Prospectus Filed Pursuant to Rule 424(b)(3) (424b3)

Date : 07/11/2018 @ 1:04PM
Source : Edgar (US Regulatory)
Stock : Premier Biomedical Inc (BIEI)
Quote : 0.1  -0.02 (-16.67%) @ 4:42PM
Premier Biomedical Inc share price Chart

Prospectus Filed Pursuant to Rule 424(b)(3) (424b3)

 

Filed pursuant to Rule 424(b)(3)

Registration No. 333-224454

 

PROSPECTUS

 

523,000 shares of common stock

 

This prospectus relates to the sale by the selling shareholders identified in this prospectus, or their assigns (each a “ Selling Shareholder ” and collectively the “ Selling Shareholders ”) of up to an aggregate of 523,000 shares of our common stock.

 

The Selling Shareholders may sell the shares using a number of different methods, and they will sell the shares at a fixed price of $0.50 per share, until the Company’s common stock is listed on a national securities exchange or is quoted on the OTC Bulletin Board, the OTCQX or the OTCQB, at which time the Selling Shareholders will sell their shares at a price based on the market price. We provide more information about how the Selling Shareholders may sell their shares of common stock in the section of this prospectus entitled “ Plan of Distribution ” beginning on page 24.

 

We are not selling any shares of common stock in this resale offering. We are registering shares that are issuable to the Selling Shareholders upon the conversion of convertible promissory notes (each a “ Note ” and collectively the “ Notes ”). We, therefore, will not receive any proceeds from the sale of the shares by the Selling Shareholders. The Notes were issued to the Selling Shareholders in private transactions. Further details of the Selling Shareholders’ securities may be found in the section of this prospectus entitled “ Private Placement of Convertible Notes ” beginning on page 19.

 

We will bear all costs associated with this registration statement.

 

Our common stock is registered under Section 12(g) of the Securities Exchange Act of 1934 and is currently quoted on the OTC Pink marketplace maintained by OTC Markets Group, Inc. under the symbol “BIEI.” The closing price of our common stock as reported on the OTC Pink on June 28, 2018, was $0.48.

 

The Selling Shareholders may be deemed “underwriters” within the meaning of the Securities Act of 1933, as amended (the “ Securities Act ”), in connection with the resale of our common stock issued pursuant to the Purchase Agreement.

 

This offering will terminate on the earlier of (i) when all 523,000 shares are sold, (ii) when all Notes issued to the Selling Shareholders are repaid or converted and all shares of common stock issued upon conversion of the notes are sold, or (iii) on the first day of the month immediately following the date which is three years after the effective date hereof, unless we terminate it earlier.

 

Investing in the common stock involves risks. Premier Biomedical, Inc. is a development stage company with limited operations, limited income, and limited assets, and you should not invest unless you can afford to lose your entire investment. See “ Risk Factors ” beginning on page 5 .  

 

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

 

The date of this Prospectus is July 11, 2018.

   
 
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Table of Contents

 

 

 

Page

 

Part I

Prospectus Summary

 

 

1

 

Risk Factors

 

 

5

 

Use of Proceeds

 

 

19

 

Private Placement of Convertible Notes

 

 

19

 

Dilution

 

 

21

 

Selling Shareholders

 

 

21

 

Plan of Distribution

 

 

24

 

Description of Securities

 

 

25

 

Interest of Named Experts and Counsel

 

 

27

 

Description of Business

 

 

27

 

Description of Property

 

 

36

 

Legal Proceedings

 

 

36

 

Selected Financial Data

 

 

37

 

Management’s Discussion and Analysis

 

 

38

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

 

47

 

Directors, Executive Officers, Promoters, and Control Persons

 

 

48

 

Executive Compensation

 

 

52

 

Security Ownership of Certain Beneficial Owners and Management

 

 

54

 

Certain Relationships and Related Transactions

 

 

56

 

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

 

 

58

 

Where You Can Find More Information

 

 

59

 

Experts

 

 

59

 

Index to Financial Statements

 

F-1

 

  

 
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ABOUT THIS PROSPECTUS

 

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

 

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

 

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

 

 
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PROSPECTUS SUMMARY

 

PREMIER BIOMEDICAL, INC.

 

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

 

We are in part a research-based company that primarily intends to discover and develop medical products. Our current focus is on the distribution of our pain products. We also conduct research and development of proprietary drugs and techniques to target cancer, multiple sclerosis and other diseases.

 

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

 

Pain Management

 

In the first quarter of 2017, we entered the pain management industry with one product: a 96-hour pain relief patch with 48 mg of hemp oil extract. We have now expanded our product offerings to four products:

 

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; and

 

4. 150 mg/ 30 ml oil-based pump spray applicator.

 

We have also designed and developed a fifth new product, a 2-ounce hemp oil cream that will debut into the market in the near future. We believe that this five-product array positions us with the majority of the hemp oil extract customers in the marketplace.

 

Our pain relief patch is a CBD, or Cannabidiol, topical patch. The patent-pending reservoir patch design from our manufacturer features a unique barrier between the foam adhesive and the pain relieving ingredients to ensure that the adhesive is not transmitted and absorbed through the skin, as with many competitive patches. The formulations for the products contain no psychoactive components and, therefore, are not expected to affect drug test results. The other products consist of the same primary ingredients as contained in our reservoir patch, but offer other convenient methods of application.

 

 
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We are also continuing to develop additional pain relief products, including creams, sprays, gel pens and capsules. These products are designed to provide natural relief from:

 

 

· Knee pain,

 

· Shoulder pain,

 

· Joint pain,

 

· Arthritis pain,

 

· Muscle soreness and tenderness,

 

· Headaches, and

 

· Migraines.

 

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

 

Research and Development

 

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

 

 

- Cancer

- Fibromyalgia

 

- Multiple Sclerosis (MS)

- Traumatic Brain Injury (TBI)

 

- Neuropathic Pain

- Alzheimer’s Disease (AD)

 

- Amyotrophic Lateral Sclerosis

(ALS/Lou Gehrig’s Disease)

- Blood Sepsis and Viremia

 

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

 

Feldetrex®

 

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

 

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

 

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

 

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

 

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

 

Corporate Information

 

We were incorporated on May 10, 2010 in the State of Nevada. We have one wholly-owned subsidiary, Premier Biomedical Pain Relief Meds, LLC, a Nevada limited liability company, organized on September 14, 2017.

 

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

 

 
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The Offering

 

Securities Offered:

Up to 523,000 shares of common stock that are issuable to the Selling Shareholders. The Selling Shareholders may acquire these shares through the conversion of a portion of the Notes to be acquired by the Selling Shareholders upon effectiveness of this registration statement, as described under “ Private Placement of Convertible Notes ” on page 19.

Selling Shareholders:

See “ Selling Shareholders ” beginning on page 21.

Common Stock Outstanding

Before Offering:

2,989,233*

After the Offering:

3,512,233*

Terms of the Offering:

The Selling Shareholders will sell the shares at a fixed price of $0.50 per share, until the Company’s common stock is listed on a national securities exchange or is quoted on the OTC Bulletin Board, the OTCQX or the OTCQB, at which time the Selling Shareholders will sell their shares at a price based on the market price. The Selling Shareholders will determine when and how they sell the shares of common stock offered in this prospectus, as described in “ Plan of Distribution ” beginning on page 24.

Use of Proceeds:

The Selling Shareholders will receive all of the proceeds from the sale of the shares offered for sale under this prospectus. We will not receive any proceeds from the sale of shares of common stock by the Selling Shareholders in this offering. See “ Use of Proceeds ” on page 19.

Risk factors:

The shares offered hereby involve a high degree of risk. See “ Risk Factors ” beginning on page 5.

Trading Symbol:

BIEI

__________

* Based on 2,989,233 shares of common stock outstanding on June 28, 2018. The shares of common stock being registered will become outstanding when issued to the Selling Shareholders upon conversion of the Notes, prior to their offer and sale of the shares. All share figures, except those in the financial statements and footnotes to the financial statements, reflect the effect of the reverse stock split of our common stock on June 26, 2018.

 

The Selling Shareholders may sell the shares of common stock registered hereunder from time to time in the over-the-counter market or other national securities exchange or automated interdealer quotation system on which our common stock is then listed or quoted, through negotiated transactions or otherwise. In any case, the Selling Shareholders will sell the shares at a fixed price of $0.50 per share, until the Company’s common stock is listed on a national securities exchange or is quoted on the OTC Bulletin Board, the OTCQX or the OTCQB, at which time the Selling Shareholders will sell their shares at a price based on the market price.

 

This offering will terminate on the earlier of (i) when all 523,000 shares are sold, (ii) when all Notes issued to the Selling Shareholders are repaid or converted and all shares of common stock issued upon conversion of the Notes are sold, or (iii) on the first day of the month immediately following the date which is three years after the effective date hereof, unless we terminate it earlier.

  

 
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Based on historical prices as of the closing of the market on June 28, 2018, the Notes, issued or to be issued pursuant to the Purchase Agreement (having an aggregate face value of $300,000), would have been convertible into approximately 2,500,000 shares of our common stock (based solely on the face value of the Notes and excluding any interest accrued thereon which would require more shares). The Notes also require that we reserve and keep available out of our authorized and unissued common stock 300% of the required minimum number of shares needed for issuance upon conversion of the Notes and payment of interest on the Notes. Based on the scenario above, the Notes require us to keep a reserve of approximately 7,500,000.

 

On May 29, 2018, we held a special meeting of shareholders and sought their approval of a reverse stock split at a ratio of 1-for-250. We did not have sufficient votes to constitute a quorum, and the meeting was adjourned without a vote. Nevertheless, of the shareholders represented in person or by proxy, a strong majority favored the reverse stock split.

 

With that show of confidence from certain shareholders, our Directors still believed that it was in the shareholders’ best interest to conduct the reverse split. Nevada law allows a corporation to decrease the number of issued and outstanding shares of a class (i.e., conduct a reverse stock split) without shareholder approval if their articles of incorporation permit it (Nevada Revised Statutes 78.2055). Article 8(C) of our Articles of Incorporation expressly waives shareholder approval for a reverse stock split. Therefore, we moved forward with the reverse stock split that took effect on June 26, 2018.

    

RISK FACTORS

 

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

 

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

 

Risk Factors Related to the Business of the Company

 

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

 

We have a limited revenue history and face many of the risks inherent to a new business. As a result of our limited revenue history, it is difficult to accurately forecast our potential revenue. We were incorporated in Nevada in 2010, but our first revenue was not until 2017. Our revenue and income potential is unproven and our business model is still emerging. Therefore, there can be no assurance that we will provide a return on investment in the future. An investor in our common stock must consider the challenges, risks and uncertainties frequently encountered in the establishment of new technologies, products and processes in emerging markets and evolving industries. These challenges include our ability to:

 

 

· execute our business model;

 

· create brand recognition;

 

· manage growth in our operations;

 

· create a customer base in a cost-effective manner;

 

· retain customers;

 

· access additional capital when required; and

 

· attract and retain key personnel.
 

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

 

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

 

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

 

 
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In 2014 and through 2017, we raised funds through public equity offerings. We may need to finance future cash needs through public or private equity offerings, debt financings or strategic collaboration and licensing arrangements. To the extent that we raise additional funds by issuing equity securities, our shareholders may experience additional dilution, and debt financing, if available, may involve restrictive covenants and may result in high interest expense. If we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our product candidates, processes and technologies or our development projects or to grant licenses on terms that are not favorable to us. We cannot be certain that additional funding will be available on acceptable terms, or at all. If adequate funds are not available from the foregoing sources, we may consider additional strategic financing options, including sales of assets, or we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or curtail some of our commercialization efforts of our operations. We may seek to access the public or private equity markets whenever conditions are favorable, even if we do not have an immediate need for additional capital.

 

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

    

We are currently in default on the Notes issued in the first tranche on March 1, 2018 because the Maturity Date has passed. Per the terms of the Notes, the Selling Shareholders have the option to demand payment of 130% of the outstanding principal amount of a Note and any accrued and unpaid interest thereon. We are currently unable to pay these amounts in full. If the Selling Shareholders elect to exercise this right rather than convert the Notes, we could possibly face litigation. If we repay the Notes or any part thereof, we may not be able to satisfy the obligations we have to other business partners and may be forced to cease our business operations. Any action by the Selling Shareholders would adversely affect our financial position and ability to operate.

  

Negative press from being in a hemp or cannabis-related business could have a material adverse effect on our business, financial condition, and results of operations.

 

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

 

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

 

There are (i) 34 states in the United States and the District of Columbia that have legalized hemp, (ii) 29 states and the District of Columbia that allow their citizens to use medical cannabis/marijuana and, (iii) 9 states and the District of Columbia that have legalized cannabis/marijuana for adult recreational use. Many other states are considering similar legislation. Conversely, under the federal Controlled Substance Act (the “CSA”), the policies and regulations of the federal government and its agencies are that cannabis/marijuana has no medical benefit and a range of activities are prohibited, including cultivation, possession, personal use, and interstate distribution of cannabis/marijuana. In the event the U.S. Department of Justice (the “DOJ”) begins strict enforcement of the CSA in states that have laws legalizing medical and/or adult recreational cannabis/marijuana, there may be a direct and adverse impact to any future business or prospects that we may have in the cannabis/marijuana business. Even in those jurisdictions in which the manufacture and use of medical cannabis/marijuana has been legalized at the state level, the possession, use, and cultivation of cannabis/marijuana all remain violations of federal law that are punishable by imprisonment and substantial fines. Moreover, individuals and entities may violate federal law if they intentionally aid and abet another in violating these federal controlled substance laws, or conspire with another to violate them.

 

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

 

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

 

Until such time as the federal government reclassifies marijuana from a Schedule 1 narcotic, we do not intend to pursue any involvement in the marijuana business. At this time we intend to continue only in the federally legal hemp product business. Also, if the Hemp Farming Act of 2018, or similar legislation is enacted, much of this uncertainty may be eliminated.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

· the effect of competing technological and market developments.
 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

· timing of market introduction of competitive drugs;

 

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

 

· lack of cost-effectiveness;

 

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

 

· lack of convenience or ease of administration;

 

· prevalence and severity of adverse side effects;

 

· other potential advantages of alternative treatment methods; and

 

· ineffective marketing and distribution support.
 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Risks Related To Our Common stock

 

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

 

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

 

 

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

 

· changes in financial estimates or recommendations by securities analysts;

 

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

 

· the emergence of new competitors;

 

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

 

· changes in our board or management;

 

· sales or purchases of our common stock by insiders;

 

· commencement of, or involvement in, litigation;

 

· changes in governmental regulations; and

 

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

 

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

 

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

 

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

 

Our common stock is listed for quotation on the OTC Pink tier of the marketplace maintained by OTC Markets Group, Inc., which may make it more difficult for investors to resell their shares due to suitability requirements.

 

Our common stock is currently quoted on the OTC Pink tier of the marketplace maintained by OTC Markets Group, Inc. Broker-dealers often decline to trade in over-the-counter stocks given the market for such securities are often limited, the stocks are more volatile, and the risk to investors is greater. These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of their shares. This could cause our stock price to decline.

 

We recently moved down to the OTC Pink tier from the OTCQB tier. We may be unable to restore eligibility for quotation of our common stock on the OTCQB tier and this will have a negative impact on our market price. The OTC Pink marketplace also does not provide as much liquidity as the OTCQB. Many broker-dealers will not trade or recommend OTC Pink stocks for their clients. Because the OTCQB generally increases transparency by maintaining higher reporting standards and requirements and imposing management certification and compliance requirements, broker-dealers are more likely to trade stocks on the OTCQB marketplace.

 

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

 

William A. Hartman and Dr. Mitchell S. Felder collectively own 145,031 shares of our outstanding common stock, 2,000,000 shares of our Series A Convertible Preferred Stock (which is convertible into an aggregate of 8,000 shares of our common stock), and through the exercise of warrants could acquire another 102,040 shares of our common stock. The shares of our preferred stock have 100 votes per share, giving these two shareholders approximately 99% of our current voting securities. As a result, they have the ability to dictate matters affecting our shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because they control such shares, investors may find it difficult to replace our management if they disagree with the way our business is being operated. Because the influence by these shareholders could result in management making decisions that are in the best interest of those shareholders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock. Investors who purchase our common stock should be willing to entrust all aspects of operational control to our current management team.

 

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

 

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

 

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

 

We are authorized to issue up to 1,000,000,000 shares of common stock, of which there were 2,989,233 shares issued and outstanding as of June 28, 2018. In addition, approximately 508,185 shares would be issued and outstanding if all of our currently outstanding preferred stock and warrants were exercised and converted into common stock. Our outstanding convertible notes require a reserve of approximately 523,000 shares. This leaves 995,979,582 shares of authorized, unissued common stock. Our Board may issue additional shares that would substantially dilute the shares of existing shareholders.

  

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

 

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

 

Our officers and directors, as a group, are the owners of 157,815 shares of our common stock, representing approximately 5.3% of our total issued shares, with convertible preferred stock, options and warrants to acquire another 218,600 shares of our common stock, representing approximately 7.3% of our total issued and outstanding shares of common stock. Each individual officer and director may be able to sell up to 1% of our outstanding common stock (currently approximately 29,892 shares) every ninety (90) days in the open market pursuant to Rule 144, which may have a negative effect on our stock price and may prevent us from obtaining additional capital. In addition, if our officers and directors are selling their stock into the open market, it may make it difficult or impossible for investors to sell their stock at any price.

 

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

 

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

 

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

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

 

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

 

 
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USE OF PROCEEDS

 

This Prospectus relates to shares of our common stock that may be offered and sold from time to time by the Selling Shareholders. We will not receive any proceeds from the sale of shares of common stock by the Selling Shareholders in this offering.

 

The proceeds we have received pursuant to the issuance of the Notes will be used for working capital and general corporate purposes. This anticipated use of net proceeds represents our intentions based upon our current plans and business conditions. If any of these factors change, we may reallocate some of the net proceeds. The portion of any net proceeds not immediately required will be invested in certificates of deposit or similar short-term interest bearing instruments.

 

We will pay for expenses of this offering, except that the Selling Shareholders will pay any broker discounts or commissions or equivalent expenses applicable to the sale of their shares.

 

PRIVATE PLACEMENT OF CONVERTIBLE NOTES

 

On March 1, 2018, we entered into a Securities Purchase Agreement (the “ Purchase Agreement ”) by and between the Company and the Selling Shareholders to sell Convertible Promissory Notes (each a “ Note ” and collectively, the “ Notes ”). Pursuant to the Purchase Agreement, the Selling Shareholders will pay an aggregate of $300,000 for the Notes in three tranches or closings.

 

The Selling Shareholders purchased Notes at the signing of the Purchase Agreement for an aggregate amount of $60,000. The Selling Shareholders purchased a second tranche of Notes for an aggregate of $60,000 on April 24, 2018 after we filed a registration statement to cover the Selling Shareholders’ shares of common stock issuable upon conversion of the Notes. Within five trading days of the registration statement being declared effective, the Selling Shareholders will buy additional Notes for an aggregate of $180,000 (the “ Third Tranche ”).

 

The shares of common stock being registered in this registration statement are the shares of common stock issuable upon conversion of certain Notes to be issued in the Third Tranche pursuant to the Purchase Agreement. The combined face value of the Notes following the completion of all three tranches will be $300,000. The shares being registered in this registration statement, based on prices reported by the OTC Markets, would only cover shares issuable upon the conversion of Notes up to $62,760. Therefore, the shares being registered are the first 523,000 shares that are issued upon conversion of Notes from the Third Tranche. The registered shares will be allocated equally to each Selling Shareholder.

 

The Notes are immediately exercisable and bear interest at a rate of 8%. No payments of interest or principal are due until the Maturity Date. The Maturity Date is the last day of the month that is three months after the date of issuance: May 31, 2018 for the Notes issued in the first tranche and July 31, 2018 for the Notes issued in the second tranche. The Maturity Date for the Notes in the first tranche has passed and the Selling Shareholders may elect to demand payment of the Mandatory Default Amount. The “Mandatory Default Amount” means the payment of 130% of the outstanding principal amount of a Note and accrued and unpaid interest thereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of the Note. The Selling Shareholders may convert the Notes at their option at any time into shares of our common stock. The conversion price is equal to 60% of the lowest traded price of our common stock in the fifteen (15) trading days prior to the conversion date but shall not be lower than $0.00005. However, in the event of default, the conversion price will be equal to 50% of the lowest traded price of our common stock in the fifteen (15) trading days prior to the conversion date. The number of shares of our common stock issued in a conversion is determined by the quotient obtained by dividing (x) the outstanding principal amount of the Note to be converted and any accrued and unpaid interest to be converted by (y) the conversion price, the calculation of which is described immediately above.

 

 
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If we elect to prepay a Note, we must give the Selling Shareholder ten days’ notice and make the prepayment to the Selling Shareholder of an amount in cash equal to the sum of the outstanding principal amount of the Note and interest multiplied by 130%. However, the Selling Shareholder may continue to convert the Note from the date of notice until the date of the prepayment.

 

The Notes also require that we reserve and keep available out of our authorized and unissued common stock 300% of the required minimum number of shares needed for issuance upon conversion of the Notes and payment of interest on the Notes. Based historical prices as of the closing of the market on June 28, 2018, the Notes, issued or to be issued pursuant to the Purchase Agreement (aggregate face value of $300,000), would have been convertible into approximately 2,500,000 shares of our common stock (based solely on the face value of the Notes and excluding any interest accrued thereon which would require more shares), requiring a reserve of approximately 7,500,000.

 

Pursuant to the terms of the Notes, we cannot sell or issue shares to a Selling Shareholder if such shares would cause the Selling Shareholder to beneficially own, as determined in accordance with Section 13(d) of the Exchange Act, more than 4.99% of our common stock. However, the Selling Shareholder can raise this limit to 9.99% but not until 61 days after giving us notice. As a result, as of the date of this Prospectus, a Selling Shareholder cannot own more than approximately 156,996 shares after giving effect to any issuance to the Selling Shareholder. If our total number of outstanding shares of common stock increases, or if the Selling Shareholder subsequently disposes of shares acquired from us in the open market, then we would be able to sell more shares to the Selling Shareholder before reaching the 4.99% threshold.

 

Because of this limitation on the Selling Shareholders’ ownership of our stock, the Selling Shareholders may not be able to convert all of their Notes.

 

Registration Rights Agreement

 

On March 1, 2018, we entered into a Registration Rights Agreement with the Selling Shareholders in connection with the Purchase Agreement. In the Registration Rights Agreement, we agreed to prepare and file a registration statement with the Securities and Exchange Commission covering the resale of all of the shares of common stock issuable upon conversion of the Notes. We agreed to (i) file an initial registration statement within 30 days of the date of the Purchase Agreement, (ii) have it declared effective no later than 90 days after its filing, and (iii) keep it continuously effective until the securities are sold or may be sold under Rule 144 of the Securities Act without volume or manner-of-sale restrictions. If all of the securities cannot be registered on one registration statement, we agreed to file subsequent registration statements to register the remaining securities as promptly as allowed.

 

The issuance of the Notes, and shares of common stock issuable upon conversion of the Notes, to the Selling Shareholders under the Purchase Agreement is exempt from registration under the Securities Act, pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

 

 
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DILUTION

 

The issuance of our common stock to the Selling Shareholders upon conversion of the Notes will have a dilutive impact on our shareholders. As a result, our net income per share, if any, would decrease in future periods and the market price of our common stock could decline. In addition, the lower our stock price is at the time the Selling Shareholders convert their Notes, the more shares of our common stock we will have to issue to the Selling Shareholders and our existing shareholders would experience greater dilution.

 

Our net tangible book value as of December 31, 2017 was approximately $(2,610,726), or $(1.02) per share. Net tangible book value per share is determined by dividing our total tangible assets, less total liabilities, by the number of shares of our common stock outstanding as of December 31, 2017.

 

After giving effect to the issuance and conversion of the Notes, and assuming the sale of all 523,000 shares of common stock by the Selling Shareholders, our pro forma as adjusted net tangible book value as of December 31, 2017 would have been approximately $(2,310,726), or ($0.75) per share of Common Stock. This represents an immediate increase in pro forma as adjusted net tangible book value of $0.27 per share to our existing shareholders and, based on the closing price of our common stock on June 28, 2018, $0.48 per share, an immediate dilution of $(0.21) per share to our new shareholders.

 

SELLING SHAREHOLDERS

 

The common stock being offered by the Selling Shareholders are those shares of common stock issuable upon conversion of their Notes. For additional information regarding the Notes and conversion features, see “ Private Placement of Convertible Notes ” on page 19 above. We are registering the shares of common stock in order to permit the Selling Shareholders to offer the shares for resale from time to time. Except for the ownership of the shares of common stock and Notes, the Selling Shareholders have not had any material relationship with us within the past three years.

 

The table below lists the Selling Shareholders and other information regarding the beneficial ownership of the shares of common stock by each of the Selling Shareholders. The second column lists the number of shares of common stock beneficially owned by each Selling Shareholder, based on its ownership as of June 28, 2018, assuming conversion of the Notes held by the Selling Shareholders on that date, subject to limitations on exercises as set forth in the Notes.

 

The third column lists the shares of common stock being offered in this prospectus by the Selling Shareholders.

 

In accordance with the terms of a registration rights agreement with the Selling Shareholders, this Prospectus generally covers the resale of shares of common stock issuable upon conversion of the Notes held by the Selling Shareholders, subject to adjustment as provided in the registration right agreement. The fourth column assumes the sale of all of the shares offered by the selling shareholders pursuant to this prospectus.

 

Under the terms of the Notes, a Selling Shareholder may not convert the Notes to the extent such conversion would cause such Selling Shareholder, together with its affiliates and attribution parties, to beneficially own a number of shares of common stock which would exceed 4.99% of our then outstanding common stock. The Selling Shareholders may sell all, some or none of their shares in this offering. See “ Plan of Distribution ” beginning on page 24.

 

 
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As of June 28, 2018, there are approximately 2,831,418 shares of our common stock held by or currently issuable to non-affiliates, representing approximately 95% of the outstanding common stock. The 523,000 shares we are registering for resale by the Selling Shareholders represents only a portion of the maximum number of shares we expect to issue upon conversion of the Selling Shareholders’ Notes. When combined with the shares registered in our last registration statement, it represents approximately 32% of the outstanding common stock held by non-affiliates. We cannot register more shares at this time, but if we are able, we will register additional shares to cover all shares issuable to the Selling Shareholders upon conversion of all Notes.

 

All information with respect to common stock ownership of the Selling Shareholders has been furnished by or on behalf of the Selling Shareholders and is as of June 28, 2018. Because the Selling Shareholders may sell some or all of the shares included in this Prospectus, and because there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares, no estimate can be given as to the number of shares available for resale hereby that will be held by the Selling Shareholders in the future. In addition, the Selling Shareholders may have sold, transferred or otherwise disposed of, or may sell, transfer or otherwise dispose of, at any time and from time to time, the common stock it holds in transactions exempt from the registration requirements of the Securities Act after the date on which it provided the information set forth on the table below. We have, therefore, assumed for the purposes of the following table, that the Selling Shareholders will sell all of the shares owned beneficially by it listed in the table below that are covered by this Prospectus. Shares in the table below refer to shares of our outstanding common stock.

 

Selling Shareholder

 

Shares of Common Stock Beneficially Owned Prior to the Offering

 

 

Maximum Number of Shares of Common Stock Being Offered Hereby

 

 

Shares of Common Stock Beneficially Owned After Completion of the Offering

 

 

Percent of Outstanding Common Stock Beneficially Owned After Completion of the Offering

 

SEG-RedaShex, LLC (1)

 

 

156,996

(3)

 

 

174,333

(4)

 

 

0 (5)

 

0%

(5)

RedDiamond Partners LLC (2)

 

 

156,996

(3)

 

 

348,667

(4)

 

 

0 (5)

 

0%

(5)

 

(1) Based on information provided to us, Jonathan Schechter and Joseph Reda are the individuals who share dispositive and voting power of the shares. Mr. Schechter and Mr. Reda disclaim any beneficial ownership of these shares. The address of The Special Equities Group, LLC is 106 Woods Dr., Roslyn, NY 11576.

 

 

(2) Based on information provided to us, John DeNobile is the individual with dispositive and voting power of the shares. Mr. DeNobile disclaims any beneficial ownership of these shares. The address of RDW Capital LLC is 110 Chestnut Ridge Rd., #138, Montvale, NJ 07645.

 

 

(3)

Consists entirely of shares issuable pursuant to the Notes. If all of the Selling Shareholder’s Notes were converted on June 28, 2018, up to 1,250,000 shares could be issued (based on market prices as reported by OTC Markets). However, a Selling Shareholder may not convert the Notes if the conversion would cause the Selling Shareholder to own more than 4.99% of our outstanding common stock after the conversion. The number of shares shown here reflects the maximum amount convertible at any one time. See “ Private Placement of Convertible Notes ” on page 19 for more details on the Notes.

 

(4) Represents the maximum number of shares each Selling Shareholder may sell pursuant to this registration statement and represents shares of common stock that may be issuable pursuant to the Notes. See “ Private Placement of Convertible Notes ” on page 19 for more details.

 

 

(5) Assumes that all Notes were converted and all underlying shares were sold in the offering. However, a Selling Shareholder may not convert the Notes, if the conversion would cause the Selling Shareholder to own more than 4.99% of our outstanding common stock after the conversion. See “ Private Placement of Convertible Notes ” on page 19 for more details on the Notes.

 

 
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Beneficial ownership for the purposes of the table above is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Except as disclosed in the table above, we believe that the Selling Shareholders and their affiliates identified herein possess sole voting and investment power over all shares of common stock shown as beneficially owned by such Selling Shareholders and affiliates.

 

Resales

 

The Selling Shareholders and intermediaries through whom shares are sold may be deemed “underwriters” within the meaning of the Securities Act with respect to the shares offered by this Prospectus, and any profits realized or commissions received may be deemed underwriting compensation.

 

Additional Selling Shareholders not named in this Prospectus will not be able to use this Prospectus for resales until they are named in the table above by prospectus supplement or post-effective amendment. Transferees, successors and donees of identified Selling Shareholders will not be able to use this Prospectus for resales until they are named in the table above by Prospectus supplement or post-effective amendment. If required, we will add transferees, successors and donees by prospectus supplement in instances where the transferee, successor or donee has acquired its shares from a Selling Shareholder named in this Prospectus after the effective date of this Prospectus.

 

Prior Transactions with Selling Shareholders

 

The Company has had an ongoing relationship with certain affiliates of the Selling Shareholders going back to 2015. In addition to the sale of the Notes to the Selling Shareholders, we have entered into the following financing transactions with affiliates of the Selling Shareholders:

 

 

· Convertible Promissory Notes issued to Redwood Management, LLC (“ Redwood ”) as follows:

 

 

o On May 27, 2016, received net proceeds of $85,000 in exchange for a note with a principal amount of $105,000;

 

 

 

 

o On March 11, 2016, received net proceeds of $90,000 in exchange for a note with a principal amount of $105,000;

 

 

 

 

o On March 7, 2016, received net proceeds of $67,500 in exchange for a note with a principal amount of $78,750;

 

 

 

 

o On February 24, 2016, received net proceeds of $67,500 in exchange for a note with a principal amount of $78,750;

 

 

 

 

o On January 8, 2016, received net proceeds of $107,500 in exchange for a note with a principal amount of $131,250;

 

 

 

 

o On December 28, 2015, received net proceeds of $130,000 in exchange for a note with a principal amount of $157,500;

 

 

 

 

o On December 15, 2015, received net proceeds of $25,000 in exchange for a note with a principal amount of $27,500;

 

 

 

 

o On September 21, 2015, received net proceeds of $45,000 in exchange for a note with a principal amount of $48,000; and

 

 

 

 

o On September 2, 2015, received net proceeds of $50,000 in exchange for a note with a principal amount of $55,000.

 

 

 

 

· Stock Purchase Agreement dated May 27, 2016 for the sale of up to $2,000,000 of our shares of common stock to Redwood over a three-year period. An aggregate of $153,843 was sold under this agreement before it was cancelled.

 

 

 

 

· Warrant Purchase Agreement dated October 10, 2016 whereby Redwood purchased a warrant for $300,000 from another investor and we issued a convertible note for the same amount to Redwood.

 

 

 

 

· Securities Purchase Agreement dated March 30, 2017 to sell an aggregate of $600,000 of our common stock and warrants to various affiliates of the Selling Shareholders. Some of these securities were exchanged for convertible notes on August 8, 2017.

 

Further details of these transactions have been disclosed in our past filings with the Commission.

 

 
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PLAN OF DISTRIBUTION

 

The Selling Shareholders of the common stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on the principal trading market on which our common stock trades or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales will be at a fixed price of $0.50 per share, until the Company’s common stock is listed on a national securities exchange or is quoted on the OTC Bulletin Board, the OTCQX or the OTCQB, at which time the Selling Shareholders will sell their shares at a price based on the market price. The Selling Shareholders may use any one or more of the following methods when selling shares:

 

 

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

 

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

 

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

 

· privately negotiated transactions;

 

·

broker‑dealers may agree with the Selling Shareholders to sell a specified number of such shares;

 

· a combination of any such methods of sale; or

 

· any other method permitted pursuant to applicable law.
   

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

 

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

 

In connection with the sale of the securities or interests therein, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Shareholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Shareholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Shareholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.

 

 
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The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

We agreed to keep this prospectus effective until the earlier of (A) the date on which the all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act and (B) after the date that no Notes are outstanding, the date that all of the securities may be sold pursuant to rule 144 without volume or manner-of-sale restrictions. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Shareholders or any other person. We will make copies of this prospectus available to the Selling Shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

 

DESCRIPTION OF SECURITIES

 

Our authorized capital stock consists of 1,000,000,000 shares of common stock, par value $0.00001, and 10,000,000 shares of preferred stock, par value $0.001. As of June 28, 2018, there were 2,989,233 shares of our common stock issued and outstanding, and 2,000,000 shares of Series A Convertible Preferred Stock issued and outstanding.

 

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

 

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

 

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

 

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

 

The voting rights of the Series A Convertible Preferred Stock were not affected by the Reverse Split, and as a result, the Series A Convertible Preferred stockholders now have voting control of over 98% of our voting stock.

 

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

 

Options and Warrants .

 

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

 

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

 

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

 

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

 

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

 

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

 

There are outstanding 121,215 Series A Warrants to acquire shares of our common stock at $7.50 per share and 121,215 Series B Warrants to acquire shares of our common stock at $12.50 per share held by three (3) investors.

 

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

 

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

 

INTEREST OF NAMED EXPERTS AND COUNSEL

 

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

 

DESCRIPTION OF BUSINESS

 

Corporate Information

 

We were incorporated on May 10, 2010 in the State of Nevada. We have one wholly-owned subsidiary, Premier Biomedical Pain Relief Meds, LLC, a Nevada limited liability company, organized on September 14, 2017.

 

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

 

Overview

 

We are in part a research-based company that primarily intends to discover and develop medical products. Our current focus is on the distribution of our pain products. We also conduct research and development of proprietary drugs and techniques to target cancer, multiple sclerosis and other diseases.

 

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

 

 
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Pain Management

 

In the first quarter of 2017, we entered the pain management industry with one product: a 96-hour pain relief patch with 48 mg of hemp oil extract. We have now expanded our product offerings to four products:

 

 

5. 96-hour pain relief patch with 50 mg of hemp oil extract, the highest level of pain relief ingredient available in the industry;

 

 

 

 

6. 120 mg/ 10 ml water-based roll-on applicator;

 

 

 

 

7. 150 mg/ 10 ml oil-based roll-on applicator; and

 

 

 

 

8. 150 mg/ 30 ml oil-based pump spray applicator.

  

We have also designed and developed a fifth new product, a 2-ounce hemp oil cream that will debut into the market in the near future. We believe that this five-product array positions us with the majority of the hemp oil extract customers in the marketplace.

 

Our pain relief patch is a CBD, or Cannabidiol, topical patch. The patent-pending reservoir patch design from our manufacturer features a unique barrier between the foam adhesive and the pain relieving ingredients to ensure that the adhesive is not transmitted and absorbed through the skin, as with many competitive patches. The formulations for the products contain no psychoactive components and, therefore, are not expected to affect drug test results. The other products consist of the same primary ingredients as contained in our reservoir patch, but offer other convenient methods of application.

 

We are also continuing to develop additional pain relief products, including creams, sprays, gel pens and capsules. These products are designed to provide natural relief from:

 

 

· Knee pain,

 

· Shoulder pain,

 

· Joint pain,

 

· Arthritis pain,

 

· Muscle soreness and tenderness,

 

· Headaches, and

 

· Migraines.
   

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

 

 
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Research and Development

 

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

 

-

Cancer

-

Fibromyalgia

-

Multiple Sclerosis (MS)

-

Traumatic Brain Injury (TBI)

-

Neuropathic Pain

-

Alzheimer’s Disease (AD)

-

Amyotrophic Lateral Sclerosis

(ALS/Lou Gehrig’s Disease)

-

Blood Sepsis and Viremia

 

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

 

Feldetrex®

 

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

 

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

 

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

 

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

 

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

 

 
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Sequential-Dialysis Technique

 

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

  

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

 

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

 

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

 

Feldetrex™

 

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

 

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

 

 
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Feldetrex® utilizes a low dosage of Naltrexone which has been shown in multiple medical articles in the medical literature to increase endogenous enkephalins 4 (endogenous enkephalins are pain-relieving pentapeptides produced in the body, located in the pituitary gland, brain, and GI tract. Axon terminals that release enkephalins are concentrated in the posterior horn of the gray matter of the spinal cord, in the central part of the thalamus, and in the amygdala of the limbic system of the cerebrum. Endogenous Enkephalins function as neurotransmitters that inhibit neurotransmitters in the pathway for pain perception, thereby reducing the emotional as well as the physical impact of pain). We have not independently conducted medical or laboratory tests to show the mechanism of action of this medication. While Naltrexone in high dosages acts as an opioid antagonist, it inhibits opiate receptors. Naltrexone in low dosages causes a compensatory upregulation (increase in the number of receptors) of native endorphins and enkephalins, which last beyond the effects of the Naltrexone itself. We believe that this means, paradoxically, that a daily dose of low dose Naltrexone can be used to chronically increase endorphin and enkephalin levels. We believe that by utilizing a low dosage, Naltrexone has a unique ability to increase enkephalins and other neurotransmitters in the brainstem of patients.

  

Marketing

 

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

 

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

____________

4

 

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

 

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

 

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

 

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

 

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

 

F.

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

 

G.

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

  

 
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Patents and Intellectual Property Rights

 

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

 

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

 

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

 

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

 

Competition

 

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

 

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

 

Environment

 

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

 

 
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Regulation

 

Pain Management Products

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

· the distribution of cannabis to minors;

 

 

 

 

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

 

 

 

 

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

 

 

 

 

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

 

 

 

 

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

 

 

 

 

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

 

 

 

 

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

 

 

 

 

· cannabis possession or use on federal property.
   

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

 

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

 

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

 

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

 

Other Medical Products

 

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

 

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

 

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

 

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

 

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

 

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

 

Employees

 

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

 

DESCRIPTION OF PROPERTY

 

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

 

LEGAL PROCEEDINGS

 

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

 

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

 

 
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SELECTED FINANCIAL DATA

 

 

 

As of and

for the Year Ended

December 31,

 

 

As of and

for the Year

Ended

December 31,

2016

 

Premier Biomedical, Inc.

 

 

2017

(audited)

 

 

(audited and restated)

 

 

 

 

 

 

 

 

 

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$ 39,761

 

 

$ -

 

Net operating income (loss)

 

$ (1,289,838 )

 

$ (637,891 )

Net income (loss)

 

$ (3,763,558 )

 

$ (1,768,221 )

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$ 83,704

 

 

$ 22,437

 

Current assets

 

$ 203,603

 

 

$ 33,867

 

Total assets

 

$ 209,081

 

 

$ 38,967

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$ 2,819,807

 

 

$ 699,671

 

Total liabilities

 

$ 2,819,807

 

 

$ 699,671

 

Accumulated deficit

 

$ (16,328,812 )

 

$ (12,565,254 )

 

 

 

 

 

 

 

 

 

Net loss per common share – basic and diluted

 

$ (0.01 )

 

$ (0.01 )

 

 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

Disclaimer Regarding Forward Looking Statements

 

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

 

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

 

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

 

Summary Overview

 

We are in part a research-based company that primarily intends to discover cures for cancer and various diseases and to develop topical pain relief products, drugs and treatment methodologies. Currently, our primary focus is the distribution of pain management products. In addition, we continue to pursue the research and development of proprietary drugs and techniques to target cancer, multiple sclerosis and other diseases.

 

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

 

Pain Management Products

 

We have developed and are now marketing natural and cannabis-based generalized, neuropathic and localized topical pain relief treatment products. Initial sales of our products were recognized in the first quarter of 2017 through a joint venture. However, because we were unable to produce the product at the volumes we desired, we terminated the joint venture and took everything in-house. We have engaged another manufacturer who we believe can produce our products more efficiently and provide the highest levels of quality control.

 

 
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In the first quarter of 2017, we started with one product: a 96-hour pain relief patch with 48 mg of hemp oil extract. Today, we have expanded our product offerings to four industry-leading products:

 

 

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; and

 

 

 

 

4. 150 mg/ 30 ml oil-based pump spray applicator.

 

We have also designed and developed a fifth new product a 2 ounce hemp oil cream that will debut into the market in the near future. We believe that this five-product array positions us with the majority of the hemp oil extract users in the marketplace. The topical pain relief market is expected to grow rapidly in the next few years, 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. Establishing an agent in Ohio, Pennsylvania, Florida, the West and the mid-South to expand our direct distributor network;

 

 

 

 

4. Engaging an investor relations firm called New To The Street that will include us in six televised appearances designed to gain optimum exposure for our company and its products;

 

 

 

 

5. Emphasizing the potential for our all-natural, 50-state legal, drug test safe topical pain relief products to be a preferred alternative to the dangerous opioid pain killers that are a major factor in numerous drug overdose deaths;

 

 

 

 

6. Arranging to complete a radio broadcast via Uptick Newswire every 4-6 weeks to ensure that our story gets out to the public; and

 

 

 

 

7. Reaching an agreement with a huge professional sports figure to become a spokesman for the company and to provide access to the sports industry—we expect to issue a press release to announce this agreement shortly.

  

In addition to online sales, we have also established an initial distribution network consisting of three pharmacies and three chiropractic clinics. We expect distribution of these products to grow rapidly as we find other local pharmacies and clinics to distribute our products. With proof of marketability from the initial sales of products, we are seeking to enter into distribution arrangements with several large pharmacy chains that operate in multiple states, and we believe we are close to coming to an agreement with these pharmacy chains.

 

In addition, we are in the process of negotiating potential partnerships outside the United States to manufacture and market our products worldwide. We expect that these partnerships will make new markets available to us and allow us to rapidly increase our revenues profitability. We hope that through these partnerships our sales will grow rapidly and we will be able to see considerable cost-savings through favorable manufacturing arrangements.

 

 
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Initial feedback from our pain management products has been promising. 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. 5 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 these products, we have relied heavily on financing through various issuances of common stock, warrants and convertible debt. We appreciate the patience of our faithful shareholders during this period as we were determined to develop and market new, ground-breaking products. As we begin to turn the corner and see the first sales being made, we expect to find stockholder-friendly financing solutions in the future that help us expand our operations, avoid dilution of our shareholders and raise our stock price. Nonetheless, we have had to rely on the financing available to us to obtain the capital we need to grow our business in the near future. On March 30, 2017, we raised $300,000 from three investors in a sale of stock and warrants. On May 30, 2017 we raised $150,000 from three investors in a sale of stock and warrants. On October 30, 2017, the same investors provided the final investment of another $150,000 in exchange for convertible notes.

 

We also have recently received $120,000 from the sale of the Notes to the Selling Shareholders. The Selling Shareholders have also committed to purchase additional Notes in the Third Tranche for an aggregate of $180,000 within five trading days of the registration statement being declared effective. For further details, see “ Private Placement of Convertible Notes ” above beginning on page 19.

  

Despite the recent sales of convertible notes, our goal is to move forward with financing that will be more favorable to investors as we begin to grow our revenues. While we have begun to generate revenues with the products we have launched in the first quarter of 2017, the cash generated by these new products is not yet sufficient to finance our volume ramp-up and planned product introductions. Therefore, as revenues grow, we expect to finance the company, if necessary, through the issuance of securities that are more favorable to our current investors, such as issuing warrants with fixed exercise prices above the market price on the date of issuance.

 

Through 2018, 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 and international partners. 

___________ 

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

 

 
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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, 2017 and 2016 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. We recently completed the sale of stock and warrants to raise $300,000 from a group of investors and expect to be able to raise another $300,000 once we complete registration of the investors’ securities. This should give us the capital we need in the short term to push forward in the production and marketing of our new pain management products. However, if we are unable to grow revenues sufficient to meet our operating expenses, we must again 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.

 

Results of Operations for the Three Months Ended March 31, 2018 and 2017

 

Introduction

 

We had revenues from our pain management products of $10,395 for the three months ended March 31, 2018 and no revenues for the three months ended March 31, 2017. Our operating expenses were $74,108, for the three months ended March 31, 2018, compared to $74,206, for the three months ended March 31, 2017, a minor decrease. Our operating expenses consisted mostly of professional fees, and to a lesser extent general and administrative expenses and research and development costs.

 

Revenues and Net Operating Loss

 

Our revenue, operating expenses, net operating loss, and net loss for the three months ended March 31, 2018 and 2017 were as follows:

 

 

 

Three Months

 

 

Three Months

 

 

 

March 31, 2018

 

 

March 31, 2017

 

 

 

 

 

 

 

 

Revenue

 

$ 10,395

 

 

$ -

 

Cost of goods sold

 

 

6,058

 

 

 

-

 

Gross profit

 

 

4,337

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

General and administrative

 

 

34,492

 

 

 

33,059

 

Professional fees

 

 

39,616

 

 

 

41,147

 

Total operating expenses

 

 

74,108

 

 

 

74,206

 

 

 

 

 

 

 

 

 

 

Net operating loss

 

 

(69,771 )

 

 

(74,206 )

Other income (expense)

 

 

636,095

 

 

 

(5,254,896 )

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$ 566,324

 

 

$ (5,329,102 )

 

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, while our cost of goods sold primarily consists of the patches and the packaging. We had revenues of $10,395 for the three months ended March 31, 2018. We had not yet begun sales in the first quarter of 2017.

 

 
41
 
 

  

Cost of Goods Sold

 

Cost of goods sold for the three months ended March 31, 2018 were $6,058 compared to $-0- during the three months ended March 31, 2017, an increase of $6,058. Cost of sales consists primarily of pain patch materials and packaging supplies. The increased cost of sales in the current period was due to the commencement of operations that were not present in the comparative period.

 

General and Administrative

 

General and administrative expenses were $34,492, for the three months ended March 31, 2018, compared to $33,059, for the three months ended March 31, 2017, an increase of $1,433, or 4.3%. The increase was primarily due to increased office supplies in support of our recently commenced operations.

  

Professional Fees

 

Professional fees expense was $39,616, for the three months ended March 31, 2018, compared to $41,147, for the three months ended March 31, 2017, a decrease of $1,531, or 3.7%. Amounts for the three months ended March 31, 2018 and 2017 consist primarily of legal and, accounting and auditing services.

 

Net Operating Loss

 

Net operating loss was $69,771 for the three months ended March 31, 2018, compared to $74,206, for the three months ended March 31, 2017, a decrease of $4,435, or 6.0%. Net operating loss decreased for the three months ended March 31, 2018, primarily due to revenues received on sales of our pain management products that had not yet commenced in the first quarter of 2017.

 

Other Income/Expense

 

Other income was $636,095 for the three months ended March 31, 2018, compared to other expense of $5,254,896 for the three months ended March 31, 2017, a decrease of $5,890,991. Other income for the three months ended March 31, 2018 consisted of $64,145 of interest expense, and a gain of $700,240 in market value of the derivative liability associated with convertible debts and warrants we issued. Other expense of $5,254,896 for the three month period ended March 31, 2017 consisted of $152,747 of interest expense, a loss of $2,058 on the termination of our investment in a joint venture, as offset by a loss of $5,100,091 in market value of the derivative liability associated with convertible debts and warrants we issued.

 

Net Income/Loss

 

Net income for the three months ended March 31, 2018 was $566,324 or $0.00 per share compared to net loss of ($5,329,102) or ($0.01) per share for the three months ended March 31, 2017. Net income (loss) increased on a net basis during the three months ended March 31, 2018, as set forth above, primarily due to the gain of $700,240 in market value of the derivative liability associated with convertible debts and warrants we issued, compared to a loss of $5,100,091 in market value during the comparative three months ended March 31, 2017.

 

 
42
 
 

  

Results of Operations for the Year Ended December 31, 2017 and 2016

 

Introduction

 

We had revenues of $39,761 and zero for the years ended December 31, 2017 and 2016, respectively. Our operating expenses were $1,304,160 for the year ended December 31, 2017 compared to $637,891 for the year ended December 31, 2017, an increase of $666,269, or 104%. Our operating expenses consisted of research and development costs, general and administrative expenses, and professional fees, including $783,404 and $110,390 of stock based compensation for the years ended December 31, 2017 and 2016, respectively.

 

Revenues and Net Operating Loss

 

Our revenues, operating expenses, and net operating loss for the years ended December 31, 2017 and 2016 were as follows:

 

 

 

Year Ended

 

 

Year Ended

 

 

 

 

 

 

December 31,

 

 

December 31,

 

 

Increase /

 

 

 

2017

 

 

2016

 

 

(Decrease)

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$ 39,761

 

 

$ -

 

 

$ 39,761

 

Cost of goods sold

 

 

25,439

 

 

 

-

 

 

 

25,439

 

Gross profit

 

 

14,322

 

 

 

-

 

 

 

14,322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

184,315

 

 

 

113,862

 

 

 

70,453

 

General and administrative

 

 

196,670

 

 

 

191,379

 

 

 

5,291

 

Professional fees

 

 

923,175

 

 

 

332,650

 

 

 

590,525

 

Total operating expenses

 

 

1,304,160

 

 

 

637,891

 

 

 

666,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating loss

 

 

(1,289,838 )

 

 

(637,891 )

 

 

(651,947 )

Other expense

 

 

(2,473,720 )

 

 

(1,130,330 )

 

 

(1,343,390 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ (3,763,558 )

 

$ (1,768,221 )

 

$ (1,995,337 )

 

 
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Revenues

 

The Company was established on May 10, 2010, and had no revenues through December 31, 2016. We began initial sales of our pain management products during the year ended December 31, 2017.

 

Cost of Goods Sold

 

Cost of goods sold for the year ended December 31, 2017 were $25,439, compared to zero during the year ended December 31, 2016. Cost of goods sold consists primarily of finished goods sold, packing and shipping costs. The increased cost of goods sold in the current period was due to the commencement of sales in 2017. Our gross margins were approximately 36%. We expect gross margins to increase along with revenues as we realize efficiencies and economies of scale and increase our pricing as demand increases.

 

Research and Development

 

Research and development expenses were $184,315 for the year ended December 31, 2017 compared to $113,862 for the year ended December 31, 2016, an increase of $70,453, or 62%. The expenses increased due to final invoices from the University of Texas at El Paso. We plan to reduce our research and development activities as we focus on our pain management products.

 

General and Administrative

 

General and administrative expenses were $196,670 for the year ended December 31, 2017 as compared to $191,379 for the year ended December 31, 2016, an increase of $5,291, or 3%.

 

Professional Fees

 

Professional fees expense was $923,175 for the year ended December 31, 2017, compared to $332,650 for the year ended December 31, 2016, an increase of $590,525, or 178%. The increase was primarily due to the increase of stock based compensation issued to directors and consultants for services rendered. A total of $783,404 of stock based compensation was awarded during the year ended December 31, 2017, compared to $110,390 of stock based compensation during the year ended December 31, 2016, an increase of $673,014 from 2016 to 2017. The increase in stock based compensation was the result of warrants that were awarded to members of the Board of Directors and the Scientific Advisory Board during 2017. We did not award warrants to members of these boards or our officers during 2016.

 

Net Operating Loss

 

Net operating loss for the year ended December 31, 2017 was $1,289,838, compared to a net operating loss of $637,891 for the year ended December 31, 2016, an increase of $651,947, or 102%. Net operating loss increased, as set forth above, primarily due to an increase in stock based compensation issued to directors and consultants for services rendered.

 

 
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Other Expense

 

Other expense for the year ended December 31, 2017 was $2,473,720, compared to $1,130,330 for the year ended December 31, 2016, an increase of $1,343,390, or 119%. Other expense consisted of interest and finance charges on debt and equity financing, a change in the fair value of derivative liabilities, as well as a net loss on our joint venture during the year ended December 31, 2017. Other expense consisted of interest and finance charges on debt and equity financing, a change in the fair value of derivative liabilities, as well as a net loss on the settlement of the Typenex warrants during the year ended December 31, 2016. The increase was primarily due to an increase of approximately $2,089,938 in the value of derivative liabilities related to significant increased convertible debt financing during the year ended December 31, 2017, compared to the year ended December 31, 2016.

 

Net Loss

 

Net loss for the year ended December 31, 2017 was $3,763,558, or $(0.01) per share, compared to a net loss of $1,768,221, or $(0.01) per share, for the year ended December 31, 2016, an increase of $1,995,337, or 113%. Net loss increased, as set forth above, primarily due to an increase of approximately $2,089,938 in the value of derivative liabilities and increased stock based compensation issued to directors and consultants for services rendered.

 

Liquidity and Capital Resources

 

Introduction

 

During the three months ended March 31, 2018, we had negative operating cash flows. Our cash on hand as of March 31, 2018 was $79,221, which was derived from the sale of shares of common stock, warrants and convertible promissory notes to investors. Our monthly cash flow burn rate for 2017 was approximately $42,500, and our monthly burn rate through the three months ended March 31, 2018 was approximately $20,800. 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 March 31, 2018 and December 31, 2017, respectively, are as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

 

 

 

2018

 

 

2017

 

 

Change

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$ 79,221

 

 

$ 83,704

 

 

$ (4,483 )

Total Current Assets

 

 

191,958

 

 

 

203,603

 

 

 

(11,645 )

Total Assets

 

 

198,874

 

 

 

209,081

 

 

 

(10,207 )

Total Current Liabilities

 

 

2,126,006

 

 

 

2,819,807

 

 

 

(693,801 )

Total Liabilities

 

$ 2,126,006

 

 

$ 2,819,807

 

 

$ (693,801 )

 

Our cash and total current assets decreased slightly as we continued to sustain losses. Our total current liabilities decreased primarily due to a reduction in the value of our derivative liability. Our working capital deficit decreased from ($2,616,204) to ($1,934,048), and our stockholders’ deficit decreased by $683,594 to ($1,927,132) due primarily to the reduction in the value of our derivative liability as well.

 

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 March 31, 2018 was $79,221. Based on our minimal revenues and current monthly burn rate of approximately $42,500 per month, we will need to continue to fund operations by raising capital from the sale of our stock and debt financings.

 

 
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Sources and Uses of Cash for the Three-Month Periods Ended March 31, 2018 and 2017

 

Operations

 

We had net cash used in operating activities of $62,454 for the three months ended March 31, 2018, compared to $113,817 for the three months ended March 31, 2017. For the three months ended March 31, 2018, the net cash used in operating activities consisted primarily of our net gain of $566,324, offset primarily by change in fair market value of derivative liabilities of ($700,240). For the three months ended March 31, 2017, the net cash used in operating activities consisted primarily of our net loss of ($5,329,102) and a decrease of our accounts payable of ($42,297), offset primarily by change in fair market value of derivative liabilities of $5,100,091 and amortization of debt discount of $149,456.

 

Investments

 

We had ($2,029) net cash used in investing activities for the three months ended March 31, 2018 for purchases of property and equipment, and ($2,058) net cash used in investing activities for the three months ended March 31, 2017 from a loss on the close of our joint venture.

 

Financing

 

Our net cash provided by financing activities for the three months ended March 31, 2018 was $60,000, compared to $303,323 for the three months ended March 31, 2017, which consisted of proceeds from issuances of convertible notes payable.

 

Sources and Uses of Cash for the Years Ended December 31, 2017 and 2016

 

Operations

 

Our net cash used in operating activities for the years ended December 31, 2017 and 2016 was $509,432 and $483,622, respectively, an increase of $25,810, or 5%. The primary uses of our cash were purchasing inventory and operating our pain management business, along with the public company compliance costs.

 

Investments

 

Our net cash used in investing activities for the years ended December 31, 2017 and 2016 was $2,694 and $3,536, respectively, a decrease of $842. The slight decrease reflected a lack of purchases of property and equipment in 2017 compared to 2016.

 

Financing

 

Our net cash provided by financing activities for the years ended December 31, 2017 and 2016 was $573,393 and $474,181, respectively, an increase of $99,212, or 17%. The increase was primarily a result of an increase in proceeds from the sale of stock of $285,000 in 2017 compared to no proceeds from the sale of stock in 2016 and a decrease in repayments of convertible notes payable from $89,039 to zero. This was offset by a decrease in the proceeds from convertible notes payable of $117,500, from $417,500 to $300,000, a decrease in proceeds from the sale of stock on equity line of credit from $143,520 to $18,323, and an increase in repayments of notes payable to related parties from zero to $30,000.

 

 
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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 the Purchase Agreement, we sold Notes to the Selling Shareholders for $60,000 on each of March 1, 2018 and April 24, 2018, for an aggregate of $120,000. The Selling Shareholders have also committed to provide an additional $180,000 within five trading days of the effectiveness of a registration statement to register shares of common stock issuable upon conversion of the Notes. For further details, see “ Private Placement of Convertible Notes ” above beginning on page 19.

  

Critical Accounting Policies and Estimates

 

See Note 1 to the Financial Statements for the year ended December 31, 2017 on page F-6 which is incorporated herein by reference.

 

CHANGES IN AND DISAGREEMENTS WITH

ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

We have no disclosure required by this item.

 

 
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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

 

The following table sets forth, as of June 12, 2018, certain information with respect to the Company’s equity securities owned of record or beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of each class of the Company’s outstanding equity securities; and (iii) all Directors and Executive Officers as a group.

 

Name

Age

Position(s)

William A. Hartman

76

President, Chief Executive Officer, and Director (June 2010)

Dr. Mitchell S. Felder

64

Chairman of the Board of Directors and the Scientific Advisory Board (June 2010)

Heidi H. Carl

48

Chief Financial Officer, Secretary, Treasurer and Director (June 2010)

Dr. Patricio F. Reyes

71

Chief Technology Officer and Director (August 2016)

John S. Borza

64

Vice President and Director (August 2012)

Jay Rosen

64

Director (June 2010)

John Pauly

57

Director (December 2017)

 

William A. Hartman , age 76, is our President and Chief Executive Officer and a member of our Board of Directors. From March 2008 until June 2010, Mr. Hartman was not directly employed but was planning the formation of Premier Biomedical, Inc. From October 2006 to March 2008, Mr. Hartman was the Chief Operating Officer of Nanologix, Inc. From July 1991 to July 2000, Mr. Hartman was a Director at TRW Automotive. From 1984 to 1991, Mr. Hartman was Chief Engineer at TRW Automotive and from 1979 to 1984 he was Division Quality Compliance Manager at Ford Motor Company. At TRW Automotive, Mr. Hartman was one of the auto industry pioneers of the concept of grouping related components into systems and modules and shipping just-in-time to the vehicle assembly plants. He founded and headed a separate business group within TRW Automotive with plants in the U.S., Mexico and Europe with combined annual sales of $1.3 Billion. Academic credentials include a BSME degree from Youngstown State University and a MSIA degree (Industrial Administration/Management) from the University of Michigan.

 

 
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Dr. Mitchell S. Felder , age 64, is our Chairman of the Board of Directors and our Scientific Advisory Board. Dr. Felder is a practicing Board Certified Neurologist. Dr. Felder acquired a B.A. Degree from the University of Pennsylvania in 1975 and an M.D. Degree from the University of Rome, Faculty of Medicine in 1983. He has been Board Certified by both the American Academy of Clinical Neurology and the American Board of Psychiatry and Neurology. Dr. Felder has authored or co-authored six publications, three studies, and has 18 issued patents. Dr. Felder is the former President, Chairman, and founder of Infectech/Nanologix (from its founding in 1989 through March 2007)—growing the company from startup to a $100 million market cap. During the past five years, Dr. Felder has had as his principal occupation and employment work as an attending neurologist. Dr. Felder is presently an attending neurologist at the William Beaumont Army Medical Center in El Paso, Texas. Dr. Felder has more than 20 years of management experience.

 

Heidi H. Carl , age 48, is our Chief Financial Officer, Secretary, Treasurer, and a member of our Board of Directors. From May 2009 until June 2010, Ms. Carl was not directly employed but was working with Mr. Hartman in planning the formation of Premier Biomedical, Inc. From June 2007 to May 2009, Ms. Carl was the Product Development Specialist at General Motors Corporation. From May 2006 to May 2007, Ms. Carl was the Associate Marketing Manager at General Motors Corporation. From May 2003 to May 2006, Ms. Carl was the Marketing Specialist at General Motors Corporation and from May 1999 to May 2003, Ms. Carl was the District Area Parts Manager at General Motors Corporation. Academic credentials include a BSBA degree from Madonna University and an ASBA degree from Oakland Community College.

 

Dr. Patricio F. Reyes , MD, FAAN, age 71, is a board certified neurologist and neuropathologist, has served as the Chief Medical Officer and Board Member of the Retired National Football League Players Association since 2013. Dr. Reyes has been a board member of the Association of Ringside Physicians since 2008 and was previously its Chair of the Education Committee and 2009 Distinguished Educator. Dr. Reyes has worked as a neurologist and neuropathologist for the Phoenix VA Hospital since 2014. Dr. Reyes is the co-founder, Chief Medical Officer and Chair of the Scientific Advisory Board of Yuma Therapeutics, Inc. where he has worked since 2012. He is a Fellow of the American Academy of Neurology and was former Professor of Neurology and Neuropathology at Thomas Jefferson Medical School in Philadelphia, Pennsylvania, and Professor of Neurology, Pathology and Psychiatry at Creighton University School of Medicine in Omaha, Nebraska.

 

John S. Borza , PE, AVS, age 64, is our Vice President and was appointed to our Board of Directors on August 17, 2012. Mr. Borza is currently the President and Chief Executive Officer of Value Innovation, LLC, a consulting firm focused on value engineering and creative problem solving, where he has served since August 2009. Prior to Value Innovation, Mr. Borza was a Specialist with TRW Automotive from September 2007 to September 2009, and a Director at TRW Automotive from May 1999 to September 2007. Earlier in his career, Mr. Borza worked in R&D for 12 years on a variety of products and technologies in various capacities ranging from Engineer to Chief Engineer, before moving into launch and production support roles. Mr. Borza is an Altshuller Institute certified TRIZ Practitioner, and a SAVE International certified Associate Value Specialist. He is active in the local chapter of SAVE International and currently serves as the chapter Past-President. Mr. Borza holds a BS degree in Electrical Engineering and an MBA from the University of Michigan.

 

Jay Rosen , age 64, has been a member of our Board of Directors since our inception in June 2010. Mr. Rosen has been a partner at Rosen Associates, a real estate holding and management company, since 1971. He is also a partner at Midway Industrial Terminal, a real estate holding and management company, and has been since 2005. Mr. Rosen privately owns and manages the Rosen Farm, cellular towers and various other real estate properties, is the President of XintCorp, a small start-up company for developing intellectual property, and is a former member of the NY Mercantile Exchange and the New York Futures Exchange. Mr. Rosen studied economics and finance at New York University and Columbia University.

 

 
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John Pauly , age 57, has served as Executive Vice President at HealthWarehouse.com, Inc., an online Verified Internet Pharmacy Practice Site (VIPPS), since October 2017. From January 2017 through March 2017, Mr. Pauly served as the interim Chief Executive Officer of HealthWarehouse.com. From January 2016 until his time at HealthWarehouse.com, he was the Chief Operating Officer of Specialty Medical Drug Store, also a VIPPS accredited online pharmacy business.

 

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

 

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

 

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

 

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

 

Family Relationships

 

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

 

Other Directorships; Director Independence

 

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

 

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

 

Board Committees

 

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

 

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

 

During the fiscal years ended December 31, 2017 and 2016, the Board of Directors met approximately on a bi-weekly basis.

 

Involvement in Certain Legal Proceedings

 

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

 

Code of Ethics

 

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

 

Scientific Advisory Board

 

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

  

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

 

EXECUTIVE COMPENSATION

 

Narrative Disclosure of Executive Compensation

 

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

 

Pursuant to the employment agreement with Hartman, he will be compensated in the amount of $150,000 per year for the duration of the agreement. Pursuant to the agreement, Hartman has waived the salary and the accrual thereof in exchange for being issued a Common Stock Purchase Warrant whereby Hartman may purchase a maximum of 420 shares of our common stock at a purchase price of $362.50 per share. The agreement has a one-year term and provides for two (2) years of severance at his then-current salary in the event Hartman is terminated due to death, disability or without cause. Mr. Hartman is still employed under the terms of the agreement.

 

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

 

Summary Compensation Table

 

The following table sets forth information with respect to compensation earned by our Chief Executive Officer, President, and Chief Financial Officer for the years ended December 31, 2017 and 2016.

 

Name and

Principal Position

 

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock

Awards

($)

 

 

Option Awards

($)

 

 

Non-Equity Incentive Plan Compensation ($)

 

 

Nonqualified Deferred Compensation ($)

 

 

All Other

Compensation

($)

 

 

Total

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

William A. Hartman,

 

2017

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

23,358 (2)

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

23,358

 

Chief Executive Officer (1)

 

2016

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heidi H. Carl,

 

2017

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

16,488 (4)

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

16,488

 

Chief Financial Officer (3)

 

2016

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

_________

(1) Mr. Hartman does not receive a salary for his services as Chief Executive Officer.
(2)

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

(3) Ms. Carl does not receive a salary for her services as Secretary and Treasurer.
(4)

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

 

 
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Officer and Director Compensation

 

On December 22, 2017, we issued warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (34,000 shares); Mitchell Felder (34,000 shares), Heidi Carl (24,000 shares), John Borza (29,000 shares), Patricio Reyes (16,000 shares) and Jay Rosen (4,000 shares). We also issued warrants to purchase shares of our common stock to three members of our Scientific Advisory Board in the amounts indicated: Heleno Souza (10,000 shares), Carl Meyer (2,000 shares) and Katherine Meyer (2,000 shares). The exercise price of the foregoing warrants is $1.25 per share. The warrants also have a cashless exercise option.

 

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

 

Also on December 22, 2017, we issued a warrant to John Pauly as an initial incentive award following his appointment to the Board of Directors, which will allow him to purchase 8,000 shares of our common stock. The terms of this warrant are the same as those in the warrants issued to the other directors on this date, having an exercise price of $1.25 and a cashless exercise option.

 

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

 

Outstanding Equity Awards at Fiscal Year-End

 

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

 

 
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SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of June 28, 2018, certain information with respect to the Company’s equity securities owned of record or beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of each class of the Company’s outstanding equity securities; and (iii) all Directors and Executive Officers as a group.

 

Name and Address (1)

 

Common Stock Ownership

 

 

Percentage of Common Stock Ownership (2)

 

 

Series A Preferred Stock Ownership

 

 

Percentage of Series A Preferred Stock Ownership (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

William A. Hartman (4)(10)

 

 

129,020

(8)

 

 

4.3 %

 

 

1,000,000

 

 

 

50.0 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dr. Mitchell S. Felder (4) (5)

 

 

126,051

(9)

 

 

4.1 %

 

 

1,000,000

 

 

 

50.0 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heidi H. Carl (4)(10)

 

 

37,080

(12)

 

 

1.2 %

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jay Rosen (4)

 

 

10,680

(13)

 

*

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John S. Borza (4)

 

 

44,904

(11)

 

 

1.5 %

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John Pauly (4) (6)

 

 

8,000

(15)

 

*

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dr. Patricio Reyes (4) (7)

 

 

20,680

(14)

 

*

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Officers and Directors as a Group (7 Persons)

 

 

376,415

(8)(9)(11)(12)(13)(14)(15)

 

 

11.7 %

 

 

2,000,000

 

 

 

100.0 %

___________

* Less than 1%
(1) Unless otherwise indicated, the address of the shareholder is c/o Premier Biomedical, Inc.
(2)

Unless otherwise indicated, based on 2,989,233 shares of common stock issued and outstanding. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person or group holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.

(3) Unless otherwise indicated, based on 2,000,000 shares of Series A Convertible Preferred Stock issued and outstanding.
(4) Indicates one of our officers or directors.
(5) Dr. Felder’s address is P.O. Box 1332, Hermitage, PA 16148.
(6) Mr. Pauly’s address is 900 Squire Oaks Drive, Villa Hills, KY 41017.
(7) Dr. Reyes’ address is 10618 North Eleventh Place, Phoenix, AZ 85020.

 

 
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(8)

Includes 4,000 shares of common stock that may be acquired upon the conversion of 1,000,000 shares of Series A Convertible Preferred Stock, 200 shares of common stock that may be acquired at $362.50 per share, 420 shares of common stock that may be acquired at $362.50 per share if the Company’s common stock reaches a closing bid price of $750.00 per share and remains at or above $750.00 per share for thirty (30) consecutive trading days on any and all markets or exchanges on which the Company’s common stock is traded, 6,400 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 4,000 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, and 8,500,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share.

(9)

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

(10) William A. Hartman is the father of Heidi H. Carl. Mr. Hartman disclaims ownership of shares held by his daughter.
(11)

Includes 80 shares of common stock owned by Mr. Borza’s spouse, 4,200 shares of common stock that may be acquired by Mr. Borza at $362.50 per share upon the exercise of warrants, 280 shares of common stock that may be acquired at $362.50 per share upon the exercise of warrants if the Company’s common stock reaches a closing bid price of $750.00 per share and remains at or above $750.00 per share for thirty (30) consecutive trading days on any and all markets or exchanges on which the Company’s common stock is traded, 4,800 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 2,400 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, and 29,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share.

(12)

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

(13)

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

(14)

Includes 2,800 shares or the Company’s common stock that may be acquired upon the exercise of warrants at $62.50 per share, 1,400 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, and 16,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share.

(15)

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

 

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

 

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

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

Joint Venture

 

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

 

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

 

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

 

License Agreements

 

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

 

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

 

As of December 31, 2017, we have not sold any products using the licensed technology and thus have not paid any license fees. We have, however, reimbursed expenses associated with the technology we have licensed, and owe them an additional $46,016.

 

 
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Stock Issuances

 

Preferred Stock

 

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

 

The Preferred Stock also contains protective provisions as follows:

 

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

 

Warrant Exercise

 

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

 

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

 

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

 

 
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Directors Notes

 

On December 2, 2013, we entered into a Directors Bridge Loan Agreement Promissory Note dated November 18, 2013 with each of William A. Hartman, one of our officers and directors, and John S. Borza, one of our directors. Pursuant to each Promissory Note, we borrowed Fifty Thousand Dollars ($50,000). The principal amount of each Promissory Note, plus the Prepayment Premium (defined below), shall be due and payable on or before the earlier of (a) the date which is nine (9) months from the date of the note, or (b) three (3) business days following the receipt by us of funding (net of offering expenses, including finders fees, commissions, legal and other fees, and discounts) from any source, of at least One Million Dollars ($1,000,000) (the “Maturity Date”). The Prepayment Premium shall be determined by multiplying the then-outstanding principal amount of the Promissory Note by the Prepayment Premium based on the following schedule:

 

No. of Days After Issue Date:

Prepayment Premium:

0-30 days

115%

31-60 days

120%

61-90 days

125%

91-120 days

130%

121 days or more

135%

 

In the event the Promissory Note is not prepaid prior to the Maturity Date, the Prepayment Premium of 135% shall apply. Interest shall accrue on the outstanding principal amount on an annual basis at a rate of eight percent (8.0%).

 

As of December 31, 2017, the Promissory Notes had an aggregate outstanding balance of $200,000.

 

DISCLOSURE OF COMMISSION POSITION ON

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

 

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

 

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

 

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

 

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

 

WHERE YOU CAN FIND MORE INFORMATION

 

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

 

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

 

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

 

INCORPORATION BY REFERENCE

 

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

 

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

 

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

 

Premier Biomedical, Inc.

P.O. Box 25

Jackson Center, PA 16133

Attn: Investor Relations

(724) 633-7033

 

EXPERTS

 

The audited financial statements of Premier Biomedical, Inc. as of December 31, 2017 and 2016 appearing in this prospectus which is part of a registration statement have been so included in reliance on the report of M&K CPAS, PLLC, given on the authority of such firm as experts in accounting and auditing.

 

 
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INDEX TO FINANCIAL STATEMENTS

 

For the Three Months ended March 31, 2018 and 2017

 

Balance Sheets as of March 31, 2018 and 2017 (Unaudited)

 

F-2

 

 

 

Statements of Operations for the three months ended March 31, 2018 and 2017 (Unaudited)

 

F-3

 

 

 

Statement of Stockholders’ Equity (Deficit) for the three months ended March 31, 2018 and 2017 (Unaudited)

 

F-

 

 

 

Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (Unaudited)

 

F-4

 

 

 

Notes to Financial Statements

 

F-5 to F-13

 

 

For the Years ended December 31, 2017 and 2016

 

Report of Independent Registered Public Accounting Firm

 

F-14

 

 

 

 

Balance Sheets as of December 31, 2017 and 2016 (Audited)

 

F-15

 

 

 

 

Statements of Operations for the years ended December 31, 2017 and 2016 (Audited).

 

F-16

 

 

 

 

Statement of Stockholders’ Equity (Deficit) for the years ended December 31, 2017 and 2016 (Audited)

 

F-17

 

 

 

 

Statements of Cash Flows for the years ended December 31, 2017 and 2016 (Audited)

 

F-18

 

 

 

 

Notes to Financial Statements

 

F-19 to F-41

 

 

 
F-1
 
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PREMIER BIOMEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

March 31,

 

December 31,

 

2018

 

2017

 

(Unaudited)

 

ASSETS

 

Current assets:

 

Cash

 

$

79,221

 

$

83,704

 

Accounts receivable

 

-

 

312

 

Inventory

 

79,410

 

84,763

 

Other current assets

 

33,327

 

34,824

 

Total current assets

 

191,958

 

203,603

 

Property and equipment, net

 

6,916

 

5,478

 

Total assets

 

$

198,874

 

$

209,081

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

Current liabilities:

 

Accounts payable

 

$

346,856

 

$

346,814

 

Accounts payable, related parties

 

40,904

 

41,382

 

Accrued interest

 

9,125

 

5,840

 

Convertible notes payable, net of discounts of $40,222 and $30,010 at March 31, 2018 and December 31, 2017, respectively, currently in default

 

154,778

 

169,990

 

Derivative liabilities

 

1,574,343

 

2,255,781

 

Total current liabilities

 

2,126,006

 

2,819,807

 

Total liabilities

 

2,126,006

 

2,819,807

 

Commitments and contingencies

 

-

 

-

 

Stockholders’ equity (deficit):

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized, 2,000,000 shares issued and outstanding at March 31, 2018 and December 31, 2017

 

2,000

 

2,000

 

Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 747,306,550 and 637,840,677 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively

 

7,473

 

6,378

 

Additional paid in capital

 

13,825,883

 

13,435,903

 

Subscriptions payable, consisting of -0- and 63,675,678 shares at March 31, 2018 and December 31, 2017, respectively

 

-

 

273,805

 

Accumulated deficit

 

(15,762,488

)

 

(16,328,812

)

Total stockholders' equity (deficit)

 

(1,927,132

)

 

(2,610,726

)

 

Total liabilities and stockholders' equity (deficit)

 

$

198,874

 

$

209,081

  

See accompanying notes to financial statements.

 

 
F-2
 
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PREMIER BIOMEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

For the Three Months

 

 

 

Ended March 31,

 

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

Revenue

 

$ 10,395

 

 

$ -

 

Cost of goods sold

 

 

6,058

 

 

 

-

 

Gross profit

 

 

4,337

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

General and administrative

 

 

34,492

 

 

 

33,059

 

Professional fees

 

 

39,616

 

 

 

41,147

 

Total operating expenses

 

 

74,108

 

 

 

74,206

 

 

 

 

 

 

 

 

 

 

Net operating loss

 

 

(69,771 )

 

 

(74,206 )

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(64,145 )

 

 

(152,747 )

Change in derivative liabilities

 

 

700,240

 

 

 

(5,100,091 )

Equity in losses of investment in joint venture

 

 

-

 

 

 

(2,058 )

Total other income (expense)

 

 

636,095

 

 

 

(5,254,896 )

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$ 566,324

 

 

$ (5,329,102 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic

 

 

718,803,900

 

 

 

401,283,532

 

Weighted average number of common shares outstanding - fully diluted

 

 

721,796,400

 

 

 

402,283,532

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic

 

$ 0.00

 

 

$ (0.01 )

Net loss per share - fully diluted

 

$ 0.00

 

 

$ (0.01 )

 

See accompanying notes to financial statements. 

 

 
F-3
 
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PREMIER BIOMEDICAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

For the Three Months

 

 

 

Ended March 31,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$ 566,324

 

 

$ (5,329,102 )

Adjustments to reconcile net loss

 

 

 

 

 

 

 

 

to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

591

 

 

 

528

 

Equity in losses of joint venture investment

 

 

-

 

 

 

2,058

 

Change in fair market value of derivative liabilities

 

 

(700,240 )

 

 

5,100,091

 

Amortization of debt discounts

 

 

60,860

 

 

 

149,456

 

Decrease (increase) in assets:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

312

 

 

 

-

 

Inventory

 

 

5,353

 

 

 

-

 

Other current assets

 

 

1,497

 

 

 

1,922

 

Increase (decrease) in liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

42

 

 

 

(42,297 )

Accounts payable, related parties

 

 

(478 )

 

 

236

 

Accrued interest

 

 

3,285

 

 

 

2,691

 

Accrued interest, related parties

 

 

-

 

 

 

600

 

Net cash used in operating activities

 

 

(62,454 )

 

 

(113,817 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,029 )

 

 

-

 

Investment in joint venture

 

 

-

 

 

 

(2,058 )

Net cash used in investing activities

 

 

(2,029 )

 

 

(2,058 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from sale of stock, net of offering costs

 

 

-

 

 

 

285,000

 

Proceeds from sale of stock on equity line of credit

 

 

-

 

 

 

18,323

 

Proceeds from convertible notes payable

 

 

60,000

 

 

 

-

 

Net cash provided by financing activities

 

 

60,000

 

 

 

303,323

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH

 

 

(4,483 )

 

 

187,448

 

CASH AT BEGINNING OF PERIOD

 

 

83,704

 

 

 

22,437

 

 

 

 

 

 

 

 

 

 

CASH AT END OF PERIOD

 

$ 79,221

 

 

$ 209,885

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

 

 

 

Interest paid

 

$ -

 

 

$ -

 

Income taxes paid

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Value of debt discounts

 

$ 60,000

 

 

$ -

 

Value of derivative adjustment due to debt conversions

 

$ 52,270

 

 

$ 229,043

 

Value of shares issued for conversion of debt

 

$ 65,000

 

 

$ 323,197

 

 

See accompanying notes to financial statements.

 

 
F-4
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 – Basis of Presentation and Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited, condensed financial statements of Premier Biomedical, Inc. (“the Company”) have been prepared pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, do not include all information and footnote disclosures normally included in audited financial statements. However, these statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. It is suggested that these statements be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

 

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 three months ended March 31, 2018 and 2017 are as follows:

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Weighted average common shares outstanding – basic

 

 

718,803,900

 

 

 

401,283,532

 

Plus: Potentially dilutive common shares:

 

 

 

 

 

 

 

 

Stock options and warrants

 

 

2,992,500

 

 

 

-

 

Weighted average common shares outstanding – diluted

 

 

721,796,400

 

 

 

401,283,532

 

 

 
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Table of Contents

 

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

For the three months ended March 31, 2017, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. Stock options and warrants excluded from the calculation of diluted EPS because their effect was anti-dilutive were 61,440,000 and 110,690,004 as of March 31, 2018 and 2017, respectively.

 

Stock-Based Compensation

 

Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company had no stock based compensation issuances during the three months ended March 31, 2018 and 2017.

 

Revenue Recognition

 

Sales on fixed price contracts are recorded when services are earned, the earnings process is complete or substantially complete, and the revenue is measurable and collectability is reasonably assured. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue from sales in which payment has been received, but the earnings process has not occurred. Sales commenced on July 5, 2017 with the termination of our joint venture and are recognized upon shipment of goods, which are typically paid for at the time of order.

 

Advertising and Promotion

 

All costs associated with advertising and promoting products are expensed as incurred. These expenses were $9,925 and $67,216 for the three months ended March 31, 2018 and 2017, respectively.

 

Income Taxes

 

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

 

Uncertain Tax Positions

 

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

 

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

 

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

 

Recent Accounting Pronouncements

 

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 three months ended March 31, 2018 and 2017, or the twelve months ended December 31, 2017.

 

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-09 , Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of ASU 2017-9 is not expected to have a material impact on the Company’s financial statements or related disclosures.

 

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

 

 
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Table of Contents

 

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 2 – Going Concern

 

As shown in the accompanying financial statements, the Company has no revenues, incurred net losses from operations resulting in an accumulated deficit of $15,762,488, and had negative working capital of ($1,934,048) at March 31, 2018. 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 $39,116 and $40,195 as of March 31, 2018 and December 31, 2017, 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 $713 as of March 31, 2018 and December 31, 2017, to the Company’s CEO for reimbursable expenses.

 

The Company owed $1,075 and $478 as of March 31, 2018 and December 31, 2017, respectively, amongst members of the Company’s Board of Directors for reimbursable expenses.

 

Note 4 – Subsidiary Formation

 

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

 

Note 5 Patent Rights and Applications

 

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

 

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

 

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

 

 
F-7
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 6 – Fair Value of Financial Instruments

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

Fair Value Measurements at

March 31, 2018

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

Cash

 

$ 79,221

 

 

$ -

 

 

$ -

 

Total assets

 

 

79,221

 

 

 

-

 

 

 

-

 

Liabilities

Convertible notes payable

 

 

 

 

 

 

154,778

 

 

 

 

 

Derivative liabilities

 

 

-

 

 

 

-

 

 

 

1,574,343

 

Total liabilities

 

 

-

 

 

 

154,778

 

 

 

1,574,343

 

 

 

$ 79,221

 

 

$ (154,778 )

 

$ (1,574,343 )

 

 

 

Fair Value Measurements at

December 31, 2017

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

Cash

 

$ 83,704

 

 

$ -

 

 

$ -

 

Total assets

 

 

83,704

 

 

 

-

 

 

 

-

 

Liabilities

Convertible note payable, net of discounts

 

 

-

 

 

 

169,990

 

 

 

-

 

Derivative liabilities

 

 

-

 

 

 

-

 

 

 

2,255,781

 

Total liabilities

 

 

-

 

 

 

169,990

 

 

 

2,255,781

 

 

 

$ 83,704

 

 

$ (169,990 )

 

$ (2,255,781 )

 

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

 

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

 

 
F-8
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

  

Note 7 – Convertible Notes Payable

 

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

On March 1, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on May 31, 2018 (“First Red Diamond Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.

 

$ 30,000

 

 

$ -

 

 

 

 

 

 

 

 

 

 

On March 1, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on May 31, 2018 (“First SEG-RedaShex Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.

 

 

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 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. Currently in default.

 

 

50,000

 

 

 

50,000

 

 

 

 

 

 

 

 

 

 

On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second SEG Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $10,000 of principal was converted into 5,208,333 shares of common stock on October 31, 2017, and the remaining $40,000 of principal was converted into 26,559,426 shares of common stock on January 29, 2018.

 

 

-

 

 

 

40,000

 

 

 

 

 

 

 

 

 

 

On August 8, 2017, the Company entered into an exchange agreement with Diamond Rock, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First Diamond Rock Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $15,000 of principal was converted into an aggregate of 7,812,500 shares of common stock at various dates between November 6, 2017 and November 13, 2017. Currently in default.

 

 

35,000

 

 

 

35,000

 

 

 

 

 

 

 

 

 

 

On August 8, 2017, the Company entered into an exchange agreement with The Special Equities Group, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First SEG Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. Currently in default.

 

 

50,000

 

 

 

50,000

 

 

 

 

 

 

 

 

 

 

On August 8, 2017, the Company entered into an exchange agreement with RDW Capital, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First RDW Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $25,000 of principal was converted into 13,157,895 shares of common stock on October 31, 2017, and the remaining $25,000 of principal was converted into 19,230,769 shares of common stock on January 3, 2018.

 

 

-

 

 

 

25,000

 

 

 

 

 

 

 

 

 

 

Total convertible notes payable, currently in default

 

 

195,000

 

 

 

200,000

 

Less unamortized derivative discounts:

 

 

40,222

 

 

 

30,010

 

Convertible notes payable

 

 

154,778

 

 

 

169,990

 

Less: current portion

 

 

154,778

 

 

 

169,990

 

Convertible notes payable, less current portion

 

$ -

 

 

$ -

 

 

 
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Table of Contents

 

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The Company recognized interest expense for the three months ended March 31, 2018 and 2017, respectively, as follows:

 

 

 

March 31,

 

 

March 31,

 

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

Interest on convertible notes

 

$ 3,285

 

 

$ 2,691

 

Interest on related party loans

 

 

1,800

 

 

 

600

 

Derivative discounts

 

 

60,860

 

 

 

149,456

 

Total interest expense

 

$ 64,145

 

 

$ 152,747

 

 

Note 8 – Derivative Liabilities

 

As discussed in Note 7 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 $1,574,343 and $2,255,781 at March 31, 2018 and December 31, 2017, respectively. The change in fair value of the derivative liabilities resulted in a gain of $700,240 and a loss of $5,100,091 for the three months ended March 31, 2018 and 2017, respectively, which has been reported within other expense in the statements of operations. The gain of $700,240 for the three months ended March 31, 2018 consisted of a gain of $718,750 due to the value attributable to the warrants and a net loss in market value of $18,510 on the convertible notes. The loss of $5,100,091 for the three months ended March 31, 2017 consisted of a loss of $4,945,782 due to the value attributable to the warrants, a loss of $147,088 in market value of the warrants and a net loss in market value of $7,221 on the convertible notes.

 

 
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Table of Contents

 

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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

 

 

 

Derivative

 

 

 

Liability

 

 

 

Total

 

Balance, December 31, 2016

 

$ 221,822

 

Increase in derivative value due to issuances of convertible promissory notes

 

 

221,515

 

Increase in derivative value attributable to tainted warrants

 

 

7,103,444

 

Decrease in derivative value attributable to exchange of warrants

 

 

(3,766,437 )

Change in fair market value of derivative liabilities due to the mark to market adjustment

 

 

(1,221,021 )

Debt conversions

 

 

(303,542 )

Balance, December 31, 2017

 

$ 2,255,781

 

Increase in derivative value due to issuances of convertible promissory notes

 

 

71,072

 

Change in fair market value of derivative liabilities due to the mark to market adjustment

 

 

(700,240 )

Debt conversions

 

 

(52,270 )

Balance, March 31, 2018

 

$ 1,574,343

 

 

Key inputs and assumptions used to value the convertible debentures and warrants issued during the three months ended March 31, 2018:

 

 

· Stock price ranging from $0.0063 to $0.0033 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 146% - 313%.

 

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

 

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

 

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

 

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

 

· The monthly trading volume would average $968,718 to $1,011,107 and would increase at 1% per month.

 

· The stock price would fluctuate with the Company projected volatility using a random sampling (450,000 iterations for each valuation) from a normal distribution. The stock price of the underlying instrument is modelled such that it follows a geometric Brownian motion with constant drift and volatility.

 

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

 

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

 

· The stock price would fluctuate with an annual volatility. The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company and the term remaining in the range 253% - 191%.

 

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

 

 
F-11
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 9 Commitments and Contingencies

 

Collaborative Patent License Agreements

 

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

 

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

 

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

 

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

 

Note 10 Changes in Stockholders Equity (Deficit)

 

Convertible Preferred Stock, Series A

 

The Company has 10,000,000 authorized shares of Preferred Stock, of which 2,000,000 shares of $0.001 par value Series A Convertible Preferred Stock (“Series A Preferred Stock”) have been designated. Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share into one (1) fully paid and non-assessable share of Common Stock. Each outstanding share of Series A Preferred Stock is entitled to one hundred (100) votes per share on all matters to which the shareholders of the Corporation are entitled or required to vote. The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares sufficient to effect the conversions.

 

Common Stock

 

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

 

Common Stock Issuances for Debt Conversions

 

On January 29, 2018, the Company issued 26,559,426 shares of common stock pursuant to the conversion of $40,000 of principal from the Second SEG Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

 

On January 3, 2018, the Company issued 19,230,769 shares of common stock pursuant to the conversion of $25,000 of principal from the First RDW Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.

 

Common Stock Issuances on Subscriptions Payable

 

On various dates from January 17, 2018 through February 13, 2018, the Company issued a total of 63,675,678 shares to The Special Equities Group and DiamondRock, LLC as compensation valued at $273,805 awarded on December 6, 2017.

 

 
F-12
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

Note 11 – 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 three months ended March 31, 2018, and the year ended December 31, 2017, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At March 31, 2018, and December 31, 2017, the Company had approximately $4,930,000 and $4,860,000 of federal net operating losses, respectively. The net operating loss carry forwards, if not utilized, will begin to expire in 2031.

 

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carry forwards

 

$ 1,725,000

 

 

$ 1,701,000

 

 

 

 

 

 

 

 

 

 

Net deferred tax assets before valuation allowance

 

$ 1,725,000

 

 

$ 1,701,000

 

Less: Valuation allowance

 

 

(1,725,000 )

 

 

(1,701,000 )

Net deferred tax assets

 

$ -

 

 

$ -

 

 

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

 

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

 

 

 

 

 

 

 

Federal and state statutory rate

 

 

21 %

 

 

35 %

Change in valuation allowance on deferred tax assets

 

 

(21 )%

 

 

(35 )%

 

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

 

Note 12 – Subsequent Events

 

Securities Purchase Agreement

 

On April 24, 2018, we received $60,000 from two investors from the sale of 8% interest bearing; unsecured convertible promissory notes maturing on May 31, 2018. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.

 

 
F-13
 
Table of Contents

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Premier Biomedical, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Premier Biomedical, Inc. (the Company) as of December 31, 2017 and 2016, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2017, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

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

 

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

 

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

 

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

 

/s/ M&K CPAS, PLLC

 

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

 

Houston, TX

April 12, 2018

 

 
F-14
 
Table of Contents

 

PREMIER BIOMEDICAL, INC.

BALANCE SHEETS

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$ 83,704

 

 

$ 22,437

 

Accounts receivable

 

 

312

 

 

 

-

 

Inventory

 

 

84,763

 

 

 

-

 

Other current assets

 

 

34,824

 

 

 

11,430

 

Total current assets

 

 

203,603

 

 

 

33,867

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

5,478

 

 

 

5,100

 

 

 

 

 

 

 

 

 

 

Total assets

 

$ 209,081

 

 

$ 38,967

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$ 346,814

 

 

$ 220,740

 

Accounts payable, related parties

 

 

41,382

 

 

 

52,489

 

Accrued interest

 

 

5,840

 

 

 

18,026

 

Accrued interest, related parties

 

 

-

 

 

 

3,570

 

Convertible notes payable, net of discounts of $30,010 and $149,456 at December 31, 2017 and 2016, respectively, currently in default

 

 

169,990

 

 

 

153,024

 

Notes payable, related parties

 

 

-

 

 

 

30,000

 

Derivative liabilities

 

 

2,255,781

 

 

 

221,822

 

Total current liabilities

 

 

2,819,807

 

 

 

699,671

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

2,819,807

 

 

 

699,671

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit):

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized, 2,000,000 and -0- shares issued and outstanding at December 31, 2017 and 2016, respectively

 

 

2,000

 

 

 

2,000

 

Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 637,840,677 and 304,556,650 shares issued and outstanding at December 31, 2017 and 2016, respectively

 

 

6,378

 

 

 

3,046

 

Additional paid in capital

 

 

13,435,903

 

 

 

11,899,504

 

Subscriptions payable, consisting of 63,675,678 and -0- shares at December 31, 2017 and 2016, respectively

 

 

273,805

 

 

 

-

 

Accumulated deficit

 

 

(16,328,812 )

 

 

(12,565,254 )

Total stockholders' equity (deficit)

 

 

(2,610,726 )

 

 

(660,704 )

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity (deficit)

 

$ 209,081

 

 

$ 38,967

 

 

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

 

 
F-15
 
Table of Contents

 

PREMIER BIOMEDICAL, INC.

STATEMENTS OF OPERATIONS

 

 

 

For the Years

 

 

 

Ended December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Revenue

 

$ 39,761

 

 

$ -

 

Cost of goods sold

 

 

25,439

 

 

 

-

 

Gross Profit

 

 

14,322

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

184,315

 

 

 

113,862

 

General and administrative

 

 

196,670

 

 

 

191,379

 

Professional fees

 

 

923,175

 

 

 

332,650

 

Total operating expenses

 

 

1,304,160

 

 

 

637,891

 

 

 

 

 

 

 

 

 

 

Net operating loss

 

 

(1,289,838 )

 

 

(637,891 )

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(351,502 )

 

 

(817,423 )

Other expense

 

 

-

 

 

 

(340,647 )

Gain on settlement

 

 

-

 

 

 

53,788

 

Change in derivative liabilities

 

 

(2,115,986 )

 

 

(26,048 )

Loss on joint venture

 

 

(6,232 )

 

 

-

 

Total other income (expense)

 

 

(2,473,720 )

 

 

(1,130,330 )

 

 

 

 

 

 

 

 

 

Net loss

 

$ (3,763,558 )

 

$ (1,768,221 )

 

 

 

 

 

 

 

 

 

Weighted average number of common shares

 

 

 

 

 

 

 

 

outstanding - basic and fully diluted

 

 

489,686,283

 

 

 

151,651,420

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic and fully diluted

 

$ (0.01 )

 

$ (0.01 )

 

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

 

 
F-16
 
Table of Contents

 

PREMIER BIOMEDICAL, INC.

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Subscriptions

 

 

Accumulated

 

 

Stockholders'

Equity 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Payable

 

 

Deficit

 

 

(Deficit )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2015 (Restated)

 

 

-

 

 

$ -

 

 

 

82,331,062

 

 

$ 823

 

 

$ 10,370,651

 

 

$ -

 

 

$ (10,797,033 )

 

$ (425,559 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued on equity line of credit

 

 

-

 

 

 

-

 

 

 

27,952,890

 

 

 

280

 

 

 

143,240

 

 

 

-

 

 

 

-

 

 

 

143,520

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued on debt conversions

 

 

-

 

 

 

-

 

 

 

165,196,985

 

 

 

1,652

 

 

 

736,064

 

 

 

-

 

 

 

-

 

 

 

737,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of preferred stock warrants at $0.001 per share, related parties

 

 

2,000,000

 

 

 

2,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of warrants at $0.00001 per share, related parties

 

 

-

 

 

 

-

 

 

 

20,000,000

 

 

 

200

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of cashless warrants at $0.00001 per share

 

 

-

 

 

 

-

 

 

 

2,248,846

 

 

 

22

 

 

 

(22 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for serttlement of reimbursements, related party

 

 

-

 

 

 

-

 

 

 

600,000

 

 

 

6

 

 

 

13,759

 

 

 

-

 

 

 

-

 

 

 

13,765

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services

 

 

-

 

 

 

-

 

 

 

6,226,867

 

 

 

63

 

 

 

70,558

 

 

 

-

 

 

 

-

 

 

 

70,621

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of warrants granted for services, related parties

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

25,030

 

 

 

-

 

 

 

-

 

 

 

25,030

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of warrants granted for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,739

 

 

 

-

 

 

 

-

 

 

 

14,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to derivative liability due to debt conversions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

525,485

 

 

 

-

 

 

 

-

 

 

 

525,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the year ended December 31, 2016

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,768,221 )

 

 

(1,768,221 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2016

 

 

2,000,000

 

 

$ 2,000

 

 

 

304,556,650

 

 

$ 3,046

 

 

$ 11,899,504

 

 

$ -

 

 

$ (12,565,254 )

 

$ (660,704 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock sold for cash

 

 

-

 

 

 

-

 

 

 

40,000,002

 

 

 

400

 

 

 

284,600

 

 

 

-

 

 

 

-

 

 

 

285,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued on equity line of credit

 

 

-

 

 

 

-

 

 

 

5,147,110

 

 

 

51

 

 

 

18,272

 

 

 

-

 

 

 

-

 

 

 

18,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued on debt conversions

 

 

-

 

 

 

-

 

 

 

199,342,008

 

 

 

1,993

 

 

 

421,204

 

 

 

-

 

 

 

-

 

 

 

423,197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of warrants at $0.00001 per share, related parties

 

 

-

 

 

 

-

 

 

 

7,000,000

 

 

 

70

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services on terminated offering

 

 

-

 

 

 

-

 

 

 

72,794,907

 

 

 

728

 

 

 

312,290

 

 

 

273,805

 

 

 

-

 

 

 

586,823

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services

 

 

-

 

 

 

-

 

 

 

9,000,000

 

 

 

90

 

 

 

84,510

 

 

 

-

 

 

 

-

 

 

 

84,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants issued for services, related parties

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

102,364

 

 

 

-

 

 

 

-

 

 

 

102,364

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9,617

 

 

 

-

 

 

 

-

 

 

 

9,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to derivative liability due to debt conversions

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

303,542

 

 

 

-

 

 

 

-

 

 

 

303,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the year ended December 31, 2017

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

(3,763,558 )

 

 

(3,763,558 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

 

2,000,000

 

 

$ 2,000

 

 

 

637,840,677

 

 

$ 6,378

 

 

$ 13,435,903

 

 

$ 273,805

 

 

$ (16,328,812 )

 

$ (2,610,726 )

 

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

 

 
F-17
 
Table of Contents

 

PREMIER BIOMEDICAL, INC.

STATEMENTS OF CASH FLOWS

 

 

 

For the Years

 

 

 

Ended December 31,

 

 

 

2017

 

 

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$ (3,763,558 )

 

$ (1,768,221 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

2,316

 

 

 

2,083

 

Change in fair market value of derivative liabilities

 

 

2,115,986

 

 

 

26,048

 

Amortization of debt discounts

 

 

340,961

 

 

 

749,162

 

Gain on settlement of judgment

 

 

-

 

 

 

(53,788 )

Stock based compensation, related parties

 

 

102,364

 

 

 

25,030

 

Stock based compensation

 

 

681,040

 

 

 

85,360

 

Decrease (increase) in assets:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(312 )

 

 

-

 

Inventory

 

 

(84,763 )

 

 

-

 

Other current assets

 

 

(23,394 )

 

 

(2,264 )

Increase (decrease) in liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

126,074

 

 

 

32,475

 

Accounts payable, related parties

 

 

(11,107 )

 

 

11,586

 

Accrued interest

 

 

8,531

 

 

 

65,860

 

Accrued interest, related parties

 

 

(3,570 )

 

 

2,400

 

Judgment payable

 

 

-

 

 

 

340,647

 

Net cash used in operating activities

 

 

(509,432 )

 

 

(483,622 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,694 )

 

 

(3,536 )

Net cash used in investing activities

 

 

(2,694 )

 

 

(3,536 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from sale of stock, net of offering costs

 

 

285,000

 

 

 

-

 

Proceeds from sale of stock on equity line of credit

 

 

18,323

 

 

 

143,520

 

Proceeds from exercise of warrants, related party

 

 

70

 

 

 

2,200

 

Proceeds from convertible notes payable

 

 

300,000

 

 

 

417,500

 

Repayments of convertible notes payable

 

 

-

 

 

 

(89,039 )

Repayments of notes payable, related parties

 

 

(30,000 )

 

 

-

 

Net cash provided by financing activities

 

 

573,393

 

 

 

474,181

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH

 

 

61,267

 

 

 

(12,977 )

CASH AT BEGINNING OF PERIOD

 

 

22,437

 

 

 

35,414

 

 

 

 

 

 

 

 

 

 

CASH AT END OF PERIOD

 

$ 83,704

 

 

$ 22,437

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

 

 

 

Interest paid

 

$ 5,580

 

 

$ 13,539

 

Income taxes paid

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Value of debt discounts

 

$ 221,515

 

 

$ 571,183

 

Value of derivative adjustment due to debt conversions

 

$ 303,542

 

 

$ 525,485

 

Value of shares issued for conversion of debt

 

$ 423,197

 

 

$ 737,716

 

Convertible note issued in settlement of judgment payable

 

$ -

 

 

$ 300,000

 

Common stock issued for settlement of accounts payable, related party

 

$ -

 

 

$ 13,765

 

Cashless exercise of common stock warrants, 2,250,000 warrants exercised

 

$ -

 

 

$ 22

 

 

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

 

 
F-18
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Note 1 – Nature of Business and Significant Accounting Policies

 

Nature of Business 

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

 

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

 

Equity Method

Investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an Investee depends on an evaluation of several factors including, among others, representation on the Investee company’s board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the Investee company. Under the equity method of accounting, an Investee company’s accounts are not reflected within the Company’s Balance Sheets and Statements of Operations; however, the Company’s share of the earnings or losses of the Investee company is reflected in the caption “Equity in losses of unconsolidated entity” in the Statements of Operations. The Company’s carrying value in an equity method Investee company is typically reflected in the caption “Investment in Joint Venture.” in the Company’s Balance Sheets. As of December 31, 2017, our share of losses from the investee company exceeded our basis, therefore the investment is not currently presented on the balance sheet.

 

U.S. GAAP considers a change in reporting entity to include “changing specific subsidiaries that make up the group of entities for which consolidated financial statements are presented.” Circumstances may arise where a parent’s controlling financial interest (e.g., generally an ownership interest in excess of 50 percent of the outstanding voting stock) is reduced to a noncontrolling investment that still enables it to exercise significant influence over the operating and financial policies of the investee. A change that results from changed facts and circumstances (such as a partial sale of a subsidiary), where there was only one acceptable method of accounting prior to the change in circumstances (consolidation) and only one acceptable method of accounting after the change (equity method accounting), is not a change in reporting entity and is not be accounted for retrospectively. Accordingly, a change from a controlling interest to a noncontrolling investment accounted for under the equity method is accounted for prospectively from the date of change in control. When the Company’s carrying value in an equity method Investee company is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company guaranteed obligations of the Investee company or has committed additional funding. When the Investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

 

Use of Estimates  

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

 

 
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Table of Contents

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Cash and Cash Equivalents 

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

 

Patent Rights and Applications  

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

 

Fair Value of Financial Instruments  

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

 

Basic and Diluted Loss Per Share  

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

 

Stock-Based Compensation  

Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company’s stock based compensation consisted of the following during the years ended December 31, 2017 and 2016, respectively:

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Common stock issued for services

 

$ 84,600

 

 

$ 70,621

 

Warrants issued for services, related parties

 

 

102,364

 

 

 

25,030

 

Warrants issued for services

 

 

9,617

 

 

 

14,739

 

Common stock issued for services on terminated offering

 

 

586,823

 

 

 

-

 

Total stock based compensation

 

$ 783,404

 

 

$ 110,390

 

 

 
F-20
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Revenue Recognition  

Sales on fixed price contracts are recorded when services are earned, the earnings process is complete or substantially complete, and the revenue is measurable and collectability is reasonably assured. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue from sales in which payment has been received, but the earnings process has not occurred. Sales commenced on July 5, 2017 with the termination of our joint venture and are recognized upon shipment of goods, which are typically paid for at the time of order.

 

Advertising and Promotion  

All costs associated with advertising and promoting products are expensed as incurred. These expenses were $64,108 and $82,246 for the years ended December 31, 2017 and 2016, respectively.

 

Income Taxes  

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

 

Uncertain Tax Positions  

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

 

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

 

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

 

 
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Premier Biomedical, Inc.

Notes to Financial Statements

 

Recently Issued Accounting Pronouncements  

In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-09 , Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Per ASU 2017-9, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification, (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified, and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in ASU 2017-9. ASU 2017-9 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this ASU should be applied prospectively to an award modified on or after the adoption date. The adoption of ASU 2017-9 is not expected to have a material impact on the Company’s financial statements or related disclosures.

 

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) . ASU 2017-04 simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual, or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendment should be applied on a prospective basis. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company intends to early adopt the ASU in 2017.

 

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for the Company in the first quarter of 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

 

No other new accounting pronouncements, issued or effective during the year ended December 31, 2017, have had or are expected to have a significant impact on the Company’s financial statements.

 

 
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Table of Contents

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Note 2 – Going Concern

 

As shown in the accompanying financial statements, the Company has no revenues, incurred net losses from operations resulting in an accumulated deficit of $16,328,812, and had negative working capital of ($2,616,204) at December 31, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new products and services to begin generating revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful; therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern.

 

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

 

Note 3 – Related Party

 

Other Receivable

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

 

Accounts Payable

The Company owed $40,195 and $46,016 as of December 31, 2017 and 2016, respectively, to entities owned by the Chairman of the Board of Directors. The amounts are related to patent costs paid by the Chairman on behalf of the Company.

 

The Company owed $713 and $306 as of December 31, 2017 and 2016, respectively, to the Company’s CEO for reimbursable expenses.

 

The Company owed $478 and $6,167 as of December 31, 2017 and 2016, respectively, amongst members of the Company’s Board of Directors for reimbursable expenses.

 

Notes Payable

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

 

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

 

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

 

 
F-23
 
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Premier Biomedical, Inc.

Notes to Financial Statements

 

Preferred Stock Issuances for Exercise of Preferred Stock Warrants

On January 29, 2016, the Company issued 1,000,000 shares of series A preferred stock pursuant to the exercise of warrants by the Company’s CEO at $0.001 per share for total proceeds of $1,000.

 

On January 29, 2016, the Company issued 1,000,000 shares of series A preferred stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.001 per share for total proceeds of $1,000.

 

Common Stock Warrants Exercised

On November 22, 2017, the Company issued 7,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $70.

 

On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $40.

 

On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.00001 per share for total proceeds of $40.

 

Common S tock Warrants Granted

On December 22, 2017, the Company granted warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (8,500,000 shares); Mitchell Felder (8,500,000 shares), Heidi Carl (6,000,000 shares), John Borza (7,250,000 shares), Jay Rosen (1,000,000 shares), Patricio Reyes (4,000,000 shares) and John Pauly (2,000,000 shares). The exercise price of the foregoing warrants is five cents ($0.005) per share. The warrants are exercisable over seven (7) years. The total fair value of the 37,250,000 common stock warrants using the Black-Scholes option-pricing model is $102,364, or $0.00275 per share, based on a volatility rate of 195%, a risk-free interest rate of 2.01% and an expected term of 3.5 years, and was expensed upon issuance.

 

Common Stock Issuances for Settlement of Accounts Payments

On March 28, 2016, upon the resignation of Richard Najarian as one of the members of our Board of Directors, the Company issued 600,000 shares of common stock to Mr. Najarian in settlement of $13,765 of outstanding expense reimbursements. The total fair value of the common stock was $9,120 based on the closing price of the Company’s common stock on the date of grant.

 

Note 4 Patent Rights and Applications

 

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

 

 
F-24
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

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

 

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

 

Note 5 – Fair Value of Financial Instruments

 

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

 

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

 

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

 

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

 

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

 

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of December 31, 2017 and 2016, respectively:

 

 

 

Fair Value Measurements at
December 31, 2017

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

Cash

 

$ 83,704

 

 

$ -

 

 

$ -

 

Total assets

 

 

83,704

 

 

 

-

 

 

 

-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Convertible note payable, net of discounts

 

 

-

 

 

 

169,990

 

 

 

-

 

Derivative liabilities

 

 

-

 

 

 

-

 

 

 

2,255,781

 

Total liabilities

 

 

-

 

 

 

169,990

 

 

 

2,255,781

 

 

 

$ 83,704

 

 

$ (169,990 )

 

$ (2,255,781 )

 

 
F-25
 
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Premier Biomedical, Inc.

Notes to Financial Statements

 

 

 

Fair Value Measurements at
December 31, 2016

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

Cash

 

$ 22,437

 

 

$ -

 

 

$ -

 

Total assets

 

 

22,437

 

 

 

-

 

 

 

-

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Convertible note payable, net of discounts

 

 

-

 

 

 

153,024

 

 

 

-

 

Notes payable, related parties

 

 

 

 

 

 

30,000

 

 

 

-

 

Derivative liabilities

 

 

-

 

 

 

-

 

 

 

221,822

 

Total liabilities

 

 

-

 

 

 

183,024

 

 

 

221,822

 

 

 

$ 22,437

 

 

$ (183,024 )

 

$ (221,822 )

 

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

 

There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the years ended December 31, 2017 or the year ended December 31, 2016.

 

Note 6 – Joint Venture

 

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

 

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

 

 
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Premier Biomedical, Inc.

Notes to Financial Statements

 

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

 

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

 

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

 

Note 7 – Subsidiary Formation

 

On January 1, 2018, we transferred the assets of our pain relief operations to Premier Biomedical Pain Relief Meds, LLC, a wholly-owned subsidiary formed on September 14, 2017.

 

Note 8 – Convertible Notes Payable

 

Convertible notes payable consist of the following at December 31, 2017 and 2016, respectively:

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

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 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. Currently in default.

 

$ 50,000

 

 

$ -

 

 

 

 

 

 

 

 

 

 

On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second SEG Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $10,000 of principal was converted into 5,208,333 shares of common stock on October 31, 2017. Currently in default.

 

 

40,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

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 RDW Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $50,000 of principal was converted into an aggregate of 31,015,038 shares of common stock at various dates between November 8, 2017 and December 26, 2017.

 

 

-

 

 

 

-

 

 

 
F-27
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

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 total of $15,000 of principal was converted into an aggregate of 7,812,500 shares of common stock at various dates between November 6, 2017 and November 13, 2017. Currently in default.

 

 

35,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

On August 8, 2017, the Company entered into an exchange agreement with The Special Equities Group, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First SEG Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. Currently in default.

 

 

50,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

On August 8, 2017, the Company entered into an exchange agreement with RDW Capital, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First RDW Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $25,000 of principal was converted into 13,157,895 shares of common stock on October 31, 2017. Currently in default.

 

 

25,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

On October 10, 2016, the Company issued a 10% interest bearing; unsecured convertible promissory note with a face value of $300,000 (“Seventh Redwood Note”), which matures on October 10, 2017, pursuant to a Warrant Purchase Agreement by and among Redwood Management, LLC, the Company and Typenex. Pursuant to this agreement, Redwood purchased the warrants from Typenex, and Typenex provided a Satisfaction of Judgment and Release of Garnishment to release the Writ of Garnishment Typenex had placed on our transfer agent. Redwood paid installment payments to Typenex in the aggregate amount of $300,000, which were completed on, or about November 10, 2016. The principal and interest of the Seventh Redwood Note is convertible into shares of common stock at the discretion of the note holder at a price equal to the greater of (i) 60% of the lowest traded price over the 15 days prior to conversion or (ii) a fixed $0.00005 per share. The note carries liquidated damages of $1,000 per day for failure to provide certificates, and compensation for Buy-In on failure to timely deliver certificates. Principal and interest is due upon default at 50% of the lowest traded price over the previous fifteen (15) days, and an additional interest rate equal to the lesser of 2% per month (24% per annum) or the maximum rate per applicable law. This settled the dispute with Typenex. A total of $308,750, consisting of $300,000 of principal and $8,750 of interest, was converted into 135,596,882 shares of common stock on various dates between November 21, 2016 and February 24, 2017.

 

$ -

 

 

$ 275,000

 

 

 

 

 

 

 

 

 

 

On March 11, 2016, the Company received net proceeds of $90,000 in exchange for a 10% interest bearing; unsecured convertible promissory note with a face value of $105,000 (“Fifth Redwood Note”), which matures on December 11, 2016. The principal and interest is convertible into shares of common stock at the discretion of the note holder at a price equal to the greater of (i) 60% of the lowest traded price over the 15 days prior to conversion or (ii) a fixed $0.00005 per share. The note carries liquidated damages of $1,000 per day for failure to provide certificates, and compensation for Buy-In on failure to timely deliver certificates. Principal and interest is due upon default at 50% of the lowest traded price over the previous fifteen (15) days, and an additional interest rate equal to the lesser of 2% per month (24% per annum) or the maximum rate per applicable law. A total of $120,517, consisting of $105,000 of principal and $15,517 of interest, was converted into an aggregate of 47,820,025 shares of common stock at various dates between November 8, 2016 and March 13, 2017.

 

 

-

 

 

 

27,480

 

 

 

 

 

 

 

 

 

 

Total convertible notes payable, currently in default

 

 

200,000

 

 

 

302,480

 

Less unamortized derivative discounts:

 

 

30,010

 

 

 

149,456

 

Convertible notes payable

 

 

169,990

 

 

 

153,024

 

Less: current portion

 

 

169,990

 

 

 

153,024

 

Convertible notes payable, less current portion

 

$ -

 

 

$ -

 

 

 
F-28
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

The Company recognized interest expense for the years ended December 31, 2017 and 2016, respectively, as follows:

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Interest on convertible notes

 

$ 8,531

 

 

$ 52,720

 

Interest on related party loans

 

 

2,010

 

 

 

2,400

 

Amortization of derivative discounts

 

 

340,961

 

 

 

551,149

 

Amortization of loan origination costs

 

 

-

 

 

 

79,451

 

Amortization of beneficial conversion feature

 

 

-

 

 

 

81,648

 

Amortization of OID

 

 

-

 

 

 

36,914

 

Interest on judgment payable

 

 

-

 

 

 

13,141

 

Total interest expense

 

$ 351,502

 

 

$ 817,423

 

 

In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $221,515 and $652,433 for the variable conversion features of the convertible debts incurred during the years ended December 31, 2017 and 2016, respectively. The discounts, as recognized below, are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded $340,961 and $749,162 of interest expense pursuant to the amortization of note discounts during the years ended December 31, 2017 and 2016, respectively.

 

The Company recognized interest expense for the years ended December 31, 2017 and 2016, respectively, as follows:

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Derivative discounts

 

$ 221,515

 

 

$ 571,183

 

Original issue discounts

 

 

-

 

 

 

23,750

 

Loan origination costs

 

 

-

 

 

 

57,500

 

Total debt discounts

 

$ 221,515

 

 

$ 652,433

 

 

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.

 

 
F-29
 
Table of Contents

 

Premier Biomedical, Inc.

Notes to Financial Statements

 

Note 9 – Notes Payable, Related Parties

 

Notes payable, related parties consist of the following at December 31, 2017 and 2016, respectively:

 

 

 

December 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

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

 

$ -

 

 

$ 10,000

 

 

 

 

 

 

 

 

 

 

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

 

 

-

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

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

 

 

-

 

 

 

10,000

 

 

 

 

 

 

 

 

 

 

Total notes payable, related parties

 

 

-

 

 

 

30,000

 

Less: current portion

 

 

-

 

 

 

30,000

 

Notes payable, related parties, less current portion

 

$ -

 

 

$ -

 

 

The Company recorded interest expense in the amount of $2,010 and $2,400 for the years ended December 31, 2017 and 2016, respectively related to notes payable, related parties.