ITEM
1 Financial
Statements
P
REMIER BIOMEDICAL, INC.
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CONDENSED
CONSOLIDATED BALANCE SHEETS
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ASSETS
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Current
assets:
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Cash
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$
87,043
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$
86,827
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Accounts
receivable
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2,012
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3,092
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Inventory
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22,168
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25,985
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Other current
assets
|
35,429
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43,883
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Total current
assets
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146,652
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159,787
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Property and
equipment, net
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8,692
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5,203
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Total
assets
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$
155,344
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$
164,990
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LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
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Current
liabilities:
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Accounts
payable
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$
224,659
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$
264,398
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Accounts payable,
related parties
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32,107
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25,944
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Accrued
interest
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39,451
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22,099
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Convertible notes
payable, net of discounts of $173,134 and $-0- at June 30,
2019
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and December 31,
2018, respectively, including $227,289 currently in
default
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249,655
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309,637
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Derivative
liabilities
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1,752,621
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1,690,304
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Total current
liabilities
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2,298,493
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2,312,382
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Total
liabilities
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2,298,493
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2,312,382
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Commitments and
contingencies
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-
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-
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Stockholders'
equity (deficit):
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Series
A convertible preferred stock, $0.001 par value, 10,000,000 shares
authorized, 2,000,000 shares
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designated, issued
and outstanding at June 30, 2019 and December 31, 2018,
respectively
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2,000
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2,000
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Series B
convertible preferred stock, $0.001 par value, 1,000,000 shares
designated, 150,000
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shares issued and
outstanding at June 30, 2019 and December 31, 2018,
respectively
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150
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150
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Common stock,
$0.00001 par value, 1,000,000,000 shares authorized, 13,532,430 and
5,652,410
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shares issued and
outstanding at June 30, 2019 and December 31, 2018,
respectively
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135
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57
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Additional paid in
capital
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14,740,801
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14,572,754
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Subscriptions
payable, consisting of 276,960 shares at December 31,
2018
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-
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5,345
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Accumulated
deficit
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(16,886,235
)
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(16,727,698
)
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Total stockholders'
equity (deficit)
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(2,143,149
)
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(2,147,392
)
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Total liabilities
and stockholders' equity (deficit)
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$
155,344
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$
164,990
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See
accompanying notes to financial statements.
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C
ONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
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Revenue
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$
3,774
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$
12,089
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$
9,510
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$
22,484
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Cost of goods
sold
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1,752
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10,146
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3,817
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16,204
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Gross
profit
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2,022
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1,943
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5,693
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6,280
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Operating
expenses:
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General and
administrative
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48,860
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42,817
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101,832
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77,309
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Professional
fees
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26,106
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38,724
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58,995
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78,340
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Total operating
expenses
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74,966
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81,541
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160,827
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155,649
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Net operating
loss
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(72,944
)
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(79,598
)
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(155,134
)
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(149,369
)
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Other income
(expense):
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Interest
expense
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(38,246
)
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(73,554
)
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(45,791
)
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(137,699
)
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Change in
derivative liabilities
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(115,858
)
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53,146
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42,388
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753,386
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Total other income
(expense)
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(154,104
)
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(20,408
)
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(3,403
)
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615,687
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Net income
(loss)
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$
(227,048
)
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$
(100,006
)
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$
(158,537
)
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$
466,318
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Weighted average
number of common shares outstanding - basic
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10,190,407
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2,989,307
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8,748,512
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2,932,577
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Weighted average
number of common shares outstanding - fully diluted
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10,190,407
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2,989,307
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8,748,512
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2,944,497
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Net income (loss)
per share - basic
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$
(0.02
)
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$
(0.03
)
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$
(0.02
)
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$
0.16
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Net income (loss)
per share - fully diluted
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$
(0.02
)
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$
(0.03
)
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$
(0.02
)
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$
0.16
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See
accompanying notes to financial statements.
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S
TATEMENT OF STOCKHOLDERS' EQUITY
(DEFICIT)
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Balance, December 31,
2017
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2,000,000
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$
2,000
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-
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$
-
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2,551,363
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$
26
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$
13,442,255
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$
273,805
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$
(16,328,812
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$
(2,610,726
)
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Common stock issued on
subsctiptions payable
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-
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-
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-
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-
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254,703
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3
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273,802
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(273,805
)
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-
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-
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Series B convertible preferred
stock sold for cash
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-
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-
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150,000
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150
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-
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-
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149,850
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-
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-
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150,000
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Common stock issued on debt
conversions
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-
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-
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-
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-
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2,834,264
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28
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210,246
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5,345
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-
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215,619
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Exercise of warrants at $0.00001
per share, related parties
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-
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-
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-
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-
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12,000
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-
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30
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-
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-
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30
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Odd lot shares issued on reverse
stock split
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-
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-
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-
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-
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80
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-
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-
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-
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-
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-
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Warrants issued for services,
related parties
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-
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-
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-
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-
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-
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-
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272,585
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-
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-
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272,585
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Warrants issued for
services
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-
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-
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-
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-
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-
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-
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24,359
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-
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-
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24,359
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Adjustments to derivative liability
due to debt conversions
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-
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-
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-
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-
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-
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-
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199,627
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-
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-
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199,627
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Net loss for the year ended
December 31, 2018
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-
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-
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-
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-
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-
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-
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-
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-
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(398,886
)
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(398,886
)
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Balance, December 31,
2018
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2,000,000
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$
2,000
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150,000
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$
150
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5,652,410
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$
57
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$
14,572,754
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$
5,345
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$
(16,727,698
)
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$
(2,147,392
)
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Common stock issued on
subscriptions payable
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-
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-
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-
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-
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276,960
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3
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5,342
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(5,345
)
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-
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-
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Common stock issued on debt
conversions
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-
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-
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-
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-
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7,603,060
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75
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93,423
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-
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-
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93,498
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Adjustments to derivative liability
due to debt conversions
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-
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-
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-
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-
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-
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-
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69,282
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-
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-
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69,282
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Net loss for the six months ended
June 30, 2019
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-
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-
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-
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-
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-
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-
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-
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-
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(158,537
)
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(158,537
)
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Balance, June 30, 2019
(Unaudited)
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2,000,000
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$
2,000
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150,000
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$
150
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13,532,430
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$
135
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$
14,740,801
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$
-
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$
(16,886,235
)
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$
(2,143,149
)
|
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See accompanying notes to financial
statements.
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C
ONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
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CASH
FLOWS FROM OPERATING ACTIVITIES
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Net income
(loss)
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$
(158,537
)
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$
466,318
|
|
Adjustments to
reconcile net income (loss)
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to net cash used in
operating activities:
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Depreciation
|
1,361
|
1,194
|
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Change in fair
market value of derivative liabilities
|
(42,388
)
|
(753,386
)
|
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Amortization of
debt discounts
|
16,353
|
129,644
|
|
Decrease (increase)
in assets:
|
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Accounts
receivable
|
1,080
|
312
|
|
Inventory
|
3,817
|
(38,653
)
|
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Other current
assets
|
8,454
|
(950
)
|
|
Increase (decrease)
in liabilities:
|
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Accounts
payable
|
(39,739
)
|
746
|
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Accounts payable,
related parties
|
6,163
|
(4,636
)
|
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Accrued
interest
|
28,502
|
8,055
|
|
Net cash used in
operating activities
|
(174,934
)
|
(191,356
)
|
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CASH
FLOWS FROM INVESTING ACTIVITIES
|
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Purchases of
property and equipment
|
(4,850
)
|
(2,029
)
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Net cash used in
investing activities
|
(4,850
)
|
(2,029
)
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CASH
FLOWS FROM FINANCING ACTIVITIES
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Proceeds from
convertible notes payable
|
180,000
|
120,000
|
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Net cash provided
by financing activities
|
180,000
|
120,000
|
|
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NET CHANGE IN
CASH
|
216
|
(73,385
)
|
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CASH AT BEGINNING
OF PERIOD
|
86,827
|
83,704
|
|
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CASH AT END OF
PERIOD
|
$
87,043
|
$
10,319
|
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SUPPLEMENTAL
INFORMATION:
|
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Interest
paid
|
$
936
|
$
-
|
|
Income taxes
paid
|
$
-
|
$
-
|
|
|
|
|
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NON-CASH INVESTING
AND FINANCING ACTIVITIES:
|
|
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Value of debt
discounts
|
$
171,167
|
$
120,000
|
|
Value of derivative
adjustment due to debt conversions
|
$
69,282
|
$
52,270
|
|
Value of shares
issued for conversion of debt
|
$
93,498
|
$
65,000
|
|
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|
See
accompanying notes to financial statements.
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Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
N
ote 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.
The
reconciliation of the denominators used to calculate basic EPS and
diluted EPS for the six months ended June 30, 2019 and
2018 are as follows:
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Weighted average
common shares outstanding – basic
|
8,748,512
|
2,932,577
|
|
Plus: Potentially
dilutive common shares:
|
|
|
|
Warrants
|
-
|
11,920
|
|
Weighted average
common shares outstanding – diluted
|
8,748,512
|
2,944,497
|
For the six months ended June 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
wasanti-dilutive were 3,901,760 and 245,760 as of
June 30, 2019 and 2018, respectively.
Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
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 six months ended June 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 $22,714 and $20,742 for
the six months ended June 30, 2019 and 2018,
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.
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.
Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
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 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.
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.
Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
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
six months ended June 30, 2019, 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
minimal revenues, incurred net losses from operations resulting in
an accumulated deficit of $16,886,235, and had negative working
capital of ($2,151,841) at June 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 $29,070 and $24,116 as of June 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 $1,962 and $753 as of June 30, 2019 and December
31, 2018, respectively, to the Company’s CEO for reimbursable
expenses.
The
Company owed $1,075 as of June 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.
Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
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 June 30, 2019 and December 31, 2018,
respectively:
|
|
Fair Value
Measurements at June 30, 2019
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Cash
|
$
87,043
|
$
-
|
$
-
|
|
Total
assets
|
87,043
|
-
|
-
|
|
Liabilities
|
|
|
|
|
Convertible notes
payable, net of discounts
|
-
|
249,655
|
-
|
|
Derivative
liabilities
|
-
|
-
|
1,752,621
|
|
Total
liabilities
|
-
|
249,655
|
1,752,621
|
|
|
$
87,043
|
$
(249,655
)
|
$
(1,752,621
)
|
|
|
Fair Value
Measurements at December 31, 2018
|
|
|
|
|
|
|
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 six months ended
June 30, 2019 or the year ended December 31,
2018.
Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
Note 5 – Patent Rights and Applications
The
Company amortizes its patent rights and applications on a
straight-line basis over the expected useful technological or
economic life of the patents, which is typically 17 years from the
legal approval of the patent applications when there are probable
future economic benefits associated with the patent. The Company
has elected to expense all of their patent rights and application
costs due to difficulties associated with having to prove the value
of their future economic benefits. All patent applications are
currently pending and the Company has no patents that have yet been
approved. It is the Company’s policy that it performs reviews
of the carrying value of its patent rights and applications on an
annual basis.
On
March 4, 2015, we entered into a Patent License Agreement
(“PLA”) with the University of Texas at El Paso
(“UTEP”) regarding our joint research and development
of CTLA-4 Blockade with Metronomic Chemotherapy for the Treatment
of Breast Cancer. This is the first PLA with UTEP following our
Collaborative Agreement with them dated May 9, 2012, and
memorializes the joint ownership of the applicable patent and the
financial and other terms related thereto.
On June
19, 2015, we entered into Amendment No. 1 to this Agreement,
pursuant to which we explicitly included Provisional Patent
Application No. 62/161,116 entitled, “Anti-CTLA-4
Blockade” (the “Application”) under the
definition of “Patent Rights” as set forth in the PLA.
The Application was filed with the United States Patent and
Trademarks Office on May 13, 2015; the underlying technology was
invented by Robert Kirken and Georgialina Rodriguez, and is
solely-owned by The Board of Regents of The University of Texas
System.
Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
Note 6 – Convertible Notes Payable
Convertible
notes payable consists of the following at June 30, 2019 and
December 31, 2018, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
68,000
|
-
|
|
|
|
|
|
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. Currently in
default.
|
94,080
|
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. Currently in default.
|
30,000
|
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. Currently in default.
|
30,000
|
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 $19,000 of principal was converted into an
aggregate of 1,128,360 shares of common stock at various dates
between January 2, 2019 and May 22, 2019.
Currently in default.
|
11,000
|
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
|
422,789
|
309,637
|
|
Less unamortized derivative
discounts:
|
173,134
|
-
|
|
Convertible notes
payable
|
249,655
|
309,637
|
|
Less: current
portion
|
249,655
|
309,637
|
|
Convertible notes payable, less
current portion
|
$
-
|
$
-
|
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 $186,667 and $300,000;
including $15,500 and $-0- of of loan origination discounts, for
the variable conversion features of the convertible debts incurred
during the six months ended June 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 $16,353 and
$129,644 of interest expense pursuant to the amortization of note
discounts during the six months ended June 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 six months ended
June 30, 2019 and 2018, respectively, as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on
convertible notes
|
$
28,502
|
$
8,055
|
|
Amortization of
derivative discounts
|
16,353
|
129,644
|
|
Interest on credit
cards
|
936
|
-
|
|
Total interest
expense
|
$
45,791
|
$
137,699
|
Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
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 $1,752,621 and $1,690,304
at June 30, 2019 and December 31, 2018,
respectively. The change in fair value of the derivative
liabilities resulted in a gain of $42,388 and $753,386 for the six
months ended June 30, 2019 and 2018, respectively, which
has been reported within other income in the statements of
operations. The gain of $42,388 for the six months ended
June 30, 2019 consisted of a gain of $18,242 due to the value
attributable to the warrants and a gain in market value of $24,146
on the convertible notes.
The gain of
$753,386 for the six months ended June 30, 2018 consisted
of a gain of $766,489 due to the value attributable to the warrants
and a net loss in market value of $13,103 on the convertible
notes
.
The
following is a summary of changes in the fair market value of the
derivative liability during the
six
months ended June 30, 2019 and the year ended
December 31, 2018, respectively
:
|
|
|
|
|
|
|
|
|
|
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
|
173,987
|
|
Change
in fair market value of derivative liabilities due to the mark to
market adjustment
|
(42,388
)
|
|
Debt
conversions
|
(69,282
)
|
|
Balance,
June 30, 2019
|
$
1,752,621
|
Key inputs and assumptions used to value the convertible debentures
and warrants issued during the six months ended June 30,
2019:
●
Stock
price
ranging from $0.0104 to $0.0370 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 224% - 274%.
●
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 $521,850 to $361,741 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 274% - 274%.
●
The Holder would
exercise the warrant at maturity in 2020 if the stock price was
above the reset exercise price.
Premier Biomedical, Inc.
Notes
to 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 $185,024 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.
Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
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.
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 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.
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.
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.
Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
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
six months ended June 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 June 30,
2019, and December 31, 2018, the Company had
approximately $5,460,000 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:
|
|
|
|
|
|
|
|
|
Deferred tax
assets:
|
|
|
|
Net operating loss
carry forwards
|
$
1,146,600
|
$
1,108,170
|
|
|
|
|
|
Net deferred tax
assets before valuation allowance
|
$
1,146,600
|
$
1,108,170
|
|
Less: Valuation
allowance
|
(1,146,600
)
|
(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 June 30, 2019, and
December 31, 2018, respectively.
A
reconciliation between the amounts of income tax benefit determined
by applying the applicable U.S. and state statutory income tax rate
to pre-tax loss is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal and state
statutory rate
|
21
%
|
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.
Premier Biomedical, Inc.
Notes
to Condensed Financial Statements
(Unaudited)
Note 11 – Subsequent Events
Convertible Debt Financing
On
August 2, 2019, the Company received net proceeds of $35,000,
carrying a $38,000 face value after loan origination fees of
$3,000, 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.
On July
2, 2019, the Company received net proceeds of $31,400, carrying a
$36,050 face value after a $3,150 original issue discount and loan
origination fee of $1,500, pursuant to the second tranche of the
securities purchase agreement with Crown Bridge Partners, LLC
(“Second Crown Bridge Partners Note”) on a 12% interest
bearing; unsecured convertible promissory note; maturing on July 2,
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 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.
Conversions of Series B Convertible Preferred Stock
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.
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 Issuances for Debt Conversions
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.
ITEM
2
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
O
ur Management’s Discussion and Analysis contains
not only statements that are historical facts, but also statements
that are forward-looking (within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). Forward-looking statements are, by their very nature,
uncertain and risky. These risks and uncertainties include
international, national and local general economic and market
conditions; demographic changes; our ability to sustain, manage, or
forecast growth; our ability to successfully make and integrate
acquisitions; raw material costs and availability; new product
development and introduction; existing government regulations and
changes in, or the failure to comply with, government regulations;
adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating
results; changes in business strategy or development plans;
business disruptions; the ability to attract and retain qualified
personnel; the ability to protect technology; and other risks that
might be detailed from time to time in our filings with the
Securities and Exchange Commission.
Although the
forward-looking statements in this Quarterly 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 unaudited financial statements and
related notes elsewhere in this Form 10-Q, 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 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.
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.
1
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.
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.
During
the three months ended June 30, 2019, we received $117,000 from the
sale of convertible notes. Despite the recent sales of convertible
notes and preferred stock, our goal is to move forward with more
favorable financing as we begin to grow our revenues. To date, the
cash generated by these new products is not yet sufficient to
finance our volume ramp-up and planned product
introductions.
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 six months ended June 30, 2019, we
completed the sale of convertible notes to raise
$180,000 of net proceeds from several investors and expect to be
able to raise another $94,000 under existing agreements
.
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.
1
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.
Results of Operations for the Three and Six Months Ended June 30,
2019 and 2018
Introduction
We had
revenues of $3,774 and $9,510 for the three and six months ended
June 30, 2019, respectively, compared to $12,089 and $22,484 for
the three and six months ended June 30, 2018, respectively. This
was a decrease of $8,315, or 69%, for the three months ended June
30, 2019 compared to 2018, and $12,974, or 58%, for the six months
ended June 30, 2019 compared to 2018.
Our
operating expenses were $74,966 and $160,827 for the three and six
months ended June 30, 2019, respectively, compared to $81,541 and
$155,649 for the three and six months ended June 30, 2018,
respectively. This was a decrease of $6,575, or 8%, for the three
months ended June 30, 2019 compared 2018, and an increase of
$5,178, or 3%, for the six months ended June 30, 2019 compared to
2018.
Our
results of operations for the three and six months ended June 30,
2019 and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
3,774
|
$
12,089
|
$
9,510
|
$
22,484
|
|
Cost of goods
sold
|
1,752
|
10,146
|
3,817
|
16,204
|
|
Gross
profit
|
2,022
|
1,943
|
5,693
|
6,280
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
General and
administrative
|
48,860
|
42,817
|
101,832
|
77,309
|
|
Professional
fees
|
26,106
|
38,724
|
58,995
|
78,340
|
|
Total operating
expenses
|
74,966
|
81,541
|
160,827
|
155,649
|
|
|
|
|
|
|
|
Net operating
loss
|
(72,944
)
|
(79,598
)
|
(155,134
)
|
(149,369
)
|
|
Other income
(expense)
|
(154,104
)
|
(20,408
)
|
(3,403
)
|
615,687
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
(227,048
)
|
$
(100,006
)
|
$
(158,537
)
|
$
466,318
|
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 wholesale transactions with 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 six months ended June 30, 2019, compared to three and
six months ended June 30, 2018, while significant in percentage
terms, was not material in absolute terms and reflects the timing
of product sales.
Cost of Goods Sold
Cost of
goods sold for the
three and six
months ended June 30, 2019
were $1,752, or 46% of
sales, and $3,817, or 40% of sales, compared to $10,146, or 84% of
sales, and $16,204, or 72% of sales, for the three and six months
ended June 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 $48,860 and $101,832,
respectively, for the three and six months ended June 30, 2019,
compared to $42,817 and $77,309, respectively, for the three and
six months ended June 30, 2018, an increase of $6,043 and $24,523,
or 14% and 32%, respectively. The increase was primarily due to
expenses related to the development of our new product line under
the ‘Nature’s Own Pain Relief’ brand name, and
increased investor relations costs.
Professional Fees
Professional fees expense was $26,106 and $58,995,
respectively, for the three and six months ended June 30, 2019,
compared to $38,724 and $78,340, respectively, for the three and
six months ended June 30, 2018, a decrease of $12,618 and $19,345,
or 33% and 25%, respectively.
Professional fees consist
primarily of legal and, accounting and auditing
services.
Net Operating Loss
Net
operating loss was $72,944 and $155,134, respectively, for the
three and six months ended June 30, 2019, compared to $79,598 and
$149,369, respectively, for the three and months ended June 30,
2018, a decrease of $6,654 and an increase of $5,765, or 8% and 4%,
respectively. The net operating loss increased during the six
months ended June 30, 2019 because of reduced revenues and
increased operating expenses as previously described.
Other Income/Expense
Other
income (expense) was ($154,104) and $(3,403), respectively, for the
three and six months ended June 30, 2019, compared to ($20,408) and
$615,687, respectively, for the three and six months ended June 30,
2018, an increase in expenses of $133,696 and $619,090,
respectively. Other expense for the six months ended June 30, 2019
consisted of interest expense of $45,791, as offset by a gain of
$42,388 in market value of derivative liabilities. The other
expense for the six months ended June 30, 2018 consisted of
interest expense of $137,699 offset by a gain of $753,386 in market
value of derivative liabilities.
Net Income (Loss)
Net
income (loss) for the three and six months ended June 30, 2019, was
($227,048) or ($0.02) per share, and ($158,537) or ($0.02) per
share, respectively, compared to ($100,006) or ($0.03) per share,
and $466,318 or $0.16 per share, respectively, for the three and
six months ended June 30, 2018. Net loss changes, as set forth
above, were primarily due to the change in derivative
liabilities.
Liquidity and Capital Resources
Introduction
During
the three and six months ended June 30, 2019, we had negative
operating cash flows. Our cash on hand as of June 30, 2019 was
$87,043, which was derived from the sale of convertible promissory
notes to investors. Our monthly cash flow burn rate for the first
six months of 2018 was approximately $32,000, and our monthly burn
rate through the six months ended June 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 June 30, 2019 and December 31, 2018,
respectively, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
$
87,043
|
$
86,827
|
$
216
|
|
Total Current
Assets
|
146,652
|
159,787
|
(13,135
)
|
|
Total
Assets
|
155,344
|
164,990
|
(9,646
)
|
|
Total Current
Liabilities
|
2,298,493
|
2,312,382
|
(13,889
)
|
|
Total
Liabilities
|
$
2,298,493
|
$
2,312,382
|
$
(13,889
)
|
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 $39,739 and the conversion of
outstanding convertible notes of $59,982, offset by an increase in
the value of our derivative liabilities of $62,317. Our
stockholders’ deficit decreased by $4,243 to
($2,143,149).
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 June 30, 2019 was $87,043. 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 ($174,934) for the six
months ended June 30, 2019, compared to ($191,356) for the six
months ended June 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 $710,998 and an increase in
inventory of $42,470, offset by a decrease in amortization of debt
discounts of $113,291 and a decrease in accounts payable of
$40,485.
Investments
We had
$4,850 net cash used in investing activities for the six months
ended June 30, 2019, and $2,029 net cash used in investing
activities for the six months ended June 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 six months ended June
30, 2019 was $180,000, which consisted of the proceeds from the
sale of convertible notes. For the six months ended June 30, 2018,
net cash provided by financing activities was $120,000, which
consisted of the proceeds from the sale of convertible
notes.
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.
Sale of Convertible Notes
Pursuant
to a separate Securities Purchase Agreement, we sold convertible
notes to two investors for $60,000 on each of March 1, 2018 and
April 24, 2018 and $180,000 on July 11, 2018, for an aggregate of
$300,000.
Quantitative
and Qualitative Disclosures About Market Risk
As a
smaller reporting company, we are not required to provide the
information required by this Item.
(a)
Disclosure
Controls and Procedures
We
conducted an evaluation, with the participation of our Chief
Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended, or the Exchange Act,
as of June 30, 2019, to ensure that information required to be
disclosed by us in the reports filed or submitted by us under the
Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Securities Exchange
Commission’s rules and forms, including to ensure that
information required to be disclosed by us in the reports filed or
submitted by us under the Exchange Act is accumulated and
communicated to our management, including our principal executive
and principal financial officer, or persons performing similar
functions, as appropriate to allow timely decisions regarding
required disclosure. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that as of June
30, 2019, our disclosure controls and procedures were not effective
at the reasonable assurance level due to the material weaknesses
identified and described in our Annual Report on Internal Control
Over Financial Reporting filed in our Annual Report on Form
10-K.
Our
principal executive officers do not expect that our disclosure
controls or internal controls will prevent all errors and all
fraud. Although our disclosure controls and procedures were
designed to provide reasonable assurance of achieving their
objectives and our principal executive officers are determined to
make our disclosure controls and procedures effective at doing so,
a control system, no matter how well conceived and operated, can
provide only reasonable, not absolute assurance that the objectives
of the system are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company
have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented if there exists in an
individual a desire to do so. There can be no assurance that any
design will succeed in achieving its stated goals under all
potential future conditions.
(b)
Changes
in Internal Control over Financial Reporting
No
change in our system of internal control over financial reporting
occurred during the period covered by this report, the three month
period ended June 30, 2019, that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting.