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

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

 

For the quarterly period ended June 30, 2018

 

 

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 ☑ 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 ☑ 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 ☑ 

 

As of August 16, 2018, there were 3,255,973 shares of common stock, $0.00001 par value, issued and outstanding.

 

 

PREMIER BIOMEDICAL, INC.

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION	1
ITEM 1    Financial Statements	1
ITEM 2    Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
ITEM 3    Quantitative and Qualitative Disclosures About Market Risk	23
ITEM 4    Controls and Procedures	23
PART II – OTHER INFORMATION	24
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	24

 

 

 

 

	June 30,	December 31,
	2018	2017
ASSETS	(Unaudited)
Current assets:
Cash	$10,319	$83,704
Accounts receivable	-	312
Inventory	123,416	84,763
Other current assets	35,774	34,824
Total current assets	169,509	203,603
Property and equipment, net	6,313	5,478
Total assets	$175,822	$209,081
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$347,560	$346,814
Accounts payable, related parties	36,746	41,382
Accrued interest	13,895	5,840
Convertible notes payable, net of discounts of $36,640 and $30,010
at June 30, 2018 and December 31, 2017, respectively, currently in default	218,360	169,990
Derivative liabilities	1,586,399	2,255,781
Total current liabilities	2,202,960	2,819,807
Total liabilities	2,202,960	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 June 30, 2018 and December 31, 2017	2,000	2,000
Common stock, $0.00001 par value, 1,000,000,000 shares
authorized, 2,989,307 and 2,551,363 shares issued and
outstanding at June 30, 2018 and December 31, 2017, respectively	30	26
Additional paid in capital	13,833,326	13,442,255
Subscriptions payable, consisting of -0- and 254,703 shares
at June 30, 2018 and December 31, 2017, respectively	-	273,805
Accumulated deficit	(15,862,494)	(16,328,812)
Total stockholders' equity (deficit)	(2,027,138)	(2,610,726)
Total liabilities and stockholders' equity (deficit)	$175,822	$209,081

 

	For the Three Months		For the Six Months
	Ended June 30,		Ended June 30,
	2018	2017	2018	2017
Revenue	$12,089	$-	$22,484	$-
Cost of goods sold	10,146	-	16,204	-
Gross profit	1,943	-	6,280	-
Operating expenses:
General and administrative	42,817	40,246	77,309	73,305
Professional fees	38,724	45,609	78,340	86,756
Total operating expenses	81,541	85,855	155,649	160,061
Net operating loss	(79,598)	(85,855)	(149,369)	(160,061)
Other income (expense):
Interest expense	(73,554)	(600)	(137,699)	(153,347)
Change in derivative liabilities	53,146	(1,161,010)	753,386	(6,261,101)
Equity in losses of investment in joint venture	-	-	-	(2,058)
Total other income (expense)	(20,408)	(1,161,610)	615,687	(6,416,506)
Net income (loss)	$(100,006)	$(1,247,465)	$466,318	$(6,576,567)
Weighted average number of common shares outstanding - basic	2,989,307	2,008,700	2,932,577	1,808,032
Weighted average number of common shares outstanding - fully diluted	2,989,307	2,008,700	2,944,497	1,808,032
Net income (loss) per share - basic	$(0.03)	$(0.62)	$0.16	$(3.64)
Net income (loss) per share - fully diluted	$(0.03)	$(0.62)	$0.16	$(3.64)

 

	For the Six Months
	Ended June 30,
	2018	2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$466,318	$(6,576,567)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation	1,194	1,191
Equity in losses of joint venture investment	-	2,058
Change in fair market value of derivative liabilities	(753,386)	6,261,101
Amortization of debt discounts	129,644	149,456
Decrease (increase) in assets:
Accounts receivable	312	-
Inventory	(38,653)	-
Other current assets	(950)	(130,091)
Increase (decrease) in liabilities:
Accounts payable	746	(57,653)
Accounts payable, related parties	(4,636)	947
Accrued interest	8,055	2,691
Accrued interest, related parties	-	1,200
Net cash used in operating activities	(191,356)	(345,667)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(2,029)	(2,694)
Investment in joint venture	-	(2,058)
Net cash used in investing activities	(2,029)	(4,752)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock, net of offering costs	-	435,000
Proceeds from sale of stock on equity line of credit	-	18,323
Proceeds from convertible notes payable	120,000	-
Net cash provided by financing activities	120,000	453,323
NET CHANGE IN CASH	(73,385)	102,904
CASH AT BEGINNING OF PERIOD	83,704	22,437
CASH AT END OF PERIOD	$10,319	$125,341
SUPPLEMENTAL INFORMATION:
Interest paid	$-	$-
Income taxes paid	$-	$-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Value of debt discounts	$120,000	$-
Value of derivative adjustment due to debt conversions	$52,270	$229,043
Value of shares issued for conversion of debt	$65,000	$323,197

 

	For the Six Months Ended
	June 30,
	2018	2017
Weighted average common shares outstanding – basic	2,932,577	1,808,032
Plus: Potentially dilutive common shares:
Warrants	11,920	-
Weighted average common shares outstanding – diluted	2,944,497	1,808,032

	Fair Value Measurements at June 30, 2018
	Level 1	Level 2	Level 3
Assets
Cash	$10,319	$-	$-
Total assets	10,319	-	-
Liabilities
Convertible notes payable, net of discounts		218,360
Derivative liabilities	-	-	1,586,399
Total liabilities	-	218,360	1,586,399
	$10,319	$(218,360)	$(1,586,399)

	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)

 

	June 30,	December 31,
	2018	2017
On April 24, 2018, the Company received proceeds of $30,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on July31, 2018 (“Second Red Diamond Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date.$	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.	30,000	-
On October 30, 2017, the Company received proceeds of $50,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on January 31, 2018 (“Second Diamond Rock Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the fifteen (15) Trading Days prior to the Conversion Date. 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 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. 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 $25,000 of principal was converted into 19,230,769 shares of common stock on January 3, 2018.	-	25,000
Total convertible notes payable, currently in default	255,000	200,000
Less unamortized derivative discounts:	36,640	30,010
Convertible notes payable	218,360	169,990
Less: current portion	218,360	169,990
Convertible notes payable, less current portion$	-	$-

	June 30,	June 30,
	2018	2017
Interest on convertible notes	$8,055	$2,691
Interest on related party loans	-	1,200
Derivative discounts	129,644	149,456
Total interest expense	$137,699	$153,347

	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	136,274
Change in fair market value of derivative liabilities due to the mark to market adjustment	(753,386)
Debt conversions	(52,270)
Balance, June 30, 2018	$1,586,399

	June 30,	December 31,
	2018	2017
Deferred tax assets:
Net operating loss carry forwards	$1,050,000	$1,701,000
Net deferred tax assets before valuation allowance	$1,050,000	$1,701,000
Less: Valuation allowance	(1,050,000)	(1,701,000)
Net deferred tax assets	$-	$-

	June 30,	December 31,
	2018	2017
Federal and state statutory rate	21%	35%
Change in valuation allowance on deferred tax assets	(21%)	(35%)

 

 

 

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 four technology centers: (1) PTSD, (2) Anti-Cancer Drugs, (3) Anti-Aging Treatments, and (4) Topical Pain Relief Products.

 

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.

 

In the past year we have rapidly expanded our product offerings, and we now offer eight pain relief products:

 

 

 

 

 

 

 

 

 

 

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:

 

 

 

 

 

 

 

 

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

 

Customers indicate that they were able to achieve pain relief from our products and stop the use of opioid painkillers. Public awareness of the harmful side effects of opioid painkillers has grown significantly, and many states have initiated litigation against drug makers claiming they misrepresented the risks of opioid painkillers.1 As patients seek to cut back their use of opioid painkillers and look for alternatives, we believe demand for our products will see a significant increase. We intend to petition national insurance agencies to urge them to consider covering the use of our all-natural pain relief products as a safe alternative to opioid painkillers.

 

 

 

Financing

 

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

 

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 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, 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 Six Months Ended June 30, 2018 and 2017

 

Introduction

 

We had revenues from our pain management products of $12,089 and $22,484 for the three and six months ended June 30, 2018, respectively. Our cost of goods sold were $10,146 and $16,204, respectively, for the three and six months ended June 30, 2018, respectively. We had no revenues or cost of goods sold for the three and six months ended June 30, 2017. Our operating expenses were $81,541 and $155,649, respectively, for the three and six months ended June 30, 2018, compared to $85,855 and $160,061, respectively, for the three and six months ended June 30, 2017, a decrease of $4,314 and $4,412, or 5% and 3%, respectively. Our operating expenses were relatively steady during these periods.

 

 

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

 

	Three Months	Three Months	Six Months	Six Months
	June 30,	June 30,	June 30,	June 30,
	2018	2017	2018	2017
Revenue	$12,089	$-	$22,484	$-
Cost of goods sold	10,146	-	16,204	-
Gross profit	1,943	-	6,280	-
Operating expenses:
General and administrative	42,817	40,246	77,309	73,305
Professional fees	38,724	45,609	78,340	86,756
Total operating expenses	81,541	85,855	155,649	160,061
Net operating loss	(79,598)	(85,855)	(149,369)	(160,061)
Other income (expense)	(20,408)	(1,161,610)	615,687	(6,416,506)
Net income (loss)	$(100,006)	$(1,247,465)	$466,318	$(6,576,567)

 

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 $12,089 and $22,484 for the three and six months ended June 30, 2018, respectively. While we did have sales through a joint venture in early 2017, we had not yet recognized any revenue directly prior to June 30, 2017.

 

Cost of Goods Sold

 

Cost of goods sold for the three and six months ended June 30, 2018 were $10,146 and $16,204. There were no cost of goods sold for the comparative periods in 2017. Cost of sales consists primarily of product materials and packaging supplies. The increased cost of sales in the periods ended June 30, 2018 was due to the commencement of operations that were not present in the comparative periods in 2017.

 

General and Administrative

 

General and administrative expenses were $42,817 and 77,309, respectively, for the three and six months ended June 30, 2018, compared to $40,246 and $73,305, respectively, for the three and six months ended June 30, 2017, an increase of $2,571 and $4,004, or 6% and 5%, respectively.

 

Professional Fees

 

Professional fees expense was $38,724 and $78,340, respectively, for the three and six months ended June 30, 2018, compared to $45,609 and $86,756, respectively, for the three and six months ended June 30, 2017, a decrease of $6,885 and $8,416, or 15% and 10%, respectively. Professional fees consist primarily of legal and, accounting and auditing services.

 

 

Net Operating Loss

 

Net operating loss was $79,598 and $149,369, respectively, for the three and six months ended June 30, 2018, compared to $85,855 and $160,061, respectively, for the three and months ended June 30, 2017, a decrease of $6,257 and $10,692, or 7% and 7%, respectively. Net operating loss decreased, as set forth above, primarily due to decreased professional fees.

 

Other Income/Expense

 

Other income (expense) was ($20,408) and $615,687, respectively, for the three and six months ended June 30, 2018, compared to ($1,161,610) and ($6,416,506), respectively, for the three and six months ended June 30, 2017, an increase of $1,141,202 and $7,014,487, respectively. Other expense for the three months ended June 30, 2018 consisted of interest expense of $73,554, as offset by a gain of $53,146 in market value of derivative liabilities. The other expense of $1,161,610 for the three months ended June 30, 2017 consisted of interest expense of $600 and a loss of $1,161,010 in market value of the warrants.

 

Other income for the six months ended June 30, 2018 consisted of a gain of $753,386 in market value of derivative liabilities, as offset by interest expense of $137,699. The other expense of $6,416,506 for the six months ended June 30, 2017 consisted of interest expense of $153,347, a loss of $6,261,101 in market value of the warrants and an investment loss of $2,058 in our terminated joint venture.

 

Net Income (Loss)

 

Net income (loss) for the three and six months ended June 30, 2018, was ($100,006) or ($0.03) per share, and $466,318 or $0.16 per share, respectively, compared to ($1,247,465) or ($0.62) per share, and ($6,576,567) or ($3.64) per share, respectively, for the three and six months ended June 30, 2017. Net loss decreased, as set forth above, primarily due to the difference between loss in value of our derivative liabilities of ($1,161,010) and ($6,261,101) for the three and six months ended June 30, 2017, respectively, and the gain in value of our derivative liabilities of $53,146 and $753,386 for the three and six months ended June 30, 2018, respectively.

 

Liquidity and Capital Resources

 

Introduction

 

During the three and six months ended June 30, 2018, we had negative operating cash flows. Our cash on hand as of June 30, 2018 was $10,319, 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 six months ended June 30, 2018 was approximately $26,000. 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 June 30, 2018 and December 31, 2017, respectively, are as follows:

 

	June 30,	December 31,
	2018	2017	Change
Cash	$10,319	$83,704	$(73,385)
Total Current Assets	169,509	203,603	(34,094)
Total Assets	175,822	209,081	(33,259)
Total Current Liabilities	2,202,960	2,819,807	(616,847)
Total Liabilities	$2,202,960	$2,819,807	$(616,847)

 

Our cash and total current assets decreased as we continued to sustain losses. Our total current liabilities decreased primarily due to a reduction of $669,382 in the value of our derivative liability. Our working capital deficit decreased from ($2,616,204) to ($2,033,451), and our stockholders’ deficit decreased by $583,588 to ($2,027,138) 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 June 30, 2018 was $10,319. Based on our minimal revenues and current monthly burn rate of approximately $26,000 per month, we will need to continue to fund operations by raising capital from the sale of our stock and debt financings.

 

Sources and Uses of Cash

 

Operations

 

We had net cash used in operating activities of $(191,356) for the six months ended June 30, 2018, compared to $(345,667) for the six months ended June 30, 2017. This decrease in net cash used in operating activities was driven primarily by a reduction in prepayments of expenses, as diminished by our increased inventory purchases of $38,653.

 

Investments

 

We had $2,029 net cash used in investing activities for the six months ended June 30, 2018, and $4,752 net cash used in investing activities for the six months ended June 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 six months ended June 30, 2018 was $120,000, which consisted of the proceeds from the sale of convertible notes. For the six months ended June 30, 2017, net cash provided by financing was $453,323, which consisted primarily of proceeds from the sale of stock of $435,000 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. We expect these investments, our growing revenues and sales of common stock, warrants and convertible notes will finance our operations for the next several months as we seek to expand revenues from our new pain management products.

 

Sale of Convertible Notes

 

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

 

 

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

 

 

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of June 30, 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 June 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.

 

No change in our system of internal control over financial reporting occurred during the period covered by this report, the three month period ended June 30, 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 previously reported on a Current Report on Form 8-K, we had no unregistered sales of equity securities during the three month period ended June 30, 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.

 

ITEM 6    Exhibits

 

 

Exhibit No.		Description of Exhibits
3.1		Certificate of Amendment to the Articles of Incorporation of Premier Biomedical, Inc., dated June 21, 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

 

 

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: August 20, 2018	By:	/s/  William A. Hartman
		William A. Hartman
		Chief Executive Officer