PREMIER BIOMEDICAL INC - Quarter Report: 2018 September (Form 10-Q)

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 September 30, 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 (State or other jurisdiction of incorporation or organization)	27-2635666 (I.R.S. Employer Identification No.)
P.O. Box 25 Jackson Center, PA (Address of principal executive offices)	16133 (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 XNo

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	☑
(Do not check if a smaller reporting company)		Emerging growth company	☑

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 November 26, 2018, there were 4,812,667 shares of common stock, $0.00001 par value, issued and outstanding.

PREMIER BIOMEDICAL, INC.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION	3

ITEM 1 Financial Statements	3

ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

ITEM 3 Quantitative and Qualitative Disclosures About Market Risk	24

ITEM 4 Controls and Procedures	24

PART II – OTHER INFORMATION	26

ITEM 1 Legal Proceedings	26

ITEM 1A Risk Factors	26

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds	26

ITEM 3 Defaults Upon Senior Securities	27

ITEM 4 Mine Safety Disclosures	27

ITEM 5 Other Information	27

ITEM 6 Exhibits	28

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.

ITEM 1 Financial Statements

PREMIER BIOMEDICAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,	December 31,
	2018	2017
ASSETS	(Unaudited)

Current assets:
Cash	$63,204	$83,704
Accounts receivable	1,966	312
Inventory	119,155	84,763
Other current assets	38,066	34,824
Total current assets	222,391	203,603

Property and equipment, net	5,758	5,478

Total assets	$228,149	$209,081


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable	$307,027	$346,814
Accounts payable, related parties	30,939	41,382
Accrued interest	21,721	5,840
Convertible notes payable, net of discounts of $60,211 and $30,010 at
September 30, 2018 and December 31, 2017, respectively, currently in default	304,269	169,990
Derivative liabilities	1,807,945	2,255,781
Total current liabilities	2,471,901	2,819,807

Total liabilities	2,471,901	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 September 30, 2018 and December 31, 2017	2,000	2,000
Common stock, $0.00001 par value, 1,000,000,000 shares
authorized, 3,773,849 and 2,551,363 shares issued and
outstanding at September 30, 2018 and December 31, 2017, respectively	38	26
Additional paid in capital	13,967,739	13,442,255
Subscriptions payable, consisting of 172,176 and 254,703 shares
at September 30, 2018 and December 31, 2017, respectively	12,500	273,805
Accumulated deficit	(16,226,029)	(16,328,812)
Total stockholders' equity (deficit)	(2,243,752)	(2,610,726)

Total liabilities and stockholders' equity (deficit)	$228,149	$209,081

See accompanying notes to financial statements.

PREMIER BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	For the Three Months		For the Nine Months
	Ended September 30,		Ended September 30,
	2018	2017	2018	2017

Revenue	$8,225	$24,276	$30,709	$24,276
Cost of goods sold	4,373	11,070	20,577	11,070
Gross profit	3,852	13,206	10,132	13,206

Operating expenses:
Research and development	-	184,315	-	184,315
General and administrative	62,572	36,979	139,881	110,284
Professional fees	22,613	22,269	100,953	109,025
Total operating expenses	85,185	243,563	240,834	403,624

Net operating loss	(81,333)	(230,357)	(230,702)	(390,418)

Other income (expense):
Interest expense	(184,624)	(37,124)	(322,323)	(190,471)
Change in derivative liabilities	(97,578)	3,993,216	655,808	(2,267,885)
Equity in losses of investment in joint venture	-	(4,174)	-	(6,232)
Total other income (expense)	(282,202)	3,951,918	333,485	(2,464,588)

Net income (loss)	$(363,535)	$3,721,561	$102,783	$(2,855,006)


Weighted average number of common shares outstanding - basic	3,306,069	2,018,791	3,058,442	1,879,057
Weighted average number of common shares outstanding - fully diluted	3,306,069	2,030,778	3,070,392	1,879,057

Net income (loss) per share - basic	$(0.11)	$1.83	$0.03	$(1.52)
Net income (loss) per share - fully diluted	$(0.11)	$1.83	$0.03	$(1.52)

See accompanying notes to financial statements.

PREMIER BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	For the Nine Months
	Ended September 30,
	2018	2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$102,783	$(2,855,006)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation	1,749	1,854
Change in fair market value of derivative liabilities	(655,808)	2,267,885
Amortization of debt discounts	306,442	184,237
Decrease (increase) in assets:
Accounts receivable	(1,654)	(834)
Inventory	(34,392)	(108,006)
Other current assets	(3,242)	3,995
Increase (decrease) in liabilities:
Accounts payable	(39,787)	129,337
Accounts payable, related parties	(10,443)	(245)
Accrued interest	15,881	4,434
Accrued interest, related parties	-	1,800
Net cash used in operating activities	(318,471)	(370,549)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(2,029)	(2,694)
Net cash used in investing activities	(2,029)	(2,694)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock, net of offering costs	-	285,000
Proceeds from sale of stock on equity line of credit	-	18,323
Proceeds from convertible notes payable	300,000	150,000
Net cash provided by financing activities	300,000	453,323

NET CHANGE IN CASH	(20,500)	80,080
CASH AT BEGINNING OF PERIOD	83,704	22,437

CASH AT END OF PERIOD	$63,204	$102,517

SUPPLEMENTAL INFORMATION:
Interest paid	$-	$-
Income taxes paid	$-	$-

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Value of debt discounts	$300,000	$115,631
Value of derivative adjustment due to debt conversions	$128,671	$229,043
Value of shares issued for conversion of debt	$135,520	$323,197

See accompanying notes to financial statements.

{01436244-2 }

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.

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the three and nine months ended September 30, 2018 and 2017 are as follows:

	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2018	2017	2018	2017
Weighted average common shares outstanding – basic	3,306,069	2,018,791	3,058,442	1,879,057
Plus: Potentially dilutive common shares:
Warrants	-	11,987	11,950	-
Weighted average common shares outstanding – diluted	3,306,069	2,030,778	3,070,392	1,879,057

For the three months ended September 30, 2018 and the nine months ended September 30, 2017, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. Warrants excluded from the calculation of diluted EPS because their effect was anti-dilutive were 245,760 and 82,760 the three months ended September 30, 2018 and the nine months ended September 30, 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 nine months ended September 30, 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 $50,127 and $42,793 for the nine months ended September 30, 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.

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Recent Accounting Pronouncements

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

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

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

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the nine months ended September 30, 2018 and 2017, or the twelve months ended December 31, 2017.

In May 2017, the FASB issued 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 nine months ended September 30, 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 minimal revenues, incurred net losses from operations resulting in an accumulated deficit of $16,226,029, and had negative working capital of ($2,249,510) at September 30, 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 $29,116 and $40,195 as of September 30, 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 $748 as of September 30, 2018 and December 31, 2017, to the Company’s CEO for reimbursable expenses.

The Company owed $1,075 and $478 as of September 30, 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.

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.

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

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

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

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

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of September 30, 2018 and December 31, 2017, respectively:

	Fair Value Measurements at September 30, 2018
	Level 1	Level 2	Level 3
Assets
Cash	$63,204	$-	$-
Total assets	63,204	-	-
Liabilities
Convertible notes payable, net of discounts		304,269
Derivative liabilities	-	-	1,807,945
Total liabilities	-	304,269	1,807,945
	$63,204	$(304,269)	$(1,807,945

	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 nine months ended September 30, 2018 or the year ended December 31, 2017.

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 7 – Convertible Notes Payable, Currently in Default

Convertible notes payable consists of the following at September 30, 2018 and December 31, 2017, respectively:

	September 30,	December 31,
	2018	2017

On July 11, 2018, the Company received proceeds of $120,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on October31, 2018 (“Third Red Diamond Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $25,920 of principal was converted into 348,667 shares of common stock over various dates between July27,2018 and August23,2018.$	94,080	$-

On July 11, 2018, the Company received proceeds of $60,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on October 31, 2018 (“Third SEG-RedaShex Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.	60,000	-

On April 24, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on July 31, 2018 (“Second Red Diamond Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.	30,000	-

On April 24, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on July 31, 2018 (“Second SEG-RedaShex Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.	30,000	-

On March 1, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on May 31, 2018 (“First Red Diamond Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.	30,000	-

On March 1, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on May 31, 2018 (“First SEG-RedaShex Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $22,500 of principal was converted into 275,875 shares of common stock over various dates between September 5, 2018 and September 18, 2018.	7,500	-

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second Diamond Rock Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.	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 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $10,000 of principal was converted into 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.	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. A total of $22,100 of principal was converted into 332,176 shares of common stock over various dates between August 20, 2018 and September 24, 2018.	27,900	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	364,480	200,000
Less unamortized derivative discounts:	60,211	30,010
Convertible notes payable	304,269	169,990
Less: current portion	304,269	169,990
Convertible notes payable, less current portion	-	-

The Company recognized interest expense for the nine months ended September 30, 2018 and 2017, respectively, as follows:

	September 30,	September 30,
	2018	2017

Interest on convertible notes	$15,881	$4,434
Interest on related party loans	-	1,800
Derivative discounts	306,442	184,237
Total interest expense	$322,323	$190,471

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 $1,807,945 and $2,255,781 at September 30, 2018 and December 31, 2017, respectively. The change in fair value of the derivative liabilities resulted in a gain of $655,808 and a loss of $2,267,885 for the nine months ended September 30, 2018 and 2017, respectively, which has been reported within other expense in the statements of operations. The gain of $655,808 for the nine months ended September 30, 2018 consisted of a gain of $743,751 due to the value attributable to the warrants and a net loss in market value of $87,943 on the convertible notes. The loss of $2,267,885 for the nine months ended September 30, 2017 consisted of a loss of $3,337,007 due to the value attributable to the warrants, a gain of $1,052,505 in market value of the warrants and a net gain in market value of $16,617 on the convertible notes.

The following is a summary of changes in the fair market value of the derivative liability during the nine months ended September 30, 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	336,643
Change in fair market value of derivative liabilities due to the mark to market adjustment	(655,808)
Debt conversions	(128,671)
Balance, September 30, 2018	$1,807,945

Key inputs and assumptions used to value the convertible debentures and warrants issued during the nine months ended September 30, 2018:

●

Stock price ranging from $0.177 to $0.52 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 151.7% - 258.1%.

●

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 $967,424 to $868,383 and would increase at 1% per month.

●

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

●

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

●

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

●

The stock price would fluctuate with an annual volatility. The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company and the term remaining in the range 176.6% - 176.6%.

●

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 October 31, 2017 we entered into an Agreement, Final Payment under Contract, and Release of all Claims, whereby we agreed to pay them a total of $326,336 arising out of the research and development agreements with an initial payment of $22,211, and monthly payments of varying amounts between $5,000 and $20,000 thereafter for twenty eight months until the balance is paid in full. Subject to the compliance of all terms, the intellectual property rights established and arising out of the collaborative agreements remain in full force and effect and the parties agreed to a mutual release upon the final contracted payment. The full amount of the liability has been recognized as accounts payable, with $262,524 outstanding as of the date of this filing.

Note 10 – Changes in Stockholders’ Equity (Deficit)

Reverse Stock Split

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

Convertible Preferred Stock, 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 Condensed Consolidated Financial Statements

(Unaudited)

Common Stock

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

Common Stock Issuances for Debt Conversions

On September 24, 2018, the Company granted 172,176 shares of common stock pursuant to the conversion of $12,500 of principal from the First SEG Note. The shares were subsequently issued on October 2, 2018. As such, the $12,500 was presented as a subscription payable at September 30, 2018. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

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

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

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

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

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

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

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

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

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

Common Stock Issuances on Subscriptions Payable

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

Note 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 nine months ended September 30, 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 September 30, 2018, and December 31, 2017, the Company had approximately $5,105,000 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:

	September 30,	December 31,
	2018	2017
Deferred tax assets:
Net operating loss carry forwards	$1,072,000	$1,701,000

Net deferred tax assets before valuation allowance	$1,072,000	$1,701,000
Less: Valuation allowance	(1,072,000)	$(1,701,000)
Net deferred tax assets	$-	$-

Premier Biomedical, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at September 30, 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:

	September 30,	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

Common Stock Issuances for Debt Conversions

On November 12, 2018, the Company issued 150,000 shares of common stock pursuant to the conversion of $13,500 of principal from the First SEG Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

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

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

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

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

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

ITEM 2

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

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

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

Pain Management Products

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

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

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

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

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

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

150 mg/ 2 oz. ointment;

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

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

500 mg/ 1 oz. ointment.

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

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

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

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

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

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

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

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

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

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

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

Customers indicate that they were able to achieve pain relief from our products and stop the use of opioid painkillers. Public awareness of the harmful side effects of opioid painkillers has grown significantly, and many states have initiated litigation against drug makers claiming they misrepresented the risks of opioid painkillers.1

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

As patients seek to cut back their use of opioid painkillers and look for alternatives, we believe demand for our products will see a significant increase. We intend to petition national insurance agencies to urge them to consider covering the use of our all-natural pain relief products as a safe alternative to opioid painkillers.

Financing

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

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. On July 11, 2018, these investors provided us with an additional $180,000 for convertible notes in the third and final tranche of their commitment to us.

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 the remainder of 2018 and into 2019, we will continue to market our pain management products and seek a wider distribution network through the negotiation of distribution agreements with large pharmacy chains, military branches, government agencies, senior care facilities and international partners.

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

Going Concern

As a result of our current financial condition, we have received a report from our independent registered public accounting firm for our financial statements for the years ended December 31, 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 $180,000. 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 and Nine Months Ended September 30, 2018 and 2017

Introduction

We had revenues from our pain management products of $8,225 and $24,276 for the three months ended September 30, 2018 and 2017, respectively. Our cost of goods sold were $4,373 and $11,070 for the three months ended September 30, 2018 and 2017, respectively. We had revenues of $30,709 and $24,276 for the nine months ended September 30, 2018 and 2017. Our cost of goods sold were $20,577 and $11,070 for the nine months ended September 30, 2018 and 2017, respectively. Our operating expenses were $85,185 and $240,834, respectively, for the three and nine months ended September 30, 2018, compared to $243,563 and $403,624, respectively, for the three and nine months ended September 30, 2017, a decrease of $158,378 and $162,790, or 66% and 27%, respectively.

Our results of operations for the three and nine months ended September 30, 2018 and 2017 were as follows:

	Three Months	Three Months	Nine Months	Nine Months
	September 30,	September 30,	September 30,	September 30,
	2018	2017	2018	2017

Revenue	$8,225	$24,276	$30,709	$24,276
Cost of goods sold	4,373	11,070	20,577	11,070
Gross profit	3,852	13,206	10,132	13,206

Operating expenses:
Research and Development	-	184,315	-	184,315
General and administrative	62,572	36,979	139,881	110,284
Professional fees	22,613	22,269	100,953	109,025
Total operating expenses	85,185	243,563	240,834	403,624

Net operating loss	(81,333)	(230,357)	(230,702)	(390,418)
Other income (expense)	(282,202)	3,951,918	333,485	(2,464,588)

Net income (loss)	$(363,535)	$3,721,561	$102,783	$(2,855,006)

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 products and the packaging. We had revenues of $8,225 and $30,709 for the three and nine months ended September 30, 2018, respectively. We had revenues of $24,276 for the both the three and nine months ended September 30, 2017. The decrease in revenues in the three months ended September 30, 2018 compared to the prior year was due to disruptions involving our transition to a new merchant account processor.

Cost of Goods Sold

Cost of goods sold for the three and nine months ended September 30, 2018 were $4,373 and $20,577, respectively. Cost of goods sold for the three and nine months ended September 30, 2017 were $11,070. Cost of sales consists primarily of product materials and packaging supplies. The decrease in cost of goods sold in the three months ended September 30, 2018 compared to the prior year was due to a decrease in revenues as explained in the preceding paragraph.

General and Administrative

General and administrative expenses were $62,572 and 139,881, respectively, for the three and nine months ended September 30, 2018, compared to $36,979 and $110,284, respectively, for the three and nine months ended September 30, 2017, an increase of $25,593 and $29,597, or 69% and 27%, respectively. The increase in general and administrative expenses was due primarily to increased advertising and investor relations expenses.

Professional Fees

Professional fees expense was $22,613 and $100,953, respectively, for the three and nine months ended September 30, 2018, compared to $22,269 and $109,025, respectively, for the three and nine months ended September 30, 2017, an increase of $344 and a decrease $8,072, or an increase of 2% and a decrease of 7%, respectively. Professional fees consist primarily of legal and, accounting and auditing services.

Net Operating Loss

Net operating loss was $81,333 and $230,702, respectively, for the three and nine months ended September 30, 2018, compared to $230,357 and $390,418, respectively, for the three and months ended September 30, 2017, a decrease of $149,024 and $159,716, or 65% and 41%, respectively. Net operating loss decreased, as set forth above, primarily due to the discontinuation of our research and development efforts in the current year.

Other Income/Expense

Other income (expense) was ($282,202) and $333,485, respectively, for the three and nine months ended September 30, 2018, compared to $3,951,918 and ($2,464,588), respectively, for the three and nine months ended September 30, 2017, a decrease of $4,234,120 and an increase of $2,798,073, respectively. Other expense for the three months ended September 30, 2018 consisted of interest expense of $184,624, and a loss of $97,578 in the market value of derivative liabilities. The other income of $3,951,918 for the three months ended September 30, 2017 consisted of a gain in the market value of derivative liabilities of $3,993,216 offset by interest expense of $37,124 and a loss of $4,174 in our terminated joint venture.

Other income for the nine months ended September 30, 2018 consisted of a gain of $655,808 in market value of derivative liabilities, as offset by interest expense of $322,323. The other expense of $2,464,588 for the nine months ended September 30, 2017 consisted of interest expense of $190,471, a loss of $2,267,885 in market value of derivative liabilities and an investment loss of $6,232 in our terminated joint venture.

Net Income (Loss)

Net income (loss) for the three and nine months ended September 30, 2018, was ($363,535) or ($0.11) per share, and $102,783 or $0.03 per share, respectively, compared to $3,721,561 or $1.83 per share, and ($2,855,006) or ($1.52) per share, respectively, for the three and nine months ended September 30, 2017. Net income (loss) decreased, as set forth above, primarily due to the ($4,090,794) difference between a loss in value of our derivative liabilities of ($97,578) and a gain in value of our derivative liabilities of $3,993,216 for the three months ended September 30, 2018 and 2017, respectively. Net income (loss) increased, as set forth above, primarily due to the $2,957,789 difference between the gain in value of our derivative liabilities of $655,808 and the loss in value of our derivative liabilities of ($2,267,885) for the nine months ended September 30, 2018 and 2017, respectively.

Liquidity and Capital Resources

During the three and nine months ended September 30, 2018, we had negative operating cash flows. Our cash on hand as of September 30, 2018 was $63,204, 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 nine months ended September 30, 2018 was approximately $35,500. We have strong short-term cash needs as we ramp up production and sales of our new products. We will face strong medium to long term cash needs as we continue to grow the business. We anticipate that these needs will be satisfied through the issuance of debt or the sale of our securities until such time as our cash flows from operations will satisfy our cash flow needs.

Our cash, current assets, total assets, current liabilities, and total liabilities as of September 30, 2018 and December 31, 2017, respectively, are as follows:

	September 30,	December 31,
	2018	2017	Change

Cash	$63,204	$83,704	$(20,500)
Total Current Assets	222,391	203,603	18,788
Total Assets	228,149	209,081	19,068
Total Current Liabilities	2,471,901	2,819,807	(347,906)
Total Liabilities	$2,471,901	$2,819,807	$(374,906)

Our cash and total current assets decreased as we continued to sustain losses. Our total current liabilities decreased primarily due to a reduction of $447,836 in the value of our derivative liability. Our working capital deficit decreased from ($2,616,204) to ($2,249,510), and our stockholders’ deficit decreased by $366,974 to ($2,243,752) 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 September 30, 2018 was $63,204. Based on our minimal revenues and current monthly burn rate of approximately $35,500 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

Operations

We had net cash used in operating activities of $(318,471) for the nine months ended September 30, 2018, compared to $(370,549) for the nine months ended September 30, 2017. This decrease in net cash used in operating activities was driven primarily by the cash that was no longer used toward our research and development activities in the current year.

Investments

We had $2,029 net cash used in investing activities for the nine months ended September 30, 2018, and $2,694 net cash used in investing activities for the nine months ended September 30, 2017. We outsource the manufacturing of our products, so our investment expenses are minimal.

Financing

Our net cash provided by financing activities for the nine months ended September 30, 2018 was $300,000, which consisted of the proceeds from the sale of convertible notes. For the nine months ended September 30, 2017, net cash provided by financing was $453,323, which consisted primarily of proceeds from the sale of stock of $285,000, proceeds from the sale of convertible notes of $150,000 and proceeds of $18,323 from sales of stock pursuant to our equity line of credit with Redwood Management, LLC.

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.

Sale of Convertible Notes

Pursuant to a separate Securities Purchase Agreement, we sold convertible notes to two investors for $60,000 on each of March 1, 2018 and April 24, 2018 and $180,000 on July 11, 2018, for an aggregate of $300,000. We sold two more convertible notes on July 11, 2018 for an aggregate of $180,000. 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.

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 September 30, 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 September 30, 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.

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

(b)

Changes in Internal Control over Financial Reporting

No change in our system of internal control over financial reporting occurred during the period covered by this report, the three month period ended September 30, 2018, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 set forth below or previously reported on a Current Report on Form 8-K, we had no unregistered sales of equity securities during the three month period ended September 30, 2018.

Convertible Debt

On July 11, 2018, we received proceeds of $120,000 upon the issuance of an 8% interest bearing, unsecured convertible promissory note maturing on October 31, 2018 (“Third Red Diamond Note”). The note was issued to RedDiamond Partners LLC and is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. A total of $25,920 of principal was converted into 348,667 shares of common stock over various dates between July 27, 2018 and August 23, 2018.

On July 11, 2018, we received proceeds of $60,000 upon the issuance of an 8% interest bearing; unsecured convertible promissory note maturing on October 31, 2018 (“Third SEG-RedaShex Note”). The note was issued to SEG-RedaShex, LLC and is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.

Issuances of Common Stock upon Conversions of Convertible Debt

We have issued shares of common stock upon the conversion of our convertible debt as set forth below. For an explanation of defined terms and the notes mentioned below, see Note 7 – Convertible Notes Payable, Currently in Default and Note 10 – Changes in Stockholders’ Equity (Deficit) of the financial statements.

On September 24, 2018, we issued 172,176 shares of common stock The Special Equities Group, LLC pursuant to the conversion of $12,500 of principal from the First SEG Note.

On September 18, 2018, the Company issued 136,986 shares of common stock to RedDiamond Partners LLC pursuant to the conversion of $10,000 of principal from the First Red Diamond Note.

On September 5, 2018, the Company issued 138,889 shares of common stock to RedDiamond Partners LLC pursuant to the conversion of $12,500 of principal from the First Red Diamond Note.

On August 23, 2018, the Company issued 82,001 shares of common stock to RedDiamond Partners LLC pursuant to the conversion of $4,920 of principal from the Third Red Diamond Note.

On August 20, 2018, the Company issued 160,000 shares of common stock to The Special Equities Group, LLC pursuant to the conversion of $9,600 of principal from the First SEG Note.

On August 15, 2018, the Company issued 100,000 shares of common stock to RedDiamond Partners LLC pursuant to the conversion of $6,000 of principal from the Third Red Diamond Note.

On August 9, 2018, the Company issued 83,333 shares of common stock to RedDiamond Partners LLC pursuant to the conversion of $5,000 of principal from the Third Red Diamond Note.

On July 27, 2018, the Company issued 83,333 shares of common stock to RedDiamond Partners LLC pursuant to the conversion of $10,000 of principal from the Third Red Diamond Note.

On November 12, 2018, the Company issued 150,000 shares of common stock to The Special Equities Group, LLC pursuant to the conversion of $13,500 of principal from the First SEG Note.

On November 5, 2018, the Company issued 190,000 shares of common stock to RedDiamond Partners LLC pursuant to the conversion of $8,075 of principal from the First Red Diamond Note.

On October 25, 2018, the Company issued 175,000 shares of common stock to RedDiamond Partners LLC pursuant to the conversion of $8,750 of principal from the First Red Diamond Note.

On October 16, 2018, the Company issued 202,702 shares of common stock to The Special Equities Group, LLC pursuant to the conversion of $13,500 of principal from the First SEG Note.

On October 12, 2018, the Company issued 175,000 shares of common stock to RedDiamond Partners LLC pursuant to the conversion of $9,712 of principal from the First Red Diamond Note.

On October 3, 2018, the Company issued 111,940 shares of common stock to RedDiamond Partners LLC pursuant to the conversion of $7,500 of principal from the First Red Diamond Note.

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.

ITEM 6 Exhibits

(a)

Exhibits

Exhibit No.		Description of Exhibits
10.1		8% Convertible Promissory Note in the principal amount of $60,000 issued July 11, 2018 to SEG-RedaShex LLC

10.2		8% Convertible Promissory Note in the principal amount of $120,000 issued July 11, 2018 to RedDiamond Partners LLC

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

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: November 26, 2018	/s/ William A. Hartman
	By: William A. Hartman
	Its: Chief Executive Officer