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.
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.
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.
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.
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:
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On May 27, 2016, received net proceeds of $85,000 in exchange for a note with a principal amount of $105,000;
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On March 11, 2016, received net proceeds of $90,000 in exchange for a note with a principal amount of $105,000;
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On March 7, 2016, received net proceeds of $67,500 in exchange for a note with a principal amount of $78,750;
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On February 24, 2016, received net proceeds of $67,500 in exchange for a note with a principal amount of $78,750;
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On January 8, 2016, received net proceeds of $107,500 in exchange for a note with a principal amount of $131,250;
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On December 28, 2015, received net proceeds of $130,000 in exchange for a note with a principal amount of $157,500;
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On December 15, 2015, received net proceeds of $25,000 in exchange for a note with a principal amount of $27,500;
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On September 21, 2015, received net proceeds of $45,000 in exchange for a note with a principal amount of $48,000; and
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On September 2, 2015, received net proceeds of $50,000 in exchange for a note with a principal amount of $55,000.
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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.
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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.
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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.
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Further details of these transactions have been disclosed in our past filings with the Commission.
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:
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ordinary brokerage transactions and transactions in which the broker‑dealer solicits purchasers;
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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;
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purchases by a broker‑dealer as principal and resale by the broker‑dealer for its account;
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privately negotiated transactions;
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broker‑dealers may agree with the Selling Shareholders to sell a specified number of such shares;
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a combination of any such methods of sale; or
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any other method permitted pursuant to applicable law.
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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.
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.
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.
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.
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:
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96-hour pain relief patch with 50 mg of hemp oil extract, the highest level of pain relief ingredient available in the industry;
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120 mg/ 10 ml water-based roll-on applicator;
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150 mg/ 10 ml oil-based roll-on applicator; and
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150 mg/ 30 ml oil-based pump spray applicator.
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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:
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Knee pain,
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Shoulder pain,
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Joint pain,
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Arthritis pain,
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Muscle soreness and tenderness,
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Headaches, and
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Migraines.
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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:
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Cancer
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Fibromyalgia
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Multiple Sclerosis (MS)
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Traumatic Brain Injury (TBI)
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Neuropathic Pain
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Alzheimer’s Disease (AD)
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Amyotrophic Lateral Sclerosis
(ALS/Lou Gehrig’s Disease)
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Blood Sepsis and Viremia
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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.
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.
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.
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4
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A.
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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.
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B.
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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.
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C.
|
Giesser, Barbara S. (2010). Primer on Multiple Sclerosis. New York: Oxford University Press US. pp. 377. ISBN 978-0-19-536928-1.
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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.
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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.
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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.
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G.
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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.
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.
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:
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the distribution of cannabis to minors;
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revenue from the sale of cannabis from going to criminal enterprises, gangs, and cartels;
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the diversion of cannabis from states where it is legal under state law in some form to other states;
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·
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state-authorized cannabis activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
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·
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violence and the use of firearms in the cultivation and distribution of cannabis;
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·
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drugged driving and the exacerbation of other adverse public health consequences associated with cannabis use;
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·
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the growing of cannabis on public lands and the attendant public safety and environmental dangers posed by cannabis production on public lands; and
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·
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cannabis possession or use on federal property.
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However, on January 4, 2018, the U.S. Attorney General, Jeff Sessions, issued a memorandum for all U.S. Attorneys (the “Sessions Memo”) stating that the Cole Memo was rescinded effective immediately. In particular, Mr. Sessions stated that “prosecutors should follow the well-established principles that govern all federal prosecutions,” which require “federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.” The Sessions Memo went on to state that given the DOJ’s well-established general principles, “previous nationwide guidance specific to marijuana is unnecessary and is rescinded, effective immediately.”
It is unclear at this time whether the Sessions Memo indicates that the Trump administration will strongly enforce the federal laws applicable to cannabis or what types of activities will be targeted for enforcement. However, a significant change in the federal government’s enforcement policy with respect to current federal laws applicable to cannabis could cause significant financial damage to us. We do not currently cultivate, distribute or sell cannabis, but our hemp oil products are closely tied to the cannabis industry.
Although the Sessions Memo has rescinded the Cole Memo and it is unclear at this time what the ultimate impact of that rescission will have on our business, if any, we intend to continue to conduct rigorous due diligence to verify the legality of all activities that we engage in and ensure that our activities do not interfere with any of the Enforcement Priorities set forth in the Cole Memo.
On March 26, 2018, Senate Majority Leader Mitch McConnell, R-Kentucky, announced plans to introduce The Hemp Farming Act of 2018 to exclude hemp from the CSA. The proposed bill would legalize hemp as an agricultural commodity and remove it from the list of controlled substances. This would greatly reduce the uncertainty we face with respect to regulation of hemp products. However, Congress has not yet taken formal action to pass the bill.
Other Medical Products
The development of proprietary drugs and medications is subject to varying degrees of governmental regulation in the United States and any other countries in which our operations are conducted. In the United States, regulation by various federal and state agencies has long been focused primarily on product safety, efficacy, manufacturing, advertising, labeling and safety reporting. The exercise of broad regulatory powers by the U.S. Federal Drug Administration (“FDA”) continues to result in increases in the amounts of testing and documentation required for FDA clearance of new drugs and devices and a corresponding increase in the expense of product introduction. Likewise, the approval process with the FDA is estimated to take approximately seven (7) years from the time it is started. Similar trends are also evident in major markets outside of the United States.
Clinical trials are a set of procedures in medical research conducted to allow safety (or more specifically, information about adverse drug reactions and adverse effects of other treatments) and efficacy data to be collected for health interventions (e.g., drugs, diagnostics, devices, therapy protocols). These trials can take place only after satisfactory information has been gathered on the quality of the non-clinical safety, and Health Authority/Ethics Committee approval is granted in the country where the trial is taking place.
Depending on the type of product and the stage of its development, investigators enroll healthy volunteers and/or patients into small pilot studies initially, followed by larger scale studies in patients that often compare the new product with the currently prescribed treatment. As positive safety and efficacy data are gathered, the number of patients is typically increased. Clinical trials can vary in size from a single center in one country to multicenter trials in multiple countries.
Due to the sizable cost a full series of clinical trials may incur, the burden of paying for all the necessary people and services is usually borne by the sponsor who may be a governmental organization, a pharmaceutical, or biotechnology company. Since the diversity of roles may exceed resources of the sponsor, often a clinical trial is managed by an outsourced partner such as a contract research organization or a clinical trials unit in the academic sector.
The regulatory agencies under whose purview we intend to operate have administrative powers that may subject us to such actions as product withdrawals, recalls, seizure of products and other civil and criminal sanctions.
Because we intend to seek a partnership with and/or sale of our product candidates/technologies to large pharmaceutical and/or medical devices firms, we anticipate that a larger pharmaceutical company will undertake to navigate the regulatory pathway, including conducting clinical trials, for a product such as
Feldetrex
™.
Employees
As of the date hereof, we do not have any employees other than our officers and directors. Our officers and directors will continue to work for us for the foreseeable future. We anticipate hiring appropriate personnel on an as-needed basis, and utilizing the services of independent contractors as needed.
DESCRIPTION OF PROPERTY
We do not currently lease or use any office space. We have not paid any amounts to Mr. Hartman for the use of his personal office or for reimbursement of personal office expenses incurred by him.
LEGAL PROCEEDINGS
We are not a party to or otherwise involved in any legal proceedings.
In the ordinary course of business, we are from time to time involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, other than as set forth herein, matters currently pending or threatened against us are not expected to have a material adverse effect on our financial position or results of operations.
SELECTED FINANCIAL DATA
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As of and
for the Year Ended
December 31,
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As of and
for the Year
Ended
December 31,
2016
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Premier Biomedical, Inc.
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2017
(audited)
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|
(audited and restated)
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Statement of Operations Data:
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Revenue
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$
|
39,761
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|
$
|
-
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Net operating income (loss)
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$
|
(1,289,838
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)
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|
$
|
(637,891
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)
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|
Net income (loss)
|
|
$
|
(3,763,558
|
)
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|
$
|
(1,768,221
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)
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Balance Sheet Data:
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Cash
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$
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83,704
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$
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22,437
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Current assets
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$
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203,603
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$
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33,867
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Total assets
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$
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209,081
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$
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38,967
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Current liabilities
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$
|
2,819,807
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|
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$
|
699,671
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Total liabilities
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$
|
2,819,807
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|
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$
|
699,671
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Accumulated deficit
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$
|
(16,328,812
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)
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$
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(12,565,254
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)
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Net loss per common share – basic and diluted
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$
|
(0.01
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)
|
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$
|
(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.
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:
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1.
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96-hour pain relief patch with 50 mg of hemp oil extract, the highest level of pain relief ingredient available in the industry;
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2.
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120 mg/ 10 ml water-based roll-on applicator;
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3.
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150 mg/ 10 ml oil-based roll-on applicator; and
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4.
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150 mg/ 30 ml oil-based pump spray applicator.
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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:
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1.
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Expanding our online sales beyond our web site at: www.painreliefmeds.com;
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2.
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Securing the services of a social media coordinator to ensure that we optimize that promotional tool;
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3.
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Establishing an agent in Ohio, Pennsylvania, Florida, the West and the mid-South to expand our direct distributor network;
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4.
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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;
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5.
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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;
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6.
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Arranging to complete a radio broadcast via Uptick Newswire every 4-6 weeks to ensure that our story gets out to the public; and
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7.
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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.
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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.
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.
___________
5
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.
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:
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|
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.
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.
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
|
)
|
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.
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.
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.
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.
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.
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.
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.
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.
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.
|
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.
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.
|
|
(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.
|
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.
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.
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.
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.
INDEX TO FINANCIAL STATEMENTS
For the Three Months ended March 31, 2018 and 2017
For the Years ended December 31, 2017 and 2016
|
|
|
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.
|
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.
|
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.
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
|
|
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.
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.
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.
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
|
|
$
|
-
|
|
|
$
|
-
|
|
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.
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.
|
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.
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.
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
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.
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.
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.
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.
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.
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
|
|
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.
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.
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.
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.
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
|
)
|
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.
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.
|
|
|
-
|
|
|
|
-
|
|
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
|
|
$
|
-
|
|
|
$
|
-
|
|
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.
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.
A total of $32,010, consisting of $30,000 of principal and $2,010 of interest was repaid on various dates within November of 2017.
Note
10
– Derivative Liabilities
As discussed in Note 8 under Convertible Notes Payable, the Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.
The fair values of the Company’s derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice model. The Company recognized current derivative liabilities of $2,255,781 and $221,822 at December 31, 2017 and 2016, respectively. The change in fair value of the derivative liabilities resulted in a loss of $2,115,986 and a loss of $26,048 for the years ended December 31, 2017 and 2016, respectively, which has been reported within other expense in the statements of operations. The loss of $2,115,986 for the year ended December 31, 2017 consisted of a loss of $7,103,444 attributable to the fair value of warrants, a gain of $3,766,437 due to the subsequent exchange of the warrants, a net loss in market value of $4,767 on the convertible notes and a net gain of $1,225,788 in market value of the warrants. The loss of $26,048 for the year ended December 31, 2016 consisted of a loss of $12,232 due to the value in excess of the face value of the convertible notes and a net loss in market value of $13,816 on the convertible notes.
Premier Biomedical, Inc.
Notes to Financial Statements
The following is a summary of changes in the fair market value of the derivative liability during the years ended December 31, 2017 and 2016, respectively:
|
|
|
Derivative
|
|
|
|
|
Liability
|
|
|
|
|
Total
|
|
|
Balance, December 31, 2015
|
|
$
|
150,076
|
|
|
Increase in derivative value due to issuances of convertible promissory notes
|
|
|
583,415
|
|
|
Change in fair market value of derivative liabilities due to the mark to market adjustment
|
|
|
13,816
|
|
|
Debt conversions
|
|
|
(525,485
|
)
|
|
Balance, December 31, 2016
|
|
$
|
221,822
|
|
|
Increase in derivative value due to issuances of convertible promissory notes
|
|
|
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
|
|
Key inputs and assumptions used to value the convertible debentures and warrants issued during the years ended December 31, 2017 and 2016:
|
|
·
|
Stock price ranging from $0.0081 to $0.0035 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 141% - 232%.
|
|
|
|
|
|
|
·
|
The Company would redeem the notes -0-% of the time, increasing 1% per month to a maximum of 5%.
|
|
|
|
|
|
|
·
|
All notes are assumed to be extended at maturity by 2 years – the time required to convert out this volume of stock.
|
|
|
|
|
|
|
·
|
The holders of the securities would automatically convert midway through to maturity on a monthly basis based on ownership and trading volume limitations.
|
|
|
|
|
|
|
·
|
A change of control and fundamental transaction would occur initially -0-% of the time and increase monthly by -0-% to a maximum of -0-%.
|
|
|
|
|
|
|
·
|
The monthly trading volume would average $1,120,620 to $1,441,388 and would increase at 1% per month.
|
Premier Biomedical, Inc.
Notes to Financial Statements
Note
11
–
Commitments and Contingencies
Collaborative Patent License Agreements
On May 9, 2012, the Company entered into a Collaborative Agreement with the University of Texas at El Paso. Pursuant to the terms of the Agreement, the Company will work jointly with the University to develop a series of research and development programs around its sequential-dialysis technology in the areas of Alzheimer’s Disease, Traumatic Brain Injury (TBI), Chronic Pain Syndrome, Fibromyalgia, Multiple Sclerosis, Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig’s disease), Blood Sepsis, Cancer, Heart Attacks and Strokes. The programs will utilize the facilities at one or more of the University of Texas’ campuses. The Company will pay the University’s actual overhead for the projects, plus a negotiated facility and administration overhead expense, and 10% of all gross revenues associated with the sale, license and/or royalties of all products and treatment procedures directly affiliated with programs. Intellectual property jointly invented and developed as a result of the projects will be owned jointly by the University and the Company. The Agreement has an initial term of five (5) years, and is renewable upon mutual agreement of the parties.
On March 4, 2015, we entered into a Patent License Agreement (PLA) with the University of Texas at El Paso (UTEP) regarding our joint research and development of CTLA-4 Blockade with Metronomic Chemotherapy for the Treatment of Breast Cancer. This is the first PLA with UTEP following our Collaborative Agreement with them dated May 9, 2012, and memorializes the joint ownership of the applicable patent and the financial and other terms related thereto.
On June 19, 2015, we entered into Amendment No. 1 to this Agreement, pursuant to which we explicitly included Provisional Patent Application No. 62/161,116 entitled, “Anti-CTLA-4 Blockade” (the “Application”) under the definition of “Patent Rights” as set forth in the PLA. The Application was filed with the United States Patent and Trademarks Office on May 13, 2015; the underlying technology was invented by Robert Kirken and Georgialina Rodriguez, and is solely-owned by The Board of Regents of The University of Texas System.
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
12
– Stockholders
’
Equity
Convertible Preferred Stock, Series A
The Company has 10,000,000 authorized shares of Preferred Stock, of which 2,000,000 shares of $0.001 par value Series A Convertible Preferred Stock (“Series A Preferred Stock”) have been designated. Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share into one (1) fully paid and non-assessable share of Common Stock. Each outstanding share of Series A Preferred Stock is entitled to one hundred (100) votes per share on all matters to which the shareholders of the Corporation are entitled or required to vote. The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares sufficient to effect the conversions.
Premier Biomedical, Inc.
Notes to Financial Statements
Preferred Stock Issuances for Exercise of Preferred Stock Warrants, Related Parties (2016)
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
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.
Securities Purchase Agreement (2017)
On March 30, 2017, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and between the Company and each of The Special Equities Group, LLC, RDW Capital LLC, and DiamondRock, LLC (each a “Purchaser” and collectively, the “Purchasers”) to sell our common stock and warrants at a fixed price. Pursuant to the Purchase Agreement, we received from the Purchasers an aggregate of $300,000, net of $15,000 of offering costs, in exchange for 40,000,002 shares of our common stock, warrants to purchase up to 40,000,002 shares of our common stock at an exercise price of $0.03 (“Series A Warrants”) and warrants to purchase up to 40,000,002 shares or our common stock at an exercise price of $0.05 (“Series B Warrants”). Both the Series A Warrants and Series B Warrants issued pursuant to the Purchase Agreement are exercisable immediately upon receipt and have a term of three years. In addition, the Purchaser is entitled to a one-time price reset on the purchase price of the common stock of each tranche to the lower of (i) $0.02 or (ii) a 50% discount to the average of the three lowest closing prices in the 20 trading days prior to the reset date, which is the earlier of (i) the 7 month anniversary of the closing of each tranche of this transaction or (ii) 20 trading days after the effectiveness of each tranche. The embedded value in this reset provision is disclosed further in Note 10.
On May 30, 2017, the Purchasers bought additional shares of our common stock and warrants for $150,000 (the “Second Closing”), in exchange for 30,303,033 shares of our common stock, warrants to purchase up to 30,303,033 shares of our common stock at an exercise price of $0.03 (“Series A Warrants”) and warrants to purchase up to 30,303,033 shares or our common stock at an exercise price of $0.05 (“Series B Warrants”). Both the Series A Warrants and Series B Warrants issued pursuant to the Purchase Agreement are exercisable immediately upon receipt and have a term of three years.
The per share purchase price of the Second Closing was the lesser of (i) $0.02, subject to certain adjustments for stock splits and other similar transactions, or (ii) 50% of the closing price on the trading day immediately prior to the date of sale. The total number of shares to be sold in the Second Closing were determined by dividing the total purchase amount of each closing (i.e., $150,000) by the per share purchase price.
The Purchase Agreement limits each Purchaser to beneficial ownership of our common stock of no more than 9.99%. The Purchasers also have certain anti-dilution rights in the Purchase Agreement for a period of 12 months. These rights allow the Purchasers to exchange their shares of common stock received pursuant to the Purchase Agreement for additional shares on the same terms and conditions of a subsequent financing.
Premier Biomedical, Inc.
Notes to Financial Statements
On August 8, 2017, the Company and each of the three Purchasers also entered into exchange agreements whereby the Purchasers exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (aggregate $150,000) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.
Registration Rights Agreement (2017)
On March 30, 2017, we entered into a Registration Rights Agreement with the Purchasers in connection with the Purchase Agreement. In the Registration Rights Agreement, we agreed to prepare and file a registration statement with the Securities and Exchange Commission covering the resale of all of the shares of common stock sold to the Purchasers and the shares issuable upon exercise of the Series A Warrants and Series B Warrants. We agreed to file an initial registration statement as promptly as possible and have it declared effective no later than June 28, 2017 (or July 28, 2017 if the registration statement was reviewed by the Securities and Exchange Commission) and keep it continuously effective until the securities are sold or may be sold under Rule 144 of the Securities Act without volume or manner-of-sale restrictions. If all of the securities cannot be registered on one registration statement, we agreed to file subsequent registration statements to register the remaining securities as promptly as allowed. The registration statement was subsequently withdrawn on July 24, 2017 and the Purchase Agreement was amended on August 8, 2017 to change the terms of the third closing to an aggregate of $150,000 of convertible notes, bearing interest at 8%, convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.
Common Stock Issuances for Debt Conversions (2017)
On various dates between October 31, 2017 and December 26, 2017, the Company issued a total of 57,193,766 shares of common stock pursuant to the conversion of an aggregate of $100,000 of principal, among the First and Second RDW, SEG and Diamond Rock Notes. The notes were converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On various dates between January 10, 2017 and March 13, 2017, the Company issued a total of 142,148,242 shares of common stock pursuant to the conversion of an aggregate of $323,197, consisting of $302,480 of principal and $20,717 of interest, among the Second, Fifth and Seventh Redwood Notes. The notes were converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common Stock Issuances for Debt Conversions (2016)
On various dates between April 6, 2016 and December 22, 2016, the Company issued a total of 152,837,041 shares of common stock pursuant to the conversion of an aggregate of $675,494, consisting of $653,771 of principal and $21,723 of interest, among the Seven Redwood Notes. The notes were converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On April 19, 2016, the Company issued 3,159,944 shares of common stock pursuant to the conversion of $10,238 of principal on the First JMJ Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Premier Biomedical, Inc.
Notes to Financial Statements
On April 11, 2016, the Company issued 2,800,000 shares of common stock pursuant to the conversion of $9,744 of principal on the First JMJ Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 17, 2016, the Company issued 4,400,000 shares of common stock pursuant to the conversion of $29,040 of principal on the First JMJ Financial Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
On March 2, 2016, the Company issued 2,000,000 shares of common stock pursuant to the conversion of $13,200 of principal on the First JMJ Financial Note. The note was converted in accordance with the conversion terms; therefore no gain or loss has been recognized.
Common Stock Issuances on Stock Purchase Agreement (2017)
On February 13, 2017, the Company drew down $8,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 2,000,000 shares of common stock pursuant to the Seventh Put Notice.
On January 10, 2017, the Company drew down $10,323 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 3,147,110 shares of common stock pursuant to the Sixth Put Notice.
Common Stock Issuances on Stock Purchase Agreement (2016)
On December 13, 2016, the Company drew down $25,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 6,250,000 shares of common stock pursuant to the Fifth Put Notice.
On November 22, 2016, the Company drew down $25,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 6,377,551 shares of common stock pursuant to the Fourth Put Notice.
On November 8, 2016, the Company drew down $25,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 6,097,561 shares of common stock pursuant to the Third Put Notice.
On August 12, 2016, the Company drew down $39,520 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 5,200,000 shares of common stock pursuant to the Second Put Notice.
On July 21, 2016, the Company drew down $29,000 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 4,027,778 shares of common stock pursuant to the First Put Notice.
Common Stock Issuances for Exercise of Common Stock Warrants (2017)
On November 22, 2016, 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.
Common Stock Issuances for Exercise of Common Stock Warrants (2016)
On December 23, 2016, the Company issued 6,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $60.
Premier Biomedical, Inc.
Notes to Financial Statements
On December 23, 2016, the Company issued 6,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.00001 per share for total proceeds of $60.
On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $40.
On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.00001 per share for total proceeds of $40.
On February 10, 2016, the Company issued 2,248,846 shares of common stock pursuant to the cashless exercise of 2,250,000 warrants by the Company’s securities attorney at $0.00001 per share.
Common Stock Issuances for Debt Financing (2016)
On February 10, 2016, the Company issued 600,000 shares of our common stock to a third-party for services rendered in connection with our recent financing transactions with Redwood Fund III, Ltd. The total fair value of the common stock was $9,600 based on the closing price of the Company’s common stock on the date of grant.
On February 10, 2016, the Company issued 2,400,000 shares of our common stock to a third-party for services rendered in connection with our recent financing transactions with Redwood Fund III, Ltd. The total fair value of the common stock was $38,400 based on the closing price of the Company’s common stock on the date of grant.
Common Stock Issuances for Settlement of Accounts Payments, Related Party (2016)
On March 28, 2016, upon the resignation of Richard Najarian as one of the members of our Board of Directors, the Company issued 600,000 shares of common stock to Mr. Najarian in settlement of $13,765 of outstanding expense reimbursements. The total fair value of the common stock was $9,120 based on the closing price of the Company’s common stock on the date of grant.
Common Stock Issuances for Services (2017)
On December 6, 2017, we agreed to issue a total of 136,470,585 shares of our common stock to The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC as compensation, of which a total of 72,794,907 shares were issued immediately with an aggregate fair value of $313,018 based on the closing price of the Company’s common stock on the date of grant, and the other 63,675,678 shares were subsequently issued on various dates between January 17, 2018 and February 13, 2018. The aggregate fair value of the shares issued subsequent to December 31, 2017 was $273,805.
On August 25, 2017, we agreed to issue 9,000,000 shares of our common stock to a third-party for consulting services rendered. The shares were subsequently issued on December 1, 2017. The total fair value of the common stock was $84,600 based on the closing price of the Company’s common stock on the date of grant.
Common Stock Issuances for Services (2016)
On November 14, 2016, we issued 2,626,867 shares of our common stock to a third-party for legal services rendered. The total fair value of the common stock was $11,821 based on the closing price of the Company’s common stock on the date of grant.
On February 12, 2016, we issued 600,000 shares of our common stock to a third-party for services rendered in connection with our recent financing transactions. The total fair value of the common stock was $10,800 based on the closing price of the Company’s common stock on the date of grant.
Premier Biomedical, Inc.
Notes to Financial Statements
Note 13 – Series A Convertible Preferred Stock Warrants
Series A Convertible Preferred Stock Warrants Granted
No series A preferred stock warrants were granted during the years ended December 31, 2017 and 2016.
Series A Preferred Stock Warrants Cancelled
No series A preferred stock warrants were cancelled during the years ended December 31, 2017 and 2016.
Series A Preferred Stock Warrants Expired
No series A preferred stock warrants were expired during the years ended December 31, 2017 and 2016.
Series A Preferred Stock Warrants Exercised
On January 29, 2016, the Company issued 1,000,000 shares of series A preferred stock pursuant to the exercise of warrants by the Company’s CEO at $0.001 per share for total proceeds of $1,000.
On January 29, 2016, the Company issued 1,000,000 shares of series A preferred stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.001 per share for total proceeds of $1,000.
No Series A Preferred Stock Warrants were outstanding at December 31, 2017.
Note 14 – Common Stock Warrants
Common Stock Warrants Granted (201
7
)
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.
On December 22, 2017, we also issued warrants to purchase a total of three million five hundred thousand (3,500,000) shares of our common stock amongst three members of our Scientific Advisory Board. 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 3,500,000 common stock warrants using the Black-Scholes option-pricing model is $9,617, 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.
A total of $111,981 and $39,769 of warrants were amortized and expensed to professional fees as stock-based compensation during the years ended December 31, 2017 and 2016, respectively, including $102,364 and $25,030 during the years ended December 31, 2017 and 2016, respectively, related to warrants issued to related parties.
Premier Biomedical, Inc.
Notes to Financial Statements
Common Stock Warrants Cancelled (2016)
A total of 351,455 warrants exercisable at the lesser of (i) $0.18, and (ii) 70% of the Market Price, which is the average of the three (3) lowest VWAPs, not less than a fixed floor of $0.0001, during the twenty (20) trading day period ending on the last complete trading day prior to the date the conversion notice is delivered, or 65% if that price is less than $0.10 per share was cancelled during the year ended December 31, 2016 pursuant to the settlement reached with Typenex.
Common Stock Warrants Expired (2016)
A total of 300,000 warrants exercisable at $0.96 per share expired during year ended December 31, 2016.
Exercise of Common Stock Warrants (2016)
On February 10, 2016, the Company issued 2,248,846 shares of common stock pursuant to the cashless exercise of 2,250,000 warrants by the Company’s securities attorney at $0.00001 per share.
Exercise of Common Stock Warrants, Related Party (2017)
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.
Exercise of Common Stock Warrants, Related Party (2016)
On December 23, 2016, the Company issued 6,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $60.
On December 23, 2016, the Company issued 6,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.00001 per share for total proceeds of $60.
On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s CEO at $0.00001 per share for total proceeds of $40.
On October 19, 2016, the Company issued 4,000,000 shares of common stock pursuant to the exercise of warrants by the Company’s Chairman of the Board at $0.00001 per share for total proceeds of $40.
The following is a summary of information about the Common Stock Warrants outstanding at December 31, 2017.
|
|
|
Shares Underlying Warrants Outstanding
|
|
|
Shares Underlying
Warrants Exercisable
|
|
|
Range of
Exercise
|
|
Shares
Underlying
Warrants
|
|
|
Weighted
Average
Remaining
Contractual
|
|
Weighted
Average
Exercise
|
|
|
Shares
Underlying
Warrants
|
|
|
Weighted
Average
Exercise
|
|
|
Prices
|
|
Outstanding
|
|
|
Life
|
|
Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.00001 – $1.45
|
|
|
64,440,000
|
|
|
6.01 years
|
|
$
|
0.1194
|
|
|
|
64,440,000
|
|
|
$
|
0.1194
|
|
Premier Biomedical, Inc.
Notes to Financial Statements
The fair value of each warrant grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants under the fixed option plan:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Average risk-free interest rates
|
|
|
1.75
|
%
|
|
N/A
|
|
|
Average expected life (in years)
|
|
|
9.22
|
|
|
N/A
|
|
The Black-Scholes option pricing model was developed for use in estimating the fair value of short-term traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock price volatility. Because the Company’s common stock warrants have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of its common stock warrants. During the years ended December 31, 2017 and 2016 there were no warrants granted with an exercise price below the fair value of the underlying stock at the grant date.
The weighted average fair value of warrants granted with exercise prices at the current fair value of the underlying stock was approximately $0.00275 per warrant granted during the year ended December 31, 2017.
The following is a summary of activity of outstanding common stock warrants:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
53,591,455
|
|
|
$
|
0.1463
|
|
|
Warrants cancelled
|
|
|
(351,455
|
)
|
|
|
(0.18
|
)
|
|
Warrants expired
|
|
|
(300,000
|
)
|
|
|
(0.96
|
)
|
|
Warrants exercised
|
|
|
(22,250,000
|
)
|
|
|
(0.00001
|
)
|
|
Balance, December 31, 2016
|
|
|
30,690,000
|
|
|
$
|
0.24407
|
|
|
Warrants granted
|
|
|
40,750,000
|
|
|
|
0.005
|
|
|
Warrants exercised
|
|
|
(7,000,000
|
)
|
|
|
(0.00001
|
)
|
|
Balance, December 31, 2017
|
|
|
64,440,000
|
|
|
$
|
0.1194
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2017
|
|
|
64,440,000
|
|
|
$
|
0.1194
|
|
Note 15 – Income Taxes
The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.
Premier Biomedical, Inc.
Notes to Financial Statements
For the years ended December 31, 2017 and 2016, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2017 and December 31, 2016, the Company had approximately $4,860,000 and $4,334,000 of federal net operating losses, respectively. The net operating loss carry forwards, if not utilized, will begin to expire in 2031.
The components of the Company’s deferred tax asset are as follows:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$
|
1,701,000
|
|
|
$
|
1,516,900
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
$
|
1,701,000
|
|
|
$
|
1,516,900
|
|
|
Less: Valuation allowance
|
|
|
(1,701,000
|
)
|
|
|
(1,516,900
|
)
|
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2017 and 2016, respectively.
A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Federal and state statutory rate
|
|
|
35
|
%
|
|
|
35
|
%
|
|
Change in valuation allowance on deferred tax assets
|
|
(35
|
)%
|
|
(35
|
)%
|
In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Premier Biomedical, Inc.
Notes to Financial Statements
Note 16 – Subsequent Events
Securities Purchase Agreement
On March 1, 2018, we received $60,000 from two investors from the sale of convertible notes. These investors have also committed to provide an additional $240,000 in the near future. The investors purchased convertible notes at the signing of a Securities Purchase Agreement for an aggregate amount of $60,000. The investors will buy additional convertible notes for an aggregate of $60,000 within five trading days of our filing a registration statement to cover the investors’ shares of common stock issuable upon conversion of the convertible notes. Within five trading days of the registration statement being declared effective, the investors will buy additional convertible notes for an aggregate of $180,000.
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.
On January 10, 2017, the Company drew down $10,323 on their Stock Purchase Agreement entered into on May 27, 2016, with Redwood and issued 3,147,110 shares of common stock pursuant to the Sixth Put Notice.
PART II – INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
We will pay all expenses in connection with the registration and sale of the common stock by the selling shareholder, who is an underwriter in connection with their offering of shares. The estimated expenses of issuance and distribution are set forth below:
|
Registration Fees
|
|
Approximately
|
|
$
|
100
|
|
|
Transfer Agent Fees
|
|
Approximately
|
|
|
2,000
|
|
|
Costs of Printing and Engraving
|
|
Approximately
|
|
|
1,000
|
|
|
Legal Fees
|
|
Approximately
|
|
|
10,000
|
|
|
Accounting and Audit Fees
|
|
Approximately
|
|
|
5,000
|
|
|
Total
|
|
|
|
$
|
18,100
|
|
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 9 of our Articles of Incorporation provides that, the personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by paragraph 1 of Section 78.037 of the General Corporation Law of the State of Nevada, as the same may be amended and supplemented. Paragraph 1 of Section 78.037 states that the articles of incorporation of a Nevada corporation may contain any provision, not contrary to the laws of the State of Nevada, for the management of the business and for the conduct of the affairs of the corporation.
Article 10 of our Articles of Incorporation provides that, the corporation shall, to the fullest extent permitted by Section 78.751 of the General Corporation Law of the State of Nevada, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all expenses, liabilities, or other matters referred to in or covered by said section. Section 78.751 states that the articles of incorporation of a Nevada corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition. It further states that indemnification does not exclude any other rights that an officer or director may have pursuant to the articles, bylaws, shareholders agreement or otherwise, and that it continues for a person who has ceased to be a director, officer, or employee of the company.
Article V of our Bylaws further addresses indemnification, including procedures for indemnification claims. Indemnification applies to any person that is made a party to, or threatened to be made a party to, any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she was an officer or director of the company.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Act”) may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
RECENT SALES OF UNREGISTERED SECURITIES
The following is a list of unregistered sales of equity securities issued by the Company from January 1, 2015 through the date hereof.
Common Stock
2015
LG Capital Funding, LLC
On January 30, 2015, we entered into a Securities Purchase Agreement with LG Capital Funding, LLC (“LG Capital”), pursuant to which we sold to LG Capital a 8% Convertible Promissory Note in the original principal amount of $82,687.00 (the “LG Note”). The LG Note has a maturity date of January 29, 2016, and is convertible after 180 days into our common stock
at the higher of (i) $0.25
cents per share or (ii) 70% of the average of the two (2) lowest closing bid prices of our common stock for the fifteen (15) trading days prior to receipt of a conversion notice from LG Capital. The shares of common stock issuable upon conversion of the LG Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The LG Note can be prepaid by us at a premium as follows: (a) between 1 and 30 days after issuance – 115% of the principal amount; (b) between 31 and 60 days after issuance – 121% of the principal amount; (c) between 61 and 90 days after issuance – 126% of the principal amount; (d) between 91 and 120 days after issuance – 132% of the principal amount; (e) between 121 and 150 days after issuance – 138% of the principal amount; and (f) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to pre-payment after 180 days. The purchase and sale of the LG Note closed on January 30, 2015, the date that the purchase price was delivered to us. The issuance of the LG Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
Adar Bays, LLC
On February 24, 2015, we entered into a Securities Purchase Agreement with Adar Bays, LLC (“Adar Bays”), pursuant to which we sold to Adar Bays an 8% Convertible Promissory Note in the original principal amount of $44,100.00 (the “Adar Note”). The Adar Note has a maturity date of February 24, 2016, and is convertible after 180 days into our common stock at the higher of (i) $0.25
cents per share or (ii) 70% of the average of the two (2) lowest closing prices of our common stock for the fifteen (15) trading days prior to receipt of a conversion notice from Adar Bays. The shares of common stock issuable upon conversion of the Adar Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Adar Note can be prepaid by us at a premium as follows: (a) between 1 and 30 days after issuance – 115% of the principal amount; (b) between 31 and 60 days after issuance – 121% of the principal amount; (c) between 61 and 90 days after issuance – 127% of the principal amount; (d) between 91 and 120 days after issuance – 133% of the principal amount; (e) between 121 and 150 days after issuance – 139% of the principal amount; and (f) between 151 and 180 days after issuance – 140% of the principal amount. There is no right to pre-payment after 180 days. The purchase and sale of the Adar Note closed on March 2, 2015, the date that the purchase price was delivered to us. The issuance of the Adar Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
Services
On March 20, 2015, we issued a warrant to acquire two thousand (2,000) shares of our common stock in exchange for services rendered. The warrant is exercisable for five (5) years at $0.20 per share, but only vests to the extent that the closing bid price of our common stock reaches the following levels over three consecutive trading days:
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500
warrants will vest at $50 per share;
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500 warrants will vest at $75 per share;
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500 warrants will vest at $100
per share; and
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500 warrants will vest at $125
per share.
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The issuance of the warrants was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was a sophisticated investor, familiar with our operations, and there was no solicitation.
On September 2, 2015, we entered into a Convertible Promissory Note with JMJ Financial (“JMJ”) in the original principal amount of up to $250,000 (the “JMJ Note”). The initial amount of funding under the JMJ Note was $50,000. The JMJ Note has a maturity date of two (2) years from each funding and is convertible at any time by the holder into our common stock at 60% of the lowest trade price in the twenty five (25) trading days previous to the conversion, with a floor of $0.025 per share. The shares of common stock issuable upon conversion of the JMJ Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. Any funding under the JMJ Note can be prepaid by us within ninety (90) days without a premium and without interest. After ninety (90) days, a one-time interest charge of twelve percent (12%) is applied, and the JMJ Note may not be prepaid without the holder’s consent. The issuance of the JMJ Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
On September 10, 2015, we issued 4,000 shares of common stock, restricted in accordance with Rule 144, to Mitchell Felder, one of our directors, upon the exercise of warrants at $0.0025 per share. The issuance was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
On September 10, 2015, we issued warrants to purchase two thousand (2,000) shares of our common stock to a new member of our Scientific Advisory Board. The exercise price of the warrants is $25 per share. The warrants are vested immediately. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investors are sophisticated and familiar with our operations, and there was no solicitation in connection with the issuance.
On September 8, 2015, we entered into a Securities Purchase Agreement with Vis Vires Group, Inc., pursuant to which we sold to Vires a 8% Convertible Promissory Note in the original principal amount of Forty Eight Thousand Dollars ($48,000.00) (the “Vires Note”). The Vires Note has a maturity date of June 8, 2016, and is convertible after 180 days into our common stock at the greater of (i) the Variable Conversion Price and (ii) the Fixed Conversion Price. The “Variable Conversion Price” shall mean 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means the closing bid price on the applicable day. The “Fixed Conversion Price” shall mean $0.0025. The shares of common stock issuable upon conversion of the Vires Note will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The Vires Note can be prepaid by us at a premium as follows: (a) between 0 and 30 days after issuance – 110% of the principal amount and any accrued and unpaid interest; (b) between 31 and 60 days after issuance – 115% of the principal amount and any accrued and unpaid interest; (c) between 61 and 90 days after issuance – 120% of the principal amount and any accrued and unpaid interest; (d) between 91 and 120 days after issuance – 125% of the principal amount and any accrued and unpaid interest; (e) between 121 and 150 days after issuance – 130% of the principal amount and any accrued and unpaid interest; and (f) between 151 and 180 days after issuance – 135% of the principal amount and any accrued and unpaid interest. The purchase and sale of the Vires Note closed on September 21, 2015, the date that the purchase price was delivered to us. The issuance of the Vires Note was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
On October 1, 2015, we issued 12,000 shares of common stock, restricted in accordance with Rule 144, to Mitchell Felder, one of our directors, upon the exercise of warrants at $0.0025 per share. The issuance was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
Effective as of October 21, 2015, we issued warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (4,000 shares); Mitchell Felder (4,000 shares), Heidi Carl (3,000 shares), John Borza (2,400 shares), Richard Najarian (800 shares), and Jay Rosen (800 shares). We also issued warrants to purchase a total of 720 shares of our common stock to six members of our Scientific Advisory Board. The exercise price of the foregoing warrants is $12.50 per share. One half of the shares underlying each of the respective warrants vest on June 15, 2016, with the balance vesting on December 15, 2016. In order for the warrants to vest on each of the foregoing dates, however, the holders must be serving in the same capacity on behalf of the Company as he or she was serving on October 21, 2015. The issuance of the warrants was fully approved by our Board of Directors on October 21, 2015, the date a fully executed resolution authorizing the issuance was delivered to us. The issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder, the investors are sophisticated and familiar with our operations, and there was no solicitation in connection with the issuance.
On December 28, 2015, we entered into a Securities Purchase Agreement with Redwood Management, LLC (“Redwood”), pursuant to which we agreed to sell, and Redwood agreed to purchase, One Million Six Hundred Thousand Dollars ($1,600,000) in 10% Convertible Promissory Notes. On February 26, 2016, and again on March 7, 2016, the Securities Purchase Agreement was amended, and the total amount of funding to which Redwood is obligated was reduced to $525,000. The notes have an original issue discount of five percent (5%). The first note was issued on December 28, 2015 in the face amount of One Hundred Fifty Seven Thousand Five Hundred Dollars ($157,500), to Redwood Management, LLC. The second note was issued on January 8, 2016, in the face amount of One Hundred Thirty One Thousand Two Hundred Fifty Dollars ($131,250), to Redwood Fund III Ltd. The third note was issued on February 22, 2016, in the face amount of Seventy Eight Thousand Seven Hundred Fifty Dollars ($78,750), to Redwood Management, LLC. The fourth note was issued on March 7, 2016, in the face amount of Seventy Eight Thousand Seven Hundred Fifty Dollars ($78,750), to Redwood Management, LLC. The fifth and final note was issued on March 11, 2016, in the face amount of One Hundred Five Thousand Dollars ($105,000). The maturity date of each note is nine (9) months after its issuance. Each note will be convertible after ninety (90) days into our common stock at a conversion price equal to 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. The shares of common stock issuable upon conversion of the notes will be restricted securities as defined in Rule 144 promulgated under the Securities Act of 1933. The notes can be prepaid by us at any time upon ten (10) days written notice to Redwood for a cash amount equal to the sum of the then outstanding principal amount of the note and interest multiplied by 130%. Pursuant to a Registration Rights Agreement, we agreed to register the shares underlying conversion of the notes. The purchase and sale of the initial note closed on December 28, 2015, the date that the purchase price was delivered to us.
On October 10, 2016, we entered into an Exchange Agreement by and between the Company and Redwood. Pursuant to the Exchange Agreement, we exchanged the Typenex Note for the Warrant. The Typenex Note has a principal amount of $300,000, an interest rate of 10% and matures on October 10, 2017, unless earlier converted into shares of our common stock. The Typenex Note may be converted to common stock at any time after January 8, 2017. The conversion price for the Typenex Note is equal to 60% of the lowest traded price of our common stock in the 15 trading days prior to the conversion date. If any shares of our common stock are sold at an effective price per share that is lower than the conversion price, the conversion price will be adjusted down to match the lower price. We have instructed our transfer agent to reserve 600,000 shares of our common stock for conversions pursuant to the Typenex Note. This reserve will stay in place until the Typenex Note and any interest due thereunder is satisfied in full.
Pursuant to the Purchase Agreement, we have issued the following shares of common stock on the dates indicated and in the amounts shown to Redwood:
The issuances to Redwood listed above were exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investor is sophisticated and familiar with our operations, and there was no solicitation in connection with the sale.
On January 2, 2016, two of our officers and directors, William A. Hartman and Mitchell Felder, 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. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investors are sophisticated and familiar with our operations, and there was no solicitation in connection with the sale.
On February 10, 2016, we issued 12,000 shares of our common stock, restricted in accordance with Rule 144, to a third-party for services rendered in connection with our recent financing transactions. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investor was sophisticated and familiar with our operations, and there was no solicitation in connection with the sale.
On February 12, 2016, we issued 2,400 shares of our common stock, restricted in accordance with Rule 144, to a third-party for services rendered in connection with our recent financing transactions. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investor was sophisticated and familiar with our operations, and there was no solicitation in connection with the sale.
On March 28, 2016, upon the resignation of Richard Najarian as one of the members of our Board of Directors, we issued to him 2,400 shares of common stock in settlement of an unpaid expense reimbursement. The issuance was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, the investor was sophisticated and familiar with our operations, and there was no solicitation in connection with the sale.
On May 27, 2016, we issued a 10% convertible promissory note to Redwood pursuant to the Note (as describe above). The issuance of the Note was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D promulgated thereunder. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
On August 19, 2016, we issued 16,000 shares of common stock, restricted in accordance with Rule 144, to each of William Hartman and Mitchell Felder, officers and directors of the Company, upon the exercise of warrants at $0.0025 per share. The issuance was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation.
On December 20, 2016, we issued 24,000 shares of common stock, restricted in accordance with Rule 144, to each of William Hartman and Mitchell Felder, officers and directors of the Company, upon the exercise of warrants at $0.0025 per share. The issuance was exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchaser was an accredited and sophisticated investor, familiar with our operations, and there was no solicitation
On March 30, 2017, we entered into Securities Purchase Agreements by and between the Company and each of The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC to sell our common stock and warrants at a fixed price. On March 30, 2017, we closed the first sale under these agreements, receiving $100,000 from each investor in exchange for 53,334 shares of our common stock, warrants to purchase up to 53,334 shares of our common stock at an exercise price of $7.50 (“
Series A Warrants
”) and warrants to purchase up to 53,334 shares or our common stock at an exercise price of $12.50 (“
Series B Warrants
” and together with the Series A Warrants, the “
Warrants
”). In the aggregate, we received $300,000 in exchange for 160,002 shares of our common stock, 160,002 Series A Warrants and 160,002 Series B Warrants.
On May 30, 2017, we completed the second sale under the Securities Purchase Agreement, dated March 30, 2017. We sold 40,405 shares of our common stock, 40,405 Series A Warrants and 40,405 Series B Warrants to each of The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC for $50,000, receiving an aggregate of $150,000 in exchange for 121,215 shares of our common stock, 121,215 Series A Warrants and 121,215 Series B Warrants.
On August 8, 2017, we entered into Exchange Agreements with The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC whereby we exchanged convertible notes with an aggregate face value of $150,000 for the following securities previously issued pursuant to the Securities Purchase Agreements, dated March 30, 2017: 121,215 shares of common stock, 160,002 Series A Warrants and 160,002 Series B Warrants. The convertible notes are convertible into shares of our common stock, bear interest at 8% and matured on November 30, 2017. The notes were convertible at 50% of the lowest traded price of our common stock in the fifteen (15) Trading Days prior to the Conversion Date.
On October 30, 2017, we completed the third sale under the Securities Purchase Agreements, dated March 30, 2017, as amended. We sold a convertible promissory note for $50,000 to each of The Special Equities Group, LLC, RDW Capital, LLC and DiamondRock, LLC, an aggregate of $150,000. The convertible notes are convertible into shares of our common stock, bear interest at 8% and mature on January 31, 2018. The notes are convertible at 50% of the lowest traded price of our common stock in the fifteen (15) Trading Days prior to the Conversion Date.
The above transactions were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) of the Securities Act of 1933. The purchasers were accredited and sophisticated investors, familiar with our operations, and there was no solicitation.