide less proceeds per share that the previous sale. In addition, we have only registered 1,000,000,000 shares for resale by Green Coast.

 

Green Coast intends to sell up to 1,000,000,000 shares and is an “underwriter” within the meaning of the Securities Act of 1933, as amended, in connection with the resale of our common stock under the Equity Purchase Agreement. As of date of this Prospectus, Green Coast or its affiliates owns zero shares of our common stock prior to the offering. After the offering is completed, unless they have sold some or all of the shares held as of the date hereof, Green Coast will continue to own zero shares of our common stock.

 

All of the shares held by the selling stockholders are restricted securities as that term is defined in Rule 144 promulgated under the Securities Act of 1933.

  

 

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PLAN OF DISTRIBUTION

 

The Selling Shareholder of the common stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the principal trading market on which our common stock trades or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Shareholder may use any one or more of the following methods when selling shares:

 

●

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

●

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

●

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

●

privately negotiated transactions;

 

●

broker-dealers may agree with the Selling Shareholder to sell a specified number of such shares at a stipulated price per share;

 

●

a combination of any such methods of sale; or

 

●

any other method permitted pursuant to applicable law.

 

The Selling Shareholder may also sell shares under Rule 144 under the Securities Act of 1933, as amended, if available, rather than under this Prospectus.

 

Broker-dealers engaged by the Selling Shareholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Shareholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

The Selling Shareholder is an underwriter within the meaning of the Securities Act and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The Selling Shareholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Common Stock. Pursuant to a requirement by the Financial Industry Regulatory Authority, or FINRA, the maximum commission or discount to be received by any FINRA member or independent broker/dealer may not be greater than eight percent (8%) of the gross proceeds received by us for the sale of any securities being registered pursuant to SEC Rule 415 under the Securities Act.

 

 

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Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by the Selling Shareholder.  The Selling Shareholder may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act.

 

We will pay all expenses in connection with the registration and sale of the common stock by the Selling Shareholder. The estimated expenses of issuance and distribution are set forth below:

 

Registration Fees	Approximately	$13
Transfer Agent Fees	Approximately	1,000
Costs of Printing and Engraving	Approximately	1,000
Legal Fees	Approximately	15,000
Accounting and Audit Fees	Approximately	5,000
Total		$22,013

 

We will not receive any proceeds from the resale of any of the shares of our common stock by the Selling Shareholder.  We may, however, receive proceeds from the sale of our common stock under the Equity Purchase Agreement.  Neither the Equity Purchase Agreement, nor any rights of the parties thereunder, may be assigned or delegated to any other person.

 

Because the Selling Shareholder is an “underwriter” within the meaning of the Securities Act, it will be subject to the Prospectus delivery requirements of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this Prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this Prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Shareholder.

 

We agreed to keep this Prospectus effective until all the shares covered by the registration statement of which this Prospectus is a part (i) have been sold, thereunder or pursuant to Rule 144, or (ii) (A) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and (B) (I) may be sold without the requirement for us to be in compliance with the current public information requirement under Rule 144 or (II) we are in compliance with the current public information requirement under Rule 144, or (iii) the commitment period under the Committed Equity Facility Agreement has expired and no registrable securities are then held of record by the Selling Shareholder that are subject to any resale restriction under Rule 144, as determined by our counsel in a written opinion letter to such effect, addressed and acceptable to the transfer agent and the affected Selling Shareholder. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Shareholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the Selling Shareholder or any other person. We will make copies of this Prospectus available to the Selling Shareholder and have informed them of the need to deliver a copy of this Prospectus to each purchaser at or prior to the time of the sale.

 

The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on NASDAQ and any equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for three years, (ii) net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years, or (iii) average annual revenue of at least $6,000,000, if such issuer has been in continuous operation for less than three years. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

 

 

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DESCRIPTION OF SECURITIES

 

Our authorized capital stock consists of 2,000,000,000 shares of common stock, par value $0.00001, and 10,000,000 shares of preferred stock, par value $0.001. As of November 12, 2019, there were 186,961,480 shares of our common stock issued and outstanding, and 2,000,000 shares of Series A Convertible Preferred Stock issued and outstanding.

 

Common Stock. Each shareholder of our common stock is entitled to a pro rata share of cash distributions made to shareholders, including dividend payments. The holders of our common stock are entitled to one vote for each share of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of our directors or any other matter. Therefore, the holders of more than 50% of the shares voted for the election of those directors can elect all of the directors. The holders of our common stock are entitled to receive dividends when and if declared by our Board of Directors from funds legally available therefore. Cash dividends are at the sole discretion of our Board of Directors. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment of our liabilities and after provision has been made for each class of stock, if any, having any preference in relation to our common shareholders of shares of our common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to our common stock.

 

On June 26, 2018, we conducted a reverse split of our common stock at a ratio of 1-for-250 (the “Reverse Split”). All share numbers in this prospectus reflect the effect of the reverse stock split of our common stock on June 26, 2018.

 

Preferred Stock. We are authorized to issue 10,000,000 shares of preferred stock, par value $0.001 per share, of which 2,000,000 shares of Series A Convertible Preferred stock have been authorized and issued. The Preferred Stock is convertible, at the option of the holder, into one share of common stock for each share of Preferred Stock converted. The holders of our Preferred Stock also have 100 votes per share of Preferred Stock that they hold, to be voted as a group along with the common shareholders on all matters on which the shareholders are entitled to vote. Other than these votes, the holders of our Preferred Stock have no specific rights, as a group, to elect directors. The holders of our preferred stock are not entitled to a dividend preference over the common stock, but are entitled to a liquidation preference in the amount of $1.25 per share. The preferred stock is not redeemable. Finally, the holders of the preferred stock are entitled to protective provisions as follows:

 

The Company may not take any of the following actions without the approval of a majority of the holders of the outstanding Series A Convertible Preferred Stock: (i) effect a sale of all or substantially all of the Company’s assets or which results in the holders of the Company’s capital stock prior to the transaction owning less than fifty percent (50%) of the voting power of the Company’s capital stock after the transaction; (ii) alter or change the rights, preferences, or privileges of the Series A Convertible Preferred Stock; (iii) increase or decrease the number of authorized shares of Series A Convertible Preferred Stock; (iv) authorize the issuance of securities having a preference over or on par with the Series A Convertible Preferred Stock; or (v) effectuate a forward or reverse stock split or dividend of the Company’s common stock.

 

  An increase in our authorized common stock has been approved by our shareholders and is anticipated to be effective on or about December 19, 2019.

 

 

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The voting rights of the Series A Convertible Preferred Stock were not affected by the Reverse Split, and as a result, the Series A Convertible Preferred stockholders now have voting control of over 51% of our voting stock.

 

Dividend Policy. We have not declared or paid a cash dividend on our capital stock in our last two fiscal years and we do not expect to pay cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings, if any, for use in our business. Any dividends declared in the future will be at the discretion of our Board of Directors and subject to any restrictions that may be imposed by our lenders.

 

Options and Warrants.

 

Mitchell S. Felder owns outstanding warrants to acquire a total of 12,000 shares of our common stock at $0.0025 per share.

 

There are outstanding warrants to acquire 11,760 shares of our common stock at $362.50 per share. Of these warrants, William A. Hartman and Dr. Mitchell S. Felder each hold 620, Heidi Carl holds 480, John S. Borza holds 4,480 and Jay Rosen holds 200. The remaining 4,880 warrants are held equally by Ramon D. Foltz, Scott Barnes and Richard T. Najarian, former members of our Board of Directors.

 

There are outstanding warrants to acquire 44,800 shares of our common stock at $62.50 per share. Of these warrants, William A. Hartman and Dr. Mitchell S. Felder each hold 6,400, Heidi Carl holds 5,600, John S. Borza holds 4,800, Dr. Patricio Reyes holds 2,800, Jay Rosen holds 1,600, and three (3) investors own 17,200.

 

There are outstanding warrants to acquire 2,000 shares of our common stock at $50 per share held by one (1) investor.

 

There are outstanding warrants to acquire 2,000 shares of our common stock at $25 per share held by one (1) investor.

 

There are outstanding warrants to acquire 22,200 shares of our common stock at $12.50 per share. Of these warrants, William A. Hartman and Dr. Mitchell S. Felder each holds 4,000, Heidi Carl holds 3,000, John S. Borza holds 2,400, Dr. Patricio Reyes holds 1,400, Jay Rosen holds 800 and six (6) investors hold 6,600.

 

There are outstanding 121,215 Series A Warrants to acquire shares of our common stock at $7.5 per share and 121,215 Series B Warrants to acquire shares of our common stock at $12.50 per share held by three (3) investors.

 

There are outstanding warrants to acquire 163,000 shares of our common stock at $1.25 per share. Of these warrants, William A. Hartman and Dr. Mitchell S. Felder each holds 34,000, Heidi Carl holds 24,000, John S. Borza holds 29,000, Dr. Patricio Reyes holds 16,000, Jay Rosen holds 4,000, John Pauly holds 8,000, and three (3) investors hold 14,000.

 

Other than as set forth above, as of the date of this prospectus, we do not have any outstanding options, warrants, or other convertible securities.

INTEREST OF NAMED EXPERTS AND COUNSEL

 

Clyde Snow & Sessions, PC serves as our legal counsel in connection with this offering. Clyde Snow & Sessions does not directly, nor do any of its attorneys, own any shares of our common stock.

 

 

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DESCRIPTION OF BUSINESS

 

Corporate Information

 

We were incorporated on May 10, 2010 in the State of Nevada. We have two wholly-owned subsidiaries, Premier Biomedical Pain Relief Meds, LLC, a Nevada limited liability company organized on September 14, 2017, and Health Stations, LLC, a Nevada limited liability company organized on August 28, 2019.

 

Our corporate headquarters are located in Jackson Center, PA. Our mailing address is P.O. Box 25, Jackson Center, PA 16133, and our telephone number is (724) 633-7033. We have offices virtually in the homes of our management team who reside in Pennsylvania, Michigan and various other states. Our websites are www.premierbiomedical.com and www.painreliefmeds.com. Information contained on our website is not incorporated into, and does not constitute any part of, this Annual Report.

 

Overview

 

We were strictly a research-based company that intended to discover cures for PTSD, cancer and various other diseases. In order to fund on-going research and development in these areas, we developed a line of topical hemp oil pain relief products. We began selling these pain relief products in January of 2017 with a single product and currently have nine topical pain relief products.

 

Through our continued development and expansion of proprietary drugs and treatments, we have reorganized the company into six technology centers: (1) extra-corporeal treatment of disease, (2) PTSD treatment, (3) anti-breast cancer drugs, (4) hemp oil/CBD pain relief products, (5) anti-aging treatments, and (6) chemical and alcohol addiction treatment.

 

In the first quarter of 2017, initial sales of our pain management products were made through a joint venture. In the third quarter of 2017, the joint venture was terminated and we began sales of our pain management products directly from the Company.

 

Nature’s Pain Relief

 

We have not yet launched our latest brand, Nature’s Pain Relief, which will be marketing 12 hemp oil products, including a 96-hour anti-pain patch, three roll-on topical products, two sprays, two ointments, two tincture drop products, a help oil capsule, and a “doggie” pet product. All of these products will be available through a new website at www.naturespainrelief.com.

 

Pain Management Products

 

We have developed and are now marketing all-natural, hemp-oil based products that are pesticide and solvent free. These products provide generalized, neuropathic and localized topical pain relief.

 

 

26

 

 

We offer alternatives to dangerous and addictive opioid pain killers. In the past year we have rapidly expanded our product offerings, and we now offer nine pain relief products that are leaders in the pain-relief field:

 

1.

96-hour pain relief patch with 50 mg of hemp oil extract, the highest level of pain relief ingredient available in the industry;

 

2.

120 mg/ 10 ml water-based roll-on applicator;

 

3.

150 mg/ 10 ml oil-based roll-on applicator;

 

4.

150 mg/ 30 ml oil-based pump spray applicator;

 

5.

150 mg/ 2 oz. ointment;

 

6.

200 mg/10 ml oil-based roll-on applicator;

 

7.

500 mg/ 30 ml oil-based pump spray applicator; and

 

8.

500 mg/ 1 oz. ointment.

 

We believe that this nine-product array positions us favorably in the topical pain relief marketplace. The topical pain relief market is expected to grow rapidly in the next few years, due to the focus on reduction of opioid pain medication use, and we intend to be a major player in that expanding market.

 

Now that we have completed the product design and development phase, we are aggressively embarking on the product distribution and sales phase by:

 

1.

Expanding our online sales beyond our web site at: www.painreliefmeds.com;

 

2.

Securing the services of a social media coordinator to ensure that we optimize that promotional tool;

 

3.

Recruiting a National Sales Director to coordinate our growing field of sales representatives and distributors;

 

4.

Securing the services of a sales organization with expertise in marketing to the government and senior care facilities;

 

5.

Engaging an investor relations firm to facilitate television appearances designed to gain optimum exposure for our company and its products;

 

6.

Appearing in radio and television broadcasts, and podcasts, via Uptick Newswire periodically to ensure that our story gets out to the public; and

 

7.

Retaining the services of marketing firms to promote the Company and its products through social media.

 

8.

Establishing relationships with major distributors who will blanket specialized sales outlets such as pharmacies, doctors’ offices, convenience stores, long-term care facilities, large retail facilities, etc.

 

 

27

 

 

In addition, we are in the process of seeking potential partnerships outside the United States to manufacture and market our products worldwide. We anticipate that these partnerships will make new markets available to us and allow us to rapidly increase our sales and profitability through favorable manufacturing arrangements.

 

Customers indicate that they were able to achieve pain relief from our products and stop the use of opioid painkillers. Public awareness of the harmful side effects of opioid painkillers has grown significantly, and many states have initiated litigation against drug makers claiming they misrepresented the risks of opioid painkillers. As patients seek to cut back their use of opioid painkillers and look for alternatives, we believe demand for our products will see an increase. We intend to petition national insurance agencies to urge them to consider covering the use of our all-natural pain relief products as a safe alternative to opioid painkillers.

 

Sales of our pain management products began on February 1, 2017 through our former joint venture. Upon termination of the joint venture, we began selling our products via our website at www.painreliefmeds.com and through various distributors. To date, three pharmacies and three chiropractic clinics have approved our products for sale and are distributing our products. We anticipate that our products will eventually be placed in several large pharmacy chains and sold in several states.

 

Research and Development

 

We intend to continue to discover and develop medical treatments for humans, specifically targeting the pain management industry and the treatment of:

 

-	Cancer	-	Fibromyalgia
-	Multiple Sclerosis (MS)	-	Traumatic Brain Injury (TBI)
-	Neuropathic Pain	-	Alzheimer’s Disease (AD)
-	Amyotrophic Lateral Sclerosis (ALS/Lou Gehrig’s Disease)	-	Blood Sepsis and Viremia

 

To target cancer, Alzheimer’s disease, ALS, blood sepsis, leukemia, and other life-threatening cancers, we intend to develop our proprietary Sequential-Dialysis Technique. The methodology involved in this technique is largely unexplored and has been described by scientists as the “wild west” of modern medicine. Consequently, our first entry into the therapeutics market for medications that work against cancer, multiple sclerosis, infectious diseases, Alzheimer’s disease, strokes and traumatic brain injury carries significant obstacles before reaching the opportunities of a $700 billion industry.

 

Feldetrex®

 

We also are in the process of developing our proprietary drug candidate Feldetrex™, a potential treatment for multiple sclerosis, fibromyalgia, neuropathic pain and traumatic brain injury. The formulation used in the current Feldetrex® will be individually tailored to the various illnesses we intend to target, with each formulation being given a unique proprietary brand name. The annual market size of multiple sclerosis treatment is $500 million and the annual market size for all proposed Feldetrex® market segments is $16 billion.

 

To overcome the significant obstacles inherent to the development of our Sequential-Dialysis Technique and Feldetrex® candidate drug, we are seeking to partner with prestigious institutions and pharmaceutical companies with the substantial infrastructure and resource capacity to perform experimentation and to engage in product development in an inexpensive and efficient manner.

 

 

28

 

 

Innovation by our research and development operations is very important to our success. Our goal is to discover, develop and bring to market innovative products and treatments that address major unmet medical needs, including initially, multiple sclerosis, septicemia, and cancer. We expect this goal to be supported by substantial research and development investments.

 

We plan on conducting research internally and may also research through contracts with third parties, through collaborations with universities and biotechnology companies, and in cooperation with pharmaceutical firms. We may also seek out promising compounds and innovative technologies developed by third parties to incorporate into our discovery or development methods and procedures or projects, as well as our future product lines, through acquisition, licensing or other arrangements.

 

In addition to discovering and developing new products, methods and procedures of treatment and treatments, we expect our research operations to add value to our existing products and methods and procedures of treatment in development by improving their effectiveness and by discovering new uses for them.

 

Sequential-Dialysis Technique

 

Our proprietary Sequential-Dialysis Technique is a methodology for the removal of those molecules which are harmful and responsible for causing diseases. A significant disappointment in the practice of modern medicine is that the capabilities do exist to eliminate the presence of most illnesses, including life-threatening diseases such as AIDS and cancer, but with a caveat that the process of treatment comes with catastrophic side effects that can and often do kill the patient.

 

Our development is that the innovative Sequential-Dialysis Methodology is done extracorporeally (outside the body). This is a truly unique and innovative method for alleviating disease.

 

We believe that this methodology can be used for the prevention of cancer metastasis, for directly attacking the causation of intractable seizures, for preventing the death of anterior motor neurons in ALS, for preventing the cause of the neuropathological changes in Alzheimer’s disease and traumatic brain injury and for eradicating the causations of infectious diseases, and our intention is that the effectiveness of this technique will be demonstrated and supported in future clinical studies.

 

Through our Sequential-Dialysis Technique, we ultimately hope to provide a cure for cancer if not only to dramatically extend the lives of suffering patients. Our initial focus is on lab and animal tests. Clinical trials, as required, will be undertaken subsequently.

 

Feldetrex™

 

Although a combination of generic medications, we have a U.S. Patent (No. 8,865,733) on our Feldetrex® candidate drug. In this way, Feldetrex® is similar to Viagra®, which was a proprietary cardiac drug prior to its current use and ownership by Pfizer. Consequently, we have one pending patent application for our Feldetrex® candidate drug—intending to increase our Feldetrex® related patent applications to three in the near future.

 

Feldetrex® may serve as an additional medication utilized by physicians for the treatment of multiple sclerosis, fibromyalgia, or traumatic brain injury, and is designed to decrease symptomatology in those conditions. Feldetrex® will not compete against our proprietary Sequential-Dialysis Technique in the market to treat traumatic brain injury, but rather the two will work conjunctively.

 

 

29

 

 

Feldetrex® utilizes a low dosage of Naltrexone which has been shown in multiple medical articles in the medical literature to increase endogenous enkephalins4 (endogenous enkephalins are pain-relieving pentapeptides produced in the body, located in the pituitary gland, brain, and GI tract. Axon terminals that release enkephalins are concentrated in the posterior horn of the gray matter of the spinal cord, in the central part of the thalamus, and inthe amygdala of the limbic system of the cerebrum. Endogenous Enkephalins function as neurotransmitters that inhibit neurotransmitters in the pathway for pain perception, thereby reducing the emotional as well as the physical impact of pain). We have not independently conducted medical or laboratory tests to show the mechanism of action of this medication. While Naltrexone in high dosages acts as an opioid antagonist, it inhibits opiate receptors. Naltrexone in low dosages causes a compensatory upregulation (increase in the number of receptors) of native endorphins and enkephalins, which last beyond the effects of the Naltrexone itself. We believe that this means, paradoxically, that a daily dose of low dose Naltrexone can be used to chronically increase endorphin and enkephalin levels. We believe that by utilizing a low dosage, Naltrexone has a unique ability to increase enkephalins and other neurotransmitters in the brainstem of patients.

 

Marketing

 

Currently, we manage our marketing responsibilities internally. Sales of our pain management products are made primarily online through our website: www.painreliefmeds.com. We intend to seek a partnership with and/or sale of our product candidates/technologies to large pharmaceutical and/or medical devices firms. These firms have the ability to effectively promote our product candidates to healthcare providers and patients. Through their marketing organizations, they can explain the approved uses, benefits and risks of our product candidates to healthcare providers such as doctors, nurse practitioners, physician assistants, pharmacists, hospitals, Pharmacy Benefit Managers (PBMs), Managed Care Organizations (MCOs), employers and government agencies. They also market directly to consumers in the U.S. through direct-to-consumer advertising that communicates the approved uses, benefits, and risks of our product candidates while continuing to motivate people to have meaningful conversations with their doctors. In addition, they sponsor general advertising to educate the public on disease awareness, important public health issues, and patient assistance programs.

 

4

A.

Bowling, Allen C.. "Low-dose naltrexone (LDN) The "411" on LDN" National Multiple Sclerosis Society. http://www.nationalmssociety.org/multimedia-library/momentum-magazine/back-issues/momentum-spring-09/index.aspx. Retrieved 6 July 2011.

B.

Bourdette, Dennis. "Spotlight on Low Dose Naltrexone (LDN)". US Department of Veteran Affairs. http://www.va.gov/MS/articles/Spotlight_on_Low_Dose_Naltrexone_LDN.asp. Retrieved 5 July 2011.

C.

Giesser, Barbara S. (2010). Primer on Multiple Sclerosis. New York: Oxford University Press US. pp. 377. ISBN 978-0-19-536928-1.

D.

Moore, Elaine A. 1948. The promise of low dose naltrexone therapy: potential benefits in cancer, autoimmune, neurological and infectious disorders. Elaine A. Moore and Samantha Wilkinson. ISBN 978-0-7864-3715-3.

E.

Crain SM, Shen K-F (1995). Ultra-low concentrations of naloxone selectively antagonize excitatory effects of morphine on sensory neurons, thereby increasing its antinociceptive potency and attenuating tolerance/dependence during chronic cotreatment. Proc Natl Acad Sci USA 92: 10540–10544.

F.

Powell KJ, Abul-Husn NS, Jhamandas A, Olmstead MC, Beninger RJ, et al. (2002). Paradoxical effects of the opioid antagonist naltrexone on morphine analgesia, tolerance, and reward in rats. J Pharmacol Exp Ther 300: 588–596.

G.

Wang H-Y, Friedman E, Olmstead MC, Burns LH (2005). Ultra-low-dose naloxone suppresses opioid tolerance, dependence and associated changes in Mu opioid receptor-G protein coupling and Gbc signaling; Neuroscience 135: 247–261.

 

 

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The large pharmaceutical/medical devices firms principally sell their products to wholesalers, but they also sell directly to retailers, hospitals, clinics, government agencies and pharmacies and also work with MCOs, PBMs, employers and other appropriate healthcare providers to assist them with disease management, patient education and other tools that help their medical treatment routines.

 

Patents and Intellectual Property Rights

 

We have licensed three U.S. patents: Sequential Extracorporeal Treatment of Bodily Fluids, U.S. Patent No. 9,216,386 and Utilization of Stents for the Treatment of Blood Borne Carcinomas, U.S. Patent No. 8,758,287 (both from Marv Enterprises, LLC), and Medication and Treatment for Disease, U.S. Patent No. 8,865,733 (from Altman Enterprises, LLC), in the areas of cancer, sepsis, and multiple sclerosis. We expect these patents to cover the medical treatments discussed above for multiple sclerosis, blood sepsis, and cancer and be effective until 2029. Marv and Altman have licensed these technologies to us pursuant to the terms of license agreements. Because our license agreements cover the patents and “all applications of the United States and foreign countries that claim priority to the above PCT applications, including any non-provisionals, continuations, continuations-in-part, divisions, reissues, re-examinations or extensions thereof,” we anticipate that other technologies that derive from these patents will also belong to us and are covered by the license agreements.

 

Patents extend for twenty years from the date of patent filing. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies in the country.

 

Dr. Felder is the owner of the Feldetrex mark, and has also licensed this to us pursuant to the terms of a license agreement.

 

We expect our patent and related rights to be of material importance to our business.

 

Competition

 

Our business is conducted in an intensely competitive and often highly regulated market. Our treatments face competition in the form of branded drugs, generic drugs and the currently practiced treatments for multiple sclerosis, blood sepsis, and cancer. The principal forms of competition include efficacy, safety, ease of use, and cost effectiveness. Where possible, companies compete on the basis of the unique features of their products, such as greater efficacy, better patient ease of use or fewer side effects. A lower overall cost of therapy is also an important factor. Products that demonstrate fewer therapeutic advantages must compete for inclusion based primarily on price. Though the means of competition vary among product categories, demonstrating the value of our medications and procedures will be a critical factor for our success.

 

Our competitors include large worldwide research-based drug companies, smaller research companies with more limited therapeutic focus, and generic drug manufacturers. We compete with other companies that manufacture and sell products that treat similar diseases as our major medications and procedures.

 

 

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Environment

 

Our business may be subject to a variety of federal, state and local environmental protection measures. We intend to comply in all material respects with applicable environmental laws and regulations.

 

Regulation

 

Pain Management Products

 

A major obstacle to our growth is the public perception that hemp and marijuana are the same thing. This perception drives much of the regulation of hemp products. Although hemp and marijuana are both part of the cannabis family, they differ in cultivation, function, and application. Despite the use of marijuana becoming more widely legalized, it is viewed by many regulators and many others as an illegal product. Hemp, on the other hand, is used in a variety of other ways that include clothing, skin products, pet products, dietary supplements (the use of CBD oil), and thousands of other applications. Hemp may be legally sold, however the inability of many to understand the difference between hemp and marijuana often causes burdensome regulation and confusion among potential customers. Therefore, we are affected by laws related to cannabis and marijuana, even though our products are not the direct targets of these laws.

 

Cannabis is currently a Schedule I controlled substance under the Controlled Substance Act (“CSA”) and is, therefore, illegal under federal law. Even in those states in which the use of cannabis has been legalized pursuant to state law, its use, possession and/or cultivation remains a violation of federal law. A Schedule I controlled substance is defined as one that has no currently accepted medical use in the United States, a lack of safety for use under medical supervision and a high potential for abuse. The U.S. Department of Justice (the “DOJ”) describes Schedule I controlled substances as “the most dangerous drugs of all the drug schedules with potentially severe psychological or physical dependence.” If the federal government decides to enforce the CSA in the states, persons that are charged with distributing, possessing with intent to distribute or growing cannabis could be subject to fines and/or terms of imprisonment, the maximum being life imprisonment and a $50 million fine.

 

Notwithstanding the CSA, 29 U.S. states, the District of Columbia and the U.S. territories of Guam and Puerto Rico allow their residents to use medical cannabis. The states of Alaska, California, Colorado, Maine, Massachusetts, Nevada, Oregon, Vermont (effective July 1, 2018) and Washington, and the District of Columbia, allow cannabis for adult recreational use. Such state and territorial laws are in conflict with the federal CSA, which makes cannabis use and possession illegal at the federal level.

 

In light of such conflict between federal laws and state laws regarding cannabis, the previous administration under President Obama had effectively stated that it was not an efficient use of resources to direct federal law enforcement agencies to prosecute those lawfully abiding by state-designated laws allowing the use and distribution of medical cannabis. For example, the prior DOJ Deputy Attorney General of the Obama administration, James M. Cole, issued a memorandum (the “Cole Memo”) to all United States Attorneys providing updated guidance to federal prosecutors concerning cannabis enforcement under the CSA. In addition, the Financial Crimes Enforcement Network (“FinCEN”) provided guidelines (the “FinCEN Guidelines”) on February 14, 2014, regarding how financial institutions can provide services to cannabis-related businesses consistent with their Bank Secrecy Act (“BSA”) obligations.

 

 

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Additional existing and pending legislation provides, or seeks to provide, protection to persons acting in violation of federal law but in compliance with state laws regarding cannabis. The Rohrabacher-Blumenauer Amendment (formerly known as the Rohrbacher-Farr Amendment) to the Commerce, Justice, Science and Related Agencies Appropriations Bill, which funds the DOJ, since 2014 has prohibited the DOJ from using funds to prevent states with laws authorizing the use, distribution, possession or cultivation of medical cannabis from implementing such laws. On August 2016, the Ninth Circuit Court of Appeals ruled in United States v. McIntosh that the Amendment bars the DOJ from spending funds on the prosecution of conduct that is allowed by state medical cannabis laws, provided that such conduct is in strict compliance with applicable state law. The Rohrabacher-Blumenauer Amendment is currently effective through September 30, 2018, but as an amendment to an appropriations bill, it must be renewed annually.

 

These developments previously were met with a certain amount of optimism in the cannabis industry, but (i) neither the CARERS Act nor the Respect State Marijuana Laws Act of 2017 have yet been adopted, (ii) the Rohrabacher-Blumenauer Amendment, being an amendment to an appropriations bill that must be renewed annually, has not currently been renewed beyond September 30, 2018, and (iii) the ruling in United States v. McIntosh is only applicable precedent in the Ninth Circuit.

 

Because of the discrepancy between the laws in some states, which permit the distribution and sale of medical and recreational cannabis, from federal law that prohibits any such activities, DOJ Deputy Attorney General James M. Cole issued the Cole Memo concerning cannabis enforcement under the CSA.

 

At the time of its issuance, the Cole Memo reiterated Congress’s determination that cannabis is a dangerous drug and that the illegal distribution and sale of cannabis is a serious crime that provides a significant source of revenue to large-scale criminal enterprises, gangs, and cartels. The Cole Memo noted that the DOJ was committed to enforcement of the CSA consistent with those determinations. It also noted that the DOJ was committed to using its investigative and prosecutorial resources to address the most significant threats in the most effective, consistent, and rational way. In furtherance of those objectives, the Cole Memo provided guidance to DOJ attorneys and law enforcement to focus their enforcement resources on persons or organizations whose conduct interferes with any one or more of the following important priorities (the “Enforcement Priorities”) in preventing:

 

●

the distribution of cannabis to minors;

 

●

revenue from the sale of cannabis from going to criminal enterprises, gangs, and cartels;

 

●

the diversion of cannabis from states where it is legal under state law in some form to other states;

 

●

state-authorized cannabis activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

 

●

violence and the use of firearms in the cultivation and distribution of cannabis;

 

●

drugged driving and the exacerbation of other adverse public health consequences associated with cannabis use;

 

●

the growing of cannabis on public lands and the attendant public safety and environmental dangers posed by cannabis production on public lands; and

 

●

cannabis possession or use on federal property.

 

 

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However, on January 4, 2018, the U.S. Attorney General, Jeff Sessions, issued a memorandum for all U.S. Attorneys (the “Sessions Memo”) stating that the Cole Memo was rescinded effective immediately. In particular, Mr. Sessions stated that “prosecutors should follow the well-established principles that govern all federal prosecutions,” which require “federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.” The Sessions Memo went on to state that given the DOJ’s well-established general principles, “previous nationwide guidance specific to marijuana is unnecessary and is rescinded, effective immediately.”

 

It is unclear at this time whether the Sessions Memo indicates that the Trump administration will strongly enforce the federal laws applicable to cannabis or what types of activities will be targeted for enforcement. However, a significant change in the federal government’s enforcement policy with respect to current federal laws applicable to cannabis could cause significant financial damage to us. We do not currently cultivate, distribute or sell cannabis, but our hemp oil products are closely tied to the cannabis industry.

 

Although the Sessions Memo has rescinded the Cole Memo and it is unclear at this time what the ultimate impact of that rescission will have on our business, if any, we intend to continue to conduct rigorous due diligence to verify the legality of all activities that we engage in and ensure that our activities do not interfere with any of the Enforcement Priorities set forth in the Cole Memo.

 

On March 26, 2018, Senate Majority Leader Mitch McConnell, R-Kentucky, announced plans to introduce The Hemp Farming Act of 2018 to exclude hemp from the CSA. The proposed bill would legalize hemp as an agricultural commodity and remove it from the list of controlled substances. This would greatly reduce the uncertainty we face with respect to regulation of hemp products. However, Congress has not yet taken formal action to pass the bill.

 

Other Medical Products

 

The development of proprietary drugs and medications is subject to varying degrees of governmental regulation in the United States and any other countries in which our operations are conducted. In the United States, regulation by various federal and state agencies has long been focused primarily on product safety, efficacy, manufacturing, advertising, labeling and safety reporting. The exercise of broad regulatory powers by the U.S. Federal Drug Administration (“FDA”) continues to result in increases in the amounts of testing and documentation required for FDA clearance of new drugs and devices and a corresponding increase in the expense of product introduction. Likewise, the approval process with the FDA is estimated to take approximately seven (7) years from the time it is started. Similar trends are also evident in major markets outside of the United States.

 

Clinical trials are a set of procedures in medical research conducted to allow safety (or more specifically, information about adverse drug reactions and adverse effects of other treatments) and efficacy data to be collected for health interventions (e.g., drugs, diagnostics, devices, therapy protocols). These trials can take place only after satisfactory information has been gathered on the quality of the non-clinical safety, and Health Authority/Ethics Committee approval is granted in the country where the trial is taking place.

 

 

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Depending on the type of product and the stage of its development, investigators enroll healthy volunteers and/or patients into small pilot studies initially, followed by larger scale studies in patients that often compare the new product with the currently prescribed treatment. As positive safety and efficacy data are gathered, the number of patients is typically increased. Clinical trials can vary in size from a single center in one country to multicenter trials in multiple countries.

 

Due to the sizable cost a full series of clinical trials may incur, the burden of paying for all the necessary people and services is usually borne by the sponsor who may be a governmental organization, a pharmaceutical, or biotechnology company. Since the diversity of roles may exceed resources of the sponsor, often a clinical trial is managed by an outsourced partner such as a contract research organization or a clinical trials unit in the academic sector.

 

The regulatory agencies under whose purview we intend to operate have administrative powers that may subject us to such actions as product withdrawals, recalls, seizure of products and other civil and criminal sanctions.

 

Because we intend to seek a partnership with and/or sale of our product candidates/technologies to large pharmaceutical and/or medical devices firms, we anticipate that a larger pharmaceutical company will undertake to navigate the regulatory pathway, including conducting clinical trials, for a product such as Feldetrex™.

 

Employees

 

As of the date hereof, we do not have any employees other than our officers and directors. Our officers and directors will continue to work for us for the foreseeable future. We anticipate hiring appropriate personnel on an as-needed basis, and utilizing the services of independent contractors as needed.

 

DESCRIPTION OF PROPERTY

 

We do not currently lease or use any office space. We have not paid any amounts to Mr. Hartman for the use of his personal office or for reimbursement of personal office expenses incurred by him.

 

LEGAL PROCEEDINGS

 

We are not a party to or otherwise involved in any legal proceedings.

 

In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.

 

 

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SELECTED FINANCIAL DATA

 

	As of and for the Nine Months ended September 30,	As of and for the Year Ended December 31,	As of and for the Year Ended December 31,
Premier Biomedical, Inc.	2019 (unaudited)	2018 (audited)	2017 (audited)
Statement of Operations Data:
Revenue	$12,975	$39,795	$39,761
Net operating income (loss)	$(219,688)	$(692,842)	$(1,289,838)
Net income (loss)	$(340,171)	$(398,886)	$(3,763,558)
Balance Sheet Data:
Cash	$117,209	$86,827	$83,704
Current assets	$177,582	$159,787	$203,603
Total assets	$185,500	$164,990	$209,081
Current liabilities	$2,303,710	$2,312,382	$2,819,807
Total liabilities	$2,303,710	$2,312,382	$2,819,807
Accumulated deficit	$(17,067,869)	$(16,727,698)	$(16,328,812)
Net loss per common share – basic and diluted	$(0.02)	$(0.11)	$(0.92)

 

Our cash and total current assets remained relatively steady as we continued to sustain losses funded by the sale of convertible notes. Our total current liabilities decreased primarily due to the reduction of our accounts payable of $66,718 and the conversion of outstanding convertible notes of $177,423, offset by a net increase in accrued interest of $27,049 and the change in the value of our derivative liabilities of $148,348, along with $338,300 of additional debt financing, net of debt discounts of $278,228. Our stockholders’ deficit decreased by $29,182 to ($2,118,210).

 

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

Disclaimer Regarding Forward Looking Statements

 

You should read the following discussion in conjunction with our financial statements and the related notes and other financial information included in this Form S-1. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form S-1, particularly in the Section titled Risk Factors.

 

Although the forward-looking statements in this registration statement reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its audited and unaudited financial statements and related notes elsewhere in this Form S-1, which have been prepared in accordance with accounting principles generally accepted in the United States.

 

Summary Overview

 

We were strictly a research-based company that intended to discover cures for PTSD, cancer and various other diseases. In order to fund on-going research and development in these areas, we developed a line of topical hemp oil pain relief products. We began selling these pain relief products in January of 2017 with a single product and currently have nine topical pain relief products.

 

Through our continued development and expansion of proprietary drugs and treatments, we have reorganized the company into six technology centers: (1) extra-corporeal treatment of disease, (2) PTSD treatment, (3) anti-breast cancer drugs, (4) hemp oil/CBD pain relief products, (5) anti-aging treatments, and (6) chemical and alcohol addiction treatment.

 

Pain Management Products

 

We have developed and are now marketing all-natural, hemp-oil based products that are pesticide and solvent free. These products provide generalized, neuropathic and localized topical pain relief.

 

 

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We offer alternatives to dangerous and addictive opioid pain killers. In the past year we have rapidly expanded our product offerings, and we now offer nine pain relief products that are leaders in the pain-relief field:

 

1.

96-hour pain relief patch with 50 mg of hemp oil extract, the highest level of pain relief ingredient available in the industry;

 

2.

120 mg/ 10 ml water-based roll-on applicator;

 

3.

150 mg/ 10 ml oil-based roll-on applicator;

 

4.

150 mg/ 30 ml oil-based pump spray applicator;

 

5.

150 mg/ 2 oz. ointment;

 

6.

200 mg/10 ml oil-based roll-on applicator;

 

7.

500 mg/ 30 ml oil-based pump spray applicator; and

 

8.

500 mg/ 1 oz. ointment.

 

We believe that this eight-product array positions us favorably in the topical pain relief marketplace. The topical pain relief market is expected to grow rapidly in the next few years, due to the focus on reduction of opioid pain medication use, and we intend to be a major player in that expanding market.

 

Now that we have completed the product design and development phase, we are aggressively embarking on the product distribution and sales phase by:

 

1.

Expanding our online sales beyond our web site at: www.painreliefmeds.com;

 

2.

Securing the services of a social media coordinator to ensure that we optimize that promotional tool;

 

3.

Recruiting a National Sales Director to coordinate our growing field of sales representatives and distributors;

 

4.

Securing the services of a sales organization with expertise in marketing to the government and senior care facilities;

 

5.

Engaging an investor relations firm to facilitate television appearances designed to gain optimum exposure for our company and its products;

 

6.

Appearing in radio and television broadcasts, and podcasts, via Uptick Newswire periodically to ensure that our story gets out to the public; and

 

7.

Retaining the services of marketing firms to promote the Company and its products through social media.

 

8.

Establishing relationships with major distributors who will blanket specialized sales outlets such as pharmacies, doctors’ offices, convenience stores, long-term care facilities, large retail facilities, etc.

 

 

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In addition, we are in the process of seeking potential partnerships outside the United States to manufacture and market our products worldwide. We anticipate that these partnerships will make new markets available to us and allow us to rapidly increase our sales and profitability through favorable manufacturing arrangements.

 

Customers indicate that they were able to achieve pain relief from our products and stop the use of opioid painkillers. Public awareness of the harmful side effects of opioid painkillers has grown significantly, and many states have initiated litigation against drug makers claiming they misrepresented the risks of opioid painkillers. As patients seek to cut back their use of opioid painkillers and look for alternatives, we believe demand for our products will see an increase. We intend to petition national insurance agencies to urge them to consider covering the use of our all-natural pain relief products as a safe alternative to opioid painkillers.

 

Financing

 

In the past, as we worked through the development of our products, we have relied heavily on financing through various issuances of common stock, warrants and convertible debt. As our sales grow, we expect to find financing solutions in the future that help us expand our operations, avoid dilution to our shareholders, and ultimately increase our company valuation.

 

Through the remainder of 2019, we will continue to market our pain management products and seek a wider distribution network through the negotiation of distribution agreements with large pharmacy chains, military branches, government agencies, senior care facilities and international partners.

 

Through our reorganization into six technology centers, we are positioned to take advantage of opportunities to individually sell, license or commercialize the technologies produced within each of these centers to suitable investment partners, without dilutive equity issuances. In the long run, we believe that this will be most beneficial to our investors.

 

Going Concern

 

As a result of our current financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 2018 and 2017 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. In order to continue as a going concern, we must effectively balance many factors and generate more revenue so that we can fund our operations from our sales and revenues. If we are not able to do this, we may not be able to continue as an operating company. During the nine months ended September 30, 2019, we completed the sale of convertible notes to raise $ 308,400 of net proceeds from several investors. We cannot be sure that sources of capital will be available to us for the remainder of 2019 and into 2020. However, without additional capital in the short term, we may not be able to push forward in the production and marketing of our new pain management products. Until we are able to grow revenues sufficient to meet our operating expenses, we must continue to raise capital by issuing debt or through the sale of our stock. There is no assurance that our cash flow will be adequate to satisfy our operating expenses and capital requirements.

 

 

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Results of Operations for the Three and Nine Months Ended September 30, 2019 and 2018

 

Introduction

 

We had revenues of $3,465 and $12,975 for the three and nine months ended September 30, 2019, respectively, compared to $8,225 and $30,709 for the three and nine months ended September 30, 2018, respectively. This was a decrease of $9,510, or 73%, for the three months ended September 30, 2019 compared to 2018, and $22,484, or 73%, for the nine months ended September 30, 2019 compared to 2018.

 

Our operating expenses were $66,366 and $227,193 for the three and nine months ended September 30, 2019, respectively, compared to $85,185 and $240,834 for the three and nine months ended September 30, 2018, respectively. This was a decrease of $18,819, or 22%, for the three months ended September 30, 2019 compared 2018, and a decrease of $13,641, or 6%, for the nine months ended September 30, 2019 compared to 2018.

 

Our results of operations for the three and nine months ended September 30, 2019 and 2018 were as follows:

 

	Three Months	Three Months	Nine Months	Nine Months
	September 30,	September 30,	September 30,	September 30,
	2019	2018	2019	2018
Revenue	$3,465	$8,225	$12,975	$30,709
Cost of goods sold	1,653	4,373	5,470	20,577
Gross profit	1,812	3,852	7,505	10,132
Operating expenses:
General and administrative	36,757	65,572	138,589	139,881
Professional fees	29,609	22,613	88,604	100,953
Total operating expenses	66,366	85,185	227,193	240,834
Net operating loss	(64,554)	(81,333)	(219,688)	(230,702)
Other income (expense)	(117,080)	(282,202)	(120,483)	333,485
Net income (loss)	$(181,634)	$(363,535)	$(340,171)	$102,783

 

Revenues

 

The Company was established on May 10, 2010, and began to generate revenues during the third quarter of 2017 from the sale of pain patches made with CBD oils. Our sales are comprised of both website sales to individual consumers and brick and mortar pharmacies, and we have expanded from patches to oils, sprays, and roll-ons. Our cost of goods sold primarily consists of the products and the packaging. The decrease in our revenues for the three and nine months ended September 30, 2019, compared to three and nine months ended September 30, 2018, while significant in percentage terms, was not material in absolute terms and reflects the timing of product sales.

 

 

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Cost of Goods Sold

 

Cost of goods sold for the three and nine months ended September 30, 2019 were $1,653, or 48% of sales, and $5,470, or 42% of sales, compared to $4,373, or 53% of sales, and $20,577, or 67% of sales, for the three and nine months ended September 30, 2018. Cost of sales consists primarily of product materials and packaging supplies. Our cost of goods sold as a percentage of sales was reduced because of lower prices in the marketplace and slightly higher volume pricing.

 

General and Administrative

 

General and administrative expenses were $36,757 and $138,589, respectively, for the three and nine months ended September 30, 2019, compared to $62,572 and $139,881, respectively, for the three and nine months ended September 30, 2018, a decrease of $25,815 and $1,292, or 41% and less than 1%, respectively. The decrease was primarily due to decreased investor relations and advertising expenses.

 

Professional Fees

 

Professional fees expense was $29,609 and $88,604, respectively, for the three and nine months ended September 30, 2019, compared to $22,613 and $100,953, respectively, for the three and nine months ended September 30, 2018, an increase of $6,996 and a decrease of $12,349, or 31% and 12%, respectively. Professional fees consist primarily of legal and, accounting and auditing services.

 

Net Operating Loss

 

Net operating loss was $64,554 and $219,688, respectively, for the three and nine months ended September 30, 2019, compared to $81,333 and $230,702, respectively, for the three and nine months ended September 30, 2018, a decrease of $16,779 and $11,014, or 21% and 5%, respectively. The net operating loss decreased during the nine months ended September 30, 2019 because of decreased operating expenses as previously described.

 

Other Income/Expense

 

Other income (expense) was ($117,080) and ($120,483), respectively, for the three and nine months ended September 30, 2019, compared to ($282,202) and $333,485, respectively, for the three and nine months ended September 30, 2018, a decrease in expenses of $165,122 and $453,968, respectively. Other expense for the nine months ended September 30, 2019 consisted of interest expense of $101,793 and a change in derivative liabilities of $18,690. Other expense for the nine months ended September 30, 2018 consisted of interest expense of $322,323 offset by a gain of $655,808 in market value of derivative liabilities.

 

Net Income (Loss)

 

Net income (loss) for the three and nine months ended September 30, 2019, was ($181,634) or ($0.01) per share, and ($340,171) or ($0.02) per share, respectively, compared to ($363,535) or ($0.11) per share, and $102,783 or $0.03 per share, respectively, for the three and nine months ended September 30, 2018. Net loss changes, as set forth above, were primarily due to the change in derivative liabilities.

 

 

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Liquidity and Capital Resources as of and for the nine months ended September 30, 2019 and the year ended December 31, 2018.

 

Introduction

 

During the three and nine months ended September 30, 2019, we had negative operating cash flows. Our cash on hand as of September 30, 2019 was $117,209, which was derived from the sale of convertible promissory notes to investors. Our monthly cash flow burn rate for the first nine months of 2018 was approximately $35,000, and our monthly burn rate through the nine months ended September 30, 2019 was approximately $30,000. Although we have moderate short term cash needs, as our operating expenses increase as we ramp up production and sales of our new products we will face strong medium to long term cash needs. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of September 30, 2019 and December 31, 2018, respectively, are as follows:

 

	September 30,	December 31,
	2019	2018	Change
Cash	$117,209	$86,827	$30,382
Total Current Assets	177,582	159,787	17,795
Total Assets	185,500	164,990	20,510
Total Current Liabilities	2,303,710	2,312,382	(8,672)
Total Liabilities	$2,303,710	$2,312,382	$(8,672)

 

Our cash and total current assets remained relatively steady as we continued to sustain losses funded by the sale of convertible notes. Our total current liabilities decreased primarily due to the reduction of our accounts payable of $66,718 and the conversion of outstanding convertible notes of $177,423, offset by a net increase in accrued interest of $27,049 and the change in the value of our derivative liabilities of $148,348, along with $338,300 of additional debt financing, net of debt discounts of $278,228. Our stockholders’ deficit decreased by $29,182 to ($2,118,210).

 

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

 

Cash Requirements

 

Our cash on hand as of September 30, 2019 was $117,209. Based on our minimal revenues and current monthly burn rate of approximately $30,000 per month, we will need to continue to fund operations by raising capital from the sale of our stock and debt financings.

 

Sources and Uses of Cash

 

Operations

 

We had net cash used in operating activities of ($273,168) for the nine months ended September 30, 2019, compared to ($318,471) for the nine months ended September 30, 2018. This decrease in net cash used in operating activities was a result of an increase in the fair market value of derivative liabilities of $674,498 and an increase in inventory of $39,861, offset by a decrease in amortization of debt discounts of $246,886.

 

 

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Investments

 

We had $4,850 net cash used in investing activities for the nine months ended September 30, 2019, and $2,029 net cash used in investing activities for the nine months ended September 30, 2018. We outsource the manufacturing of our products, so our investment expenses are minimal.

 

Financing

 

Our net cash provided by financing activities for the nine months ended September 30, 2019 was $308,400, which consisted of the proceeds from the sale of convertible notes. For the nine months ended September 30, 2018, net cash provided by financing activities was $300,000, which consisted of the proceeds from the sale of convertible notes.

 

Results of Operations for the Years Ended December 31, 2018 and 2017

 

Introduction

 

We had revenues of $39,795 and $39,761 for the years ended December 31, 2018 and 2017, respectively. Our operating expenses were $618,910 for the year ended December 31, 2018 compared to $1,304,160 for the year ended December 31, 2017, an increase of $685,250, or 53%. Our operating expenses consisted of research and development costs, general and administrative expenses, and professional fees, including $296,944 and $783,404 of stock-based compensation for the years ended December 31, 2018 and 2017, respectively.

 

Revenues and Net Operating Loss

 

Our revenues, operating expenses, and net operating loss for the years ended December 31, 2018 and 2017 were as follows:

 

	Year Ended	Year Ended
	December 31,	December 31,	Increase /
	2018	2017	(Decrease)
Revenue	$39,795	$39,761	$34
Cost of goods sold	113,727	25,439	88,288
Gross profit (loss)	(73,932)	14,322	(88,254)
Operating expenses:
Research and development	-	184,315	(184,315)
General and administrative	189,285	196,670	(7,385)
Professional fees	429,625	923,175	(493,550)
Total operating expenses	618,910	1,304,160	(685,250)
Net operating loss	(692,842)	(1,289,838)	(596,996)
Other income (expense)	293,956	(2,473,720)	2,767,676
Net loss	$(398,886)	$(3,763,558)	$(3,364,672)

 

 

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Revenues

 

The Company was established on May 10, 2010, and began initial sales of our pain management products during the year ended December 31, 2017.

 

Research and Development

 

Research and development expenses were $-0- for the year ended December 31, 2018 compared to $184,315 for the year ended December 31, 2017, an increase of $184,315. The expenses decreased due to final invoices from the University of Texas at El Paso. We plan to continue to reduce our research and development activities as we focus on our pain management products.

 

General and Administrative

 

General and administrative expenses were $189,285 for the year ended December 31, 2018 as compared to $196,670 for the year ended December 31, 2017, a decrease of $7,385, or 4%.

 

Professional Fees

 

Professional fees expense was $429,625 for the year ended December 31, 2018, compared to $923,175 for the year ended December 31, 2017, a decrease of $493,550, or 53%. The decrease was primarily due to the decrease of stock-based compensation issued to debt holders, directors and consultants for services rendered. A total of $296,944 of stock-based compensation was awarded during the year ended December 31, 2018, compared to $783,404 of stock-based compensation during the year ended December 31, 2017, a decrease of $486,460 from 2017 to 2018. The decrease in stock-based compensation was the result of $671,424 of shares of common stock that were awarded to note holders during 2017.

 

Net Operating Loss

 

Net operating loss for the year ended December 31, 2018 was $692,842, compared to a net operating loss of $1,289,838 for the year ended December 31, 2017, a decrease of $596,996, or 46%. Net operating loss decreased, as set forth above, primarily due to a decrease in stock-based compensation issued to note holders for services rendered.

 

Other Income (Expense)

 

Other income (expense) for the year ended December 31, 2018 was $293,956, compared to ($2,473,720) for the year ended December 31, 2017, a net increase of $2,767,676, or 112%. Other income (expense) consisted of interest and finance charges on debt and equity financing, gain on early extinguishment of debt, and a change in the fair value of derivative liabilities during the year ended December 31, 2018. Other income (expense) consisted of interest and finance charges on debt and equity financing, a change in the fair value of derivative liabilities, as well as a net loss on our joint venture during the year ended December 31, 2017. The net increase was primarily due to an increase of approximately $2,818,479 in the value of derivative liabilities related to significant decreased convertible debt financing during the year ended December 31, 2018, compared to the year ended December 31, 2017.

 

 

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Net Loss

 

Net loss for the year ended December 31, 2018 was $398,886, or $(0.11) per share, compared to a net loss of $3,763,558, or $(1.92) per share, for the year ended December 31, 2017, a decrease of $3,364,672, or 89%. Net loss decreased, as set forth above, primarily due to an increase of approximately $2,818,479 in the value of derivative liabilities and decreased stock-based compensation issued to note holders for services rendered.

 

Liquidity and Capital Resources as of and for the Nine Months ended September 30, 2019 and 2017

 

Introduction

 

During the three and nine months ended September 30, 2019, we had negative operating cash flows. Our cash on hand as of September 30, 2019 was $117,209, which was derived from the sale of convertible promissory notes to investors. Our monthly cash flow burn rate for the first nine months of 2018 was approximately $35,000, and our monthly burn rate through the nine months ended September 30, 2019 was approximately $30,000. Although we have moderate short term cash needs, as our operating expenses increase as we ramp up production and sales of our new products we will face strong medium to long term cash needs. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of September 30, 2019 and December 31, 2018, respectively, are as follows:

 

	September 30,	December 31,
	2019	2018	Change
Cash	$117,209	$86,827	$30,382
Total Current Assets	177,582	159,787	17,795
Total Assets	185,500	164,990	20,510
Total Current Liabilities	2,303,710	2,312,382	(8,672)
Total Liabilities	$2,303,710	$2,312,382	$(8,672)

 

Our cash and total current assets remained relatively steady as we continued to sustain losses funded by the sale of convertible notes. Our total current liabilities decreased primarily due to the reduction of our accounts payable of $71,855 and the conversion of outstanding convertible notes of $95,075, offset by an increase in accrued interest of $27,049 and the value of our derivative liabilities of $148,348. Our stockholders’ deficit decreased by $29,182 to ($2,118,210).

 

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

 

Cash Requirements

 

Our cash on hand as of September 30, 2019 was $117,209. Based on our minimal revenues and current monthly burn rate of approximately $30,000 per month, we will need to continue to fund operations by raising capital from the sale of our stock and debt financings.

 

 

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Sources and Uses of Cash

 

Operations

 

We had net cash used in operating activities of ($273,168) for the nine months ended September 30, 2019, compared to ($318,471) for the nine months ended September 30, 2018. This decrease in net cash used in operating activities was a result of an increase in the fair market value of derivative liabilities of $674,498 and an increase in inventory of $39,861, offset by a decrease in amortization of debt discounts of $246,886.

 

Investments

 

We had $4,850 net cash used in investing activities for the nine months ended September 30, 2019, and $2,029 net cash used in investing activities for the nine months ended September 30, 2018. We outsource the manufacturing of our products, so our investment expenses are minimal.

 

Financing

 

Our net cash provided by financing activities for the nine months ended September 30, 2019 was $308,400, which consisted of the proceeds from the sale of convertible notes. For the nine months ended September 30, 2018, net cash provided by financing activities was $300,000, which consisted of the proceeds from the sale of convertible notes.

 

Liquidity and Capital Resources as of and for the Years ended December 31, 2018 and 2018

 

Introduction

 

During the year ended December 31, 2018, because we did not generate any revenues, we had negative operating cash flows. Our cash on hand as of December 31, 2018 was $86,827, which was derived from the sale of convertible promissory notes to investors. Our monthly cash flow burn rate has increased from approximately $37,000 in 2018 to approximately $42,500 in 2017. Although we have moderate short-term cash needs, as our operating expenses increase we will face strong medium to long-term cash needs. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

 

Our cash, current assets, total assets, current liabilities, and total liabilities as of December 31, 2018 and December 31, 2017, respectively, are as follows:

 

	December 31, 2018	December 31, 2017	Change
Cash	$86,827	$83,704	$3,123
Total Current Assets	159,787	203,603	(43,816)
Total Assets	164,990	209,081	(44,091)
Total Current Liabilities	2,312,382	2,819,807	(507,425)
Total Liabilities	$2,312,382	$2,819,807	$(507,425)

 

Our cash increased by $3,123 as of December 31, 2018, compared to December 31, 2017. Our total current assets decreased by $43,816 primarily because we recognized an $87,650 allowance for inventory obsolescence in 2018. Our total assets decreased by $44,091 primarily for the same reasons.

 

 

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Our current liabilities decreased by $507,425 as of December 31, 2018, compared to December 31, 2017, primarily due to decreases in accounts payable of $97,854 and derivative liabilities of $565,477. Our total liabilities decreased by the same amount for the same reasons as we do not have long term liabilities.

 

In order to repay our obligations in full or in part when due, we will be required to raise significant capital from other sources. There is no assurance, however, that we will be successful in these efforts.

 

Cash Requirements

 

Our cash on hand as of December 31, 2018 was $86,827, which was derived from the sale of convertible promissory notes and common stock. Our monthly cash flow burn rate is approximately $37,000. Although we have moderate short-term cash needs, as our operating expenses increase we will face strong medium to long term cash needs. We anticipate that these needs will be satisfied through the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

 

Sources and Uses of Cash

 

Operations

 

Our net cash used in operating activities for the years ended December 31, 2018 and 2017 was $444,878 and $507,116, respectively, a decrease of $62,238, or 12%. The primary uses of our cash were purchasing inventory and operating our pain management business, along with the public company compliance costs.

 

Investments

 

Our net cash used in investing activities for the years ended December 31, 2018 and 2017 was $2,029 and $2,694, respectively, a decrease of $665. The slight decrease reflected a lack of purchases of property and equipment in 2018 compared to 2017.

 

Financing

 

Our net cash provided by financing activities for the years ended December 31, 2018 and 2017 was $450,030 and $573,393, respectively, a decrease of $123,363, or 22%. The decrease was primarily a result of a decrease in proceeds from the sale of stock of $135,000 in 2018, compared to $285,000 of proceeds from the sale of stock in 2017 and a decrease in repayments of convertible notes payable from $30,000 to zero. This was offset by a decrease in the proceeds from the sale of stock on equity line of credit from $18,323 to $-0-.

 

Securities Purchase Agreement

 

On March 30, 2017, we entered into a Securities Purchase Agreement with three investors and raised $300,000 through the sale of stock and warrants. These same investors purchased $150,000 of common stock and warrants in the second tranche on May 30, 2017.On August 8, 2017, we exchanged convertible notes with the investors for the warrants issued in the first tranche and the common stock issued in the second tranche. We also amended the Securities Purchase Agreement on that date, and on October 30, 2017, the investors purchased an additional $150,000 of our convertible notes. We expect these investments, our growing revenues and sales of common stock, warrants and convertible notes will finance our operations for the next several months as we seek to expand revenues from our new pain management products.

 

 

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Sale of Convertible Notes

 

On March 1, 2018, we received $60,000 from two investors from the sale of convertible notes. These investors have also committed to provide an additional $240,000 in the near future. The investors purchased convertible notes at the signing of a Securities Purchase Agreement for an aggregate amount of $60,000. The investors will buy additional convertible notes for an aggregate of $60,000 within five trading days of our filing a registration statement to cover the investors’ shares of common stock issuable upon conversion of the convertible notes. Within five trading days of the registration statement being declared effective, the investors will buy additional convertible notes for an aggregate of $180,000. For further details, see our Form 8-K filed on March 5, 2018 and copies of the agreements filed herewith as Exhibits 10.60, 10.61 and 10.62.

 

Critical Accounting Policies and Estimates

 

See Note 1 to the Financial Statements for the year ended December 31, 2018 on page F-6 which is incorporated herein by reference.

 

CHANGES IN AND DISAGREEMENTS WITH

ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

We have no disclosure required by this item.

 

 

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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

 

The following table sets forth the names, ages, and biographical information of each of our current directors and executive officers, and the positions with the Company held by each person, and the date such person became a director or executive officer of the Company. Our executive officers are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Family relationships among any of the directors and officers are described below.

 

Name		Age		Position(s)
William A. Hartman		77		President, Chief Executive Officer, and Director (June 2010)
Dr. Mitchell S. Felder		65		Chairman of the Board of Directors and the Scientific Advisory Board (June 2010)
Heidi H. Carl		49		Chief Financial Officer, Secretary, Treasurer and Director (June 2010)
Dr. Patricio F. Reyes		72		Chief Technology Officer and Director (August 2016)
John S. Borza		65		Vice President and Director (August 2012)
Jay Rosen		65		Director (June 2010)
John Pauly		58		Director (December 2017)

 

William A. Hartman, age 77, is our President and Chief Executive Officer and a member of our Board of Directors. From March 2008 until June 2010, Mr. Hartman was not directly employed but was planning the formation of Premier Biomedical, Inc. From October 2006 to March 2008, Mr. Hartman was the Chief Operating Officer of Nanologix, Inc. From July 1991 to July 2000, Mr. Hartman was a Director at TRW Automotive. From 1984 to 1991, Mr. Hartman was Chief Engineer at TRW Automotive and from 1979 to 1984 he was Division Quality Compliance Manager at Ford Motor Company. At TRW Automotive, Mr. Hartman was one of the auto industry pioneers of the concept of grouping related components into systems and modules and shipping just-in-time to the vehicle assembly plants. He founded and headed a separate business group within TRW Automotive with plants in the U.S., Mexico and Europe with combined annual sales of $1.3 Billion. Academic credentials include a BSME degree from Youngstown State University and a MSIA degree (Industrial Administration/Management) from the University of Michigan.

 

Dr. Mitchell S. Felder, age 65, is our Chairman of the Board of Directors and our Scientific Advisory Board. Dr. Felder is a practicing Board Certified Neurologist. Dr. Felder acquired a B.A. Degree from the University of Pennsylvania in 1975 and an M.D. Degree from the University of Rome, Faculty of Medicine in 1983. He has been Board Certified by both the American Academy of Clinical Neurology and the American Board of Psychiatry and Neurology. Dr. Felder has authored or co-authored six publications, three studies, and has 18 issued patents. Dr. Felder is the former President, Chairman, and founder of Infectech/Nanologix (from its founding in 1989 through March 2007)—growing the company from startup to a $100 million market cap. During the past five years, Dr. Felder has had as his principal occupation and employment work as an attending neurologist. Dr. Felder is presently an attending neurologist at the William Beaumont Army Medical Center in El Paso, Texas. Dr. Felder has more than 20 years of management experience.

 

 

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Heidi H. Carl, age 49, is our Chief Financial Officer, Secretary, Treasurer, and a member of our Board of Directors. From May 2009 until June 2010, Ms. Carl was not directly employed but was working with Mr. Hartman in planning the formation of Premier Biomedical, Inc. From June 2007 to May 2009, Ms. Carl was the Product Development Specialist at General Motors Corporation. From May 2006 to May 2007, Ms. Carl was the Associate Marketing Manager at General Motors Corporation. From May 2003 to May 2006, Ms. Carl was the Marketing Specialist at General Motors Corporation and from May 1999 to May 2003, Ms. Carl was the District Area Parts Manager at General Motors Corporation. Academic credentials include a BSBA degree from Madonna University and an ASBA degree from Oakland Community College.

 

Dr. Patricio F. Reyes, MD, FAAN, age 72, is a board certified neurologist and neuropathologist, has served as the Chief Medical Officer and Board Member of the Retired National Football League Players Association since 2013. Dr. Reyes has been a board member of the Association of Ringside Physicians since 2008 and was previously its Chair of the Education Committee and 2009 Distinguished Educator. Dr. Reyes has worked as a neurologist and neuropathologist for the Phoenix VA Hospital since 2014. Dr. Reyes is the co-founder, Chief Medical Officer and Chair of the Scientific Advisory Board of Yuma Therapeutics, Inc. where he has worked since 2012. He is a Fellow of the American Academy of Neurology and was former Professor of Neurology and Neuropathology at Thomas Jefferson Medical School in Philadelphia, Pennsylvania, and Professor of Neurology, Pathology and Psychiatry at Creighton University School of Medicine in Omaha, Nebraska.

 

John S. Borza, PE, AVS, age 65, is our Vice President and was appointed to our Board of Directors on August 17, 2012. Mr. Borza is currently the President and Chief Executive Officer of Value Innovation, LLC, a consulting firm focused on value engineering and creative problem solving, where he has served since August 2009. Prior to Value Innovation, Mr. Borza was a Specialist with TRW Automotive from September 2007 to September 2009, and a Director at TRW Automotive from May 1999 to September 2007. Earlier in his career, Mr. Borza worked in R&D for 12 years on a variety of products and technologies in various capacities ranging from Engineer to Chief Engineer, before moving into launch and production support roles. Mr. Borza is an Altshuller Institute certified TRIZ Practitioner, and a SAVE International certified Associate Value Specialist. He is active in the local chapter of SAVE International and currently serves as the chapter Past-President. Mr. Borza holds a BS degree in Electrical Engineering and an MBA from the University of Michigan.

 

Jay Rosen, age 65, has been a member of our Board of Directors since our inception in June 2010. Mr. Rosen has been a partner at Rosen Associates, a real estate holding and management company, since 1971. He is also a partner at Midway Industrial Terminal, a real estate holding and management company, and has been since 2005. Mr. Rosen privately owns and manages the Rosen Farm, cellular towers and various other real estate properties, is the President of XintCorp, a small start-up company for developing intellectual property, and is a former member of the NY Mercantile Exchange and the New York Futures Exchange. Mr. Rosen studied economics and finance at New York University and Columbia University.

 

John Pauly, age 58, has served as Executive Vice President at HealthWarehouse.com, Inc., an online Verified Internet Pharmacy Practice Site (VIPPS), since October 2017. From January 2017 through March 2017, Mr. Pauly served as the interim Chief Executive Officer of HealthWarehouse.com. From January 2016 until his time at HealthWarehouse.com, he was the Chief Operating Officer of Specialty Medical Drug Store, also a VIPPS accredited online pharmacy business.

 

 

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Since January 2014, Mr. Pauly has been an independent consultant and investor to businesses in the pharmaceutical industry. From August 2013 through December 2013, he was Vice President at Acton Pharmaceuticals where he was responsible for the strategy and operations to commercialize its first FDA approved product, handling all implementation activities through outsourced third-parties.

 

From January 2013 through August 2013, Mr. Pauly was a consultant to the Chief Executive Officer of Crown Laboratories, Inc., a fully integrated specialty pharmaceutical company. There he assisted in creating and implementing corporate strategy, and OTC and Rx drug development, manufacturing and commercialization.

 

Prior to his time at Crown Laboratories, Mr. Pauly was at Merz Pharmaceuticals, LLC, a specialty healthcare company and subsidiary of Merz Pharmaceuticals GmbH, where he served as Vice President of Commercial Operations from May 2011 to June 2012 and Executive Director of OCG Strategy and Operations from March 2009 to April 2011. His duties at Merz included management of a unit of 98 people covering a wide-range of business functions. He played a major role in corporate strategy and evaluating licensing and M&A opportunities.

 

Mr. Pauly has also served in a variety of management positions within the healthcare and pharmaceutical industries since 1990 and brings a wide range of skills and expertise to the Board of Directors.

 

Family Relationships

 

Heidi H. Carl is the daughter of William A. Hartman.

 

Other Directorships; Director Independence

 

Other than as set forth above, none of our officers and directors is a director of any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

 

For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). Neither the OTC Pink Tier on which shares of common stock are quoted, nor the Pink Sheets Current tier, has any director independence requirements. The NASDAQ definition of “Independent Officer” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company's Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. According to the NASDAQ definition, only Mr. Rosen and Mr. Pauly are an independent directors.

 

Board Committees

 

Our Board of Directors does not maintain a separate audit, nominating or compensation committee. Functions customarily performed by such committees are performed by its Board of Directors as a whole. We are not required to maintain such committees under the applicable rules of the OTC Markets. We do not currently have an “audit committee financial expert” since we currently do not have an audit committee in place. We intend to create board committees, including an independent audit committee, in the near future. We have a Scientific Advisory Board that serves an advisory role to management and the Board of Directors.

 

 

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We do not currently have a process for security holders to send communications to the Board.

 

During the fiscal years ended December 31, 2018 and 2017, the Board of Directors met approximately on a bi-weekly basis. Only Mr. Rosen attended fewer than 75 percent of the meetings. We have no policy with regard to attendance at meetings of the Board of Directors.

 

Involvement in Certain Legal Proceedings

 

None of our officers or directors has, in the past ten years, filed bankruptcy, been convicted in a criminal proceeding or named in a pending criminal proceeding, been the subject of any order, judgment, or decree of any court permanently or temporarily enjoining him or her from any securities activities, or any other disclosable event required by Item 401(f) of Regulation S-K.

 

Code of Ethics

 

We have not adopted a written code of ethics, primarily because we believe and understand that our officers and directors adhere to and follow ethical standards without the necessity of a written policy.

 

Scientific Advisory Board

 

Our Board of Directors has established a Scientific Advisory Board that assists management and the Board of Directors on an advisory basis with respect to the research, development, clinical, regulatory and commercial plans and activities relating to research, manufacture, use and sale of our pain management products and drug candidates. The Scientific Advisory Board meets on an ad hoc basis and may attend meetings of the Board at the Board’s request. Its current members are Mitchell S. Felder, MD, Patricio F. Reyes, MD, FAAN, Carl E. Meyer, DO, MBA, and Kathryn Meyer, DO. All members of the Scientific Advisory Board are doctors and have extensive knowledge, experience and training in the fields of medicine relevant to our business.

 

Scientific Advisory Board members are not entitled to receive compensation, but warrants or other benefits may be awarded at the discretion of the Board of Directors. We granted warrants, to purchase 2,000 shares of our common stock at an exercise price of $1.25 over seven (7) years from the grant date on December 22, 2017, to each of Carl Meyer and Katherine Meyer for their services on the Scientific Advisory Board.

EXECUTIVE COMPENSATION

 

Narrative Disclosure of Executive Compensation

 

Effective on September 28, 2012, we entered into employment agreements with our President and Chief Executive Officer, William A. Hartman, and our Chairman of the Board of Directors and Chairman of the Scientific Advisory Board, Dr. Mitchell S. Felder. In December 2012, the Company and Dr. Felder agreed to terminate his employment agreement, effective as of its date of inception.

 

 

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Pursuant to the employment agreement with Hartman, he will be compensated in the amount of $150,000 per year for the duration of the agreement. Pursuant to the agreement, Hartman has waived the salary and the accrual thereof in exchange for being issued a Common Stock Purchase Warrant whereby Hartman may purchase a maximum of 105,000 shares of our common stock at a purchase price of $1.45 per share. The agreement has a one-year term and provides for two (2) years of severance at his then-current salary in the event Hartman is terminated due to death, disability or without cause. Mr. Hartman is still employed under the terms of the agreement.

 

We do not currently have a written employment agreement with our other executives. All other executives are at-will employees or consultants whose compensation is set forth in the Summary Compensation Table below.

 

Summary Compensation Table

 

The following table sets forth information with respect to compensation earned by our Chief Executive Officer, President, and Chief Financial Officer for the years ended December 31, 2018 and 2017.

 

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation ($)	All Other Compensation ($)	Total ($)
William A. Hartman,	2018	-0-	-0-	-0-	68,146(2)	-0-	-0-	-0-	68,146
Chief Executive Officer (1)	2017	-0-	-0-	-0-	23,358(3)	-0-	-0-	-0-	23,358
Heidi H. Carl,	2018
Chief Financial Officer(4)	2017	-0-	-0-	-0-	16,488(4)	-0-	-0-	-0-	16,488

 

(1) 

Mr. Hartman does not receive a salary for his services as Chief Executive Officer.

(2) 

Option awards consist of warrants to purchase 842,000 shares of our common stock at an exercise price of $0.05 over seven (7) years from the grant date on December 15, 2018.

(3) 

Option awards consist of warrants to purchase 34,000 shares of our common stock at an exercise price of $1.25 over seven (7) years from the grant date on December 22, 2017.

(4) 

Ms. Carl does not receive a salary for her services as Secretary and Treasurer.

(5) 

Option awards consist of warrants to purchase 500,000 shares of our common stock at an exercise price of $0.09 over seven (7) years from the grant date on December 15, 2018.

(6) 

Option awards consist of warrants to purchase 24,000 shares of our common stock at an exercise price of $1.25 over seven (7) years from the grant date on December 22, 2017.

Officer and Director Compensation

 

On December 20, 2018, we issued warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (842,000 shares); Mitchell Felder (842,000 shares), Heidi Carl (500,000 shares), John Borza (579,000 shares), Patricio Reyes (500,000 shares), John Pauly (52,500 shares) and Jay Rosen (52,500 shares). We also issued warrants to purchase shares of our common stock to three members of our Scientific Advisory Board in the amounts indicated: Heleno Souza (131,000 shares), Carl Meyer (26,000 shares) and Katherine Meyer (26,000 shares). The exercise price of the foregoing warrants is Nine Cents ($0.09) per share. The warrants also have a cashless exercise option.

 

 

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The warrants were issued with respect to services provided in 2018 and vested immediately upon issuance. The issuance of the warrants was fully approved by our Board of Directors on December 20, 2018, the date a fully executed resolution authorizing the issuance was delivered to us.

 

On December 22, 2017, we issued warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (8,500,000 shares); Mitchell Felder (8,500,000 shares), Heidi Carl (6,000,000 shares), John Borza (7,250,000 shares), Patricio Reyes (4,000,000 shares) and Jay Rosen (1,000,000 shares). We also issued warrants to purchase shares of our common stock to three members of our Scientific Advisory Board in the amounts indicated: Heleno Souza (2,500,000 shares), Carl Meyer (500,000 shares) and Katherine Meyer (500,000 shares). The exercise price of the foregoing warrants is One Half Cent ($0.005) per share. The warrants also have a cashless exercise option.

 

The warrants were issued with respect to services provided in 2017 and vested immediately upon issuance. The issuance of the warrants was fully approved by our Board of Directors on December 22, 2017, the date a fully executed resolution authorizing the issuance was delivered to us.

 

Also on December 22, 2017, we issued a warrant to John Pauly as an initial incentive award following his appointment to the Board of Directors, which will allow him to purchase 2,000,000 shares of our common stock. The terms of this warrant are the same as those in the warrants issued to the other directors on this date, having an exercise price of One Half Cent ($0.005) and a cashless exercise option.

 

We do not currently have an established policy to provide compensation to members of our Board of Directors for their services in that capacity. We intend to develop such a policy in the near future.

 

Outstanding Equity Awards at Fiscal Year-End

 

We do not currently have a stock option or grant plan.

 

 

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SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of November 7, 2019, certain information with respect to the Company’s equity securities owned of record or beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of each class of the Company’s outstanding equity securities; and (iii) all Directors and Executive Officers as a group.

 

Name and Address (1)	Common Stock Ownership	Percentage of Common Stock Ownership (2)	Series A Preferred Stock Ownership	Percentage of Series A Preferred Stock Ownership (3)
William A. Hartman (4)(10)	971,020(8)	1.50%	1,000,000	50.0%
Dr. Mitchell S. Felder (4) (5)	968,051(9)	1.50%	1,000,000	50.0%
Heidi H. Carl (4)(10)	537,080(12)	*	-	-
Jay Rosen (4)	63,120(13)	*	-	-
John S. Borza (4)	619,934(11)	*	-	-
John Pauly(4) (6)	60,500(15)	*	-	-
Dr. Patricio Reyes(4) (7)	520,680(14)	*	-	-
All Officers and Directors as a Group (7 Persons)	3,740,445(8)(9)(11)(12)(13)(14)(15)	5.56%	2,000,000	100.0%

 

* 

Less than 1%

(1) 

Unless otherwise indicated, the address of the shareholder is c/o Premier Biomedical, Inc.

(2) 

Unless otherwise indicated, based on 63,723,186 shares of common stock issued and outstanding. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person or group holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.

(3) 

Unless otherwise indicated, based on 2,000,000 shares of Series A Convertible Preferred Stock issued and outstanding.

(4) 

Indicates one of our officers or directors.

(5)            

Dr. Felder’s address is P.O. Box 1332, Hermitage, PA 16148.

(6) 

Mr. Pauly’s address is 900 Squire Oaks Drive, Villa Hills, KY 41017.

(7) 

Dr. Reyes’ address is 10618 North Eleventh Place, Phoenix, AZ 85020.

(8) 

Includes 4,000 shares of common stock that may be acquired upon the conversion of 1,000,000 shares of Series A Convertible Preferred Stock, 200 shares of common stock that may be acquired at $362.50 per share, 420 shares of common stock that may be acquired at $362.50 per share if the Company’s common stock reaches a closing bid price of $750.00 per share and remains at or above $750.00 per share for thirty (30) consecutive trading days on any and all markets or exchanges on which the Company’s common stock is traded, 6,400 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 4,000 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, 34,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 842,000 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(9) 

Includes 12,000 shares of common stock that may be acquired upon the exercise of warrants at $0.0025 per share, 4,000 shares of common stock that may be acquired upon the conversion of 1,000,000 shares of Series A Convertible Preferred Stock, 200 shares of common stock that may be acquired at $362.50 per share, 420 shares of common stock that may be acquired at $362.50 per share if the Company’s common stock reaches a closing bid price of $750.00 per share and remains at or above $750.00 per share for thirty (30) consecutive trading days on any and all markets or exchanges on which the Company’s common stock is traded, 6,400 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 4,000 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, 34,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 579,000 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(10) 

William A. Hartman is the father of Heidi H. Carl. Mr. Hartman disclaims ownership of shares held by his daughter.

(11) 

Includes 110 shares of common stock owned members of Mr. Borza’s household, 4,200 shares of common stock that may be acquired by Mr. Borza at $362.50 per share upon the exercise of warrants, 280 shares of common stock that may be acquired at $362.50 per share upon the exercise of warrants if the Company’s common stock reaches a closing bid price of $750.00 per share and remains at or above $750.00 per share for thirty (30) consecutive trading days on any and all markets or exchanges on which the Company’s common stock is traded, 4,800 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 2,400 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, 29,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 579,000 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(12) 

Includes 200 shares of common stock that may be acquired upon the exercise of warrants at $362.50 per share, 280 shares of common stock that can be acquired at $362.50 per share if the Company’s common stock reaches a closing bid price of $750.00 per share and remains at or above $750.00 per share for thirty (30) consecutive trading days on any and all markets or exchanges on which the Company’s common stock is traded, 5,600 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 3,000 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, 24,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 500,000 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(13) 

Includes 200 shares of common stock that may be acquired upon the exercise of warrants at $362.50 per share, 1,600 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 800 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, 4,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 52,500 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(14) 

Includes 2,800 shares or the Company’s common stock that may be acquired upon the exercise of warrants at $62.50 per share, 1,400 per share, 16,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 500,000 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(15) 

Consists of 8,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 52,500 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

 

Other than as set forth above, the issuer is not aware of any person who owns of record, or is known to own beneficially, five percent (5%) or more of the outstanding securities of any class of the issuer.

 

There are no current arrangements which will result in a change in control.

 

 

55

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

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 owned by Ronald T. La Borde, a member of our Board of Directors. The joint venture company, Premier Biomedical Pain Management Solutions, LLC, a Nevada limited liability company (PBPMS), was formed 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.

 

The PBPMS operating agreement called for ATS to enter into a licensing agreement with PBPMS. Upon entering into the license agreement, Mr. La Borde was to receive 5,000 warrants to purchase our common stock at an exercise price of $12.50 per share.

 

However, the license agreement was never entered into, the joint venture was terminated, and PBPMS was dissolved on September 19, 2017.

 

License Agreements

 

On May 12, 2010, we entered into two separate license agreements. One license agreement was entered into with Altman Enterprises, LLC, wherein we obtained certain exclusive rights in (i) proprietary technology that is the subject of one pending PCT patent application relating to the treatment of auto-immune diseases, and (ii) the Feldetrex® trademark. The other license agreement was entered into with Marv Enterprises, LLC, wherein we obtained certain exclusive rights in proprietary technology that is the subject of two PCT patent applications relating to the treatment of blood borne carcinomas and sequential extracorporeal treatment of blood. Authority to execute the license agreements on behalf of Altman and Marv is vested in Dr. Mitchell S. Felder, the Chairman of our Board of Directors. Because the licensors are controlled by one of our directors, there may exist a conflict of interest in decisions made by the Company with respect to the licenses.

 

As consideration for the two licenses, we agreed to (i) pay a royalty of five percent (5%) of any sales of products using the technology, with no minimum royalty, and (ii) reimburse the licensor for any costs already incurred in pursuing its proprietary rights in the licensed technology and pay any costs incurred for maintaining or obtaining the licensors’ proprietary rights in the licensed technology in the U.S. and in extending the intellectual property to other countries around the world. Licensor shall have sole discretion to select other countries into which exclusive rights in the licensed technology may be pursued, and if we decline to pay those expenses, then licensor may pay said expenses and our licensed rights in those countries will revert to the licensor.

 

As of December 31, 2018, we have not sold any products using the licensed technology and thus have not paid any license fees. We have, however, reimbursed expenses associated with the technology we have licensed, and owe them an additional $46,016.

 

 

56

 

 

Stock Issuances

 

Preferred Stock

 

On January 2, 2016, two of our officers and directors, William A. Hartman and Mitchell Felder, each exercised warrants to acquire one million (1,000,000) shares of Series A Convertible Preferred Stock each. Each share of Series A Convertible Preferred Stock is convertible, at the election of the holder thereof, into 0.004 of a share of our common stock, and has one hundred (100) votes per share. We issued the warrants on June 21, 2010 and they had an exercise price of $0.001 per share.

 

The Preferred Stock also contains protective provisions as follows:

 

The Company may not take any of the following actions without the approval of a majority of the holders of the outstanding Series A Convertible Preferred Stock: (i) effect a sale of all or substantially all of the Company’s assets or which results in the holders of the Company’s capital stock prior to the transaction owning less than fifty percent (50%) of the voting power of the Company’s capital stock after the transaction, (ii) alter or change the rights, preferences, or privileges of the Series A Convertible Preferred Stock, (iii) increase or decrease the number of authorized shares of Series A Convertible Preferred Stock, (iv) authorize the issuance of securities having a preference over or on par with the Series A Convertible Preferred Stock, or (v) effectuate a forward or reverse stock split or dividend of the Company’s common stock.

 

Warrant Exercise

 

On November 22, 2017, we issued 28,000 shares of common stock, restricted in accordance with Rule 144, to William Hartman, an officer and director of the Company, upon the exercise of warrants at $0.63 per share.

 

On December 20, 2016, we issued 24,000 shares of common stock, restricted in accordance with Rule 144, to each of William Hartman and Mitchell Felder, officers and directors of the Company, upon the exercise of warrants at $0.63 per share.

 

On August 19, 2016, we issued 16,000 shares of common stock, restricted in accordance with Rule 144, to each of William Hartman and Mitchell Felder, officers and directors of the Company, upon the exercise of warrants at $0.63 per share.

 

 

57

 

 

DISCLOSURE OF COMMISSION POSITION ON

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

Article 9 of our Articles of Incorporation provides that, the personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by paragraph 1 of Section 78.037 of the General Corporation Law of the State of Nevada, as the same may be amended and supplemented. Paragraph 1 of Section 78.037 states that the articles of incorporation of a Nevada corporation may contain any provision, not contrary to the laws of the State of Nevada, for the management of the business and for the conduct of the affairs of the corporation.

 

Article 10 of our Articles of Incorporation provides that, the corporation shall, to the fullest extent permitted by Section 78.751 of the General Corporation Law of the State of Nevada, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all expenses, liabilities, or other matters referred to in or covered by said section. Section 78.751 states that the articles of incorporation of a Nevada corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition. It further states that indemnification does not exclude any other rights that an officer or director may have pursuant to the articles, bylaws, shareholders agreement or otherwise, and that it continues for a person who has ceased to be a director, officer, or employee of the company.

 

Article V of our Bylaws further addresses indemnification, including procedures for indemnification claims. Indemnification applies to any person that is made a party to, or threatened to be made a party to, any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she was an officer or director of the company.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

 

 

58

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the Securities and Exchange Commission a registration statement on Form S-1, together with all amendments and exhibits thereto, under the Securities Act of 1933 with respect to the common stock offered hereby. This Prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. You should refer to the registration statement and its exhibits and schedules for further information. Statements contained in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference.

 

Copies of documents we file with the Commission, including this prospectus, the registration of which it is a part and the related exhibits, may be read and copies at the Commission’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our filings with the Commission are also available through the Commission’s website at the following address: http://www.sec.gov.

 

We are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, and, in accordance therewith, file periodic reports, proxy statements and other information with the Commission. Such periodic reports, proxy statements and other information are available for inspection and copying at the Public Reference Room and website of the SEC referred to above. We also furnish our shareholders with annual reports containing our financial statements audited by an independent registered public accounting firm and quarterly reports containing our unaudited financial information. We maintain a website at www.premierbiomedical.com. You may access our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act with the Commission free of charge at our website as soon as reasonably practicable after this material is electronically filed with, or furnished to, the Commission. The reference to our website or web address does not constitute incorporation by reference of the information contained at that site.

 

INCORPORATION BY REFERENCE

 

We “incorporate by reference” information from other documents that we file with the SEC into this prospectus, which means that we disclose important information to you by referring you to those documents. The information incorporated by reference is deemed to be part of this prospectus except for any information that is superseded by information included directly in this prospectus, and the information that we file later with the SEC will automatically supersede this information. Any statement contained in this prospectus or any prospectus supplement or a document incorporated by reference in this prospectus or in any prospectus supplement will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any other subsequently filed document that is incorporated by reference in this prospectus modifies or superseded the statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. You should not assume that the information in this prospectus is current as of the date other than the date on the cover page of this prospectus.

 

 

59

 

 

We are incorporating by reference into this prospectus any additional documents that we may file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the effective date of the registration statement and prior to the termination of the offering.

 

You may request a copy of any document incorporated by reference in this prospectus and any exhibit specifically incorporated by reference in those documents, at no cost, by writing or telephoning us at the following address or phone number:

 

Premier Biomedical, Inc.

P.O. Box 25

Jackson Center, PA 16133

Attn: Investor Relations

(724) 633-7033

 

EXPERTS

 

The audited financial statements of Premier Biomedical, Inc. as of December 31, 2018 and 2017 appearing in this prospectus which is part of a registration statement have been so included in reliance on the report of M&K CPAS, PLLC, given on the authority of such firm as experts in accounting and auditing.

 

 

60

 

INDEX TO FINANCIAL STATEMENTS

 

For the Three and Nine Months ended September 30, 2019 and 2018

 

Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (Unaudited)	F-1
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	F-2
Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the nine months ended September 30, 2019 and 2018 (Unaudited)	F-3
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (Unaudited)	F-4
Notes to Condensed Consolidated Financial Statements	F-5 to F-20

 

For the Years ended December 31, 2018 and 2017

 

Report of Independent Registered Public Accounting Firm	F-21
Balance Sheets as of December 31, 2018 and 2017 (Audited)	F-22
Statements of Operations for the years ended December 31, 2018 and 2017 (Audited)	F-23
Statement of Stockholders’ Equity (Deficit) for the years ended December 31, 2018 and 2017 (Audited)	F-24
Statements of Cash Flows for the years ended December 31, 2018 and 2017 (Audited)	F-25
Notes to Financial Statements	F-26 to F-44

 

 

 

61

 

 

PREMIER BIOMEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

	September 30,	December 31,
	2019	2018
ASSETS	(Unaudited)
Current assets:
Cash	$117,209	$86,827
Accounts receivable	3,387	3,092
Inventory	20,516	25,985
Other current assets	36,470	43,883
Total current assets	177,582	159,787
Property and equipment, net	7,918	5,203
Total assets	$185,500	$164,990
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$192,543	$264,398
Accounts payable, related parties	31,081	25,944
Accrued interest	49,148	22,099
Convertible notes payable, net of discounts of $278,228 and $-0- at September 30, 2019
and December 31, 2018, respectively, including $139,614 currently in default	192,286	309,637
Derivative liabilities	1,838,652	1,690,304
Total current liabilities	2,303,710	2,312,382
Total liabilities	2,303,710	2,312,382
Commitments and contingencies	-	-
Stockholders' equity (deficit):
Series A convertible preferred stock, $0.001 par value, 10,000,000 shares authorized, 2,000,000 shares designated, issued and outstanding at September 30, 2019 and December 31, 2018, respectively	2,000	2,000
Series B convertible preferred stock, $0.001 par value, 1,000,000 shares designated, 133,780 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	134	150
Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 49,216,810 and 5,652,410 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	492	57
Additional paid in capital	14,947,033	14,572,754
Subscriptions payable, consisting of 276,960 shares at December 31, 2018	-	5,345
Accumulated deficit	(17,067,869)	(16,727,698)
Total stockholders' equity (deficit)	(2,118,210)	(2,147,392)
Total liabilities and stockholders' equity (deficit)	$185,500	$164,990

 

See accompanying notes to financial statements.

 

 

F-1

 

 

PREMIER BIOMEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

	For the Three Months		For the Nine Months
	Ended September 30,		Ended September 30,
	2019	2018	2019	2018
Revenue	$3,465	$8,225	$12,975	$30,709
Cost of goods sold	1,653	4,373	5,470	20,577
Gross profit	1,812	3,852	7,505	10,132
Operating expenses:
General and administrative	36,757	62,572	138,589	139,881
Professional fees	29,609	22,613	88,604	100,953
Total operating expenses	66,366	85,185	227,193	240,834
Net operating loss	(64,554)	(81,333)	(219,688)	(230,702)
Other income (expense):
Interest expense	(56,002)	(184,624)	(101,793)	(322,323)
Change in derivative liabilities	(61,078)	(97,578)	(18,690)	655,808
Total other income (expense)	(117,080)	(282,202)	(120,483)	333,485
Net income (loss)	$(181,634)	$(363,535)	$(340,171)	$102,783
Weighted average number of common shares outstanding - basic	26,817,415	3,306,069	14,837,666	3,058,442
Weighted average number of common shares outstanding - fully diluted	26,817,415	3,306,069	14,837,666	3,070,392
Net income (loss) per share - basic	$(0.01)	$(0.11)	$(0.02)	$0.03
Net income (loss) per share - fully diluted	$(0.01)	$(0.11)	$(0.02)	$0.03

 

See accompanying notes to financial statements.

 

 

F-2

 

 

PREMIER BIOMEDICAL, INC.

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

 

	Series A Convertible		Series B Convertible				Additional			Total
	Preferred Stock		Preferred Stock		Common Stock		Paid-In	Subscriptions	Accumulated	Stockholders'
	Shares	Amount	Shares	Amount	Shares	Amount	Capital	Payable	Deficit	Equity (Deficit)
Balance, December 31, 2017	2,000,000	$2,000	-	$-	2,551,443	$26	$13,442,255	$273,805	$(16,328,812)	$(2,610,726)
Common stock issued on subsctiptions payable	-	-	-	-	254,703	2	273,803	(273,805)	-	-
Common stock issued on debt conversions	-	-	-	-	183,161	2	64,998	-	-	65,000
Adjustments to derivative liability due to debt conversions	-	-	-	-	-	-	52,270	-	-	52,270
Net income for the three months ended March 31, 2018	-	-	-	-	-	-	-	-	566,324	566,324
Balance, March 31, 2018	2,000,000	$2,000	-	$-	2,989,307	$30	$13,833,326	$-	$(15,762,488)	$(1,927,132)
Net loss for the three months ended June 30, 2018	-	-	-	-	-	-	-	-	(100,006)	(100,006)
Balance, June 30, 2018	2,000,000	$2,000	-	$-	2,989,307	$30	$13,833,326	$-	$(15,862,494)	$(2,027,138)
Common stock issued on debt conversions	-	-	-	-	784,542	8	58,012	12,500	-	70,520
Adjustments to derivative liability due to debt conversions	-	-	-	-	-	-	76,401	-	-	76,401
Net loss for the three months ended Septmeber 30, 2018	-	-	-	-	-	-	-	-	(363,535)	(363,535)
Balance, September 30, 2018	2,000,000	$2,000	-	$-	3,773,849	$38	$13,967,739	$12,500	$(16,226,029)	$(2,243,752)
Common stock issued on subsctiptions payable	-	-	-	-	172,176	2	12,498	(12,500)	-	-
Series B convertible preferred stock sold for cash	-	-	150,000	150	-	-	149,850	-	-	150,000
Common stock issued on debt conversions	-	-	-	-	1,694,385	17	74,737	5,345	-	80,099
Exercise of warrants at $0.00001 per share, related parties	-	-	-	-	12,000	-	30	-	-	30
Warrants issued for services, related parties	-	-	-	-	-	-	272,585	-	-	272,585
Warrants issued for services	-	-	-	-	-	-	24,359	-	-	24,359
Adjustments to derivative liability due to debt conversions	-	-	-	-	-	-	70,956	-	-	70,956
Net loss for the three months ended December 31, 2018	-	-	-	-	-	-	-	-	(501,669)	(501,669)
Balance, December 31, 2018	2,000,000	$2,000	150,000	$150	5,652,410	$57	$14,572,754	$5,345	$(16,727,698)	$(2,147,392)
Common stock issued on subscriptions payable	-	-	-	-	276,960	3	5,342	(5,345)	-	-
Common stock issued on debt conversions	-	-	-	-	2,578,585	25	50,765	6,500	-	57,290
Adjustments to derivative liability due to debt conversions	-	-	-	-	-	-	48,807	-	-	48,807
Net loss for the three months ended March 31, 2019	-	-	-	-	-	-	-	-	68,511	68,511
Balance, March 31, 2019 (Unaudited)	2,000,000	$2,000	150,000	$150	8,507,955	$85	$14,677,668	$6,500	$(16,659,187)	$(1,972,784)
Common stock issued on debt conversions	-	-	-	-	5,024,475	50	42,658	(6,500)	-	36,208
Adjustments to derivative liability due to debt conversions	-	-	-	-	-	-	20,475	-	-	20,475
Net loss for the three months ended June 30, 2019	-	-	-	-	-	-	-	-	(227,048)	(227,048)
Balance, June 30, 2019 (Unaudited)	2,000,000	$2,000	150,000	$150	13,532,430	$135	$14,740,801	$-	$(16,886,235)	$(2,143,149)
Preferred stock issued on conversions	-	-	(16,220)	(16)	4,689,556	47	(31)	-	-	-
Common stock issued on debt conversions	-	-	-	-	30,994,824	310	97,319	-	-	97,629
Adjustments to derivative liability due to debt conversions	-	-	-	-	-	-	108,944	-	-	108,944
Net loss for the three months ended September 30, 2019	-	-	-	-	-	-	-	-	(181,634)	(181,634)
Balance, September 30, 2019 (Unaudited)	2,000,000	$2,000	133,780	$134	49,216,810	$492	$14,947,033	$-	$(17,067,869)	$(2,118,210)

 

 See accompanying notes to financial statements.

 

 

F-3

 

 

PREMIER BIOMEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

	For the Nine Months
	Ended September 30,
	2019	2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$(340,171)	$102,783
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation	2,135	1,749
Change in fair market value of derivative liabilities	18,690	(655,808)
Amortization of debt discounts	59,556	306,442
Decrease (increase) in assets:
Accounts receivable	(295)	(1,654)
Inventory	5,469	(34,392)
Other current assets	7,413	(3,242)
Increase (decrease) in liabilities:
Accounts payable	(71,855)	(39,787)
Accounts payable, related parties	5,137	(10,443)
Accrued interest	40,753	15,881
Net cash used in operating activities	(273,168)	(318,471)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(4,850)	(2,029)
Net cash used in investing activities	(4,850)	(2,029)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible notes payable	308,400	300,000
Net cash provided by financing activities	308,400	300,000
NET CHANGE IN CASH	30,382	(20,500)
CASH AT BEGINNING OF PERIOD	86,827	83,704
CASH AT END OF PERIOD	$117,209	$63,204
SUPPLEMENTAL INFORMATION:
Interest paid	$1,484	$-
Income taxes paid	$-	$-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Value of preferred stock converted to common stock	$44,913	$-
Value of debt discounts	$304,311	$300,000
Value of derivative adjustment due to debt conversions	$178,226	$128,671
Value of shares issued for conversion of debt	$191,127	$135,520

 

See accompanying notes to financial statements.

 

 

F-4

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

Note 1 – Basis of Presentation and Significant Accounting Policies

 

Basis of Presentation

The accompanying unaudited, condensed consolidated 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, 2018.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

We maintain cash balances in non-interest-bearing accounts, which do not currently exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.

 

Patent Rights and Applications

Patent rights and applications costs include the acquisition costs and costs incurred for the filing of patents. Patent rights and applications are amortized on a straight-line basis over the legal life of the patent rights beginning at the time the patents are approved. Patent costs for unsuccessful patent applications are expensed when the application is terminated.

 

Fair Value of Financial Instruments

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, prepaid expenses and accrued expenses reported on the balance sheet are estimated by management to approximate fair value primarily due to the short-term nature of the instruments.

 

Basic and Diluted Loss Per Share

Basic earnings per share (“EPS”) are computed by dividing net income (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted EPS is computed by dividing net income by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include stock options, warrants and restricted stock. The number of potential common shares outstanding relating to stock options, warrants and restricted stock is computed using the treasury stock method.

 

 

F-5

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the nine months ended September 30, 2019 and 2018 are as follows:

 

	For the Nine Months Ended
	September 30,
	2019	2018
Weighted average common shares outstanding – basic	14,837,666	3,058,442
Plus: Potentially dilutive common shares:
Warrants	-	11,950
Weighted average common shares outstanding – diluted	14,837,666	3,070,392

 

For the nine months ended September 30, 2019, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. Warrants excluded from the calculation of diluted EPS because their effect was anti-dilutive were 3,898,000 and 245,760 as of September 30, 2019 and 2018, respectively.

 

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 had no stock-based compensation issuances during the nine months ended September 30, 2019 and 2018.

 

Revenue Recognition

On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.

 

Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

 

We determine revenue recognition through the following steps:

 

●

identification of the contract, or contracts, with a customer;

●

identification of the performance obligations in the contract;

●

determination of the transaction price;

●

allocation of the transaction price to the performance obligations in the contract; and

●

recognition of revenue when, or as, we satisfy a performance obligation.

 

Sales are recorded when the earnings process is complete or substantially complete, and the revenue is measurable and collectability is reasonably assured, which is typically when products are shipped. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue from sales in which payment has been received, but the earnings process has not been completed. Sales commenced on July 5, 2017 with the termination of our joint venture.

 

Advertising and Promotion

All costs associated with advertising and promoting products are expensed as incurred. These expenses were $35,696 and $50,127 for the nine months ended September 30, 2019 and 2018, respectively.

 

 

F-6

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not, that such asset will not be recovered through future operations.

 

Uncertain Tax Positions

In accordance with ASC 740, “Income Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

 

Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.

 

The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.

 

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modify the disclosure requirements of Topic 820. The new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

 

In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases. The amendments in ASU 2018-10 provide additional clarification and implementation guidance on certain aspects of the previously issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) and have the same effective and transition requirements as ASU 2016-02. Upon the effective date, ASU 2018-10 will supersede the current lease guidance in ASC Topic 840, Leases. Under the new guidance, lessees will be required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis. Concurrently, lessees will be required to recognize a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2018-10 is effective for private companies and emerging growth public companies for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The guidance is required to be applied using a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative periods presented in the financial statements. The Company adopted this guidance effective January 1, 2019, and the standard did not have a material impact on the Company’s combined financial statements and related disclosures.

 

 

F-7

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU has not had a material impact on its consolidated financial statements.

 

In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The amendment provides guidance on accounting for the impact of the Tax Cuts and Jobs Act (the “Tax Act”) and allows entities to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. The Tax Act has several significant changes that impact all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to 1986. The adoption of this ASU has not had a material impact on its consolidated financial statements.

 

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The guidance permits entities to reclassify tax effects stranded in Accumulated Other Comprehensive Income as a result of tax reform to retained earnings. This new guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted in annual and interim periods and can be applied retrospectively or in the period of adoption. The adoption of this ASU has not had a material impact on its consolidated financial statements.

 

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the years ended December 31, 2018 and 2017.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. ASU 2016-02 is effective for public entity financial statements for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. ASU 2016-02 was further clarified and amended within ASU 2018-01, ASU 2018-10, ASU 2018-11 and ASU 2018-20 which included provisions that would provide us with the option to adopt the provisions of the new guidance using a modified retrospective transition approach, without adjusting the comparative periods presented. We adopted the new standard on January 1, 2019 and used the effective date as our date of initial application under the modified retrospective approach. We elected the short-term lease recognition exemption for all of our leases that qualify. This means, for those leases we will not recognize right-of-use (RoU) assets or lease liabilities. The implementation of this new standard has no impact on our financial statements.

 

No other new accounting pronouncements, issued or effective during the nine months ended September 30, 2019, have had or are expected to have a significant impact on the Company’s financial statements.

 

 

F-8

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

Note 2 – Going Concern

 

As shown in the accompanying financial statements, the Company has minimal revenues, incurred net losses from operations resulting in an accumulated deficit of $17,067,869, and had negative working capital of ($2,126,128) at September 30, 2019. 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 – Related Parties

 

Accounts Payable

The Company owed $30,006 and $24,116 as of September 30, 2019 and December 31, 2018, 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 $753 as of December 31, 2018 to the Company’s CEO for reimbursable expenses.

 

The Company owed $1,075 as of September 30, 2019 and December 31, 2018 amongst members of the Company’s Board of Directors for reimbursable expenses.

 

Note 4 – 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.

 

 

F-9

 

 

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, 2019 and December 31, 2018, respectively:

 

	Fair Value Measurements at September 30, 2019
	Level 1	Level 2	Level 3
Assets
Cash	$117,209	$-	$-
Total assets	117,209	-	-
Liabilities
Convertible notes payable, net of discounts	-	192,286	-
Derivative liabilities	-	-	1,838,652
Total liabilities	-	192,286	1,838,652
	$117,209	$(192,286)	$(1,838,652)

 

	Fair Value Measurements at December 31, 2018
	Level 1	Level 2	Level 3
Assets
Cash	$86,827	$-	$-
Total assets	86,827	-	-
Liabilities
Convertible notes payable, net of discounts	-	309,637	-
Derivative liabilities	-	-	1,690,304
Total liabilities	-	309,637	1,690,304
	$86,827	$(309,637)	$(1,690,304)

 

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, 2019 or the year ended December 31, 2018.

 

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 are probable future economic benefits associated with the patent. The Company has elected to expense all of their patent rights and application costs due to difficulties associated with having to prove the value of their future economic benefits. All patent applications are currently pending and the Company has no patents that have yet been approved. It is the Company’s policy that it performs reviews of the carrying value of its patent rights and applications on an annual basis.

 

On March 4, 2015, we entered into a Patent License Agreement (“PLA”) with the University of Texas at El Paso (“UTEP”) regarding our joint research and development of CTLA-4 Blockade with Metronomic Chemotherapy for the Treatment of Breast Cancer. This is the first PLA with UTEP following our Collaborative Agreement with them dated May 9, 2012, and memorializes the joint ownership of the applicable patent and the financial and other terms related thereto.

 

On June 19, 2015, we entered into Amendment No. 1 to this Agreement, pursuant to which we explicitly included Provisional Patent Application No. 62/161,116 entitled, “Anti-CTLA-4 Blockade” (the “Application”) under the definition of “Patent Rights” as set forth in the PLA. The Application was filed with the United States Patent and Trademarks Office on May 13, 2015; the underlying technology was invented by Robert Kirken and Georgialina Rodriguez, and is solely-owned by The Board of Regents of The University of Texas System.

 

 

F-10

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

Note 6 – Convertible Notes Payable

 

Convertible notes payable consists of the following at September 30, 2019 and December 31, 2018, respectively:

 

	September 30,	December 31,
	2019	2018
On September 12, 2019, the Company received net proceeds of $22,000, carrying a $25,750 face value, in exchange for a 12% interest bearing; unsecured convertible promissory note maturing on September 12, 2020 (“Third Crown Bridge Partners Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date. In addition, the holder is entitled to deduct $500 from the conversion amount in each conversion to cover the holder’s deposit fees.	$25,750	$-
On August 15, 2019, the Company received net proceeds of $40,000, carrying a $43,000 face value, in exchange for a 10% interest bearing; unsecured convertible promissory note maturing on August 15, 2020 (“Fifth Power Up Lending Note”). The note is convertible 180 days from the date of the note at 61% of the average of the two lowest closing bid prices of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.	43,000	-
On August 2, 2019, the Company received net proceeds of $35,000, carrying a $38,000 face value, in exchange for a 10% interest bearing; unsecured convertible promissory note maturing on August 2, 2020 (“Fourth Power Up Lending Note”). The note is convertible 180 days from the date of the note at 61% of the average of the two lowest closing bid prices of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.	38,000	-
On July 2, 2019, the Company received net proceeds of $31,400, carrying a $36,050 face value, in exchange for a 12% interest bearing; unsecured convertible promissory note maturing on June 27, 2020 (“Second Crown Bridge Partners Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date. In addition, the holder is entitled to deduct $500 from the conversion amount in each conversion to cover the holder’s deposit fees.	36,050	-
On June 7, 2019, the Company received net proceeds of $35,000, carrying a $38,000 face value, in exchange for a 10% interest bearing; unsecured convertible promissory note maturing on June 7, 2020 (“Third Power Up Lending Note”). The note is convertible 180 days from the date of the note at 61% of the average of the two lowest closing bid prices of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.	38,000	-
On April 23, 2019, the Company received net proceeds of $35,000, carrying a $38,000 face value, in exchange for a 10% interest bearing; unsecured convertible promissory note maturing on April 23, 2020 (“Second Power Up Lending Note”). The note is convertible 180 days from the date of the note at 61% of the average of the two lowest closing bid prices of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.	38,000	-
On March 27, 2019, the Company entered into a securities purchase agreement with Crown Bridge Partners, LLC to sell convertible notes with a face value of $154,500, with net proceeds of $141,000 after the deduction of an original issue discount of $13,500 on a 12% interest bearing; unsecured convertible promissory note with the first twelve months of interest of each tranche guaranteed. The maturity date for each tranche funded shall be twelve (12) months from the effective date of each payment. The note is payable in tranches with the first tranche, which was received on April 17, 2019, carrying a $51,500 face value, with net proceeds of $47,000 after a $4,500 original issue discounts (“First Crown Bridge Partners Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date. In addition, the holder is entitled to deduct $500 from the conversion amount in each conversion to cover the holder’s deposit fees.	51,500	-
On March 26, 2019, the Company received proceeds of $68,000 in exchange for a 10% interest bearing; unsecured convertible promissory note maturing on March 26, 2020 (“First Power Up Lending Note”). The note is convertible 180 days from the date of the note at 61% of the average of the two lowest closing bid prices of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date. A total of $7,400 of principal was converted into 1,947,368 shares of common stock on September 30, 2019.	60,600	-
On July 11, 2018, the Company received proceeds of $120,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on October 31, 2018 (“Third Red Diamond Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $59,959 of principal was converted into 11,641,667 shares of common stock over various dates between July 27, 2018 and September 26, 2019. Currently in default.	60,041	94,080
On July 11, 2018, the Company received proceeds of $60,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on October 31, 2018 (“Third SEG-RedaShex Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. Currently in default.	60,000	60,000
On April 24, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on July 31, 2018 (“Second Red Diamond Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $32,553, consisting of $30,000 of principal and $2,553 of interest, was converted into 11,110,400 shares of common stock over various dates between August 8, 2019 and September 3, 2019.	-	30,000
On April 24, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on July 31, 2018 (“Second SEG-RedaShex Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $12,636 of principal was converted into 3,510,000 shares of common stock over various dates between September 10, 2019 and September 17, 2019.Currently in default.	17,364	30,000
On March 1, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on May 31, 2018 (“First SEG-RedaShex Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $30,000 of principal was converted into an aggregate of 4,262,416 shares of common stock at various dates between January 2, 2019 and August 15, 2019.	-	30,000
On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second Diamond Rock Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A $15,000 loss was recognized during the fourth quarter of 2018 due to the enactment of default provision. A total of $76,150, consisting of $65,000 of principal and $11,150 of interest, was converted into 5,169,160 shares of common stock over various dates between December 12, 2018 and June 7, 2019.	-	55,057
On August 8, 2017, the Company entered into an exchange agreement with Diamond Rock, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First Diamond Rock Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A $10,500 loss was recognized during the fourth quarter of 2018 due to the enactment of default provision. A total of $15,000 of principal was converted into an aggregate of 31,250 shares of common stock at various dates between November 6, 2017 and November 13, 2017, and another $35,000 of principal was converted into an aggregate of 751,550 shares of common stock at various dates between October 12, 2018 and November 30, 2018, along with $52,581 of principal that was converted into an aggregate of 4,099,700 shares of common stock at various dates between January 11, 2019 and June 27, 2019. Currently in default.	2,209	10,500
Total convertible notes payable	470,514	309,637
Less unamortized derivative discounts:	278,228	-
Convertible notes payable	192,286	309,637
Less: current portion	192,286	309,637
Convertible notes payable, less current portion	$-	$-

 

 

F-11

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $334,211 and $300,000; including $29,900 and $-0- of loan origination discounts, for the variable conversion features of the convertible debts incurred during the nine months ended September 30, 2019 and the year ended December 31, 2018, respectively. The discounts are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded $59,556 and $306,442 of interest expense pursuant to the amortization of note discounts during the nine months ended September 30, 2019 and 2018, respectively.

 

All of the convertible debentures carry default provisions that place a “maximum share amount” on the note holders. The maximum share amount that can be owned as a result of the conversions to common stock by the note holders is 4.99% of the Company’s issued and outstanding shares.

 

In accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued on the Redwood Notes represented embedded derivative features, and these are shown as derivative liabilities on the balance sheet. The Company calculated the fair value of the compound embedded derivatives associated with the convertible debentures utilizing a lattice model.

 

The Company recognized interest expense for the nine months ended September 30, 2019 and 2018, respectively, as follows:

 

	September 30,	September 30,
	2019	2018
Interest on convertible notes	$40,753	$15,881
Amortization of debt discounts	59,556	306,442
Interest on credit cards	1,484	-
Total interest expense	$101,793	$322,323

 

Note 7 – Derivative Liabilities

 

As discussed in Note 6 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 $1,838,652 and $1,690,304 at September 30, 2019 and December 31, 2018, respectively. The change in fair value of the derivative liabilities resulted in a loss of $18,690 and a gain of $655,808 for the nine months ended September 30, 2019 and 2018, respectively, which has been reported within other income in the statements of operations. The loss of $18,690 for the nine months ended September 30, 2019 consisted of a gain of $26,267 due to the value attributable to the warrants and a loss in market value of $44,957 on the convertible notes. The gain of $655,808 for the nine months ended September 30, 2018 consisted of a gain of $743,751 due to the value attributable to the warrants and a net loss in market value of $87,943 on the convertible notes.

 

 

F-12

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

The following is a summary of changes in the fair market value of the derivative liability during the nine months ended September 30, 2019 and the year ended December 31, 2018, respectively:

 

	Derivative
	Liability
	Total
Balance, December 31, 2017	$2,255,781
Increase in derivative value due to issuances of convertible promissory notes	336,643
Change in fair market value of derivative liabilities due to the mark to market adjustment	(702,493)
Debt conversions	(199,627)
Balance, December 31, 2018	$1,690,304
Increase in derivative value due to issuances of convertible promissory notes	307,884
Change in fair market value of derivative liabilities due to the mark to market adjustment	18,690
Debt conversions	(178,226)
Balance, September 30, 2019	$1,838,652

 

Key inputs and assumptions used to value the convertible debentures and warrants issued during the nine months ended September 30, 2019:

●

Stock price ranging from $0.0285 to $0.0066 during these periods would fluctuate with projected volatility.

●

The notes convert with variable conversion prices and fixed conversion prices (tainted notes).

●

An event of default would occur -0-% of the time, increasing 2% per month to a maximum of 10%.

●

The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company in the range of 246.5% - 452.3%.

●

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 – the time required to convert out this volume of stock.

●

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 $336,476 to $357,240 and would increase at 1% per month.

●

The stock price would fluctuate with the Company projected volatility using a random sampling (500,000 iterations for each valuation) from a normal distribution. The stock price of the underlying instrument is modelled such that it follows a geometric Brownian motion with constant drift and volatility.

●

The Holder would exercise the warrants after one trading day as they become exercisable (at issuance) at target prices of 3 to 5 times the projected reset price or higher.

●

Reset events were projected to occur by 9/30/19 – the option expires 3/31/20.

●

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 369.2% - 369.2%.

●

The Holder would exercise the warrant at maturity in 2020 if the stock price was above the reset exercise price.

 

 

F-13

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

Note 8 – Commitments and Contingencies

 

Collaborative Patent License Agreements

On May 9, 2012, the Company entered into a Collaborative Agreement with the University of Texas at El Paso. Pursuant to the terms of the Agreement, the Company will work jointly with the University to develop a series of research and development programs around its sequential-dialysis technology in the areas of Alzheimer's Disease, Traumatic Brain Injury (TBI), Chronic Pain Syndrome, Fibromyalgia, Multiple Sclerosis, Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig's disease), Blood Sepsis, Cancer, Heart Attacks and Strokes. The programs will utilize the facilities at one or more of the University of Texas’ campuses. The Company will pay the University’s actual overhead for the projects, plus a negotiated facility and administration overhead expense, and 10% of all gross revenues associated with the sale, license and/or royalties of all products and treatment procedures directly affiliated with programs. Intellectual property jointly invented and developed as a result of the projects will be owned jointly by the University and the Company. The Agreement has an initial term of five (5) years, and is renewable upon mutual agreement of the parties.

 

On March 4, 2015, we entered into a Patent License Agreement (PLA) with the University of Texas at El Paso (UTEP) regarding our joint research and development of CTLA-4 Blockade with Metronomic Chemotherapy for the Treatment of Breast Cancer. This is the first PLA with UTEP following our Collaborative Agreement with them dated May 9, 2012, and memorializes the joint ownership of the applicable patent and the financial and other terms related thereto.

 

On June 19, 2015, we entered into Amendment No. 1 to this Agreement, pursuant to which we explicitly included Provisional Patent Application No. 62/161,116 entitled, “Anti-CTLA-4 Blockade” (the “Application”) under the definition of “Patent Rights” as set forth in the PLA. The Application was filed with the United States Patent and Trademarks Office on May 13, 2015; the underlying technology was invented by Robert Kirken and Georgialina Rodriguez, and is solely-owned by The Board of Regents of The University of Texas System.

 

On October 31, 2017 we entered into an Agreement, Final Payment under Contract, and Release of all Claims, whereby we agreed to pay them a total of $326,336 arising out of the research and development agreements with an initial payment of $22,211, and monthly payments of varying amounts between $5,000 and $20,000 thereafter for twenty eight months until the balance is paid in full. Subject to the compliance of all terms, the intellectual property rights established and arising out of the collaborative agreements remain in full force and effect and the parties agreed to a mutual release upon the final contracted payment. The full amount of the liability has been recognized as accounts payable, with $155,024 outstanding as of the end of this period, which is currently in default.

 

Note 9 – Changes in Stockholders’ Equity (Deficit)

 

Reverse Stock Split

On June 27, 2018, the Company effected a 1-for-250 reverse stock split (the “Reverse Stock Split”). No fractional shares were issued, and no cash or other consideration was paid in connection with the Reverse Stock Split. Instead, the Company issued one whole share of the post-Reverse Stock Split common stock to any stockholder who otherwise would have received a fractional share as a result of the Reverse Stock Split. The Company was authorized to issue 1,000,000,000 shares of common stock prior to the Reverse Stock Split, which remains unaffected. The Reverse Stock Split did not have any effect on the stated par value of the common stock, or the Company’s authorized preferred stock. Unless otherwise stated, all share and per share information in this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the Reverse Stock Split.

 

Convertible Preferred Stock

The Company has 10,000,000 authorized shares of Preferred Stock, of which 2,000,000 shares of $0.001 par value Series A Convertible Preferred Stock (“Series A Preferred Stock”) have been designated, and another 1,000,000 shares of $0.001 par value Series B Convertible Preferred Stock (“Series B Preferred Stock”) were designated on November 23, 2018. The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares sufficient to effect the conversions, and agreed to reserve no less than 225 million shares.

 

 

F-14

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

Convertible Preferred Stock, Series A

Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share into one (1) fully paid and non-assessable share of Common Stock. Each outstanding share of Series A Preferred Stock is entitled to one hundred (100) votes per share on all matters to which the shareholders of the Corporation are entitled or required to vote.

 

Convertible Preferred Stock, Series B

Each share of Series B Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share into that number of fully paid and nonassessable shares of our common stock equal to the quotient of the Conversion Principal Amount divided by the lesser of (a) the Fixed Conversion Price established by our Board of Directors on the date of conversion, and (b) the Fair Market Value. The Certificate of Designation defines Fair Market Value as 60% of the lowest Traded Price for the common stock for the previous fifteen (15) trading days prior to the Conversion Date on the market or exchange where our common stock is trading. The Conversion Principal Amount is equal to the Original Issue Price ($1.00) divided by nine-tenths (0.9). The Fixed Conversion Price is the price set by our Board of Directors upon conversion but in no event less than the last Traded Price of our common stock. Traded Price is defined as the price at which our common stock changes hands on the designated exchange or market. Conversion of the Series B Preferred Stock is subject to a Beneficial Ownership Limitation that prohibits the conversion of the Series B Preferred Stock if the conversion would result in beneficial ownership by the holder and its affiliates of more than 4.99% of our outstanding shares of common stock. A holder of Series B Preferred Stock may increase its Beneficial Ownership Limitation up to 9.99% but only after 61 days have passed since the holder gave notice to the Company. The Series B Preferred Stock has no voting rights. The rights of the Series B Preferred Stock survive any reorganization, merger or sale of the Company.

 

The holders of Series B Preferred Stock shall receive noncumulative dividends on an as-converted basis in the same form as any dividends to be paid out on shares of our common stock. Any dividends paid will first be paid to the holders of Series B Preferred Stock prior and in preference to any payment or distribution to holders of common stock. Other than as set forth in the previous sentence, the Certificate of Designation provides that no other dividends shall be paid on Series B Preferred Stock. Dividends on the Series B Preferred Stock are not mandatory or cumulative. There are no sinking fund provisions applicable to the Series B Preferred Stock, and the holders of Series B Preferred Stock have no redemption rights. The Corporation may redeem the Series B Preferred Stock upon 30 days’ prior notice at a price equal to the sum of 133% of the Original Issue Price plus the amount of any unpaid dividends on the shares to be redeemed.

 

As long as any shares of Series B Preferred Stock remain outstanding, the Certificate of Designation provides that without the approval of 75% of the holders of the outstanding Series B Preferred Stock, we may not (i) alter or change the rights, preferences, or privileges of the Series B Convertible Preferred Stock, (ii) increase or decrease the number of authorized shares of Series B Convertible Preferred Stock, or (iii) authorize the issuance of securities having a preference over or on par with the Series B Preferred Stock.

 

Common Stock Issuances for Series B Preferred Stock Conversions

On August 8, 2019, the Company issued 925,927 shares of common stock pursuant to the conversion of 2,500 of Series B Convertible Preferred Stock held by RedDiamond Partners.

 

On August 2, 2019, the Company issued 851,853 shares of common stock pursuant to the conversion of 2,300 of Series B Convertible Preferred Stock held by RedDiamond Partners.

 

On July 29, 2019, the Company issued 796,297 shares of common stock pursuant to the conversion of 2,150 of Series B Convertible Preferred Stock held by RedDiamond Partners.

 

On July 23, 2019, the Company issued 741,741 shares of common stock pursuant to the conversion of 2,470 of Series B Convertible Preferred Stock held by RedDiamond Partners.

 

 

F-15

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

On July 16, 2019, the Company issued 707,071 shares of common stock pursuant to the conversion of 3,500 of Series B Convertible Preferred Stock held by RedDiamond Partners.

 

On July 8, 2019, the Company issued 666,667 shares of common stock pursuant to the conversion of 3,300 of Series B Convertible Preferred Stock held by RedDiamond Partners.

 

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

On September 30, 2019, the Company issued 1,947,368 shares of common stock pursuant to the conversion of $7,400 of principal from the First PowerUp Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 26, 2019, the Company issued 2,150,000 shares of common stock pursuant to the conversion of $6,450 of principal from the Third RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 23, 2019, the Company issued 2,050,000 shares of common stock pursuant to the conversion of $6,150 of principal from the Third RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 18, 2019, the Company issued 1,950,000 shares of common stock pursuant to the conversion of $5,850 of principal from the Third RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 17, 2019, the Company issued 1,920,000 shares of common stock pursuant to the conversion of $6,912 of principal from the Second SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 16, 2019, the Company issued 1,863,000 shares of common stock pursuant to the conversion of $5,589 of principal from the Third RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 12, 2019, the Company issued 1,680,000 shares of common stock pursuant to the conversion of $5,040 of principal from the Third RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 10, 2019, the Company issued 1,590,000 shares of common stock pursuant to the conversion of $5,724 of principal from the Second SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 6, 2019, the Company issued 1,600,000 shares of common stock pursuant to the conversion of $4,960 of principal from the Third RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 3, 2019, the Company issued 1,540,000 shares of common stock pursuant to the conversion of $4,774, consisting of $2,221 of principal and $2,553 of interest from the Second RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

 

F-16

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

On August 28, 2019, the Company issued 1,469,000 shares of common stock pursuant to the conversion of $4,554 of principal from the Second RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 22, 2019, the Company issued 1,360,000 shares of common stock pursuant to the conversion of $4,216 of principal from the Second RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 20, 2019, the Company issued 1,295,000 shares of common stock pursuant to the conversion of $4,533 of principal from the Second RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 19, 2019, the Company issued 1,230,000 shares of common stock pursuant to the conversion of $3,936 of principal from the Second RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 15, 2019, the Company issued 1,124,000 shares of common stock pursuant to the conversion of $2,810 of principal from the Second RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 15, 2019, the Company issued 833,333 shares of common stock pursuant to the conversion of $2,500 of principal from the First SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 14, 2019, the Company issued 1,080,000 shares of common stock pursuant to the conversion of $2,700 of principal from the Second RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 13, 2019, the Company issued 1,030,000 shares of common stock pursuant to the conversion of $2,575 of principal from the Second RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 12, 2019, the Company issued 833,333 shares of common stock pursuant to the conversion of $2,500 of principal from the First SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 12, 2019, the Company issued 982,400 shares of common stock pursuant to the conversion of $2,456 of principal from the Second RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 1, 2019, the Company issued 833,333 shares of common stock pursuant to the conversion of $2,500 of principal from the First SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On July 11, 2019, the Company issued 634,057 shares of common stock pursuant to the conversion of $3,500 of principal from the First SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On June 27, 2019, the Company issued 640,000 shares of common stock pursuant to the conversion of $2,944 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

 

F-17

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

(Unaudited)

 

On June 21, 2019, the Company issued 612,500 shares of common stock pursuant to the conversion of $2,817 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On June 17, 2019, the Company issued 550,000 shares of common stock pursuant to the conversion of $2,530 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On June 7, 2019, the Company issued 530,000 shares of common stock pursuant to the conversion of $2,703 of interest from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On May 28, 2019, the Company issued 505,000 shares of common stock pursuant to the conversion of $4,596 of interest from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On May 22, 2019, the Company issued 497,512 shares of common stock pursuant to the conversion of $6,000 of principal from the First SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On May 16, 2019, the Company issued 480,000 shares of common stock pursuant to the conversion of $4,992, consisting of $1,141 of principal and $3,851 of interest, from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On May 7, 2019, the Company issued 460,000 shares of common stock pursuant to the conversion of $5,106 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On April 26, 2019, the Company issued 400,000 shares of common stock pursuant to the conversion of $4,520 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On March 22, 2019, the Company issued 386,000 shares of common stock pursuant to the conversion of $6,369, consisting of $2,136 of principal and $4,233 of interest, from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On March 6, 2019, the Company issued 370,000 shares of common stock pursuant to the conversion of $5,739 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 26, 2019, the Company issued 349,463 shares of common stock pursuant to the conversion of $6,500 of principal from the First SEG-RedaShex Note. The shares were subsequently issued in May of 2019. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 26, 2019, the Company issued 340,000 shares of common stock pursuant to the conversion of $5,273 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 12, 2019, the Company issued 346,200 shares of common stock pursuant to the conversion of $6,924 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

 

F-18

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

On February 1, 2019, the Company issued 315,000 shares of common stock pursuant to the conversion of $7,875 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On January 23, 2019, the Company issued 260,000 shares of common stock pursuant to the conversion of $6,513 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On January 11, 2019, the Company issued 280,000 shares of common stock pursuant to the conversion of $5,597 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On January 2, 2019, the Company issued 281,385 shares of common stock pursuant to the conversion of $6,500 of principal from the First SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Common Stock Issuances on Subscriptions Payable

 

On January 1, 2019, the Company issued 276,960 shares to DiamondRock, LLC for the conversion of $5,345 of debt on December 31, 2018.

 

Note 10 – 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, 2019, and the year ended December 31, 2018, 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, 2019, and December 31, 2018, the Company had approximately $5,540,000 and $5,277,000 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,
	2019	2018
Deferred tax assets:
Net operating loss carry forwards	$1,163,400	$1,108,170
Net deferred tax assets before valuation allowance	$1,163,400	$1,108,170
Less: Valuation allowance	(1,163,400)	(1,108,170)
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, 2019, and December 31, 2018, respectively.

 

 

F-19

 

 

Premier Biomedical, Inc.

Notes to Condensed Financial Statements

 (Unaudited)

 

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,
	2019	2018
Federal and state statutory rate	21%	21%
Change in valuation allowance on deferred tax assets	(21%)	(21%)

 

In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.

 

Note 11 – Subsequent Events

 

Convertible Debt Financing

On October 3, 2019, the Company received net proceeds of $25,000, carrying a $150,000 face value after a $125,000 commitment fee, pursuant to the first tranche of the securities purchase agreement with Green Coast Capital International SA (“First GCCI Note”) on a 12% interest bearing; unsecured convertible promissory note; maturing on October 3, 2020, with the first twelve (12) months of interest guaranteed. The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. In addition, the holder is entitled to deduct $1,000 from the conversion amount in each conversion to cover the holder’s deposit fees.

 

Common Stock Issuances for Debt Conversions

On various dates from October 4, 2019 through November 11, 2019, the Company issued a total of 48,950,000 shares of common stock pursuant to the conversion of $46,374 of principal from the Third RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On various dates from October 28, 2019 through November 12, 2019, the Company issued a total of 45,969,063 shares of common stock pursuant to the conversion of $39,900, consisting of $38,000 of principal and $1,900 of interest, from the Second PowerUp Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On various dates from October 2, 2019 through October 21, 2019, the Company issued a total of 27,225,607 shares of common stock pursuant to the conversion of $64,000 of convertible debt, consisting of $60,600 of principal and $3,400 of interest, from the First PowerUp Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On various dates from October 18, 2019 through November 5, 2019, the Company issued a total of 15,600,000 shares of common stock pursuant to the conversion of $8,860 of principal and $1,500 of selling of fees, from the First Crown Bridge Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

 

 

F-20

 

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Premier Biomedical, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Premier Biomedical, Inc. (the Company) as of December 31, 2018 and 2017, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2018, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company suffered losses from operations which raise substantial doubt about its ability to continue as a going concern. Managements plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ M&K CPAS, PLLC

 

 We have served as the Company’s auditor since 2011.

 

Houston, TX

April 15, 2019

 

 

 

F-21

 

 

PREMIER BIOMEDICAL, INC.

BALANCE SHEETS

 

	December 31,	December 31,
	2018	2017
ASSETS
Current assets:
Cash	$86,827	$83,704
Accounts receivable	3,092	312
Inventory	25,985	84,763
Other current assets	43,883	34,824
Total current assets	159,787	203,603
Property and equipment, net	5,203	5,478
Total assets	$164,990	$209,081
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$264,398	$346,814
Accounts payable, related parties	25,944	41,382
Accrued interest	22,099	5,840
Convertible notes payable, net of discounts of $-0- and $30,010
at December 31, 2018 and 2017, respectively, currently in default	309,637	169,990
Derivative liabilities	1,690,304	2,255,781
Total current liabilities	2,312,382	2,819,807
Total liabilities	2,312,382	2,819,807
Commitments and contingencies	-	-
Stockholders' equity (deficit):
Series A convertible preferred stock, $0.001 par value, 10,000,000 shares authorized,
2,000,000 shares designated, issued and outstanding at December 31, 2018 and 2017	2,000	2,000
Series B convertible preferred stock, $0.001 par value, 1,000,000 shares designated, 150,000
and -0- shares issued and outstanding at December 31, 2018 and 2017, respectively	150	-
Common stock, $0.00001 par value, 1,000,000,000 shares
authorized, 5,652,410 and 2,551,363 shares issued and
outstanding at December 31, 2018 and 2017, respectively	57	26
Additional paid in capital	14,572,754	13,442,255
Subscriptions payable, consisting of 276,960 and 254,703
shares at December 31, 2018 and 2017, respectively	5,345	273,805
Accumulated deficit	(16,727,698)	(16,328,812)
Total stockholders' equity (deficit)	(2,147,392)	(2,610,726)
Total liabilities and stockholders' equity (deficit)	$164,990	$209,081

 

The accompanying notes are an integral part of these financial statements.

 

 

F-22

 

 

PREMIER BIOMEDICAL, INC.

STATEMENTS OF OPERATIONS

 

	For the Years
	Ended December 31,
	2018	2017
Revenue	$39,795	$39,761
Cost of goods sold	113,727	25,439
Gross profit (loss)	(73,932)	14,322
Operating expenses:
Research and development	-	184,315
General and administrative	189,285	196,670
Professional fees	429,625	923,175
Total operating expenses	618,910	1,304,160
Net operating loss	(692,842)	(1,289,838)
Other income (expense):
Interest expense	(415,287)	(351,502)
Gain on early extinguishment of debt	6,750	-
Change in derivative liabilities	702,493	(2,115,986)
Loss on joint venture	-	(6,232)
Total other income (expense)	293,956	(2,473,720)
Net loss	$(398,886)	$(3,763,558)
Weighted average number of common shares
outstanding - basic and fully diluted	3,505,460	1,958,745
Net loss per share - basic and fully diluted	$(0.11)	$(1.92)

 

The accompanying notes are an integral part of these financial statements.

 

 

F-23

 

 

PREMIER BIOMEDICAL, INC.

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

 

	Series A Convertible		Series B Convertible				Additional			Total
	Preferred Stock		Preferred Stock		Common Stock		Paid-In	Subscriptions	Accumulated	Equity
	Shares	Amount	Shares	Amount	Shares	Amount	Capital	Payable	Deficit	(Deficit)
Balance, December 31, 2016	2,000,000	$2,000	-	$-	1,218,227	$13	$11,902,537	$-	$(12,565,254)	$(660,704)
Common stock sold for cash	-	-	-	-	160,000	2	284,998	-	-	285,000
Common stock issued on equity line of credit	-	-	-	-	20,588	-	18,323	-	-	18,323
Common stock issued on debt conversions	-	-	-	-	797,368	8	423,189	-	-	423,197
Exercise of warrants at $0.00001 per share, related parties	-	-	-	-	28,000	-	70	-	-	70
Shares issued for services on terminated offering	-	-	-	-	291,180	3	313,015	273,805	-	586,823
Shares issued for services	-	-	-	-	36,000	-	84,600	-	-	84,600
Warrants issued for services, related parties	-	-	-	-	-	-	102,364	-	-	102,364
Warrants issued for services	-	-	-	-	-	-	9,617	-	-	9,617
Adjustments to derivative liability due to debt conversions	-	-	-	-	-	-	303,542	-	-	303,542
Net loss for the year ended December 31, 2017	-	-	-	-	-	-	-		(3,763,558)	(3,763,558)
Balance, December 31, 2017	2,000,000	$2,000	-	$-	2,551,363	$26	$13,442,255	$273,805	$(16,328,812)	$(2,610,726)
Common stock issued on subsctiptions payable	-	-	-	-	254,703	3	273,802	(273,805)	-	-
Series B convertible preferred stock sold for cash	-	-	150,000	150	-	-	149,850	-	-	150,000
Common stock issued on debt conversions	-	-	-	-	2,834,264	28	210,246	5,345	-	215,619
Exercise of warrants at $0.00001 per share, related parties	-	-	-	-	12,000	-	30	-	-	30
Odd lot shares issued on reverse stock split	-	-	-	-	80	-	-	-	-	-
Warrants issued for services, related parties	-	-	-	-	-	-	272,585	-	-	272,585
Warrants issued for services	-	-	-	-	-	-	24,359	-	-	24,359
Adjustments to derivative liability due to debt conversions	-	-	-	-	-	-	199,627	-	-	199,627
Net loss for the year ended December 31, 2018	-	-	-	-	-	-	-		(398,886)	(398,886)
Balance, December 31, 2018	2,000,000	$2,000	150,000	$150	5,652,410	$57	$14,572,754	$5,345	$(16,727,698)	$(2,147,392)

 

The accompanying notes are an integral part of these financial statements.

 

 

F-24

 

 

PREMIER BIOMEDICAL, INC.

STATEMENTS OF CASH FLOWS

 

	For the Years
	Ended December 31,
	2018	2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$(398,886)	$(3,763,558)
Adjustments to reconcile net loss
to net cash used in operating activities:
Allowance for inventory obsolescence	87,650	2,316
Depreciation	2,304	2,316
Gain on early extinguishment of debt	(6,750)	-
Loss on debt default provisions	25,500	-
Change in fair market value of derivative liabilities	(702,493)	2,115,986
Amortization of debt discounts	366,653	340,961
Stock based compensation, related parties	272,585	102,364
Stock based compensation	24,359	681,040
Decrease (increase) in assets:
Accounts receivable	(2,780)	(312)
Inventory	(28,872)	(84,763)
Other current assets	(9,059)	(23,394)
Increase (decrease) in liabilities:
Accounts payable	(82,416)	126,074
Accounts payable, related parties	(15,438)	(11,107)
Accrued interest	22,765	8,531
Accrued interest, related parties	-	(3,570)
Net cash used in operating activities	(444,878)	(507,116)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(2,029)	(2,694)
Net cash used in investing activities	(2,029)	(2,694)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock, net of offering costs	150,000	285,000
Proceeds from sale of stock on equity line of credit	-	18,323
Proceeds from exercise of warrants, related party	30	70
Proceeds from convertible notes payable	300,000	300,000
Repayments of notes payable, related parties	-	(30,000)
Net cash provided by financing activities	450,030	573,393
NET CHANGE IN CASH	3,123	63,583
CASH AT BEGINNING OF PERIOD	83,704	22,437
CASH AT END OF PERIOD	$86,827	$86,020
SUPPLEMENTAL INFORMATION:
Interest paid	$369	$5,580
Income taxes paid	$-	$-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Value of debt discounts	$300,000	$221,515
Value of derivative adjustment due to debt conversions	$199,627	$303,542
Value of shares issued for conversion of debt	$215,619	$423,197

 

The accompanying notes are an integral part of these financial statements.

 

 

F-25

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Note 1 – Nature of Business and Significant Accounting Policies

 

Nature of Business

Premier Biomedical, Inc. (“the Company”) was incorporated in the State of Nevada on May 10, 2010 (“Inception”). The Company was formed to develop and market medications and procedures that address a significant number of the most highly visible health issues currently affecting mankind. Our current focus is primarily on the development and distribution of our pain products.

 

These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

We maintain cash balances in non-interest-bearing accounts, which do not currently exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.

 

Patent Rights and Applications

Patent rights and applications costs include the acquisition costs and costs incurred for the filing of patents. Patent rights and applications are amortized on a straight-line basis over the legal life of the patent rights beginning at the time the patents are approved. Patent costs for unsuccessful patent applications are expensed when the application is terminated.

 

Fair Value of Financial Instruments

Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, prepaid expenses and accrued expenses reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments.

 

Basic and Diluted Loss Per Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

 

 

F-26

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Stock-Based Compensation

Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company’s stock-based compensation consisted of the following during the years ended December 31, 2018 and 2017, respectively:

 

	December 31,	December 31,
	2018	2017
Common stock issued for services	$-	$84,600
Warrants issued for services, related parties	272,585	102,364
Warrants issued for services	24,359	9,617
Common stock issued for services on terminated offering	-	586,823
Total stock based compensation	$296,944	$783,404

 

Revenue Recognition

On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.

 

Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

 

We determine revenue recognition through the following steps:

 

●

identification of the contract, or contracts, with a customer;

●

identification of the performance obligations in the contract;

●

determination of the transaction price;

●

allocation of the transaction price to the performance obligations in the contract; and

●

recognition of revenue when, or as, we satisfy a performance obligation.

 

Sales are recorded when the earnings process is complete or substantially complete, and the revenue is measurable and collectability is reasonably assured, which is typically when products are shipped. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue from sales in which payment has been received, but the earnings process has not been completed. Sales commenced on July 5, 2017 with the termination of our joint venture.

 

Advertising and Promotion

All costs associated with advertising and promoting products are expensed as incurred. These expenses were $66,244 and $64,108 for the years ended December 31, 2018 and 2017, respectively.

 

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not, that such asset will not be recovered through future operations.

 

 

F-27

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Uncertain Tax Positions

In accordance with ASC 740, “Income Taxes” (“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

 

Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.

 

The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.

 

Recently Issued Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modify the disclosure requirements of Topic 820. The new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

 

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

 

In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The amendment provides guidance on accounting for the impact of the Tax Cuts and Jobs Act (the “Tax Act”) and allows entities to complete the accounting under ASC 740 within a one-year measurement period from the Tax Act enactment date. This standard is effective upon issuance. The Tax Act has several significant changes that impact all taxpayers, including a transition tax, which is a one-time tax charge on accumulated, undistributed foreign earnings. The calculation of accumulated foreign earnings requires an analysis of each foreign entity’s financial results going back to 1986. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

 

In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The guidance permits entities to reclassify tax effects stranded in Accumulated Other Comprehensive Income as a result of tax reform to retained earnings. This new guidance is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted in annual and interim periods and can be applied retrospectively or in the period of adoption. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements.

 

 

F-28

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the years ended December 31, 2018 and 2017.

 

No other new accounting pronouncements, issued or effective during the year ended December 31, 2018, have had or are expected to have a significant impact on the Company’s financial statements.

 

Note 2 – Going Concern

 

As shown in the accompanying financial statements, the Company has no revenues, incurred net losses from operations resulting in an accumulated deficit of $16,727,698, and had negative working capital of ($2,152,595) at December 31, 2018. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new products and services to begin generating revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful; therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.

 

The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 3 – Related Party

 

Accounts Payable

The Company owed $24,116 and $39,116 as of December 31, 2018 and 2017, respectively, to entities owned by the Chairman of the Board of Directors. The amounts are related to patent costs paid by the Chairman on behalf of the Company.

 

The Company owed $753 and $713 as of December 31, 2018 and 2017, respectively, to the Company’s CEO for reimbursable expenses.

 

The Company owed $1,075 and $1,553 as of December 31, 2018 and 2017, respectively, amongst members of the Company’s Board of Directors for reimbursable expenses.

 

Notes Payable

On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from the Company’s CEO. The principal and interest was repaid in full in November of 2017.

 

On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from the Company’s Chairman of the Board. The principal and interest was repaid in full in November of 2017.

 

On July 6, 2015, the Company received an unsecured loan in the amount of $10,000, due on demand, bearing interest at a simple interest rate of 8%, from one of the Company’s Directors. The principal and interest was repaid in full in November of 2017.

  

 

F-29

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

  

Common Stock Warrants Exercised

On November 5, 2018, the Company issued 12,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.0025 per share for total proceeds of $30.

 

On November 22, 2017, the Company issued 28,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.0025 per share for total proceeds of $70.

 

Common Stock Warrants Granted

On December 15, 2018, the Company granted warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (842,000 shares); Mitchell Felder (842,000 shares), Heidi Carl (500,000 shares), John Borza (579,000 shares), Jay Rosen (52,500 shares), Patricio Reyes (500,000 shares) and John Pauly (52,500 shares). The exercise price of the foregoing warrants is nine cents ($0.09) per share. The warrants are exercisable over seven (7) years. The total fair value of the 3,368,000 common stock warrants using the Black-Scholes option-pricing model is $272,585, or $0.08093 per share, based on a volatility rate of 211%, a risk-free interest rate of 2.72% and an expected term of 3.5 years, and was expensed upon issuance.

 

On December 22, 2017, the Company granted warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (34,000 shares); Mitchell Felder (34,000 shares), Heidi Carl (24,000 shares), John Borza (29,000 shares), Jay Rosen (4,000 shares), Patricio Reyes (16,000 shares) and John Pauly (8,000 shares). The exercise price of the foregoing warrants is one dollar and twenty-five cents ($1.25) per share. The warrants are exercisable over seven (7) years. The total fair value of the 149,000 common stock warrants using the Black-Scholes option-pricing model is $102,364, or $0.68699 per share, based on a volatility rate of 195%, a risk-free interest rate of 2.01% and an expected term of 3.5 years, and was expensed upon issuance.

 

Loss on Joint Venture

The Company advanced a total of $48,778 to its joint venture partner, Premier Biomedical Pain Management Solutions, LLC, and was subsequently repaid a total of $44,604 on July 5, 2017 with the termination of the joint venture, resulting in a loss of $6,232, consisting of the original investment of $2,058 and the loss on this receivable of $4,174, for the year ended December 31, 2017.

 

Note 4 – Joint Venture

 

On September 13, 2016, we entered into an operating agreement to form a pain management joint venture company with Advanced Technologies Solutions (ATS), a company based in San Diego, California and owned by Ronald T. LaBorde, a member of our Board of Directors. The joint venture company, Premier Biomedical Pain Management Solutions, LLC, a Nevada limited liability company (PBPMS), to develop and market natural and cannabis-based generalized, neuropathic, and localized pain relief treatment products. We owned 50% of PBPMS and ATS owned the other 50%, with 89% of the profits allocated to us and the remaining 11% of profits allocated to ATS. As part of the agreement with ATS, Mr. LaBorde was appointed a member of our Board of Directors.

 

PBPMS was required to enter into separate license agreements with us and ATS for the use of technology previously developed by both companies. Intellectual property developed jointly by the parties will be the property of PBPMS. However, ATS and Mr. LaBorde could have developed inventions and intellectual property independently from PBPMS, and such inventions and intellectual property would have been the sole property of ATS or Mr. LaBorde. Pursuant to the terms of the PBPMS operating agreement, The Company was to tender 1,250,000 warrants, for the purchase of an equal number of shares of our common stock at a strike price of $0.05, pursuant to the license agreement between ATS and PBPMS. The Company and Mr. LaBorde did not execute the license agreement or issue these warrants, and on July 5, 2017, the Company terminated the joint venture agreement, resulting in a loss of $6,232.

 

 

F-30

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Our initial capital contribution to PBPMS was $25,000. ATS was to contribute (i) technical, labor, manufacturing information and know-how required to produce the initial product, an extended duration topical pain relief patch; (ii) $5,000 worth of primary ingredients; and (iii) $5,000 worth of other materials to produce the initial prototype pain relief patches.

 

PBPMS was managed by a board of managers (PBPMS Board). The PBPMS Board consisted of William A. Hartman, our President and Chief Executive Officer and member of our Board of Directors, Ronald T. LaBorde, the Founder of ATS and member of our Board of Directors, Dr. Patricio Reyes, our Chief Technology Officer and member of our Board of Directors, and John Borza, our Vice-President and member of our Board of Directors. Decisions of the PBPMS Board require unanimous approval.

 

The PBPMS operating agreement was subject to other common terms and ownership transfer restrictions, including a right of first refusal; however, the operating agreement and entity were dissolved upon the termination of the joint venture on July 5, 2017.

 

Note 5 – Subsidiary Formation

 

On September 14, 2017, we formed Premier Biomedical Pain Relief Meds, LLC as a wholly-owned Nevada limited liability company. On January 1, 2018, we contributed our pain management assets to this entity and continued our pain management operations within this new subsidiary.

 

Note 6 – Fair Value of Financial Instruments

 

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

 

The Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

 

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

 

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of December 31, 2018 and 2017, respectively:

 

	Fair Value Measurements at December 31, 2018
	Level 1	Level 2	Level 3
Assets
Cash	$86,827	$-	$-
Total assets	86,827	-	-
Liabilities
Convertible note payable	-	309,637	-
Derivative liabilities	-	-	1,690,304
Total liabilities	-	309,637	1,690,304
	$86,827	$(309,637)	$(1,690,304)

 

 

F-31

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

	Fair Value Measurements at December 31, 2017
	Level 1	Level 2	Level 3
Assets
Cash	$83,704	$-	$-
Total assets	83,704	-	-
Liabilities
Convertible note payable, net of discounts	-	169,990	-
Derivative liabilities	-	-	2,255,781
Total liabilities	-	169,990	2,255,781
	$83,704	$(169,990)	$(2,255,781)

 

The fair values of our related party debts are deemed to approximate book value, and are considered Level 2 inputs as defined by ASC Topic 820-10-35.

 

There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the years ended December 31, 2018 or the year ended December 31, 2017.

 

Note 7 – Patent Rights and Applications

 

The Company amortizes its patent rights and applications on a straight-line basis over the expected useful technological or economic life of the patents, which is typically 17 years from the legal approval of the patent applications when there are probable future economic benefits associated with the patent. The Company has elected to expense all of their patent rights and application costs due to difficulties associated with having to prove the value of their future economic benefits. All patent applications are currently pending and the Company has no patents that have yet been approved. It is the Company’s policy that it performs reviews of the carrying value of its patent rights and applications on an annual basis.

 

On March 4, 2015, we entered into a Patent License Agreement (“PLA”) with the University of Texas at El Paso (“UTEP”) regarding our joint research and development of CTLA-4 Blockade with Metronomic Chemotherapy for the Treatment of Breast Cancer. This is the first PLA with UTEP following our Collaborative Agreement with them dated May 9, 2012, and memorializes the joint ownership of the applicable patent and the financial and other terms related thereto.

 

On June 19, 2015, we entered into Amendment No. 1 to this Agreement, pursuant to which we explicitly included Provisional Patent Application No. 62/161,116 entitled, “Anti-CTLA-4 Blockade” (the “Application”) under the definition of “Patent Rights” as set forth in the PLA. The Application was filed with the United States Patent and Trademarks Office on May 13, 2015; the underlying technology was invented by Robert Kirken and Georgialina Rodriguez, and is solely-owned by The Board of Regents of The University of Texas System.

 

 

F-32

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Note 8 – Convertible Notes Payable

 

Convertible notes payable consists of the following at December 31, 2018 and 2017, respectively:

 

	December 31,	December 31,
	2018	2017
On July 11, 2018, the Company received proceeds of $120,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on October 31, 2018 (“Third Red Diamond Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $25,920 of principal was converted into 348,667 shares of common stock over various dates between July 27, 2018 and August 23, 2018.	$94,080	$-
On July 11, 2018, the Company received proceeds of $60,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on October 31, 2018 (“Third SEG-RedaShex Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.	60,000	-
On April 24, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on July 31, 2018 (“Second Red Diamond Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.	30,000	-
On April 24, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on July 31, 2018 (“Second SEG-RedaShex Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.	30,000	-
On March 1, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on May 31, 2018 (“First SEG-RedaShex Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.	30,000	-
On March 1, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on May 31, 2018 (“First Red Diamond Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $30,000 of principal was converted into 387,815 shares of common stock over various dates between September 5, 2018 and October 3, 2018.	-	-
On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second Diamond Rock Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A $15,000 loss was recognized during the fourth quarter of 2018 due to the enactment of default provision. A total of $9,943 of principal was converted into 496,960 shares of common stock over various dates between December 12, 2018 and December 31, 2018, and 276,960 of those shares were subsequently issued on January 1, 2019.	55,057	50,000
On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second SEG Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $10,000 of principal was converted into 20,833 shares of common stock on October 31, 2017, and the remaining $40,000 of principal was converted into 106,238 shares of common stock on January 29, 2018.	-	40,000
On August 8, 2017, the Company entered into an exchange agreement with Diamond Rock, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First Diamond Rock Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A $10,500 loss was recognized during the fourth quarter of 2018 due to the enactment of default provision. A total of $15,000 of principal was converted into an aggregate of 31,250 shares of common stock at various dates between November 6, 2017 and November 13, 2017, and another $35,000 of principal was converted into an aggregate of 751,550 shares of common stock at various dates between October 12, 2018 and November 30, 2018.	10,500	35,000
On August 8, 2017, the Company entered into an exchange agreement with The Special Equities Group, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First SEG Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $49,756, consisting of $43,250 of principal and $6,506 of interest, was converted into 943,071 shares of common stock over various dates between August 20, 2018 and December 12, 2018. An additional $6,750 of principal was forgiven on the note.	-	50,000
On August 8, 2017, the Company entered into an exchange agreement with RDW Capital, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First RDW Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $25,000 of principal was converted into 52,632 shares of common stock on October 31, 2017, and the remaining $25,000 of principal was converted into 76,923 shares of common stock on January 3, 2018.	-	25,000
Total convertible notes payable, currently in default	309,637	200,000
Less unamortized derivative discounts:	-	30,010
Convertible notes payable	309,637	169,990
Less: current portion	309,637	169,990
Convertible notes payable, less current portion	$-	$-

 

 

F-33

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $300,000 and $221,515 for the variable conversion features of the convertible debts incurred during the years ended December 31, 2018 and 2017, respectively. The discounts are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded $366,653 and $340,961 of interest expense pursuant to the amortization of note discounts during the years ended December 31, 2018 and 2017, respectively.

 

All of the convertible debentures carry default provisions that place a “maximum share amount” on the note holders. The maximum share amount that can be owned as a result of the conversions to common stock by the note holders is 4.99% of the Company’s issued and outstanding shares.

 

In accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued on the Redwood Notes represented embedded derivative features, and these are shown as derivative liabilities on the balance sheet. The Company calculated the fair value of the compound embedded derivatives associated with the convertible debentures utilizing a lattice model.

 

The Company recognized interest expense for the years ended December 31, 2018 and 2017, respectively, as follows:

 

	December 31,	December 31,
	2018	2017
Interest on convertible notes	$22,765	$8,531
Interest on related party loans	-	2,010
Amortization of derivative discounts	366,653	340,961
Loss on default provisions	25,500	-
Interest on credit cards	369	-
Total interest expense	$415,287	$351,502

 

Note 9 – Derivative Liabilities

 

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.

 

The fair values of the Company’s derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice model. The Company recognized current derivative liabilities of $1,690,304 and $2,255,781 at December 31, 2018 and 2017, respectively. The change in fair value of the derivative liabilities resulted in a gain of $702,493 and a loss of $2,115,986 for the years ended December 31, 2018 and 2017, respectively, which has been reported within other expense in the statements of operations. The gain of $702,493 for the year ended December 31, 2018 consisted of a net loss in market value of $64,139 on the convertible notes and a net gain of $766,632 in market value of the warrants. The loss of $2,115,986 for the year ended December 31, 2017 consisted of a loss of $7,103,444 attributable to the fair value of warrants, a gain of $3,766,437 due to the subsequent exchange of the warrants, a net loss in market value of $4,767 on the convertible notes and a net gain of $1,225,788 in market value of the warrants.

 

 

F-34

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

The following is a summary of changes in the fair market value of the derivative liability during the years ended December 31, 2018 and 2017, respectively:

 

	Derivative
	Liability
	Total
Balance, December 31, 2016	$221,822
Increase in derivative value due to issuances of convertible promissory notes	221,515
Increase in derivative value attributable to tainted warrants	7,103,444
Decrease in derivative value attributable to exchange of warrants	(3,766,437)
Change in fair market value of derivative liabilities due to the mark to market adjustment	(1,221,021)
Debt conversions	(303,542)
Balance, December 31, 2017	$2,255,781
Increase in derivative value due to issuances of convertible promissory notes	336,643
Change in fair market value of derivative liabilities due to the mark to market adjustment	(702,493)
Debt conversions	(199,627)
Balance, December 31, 2018	$1,690,304

 

Key inputs and assumptions used to value the convertible debentures and warrants issued during the years ended December 31, 2018 and 2017:

●

Stock price ranging from $0.19 to $0.0812 during these periods would fluctuate with projected volatility.

●

The notes convert with variable conversion prices and fixed conversion prices (tainted notes).

●

An event of default would occur -0-% of the time, increasing 2% per month to a maximum of 10%.

●

The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company in the range of 208.5% - 289.6%.

●

The Company would redeem the notes -0-% of the time, increasing 1% per month to a maximum of 5%.

●

All notes are assumed to be extended at maturity by 2 years – the time required to convert out this volume of stock.

●

The holders of the securities would automatically convert midway through to maturity on a monthly basis based on ownership and trading volume limitations.

●

A change of control and fundamental transaction would occur initially -0-% of the time and increase monthly by -0-% to a maximum of -0-%.

●

The monthly trading volume would average $868,383 to $798,331 and would increase at 1% per month.

●

The stock price would fluctuate with the Company projected volatility using a random sampling (500,000 iterations for each valuation) from a normal distribution. The stock price of the underlying instrument is modelled such that it follows a geometric Brownian motion with constant drift and volatility.

●

The Holder would exercise the warrants after one trading day as they become exercisable (at issuance) at target prices of 3 to 5 times the projected reset price or higher.

●

Reset events were projected to occur by 12/31/18 – the reset provision ends 3/30/19 and the option expires 3/30/20.

●

The stock price would fluctuate with an annual volatility. The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company and the term remaining in the range 226.2% - 226.2%.

●

The Holder would exercise the warrant at maturity in 2020 if the stock price was above the reset exercise price.

 

 

F-35

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Note 10 – Commitments and Contingencies

 

Collaborative Patent License Agreements

On May 9, 2012, the Company entered into a Collaborative Agreement with the University of Texas at El Paso. Pursuant to the terms of the Agreement, the Company will work jointly with the University to develop a series of research and development programs around its sequential-dialysis technology in the areas of Alzheimer's Disease, Traumatic Brain Injury (TBI), Chronic Pain Syndrome, Fibromyalgia, Multiple Sclerosis, Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig's disease), Blood Sepsis, Cancer, Heart Attacks and Strokes. The programs will utilize the facilities at one or more of the University of Texas’ campuses. The Company will pay the University’s actual overhead for the projects, plus a negotiated facility and administration overhead expense, and 10% of all gross revenues associated with the sale, license and/or royalties of all products and treatment procedures directly affiliated with programs. Intellectual property jointly invented and developed as a result of the projects will be owned jointly by the University and the Company. The Agreement has an initial term of five (5) years, and is renewable upon mutual agreement of the parties.

 

On March 4, 2015, we entered into a Patent License Agreement (PLA) with the University of Texas at El Paso (UTEP) regarding our joint research and development of CTLA-4 Blockade with Metronomic Chemotherapy for the Treatment of Breast Cancer. This is the first PLA with UTEP following our Collaborative Agreement with them dated May 9, 2012, and memorializes the joint ownership of the applicable patent and the financial and other terms related thereto.

 

On June 19, 2015, we entered into Amendment No. 1 to this Agreement, pursuant to which we explicitly included Provisional Patent Application No. 62/161,116 entitled, “Anti-CTLA-4 Blockade” (the “Application”) under the definition of “Patent Rights” as set forth in the PLA. The Application was filed with the United States Patent and Trademarks Office on May 13, 2015; the underlying technology was invented by Robert Kirken and Georgialina Rodriguez, and is solely-owned by The Board of Regents of The University of Texas System.

 

On October 31, 2017 we entered into an Agreement, Final Payment under Contract, and Release of all Claims, whereby we agreed to pay them a total of $326,336 arising out of the research and development agreements with an initial payment of $22,211, and monthly payments of varying amounts between $5,000 and $20,000 thereafter for twenty eight months until the balance is paid in full. Subject to the compliance of all terms, the intellectual property rights established and arising out of the collaborative agreements remain in full force and effect and the parties agreed to a mutual release upon the final contracted payment. The full amount of the liability has been recognized as accounts payable, with $225,024 outstanding as of the date of this filing, which is currently in default.

 

Note 11 – Stockholders’ Equity

 

Reverse Stock Split

On June 27, 2018, the Company effected a 1-for-250 reverse stock split (the “Reverse Stock Split”). No fractional shares were issued, and no cash or other consideration was paid in connection with the Reverse Stock Split. Instead, the Company issued one whole share of the post-Reverse Stock Split common stock to any stockholder who otherwise would have received a fractional share as a result of the Reverse Stock Split. The Company was authorized to issue 1,000,000,000 shares of common stock prior to the Reverse Stock Split, which remains unaffected. The Reverse Stock Split did not have any effect on the stated par value of the common stock, or the Company’s authorized preferred stock. Unless otherwise stated, all share and per share information in this Annual Report on Form 10-K has been retroactively adjusted to reflect the Reverse Stock Split.

 

 

F-36

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Convertible Preferred Stock

The Company has 10,000,000 authorized shares of Preferred Stock, of which 2,000,000 shares of $0.001 par value Series A Convertible Preferred Stock (“Series A Preferred Stock”) have been designated, and another 1,000,000 shares of $0.001 par value Series B Convertible Preferred Stock (“Series B Preferred Stock”) were designated on November 23, 2018. The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares sufficient to effect the conversions, and agreed to reserve no less than 225 million shares.

 

Convertible Preferred Stock, Series A

Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share into one (1) fully paid and non-assessable share of Common Stock. Each outstanding share of Series A Preferred Stock is entitled to one hundred (100) votes per share on all matters to which the shareholders of the Corporation are entitled or required to vote.

 

Convertible Preferred Stock, Series B

Each share of Series B Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share into that number of fully paid and nonassessable shares of our common stock equal to the quotient of the Conversion Principal Amount divided by the lesser of (a) the Fixed Conversion Price established by our Board of Directors on the date of conversion, and (b) the Fair Market Value. The Certificate of Designation defines Fair Market Value as 60% of the lowest Traded Price for the common stock for the previous fifteen (15) trading days prior to the Conversion Date on the market or exchange where our common stock is trading. The Conversion Principal Amount is equal to the Original Issue Price ($1.00) divided by nine-tenths (0.9). The Fixed Conversion Price is the price set by our Board of Directors upon conversion but in no event less than the last Traded Price of our common stock. Traded Price is defined as the price at which our common stock changes hands on the designated exchange or market. Conversion of the Series B Preferred Stock is subject to a Beneficial Ownership Limitation that prohibits the conversion of the Series B Preferred Stock if the conversion would result in beneficial ownership by the holder and its affiliates of more than 4.99% of our outstanding shares of common stock. A holder of Series B Preferred Stock may increase its Beneficial Ownership Limitation up to 9.99% but only after 61 days have passed since the holder gave notice to the Company. The Series B Preferred Stock has no voting rights. The rights of the Series B Preferred Stock survive any reorganization, merger or sale of the Company.

 

The holders of Series B Preferred Stock shall receive noncumulative dividends on an as-converted basis in the same form as any dividends to be paid out on shares of our common stock. Any dividends paid will first be paid to the holders of Series B Preferred Stock prior and in preference to any payment or distribution to holders of common stock. Other than as set forth in the previous sentence, the Certificate of Designation provides that no other dividends shall be paid on Series B Preferred Stock. Dividends on the Series B Preferred Stock are not mandatory or cumulative. There are no sinking fund provisions applicable to the Series B Preferred Stock, and the holders of Series B Preferred Stock have no redemption rights. The Corporation may redeem the Series B Preferred Stock upon 30 days’ prior notice at a price equal to the sum of 133% of the Original Issue Price plus the amount of any unpaid dividends on the shares to be redeemed.

 

As long as any shares of Series B Preferred Stock remain outstanding, the Certificate of Designation provides that without the approval of 75% of the holders of the outstanding Series B Preferred Stock, we may not (i) alter or change the rights, preferences, or privileges of the Series B Convertible Preferred Stock, (ii) increase or decrease the number of authorized shares of Series B Convertible Preferred Stock, or (iii) authorize the issuance of securities having a preference over or on par with the Series B Preferred Stock.

 

Sale of Convertible Preferred Stock, Series B (2018)

On November 23, 2018, we sold 75,000 shares of Series B Convertible Preferred Stock to RedDiamond Partners LLC, and another 75,000 shares of Series B Convertible Preferred Stock to SEG-RedaShex, LLC for $150,000 in total. Pursuant to the sale, the purchasers have the right to participate in any future financing up to 100% of the financing for the next 12 months. We also agreed to refrain from issuing any shares of common stock or equivalents for 30 days after the sale. The agreement also prohibits the Company from entering into any agreement involving a Variable Rate Transaction for eight months after the sale. In addition, we agreed to grant the purchasers a most-favored nation provision whereby the purchasers may exchange their shares of Series B Preferred Stock for securities issued in a subsequent financing on the same terms and conditions. The purchasers also have anti-dilution rights that allow them to acquire shares of common stock at a lower conversion price if a person acquires shares of our common stock or equivalents at a price per share lower than the conversion price of the Series B Preferred Stock.

 

 

F-37

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Common Stock

The Company has one billion authorized shares of $0.00001 par value Common Stock, as increased pursuant to an amendment to the articles of incorporation on February 9, 2016.

 

Common Stock Warrants Exercised (2018)

On November 5, 2018, the Company issued 12,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.0025 per share for total proceeds of $30.

 

Common Stock Warrants Exercised (2017)

On November 22, 2017, the Company issued 28,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.0025 per share for total proceeds of $70.

 

Securities Purchase Agreement (2017)

On March 30, 2017, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and each of The Special Equities Group, LLC, RDW Capital LLC, and DiamondRock, LLC (each a “Purchaser” and collectively, the “Purchasers”) to sell our common stock and warrants at a fixed price. Pursuant to the Purchase Agreement, we received from the Purchasers an aggregate of $300,000, net of $15,000 of offering costs, in exchange for 160,000 shares of our common stock, warrants to purchase up to 160,000 shares of our common stock at an exercise price of $7.50 (“Series A Warrants”) and warrants to purchase up to 160,000 shares or our common stock at an exercise price of $12.50 (“Series B Warrants”). Both the Series A Warrants and Series B Warrants issued pursuant to the Purchase Agreement are exercisable immediately upon receipt and have a term of three years. In addition, the Purchaser is entitled to a one-time price reset on the purchase price of the common stock of each tranche to the lower of (i) $5.00 or (ii) a 50% discount to the average of the three lowest closing prices in the 20 trading days prior to the reset date, which is the earlier of (i) the 7 month anniversary of the closing of each tranche of this transaction or (ii) 20 trading days after the effectiveness of each tranche. The embedded value in this reset provision is disclosed further in Note 8.

 

On May 30, 2017, the Purchasers bought additional shares of our common stock and warrants for $150,000 (the “Second Closing”), in exchange for 30,303,033 shares of our common stock, warrants to purchase up to 121,212 shares of our common stock at an exercise price of $7.50 (“Series A Warrants”) and warrants to purchase up to 121,212 shares or our common stock at an exercise price of $12.50 (“Series B Warrants”). Both the Series A Warrants and Series B Warrants issued pursuant to the Purchase Agreement are exercisable immediately upon receipt and have a term of three years.

 

The per share purchase price of the Second Closing was the lesser of (i) $5.00, subject to certain adjustments for stock splits and other similar transactions, or (ii) 50% of the closing price on the trading day immediately prior to the date of sale. The total number of shares to be sold in the Second Closing were determined by dividing the total purchase amount of each closing (i.e., $150,000) by the per share purchase price.

 

The Purchase Agreement limits each Purchaser to beneficial ownership of our common stock of no more than 9.99%. The Purchasers also have certain anti-dilution rights in the Purchase Agreement for a period of 12 months. These rights allow the Purchasers to exchange their shares of common stock received pursuant to the Purchase Agreement for additional shares on the same terms and conditions of a subsequent financing.

 

On August 8, 2017, the Company and each of the three Purchasers also entered into exchange agreements whereby the Purchasers exchanged (i) the 53,333 Series A Warrants purchased in the First Closing, (ii) the 53,333 Series B Warrants purchased in the First Closing, and (iii) the 40,404 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (aggregate $150,000) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.

 

 

F-38

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Registration Rights Agreement (2017)

On March 30, 2017, we entered into a Registration Rights Agreement with the Purchasers in connection with the Purchase Agreement. In the Registration Rights Agreement, we agreed to prepare and file a registration statement with the Securities and Exchange Commission covering the resale of all of the shares of common stock sold to the Purchasers and the shares issuable upon exercise of the Series A Warrants and Series B Warrants. We agreed to file an initial registration statement as promptly as possible and have it declared effective no later than June 28, 2017 (or July 28, 2017 if the registration statement was reviewed by the Securities and Exchange Commission) and keep it continuously effective until the securities are sold or may be sold under Rule 144 of the Securities Act without volume or manner-of-sale restrictions. If all of the securities cannot be registered on one registration statement, we agreed to file subsequent registration statements to register the remaining securities as promptly as allowed. The registration statement was subsequently withdrawn on July 24, 2017 and the Purchase Agreement was amended on August 8, 2017 to change the terms of the third closing to an aggregate of $150,000 of convertible notes, bearing interest at 8%, convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.

 

Common Stock Issuances for Debt Conversions (2018)

On December 31, 2018, the Company granted 276,960 shares of common stock pursuant to the conversion of $5,345 of principal from the Second Diamond Rock Note. The shares were subsequently issued on January 1, 2019. As such, the $5,345 was presented as a subscription payable at December 31, 2018. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On December 12, 2018, the Company issued 258,193 shares of common stock pursuant to the conversion of $6,506 of interest from the First SEG Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On December 12, 2018, the Company issued 220,000 shares of common stock pursuant to the conversion of $4,598 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On November 30, 2018, the Company issued 211,550 shares of common stock pursuant to the conversion of $8,462 of principal from the First Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On November 12, 2018, the Company issued 150,000 shares of common stock pursuant to the conversion of $7,650 of principal from the First SEG Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On November 5, 2018, the Company issued 190,000 shares of common stock pursuant to the conversion of $8,075 of principal from the First Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On October 25, 2018, the Company issued 175,000 shares of common stock pursuant to the conversion of $8,750 of principal from the First Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On October 16, 2018, the Company issued 202,702 shares of common stock pursuant to the conversion of $13,500 of principal from the First SEG Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On October 12, 2018, the Company issued 175,000 shares of common stock pursuant to the conversion of $9,712 of principal from the First Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On October 3, 2018, the Company issued 111,940 shares of common stock pursuant to the conversion of $7,500 of principal from the First Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

 

F-39

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

On September 24, 2018, the Company issued 172,176 shares of common stock pursuant to the conversion of $12,500 of principal from the First SEG Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 18, 2018, the Company issued 136,986 shares of common stock pursuant to the conversion of $10,000 of principal from the First Red Diamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On September 5, 2018, the Company issued 138,889 shares of common stock pursuant to the conversion of $12,500 of principal from the First Red Diamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 23, 2018, the Company issued 82,001 shares of common stock pursuant to the conversion of $4,920 of principal from the Third Red Diamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 20, 2018, the Company issued 160,000 shares of common stock pursuant to the conversion of $9,600 of principal from the First SEG Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 15, 2018, the Company issued 100,000 shares of common stock pursuant to the conversion of $6,000 of principal from the Third Red Diamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 9, 2018, the Company issued 83,333 shares of common stock pursuant to the conversion of $5,000 of principal from the Third Red Diamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On July 27, 2018, the Company issued 83,333 shares of common stock pursuant to the conversion of $10,000 of principal from the Third Red Diamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On January 29, 2018, the Company issued 106,238 shares of common stock pursuant to the conversion of $40,000 of principal from the Second SEG Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On January 3, 2018, the Company issued 76,923 shares of common stock pursuant to the conversion of $25,000 of principal from the First RDW Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Common Stock Issuances for Debt Conversions (2017)

On various dates between October 31, 2017 and December 26, 2017, the Company issued a total of 228,775 shares of common stock pursuant to the conversion of an aggregate of $100,000 of principal, among the First and Second RDW, SEG and Diamond Rock Notes. The notes were converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

 

On various dates between January 10, 2017 and March 13, 2017, the Company issued a total of 568,593 shares of common stock pursuant to the conversion of an aggregate of $323,197, consisting of $302,480 of principal and $20,717 of interest, among the Second, Fifth and Seventh Redwood Notes. The notes were converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

 

 

F-40

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Common Stock Issuances on Stock Purchase Agreement (2017)

On February 13, 2017, the Company drew down $8,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 8,000 shares of common stock pursuant to the Seventh Put Notice.

 

On January 10, 2017, the Company drew down $10,323 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 12,588 shares of common stock pursuant to the Sixth Put Notice.

 

Common Stock Issuances for Services (2017)

On December 6, 2017, we agreed to issue a total of 545,882 shares of our common stock to The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC as compensation, of which a total of 291,180 shares were issued immediately with an aggregate fair value of $313,018 based on the closing price of the Company’s common stock on the date of grant, and the other 254,703 shares were subsequently issued on various dates between January 17, 2018 and February 13, 2018. The aggregate fair value of the shares issued subsequent to December 31, 2017 was $273,805.

 

On August 25, 2017, we agreed to issue 36,000 shares of our common stock to a third-party for consulting services rendered. The shares were subsequently issued on December 1, 2017. The total fair value of the common stock was $84,600 based on the closing price of the Company’s common stock on the date of grant.

 

Common Stock Issuances on Subscriptions Payable (2018)

On various dates from January 17, 2018 through February 13, 2018, the Company issued a total of 254,703 shares to The Special Equities Group and DiamondRock, LLC as compensation valued at $273,805 awarded on December 6, 2017.

 

Note 12 – Common Stock Warrants

 

Common Stock Warrants Granted (2018)

On December 15, 2018, the Company granted warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (842,000 shares); Mitchell Felder (842,000 shares), Heidi Carl (500,000 shares), John Borza (579,000 shares), Jay Rosen (52,500 shares), Patricio Reyes (500,000 shares) and John Pauly (52,500 shares). The exercise price of the foregoing warrants is nine cents ($0.09) per share. The warrants are exercisable over seven (7) years. The total fair value of the 3,368,000 common stock warrants using the Black-Scholes option-pricing model is $272,585, or $0.08093 per share, based on a volatility rate of 211%, a risk-free interest rate of 2.72% and an expected term of 3.5 years, and was expensed upon issuance.

 

On December 15, 2018, we also issued warrants to purchase a total of two hundred and eighty-eight thousand (288,000) shares of our common stock amongst four members of our Scientific Advisory Board. The exercise price of the foregoing warrants is nine cents ($0.09) per share. The warrants are exercisable over seven (7) years. The total fair value of the 288,000 common stock warrants using the Black-Scholes option-pricing model is $24,359, or $0.08458 per share, based on a volatility rate of 211%, a risk-free interest rate of 2.81% and an expected term of 7 years, and was expensed upon issuance.

 

Common Stock Warrants Granted (2017)

On December 22, 2017, the Company granted warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (34,000 shares); Mitchell Felder (34,000 shares), Heidi Carl (24,000 shares), John Borza (29,000 shares), Jay Rosen (4,000 shares), Patricio Reyes (16,000 shares) and John Pauly (8,000 shares). The exercise price of the foregoing warrants is one dollar and twenty-five cents ($1.25) per share. The warrants are exercisable over seven (7) years. The total fair value of the 149,000 common stock warrants using the Black-Scholes option-pricing model is $102,364, or $0.68699 per share, based on a volatility rate of 195%, a risk-free interest rate of 2.01% and an expected term of 3.5 years, and was expensed upon issuance.

 

 

F-41

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

On December 22, 2017, we also issued warrants to purchase a total of fourteen thousand (14,000) shares of our common stock amongst three members of our Scientific Advisory Board. The exercise price of the foregoing warrants is one dollar and twenty-five cents ($1.25) per share. The warrants are exercisable over seven (7) years. The total fair value of the 14,000 common stock warrants using the Black-Scholes option-pricing model is $9,617, or $0.68699 per share, based on a volatility rate of 195%, a risk-free interest rate of 2.01% and an expected term of 7 years, and was expensed upon issuance.

 

A total of $296,944 and $111,981 of warrants were amortized and expensed to professional fees as stock-based compensation during the years ended December 31, 2018 and 2017, respectively, including $272,585 and $102,364 during the years ended December 31, 2018 and 2017, respectively, related to warrants issued to related parties.

 

Exercise of Common Stock Warrants, Related Party (2018)

On November 5, 2018, the Company issued 12,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.0025 per share for total proceeds of $30.

 

Exercise of Common Stock Warrants, Related Party (2017)

On November 22, 2017, the Company issued 28,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.0025 per share for total proceeds of $70.

 

The following is a summary of information about the Common Stock Warrants outstanding at December 31, 2018.

 

								Shares Underlying
	Shares Underlying Warrants Outstanding							Warrants Exercisable
				Weighted
		Shares		Average		Weighted		Shares		Weighted
Range of		Underlying		Remaining		Average		Underlying		Average
Exercise		Warrants		Contractual		Exercise		Warrants		Exercise
Prices		Outstanding		Life		Price		Exercisable		Price
$1.25 – $362.50		3,901,760		6.85 years		$2.05		3,901,760		$2.05

 

The fair value of each warrant grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants under the fixed option plan:

 

	December 31,	December 31,
	2018	2017
Average risk-free interest rates	2.73%	1.75%
Average expected life (in years)	3.78	9.22

 

The Black-Scholes option pricing model was developed for use in estimating the fair value of short-term traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock price volatility. Because the Company’s common stock warrants have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of its common stock warrants. During the years ended December 31, 2018 and 2017 there were no warrants granted with an exercise price below the fair value of the underlying stock at the grant date.

 

The weighted average fair value of warrants granted with exercise prices at the current fair value of the underlying stock was approximately $0.08122 per warrant granted during the year ended December 31, 2018.

 

 

F-42

 

 

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, 2016	122,760	$61.0175
Warrants granted	163,000	1.25
Warrants exercised	(28,000)	(0.0025)
Balance, December 31, 2017	257,760	$29.85
Warrants granted	3,656,000	0.09
Warrants exercised	(12,000)	(0.0025)
Balance, December 31, 2018	3,901,760	$2.05
Exercisable, December 31, 2018	3,901,760	$2.05

 

Note 13 – Income Taxes

 

The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.

 

For the years ended December 31, 2018 and 2017, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2018 and December 31, 2017, the Company had approximately $5,277,000 and $4,860,000 of federal net operating losses, respectively. The net operating loss carry forwards, if not utilized, will begin to expire in 2031.

 

The components of the Company’s deferred tax asset are as follows:

 

	December 31,	December 31,
	2018	2017
Deferred tax assets:
Net operating loss carry forwards	$1,108,170	$1,701,000
Net deferred tax assets before valuation allowance	$1,108,170	$1,701,000
Less: Valuation allowance	(1,108,170)	(1,701,000)
Net deferred tax assets	$-	$-

 

Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2018 and 2017, respectively.

 

A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:

 

	December 31,	December 31,
	2018	2017
Federal and state statutory rate	21%	35%
Change in valuation allowance on deferred tax assets	(21%)	(35%)

 

In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.

  

 

F-43

 

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Note 14 – Subsequent Events

 

Convertible Debt Financing

On March 26, 2019, the Company received proceeds of $68,000 in exchange for a 10% interest bearing; unsecured convertible promissory note maturing on March 26, 2020 (“First Power Up Lending Note”). The note is convertible 180 days from the date of the note at 61% of the average of the two lowest closing bid prices of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.

 

Common Stock Issuances for Debt Conversions

On March 22, 2019, the Company issued 386,000 shares of common stock pursuant to the conversion of $6,369, consisting of $2,136 of principal and $4,233 of interest, from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On March 6, 2019, the Company issued 370,000 shares of common stock pursuant to the conversion of $5,739 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 26, 2019, the Company issued 349,463 shares of common stock pursuant to the conversion of $6,500 of principal from the First SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 26, 2019, the Company issued 340,000 shares of common stock pursuant to the conversion of $5,273 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 12, 2019, the Company issued 346,200 shares of common stock pursuant to the conversion of $6,924 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 1, 2019, the Company issued 315,000 shares of common stock pursuant to the conversion of $7,875 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On January 23, 2019, the Company issued 260,000 shares of common stock pursuant to the conversion of $6,513 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On January 11, 2019, the Company issued 280,000 shares of common stock pursuant to the conversion of $5,597 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On January 2, 2019, the Company issued 281,385 shares of common stock pursuant to the conversion of $6,500 of principal from the First SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Common Stock Issuances on Subscriptions Payable

On January 1, 2019, the Company issued 276,960 shares to DiamondRock, LLC for the conversion of $5,345 of debt on December 31, 2018.

 

 

F-44

 

PART II – INFORMATION NOT REQUIRED IN PROSPECTUS

 

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

 

We will pay all expenses in connection with the registration and sale of the common stock by the selling shareholder, who is an underwriter in connection with their offering of shares. The estimated expenses of issuance and distribution are set forth below:

 

Registration Fees	Approximately	$13
Transfer Agent Fees	Approximately	1,000
Costs of Printing and Engraving	Approximately	1,000
Legal Fees	Approximately	15,000
Accounting and Audit Fees	Approximately	5,000
Total		$22,013

 

INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

Article 9 of our Articles of Incorporation provides that, the personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by paragraph 1 of Section 78.037 of the General Corporation Law of the State of Nevada, as the same may be amended and supplemented. Paragraph 1 of Section 78.037 states that the articles of incorporation of a Nevada corporation may contain any provision, not contrary to the laws of the State of Nevada, for the management of the business and for the conduct of the affairs of the corporation.

 

Article 10 of our Articles of Incorporation provides that, the corporation shall, to the fullest extent permitted by Section 78.751 of the General Corporation Law of the State of Nevada, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all expenses, liabilities, or other matters referred to in or covered by said section. Section 78.751 states that the articles of incorporation of a Nevada corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition. It further states that indemnification does not exclude any other rights that an officer or director may have pursuant to the articles, bylaws, shareholders agreement or otherwise, and that it continues for a person who has ceased to be a director, officer, or employee of the company.

 

Article V of our Bylaws further addresses indemnification, including procedures for indemnification claims. Indemnification applies to any person that is made a party to, or threatened to be made a party to, any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she was an officer or director of the company.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

 

 

II-1

 

 

RECENT SALES OF UNREGISTERED SECURITIES

 

The following is a list of unregistered sales of equity securities issued by the Company from January 1, 2015 through the date hereof.

 

Common Stock

 

2015

 

LG Capital Funding, LLC

 

On January 30, 2015, we entered into a Securities Purchase Agreement with LG Capital Funding, LLC (“LG Capital”), pursuant to which we sold to LG Capital a 8% Convertible Promissory Note in the original principal amount of $82,687.00 (the “LG Note”). The LG Note has a maturity date of January 29, 2016, and is convertible after 180 days into our common stock at the higher of (i) $0.25 cents per share or (ii) 70% of the average of the two (2) lowest closing bid prices of our common stock for the fifteen (15) trading days prior to receipt of a conversion notice from LG Capital. The shares of common stock issuable upon conversion of the LG Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The LG Note can be prepaid by us at a premium as follows: (a) between 1 and 30 days after issuance – 115% of the principal amount; (b) between 31 and 60 days after issuance – 121% of the principal amount; (c) between 61 and 90 days after issuance – 126% of the principal amount; (d) between 91 and 120 days after issuance – 132% of the principal amount; (e) between 121 and 150 days after issuance – 138% of the principal amount; and (f) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to pre-payment after 180 days. The purchase and sale of the LG Note closed on January 30, 2015, the date that the purchase price was delivered to us. The issuance of the LG Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.

 

Adar Bays, LLC

 

On February 24, 2015, we entered into a Securities Purchase Agreement with Adar Bays, LLC (“Adar Bays”), pursuant to which we sold to Adar Bays an 8% Convertible Promissory Note in the original principal amount of $44,100.00 (the “Adar Note”). The Adar Note has a maturity date of February 24, 2016, and is convertible after 180 days into our common stock at the higher of (i) $0. 25 cents per share or (ii) 70% of the average of the two (2) lowest closing prices of our common stock for the fifteen (15) trading days prior to receipt of a conversion notice from Adar Bays. The shares of common stock issuable upon conversion of the Adar Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Adar Note can be prepaid by us at a premium as follows: (a) between 1 and 30 days after issuance – 115% of the principal amount; (b) between 31 and 60 days after issuance – 121% of the principal amount; (c) between 61 and 90 days after issuance – 127% of the principal amount; (d) between 91 and 120 days after issuance – 133% of the principal amount; (e) between 121 and 150 days after issuance – 139% of the principal amount; and (f) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to pre-payment after 180 days. The purchase and sale of the Adar Note closed on March 2, 2015, the date that the purchase price was delivered to us. The issuance of the Adar Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.

 

 

II-2

 

 

Services

 

On March 20, 2015, we issued a warrant to acquire two thousand (2,000) shares of our common stock in exchange for services rendered. The warrant is exercisable for five (5) years at $0.20 per share, but only vests to the extent that the closing bid price of our common stock reaches the following levels over three consecutive trading days:

 

●

500 warrants will vest at $50 per share;

●

500 warrants will vest at $75 per share;

●

500 warrants will vest at $100 per share; and

●

500 warrants will vest at $125 per share.

 

The issuance of the warrants was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was a sophisticated investor, familiar with our operations, and there was no solicitation.

 

On May 30, 2015, we issued a warrant to acquire up to two thousand (2,000) shares of our common stock to Ryan Fields, one of the members of our Scientific Advisory Board, in exchange for services related thereto. The warrant is exercisable for seven (7) years at $62.50 and shall vest in its entirety on December 1, 2015, subject to the condition that Mr. Fields is still a member of our Scientific Advisory Board at that time. If Mr. Fields ceases to be a member of our Scientific Advisory Board for any reason prior to December 1, 2015, the warrant shall terminate immediately. The issuance of the warrant was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was a sophisticated investor, familiar with our operations, and there was no solicitation.

 

JMJ Financial

 

On September 2, 2015, we entered into a Convertible Promissory Note with JMJ Financial (“JMJ”) in the original principal amount of up to $250,000 (the “JMJ Note”). The initial amount of funding under the JMJ Note was $50,000. The JMJ Note has a maturity date of two (2) years from each funding and is convertible at any time by the holder into our common stock at 60% of the lowest trade price in the twenty five (25) trading days previous to the conversion, with a floor of $0.025 per share. The shares of common stock issuable upon conversion of the JMJ Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. Any funding under the JMJ Note can be prepaid by us within ninety (90) days without a premium and without interest. After ninety (90) days, a one-time interest charge of twelve percent (12%) is applied, and the JMJ Note may not be prepaid without the holder’s consent. The issuance of the JMJ Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.

 

Warrant Exercise

 

On September 10, 2015, we issued 4,000 shares of common stock, restricted in accordance with Rule 144, to Mitchell Felder, one of our directors, upon the exercise of warrants at $0.0025 per share. The issuance was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.

  

 

II-3

 

 

Advisory Board Warrants

 

On September 10, 2015, we issued warrants to purchase two thousand (2,000) shares of our common stock to a new member of our Scientific Advisory Board. The exercise price of the warrants is $25 per share. The warrants are vested immediately. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investors are sophisticated and familiar with our operations, and there was no solicitation in connection with the issuance.

 

Vis Vires Group, Inc.

 

On September 8, 2015, we entered into a Securities Purchase Agreement with Vis Vires Group, Inc., pursuant to which we sold to Vires a 8% Convertible Promissory Note in the original principal amount of Forty Eight Thousand Dollars ($48,000.00) (the “Vires Note”). The Vires Note has a maturity date of June 8, 2016, and is convertible after 180 days into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means the closing bid price on the applicable day. The “Fixed Conversion Price” shall mean $0.0025. The shares of common stock issuable upon conversion of the Vires Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Vires Note can be prepaid by us at a premium as follows: (a) between 0 and 30 days after issuance – 110% of the principal amount and any accrued and unpaid interest; (b) between 31 and 60 days after issuance – 115% of the principal amount and any accrued and unpaid interest; (c) between 61 and 90 days after issuance – 120% of the principal amount and any accrued and unpaid interest; (d) between 91 and 120 days after issuance – 125% of the principal amount and any accrued and unpaid interest; (e) between 121 and 150 days after issuance – 130% of the principal amount and any accrued and unpaid interest; and (f) between 151 and 180 days after issuance – 135% of the principal amount and any accrued and unpaid interest. The purchase and sale of the Vires Note closed on September 21, 2015, the date that the purchase price was delivered to us. The issuance of the Vires Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.

 

Warrant Exercise

 

On October 1, 2015, we issued 12,000 shares of common stock, restricted in accordance with Rule 144, to Mitchell Felder, one of our directors, upon the exercise of warrants at $0.0025 per share. The issuance was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.

 

Effective as of October 21, 2015, we issued warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (4,000 shares); Mitchell Felder (4,000 shares), Heidi Carl (3,000 shares), John Borza (2,400 shares), Richard Najarian (800 shares), and Jay Rosen (800 shares). We also issued warrants to purchase a total of 720 shares of our common stock to six members of our Scientific Advisory Board. The exercise price of the foregoing warrants is $12.50 per share. 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 to us. The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder, the investors are sophisticated and familiar with our operations, and there was no solicitation in connection with the issuance.

  

 

II-4

 

 

2016

 

Redwood Management, LLC

 

On December 28, 2015, we entered into a Securities Purchase Agreement with Redwood Management, LLC (“Redwood”), pursuant to which we agreed to sell, and Redwood agreed to purchase, One Million Six Hundred Thousand Dollars ($1,600,000) in 10% Convertible Promissory Notes. On February 26, 2016, and again on March 7, 2016, the Securities Purchase Agreement was amended, and the total amount of funding to which Redwood is obligated was reduced to $525,000. The notes have an original issue discount of five percent (5%). The first note was issued on December 28, 2015 in the face amount of One Hundred Fifty Seven Thousand Five Hundred Dollars ($157,500), to Redwood Management, LLC. The second note was issued on January 8, 2016, in the face amount of One Hundred Thirty One Thousand Two Hundred Fifty Dollars ($131,250), to Redwood Fund III Ltd. The third note was issued on February 22, 2016, in the face amount of Seventy Eight Thousand Seven Hundred Fifty Dollars ($78,750), to Redwood Management, LLC. The fourth note was issued on March 7, 2016, in the face amount of Seventy Eight Thousand Seven Hundred Fifty Dollars ($78,750), to Redwood Management, LLC. The fifth and final note was issued on March 11, 2016, in the face amount of One Hundred Five Thousand Dollars ($105,000). The maturity date of each note is nine (9) months after its issuance. Each note will be convertible after ninety (90) days into our common stock at a conversion price equal to 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. The shares of common stock issuable upon conversion of the notes will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The notes can be prepaid by us at any time upon ten (10) days written notice to Redwood for a cash amount equal to the sum of the then outstanding principal amount of the note and interest multiplied by 130%. Pursuant to a Registration Rights Agreement, we agreed to register the shares underlying conversion of the notes. The purchase and sale of the initial note closed on December 28, 2015, the date that the purchase price was delivered to us.

 

On October 10, 2016, we entered into an Exchange Agreement by and between the Company and Redwood. Pursuant to the Exchange Agreement, we exchanged the Typenex Note for the Warrant. The Typenex Note has a principal amount of $300,000, an interest rate of 10% and matures on October 10, 2017, unless earlier converted into shares of our common stock. The Typenex Note may be converted to common stock at any time after January 8, 2017. The conversion price for the Typenex Note is equal to 60% of the lowest traded price of our common stock in the 15 trading days prior to the conversion date. If any shares of our common stock are sold at an effective price per share that is lower than the conversion price, the conversion price will be adjusted down to match the lower price. We have instructed our transfer agent to reserve 600,000 shares of our common stock for conversions pursuant to the Typenex Note. This reserve will stay in place until the Typenex Note and any interest due thereunder is satisfied in full.

 

Pursuant to the Purchase Agreement, we have issued the following shares of common stock on the dates indicated and in the amounts shown to Redwood:

 

Date	Purchase Amount	Shares Issued
7/21/2016	$29,000	16,112
8/9/2016	$39,520	20,800
11/8/2016	$25,000	24,391
11/22/2016	$25,000	25,511
12/13/2016	$25,000	25,000
1/4/2017	$10,323	12,589
Totals	$153,843	124,403

  

 

II-5

 

 

The issuances to Redwood listed above were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investor is sophisticated and familiar with our operations, and there was no solicitation in connection with the sale.

 

Preferred Stock

 

On January 2, 2016, two of our officers and directors, William A. Hartman and Mitchell Felder, each exercised warrants to acquire one million (1,000,000) shares of Series A Convertible Preferred Stock each. Each share of Series A Convertible Preferred Stock is convertible, at the election of the holder thereof, into one (1) share of our common stock, and has one hundred (100) votes per share. We issued the warrants on June 21, 2010 and they had an exercise price of $0.001 per share.

 

The Preferred Stock also contains protective provisions as follows:

 

The Company may not take any of the following actions without the approval of a majority of the holders of the outstanding Series A Convertible Preferred Stock: (i) effect a sale of all or substantially all of the Company’s assets or which results in the holders of the Company’s capital stock prior to the transaction owning less than fifty percent (50%) of the voting power of the Company’s capital stock after the transaction, (ii) alter or change the rights, preferences, or privileges of the Series A Convertible Preferred Stock, (iii) increase or decrease the number of authorized shares of Series A Convertible Preferred Stock, (iv) authorize the issuance of securities having a preference over or on par with the Series A Convertible Preferred Stock, or (v) effectuate a forward or reverse stock split or dividend of the Company’s common stock.

 

Common Stock

 

On February 10, 2016, we issued 12,000 shares of our common stock, restricted in accordance with Rule 144, to a third-party for services rendered in connection with our recent financing transactions. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investor was sophisticated and familiar with our operations, and there was no solicitation in connection with the sale.

 

On February 12, 2016, we issued 2,400shares of our common stock, restricted in accordance with Rule 144, to a third-party for services rendered in connection with our recent financing transactions. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investor was sophisticated and familiar with our operations, and there was no solicitation in connection with the sale.

 

On March 28, 2016, upon the resignation of Richard Najarian as one of the members of our Board of Directors, we issued to him 2,400 shares of common stock in settlement of an unpaid expense reimbursement. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investor was sophisticated and familiar with our operations, and there was no solicitation in connection with the sale.

 

The Note

 

On May 27, 2016, we issued a 10% convertible promissory note to Redwood pursuant to the Note (as describe above). The issuance of the Note was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.

  

 

II-6

 

 

Warrant Exercise

 

On August 19, 2016, we issued 16,000 shares of common stock, restricted in accordance with Rule 144, to each of William Hartman and Mitchell Felder, officers and directors of the Company, upon the exercise of warrants at $0.0025 per share. The issuance was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.

 

On December 20, 2016, we issued 24,000 shares of common stock, restricted in accordance with Rule 144, to each of William Hartman and Mitchell Felder, officers and directors of the Company, upon the exercise of warrants at $0.0025 per share. The issuance was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.

 

2017

 

Private Placement of Stock, Warrants and Convertible Notes

 

On March 30, 2017, we entered into Securities Purchase Agreements by and between the Company and each of The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC to sell our common stock and warrants at a fixed price. On March 30, 2017, we closed the first sale under these agreements, receiving $100,000 from each investor in exchange for 53,334 shares of our common stock, warrants to purchase up to 53,334 shares of our common stock at an exercise price of $7.50 (“Series A Warrants”) and warrants to purchase up to 53,334 shares or our common stock at an exercise price of $12.50 (“Series B Warrants” and together with the Series A Warrants, the “Warrants”). In the aggregate, we received $300,000 in exchange for 160,002 shares of our common stock, 160,002 Series A Warrants and 160,002 Series B Warrants.

 

On May 30, 2017, we completed the second sale under the Securities Purchase Agreement, dated March 30, 2017. We sold 40,405 shares of our common stock, 40,405 Series A Warrants and 40,405 Series B Warrants to each of The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC for $50,000, receiving an aggregate of $150,000 in exchange for 121,215 shares of our common stock, 121,215 Series A Warrants and 121,215 Series B Warrants.

 

On August 8, 2017, we entered into Exchange Agreements with The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC whereby we exchanged convertible notes with an aggregate face value of $150,000 for the following securities previously issued pursuant to the Securities Purchase Agreements, dated March 30, 2017: 121,215 shares of common stock, 160,002 Series A Warrants and 160,002 Series B Warrants. The convertible notes are convertible into shares of our common stock, bear interest at 8% and matured on November 30, 2017. The notes were convertible at 50% of the lowest traded price of our common stock in the fifteen (15) Trading Days prior to the Conversion Date.

 

On October 30, 2017, we completed the third sale under the Securities Purchase Agreements, dated March 30, 2017, as amended. We sold a convertible promissory note for $50,000 to each of The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC, an aggregate of $150,000. The convertible notes are convertible into shares of our common stock, bear interest at 8% and mature on January 31, 2018. The notes are convertible at 50% of the lowest traded price of our common stock in the fifteen (15) Trading Days prior to the Conversion Date.

 

 

II-7

 

 

On November 22, 2017, we issued 28,000 shares of common stock, restricted in accordance with Rule 144, to William Hartman, an officer and director of the Company, upon the exercise of warrants at $0.0025 per share.

 

The above transactions were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchasers were accredited and sophisticated investors, familiar with our operations, and there was no solicitation.

 

2018

 

On March 1, 2018, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and the Selling Shareholders to sell Convertible Promissory Notes (each a “Note” and collectively, the “Notes”). Pursuant to the Purchase Agreement, the Selling Shareholders will pay an aggregate of $300,000 for the Notes in three tranches or closings.

 

The Selling Shareholders purchased Notes at the signing of the Purchase Agreement for an aggregate amount of $60,000. The Selling Shareholders purchased a second tranche of Notes for an aggregate of $60,000 on April 24, 2018 after we filed a registration statement to cover the Selling Shareholders’ shares of common stock issuable upon conversion of the Notes. Within five trading days of the registration statement being declared effective, the Selling Shareholders will buy additional Notes for an aggregate of $180,000 (the “Third Tranche”).

 

2019

 

Securities Purchase Agreement and Convertible Note

 

On March 28, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and Power Up Lending Group Ltd. (the “Purchaser”) to sell a Convertible Promissory Note (“Note”). The Purchaser purchased the Note at the signing of the Purchase Agreement for an aggregate amount of $68,000. The Note has a maturity date of March 26, 2020, an interest rate of 10% and a default interest rate of 22%. The Note is convertible into our common stock at a conversion price equal to 61% of the average of the lowest two (2) trading prices during the last twenty (20) trading days prior to the conversion date. 

 

The sale of the Note pursuant to the Purchase Agreement and in the transaction described above was offered and sold in reliance on an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D. The Purchaser has represented that it is an accredited investor, as defined in Regulation D, and has acquired the securities for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof. The securities were not issued through any general solicitation or advertisement.

 

On March 27, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and Crown Bridge Partners, LLC (the “Purchaser”) to sell Convertible Promissory Notes (each a “Note”) in the principal amount of up to $154,500, with a purchase price of up to $141,000. The Purchaser purchased the first Note on April 17, 2019 for an aggregate amount of $47,000. The Note has a maturity date of twelve (12) months from each funding date, or April 17, 2020 with respect to the first Note. Each Note has an interest rate of 12% and a default interest rate of 15%. The Note is convertible into our common stock at a conversion price equal to 60% of the lowest trading price during the last twenty (20) trading days prior to the conversion date.

  

 

II-8

 

 

On April 23, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and Power Up Lending Group Ltd. (the “Purchaser”) to sell a Convertible Promissory Note (“Note”). The Purchaser purchased the Note at the signing of the Purchase Agreement for an aggregate amount of $38,000. The Note has a maturity date of April 23, 2020, an interest rate of 10% and a default interest rate of 22%. The Note is convertible into our common stock at a conversion price equal to 61% of the average of the lowest two (2) trading prices during the last twenty (20) trading days prior to the conversion date.

 

On June 7, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and Power Up Lending Group Ltd. (the “Purchaser”) to sell a Convertible Promissory Note (“Note”). The Purchaser purchased the Note at the signing of the Purchase Agreement for an aggregate amount of $38,000. The Note has a maturity date of June 7, 2020, an interest rate of 10% and a default interest rate of 22%. The Note is convertible into our common stock at a conversion price equal to 61% of the average of the lowest two (2) trading prices during the last twenty (20) trading days prior to the conversion date. We closed the sale of the Note on June 12, 2019.

 

Securities Purchase Agreement and Convertible Note - Crown Bridge Partners, LLC

 

On March 27, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and Crown Bridge Partners, LLC (the “Purchaser”) to sell Convertible Promissory Notes (each a “Note”) in the principal amount of up to $154,500, with a purchase price of up to $141,000. The Purchaser purchased the first Note on April 17, 2019 for an aggregate amount of $47,000 (the “First Tranche”). The Note has a maturity date of twelve (12) months from each funding date, or April 17, 2020 with respect to the first Note. Each Note has an interest rate of 12% and a default interest rate of 15%. The Note is convertible into our common stock at a conversion price equal to 60% of the lowest trading price during the last twenty (20) trading days prior to the conversion date. The above stated transaction was reported in Premier’s April 17, 2019 Form 8-K.

 

On July 8, 2019, pursuant to the Securities Purchase Agreement, the Purchaser purchased the second Note for an aggregate amount of $32,900 (the “Second Tranche”). The Note has a maturity date of twelve (12) months from each funding date, or July 8, 2020 with respect to the second Note. Each Note has an interest rate of 12% and a default interest rate of 15%. The Note is convertible into our common stock at a conversion price equal to 60% of the lowest trading price during the last twenty (20) trading days prior to the conversion date.

 

On September 13, 2019, pursuant to the Purchase Agreement, the Purchaser purchased the third Note for an aggregate amount of $23,500 (the “Third Tranche”). The third Note has a maturity date of September 13, 2020.

 

We must reserve shares of our authorized common stock equal to four times the number of shares issuable upon full conversion of the Note, initially 26,580,645 shares. The Note can be prepaid by us at any time for a cash amount equal to the sum of the then outstanding principal amount of the note and interest multiplied by a prepayment percentage that ranges from as low as 125% to as high as 150%, depending on when we prepay the Note.

 

The Note limits the Purchaser to beneficial ownership of our common stock of no more than 4.99%. The Purchaser has the right to receive any dividend or distribution of assets as if the Note had been fully converted on the applicable record date. The Purchase Agreement and Note also contain customary representations and warranties made by the Company and by the Purchaser.

  

 

II-9

 

 

The sale of the Note pursuant to the Purchase Agreement was offered and sold in reliance on an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D. The Purchaser has represented that it is an accredited investor, as defined in Regulation D, and has acquired the securities for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof. The securities were not issued through any general solicitation or advertisement.

 

Securities Purchase Agreement and Convertible Note – Power Up Lending Group Ltd.

 

On August 2, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and Power Up Lending Group Ltd. (the “Purchaser”) to sell a Convertible Promissory Note (“Note”). The Purchaser purchased the Note at the signing of the Purchase Agreement for an aggregate amount of $38,000. The Note has a maturity date of August 2, 2020, an interest rate of 10% and a default interest rate of 22%. The Note is convertible into our common stock at a conversion price equal to 61% of the average of the lowest two (2) trading prices during the last twenty (20) trading days prior to the conversion date. We closed the sale of the Note on August 7, 2019.

 

On August 15, 2019, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and Power Up Lending Group Ltd. (the “Purchaser”) to sell a Convertible Promissory Note (“Note”). The Purchaser purchased the Note at the signing of the Purchase Agreement for an aggregate amount of $43,000. The Note has a maturity date of August 15, 2020, an interest rate of 10% and a default interest rate of 22%. The Note is convertible into our common stock at a conversion price equal to 61% of the average of the lowest two (2) trading prices during the last twenty (20) trading days prior to the conversion date. We closed the sale of the Note on August 16, 2019.

 

We must reserve shares of our authorized common stock equal to four times the number of shares issuable upon full conversion of the Note, initially 40,849,234. The Note can be prepaid by us at any time upon three (3) days written notice to the Purchaser for a cash amount equal to the sum of the then outstanding principal amount of the note and interest multiplied by a prepayment percentage that ranges from as low as 115% to as high as 140%, depending on when we prepay the Note.

 

The Note limits the Purchaser to beneficial ownership of our common stock of no more than 4.99%. The Purchaser has the right to receive any dividend or distribution of assets as if the Note had been fully converted on the applicable record date. The Purchase Agreement and Note also contain customary representations and warranties made by the Company and by the Purchaser.

 

The sale of the Note pursuant to the Purchase Agreement was offered and sold in reliance on an exemption from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D. The Purchaser has represented that it is an accredited investor, as defined in Regulation D, and has acquired the securities for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof. The securities were not issued through any general solicitation or advertisement.

  

 

II-10

 

 

EXHIBITS

 

(a)

The exhibits listed on the Exhibit Index at the end of this Registration Statement are incorporated herein and filed as part of this registration statement.

 

(b)

Financial Statement Schedules.

 

No financial statement schedules have been provided because the information is not required or is shown either in the financial statements or the notes thereto.

    

Undertakings

 

A. 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

 

B.            

The undersigned registrant hereby undertakes:

 

(1) 

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(a) 

To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

 

(b) 

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of Regulation S-K) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

 

(c) 

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

 

(2) 

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3) 

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(4) 

That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

  

 

II-11

 

 

(i)           If the registrant is relying on Rule 430B (§230.430B of this chapter):

 

(a) 

Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (§230.424(b)(3) of this chapter) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

 

(b) 

Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) (§230.424(b)(2), (b)(5), or (b)(7) of this chapter) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) (§230.415(a)(1)(i), (vii), or (x) of this chapter) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any personthat is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or

 

(ii) 

If the registrant is subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

   

 

II-12

 

 

(5) 

That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

 

(i) 

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

(a) 

Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter);

 

(b) 

Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

 

(c) 

The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

 

(d) 

Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

(6)           

The undersigned registrant hereby undertakes that:

 

(i) 

For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

(ii) 

For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

 

II-13

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jackson Center, State of Pennsylvania.

 

	Premier Biomedical, Inc.
Dated: December 9, 2019	/s/ William A. Hartman
	By: William A. Hartman
	Its: Chief Executive Officer
Dated: December 9, 2019	/s/ Heidi H. Carl
	By: Heidi H. Carl
	Its: Chief Financial Officer, Treasurer and Principal Accounting Officer

 

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

 

Dated: December 9, 2019	/s/ William A. Hartman
	Name: William A. Hartman Title: Chief Executive Officer, President and Director
Dated: December 9, 2019	/s/ Mitchell S. Felder
	Name: Mitchell S. Felder Title: Chairman of the Board and Director
Dated: December 9, 2019	/s/ Heidi H. Carl
	Name: Heidi H. Carl Title: Chief Financial Officer, Secretary and Director
Dated: December 9, 2019	/s/ John S. Borza
	Name: John S. Borza Title: Director
Dated: December 9, 2019	/s/ Patricio Reyes
	Name: Patricio Reyes Title: Director
Dated: December 9, 2019	/s Jay Rosen
	Name: Jay Rosen Title: Director
Dated: December 9, 2019	/s/ John Pauly
	Name: John Pauly Title: Director

 

 

II-14

 

EXHIBIT INDEX

 

Exhibit No.		Description of Exhibits
3.1 (1)		Articles of Incorporation of Premier Biomedical, Inc.
3.2 (2)		Amendment to Articles of Incorporation of Premier Biomedical, Inc.
3.2 (1)		Bylaws of Premier Biomedical, Inc., as amended
3.3 (1)		Certificate of Designation of Series A Convertible Preferred Stock
3.3 (17)		Certificate of Designation of Series B Convertible Preferred Stock
4.1 (13)		Form of Series A Common Stock Purchase Warrant
4.2 (13)		Form of Series B Common Stock Purchase Warrant
5.1*		Opinion of Clyde Snow & Sessions P.C.
10.1 (1)		License Agreement dated May 12, 2010 with Altman Enterprises, Inc.
10.2 (1)		License Agreement dated May 12, 2010 with Marv Enterprises, LLC.
10.3 (1)		Preferred Stock Purchase Warrant issued to Mitchell Felder
10.4 (1)		Preferred Stock Purchase Warrant issued to William A. Hartman
10.5 (1)		Common Stock Purchase Warrant issued to Mitchell Felder
10.6 (1)		Common Stock Purchase Warrant issued to William A. Hartman
10.7 (1)		Common Stock Purchase Warrant issued to The Lebrecht Group, APLC
10.8 (1)		Form of Warrant Sold in Private Placement
10.9 (3)		First Addendum to License Agreement dated August 17, 2011 with Marv Enterprises, LLC.
10.10 (3)		Frist Addendum to License Agreement dated August 17, 2011 with Altman Enterprises, LLC.
10.11 (4)		Collaboration Agreement with the University of Texas System dated May 9, 2012
10.12 (5)		Employment Agreement with William A. Hartman, dated September 28, 2012

 

 

II-15

 

 

Exhibit No.		Description of Exhibits
10.13 (6)		Form of Directors and Officers Warrant
10.14 (7)		Form of Directors Stock Purchase Agreement
10.15 (8)		Cooperative Research and Development Agreement with U.S. Army Medical Research and Material Command
10.16 (9)		Patent License Agreement dated March 4, 2015
10.17 (10)		Common Stock Purchase Warrant dated March 20, 2015
10.18 (11)		Amendment No. 1 to Patent License Agreement dated June 19, 2015.
10.19 (12)		Common Stock Purchase Warrant issued to Ryan Fields dated March 30, 2015
10.20 (13)		Form of Securities Purchase Agreement, dated March 30, 2017
10.21 (13)		Form of Registration Rights Agreement, dated March 30, 2017
10.22 (14)		Amendment No. 1 of the Securities Purchase Agreement, dated August 8, 2017
10.23 (14)		Amendment No. 1 of the Registration Rights Agreement, dated August 4, 2017
10.24 (14)		Form of Exchange Agreement, dated August 4, 2017
10.25 (14)		Form of 8% Convertible Promissory Note, dated August 8, 2017
10.26 (15)		Form of 8% Convertible Promissory Note, dated October 30, 2017
10.27 (16)		Form of 8% Convertible Promissory Note, dated March 1, 2018
10.28 (16)		Securities Purchase Agreement, dated March 1, 2018, by and among the Company, RedDiamond Partners LLC and SEG-RedaShex, LLC
10.29 (16)		Registration Rights Agreement, dated March 1, 2018, by and among the Company, RedDiamond Partners LLC and SEG-RedaShex, LLC
10.30 (17)		Securities Purchase Agreement, dated November 23, 2018, by and between the Company and each of RedDiamond Partners LLC and SEG-RedaShex, LLC

 

 

II-16

 

 

Exhibit No.		Description
10.31 (18)		Securities Purchase Agreement with Power Up Lending Group Ltd. dated March 26, 2019
10.32 (18)		Convertible Promissory Note with Power Up Lending Group Ltd. dated March 26, 2019
10.33 (19)		Securities Purchase Agreement with Crown Bridge Partners, LLC entered into on March 27, 2019
10.34 (19)		Convertible Promissory Note with Crown Bridge Partners, LLC entered into on March 27, 2019
10.35 (19)		Securities Purchase Agreement with Power Up Lending Group, Ltd. entered into on April 23, 2019
10.36 (19)		Convertible Promissory Note with Power Up Lending Group, Ltd. entered into on April 23, 2019
10.37 (19)		Securities Purchase Agreement with Power Up Lending Group, Ltd. entered into on June 7, 2019
10.38 (19)		Convertible Promissory Note with Power Up Lending Group, Ltd. entered into on June 7, 2019
23.1 *		Consent of Independent Registered Public Accounting Firm

 

* 

Filed herewith.

 

(1) 

Incorporated by reference from our Registration Statement on Form S-1 dated June 13, 2011, filed with the Commission on June 14, 2011.

(2) 

Incorporated by reference from our Current Report on Form 8-K dated February 9, 2016, filed with the Commission on February 10, 2016.

(3) 

Incorporated by reference from our Registration Statement on Form S-1/A dated and filed with the Commission on October 4, 2011.

(4) 

Incorporated by reference from our Current Report on Form 8-K filed with the Commission on May 14, 2012.

(5) 

Incorporated by reference from our Current Report on Form 8-K filed with the Commission on October 10, 2012.

(6) 

Incorporated by reference from our Annual Report on Form 10-K filed with the Commission on April 1, 2013.

(7) 

Incorporated by reference from our Current Report on Form 8-K dated February 20, 2013, filed with the Commission on February 27, 2013.

(8) 

Incorporated by reference from our Current Report on Form 8-K dated and filed with the Commission on June 12, 2013.

(9) 

Incorporated by reference from our Current Report on Form 8-K dated March 16, 2015, filed with the Commission on March 18, 2015.

(10) 

Incorporated by reference from our Quarterly Report on Form 10-Q dated May 14, 2015, filed with the Commission on May 15, 2015.

(11) 

Incorporated by reference from our Current Report on Form 8-K dated June 19, 2015, filed with the Commission on June 23, 2015.

(12) 

Incorporated by reference from our Quarterly Report on Form 10-Q dated and filed with the Commission on August 14, 2015.

(13) 

Incorporated by reference from our Registration Statement on Form S-1 (File No. 333-218250) filed with the Commission on May 26, 2017.

(14) 

Incorporated by reference from our Quarterly Report on Form 10-Q dated and filed with the Commission on August 21, 2017.

(15) 

Incorporated by reference from our Registration Statement on Form S-1/A dated and filed with the Commission on October 16, 2017.

(16) 

Incorporated by reference from our Annual Report dated and filed with the Commission on April 12, 2018.

(17) 

Incorporated by reference from our Current Report on Form 8-K dated and filed with the Commission on November 29, 2018.

(18)

Incorporated by reference from our Quarterly Report dated and filed with the Commission on May 15, 2019.

(19)

Incorporated by reference from our Quarterly Report dated and filed with the Commission on August 14, 2019.

 

 

II-17