UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2018

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________ to _______________.

 

Commission File Number: 000-54563

 

PREMIER BIOMEDICAL, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		27-2635666
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
P.O. Box 25 Jackson Center, PA		16133
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code (814) 786-8849

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)		Emerging growth company	x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

As of May 21, 2018, there were 747,306,550 shares of common stock, $0.00001 par value, issued and outstanding.

 

 

PREMIER BIOMEDICAL, INC.

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
ITEM 1	Financial Statements		4
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk		22
ITEM 4	Controls and Procedures		22
PART II – OTHER INFORMATION
ITEM 1	Legal Proceedings		24
ITEM 1A	Risk Factors		24
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds		24
ITEM 3	Defaults Upon Senior Securities		24
ITEM 4	Mine Safety Disclosures		24
ITEM 5	Other Information		24
ITEM 6	Exhibits		25

 

2

 

PART I – FINANCIAL INFORMATION

 

This Quarterly Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning our possible or assumed future results of operations set forth under the heading: “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

 

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. Our future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

 

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ITEM 1 Financial Statements

 

PREMIER BIOMEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		March 31,				December 31,
		2018				2017
		(Unaudited)
ASSETS
Current assets:
Cash		$	79,221			$	83,704
Accounts receivable			-				312
Inventory			79,410				84,763
Other current assets			33,327				34,824
Total current assets			191,958				203,603
Property and equipment, net			6,916				5,478
Total assets		$	198,874			$	209,081
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable		$	346,856			$	346,814
Accounts payable, related parties			40,904				41,382
Accrued interest			9,125				5,840
Convertible notes payable, net of discounts of $40,222 and $30,010 at March 31, 2018 and December 31, 2017, respectively, currently in default			154,778				169,990
Derivative liabilities			1,574,343				2,255,781
Total current liabilities			2,126,006				2,819,807
Total liabilities			2,126,006				2,819,807
Commitments and contingencies			-				-
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value, 10,000,000 shares authorized, 2,000,000 shares issued and outstanding at March 31, 2018 and December 31, 2017			2,000				2,000
Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 747,306,550 and 637,840,677 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively			7,473				6,378
Additional paid in capital			13,825,883				13,435,903
Subscriptions payable, consisting of -0- and 63,675,678 shares at March 31, 2018 and December 31, 2017, respectively			-				273,805
Accumulated deficit			(15,762,488	)			(16,328,812	)
Total stockholders' equity (deficit)			(1,927,132	)			(2,610,726	)
Total liabilities and stockholders' equity (deficit)		$	198,874			$	209,081

  

See accompanying notes to financial statements.

 

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PREMIER BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
		For the Three Months
		Ended March 31,
		2018				2017
Revenue		$	10,395			$	-
Cost of goods sold			6,058				-
Gross profit			4,337				-
Operating expenses:
General and administrative			34,492				33,059
Professional fees			39,616				41,147
Total operating expenses			74,108				74,206
Net operating loss			(69,771	)			(74,206	)
Other income (expense):
Interest expense			(64,145	)			(152,747	)
Change in derivative liabilities			700,240				(5,100,091	)
Equity in losses of investment in joint venture			-				(2,058	)
Total other income (expense)			636,095				(5,254,896	)
Net income (loss)		$	566,324			$	(5,329,102	)
Weighted average number of common shares outstanding - basic			718,803,900				401,283,532
Weighted average number of common shares outstanding - fully diluted			721,796,400				402,283,532
Net loss per share - basic		$	0.00			$	(0.01	)
Net loss per share - fully diluted		$	0.00			$	(0.01	)

 

See accompanying notes to financial statements. 

 

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PREMIER BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		For the Three Months
		Ended March 31,
		2018				2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	566,324			$	(5,329,102	)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation			591				528
Equity in losses of joint venture investment			-				2,058
Change in fair market value of derivative liabilities			(700,240	)			5,100,091
Amortization of debt discounts			60,860				149,456
Decrease (increase) in assets:
Accounts receivable			312				-
Inventory			5,353				-
Other current assets			1,497				1,922
Increase (decrease) in liabilities:
Accounts payable			42				(42,297	)
Accounts payable, related parties			(478	)			236
Accrued interest			3,285				2,691
Accrued interest, related parties			-				600
Net cash used in operating activities			(62,454	)			(113,817	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment			(2,029	)			-
Investment in joint venture			-				(2,058	)
Net cash used in investing activities			(2,029	)			(2,058	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock, net of offering costs			-				285,000
Proceeds from sale of stock on equity line of credit			-				18,323
Proceeds from convertible notes payable			60,000				-
Net cash provided by financing activities			60,000				303,323
NET CHANGE IN CASH			(4,483	)			187,448
CASH AT BEGINNING OF PERIOD			83,704				22,437
CASH AT END OF PERIOD		$	79,221			$	209,885
SUPPLEMENTAL INFORMATION:
Interest paid		$	-			$	-
Income taxes paid		$	-			$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Value of debt discounts		$	60,000			$	-
Value of derivative adjustment due to debt conversions		$	52,270			$	229,043
Value of shares issued for conversion of debt		$	65,000			$	323,197

 

See accompanying notes to financial statements.

 

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Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 – Basis of Presentation and Significant Accounting Policies

 

Basis of Presentation

 

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

 

Use of Estimates

 

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

 

Cash and Cash Equivalents

 

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

 

Patent Rights and Applications

 

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

 

Fair Value of Financial Instruments

 

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

 

Basic and Diluted Loss Per Share

 

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

 

The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the three months ended March 31, 2018 and 2017 are as follows:

 

		For the Three Months Ended
		March 31,
		2018				2017
Weighted average common shares outstanding – basic			718,803,900				401,283,532
Plus: Potentially dilutive common shares:
Stock options and warrants			2,992,500				-
Weighted average common shares outstanding – diluted			721,796,400				401,283,532

 

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Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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

 

Stock-Based Compensation

 

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

 

Revenue Recognition

 

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

 

Advertising and Promotion

 

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

 

Income Taxes

 

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

 

Uncertain Tax Positions

 

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

 

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

 

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

 

Recent Accounting Pronouncements

 

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.

 

There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the three months ended March 31, 2018 and 2017, or the twelve months ended December 31, 2017.

 

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

 

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

 

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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.

 

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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.

 

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Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

  

Note 7 – Convertible Notes Payable

 

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

 

		March 31,				December 31,
		2018				2017
On March 1, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on May 31, 2018 (“First Red Diamond Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.		$	30,000			$	-
On March 1, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on May 31, 2018 (“First SEG-RedaShex Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.			30,000				-
On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second Diamond Rock Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. Currently in default.			50,000				50,000
On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second SEG Note”). The note is convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $10,000 of principal was converted into 5,208,333 shares of common stock on October 31, 2017, and the remaining $40,000 of principal was converted into 26,559,426 shares of common stock on January 29, 2018.			-				40,000
On August 8, 2017, the Company entered into an exchange agreement with Diamond Rock, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First Diamond Rock Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $15,000 of principal was converted into an aggregate of 7,812,500 shares of common stock at various dates between November 6, 2017 and November 13, 2017. Currently in default.			35,000				35,000
On August 8, 2017, the Company entered into an exchange agreement with The Special Equities Group, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First SEG Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. Currently in default.			50,000				50,000
On August 8, 2017, the Company entered into an exchange agreement with RDW Capital, LLC whereby they exchanged (i) the 13,333,334 Series A Warrants purchased in the First Closing, (ii) the 13,333,334 Series B Warrants purchased in the First Closing, and (iii) the 10,101,011 shares of common stock purchased in the Second Closing (the “Exchange Securities”) for a $50,000 convertible note (“First RDW Note”) issued by the Company, bearing interest at 8% interest and maturing on November 30, 2017. The notes are convertible at 50% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $25,000 of principal was converted into 13,157,895 shares of common stock on October 31, 2017, and the remaining $25,000 of principal was converted into 19,230,769 shares of common stock on January 3, 2018.			-				25,000
Total convertible notes payable, currently in default			195,000				200,000
Less unamortized derivative discounts:			40,222				30,010
Convertible notes payable			154,778				169,990
Less: current portion			154,778				169,990
Convertible notes payable, less current portion		$	-			$	-

 

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Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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

 

		March 31,				March 31,
		2018				2017
Interest on convertible notes		$	3,285			$	2,691
Interest on related party loans			1,800				600
Derivative discounts			60,860				149,456
Total interest expense		$	64,145			$	152,747

 

Note 8 – Derivative Liabilities

 

As discussed in Note 7 under Convertible Notes Payable, the Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.

 

The fair values of the Company’s derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice model. The Company recognized current derivative liabilities of $1,574,343 and $2,255,781 at March 31, 2018 and December 31, 2017, respectively. The change in fair value of the derivative liabilities resulted in a gain of $700,240 and a loss of $5,100,091 for the three months ended March 31, 2018 and 2017, respectively, which has been reported within other expense in the statements of operations. The gain of $700,240 for the three months ended March 31, 2018 consisted of a gain of $718,750 due to the value attributable to the warrants and a net loss in market value of $18,510 on the convertible notes. The loss of $5,100,091 for the three months ended March 31, 2017 consisted of a loss of $4,945,782 due to the value attributable to the warrants, a loss of $147,088 in market value of the warrants and a net loss in market value of $7,221 on the convertible notes.

 

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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.

 

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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.

 

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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.

 

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ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

 

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

 

The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, its unaudited financial statements and related notes elsewhere in this Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States.

 

Summary Overview

 

We 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.

 

We began sales of our pain management products in the third quarter of 2017. As such, we had no comparative revenues during the first quarter of 2017.

 

Pain Management Products

 

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

 

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

 

	1.	96-hour pain relief patch with 50 mg of hemp oil extract, the highest level of pain relief ingredient available in the industry;
	2.	120 mg/ 10 ml water-based roll-on applicator;
	3.	150 mg/ 10 ml oil-based roll-on applicator; and
	4.	150 mg/ 30 ml oil-based pump spray applicator.

 

We have also designed and developed a fifth new product, a 2 ounce hemp oil cream that will debut into the market in the near future. We believe that this five-product array positions us with the majority of the hemp oil extract users in the marketplace. The topical pain relief market is expected to grow rapidly in the next few years, and we intend to be a major player in that expanding market.

 

Now that we have completed the product design and development phase, we intend to embark on the product distribution and sales phase by:

 

	1.	Expanding our online sales beyond our web site at www.painreliefmeds.com;
	2.	Securing the services of a social media coordinator to ensure that we optimize that promotional tool;
	3.	Establishing an agent in Ohio, Pennsylvania, Florida, the West and the mid-South to expand our direct distributor network;
	4.	Engaging an investor relations firm that will include us in, among other things, televised appearances designed to gain optimum exposure for our company and its products;
	5.	Emphasizing the potential for our all-natural, 50-state legal, drug test safe topical pain relief products to be a preferred alternative to the dangerous opioid pain killers that are a major factor in numerous drug overdose deaths;
	6.	Arranging to complete radio broadcasts to ensure that our story gets out to the public; and
	7.	Reaching an agreement with a professional sports figure to become a spokesman for the company and to provide access to the sports industry.

 

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 our products through these distribution channels 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.

 

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In addition, we are in the process of negotiating potential partnerships outside the United States to market our products worldwide. We expect that these partnerships will make new markets available to us and allow us to rapidly increase our revenues. We hope that through these partnerships we will also be able to see 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. As patients seek to cut back their use of opioid painkillers and look for alternatives, we believe demand for our products will see an increase.

 

Financing

 

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

 

On March 1, 2018, we received $60,000 from the sale of convertible notes to two investors. On April 24, 2018, the investors bought additional convertible notes for an aggregate of $60,000 when we filed a registration statement to cover the shares of common stock issuable upon conversion of their convertible notes. These investors have also committed to provide an additional $180,000 within five trading days of the registration statement being declared effective.

 

Despite the recent sales of convertible notes, our goal is to move forward with more favorable financing as we begin to grow our revenues. To date, the cash generated by these new products is not yet sufficient to finance our volume ramp-up and planned product introductions.

 

Through 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.

 

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 convertible notes to raise $120,000 from a group of investors and expect to be able to raise another $180,000 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.

 

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

 

Introduction

 

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

 

Revenues and Net Operating Loss

 

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

 

		Three Months				Three Months
		March 31,				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)			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.

 

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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.

 

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Liquidity and Capital Resources

 

Introduction

 

During the three months ended March 31, 2018, we had negative operating cash flows. Our cash on hand as of March 31, 2018 was $79,221, which was derived from the sale of shares of common stock, warrants and convertible promissory notes to investors. Our monthly cash flow burn rate for 2017 was approximately $42,500, and our monthly burn rate through the three months ended March 31, 2018 was approximately $20,800. Although we have moderate short term cash needs, as our operating expenses increase as we ramp up production and sales of our new products we will face strong medium to long term cash needs. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

 

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

 

		March 31,				December 31,
		2018				2017				Change
Cash		$	79,221			$	83,704			$	(4,483	)
Total Current Assets			191,958				203,603				(11,645	)
Total Assets			198,874				209,081				(10,207	)
Total Current Liabilities			2,126,006				2,819,807				(693,801	)
Total Liabilities		$	2,126,006			$	2,819,807			$	(693,801	)

 

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

 

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

 

Cash Requirements

 

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

 

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Sources and Uses of Cash

 

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.

 

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 4 Controls and Procedures

 

(a) Disclosure Controls and Procedures

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2018, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2018, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in our Annual Report on Internal Control Over Financial Reporting filed in our Annual Report on Form 10-K.

 

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Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all errors and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

(b) Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the period covered by this report, the three month period ended March 31, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

ITEM 1 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.

 

ITEM 1A Risk Factors

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

 

Except as previously reported on a Current Report on Form 8-K, we had no unregistered sales of equity securities during the three month period ended March 31, 2018.

 

ITEM 3 Defaults Upon Senior Securities

 

There have been no events which are required to be reported under this Item.

 

ITEM 4 Mine Safety Disclosures

 

Not applicable.

 

ITEM 5 Other Information

 

None.

 

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ITEM 6 Exhibits

 

(a) Exhibits

 

Exhibit No.		Description of Exhibits
10.1*		Securities Purchase Agreement by and between the Company and each of RedDiamond Partners LLC and SEG-RedaShex, LLC, dated March 1, 2018
10.2*		Form of 8% Convertible Promissory Note, dated March 1, 2018
10.3*		Registration Rights Agreement by and between the Company and each of RedDiamond Partners LLC and SEG-RedaShex, LLC, dated March 1, 2018
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1		Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.DEF		XBRL Definition Linkbase Document
101.LAB		XBRL Labels Linkbase Document
101.PRE		XBRL Presentation Linkbase Document

_____________

* Incorporated by reference from our Annual Report on Form 10-K filed with the Commission on April 12, 2018.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	Premier Biomedical, Inc.
Dated: May 23, 2018	By:	/s/ William A. Hartman
	Name:	William A. Hartman
	Its:	Chief Executive Officer

 

 

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