PREMIER BIOMEDICAL INC - Quarter Report: 2019 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, 2019

 

 

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 X No __

 

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

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

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☑
(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 August 12, 2019, there were 20,671,776 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	21
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	27
ITEM 4	Controls and Procedures	27
PART II – OTHER INFORMATION		28
ITEM 1	Legal Proceedings	28
ITEM 1A	Risk Factors	28
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	28
ITEM 3	Defaults Upon Senior Securities	28
ITEM 4	Mine Safety Disclosures	28
ITEM 5	Other Information	29
ITEM 6	Exhibits	29

 

 

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
	June 30,	December 31,
	2019	2018
ASSETS	(Unaudited)
Current assets:
Cash	$87,043	$86,827
Accounts receivable	2,012	3,092
Inventory	22,168	25,985
Other current assets	35,429	43,883
Total current assets	146,652	159,787
Property and equipment, net	8,692	5,203
Total assets	$155,344	$164,990
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$224,659	$264,398
Accounts payable, related parties	32,107	25,944
Accrued interest	39,451	22,099
Convertible notes payable, net of discounts of $173,134 and $-0- at June 30, 2019
and December 31, 2018, respectively, including $227,289 currently in default	249,655	309,637
Derivative liabilities	1,752,621	1,690,304
Total current liabilities	2,298,493	2,312,382
Total liabilities	2,298,493	2,312,382
Commitments and contingencies	-	-
Stockholders' equity (deficit):
Series A convertible preferred stock, $0.001 par value, 10,000,000 shares authorized, 2,000,000 shares
designated, issued and outstanding at June 30, 2019 and December 31, 2018, respectively	2,000	2,000
Series B convertible preferred stock, $0.001 par value, 1,000,000 shares designated, 150,000
shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	150	150
Common stock, $0.00001 par value, 1,000,000,000 shares authorized, 13,532,430 and 5,652,410
shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	135	57
Additional paid in capital	14,740,801	14,572,754
Subscriptions payable, consisting of 276,960 shares at December 31, 2018	-	5,345
Accumulated deficit	(16,886,235)	(16,727,698)
Total stockholders' equity (deficit)	(2,143,149)	(2,147,392)
Total liabilities and stockholders' equity (deficit)	$155,344	$164,990
See accompanying notes to financial statements.

 

 

PREMIER BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	For the Three Months		For the Six Months
	Ended June 30,		Ended June 30,
	2019	2018	2019	2018
Revenue	$3,774	$12,089	$9,510	$22,484
Cost of goods sold	1,752	10,146	3,817	16,204
Gross profit	2,022	1,943	5,693	6,280
Operating expenses:
General and administrative	48,860	42,817	101,832	77,309
Professional fees	26,106	38,724	58,995	78,340
Total operating expenses	74,966	81,541	160,827	155,649
Net operating loss	(72,944)	(79,598)	(155,134)	(149,369)
Other income (expense):
Interest expense	(38,246)	(73,554)	(45,791)	(137,699)
Change in derivative liabilities	(115,858)	53,146	42,388	753,386
Total other income (expense)	(154,104)	(20,408)	(3,403)	615,687
Net income (loss)	$(227,048)	$(100,006)	$(158,537)	$466,318
Weighted average number of common shares outstanding - basic	10,190,407	2,989,307	8,748,512	2,932,577
Weighted average number of common shares outstanding - fully diluted	10,190,407	2,989,307	8,748,512	2,944,497
Net income (loss) per share - basic	$(0.02)	$(0.03)	$(0.02)	$0.16
Net income (loss) per share - fully diluted	$(0.02)	$(0.03)	$(0.02)	$0.16
See accompanying notes to financial statements.

 

 

PREMIER BIOMEDICAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
	Series A Convertible		Series B Convertible				Additional			Total
	Preferred Stock		Preferred Stock		Common Stock		Paid-In	Subscriptions	Accumulated	Stockholders'
	Shares	Amount	Shares	Amount	Shares	Amount	Capital	Payable	Deficit	Equity (Deficit)
Balance, December 31, 2017	2,000,000	$2,000	-	$-	2,551,363	$26	$13,442,255	$273,805	$(16,328,812)	$(2,610,726)
Common stock issued on subsctiptions payable	-	-	-	-	254,703	3	273,802	(273,805)	-	-
Series B convertible preferred stock sold for cash	-	-	150,000	150	-	-	149,850	-	-	150,000
Common stock issued on debt conversions	-	-	-	-	2,834,264	28	210,246	5,345	-	215,619
Exercise of warrants at $0.00001 per share, related parties	-	-	-	-	12,000	-	30	-	-	30
Odd lot shares issued on reverse stock split	-	-	-	-	80	-	-	-	-	-
Warrants issued for services, related parties	-	-	-	-	-	-	272,585	-	-	272,585
Warrants issued for services	-	-	-	-	-	-	24,359	-	-	24,359
Adjustments to derivative liability due to debt conversions	-	-	-	-	-	-	199,627	-	-	199,627
Net loss for the year ended December 31, 2018	-	-	-	-	-	-	-	-	(398,886)	(398,886)
Balance, December 31, 2018	2,000,000	$2,000	150,000	$150	5,652,410	$57	$14,572,754	$5,345	$(16,727,698)	$(2,147,392)
Common stock issued on subscriptions payable	-	-	-	-	276,960	3	5,342	(5,345)	-	-
Common stock issued on debt conversions	-	-	-	-	7,603,060	75	93,423	-	-	93,498
Adjustments to derivative liability due to debt conversions	-	-	-	-	-	-	69,282	-	-	69,282
Net loss for the six months ended June 30, 2019	-	-	-	-	-	-	-	-	(158,537)	(158,537)
Balance, June 30, 2019 (Unaudited)	2,000,000	$2,000	150,000	$150	13,532,430	$135	$14,740,801	$-	$(16,886,235)	$(2,143,149)
See accompanying notes to financial statements.

 

 

PREMIER BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	For the Six Months
	Ended June 30,
	2019	2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$(158,537)	$466,318
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation	1,361	1,194
Change in fair market value of derivative liabilities	(42,388)	(753,386)
Amortization of debt discounts	16,353	129,644
Decrease (increase) in assets:
Accounts receivable	1,080	312
Inventory	3,817	(38,653)
Other current assets	8,454	(950)
Increase (decrease) in liabilities:
Accounts payable	(39,739)	746
Accounts payable, related parties	6,163	(4,636)
Accrued interest	28,502	8,055
Net cash used in operating activities	(174,934)	(191,356)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(4,850)	(2,029)
Net cash used in investing activities	(4,850)	(2,029)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible notes payable	180,000	120,000
Net cash provided by financing activities	180,000	120,000
NET CHANGE IN CASH	216	(73,385)
CASH AT BEGINNING OF PERIOD	86,827	83,704
CASH AT END OF PERIOD	$87,043	$10,319
SUPPLEMENTAL INFORMATION:
Interest paid	$936	$-
Income taxes paid	$-	$-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Value of debt discounts	$171,167	$120,000
Value of derivative adjustment due to debt conversions	$69,282	$52,270
Value of shares issued for conversion of debt	$93,498	$65,000
See accompanying notes to financial statements.

 

    

Note 1 – Basis of Presentation and Significant Accounting Policies

 

Basis of Presentation

The accompanying unaudited, condensed consolidated 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, 2018.

 

Use of Estimates

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

 

Cash and Cash Equivalents

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

 

Patent Rights and Applications

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

 

Fair Value of Financial Instruments

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

 

Basic and Diluted Loss Per Share

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

 

The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the six months ended June 30, 2019 and 2018 are as follows:

 

	For the Six Months Ended
	June 30,
	2019	2018
Weighted average common shares outstanding – basic	8,748,512	2,932,577
Plus: Potentially dilutive common shares:
Warrants	-	11,920
Weighted average common shares outstanding – diluted	8,748,512	2,944,497

 

For the six months ended June 30, 2019, 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 wasanti-dilutive were 3,901,760 and 245,760 as of June 30, 2019 and 2018, 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 six months ended June 30, 2019 and 2018.

 

Revenue Recognition

On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.

 

Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

 

We determine revenue recognition through the following steps:

 

●	identification of the contract, or contracts, with a customer;
●	identification of the performance obligations in the contract;
●	determination of the transaction price;
●	allocation of the transaction price to the performance obligations in the contract; and
●	recognition of revenue when, or as, we satisfy a performance obligation.

 

Sales are recorded when the earnings process is complete or substantially complete, and the revenue is measurable and collectability is reasonably assured, which is typically when products are shipped. 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 been completed. Sales commenced on July 5, 2017 with the termination of our joint venture.

 

Advertising and Promotion

All costs associated with advertising and promoting products are expensed as incurred. These expenses were $22,714 and $20,742 for the six months ended June 30, 2019 and 2018, respectively.

 

Income Taxes

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

 

Uncertain Tax Positions

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

 

 

 

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

 

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

 

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modify the disclosure requirements of Topic 820. The new guidance is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2019, 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 June 2018, the FASB issued 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 years ended December 31, 2018 and 2017.

 

 

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. ASU 2016-02 is effective for public entity financial statements for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. ASU 2016-02 was further clarified and amended within ASU 2018-01, ASU 2018-10, ASU 2018-11 and ASU 2018-20 which included provisions that would provide us with the option to adopt the provisions of the new guidance using a modified retrospective transition approach, without adjusting the comparative periods presented. We adopted the new standard on January 1, 2019 and used the effective date as our date of initial application under the modified retrospective approach. We elected the short-term lease recognition exemption for all of our leases that qualify. This means, for those leases we will not recognize right-of-use (RoU) assets or lease liabilities. The implementation of this new standard has no impact on our financial statements.

 

No other new accounting pronouncements, issued or effective during the six months ended June 30, 2019, have had or are expected to have a significant impact on the Company’s financial statements.

 

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 $16,886,235, and had negative working capital of ($2,151,841) at June 30, 2019. 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 $29,070 and $24,116 as of June 30, 2019 and December 31, 2018, 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 $1,962 and $753 as of June 30, 2019 and December 31, 2018, respectively, to the Company’s CEO for reimbursable expenses.

 

The Company owed $1,075 as of June 30, 2019 and December 31, 2018 amongst members of the Company’s Board of Directors for reimbursable expenses.

 

Note 4 – Fair Value of Financial Instruments

 

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

 

 

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

 

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

 

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

 

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

 

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of June 30, 2019 and December 31, 2018, respectively:

 

	Fair Value Measurements at June 30, 2019
	Level 1	Level 2	Level 3
Assets
Cash	$87,043	$-	$-
Total assets	87,043	-	-
Liabilities
Convertible notes payable, net of discounts	-	249,655	-
Derivative liabilities	-	-	1,752,621
Total liabilities	-	249,655	1,752,621
	$87,043	$(249,655)	$(1,752,621)

 

	Fair Value Measurements at December 31, 2018
	Level 1	Level 2	Level 3
Assets
Cash	$86,827	$-	$-
Total assets	86,827	-	-
Liabilities
Convertible notes payable, net of discounts	-	309,637	-
Derivative liabilities	-	-	1,690,304
Total liabilities	-	309,637	1,690,304
	$86,827	$(309,637)	$(1,690,304)

 

 

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 are 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 – Convertible Notes Payable

 

Convertible notes payable consists of the following at June 30, 2019 and December 31, 2018, respectively:

 

	June 30,	December 31,
	2019	2018
On June 7, 2019, the Company received net proceeds of $35,000, carrying a $38,000 face value, in exchange for a 10% interest bearing; unsecured convertible promissory note maturing on June 7, 2020 (“Third Power Up Lending Note”). The note is convertible 180 days from the date of the note at 61% of the average of the two lowest closing bid prices of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.	$38,000	$-
On April 23, 2019, the Company received net proceeds of $35,000, carrying a $38,000 face value, in exchange for a 10% interest bearing; unsecured convertible promissory note maturing on April 23, 2020 (“Second Power Up Lending Note”). The note is convertible 180 days from the date of the note at 61% of the average of the two lowest closing bid prices of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.	38,000	-
On March 27, 2019, the Company entered into a securities purchase agreement with Crown Bridge Partners, LLC to sell convertible notes with a face value of $154,500, with net proceeds of $141,000 after the deduction of an original issue discount of $13,500 on a 12% interest bearing; unsecured convertible promissory note with the first twelve months of interest of each tranche guaranteed. The maturity date for each tranche funded shall be twelve (12) months from the effective date of each payment. The note is payable in tranches with the first tranche, which was received on April 17, 2019, carrying a $51,500 face value, with net proceeds of $47,000 after a $4,500 original issue discounts (“First Crown Bridge Partners Note”). The note is convertible at 60% of the lowest traded price of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date. In addition, the holder is entitled to deduct $500 from the conversion amount in each conversion to cover the holder’s deposit fees.	51,500	-
On March 26, 2019, the Company received proceeds of $68,000 in exchange for a 10% interest bearing; unsecured convertible promissory note maturing on March 26, 2020 (“First Power Up Lending Note”). The note is convertible 180 days from the date of the note at 61% of the average of the two lowest closing bid prices of the Common Stock in the twenty (20) Trading Days prior to the Conversion Date.	68,000	-
On July 11, 2018, the Company received proceeds of $120,000 in exchange for an 8% interest bearing; unsecured convertible promissory note maturing on October 31, 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 July 27, 2018 and August 23, 2018. Currently in default.	94,080	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. Currently in default.	60,000	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. Currently in default.	30,000	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. Currently in default.	30,000	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 $19,000 of principal was converted into an aggregate of 1,128,360 shares of common stock at various dates between January 2, 2019 and May 22, 2019. Currently in default.	11,000	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. A $15,000 loss was recognized during the fourth quarter of 2018 due to the enactment of default provision. A total of $76,150, consisting of $65,000 of principal and $11,150 of interest, was converted into 5,169,160 shares of common stock over various dates between December 12, 2018 and June 7, 2019.	-	55,057
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 $10,500 loss was recognized during the fourth quarter of 2018 due to the enactment of default provision. A total of $15,000 of principal was converted into an aggregate of 31,250 shares of common stock at various dates between November 6, 2017 and November 13, 2017, and another $35,000 of principal was converted into an aggregate of 751,550 shares of common stock at various dates between October 12, 2018 and November 30, 2018, along with $52,581 of principal that was converted into an aggregate of 4,099,700 shares of common stock at various dates between January 11, 2019 and June 27, 2019. Currently in default.	2,209	10,500
Total convertible notes payable	422,789	309,637
Less unamortized derivative discounts:	173,134	-
Convertible notes payable	249,655	309,637
Less: current portion	249,655	309,637
Convertible notes payable, less current portion	$-	$-

 

 

 

In accordance with ASC 470-20 Debt with Conversion and Other Options, the Company recorded total discounts of $186,667 and $300,000; including $15,500 and $-0- of of loan origination discounts, for the variable conversion features of the convertible debts incurred during the six months ended June 30, 2019 and the year ended December 31, 2018, respectively. The discounts are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded $16,353 and $129,644 of interest expense pursuant to the amortization of note discounts during the six months ended June 30, 2019 and 2018, respectively.

 

All of the convertible debentures carry default provisions that place a “maximum share amount” on the note holders. The maximum share amount that can be owned as a result of the conversions to common stock by the note holders is 4.99% of the Company’s issued and outstanding shares.

 

In accordance with ASC 815-15, the Company determined that the variable conversion feature and shares to be issued on the Redwood Notes represented embedded derivative features, and these are shown as derivative liabilities on the balance sheet. The Company calculated the fair value of the compound embedded derivatives associated with the convertible debentures utilizing a lattice model.

 

The Company recognized interest expense for the six months ended June 30, 2019 and 2018, respectively, as follows:

 

	June 30,	June 30,
	2019	2018
Interest on convertible notes	$28,502	$8,055
Amortization of derivative discounts	16,353	129,644
Interest on credit cards	936	-
Total interest expense	$45,791	$137,699

 

 

 

Note 7 – Derivative Liabilities

 

As discussed in Note 6 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 $1,752,621 and $1,690,304 at June 30, 2019 and December 31, 2018, respectively. The change in fair value of the derivative liabilities resulted in a gain of $42,388 and $753,386 for the six months ended June 30, 2019 and 2018, respectively, which has been reported within other income in the statements of operations. The gain of $42,388 for the six months ended June 30, 2019 consisted of a gain of $18,242 due to the value attributable to the warrants and a gain in market value of $24,146 on the convertible notes. The gain of $753,386 for the six months ended June 30, 2018 consisted of a gain of $766,489 due to the value attributable to the warrants and a net loss in market value of $13,103 on the convertible notes.

 

The following is a summary of changes in the fair market value of the derivative liability during the six months ended June 30, 2019 and the year ended December 31, 2018, respectively:

 

	Derivative
	Liability
	Total
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	(702,493)
Debt conversions	(199,627)
Balance, December 31, 2018	$1,690,304
Increase in derivative value due to issuances of convertible promissory notes	173,987
Change in fair market value of derivative liabilities due to the mark to market adjustment	(42,388)
Debt conversions	(69,282)
Balance, June 30, 2019	$1,752,621

 

Key inputs and assumptions used to value the convertible debentures and warrants issued during the six months ended June 30, 2019:

 

 

Note 8 – Commitments and Contingencies

 

Collaborative Patent License Agreements

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

 

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

 

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

 

On October 31, 2017 we entered into an Agreement, Final Payment under Contract, and Release of all Claims, whereby we agreed to pay them a total of $326,336 arising out of the research and development agreements with an initial payment of $22,211, and monthly payments of varying amounts between $5,000 and $20,000 thereafter for twenty eight months until the balance is paid in full. Subject to the compliance of all terms, the intellectual property rights established and arising out of the collaborative agreements remain in full force and effect and the parties agreed to a mutual release upon the final contracted payment. The full amount of the liability has been recognized as accounts payable, with $185,024 outstanding as of the end of this period, which is currently in default.

 

Note 9 – 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

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, and another 1,000,000 shares of $0.001 par value Series B Convertible Preferred Stock (“Series B Preferred Stock”) were designated on November 23, 2018. 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, and agreed to reserve no less than 225 million shares.

 

Convertible Preferred Stock, Series A

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.

 

Convertible Preferred Stock, Series B

Each share of Series B Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share into that number of fully paid and nonassessable shares of our common stock equal to the quotient of the Conversion Principal Amount divided by the lesser of (a) the Fixed Conversion Price established by our Board of Directors on the date of conversion, and (b) the Fair Market Value. The Certificate of Designation defines Fair Market Value as 60% of the lowest Traded Price for the common stock for the previous fifteen (15) trading days prior to the Conversion Date on the market or exchange where our common stock is trading. The Conversion Principal Amount is equal to the Original Issue Price ($1.00) divided by nine-tenths (0.9). The Fixed Conversion Price is the price set by our Board of Directors upon conversion but in no event less than the last Traded Price of our common stock. Traded Price is defined as the price at which our common stock changes hands on the designated exchange or market. Conversion of the Series B Preferred Stock is subject to a Beneficial Ownership Limitation that prohibits the conversion of the Series B Preferred Stock if the conversion would result in beneficial ownership by the holder and its affiliates of more than 4.99% of our outstanding shares of common stock. A holder of Series B Preferred Stock may increase its Beneficial Ownership Limitation up to 9.99% but only after 61 days have passed since the holder gave notice to the Company. The Series B Preferred Stock has no voting rights. The rights of the Series B Preferred Stock survive any reorganization, merger or sale of the Company.

 

The holders of Series B Preferred Stock shall receive noncumulative dividends on an as-converted basis in the same form as any dividends to be paid out on shares of our common stock. Any dividends paid will first be paid to the holders of Series B Preferred Stock prior and in preference to any payment or distribution to holders of common stock. Other than as set forth in the previous sentence, the Certificate of Designation provides that no other dividends shall be paid on Series B Preferred Stock. Dividends on the Series B Preferred Stock are not mandatory or cumulative. There are no sinking fund provisions applicable to the Series B Preferred Stock, and the holders of Series B Preferred Stock have no redemption rights. The Corporation may redeem the Series B Preferred Stock upon 30 days’ prior notice at a price equal to the sum of 133% of the Original Issue Price plus the amount of any unpaid dividends on the shares to be redeemed.

 

As long as any shares of Series B Preferred Stock remain outstanding, the Certificate of Designation provides that without the approval of 75% of the holders of the outstanding Series B Preferred Stock, we may not (i) alter or change the rights, preferences, or privileges of the Series B Convertible Preferred Stock, (ii) increase or decrease the number of authorized shares of Series B Convertible Preferred Stock, or (iii) authorize the issuance of securities having a preference over or on par with the Series B Preferred Stock.

 

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 June 27, 2019, the Company issued 640,000 shares of common stock pursuant to the conversion of $2,944 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

 

 

On June 21, 2019, the Company issued 612,500 shares of common stock pursuant to the conversion of $2,817 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On June 17, 2019, the Company issued 550,000 shares of common stock pursuant to the conversion of $2,530 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On June 7, 2019, the Company issued 530,000 shares of common stock pursuant to the conversion of $2,703 of interest from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On May 28, 2019, the Company issued 505,000 shares of common stock pursuant to the conversion of $4,596 of interest from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On May 22, 2019, the Company issued 497,512 shares of common stock pursuant to the conversion of $6,000 of principal from the First SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On May 16, 2019, the Company issued 480,000 shares of common stock pursuant to the conversion of $4,992, consisting of $1,141 of principal and $3,851 of interest, from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On May 7, 2019, the Company issued 460,000 shares of common stock pursuant to the conversion of $5,106 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On April 26, 2019, the Company issued 400,000 shares of common stock pursuant to the conversion of $4,520 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On March 22, 2019, the Company issued 386,000 shares of common stock pursuant to the conversion of $6,369, consisting of $2,136 of principal and $4,233 of interest, from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On March 6, 2019, the Company issued 370,000 shares of common stock pursuant to the conversion of $5,739 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 26, 2019, the Company issued 349,463 shares of common stock pursuant to the conversion of $6,500 of principal from the First SEG-RedaShex Note. The shares were subsequently issued in May of 2019. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 26, 2019, the Company issued 340,000 shares of common stock pursuant to the conversion of $5,273 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 12, 2019, the Company issued 346,200 shares of common stock pursuant to the conversion of $6,924 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On February 1, 2019, the Company issued 315,000 shares of common stock pursuant to the conversion of $7,875 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

 

 

On January 23, 2019, the Company issued 260,000 shares of common stock pursuant to the conversion of $6,513 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On January 11, 2019, the Company issued 280,000 shares of common stock pursuant to the conversion of $5,597 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On January 2, 2019, the Company issued 281,385 shares of common stock pursuant to the conversion of $6,500 of principal from the First SEG-RedaShex 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 January 1, 2019, the Company issued 276,960 shares to DiamondRock, LLC for the conversion of $5,345 of debt on December 31, 2018.

 

Note 10 – 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 six months ended June 30, 2019, and the year ended December 31, 2018, 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 June 30, 2019, and December 31, 2018, the Company had approximately $5,460,000 and $5,277,000 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:

 

	June 30,	December 31,
	2019	2018
Deferred tax assets:
Net operating loss carry forwards	$1,146,600	$1,108,170
Net deferred tax assets before valuation allowance	$1,146,600	$1,108,170
Less: Valuation allowance	(1,146,600)	(1,108,170)
Net deferred tax assets	$-	$-

 

Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at June 30, 2019, and December 31, 2018, 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:

 

	June 30,	December 31,
	2019	2018
Federal and state statutory rate	21%	21%
Change in valuation allowance on deferred tax assets	(21%)	(21%)