Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X]
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2019
OR
[ ]
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from_____________ to
_____________.
Commission file number
000-54563
Premier Biomedical, Inc.
(Exact name of registrant as specified in its charter)
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Nevada
(State or other jurisdiction of
incorporation or organization)
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27-2635666
(I.R.S. Employer
Identification No.)
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P.O. Box 25
Jackson Center, PA
(Address of principal executive offices)
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16133
(Zip Code)
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Registrant’s telephone number,
including area code (724) 633-7033
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Name of
each exchange on which registered
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None
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None
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Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, par value $0.00001
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [__] No [ X
]
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes [__] No [ X
]
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
every Interactive Data File required to be submitted 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 such files).
Yes [ X ] No [__]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange
Act. (Check one):
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Large accelerated filer
[__]
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Accelerated
filer [__]
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Smaller
reporting company [ X ]
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Non-accelerated filer [__]
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Emerging
growth company [__]
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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 Act). Yes [__] No [ X ]
The
aggregate market value of 9,547,573 shares of common stock held by
non-affiliates as of May 13, 2019, using the closing price of the
common stock on June 28, 2019 (the last business day of the most
recently completed second fiscal quarter) was approximately
$143,214.
On May 13, 2020, there were 999,980,958
shares of common stock, par value
$0.00001, issued and outstanding.
Documents Incorporated by Reference
None.
PREMIER BIOMEDICAL, INC.
FORM 10-K ANNUAL REPORT
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019
TABLE OF CONTENTS
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PART I
Cautionary Statement Regarding Forward Looking
Statements
This
Annual 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 possible or assumed future results of operations of the
Company set forth under the heading “Management’s
Discussion and Analysis of Financial Condition or Plan of
Operation.” 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. The Company’s 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
– BUSINESS
Corporate Information
We
were incorporated on May 10, 2010 in the State of Nevada. We have
two wholly-owned subsidiaries, Premier Biomedical Pain Relief Meds,
LLC, a Nevada limited liability company organized on September 14,
2017, and Health Stations, LLC, a Nevada limited liability company
organized on August 28, 2019.
Our
corporate headquarters are located in Jackson Center, PA. Our
mailing address is P.O. Box 25, Jackson Center, PA 16133,
and our telephone number is (724) 633-7033. We have offices
virtually in the homes of our management team who
reside in Pennsylvania, Michigan and various other states. Our
websites are www.premierbiomedical.com and
www.painreliefmeds.com.
Information contained on our website is not incorporated into, and
does not constitute any part of, this Annual Report.
Overview
We 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 these areas, we developed a
line of topical hemp oil pain relief products. We began selling
these pain relief products in January of 2017 with a single product
and currently have nine topical pain relief products.
Through
our continued development and expansion of proprietary drugs and
treatments, we have reorganized the company into six technology
centers: (1) extra-corporeal treatment of disease, (2) PTSD
treatment, (3) anti-breast cancer drugs, (4) hemp oil/CBD pain
relief products, (5) anti-aging treatments, and (6) chemical and
alcohol addiction treatment.
In the
first quarter of 2017, initial sales of our pain management
products were made through a joint venture. In the third quarter of
2017, the joint venture was terminated and we began sales of our
pain management products directly from the Company.
Joint Ventures to Research COVID-19 Treatment
In
April 2020, we signed a joint venture agreement with two other
companies to pursue the funding and research and development on our
patented extracorporeal therapy for the safe removal of targeted
antigens from the blood and targeted organs. In the case of
COVID-19, this entails removal of specific compounds which allow
the virus to replicate, which may eliminate mutations of the virus.
In preparation for the joint venture, we filed a new provisional
patent entitled “Method for
Treating and Curing COVID-19 Infection.” Following the
start of the joint venture, we filed another provisional patent
entitled “Method for Treating
Covid-19 Inflammatory Cytokine Storm for the Reduction of Morbidity
and Mortality in Covid-19 Patients”. It is too early to tell whether these
technologies will have any practical
application.
On May 12, 2020, we assigned our rights
in these two patents to Technology Health, Inc. pursuant to an
Intellectual Property Agreement in hopes that they will be able to
finance and develop the technologies. The assignment is part
of an agreement with Technology Health, Inc., and two other
companies to pursue a novel coronavirus extracorporeal treatment
which combines our antigen mapping technique with
Datatecnics’ laser ablation technology in a focused
“Map and ZapTM”
treatment protocol disclosed in a provisional patent application
that is intended to eliminate COVID-19 antigens and potential
mutations. Research is expected to start in the second quarter of
2020 to develop complexing agents to bind with coronavirus antigens
which can be illuminated and eliminated using a computer-controlled
targeting and laser system. The proposed hospital/clinic process
would illuminate the compounded molecular target disease antigens
for destruction by a nano-focus laser, and the purified blood would
then be returned to the patient.
Nature’s Pain Relief
We have not yet launched our latest brand,
Nature’s
Pain Relief, which will be
marketing 12 hemp oil products, including a 96-hour anti-pain
patch, three roll-on topical products, two sprays, two ointments,
one tincture drop product, a hemp oil capsule, and a
“doggie” pet product. All of these products will be
available through a new website at www.naturespainrelief.com.
1
Pain Management Products
We have
developed and are now marketing all-natural, hemp-oil based
products that are pesticide and solvent free. These products
provide generalized, neuropathic and localized topical pain
relief.
We
offer alternatives to dangerous and addictive opioid pain killers.
In the past year we have rapidly expanded our product offerings,
and we now offer eight pain relief products that are leaders in the
pain-relief field:
1.
96-hour pain relief
patch with 50 mg of hemp oil extract, the highest level of pain
relief ingredient available in the industry;
2.
120 mg/ 10 ml
water-based roll-on applicator;
3.
150 mg/ 10 ml
oil-based roll-on applicator;
4.
150 mg/ 30 ml
oil-based pump spray applicator;
5.
150 mg/ 2 oz.
ointment;
6.
200 mg/10 ml
oil-based roll-on applicator;
7.
500 mg/ 30 ml
oil-based pump spray applicator; and
8.
500 mg/ 1 oz.
ointment.
We
believe that this eight-product array positions us favorably in the
topical pain relief marketplace. The topical pain relief market is
expected to grow rapidly in the next few years, due to the focus on
reduction of opioid pain medication use, and we intend to be a
major player in that expanding market.
Now
that we have completed the product design and development phase, we
are aggressively embarking on the product distribution and sales
phase by:
1.
Expanding our
online sales beyond our web site at: www.painreliefmeds.com;
2.
Securing the
services of a social media coordinator to ensure that we optimize
that promotional tool;
3.
Recruiting a
National Sales Director to coordinate our growing field of sales
representatives and distributors;
4.
Securing the
services of a sales organization with expertise in marketing to the
government and senior care facilities;
5.
Engaging an
investor relations firm to facilitate television appearances
designed to gain optimum exposure for our company and its
products;
6.
Appearing in radio
and television broadcasts, and podcasts, via Uptick Newswire
periodically to ensure that our story gets out to the public;
and
7.
Retaining the
services of marketing firms to promote the Company and its products
through social media.
8.
Establishing
relationships with major distributors who will blanket specialized
sales outlets such as pharmacies, doctors’ offices,
convenience stores, long-term care facilities, large retail
facilities, etc.
In
addition, we are in the process of seeking potential partnerships
outside the United States to manufacture and market our products
worldwide. We anticipate that these partnerships will make new
markets available to us and allow us to rapidly increase our sales
and profitability through favorable manufacturing
arrangements.
Customers indicate
that they were able to achieve pain relief from our products and
stop the use of opioid painkillers. Public awareness of the harmful
side effects of opioid painkillers has grown significantly, and
many states have initiated litigation against drug makers claiming
they misrepresented the risks of opioid painkillers. As patients
seek to cut back their use of opioid painkillers and look for
alternatives, we believe demand for our products will see an
increase. 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.
Sales of our pain management products began on
February 1, 2017 through our former joint venture. Upon termination
of the joint venture, we began selling our products via our
website at www.painreliefmeds.com and
through various distributors. To date,
three pharmacies and three chiropractic clinics have approved our
products for sale and are distributing our products. We anticipate
that our products will eventually be placed in several large
pharmacy chains and sold in several states.
2
Research and Development
We
intend to continue to discover and develop medical treatments for
humans, specifically targeting the pain management industry and the
treatment of:
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Cancer
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Fibromyalgia
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Multiple
Sclerosis (MS)
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Traumatic
Brain Injury (TBI)
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Neuropathic
Pain
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Alzheimer’s
Disease (AD)
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Amyotrophic
Lateral Sclerosis
(ALS/Lou
Gehrig’s Disease)
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Blood
Sepsis and Viremia
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To
target cancer, Alzheimer’s disease, ALS, blood sepsis,
leukemia, and other life-threatening cancers, we intend to develop
our proprietary Sequential-Dialysis
Technique. The methodology involved in this technique is
largely unexplored and has been described by scientists as the
“wild west” of modern medicine. Consequently, our first
entry into the therapeutics market for medications that work
against cancer, multiple sclerosis, infectious diseases,
Alzheimer’s disease, strokes and traumatic brain injury
carries significant obstacles before reaching the opportunities of
a $700 billion industry.
Feldetrex®
We also
are in the process of developing our proprietary drug candidate
Feldetrex™, a
potential treatment for multiple sclerosis, fibromyalgia,
neuropathic pain and traumatic brain injury. The formulation used
in the current Feldetrex® will
be individually tailored to the various illnesses we intend to
target, with each formulation being given a unique proprietary
brand name. The annual market size of multiple sclerosis treatment
is $500 million and the annual market size for all proposed
Feldetrex®
market segments is $16 billion.
To
overcome the significant obstacles inherent to the development of
our Sequential-Dialysis
Technique and Feldetrex®
candidate drug, we are seeking to partner with prestigious
institutions and pharmaceutical companies with the substantial
infrastructure and resource capacity to perform experimentation and
to engage in product development in an inexpensive and efficient
manner.
Innovation
by our research and development operations is very important to our
success. Our goal is to discover, develop and bring to market
innovative products and treatments that address major unmet medical
needs, including initially, multiple sclerosis, septicemia, and
cancer. We expect this goal to be supported by substantial research
and development investments.
We
plan on conducting research internally and may also research
through contracts with third parties, through collaborations with
universities and biotechnology companies, and in cooperation with
pharmaceutical firms. We may also seek out promising compounds and
innovative technologies developed by third parties to incorporate
into our discovery or development methods and procedures or
projects, as well as our future product lines, through acquisition,
licensing or other arrangements.
In
addition to discovering and developing new products, methods and
procedures of treatment and treatments, we expect our research
operations to add value to our existing products and methods and
procedures of treatment in development by improving their
effectiveness and by discovering new uses for them.
Sequential-Dialysis Technique
Our
proprietary Sequential-Dialysis
Technique is a methodology for the removal of those
molecules which are harmful and responsible for causing diseases. A
significant disappointment in the practice of modern medicine is
that the capabilities do exist to eliminate the presence of most
illnesses, including life-threatening diseases such as AIDS and
cancer, but with a caveat that the process of treatment comes with
catastrophic side effects that can and often do kill the
patient.
Our
development is that the innovative Sequential-Dialysis
Methodology is done extracorporeally (outside the body).
This is a truly unique and innovative method for alleviating
disease.
We
believe that this methodology can be used for the prevention of
cancer metastasis, for directly attacking the causation of
intractable seizures, for preventing the death of anterior motor
neurons in ALS, for preventing the cause of the neuropathological
changes in Alzheimer’s disease and traumatic brain injury and
for eradicating the causations of infectious diseases, and our
intention is that the effectiveness of this technique will be
demonstrated and supported in future clinical studies.
Through
our Sequential-Dialysis
Technique, we ultimately hope to provide a cure for cancer
if not only to dramatically extend the lives of suffering patients.
Our initial focus is on lab and animal tests. Clinical trials, as
required, will be undertaken subsequently.
3
Feldetrex™
Although a
combination of generic medications, we have a U.S. Patent (No.
8,865,733) on our Feldetrex®
candidate drug. In this way, Feldetrex® is
similar to Viagra®, which was a proprietary cardiac drug prior
to its current use and ownership by Pfizer. Consequently, we have
one pending patent application for our Feldetrex®
candidate drug—intending to increase our Feldetrex®
related patent applications to three in the near
future.
Feldetrex® may
serve as an additional medication utilized by physicians for the
treatment of multiple sclerosis, fibromyalgia, or traumatic brain
injury, and is designed to decrease symptomatology in those
conditions. Feldetrex® will
not compete against our proprietary Sequential-Dialysis
Technique in the market to treat traumatic brain injury, but
rather the two will work conjunctively.
Feldetrex®
utilizes a low dosage of Naltrexone which has been shown in
multiple medical articles in the medical literature to increase
endogenous enkephalins1 (endogenous enkephalins are
pain-relieving pentapeptides produced in the body, located in the
pituitary gland, brain, and GI tract. Axon terminals that release
enkephalins are concentrated in the posterior horn of the gray
matter of the spinal cord, in the central part of the thalamus, and
in the amygdala of the limbic system of the cerebrum. Endogenous
Enkephalins function as neurotransmitters that inhibit
neurotransmitters in the pathway for pain perception, thereby
reducing the emotional as well as the physical impact of pain). We
have not independently conducted medical or laboratory tests to
show the mechanism of action of this medication. While Naltrexone in high dosages acts
as an opioid antagonist, it inhibits opiate receptors.
Naltrexone in low dosages causes a compensatory upregulation
(increase in the number of receptors) of native endorphins and
enkephalins, which last beyond the effects of the Naltrexone
itself. We believe that this means, paradoxically, that a daily
dose of low dose Naltrexone can be used to chronically
increase endorphin and enkephalin levels. We believe that by
utilizing a low dosage, Naltrexone has a unique ability to
increase enkephalins and other neurotransmitters in the brainstem
of patients.
Marketing
Currently, we manage our marketing
responsibilities internally. Sales of our pain management products
are made primarily online through our website: www.painreliefmeds.com. We intend to seek
a partnership with and/or sale of our product
candidates/technologies to large
pharmaceutical and/or medical devices firms. These firms have the
ability to effectively promote our product candidates to healthcare
providers and patients. Through their marketing organizations, they
can explain the approved uses, benefits and risks of our product
candidates to healthcare providers such as doctors, nurse
practitioners, physician assistants, pharmacists, hospitals,
Pharmacy Benefit Managers (PBMs), Managed Care Organizations
(MCOs), employers and government agencies. They also market
directly to consumers in the U.S. through direct-to-consumer
advertising that communicates the approved uses, benefits, and
risks of our product candidates while continuing to motivate people
to have meaningful conversations with their doctors. In addition,
they sponsor general advertising to educate the public on disease
awareness, important public health issues, and patient assistance
programs.
______________________________
A.
Bowling, Allen C..
"Low-dose naltrexone (LDN) The "411" on LDN" National Multiple
Sclerosis Society.
http://www.nationalmssociety.org/multimedia-library/momentum-magazine/back-issues/momentum-spring-09/index.aspx.
Retrieved 6 July 2011.
B.
Bourdette, Dennis.
"Spotlight on Low Dose Naltrexone (LDN)". US Department of Veteran
Affairs.
http://www.va.gov/MS/articles/Spotlight_on_Low_Dose_Naltrexone_LDN.asp.
Retrieved 5 July 2011.
C.
Giesser, Barbara S.
(2010). Primer on Multiple Sclerosis. New York: Oxford University
Press US. pp. 377. ISBN 978-0-19-536928-1.
D.
Moore, Elaine A.
1948. The promise of low dose naltrexone therapy: potential
benefits in cancer, autoimmune, neurological and infectious
disorders. Elaine A. Moore and Samantha Wilkinson. ISBN
978-0-7864-3715-3.
E.
Crain SM, Shen K-F
(1995). Ultra-low concentrations of naloxone selectively antagonize
excitatory effects of morphine on sensory neurons, thereby
increasing its antinociceptive potency and attenuating
tolerance/dependence during chronic cotreatment. Proc Natl Acad Sci
USA 92: 10540–10544.
F.
Powell KJ,
Abul-Husn NS, Jhamandas A, Olmstead MC, Beninger RJ, et al. (2002).
Paradoxical effects of the opioid antagonist naltrexone on morphine
analgesia, tolerance, and reward in rats. J Pharmacol Exp Ther 300:
588–596.
G.
Wang H-Y, Friedman
E, Olmstead MC, Burns LH (2005). Ultra-low-dose naloxone suppresses
opioid tolerance, dependence and associated changes in Mu opioid
receptor-G protein coupling and Gbc signaling; Neuroscience 135:
247–261.
The
large pharmaceutical/medical devices firms principally sell their
products to wholesalers, but they also sell directly to retailers,
hospitals, clinics, government agencies and pharmacies and also
work with MCOs, PBMs, employers and other appropriate healthcare
providers to assist them with disease management, patient education
and other tools that help their medical treatment
routines.
4
Patents and Intellectual Property Rights
We have
licensed three U.S. patents: Sequential Extracorporeal Treatment of Bodily
Fluids, U.S. Patent No. 9,216,386 and Utilization of Stents for the Treatment of
Blood Borne Carcinomas, U.S. Patent No. 8,758,287 (both from
Marv Enterprises, LLC), and Medication and Treatment for Disease,
U.S. Patent No. 8,865,733 (from Altman Enterprises, LLC), in the
areas of cancer, sepsis, and multiple sclerosis. We expect these
patents to cover the medical treatments discussed above for
multiple sclerosis, blood sepsis, and cancer and be effective until
2029. Marv and Altman have licensed these technologies to us
pursuant to the terms of license agreements. Because our license
agreements cover the patents and “all applications of the United States and foreign
countries that claim priority to the above PCT applications,
including any non-provisionals, continuations,
continuations-in-part, divisions, reissues, re-examinations or
extensions thereof,” we anticipate that other
technologies that derive from these patents will also belong to us
and are covered by the license agreements.
In
April 2020, Marv applied for two new patents: Method for Treating and Curing COVID-19
Infection” and “Method for Treating
Covid-19 Inflammatory Cytokine Storm for the Reduction of Morbidity
and Mortality in Covid-19 Patients”. On May 12, 2020, we assigned our rights
in these two patents to Technology Health, Inc. pursuant to an
Intellectual Property Agreement in hopes that they will be able to
finance and develop the technologies.
Patents
extend for twenty years from the date of patent filing. The actual
protection afforded by a patent, which can vary from country to
country, depends upon the type of patent, the scope of its coverage
and the availability of legal remedies in the country.
Dr.
Felder is the owner of the Feldetrex mark, and has also licensed
this to us pursuant to the terms of a license
agreement.
We
expect our patent and related rights to be of material importance
to our business.
Competition
Our
business is conducted in an intensely competitive and often highly
regulated market. Our treatments face competition in the form of
branded drugs, generic drugs and the currently practiced treatments
for multiple sclerosis, blood sepsis, and cancer. The principal
forms of competition include efficacy, safety, ease of use, and
cost effectiveness. Where possible, companies compete on the basis
of the unique features of their products, such as greater efficacy,
better patient ease of use or fewer side effects. A lower overall
cost of therapy is also an important factor. Products that
demonstrate fewer therapeutic advantages must compete for inclusion
based primarily on price. Though the means of competition vary
among product categories, demonstrating the value of our
medications and procedures will be a critical factor for our
success.
Our
competitors include large worldwide research-based drug companies,
smaller research companies with more limited therapeutic focus, and
generic drug manufacturers. We compete with other companies that
manufacture and sell products that treat similar diseases as our
major medications and procedures.
Environment
Our
business may be subject to a variety of federal, state and local
environmental protection measures. We intend to comply in all
material respects with applicable environmental laws and
regulations.
Regulation
Pain Management Products
A major
obstacle to our growth is the public perception that hemp and
marijuana are the same thing. This perception drives much of the
regulation of hemp products. Although hemp and marijuana are both
part of the cannabis family, they differ in cultivation, function,
and application. Despite the use of marijuana becoming more widely
legalized, it is viewed by many regulators and many others as an
illegal product. Hemp, on the other hand, is used in a variety of
other ways that include clothing, skin products, pet products,
dietary supplements (the use of CBD oil), and thousands of other
applications. Hemp may be legally sold, however the inability of
many to understand the difference between hemp and marijuana often
causes burdensome regulation and confusion among potential
customers. Therefore, we are affected by laws related to cannabis
and marijuana, even though our products are not the direct targets
of these laws.
5
Cannabis is
currently a Schedule I controlled substance under the Controlled
Substance Act (“CSA”) and is, therefore, illegal under
federal law. Even in those states in which the use
of cannabis has been legalized pursuant to state law, its
use, possession and/or cultivation remains a violation of federal
law. A Schedule I controlled substance is defined as one that has
no currently accepted medical use in the United States, a lack of
safety for use under medical supervision and a high potential for
abuse. The U.S. Department of Justice (the “DOJ”)
describes Schedule I controlled substances as “the most
dangerous drugs of all the drug schedules with potentially severe
psychological or physical dependence.” If the federal
government decides to enforce the CSA in the states, persons that
are charged with distributing, possessing with intent to distribute
or growing cannabis could be subject to fines and/or
terms of imprisonment, the maximum being life imprisonment and a
$50 million fine.
Notwithstanding the
CSA, 29 U.S. states, the District of Columbia and the U.S.
territories of Guam and Puerto Rico allow their residents to use
medical cannabis. The states of Alaska, California, Colorado,
Maine, Massachusetts, Nevada, Oregon, Vermont (effective July 1,
2018) and Washington, and the District of Columbia, allow
cannabis for adult recreational use. Such state and
territorial laws are in conflict with the federal CSA, which
makes cannabis use and possession illegal at the federal
level.
In
light of such conflict between federal laws and state laws
regarding cannabis, the previous administration under
President Obama had effectively stated that it was not an efficient
use of resources to direct federal law enforcement agencies to
prosecute those lawfully abiding by state-designated laws allowing
the use and distribution of medical cannabis. For example, the
prior DOJ Deputy Attorney General of the Obama administration,
James M. Cole, issued a memorandum (the “Cole Memo”) to
all United States Attorneys providing updated guidance to federal
prosecutors concerning cannabis enforcement under the
CSA. In addition, the Financial Crimes Enforcement Network
(“FinCEN”) provided guidelines (the “FinCEN
Guidelines”) on February 14, 2014, regarding how financial
institutions can provide services to cannabis-related
businesses consistent with their Bank Secrecy Act
(“BSA”) obligations.
Additional existing
and pending legislation provides, or seeks to provide, protection
to persons acting in violation of federal law but in compliance
with state laws regarding cannabis. The Rohrabacher-Blumenauer
Amendment (formerly known as the Rohrbacher-Farr Amendment) to the
Commerce, Justice, Science and Related Agencies Appropriations
Bill, which funds the DOJ, since 2014 has prohibited the DOJ from
using funds to prevent states with laws authorizing the use,
distribution, possession or cultivation of
medical cannabis from implementing such laws. On August
2016, the Ninth Circuit Court of Appeals ruled in United States v. McIntosh that the
Amendment bars the DOJ from spending funds on the prosecution of
conduct that is allowed by state medical cannabis laws,
provided that such conduct is in strict compliance with applicable
state law. The Rohrabacher-Blumenauer Amendment is currently
effective through September 30, 2020, but as an amendment to an
appropriations bill, it must be renewed annually.
These
developments previously were met with a certain amount of optimism
in the cannabis industry, but (i) neither the CARERS Act
nor the Respect State Marijuana Laws Act of 2017 have yet been
adopted, (ii) the Rohrabacher-Blumenauer Amendment, being an
amendment to an appropriations bill that must be renewed annually,
has not currently been renewed beyond September 30, 2018, and (iii)
the ruling in United States
v. McIntosh is only applicable precedent in the Ninth
Circuit.
Because
of the discrepancy between the laws in some states, which permit
the distribution and sale of medical and
recreational cannabis, from federal law that prohibits any
such activities, DOJ Deputy Attorney General James M. Cole issued
the Cole Memo concerning cannabis enforcement under the
CSA.
At the
time of its issuance, the Cole Memo reiterated Congress’s
determination that cannabis is a dangerous drug and that
the illegal distribution and sale of cannabis is a
serious crime that provides a significant source of revenue to
large-scale criminal enterprises, gangs, and cartels. The Cole Memo
noted that the DOJ was committed to enforcement of the CSA
consistent with those determinations. It also noted that the DOJ
was committed to using its investigative and prosecutorial
resources to address the most significant threats in the most
effective, consistent, and rational way. In furtherance of those
objectives, the Cole Memo provided guidance to DOJ attorneys and
law enforcement to focus their enforcement resources on persons or
organizations whose conduct interferes with any one or more of the
following important priorities (the “Enforcement
Priorities”) in preventing:
●
the distribution
of cannabis to minors;
●
revenue from the
sale of cannabis from going to criminal enterprises,
gangs, and cartels;
●
the diversion
of cannabis from states where it is legal under state law
in some form to other states;
●
state-authorized cannabis activity
from being used as a cover or pretext for the trafficking of other
illegal drugs or other illegal activity;
●
violence and the
use of firearms in the cultivation and distribution
of cannabis;
●
drugged driving and
the exacerbation of other adverse public health consequences
associated with cannabis use;
●
the growing
of cannabis on public lands and the attendant public
safety and environmental dangers posed
by cannabis production on public lands; and
●
cannabis possession
or use on federal property.
6
However, on January
4, 2018, the U.S. Attorney General, Jeff Sessions, issued a
memorandum for all U.S. Attorneys (the “Sessions Memo”)
stating that the Cole Memo was rescinded effective immediately. In
particular, Mr. Sessions stated that “prosecutors should
follow the well-established principles that govern all federal
prosecutions,” which require “federal prosecutors
deciding which cases to prosecute to weigh all relevant
considerations, including federal law enforcement priorities set by
the Attorney General, the seriousness of the crime, the deterrent
effect of criminal prosecution, and the cumulative impact of
particular crimes on the community.” The Sessions Memo went
on to state that given the DOJ’s well-established general
principles, “previous nationwide guidance specific to
marijuana is unnecessary and is rescinded, effective
immediately.”
It is
unclear at this time whether the Sessions Memo indicates that the
Trump administration will strongly enforce the federal laws
applicable to cannabis or what types of activities will
be targeted for enforcement. However, a significant change in the
federal government’s enforcement policy with respect to
current federal laws applicable to cannabis could cause
significant financial damage to us. We do not currently cultivate,
distribute or sell cannabis, but our hemp oil products are
closely tied to the cannabis industry.
Although the
Sessions Memo has rescinded the Cole Memo and it is unclear at this
time what the ultimate impact of that rescission will have on our
business, if any, we intend to continue to conduct rigorous due
diligence to verify the legality of all activities that we engage
in and ensure that our activities do not interfere with any of the
Enforcement Priorities set forth in the Cole Memo.
On
March 26, 2018, Senate Majority Leader Mitch McConnell, R-Kentucky,
announced plans to introduce The Hemp Farming Act of 2018 was a
proposed law to exclude hemp (defined as cannabis with less than
0.3% THC) from Schedule 1 controlled substances and making it an
ordinary agricultural commodity. Its provisions were incorporated
in the 2018 United States Farm Bill that became law on December 20,
2018.
Other Medical Products
The
development of proprietary drugs and medications is subject to
varying degrees of governmental regulation in the United States and
any other countries in which our operations are conducted. In the
United States, regulation by various federal and state agencies has
long been focused primarily on product safety, efficacy,
manufacturing, advertising, labeling and safety reporting. The
exercise of broad regulatory powers by the U.S. Federal Drug
Administration (“FDA”) continues to result in increases
in the amounts of testing and documentation required for FDA
clearance of new drugs and devices and a corresponding increase in
the expense of product introduction. Likewise, the approval process
with the FDA is estimated to take approximately seven (7) years
from the time it is started. Similar trends are also evident in
major markets outside of the United States.
Clinical
trials are a set of procedures in medical
research conducted to allow safety (or more specifically,
information about adverse drug reactions and adverse
effects of other treatments) and efficacy data to be
collected for health interventions (e.g., drugs, diagnostics,
devices, therapy protocols). These trials can take place only after
satisfactory information has been gathered on the quality of the
non-clinical safety, and Health Authority/Ethics
Committee approval is granted in the country where the trial
is taking place.
Depending on the
type of product and the stage of its development, investigators
enroll healthy volunteers and/or patients into small pilot
studies initially, followed by larger scale studies in
patients that often compare the new product with the currently
prescribed treatment. As positive safety and efficacy data are
gathered, the number of patients is typically increased. Clinical
trials can vary in size from a single center in one country to
multicenter trials in multiple countries.
Due to
the sizable cost a full series of clinical trials may incur, the
burden of paying for all the necessary people and services is
usually borne by the sponsor who may be a governmental
organization, a pharmaceutical,
or biotechnology company. Since the diversity of roles
may exceed resources of the sponsor, often a clinical trial is
managed by an outsourced partner such as a contract
research organization or a clinical trials unit in the
academic sector.
The
regulatory agencies under whose purview we intend to operate have
administrative powers that may subject us to such actions as
product withdrawals, recalls, seizure
of products and other civil and criminal
sanctions.
Because we intend to seek a partnership with
and/or sale of our product candidates/technologies to large
pharmaceutical and/or medical devices firms, we anticipate that a
larger pharmaceutical company will undertake to navigate the
regulatory pathway, including conducting clinical trials, for a
product such as Feldetrex™.
Employees
As of
the date hereof, we do not have any employees other than our
officers and directors. Our officers and directors will continue to
work for us for the foreseeable future. We anticipate hiring
appropriate personnel on an as-needed basis, and utilizing the
services of independent contractors as needed.
7
ITEM
1A – RISK FACTORS.
As a
smaller reporting company, we are not required to provide a
statement of risk factors. Nonetheless, we are voluntarily
providing risk factors herein.
Any
investment in our common stock involves a high degree of risk. You
should consider carefully the following information, together with
the other information contained in this Annual Report, before you
decide to buy our common stock. If one or more of the following
events actually occurs, our business will suffer, and as a result
our financial condition or results of operations will be adversely
affected. In this case, the market price, if any, of our common
stock could decline, and you could lose all or part of your
investment in our common stock.
Currently, our
focus is on the development and distribution of our pain products.
We are also developing medical treatments for Alzheimer’s
disease, multiple sclerosis, amyotrophic lateral sclerosis,
fibromyalgia, traumatic brain injury, blood sepsis and viremia, and
cancer. We face risks in developing our product candidates and
services and eventually bringing them to market. We also face risks
that our business model may become obsolete. The following risks
are material risks that we face. If any of these risks occur, our
business, our ability to achieve revenues, our operating results
and our financial condition could be seriously harmed.
Risk Factors Related to the Business of the Company
We have a limited operating history and our financial results are
uncertain.
We have
a limited history and face many of the risks inherent to a new
business. As a result of our limited operating history, it is
difficult to accurately forecast our potential revenue. We were
incorporated in Nevada in 2010. Our revenue and income potential is
unproven and our business model is still emerging. Therefore, there
can be no assurance that we will provide a return on investment in
the future. An investor in our common stock must consider the
challenges, risks and uncertainties frequently encountered in the
establishment of new technologies, products and processes in
emerging markets and evolving industries. These challenges include
our ability to:
●
execute our
business model;
●
create brand
recognition;
●
manage growth in
our operations;
●
create a customer
base in a cost-effective manner;
●
retain
customers;
●
access additional
capital when required; and
●
attract and retain
key personnel.
There
can be no assurance that our business model will be successful or
that it will successfully address these and other challenges, risks
and uncertainties.
We will need additional funding in the future, and if we are unable
to raise capital when needed, we may be forced to delay, reduce or
eliminate our product candidate development programs, commercial
efforts, or sales efforts.
Developing products
and methods and procedures of treatment and marketing developed
products is costly. We will need to raise substantial additional
capital in the future in order to execute our business plan and
help us and our collaboration partners fund the development and
commercialization of our product candidates.
In 2014
and through 2019, we raised funds through public and private equity
offerings. We may need to finance future cash needs through public
or private equity offerings, debt financings or strategic
collaboration and licensing arrangements. To the extent that we
raise additional funds by issuing equity securities, our
shareholders may experience additional dilution, and debt
financing, if available, may involve restrictive covenants and may
result in high interest expense. If we raise additional funds
through collaboration and licensing arrangements, it may be
necessary to relinquish some rights to our product candidates,
processes and technologies or our development projects or to grant
licenses on terms that are not favorable to us. We cannot be
certain that additional funding will be available on acceptable
terms, or at all. If adequate funds are not available from the
foregoing sources, we may consider additional strategic financing
options, including sales of assets, or we may be required to delay,
reduce the scope of, or eliminate one or more of our research or
development programs or curtail some of our commercialization
efforts of our operations. We may seek to access the public or
private equity markets whenever conditions are favorable, even if
we do not have an immediate need for additional
capital.
8
Negative public perception of hemp and cannabis-related businesses,
misconceptions about the nature of our business and regulatory
uncertainties could have a material adverse effect on our business,
financial condition, and results of operations.
The hemp plant
and the cannabis/marijuana plant are both part of the
same cannabis sativa
genus species of plant, except that hemp, by
definition, has less than 0.3% tetrahydrocannabinol
(“THC”) content and is legal under federal and state
laws, but the same plant with a higher THC content is
cannabis/marijuana, which is legal under certain state laws, but
which is not legal under federal law. The similarities between
these plants can cause confusion, and our activities with
legal hemp may be incorrectly perceived as us being
involved in federally illegal cannabis/marijuana. Also, despite
growing support for the cannabis/marijuana industry and
legalization of cannabis/marijuana in certain U.S. states, many
individuals and businesses remain opposed to the cannabis/marijuana
industry. Any negative press resulting from any incorrect
perception that we have entered into the cannabis/marijuana space
could result in a loss of current or future business. It could also
adversely affect the public’s perception of us and lead to
reluctance by new parties to do business with us or to own our
common stock.
Certain
retailers, like Amazon, do not allow the sale of products
containing CBD. Other platforms such as Facebook and Google have
policies that restrict advertising of CBD products. Until
regulators provide more definitive and consistent rules for CBD
products, many retailers, distributors and business partners tend
to avoid getting involved in CBD businesses because of the
uncertainty of what regulators may do. Misunderstandings about the
legal nature of our business and the difference between CBD and
marijuana may also discourage some business partners and customers
from working with us or purchasing our products.
We
cannot assure you that additional business partners, including but
not limited to online retailers, distributors, financial
institutions and customers, will not attempt to end or curtail
their relationships with us. Any such negative press or cessation
of business could have a material adverse effect on our business,
financial condition, and results of operations.
U.S. federal, state and foreign regulation and enforcement of laws
relating to cannabis and its derivatives may adversely affect our
ability to sell our products and our revenue.
There
are (i) thirty-three (33) states in the United States, the District
of Columbia, Guam and Puerto Rico have approved comprehensive
public medical marijuana/cannabis programs. Approved Efforts in
another thirteen (13) states allow use of low THC, high CBD
products for medical reasons in limited situations or as a legal
defense. Ten (10) of these states and the District of Columbia have
legalized cannabis/marijuana for adult recreational
use. This leaves only
four states (Idaho, Kansas, Conversely, under the federal
Controlled Substances Act (the “CSA”), the policies and
regulations of the federal government and its agencies are that
cannabis/marijuana has no medical benefit and a range of activities
are prohibited, including cultivation, possession, personal use,
and interstate distribution of cannabis/marijuana. In the event the
U.S. Department of Justice (the “DOJ”) begins strict
enforcement of the CSA in states that have laws legalizing medical
and/or adult recreational cannabis/marijuana, there may be a direct
and adverse impact to any future business or prospects that we may
have in the cannabis/marijuana business. Even in those
jurisdictions in which the manufacture and use of medical
cannabis/marijuana has been legalized at the state level, the
possession, use, and cultivation of cannabis/marijuana all remain
violations of federal law that are punishable by imprisonment and
substantial fines. Moreover, individuals and entities may violate
federal law if they intentionally aid and abet another in violating
these federal controlled substance laws, or conspire with another
to violate them.
For
example, the California Bureau of Cannabis Control sent nine
hundred (900) warning letters to marijuana shops suspected of
operating without a state license. The Bureau also issued a
cease-and-desist letter to the operator of an online directory of
marijuana dispensaries, products, and delivery services. The letter
threatened fines and criminal penalties if the company did not
remove the listings for unlicensed marijuana businesses. Likewise,
if we unknowingly do business with unlicensed entities or list them
on our website, we may be subject to similar regulatory action that
would halt our operations and affect our financial
performance.
Local,
state, federal, and international hemp and
cannabis/marijuana laws and regulations are broad in scope and
subject to evolving interpretations, which could require us to
incur substantial costs associated with compliance requirements. In
addition, violations of these laws, or allegations of such
violations, could disrupt our business and result in a material
adverse effect on our operations. In addition, it is possible that
cannabinoid-related regulations may be enacted in the future that
will be directly applicable to our business. It is also possible
that the federal government will begin strictly enforcing existing
laws, which may limit the legal uses of the hemp plant and its
derivatives and extracts, such as cannabinoids. However, our work
in hemp would continue since hemp research, development, and
commercialization activities are permitted under applicable federal
and state laws, rules, and regulations. Until Congress amends the
CSA or the executive branch deschedules or reschedules cannabis
under it, there is a risk that federal authorities may enforce
current federal law. Enforcement of the CSA by federal authorities
could impair the Company’s revenue and profit, and it could
even force the Company to cease manufacturing its products. The
risk of strict federal enforcement of the CSA in light of
congressional activity, judicial holdings, and stated federal
policy, including enforcement priorities, remains
uncertain.
9
Until
such time as the federal government reclassifies marijuana from a
Schedule 1 narcotic, we do not intend to pursue any
involvement in the marijuana business. At this time, we intend to
continue only in the federally legal hemp product business. When
Congress approved the 2018 Farm Bill, it defined hemp as an
agricultural product and differentiated it from marijuana. This
means hemp is not a controlled substance, and may be more broadly
cultivated. Hemp-derived products may now be transferred across
state lines for commercial purposes. The new law also allows for
the sale, transport, or possession of hemp-derived products, so
long as those items are produced in a manner consistent with the
law. There are several restrictions that apply to those who
cultivate hemp and produce hemp-derived products. Key among these
restrictions is that hemp cannot contain more than 0.3 percent
THC.
While
the 2018 Farm Bill legalized the cultivation of hemp and removed
hemp-derived substances from Schedule 1 of the CSA, it does not
legalize CBD generally. The FDA and DOJ continue to exercise
control over CBD and there is still some lack of clarity as to
exactly how CBD will be regulated going forward.
CBD has
been deemed relatively safe and, from now on, should not be subject
to international illicit drug scheduling according to a World
Health Organization (“WHO”) comprehensive review
published in July 2018. The WHO has formally submitted its
conclusion to United Nations Secretary-General António
Guterres, a prelude to this officially becoming the
case.
On June
25, 2018, the U.S. Food and Drug Administration (“FDA”)
approved CBD-based Epidiolex to treat severe forms of epilepsy.
This marked the groundbreaking admission by the FDA that cannabis
has medical value. On October 1, 2018, the DOJ placed
“FDA-approved drugs that contain CBD derived from cannabis
and no more than 0.1 percent THC” to Schedule 5 of the CSA.
This action is narrowly tailored to reschedule Epidiolex off of
Schedule 1 because the DOJ’s ability to remove all
restrictions from cannabis extracts, including CDB, is restricted
by the Single Convention on Narcotic Drugs, 1961.
Our product candidates are not approved by the FDA or other
regulatory authority, and we face risks of unforeseen medical
problems, and up to a complete ban on the sale of our product
candidates.
The
efficacy and safety of pharmaceutical products is established
through a process of clinical testing under FDA oversight. Our
products have not gone through this process because we believe that
the topical products we sell are not subject to this process.
However, if an individual were to use one of our products in an
improper manner, we cannot predict the potential medical harm to
that individual. If such an event were to occur, the FDA or similar
regulatory agency might impose a complete ban on the sale or use of
our products.
The FDA might not approve
our product candidates for marketing and sale.
We
intend to enter into agreements with larger pharmaceutical
companies as collaboration partners, in part to help cover the cost
of seeking regulatory approvals for our pharmaceutical and medical
product candidates. We believe that FDA approval of some of our
product candidates will need to undergo a full investigational new
drug (IND) application with the FDA, including clinical trials.
There can be no assurance that the FDA will approve our IND
application or any other applications. Failure to obtain the
necessary FDA approval will have a material negative affect on our
operations. While we intend to license our Feldetrex®
product to a larger pharmaceutical company, they in turn, may not
be able to obtain the necessary approval to market and sale the
product.
New regulations governing the introduction, marketing and sale of
our products to consumers could harm our business.
Our
pain management products have not been approved by the FDA or any
other regulatory agency, and the FDA does not have a
pre-market approval system for our pain management
products. However, our operations could be harmed if new laws or
regulations are enacted that restrict our ability to market or
distribute our products or impose additional burdens or
requirements on us in order to continue selling our products. In
addition, the adoption of new regulations or changes in the
interpretations of existing regulations may result in significant
compliance costs or discontinuation of product sales and may impair
the marketability of our products, resulting in significant loss of
net sales.
We have
observed a general increase in regulatory activity and activism in
the United States and the regulatory landscape is becoming more
complex with increasingly strict requirements. If this trend
continues, we may find it necessary to alter some of the ways we
have traditionally marketed our products in order to stay in
compliance with a changing regulatory landscape and this could add
to the costs of our operations and/or have an adverse impact on our
business.
We
cannot predict the nature of any future laws, regulations,
interpretations, or applications, nor can we determine what effect
additional governmental regulations or administrative orders, when
and if promulgated, would have on our business. Future changes
could include requirements to make certain changes to our products
to meet new standards, the recall or discontinuation of certain
products that cannot be changed, additional record keeping,
expanded documentation of the properties of certain products,
expanded or different labeling, and additional scientific
substantiation. Any or all of these requirements could have a
material adverse effect on our business, financial condition, and
operating results.
10
We may fail to deliver commercially successful new product
candidates, methods and procedures of treatment, and
treatments.
Our
technology is at an early stage of research and development. We are
also actively engaged in research and development of new
products.
The
development of commercially viable new products and methods and
procedures of treatment, as well as the development of additional
uses for existing products and methods and procedures of treatment,
is critical to our ability to generate sales and/or sell the rights
to manufacture and distribute our product and process candidates to
another firm. Developing new products and methods and procedures of
treatment is a costly, lengthy and uncertain process. A new product
or process candidate can fail at any stage of the development or
commercialization, and one or more late-stage product or process
candidates could fail to receive regulatory approval.
New
product and process candidates may appear promising in development,
but after significant investment, fail to reach the market or have
only limited commercial success. This, for example, could be as a
result of efficacy or safety concerns, inability to obtain
necessary regulatory approvals, difficulty or excessive costs to
manufacture, erosion of patent term as a result of a lengthy
development period, infringement of third-party patents or other
intellectual property rights of others or inability to
differentiate the product or process adequately from those with
which it competes.
The commercialization of product and process candidates under
development may not be profitable.
In
order for the commercialization of our product candidates to be
profitable, our product and process candidates must be
cost-effective and economical to manufacture on a commercial scale.
Furthermore, if our product candidates and methods and procedures
of treatment do not achieve market acceptance, we may not be
profitable. Subject to regulatory approval, we expect to incur
significant development, sales and marketing expenses in connection
with the commercialization of our new product and process
candidates. Even if we receive additional financing, we may not be
able to complete planned development and marketing of any or all of
our product or process candidates. Our future profitability may
depend on many factors, including, but not limited to:
●
the terms and
timing of any collaborative, licensing and other arrangements that
we may establish;
●
the costs of
filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights;
●
the costs of
establishing manufacturing and production, sales, marketing and
distribution capabilities; and
●
the effect of
competing technological and market developments.
Even if
our collaboration partners receive regulatory approval for our
product and process candidates, we may not earn significant
revenues from such product or process candidates. With respect to
the product and methods and procedures of treatment candidates in
our development pipeline that are being developed by or in close
conjunction with third parties, our ability to generate revenues
from such product and process candidates will depend in large part
on the efforts of such third parties. To the extent that our
collaboration partners are not successful in commercializing our
product or process candidates, our revenues will suffer, we will
incur significant additional losses and the price of our common
stock will be negatively affected.
We may engage in strategic transactions that fail to enhance
shareholder value.
From
time to time, we may consider possible strategic transactions,
including the potential acquisitions or licensing of products or
technologies or acquisition of companies, and other alternatives
with the goal of maximizing shareholder value. We may never
complete a strategic transaction, and in the event that we do
complete a strategic transaction, implementation of such
transactions may impair shareholder value or otherwise adversely
affect our business. Any such transaction may require us to incur
non-recurring or other charges and may pose significant integration
challenges and/or management and business disruptions, any of which
could harm our results of operation and business
prospects.
Our business is heavily regulated by governmental authorities, and
failure to comply with such regulation or changes in such
regulations could negatively impact our financial
results.
We must
comply with a broad range of regulatory controls on the testing,
approval, manufacturing and marketing of our product candidates,
procedures and other treatments, particularly in the United States
and countries of the European Union, that affect not only the cost
of product development but also the time required to reach the
market and the uncertainty of successfully doing so. Health
authorities have increased their focus on safety when assessing the
benefit risk/balance of drugs in the context of not only initial
product approval but also in the context of approval of additional
indications and review of information regarding marketed products.
Stricter regulatory controls also heighten the risk of changes in
product profile or withdrawal by regulators on the basis of
post-approval concerns over product safety, which could reduce
revenues and can result in product recalls and product liability
lawsuits. There is also greater regulatory scrutiny, especially in
the United States, on advertising and promotion and in particular
on direct-to-consumer advertising.
The
regulatory process is uncertain, can take many years, and requires
the expenditure of substantial resources. In particular, proposed
human pharmaceutical therapeutic product requirements set by the
FDA in the United States, and similar health authorities in other
countries, require substantial time and resources to satisfy. We
may never obtain regulatory approval for our product and process
candidates.
We may not be able to gain or sustain market acceptance for our
services and product candidates.
Failure
to establish a brand and presence in the marketplace on a timely
basis could adversely affect our financial condition and results of
operations. Moreover, there can be no assurance that we will
successfully complete our development and introduction of new
products or product enhancements, or methods and procedures of
treatment or that any such product candidates or methods and
procedures of treatment will achieve acceptance in the marketplace.
We may also fail to develop and deploy new products and product
enhancements on a timely basis.
11
The market for pain management products is highly competitive, and
we may not be able to compete successfully.
We
intend to operate in highly competitive markets. We will likely
face competition both from proprietary products of large
international manufacturers and producers of generic pain
management products. Most of the competitors in the industry have
longer operating histories and significantly greater financial,
technical, marketing and other resources than us, and may be able
to respond more quickly than we can to new or changing
opportunities and customer requirements. Also, many competitors
have greater name recognition and more extensive customer bases
that they can leverage to gain market share. Such competitors are
able to undertake more extensive promotional activities, adopt more
aggressive pricing policies and offer more attractive terms to
purchasers than we can.
Significant product
innovations, technical advances or the intensification of price
competition by competitors could adversely affect our operating
results. We cannot predict the timing or impact of competitive
products or their potential impact on sales of our products under
development.
If any
of our major pain management products were to become subject to a
problem such as unplanned loss of patent protection, unexpected
side effects, regulatory proceedings, publicity affecting doctor or
consumer confidence or pressure from competitive products, or if a
new, more effective alternative should be introduced, the adverse
impact on our revenues and operating results could be
significant.
The market for products, methods and procedures of treatment and
services in the pharmaceuticals industry is highly competitive, and
we may not be able to compete successfully.
We
intend to operate in highly competitive markets. We will likely
face competition both from proprietary products of large
international manufacturers and producers of generic
pharmaceuticals. Most of the competitors in the industry have
longer operating histories and significantly greater financial,
technical, marketing and other resources than us, and may be able
to respond more quickly than we can to new or changing
opportunities and customer requirements. Also, many competitors
have greater name recognition and more extensive customer bases
that they can leverage to gain market share. Such competitors are
able to undertake more extensive promotional activities, adopt more
aggressive pricing policies and offer more attractive terms to
purchasers than we can.
Significant product
innovations, technical advances or the intensification of price
competition by competitors could adversely affect our operating
results. We cannot predict the timing or impact of competitive
products or their potential impact on sales of our product
candidates.
If any
of our major product candidates or methods and procedures of
treatment were to become subject to a problem such as unplanned
loss of patent protection, unexpected side effects, regulatory
proceedings, publicity affecting doctor or patient confidence or
pressure from competitive products and methods and procedures of
treatment, or if a new, more effective treatment should be
introduced, the adverse impact on our revenues and operating
results could be significant.
We are dependent on the services of key personnel and failure to
attract qualified management could limit our growth and negatively
impact our results of operations.
We are
highly dependent on the principal members of our management and
scientific staff and certain key consultants, including our Chief
Executive Officer and the Chairman of our Board of Directors. We
will continue to depend on operations management personnel with
pharmaceutical and scientific industry experience. At this time, we
do not know of the availability of such experienced management
personnel or how much it may cost to attract and retain such
personnel. The loss of the services of any member of senior
management or the inability to hire experienced operations
management personnel could have a material adverse effect on our
financial condition and results of operations.
If physicians and patients do not accept our current or future
product candidates or methods and procedures of treatment, we may
be unable to generate significant additional revenue, if
any.
The
products and methods and procedures of treatment that we may
develop or acquire in the future may fail to gain market acceptance
among physicians, health care payors, patients and the medical
community. Physicians may elect not to recommend these treatments
for a variety of reasons, including:
●
timing of market
introduction of competitive drugs;
●
lower demonstrated
clinical safety and efficacy compared to other drugs or
treatments;
●
lack of
cost-effectiveness;
●
lack of
availability of reimbursement from managed care plans and other
third-party payors;
●
lack of convenience
or ease of administration;
●
prevalence and
severity of adverse side effects;
●
other potential
advantages of alternative treatment methods; and
●
ineffective
marketing and distribution support.
If our
product candidates and processes fail to achieve market acceptance,
we would not be able to generate significant revenue.
12
We are exposed to the risk of liability claims, for which we may
not have adequate insurance.
Since
we participate in the CBD, pain management and pharmaceutical
industries, we may be subject to liability claims by employees,
customers, end users and third parties. We do not currently have
product liability insurance. We intend to have proper insurance in
place; however, there can be no assurance that any liability
insurance we purchase will be adequate to cover claims asserted
against us or that we will be able to maintain such insurance in
the future. We intend to adopt prudent risk management programs to
reduce these risks and potential liabilities; however, we have not
taken any steps to create these programs and have no estimate as to
the cost or time required to do so and there can be no assurance
that such programs, if and when adopted, will fully protect us. We
may not be able to put risk management programs in place, or obtain
insurance, if we are unable to retain the necessary expertise
and/or are unsuccessful in raising necessary capital in the future.
Adverse rulings in any legal matters, proceedings and other matters
could have a material adverse effect on our business.
Pre-clinical and
clinical trials are conducted during the development of potential
products and other treatments to determine their safety and
efficacy for use by humans. Notwithstanding these efforts, when our
treatments are introduced into the marketplace, unanticipated side
effects may become evident. Manufacturing, marketing, selling and
testing our product candidates under development or to be acquired
or licensed, entails a risk of product liability claims. We could
be subject to product liability claims in the event that our
product candidates, processes, or products under development fail
to perform as intended. Even unsuccessful claims could result in
the expenditure of funds in litigation and the diversion of
management time and resources, and could damage our reputation and
impair the marketability of our product candidates and processes.
While we plan to maintain liability insurance for product liability
claims, we may not be able to obtain or maintain such insurance at
a commercially reasonable cost. If a successful claim were made
against us, and we don’t have insurance or the amount of
insurance was inadequate to cover the costs of defending against or
paying such a claim or the damages payable by us, we would
experience a material adverse effect on our business, financial
condition and results of operations.
Other companies may claim that we have infringed upon their
intellectual property or proprietary rights.
We do
not believe that our product candidates and methods and procedures
violate third-party intellectual property rights; however, we have
not had an independent party conduct a study of possible patent
infringements. Nevertheless, we cannot guarantee that claims
relating to violation of such rights will not be asserted by third
parties. If any of our product candidates or methods and procedures
of treatment are found to violate third-party intellectual property
rights, we may be required to expend significant funds to
re-engineer or cause to be re-engineered one or more of those
product candidates or methods and procedures of treatment to avoid
infringement, or seek to obtain licenses from third parties to
continue offering our product candidates or methods and procedures
of treatment without substantial re-engineering, and such efforts
may not be successful.
In
addition, future patents may be issued to third parties upon which
our product candidates and methods and procedures of treatment may
infringe. We may incur substantial costs in defending against
claims under any such patents. Furthermore, parties making such
claims may be able to obtain injunctive or other equitable relief,
which effectively could block our ability to further develop or
commercialize some or all of our products or methods and procedures
of treatment in the United States or abroad, and could result in
the award of substantial damages against us. In the event of a
claim of infringement, we may be required to obtain one or more
licenses from third parties. There can be no assurance that we will
be able to obtain such licenses at a reasonable cost, if at all.
Defense of any lawsuit or failure to obtain any such license could
be costly and have a material adverse effect on our
business.
Our success depends on our ability to protect our proprietary
technology.
Our
success depends, to a significant degree, upon the protection of
our proprietary technology, and that of any licensors. Legal fees
and other expenses necessary to obtain and maintain appropriate
patent protection could be material. Insufficient funding may
inhibit our ability to obtain and maintain such protection.
Additionally, if we must resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome
and expensive, and could involve a high degree of risk to our
proprietary rights if we are unsuccessful in, or cannot afford to
pursue, such proceedings.
13
Our
licensors have been granted three U.S. patents: Sequential
Extracorporeal Treatment of Bodily Fluids, U.S. Patent No.
9,216,386; Utilization of Stents for the Treatment of Blood Borne
Carcinomas, U.S. Patent No. 8,758,287; and Medication and Treatment
for Disease, U.S. Patent No. 8,865,733, in the areas of cancer,
sepsis, and multiple sclerosis. We expect these patents to cover
the medical treatments for multiple sclerosis, blood sepsis, and
cancer and be effective until 2029. Our licensors have licensed
these technologies to us pursuant to the terms of the license
agreements. We anticipate that other technologies that derive from
these patents will also belong to us and are covered by the license
agreements. However, we have not conducted thorough prior art or
novelty studies, but we are not aware of existing prior art that
would prevent us from obtaining patents on our product candidates
or methods and procedures of treatment. Prior art preventing us
from obtaining broad patent protection is a possibility. Inability
to obtain valid and enforceable patent protection would have a
material negative impact on our business opportunities and success.
Because the patent positions of pharmaceutical and biotechnology
companies are highly uncertain and involve complex legal and
factual questions, the patents may not be granted on our
applications, and any future patents owned and licensed by us may
not prevent other companies from developing competing products or
ensure that others will not be issued patents that may prevent the
sale of our products or require licensing and the payment of
significant fees or royalties. Furthermore, to the extent that:
(i) any of our future products or methods are not patentable;
(ii) such products or methods infringe upon the patents of
third parties; or (iii) our patents or future patents fail to
give us an exclusive position in the subject matter to which such
patents relate, our business will be adversely affected. We may be
unable to avoid infringement of third-party patents and may have to
obtain a license, or defend an infringement action and challenge
the validity of such patents in court. A license may be unavailable
on terms and conditions acceptable to us, if at all. Patent
litigation is costly and time consuming, and we may be unable to
prevail in any such patent litigation or devote sufficient
resources to even pursue such litigation. If we do not obtain a
license under such patents, are found liable for infringement and
are not able to have such patents declared invalid, we may be
liable for significant monetary damages, encounter significant
delays in bringing products to market or may be precluded from
participating in the manufacture, use or sale of products or
methods of treatment requiring such licenses.
We may
also rely on trademarks, trade secrets and contract law to protect
certain of our proprietary technology. There can be no assurance
that any trademarks will be approved, that such contract will not
be breached, or that if breached, we will have adequate remedies.
Furthermore, there can be no assurance that any of our trade
secrets will not become known or independently discovered by third
parties.
Additionally, we
may, from time to time, support and collaborate in research
conducted by universities and governmental research organizations.
There can be no assurance that we will have or be able to acquire
title or exclusive rights to the inventions or technical
information derived from such collaborations, or that disputes will
not arise with respect to rights in derivative or related research
programs conducted by us or such collaborators.
Our future growth may be inhibited by the failure to implement new
technologies.
Our
future growth is partially tied to our ability to improve our
knowledge and implementation of medical and pharmaceutical
technologies. The inability to successfully implement commercially
viable medical and pharmaceutical technologies in response to
market conditions in a manner that is responsive to our
customers’ requirements could have a material adverse effect
on our business.
We do not own certain of our technologies, they are owned by, and
licensed from, entities that are under the control of the Chairman
of our Board of Directors.
We do
not currently own the certain technologies necessary to conduct our
operations. The patents necessary to pursue our intended business
plan are under the control of our Chairman of the Board of
Directors. As consideration for the two licenses, we agreed to (i)
pay a royalty of five percent (5%) of any sales of products using
the technology, with no minimum royalty and (ii) reimburse the
licensor for any costs incurred in pursuing its proprietary rights
in the licensed technology and pay any costs incurred for
maintaining or obtaining the licensors’ proprietary rights in
the licensed technology in the U.S. and in extending the
intellectual property to other countries around the world. The
licensor has the sole discretion to select other countries into
which exclusive rights in the licensed technology may be pursued,
and if we decline to pay those expenses, then the licensor may pay
said expenses and our licensed rights in those countries will
revert to the licensor. The license agreements contain provisions
that require us to indemnify the licensor for any claims, including
costs of litigation, brought against them related to the licenses,
and require us to maintain insurance that may be burdensome. In the
event of a breach of our obligations under the license agreements,
the licensors are entitled to various damages and remedies, up to
and including termination of said license agreements. The licensors
are entities under the control of Dr. Mitchell S. Felder, who until
May 2, 2020 was the Chairman of our Board of Directors and still is
the Chair of our Scientific Advisory Board. While Dr. Felder is one
of our Company’s founders, there can be no assurance that he
will extend the offer to license these technologies to us in the
future as currently contemplated.
We do not intend to take our Feldetrex® product candidate past
the development stage, but instead intend to enter into
collaboration agreements with collaboration partners. If we are
unable to enter into an agreement with collaboration partners, our
Feldetrex® product candidate cannot be marketed, and it will
not generate revenue for us.
We do
not intend to conduct clinical trials on our Feldetrex®
product candidate. We instead intend to enter into one or more
collaboration agreements with third parties to do so. However, we
have not entered into any such agreements, or discussions for any
such agreements, and we cannot guarantee that we will be successful
in doing so. If we do not find a collaboration partner, the
Feldetrex®
product candidate cannot be marketed, and it will not generate any
revenue for us.
The
failure to generate revenue from our Feldetrex®
product candidate will have a materially adverse effect on our
overall revenues, profitability.
14
The outbreak of the coronavirus (“COVID-19”) has
negatively impacted and could continue to negatively impact the
global economy. In addition, the COVID-19 pandemic could disrupt or
otherwise negatively impact global credit markets, our operations
and our efforts to identify, review and explore alternatives for
the Company, including a merger, acquisition, or a business
combination.
The
significant outbreak of COVID-19 has resulted in a widespread
health crisis, which has negatively impacted and could continue to
negatively impact the global economy. In addition, the global and
regional impact of the outbreak, including official or unofficial
quarantines and governmental restrictions on activities taken in
response to such event, could have a negative impact on our
operations and our ability to identify, review and explore
alternatives for the Company. More broadly, the outbreak could
potentially lead to an economic downturn that could limit the
potential opportunities available to us via merger, acquisition or
business combination.
The
COVID-19 outbreak could disrupt or otherwise negatively impact
credit and equity markets, which could adversely affect the
availability and cost of capital. Such impacts could limit our
ability to obtain additional funding through various financing
transactions or arrangements, including joint venturing of
projects, equity or debt financing or other means.
A
pandemic typically results in social distancing, travel bans and
quarantines, and this may limit access to our management, support
staff, professional advisors and our independent auditors. These
factors, in turn, may not only impact our operations, financial
condition and our overall ability to react timely to mitigate the
impact of this event. Also, it may hamper our efforts to comply
with our filing obligations with the Securities and Exchange
Commission.
The
extent and potential short and long term impact of the COVID-19
outbreak on our business will depend on future developments,
including the duration, severity and spread of the virus, actions
that may be taken by governmental authorities and the impact on the
financial markets, all of which are highly uncertain and cannot be
predicted. These and other potential impacts of an epidemic,
pandemic or other health crisis, such as COVID-19, could therefore
materially and adversely affect our business, financial condition
and results of operations.
Risks Related To Our Common stock
The market price of our common stock may be volatile and may be
affected by market conditions beyond our control.
The
market price of our common stock is subject to significant
fluctuations in response to, among other factors:
●
variations in our
operating results and market conditions specific to Biomedical
Industry companies;
●
changes in
financial estimates or recommendations by securities
analysts;
●
announcements of
innovations or new products or services by us or our
competitors;
●
the emergence of
new competitors;
●
operating and
market price performance of other companies that investors deem
comparable;
●
changes in our
board or management;
●
sales or purchases
of our common stock by insiders;
●
commencement of, or
involvement in, litigation;
●
changes in
governmental regulations; and
●
general economic
conditions and slow or negative growth of related
markets.
In
addition, if the market for stocks in our industry or the stock
market in general, experiences a loss of investor confidence, the
market price of our common stock could decline for reasons
unrelated to our business, financial condition or results of
operations. If any of the foregoing occurs, it could cause the
price of our common stock to fall and may expose us to lawsuits
that, even if unsuccessful, could be costly to defend and a
distraction to the board of directors and management.
If we default on our convertible notes and are unable to repay the
notes, we will not have the funds we need to operate our business
and may lose access to additional financing.
We are
currently in default on the Note issued on August 8, 2017 because
the Maturity Date has passed. Per the terms of the Notes, the
Selling Shareholders have the option to demand payment of 130% of
the outstanding principal amount of a Note and any accrued and
unpaid interest thereon. We are currently unable to pay these
amounts in full. If the Selling Shareholders elect to exercise this
right rather than convert the Notes, we could possibly face
litigation. If we repay the Notes or any part thereof, we may not
be able to satisfy the obligations we have to other business
partners and may be forced to cease our business operations. Any
action by the Selling Shareholders would adversely affect our
financial position and ability to operate.
If we are unable to pay the costs associated with being a public,
reporting company, we may be forced to discontinue
operations.
We
expect to have significant costs associated with being a public,
reporting company, which may raise substantial doubt about our
ability to continue as a going concern. Our ability to continue as
a going concern will depend on positive cash flow, if any, from
future operations and on our ability to raise additional funds
through equity or debt financing. If we are unable to achieve the
necessary product sales or raise or obtain needed funding to cover
the costs of operating as a public, reporting company, we may be
forced to discontinue operations.
15
If we do not continue to meet the eligibility requirements of the
Pink Sheets Current tier, our common stock may be removed from Pink
Sheets Current and moved for quotation on a lower tier of the
marketplace maintained by OTC Markets Group, Inc., which may make
it more difficult for investors to resell their shares due to
suitability requirements.
Our
common stock is currently quoted on the Pink Sheets Current tier of
the marketplace maintained by OTC Markets Group, Inc. The Pink
Sheets Current tier does not require a minimum bid price. If we are
removed from the Pink Sheets Current tier, our stock will be quoted
on a lower tier. Broker-dealers often decline to trade in
over-the-counter stocks that are quoted on the OTC Pink tier, or a
lower tier, given the market for such securities are often limited,
the stocks are more volatile, and the risk to investors is greater.
These factors may reduce the potential market for our common stock
by reducing the number of potential investors. This may make it
more difficult for investors in our common stock to sell shares to
third parties or to otherwise dispose of their shares. This could
cause our stock price to decline.
If we
move down from the OTC Pink Current tier, we may be unable to
restore eligibility for quotation of our common stock on the Pink
Sheets Current tier or the OTCQB tier, and this will have a
negative impact on our market price. The lower tiers maintained by
OTC Markets, Inc. does not provide as much liquidity as the Pink
Sheets Current tier or the OTCQB tier. Many broker-dealers will not
trade or recommend OTC Pink stocks for their
clients.
Our principal shareholders have the ability to exert significant
control in matters requiring shareholder approval and could delay,
deter, or prevent a change in control of our company.
William
A. Hartman and Dr. Mitchell S. Felder collectively own 157,031
shares of our outstanding common stock, 2,000,000 shares of our
Series A Convertible Preferred Stock (which is convertible into an
aggregate of 2,000,000 shares of our common stock), and through the
exercise of warrants could acquire another 1,782,040 shares of our
common stock. The shares of our preferred stock have 100 votes per
share, giving these two shareholders approximately 51% of our
current voting securities. As a result, they have the ability to
influence matters affecting our shareholders, including the
election of our directors, the acquisition or disposition of our
assets, and the future issuance of our shares. Because they control
such shares, investors may find it difficult to replace our
management if they disagree with the way our business is being
operated. Because the influence by these shareholders could result
in management making decisions that are in the best interest of
those shareholders and not in the best interest of the investors,
you may lose some or all of the value of your investment in our
common stock. Investors who purchase our common stock should be
willing to entrust all aspects of operational control to our
current management team.
We do not intend to pay dividends in the foreseeable
future.
We do
not intend to pay any dividends in the foreseeable future. We do
not plan on making any cash distributions in the manner of a
dividend or otherwise. Our Board presently intends to follow a
policy of retaining earnings, if any.
We have the right to issue additional common stock and preferred
stock without consent of shareholders. This would have the effect
of diluting investors’ ownership and could decrease the value
of their investment.
Our certificate of
incorporation authorizes the issuance of shares of preferred stock,
the rights, preferences, designations and limitations of which may
be set by the Board of Directors. Our certificate of incorporation
has authorized the issuance of up to 10,000,000 shares of preferred
stock in the discretion of our Board. The shares of authorized but
undesignated preferred stock may be issued upon filing of an
amended certificate of incorporation and the payment of required
fees; no further shareholder action is required. If issued, the
rights, preferences, designations and limitations of such preferred
stock would be set by our Board and could operate to the
disadvantage of the outstanding common stock. Such terms could
include, among others, preferences as to dividends and
distributions on liquidation. We have designated a series of
convertible preferred stock, the Series A Convertible Preferred
Stock. 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. As of the date hereof, there were 2,000,000 shares of
Series A Convertible Preferred Stock issued and
outstanding.
16
Our officers and directors can sell some of their stock, which may
have a negative effect on our stock price and ability to raise
additional capital, and may make it difficult for investors to sell
their stock at any price.
Our
officers and directors, as a group, are the owners of 169,845
shares of our common stock, and with convertible preferred stock,
options and warrants to acquire another 3,570,600 shares of our
common stock, representing approximately 2% of our total issued and
outstanding shares of common stock. Each individual officer and
director may be able to sell up to 1% of our outstanding common
stock (currently approximately 1.8 million shares) every ninety
(90) days in the open market pursuant to Rule 144, which may have a
negative effect on our stock price and may prevent us from
obtaining additional capital. In addition, if our officers and
directors are selling their stock into the open market, it may make
it difficult or impossible for investors to sell their stock at any
price.
Our common stock is governed under The Securities Enforcement and
Penny Stock Reform Act of 1990.
The
Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in
connection with trades in any stock defined as a penny stock. The
Commission has adopted regulations that generally define a penny
stock to be any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Such
exceptions include any equity security listed on NASDAQ and any
equity security issued by an issuer that has (i) net tangible
assets of at least $2,000,000, if such issuer has been in
continuous operation for three years; (ii) net tangible assets
of at least $5,000,000, if such issuer has been in continuous
operation for less than three years; or (iii) average annual
revenue of at least $6,000,000, if such issuer has been in
continuous operation for less than three years. Unless an exception
is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risks associated
therewith.
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have
made forward-looking statements in this Annual Report, including
the sections entitled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
and “Business,” that are based on our
management’s beliefs and assumptions and on information
currently available to our management. Forward-looking statements
include the information concerning our possible or assumed future
results of operations, business strategies, financing plans,
competitive position, industry environment, potential growth
opportunities, the effects of future regulation, and the effects of
competition. Forward-looking statements include all statements that
are not historical facts and can be identified by the use of
forward-looking terminology such as the words
“believe,” “expect,”
“anticipate,” “intend,” “plan,”
“estimate” or similar expressions. These statements are
only predictions and involve known and unknown risks and
uncertainties, including the risks outlined under “Risk
Factors” and elsewhere in this Annual Report.
Although we believe
that the expectations reflected in our forward-looking statements
are reasonable, we cannot guarantee future results, events, levels
of activity, performance or achievement. We are not under any duty
to update any of the forward-looking statements after the date of
this annual report to conform these statements to actual results,
unless required by law.
ITEM
1B – UNRESOLVED STAFF COMMENTS
Not
applicable.
ITEM 2
– PROPERTIES
We
do not currently lease or use any office space. We have not paid
any amounts to Mr. Hartman for the use of his personal office or
for reimbursement of personal office expenses incurred by
him.
ITEM 3
– 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.
On
April 13, 2020, we received a default notice from Green Coast
Capital International S.A. because we do not have enough authorized
common stock to fulfill the reserve requirements pursuant to the
Convertible Promissory Note issued to them. On May 5, 2020, we were
served with a Notice of Arbitration by Green Coast on the same
matter. We intend to timely respond to the Notice of Arbitration.
We cannot estimate or determine our liability or potential damages
at this time.
ITEM 4
– MINE SAFETY DISCLOSURES
Not
applicable.
17
PART
II
ITEM 5 - MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our
common stock was quoted on the OTCQB tier of the marketplace
maintained by OTC Markets Group, Inc. under the symbol
“BIEI.” It traded there from February 23, 2012 to
December 26, 2017. Our common stock was then quoted on the OTC Pink
tier of the marketplace maintained by OTC Markets Group, Inc. until
July 27, 2018, when we were upgraded back to the OTCQB where our
stock traded until November 22, 2019, when we were again moved to
the OTC Pink tier. Our common stock trades on a limited or sporadic
basis and should not be deemed to constitute an established public
trading market. There is no assurance that there will be liquidity
in the common stock.
Effective June 27,
2018, our common stock underwent a 1-for-250 reverse split, which
is reflected in the table below.
The
following table sets forth the high and low transaction price for
each quarter within the fiscal years ended December 31, 2019 and
2018, as provided by Nasdaq. The information reflects prices
between dealers, and does not include retail markup, markdown, or
commission, and may not represent actual transactions.
|
|
|
Transaction
Prices
|
|
|
Fiscal Year Ended December
31,
|
Period
|
High
|
Low
|
|
2020
|
Second
Quarter
|
$0.0074
|
$0.0013
|
|
|
(through May 13,
2020)
|
|
|
|
|
First
Quarter
|
$0.0084
|
$0.0002
|
|
|
|
|
|
|
2019
|
Fourth
Quarter
|
$0.0067
|
$0.0003
|
|
|
Third
Quarter
|
$0.0239
|
$0.0050
|
|
|
Second
Quarter
|
$0.047
|
$0.0091
|
|
|
First
Quarter
|
$0.10
|
$0.0330
|
|
|
|
|
|
|
2018
|
Fourth
Quarter
|
$0.20
|
$0.04
|
|
|
Third
Quarter
|
$0.56
|
$0.10
|
|
|
Second
Quarter
|
$0.90
|
$0.20
|
|
|
First
Quarter
|
$2.45
|
$0.63
|
The
Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in
connection with trades in any stock defined as a penny stock. The
Commission has adopted regulations that generally define a penny
stock to be any equity security that has a market price of less
than $5.00 per share, subject to a few exceptions which we do not
meet. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks
associated therewith.
Holders
As of
May 1, 2020, there were 999,980,958 shares of our common stock issued
and outstanding and held by approximately 107 holders of record, not including
shares held in “street name” in brokerage accounts
which is unknown.
Dividend Policy
We have
not paid any dividends on our common stock and do not expect to do
so in the foreseeable future. We intend to apply our earnings, if
any, in expanding our operations and related activities. The
payment of cash dividends in the future will be at the discretion
of the Board of Directors and will depend upon such factors as
earnings levels, capital requirements, our financial condition and
other factors deemed relevant by the Board of
Directors.
Securities Authorized for Issuance under Equity Compensation
Plans
We do
not currently have a stock option or grant plan.
Recent Issuance of Unregistered Securities
Unregistered
securities issued during the year ended December 31, 2019 were
previously reported on our Quarterly Reports on Form 10-Q or our
Current Reports on Form 8-K.
All of
the unregistered securities were issued and sold in reliance upon
the exemption from registration contained in Section 4(a)(2) of the
Securities Act of 1933 (the “Act”). These securities
may not be offered or sold in the United States in the absence of
an effective registration statement or exemption from the
registration requirements under the Act. The investors are
accredited investors and there was no general
solicitation.
18
ITEM 6 – SELECTED
FINANCIAL DATA
As a
smaller reporting company, we are not required to provide the
information required by this Item.
ITEM 7 –
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Our
Management’s Discussion and Analysis contains not only
statements that are historical facts, but also statements that are
forward-looking (within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934). Forward-looking statements are, by their very nature,
uncertain and risky. These risks and uncertainties include
international, national and local general economic and market
conditions; demographic changes; our ability to sustain, manage, or
forecast growth; our ability to successfully make and integrate
acquisitions; existing government regulations and changes in, or
the failure to comply with, government regulations; adverse
publicity; competition; 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 Annual Report 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.
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 these areas, we developed a
line of topical hemp oil pain relief products. We began selling
these pain relief products in January of 2017 with a single product
and currently have eight topical pain relief products.
Through
our continued development and expansion of proprietary drugs and
treatments, we have reorganized the company into six technology
centers: (1) extra-corporeal treatment of disease, (2) PTSD
treatment, (3) anti-breast cancer drugs, (4) hemp oil/CBD pain
relief products, (5) anti-aging treatments, and (6) chemical and
alcohol addiction treatment.
Pain Management Products
We have
developed and are now marketing all-natural, hemp-oil based
products that are pesticide and solvent free. These products
provide generalized, neuropathic and localized topical pain
relief.
We
offer alternatives to dangerous and addictive opioid pain killers.
In the past year we have rapidly expanded our product offerings,
and we now offer nine pain relief products that are leaders in the
pain-relief field:
1.
96-hour pain relief
patch with 50 mg of hemp oil extract, the highest level of pain
relief ingredient available in the industry;
2.
120 mg/ 10 ml
water-based roll-on applicator;
3.
150 mg/ 10 ml
oil-based roll-on applicator;
4.
150 mg/ 30 ml
oil-based pump spray applicator;
5.
150 mg/ 2 oz.
ointment;
6.
200 mg/10 ml
oil-based roll-on applicator;
7.
500 mg/ 30 ml
oil-based pump spray applicator; and
8.
500 mg/ 1 oz.
ointment.
We
believe that this eight-product array positions us favorably in the
topical pain relief marketplace. The topical pain relief market is
expected to grow rapidly in the next few years, due to the focus on
reduction of opioid pain medication use, and we intend to be a
major player in that expanding market.
19
Now
that we have completed the product design and development phase, we
are aggressively embarking on the product distribution and sales
phase by:
1.
Expanding our
online sales beyond our web site at: www.painreliefmeds.com;
2.
Securing the
services of a social media coordinator to ensure that we optimize
that promotional tool;
3.
Recruiting a
National Sales Director to coordinate our growing field of sales
representatives and distributors;
4.
Securing the
services of a sales organization with expertise in marketing to the
government and senior care facilities;
5.
Engaging an
investor relations firm to facilitate television appearances
designed to gain optimum exposure for our company and its
products;
6.
Appearing in radio
and television broadcasts, and podcasts, via Uptick Newswire
periodically to ensure that our story gets out to the public;
and
7.
Retaining the
services of marketing firms to promote the Company and its products
through social media.
8.
Establishing
relationships with major distributors who will blanket specialized
sales outlets such as pharmacies, doctors’ offices,
convenience stores, long-term care facilities, large retail
facilities, etc.
In
addition, we are in the process of seeking potential partnerships
outside the United States to manufacture and market our products
worldwide. We anticipate that these partnerships will make new
markets available to us and allow us to rapidly increase our sales
and profitability through favorable manufacturing
arrangements.
Customers indicate
that they were able to achieve pain relief from our products and
stop the use of opioid painkillers. Public awareness of the harmful
side effects of opioid painkillers has grown significantly, and
many states have initiated litigation against drug makers claiming
they misrepresented the risks of opioid painkillers. As patients
seek to cut back their use of opioid painkillers and look for
alternatives, we believe demand for our products will see an
increase. 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.
Through
the remainder of 2020, 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 six 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, 2019 and
2018 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.
During the year ended December 31, 2019, we completed the sale of convertible notes to raise
$333,400 of net proceeds from several investors. We cannot
be sure that sources of capital will be available to us for 2020.
However, without additional capital in the short term, we may not
be able to push forward in the production and marketing of our new
pain management products. Until we are able to grow revenues
sufficient to meet our operating expenses, we must continue to
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.
20
Results of Operations for the Year Ended December 31, 2019 and
2018
Introduction
We had
revenues of $14,281 and $39,795 for the years ended December 31,
2019 and 2018, respectively. Our operating expenses were $328,156
for the year ended December 31, 2019 compared to $618,910 for the
year ended December 31, 2018, a decrease of $290,754, or 47%. Our
operating expenses consisted of general and administrative expenses
and professional fees.
Revenues and Net Operating Loss
Our
revenues, operating expenses, and net operating loss for the years
ended December 31, 2019 and 2018 were as follows:
|
|
Year Ended
|
Year Ended
|
|
|
|
December 31,
|
December 31,
|
Increase /
|
|
|
2019
|
2018
|
(Decrease)
|
|
|
|
|
|
|
Revenue
|
$14,281
|
$39,795
|
$(25,514)
|
|
Cost of goods
sold
|
12,860
|
113,727
|
(100,867)
|
|
Gross profit
(loss)
|
1,421
|
(73,932)
|
75,353
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
General and
administrative
|
200,644
|
189,285
|
11,359
|
|
Professional
fees
|
127,512
|
429,625
|
(302,113)
|
|
Total operating
expenses
|
328,156
|
618,910
|
(290,754)
|
|
|
|
|
|
|
Net operating
loss
|
(326,735)
|
(692,842)
|
366,107
|
|
Other income
(expense)
|
(47,735)
|
293,956
|
(341,691)
|
|
|
|
|
|
|
Net
loss
|
$(374,470)
|
$(398,886)
|
$24,416
|
Revenues
The
Company was established on May 10, 2010, and its sales consist of
pain management products.
General and Administrative
General
and administrative expenses were $200,644 for the year ended
December 31, 2019, compared to $189,285 for the year ended December
31, 2018, an increase of 11,359, or 6%.
Professional Fees
Professional
fees expense was $127,512 for the year ended December 31, 2019,
compare to $429,625 for the year ended December 31, 2018, a
decrease of $302,113, or 70%. The decrease was primarily due to the
decrease of stock-based compensation issued to debt holders,
directors and consultants for services rendered. A total of
$296,944 of stock-based compensation was awarded during the year
ended December 31, 2018.
Net Operating Loss
Net
operating loss for the year ended December 31, 2019 was $326,735,
compared to $692,842 for the year ended December 31, 2018, a
decrease of $366,107, or 53%. Net operating loss decreased, as set
forth above, primarily due to a decrease in stock-based
compensation issued to note holders for services
rendered.
21
Other Income (Expense)
Other
income (expense) for the year ended December 31, 2019 was
$(47,735), compared to $293,956 for the year ended December 31,
2018, a decrease of $341,691, or 116%. Other income (expense)
consisted of interest and finance charges on debt and equity
financing and a change in the fair value of derivative liabilities
during the year ended December 31, 2019. Other income (expense)
consisted of interest and finance charges on debt and equity
financing, gain on early extinguishment of debt, and a change in
the fair value of derivative liabilities during the year ended
December 31, 2018. The net decrease was primarily due to a decrease
of $357,679 in the value of derivative liabilities related to
significant decreased convertible debt financing during the year
ended December 31, 2019, compared to the year ended December 31,
2018.
Net Loss
Net
loss for the year ended December 31, 2019 was $374,470, or $(0.01)
per share, compared to a net loss of $398,886, or $(0.11) per
share, for the year ended December 31, 2018, a decrease of $24,416,
or 6%.
Liquidity and Capital Resources
Introduction
During
the year ended December 31, 2019, because we generated limited
revenues, we had negative operating cash flows. Our cash on hand as
of December 31, 2019 was $71,197, which was derived from the sale
of convertible promissory notes to investors. Our monthly cash flow
burn rate has decreased from approximately $37,000 in 2018 to
approximately $28,700 in 2019. Although we have moderate short-term
cash needs, as our operating expenses increase, we will face strong
medium to long-term cash needs. We anticipate that these needs will
be satisfied through the issuance of debt or the sale of our
securities until such time as our cash flows from operations will
satisfy our cash flow needs.
Our
cash, current assets, total assets, current liabilities, and total
liabilities as of December 31, 2019 and December 31, 2018,
respectively, are as follows:
|
|
December 31,
2019
|
December 31,
2018
|
Change
|
|
|
|
|
|
|
Cash
|
$71,197
|
$86,827
|
$(15,630)
|
|
Total Current
Assets
|
93,720
|
159,787
|
(66,067)
|
|
Total
Assets
|
100,943
|
164,990
|
(64,047)
|
|
Total Current
Liabilities
|
1,933,761
|
2,312,382
|
(378,621)
|
|
Total
Liabilities
|
$1,933,761
|
$2,312,382
|
$(378,621)
|
Our
cash decreased by $15,630 as of December 31, 2019, compared to
December 31, 2018. Our total current assets decreased by $66,067
primarily because we recognized an allowance for inventory
obsolescence in 2019. Our total assets decreased by $64,047
primarily for the same reasons.
Our
current liabilities decreased by $378,621 as of December 31, 2019,
compared to December 31, 2018, primarily due to decreases in
accounts payable of $76,432, convertible notes payable of $148,889,
and derivative liabilities of $203,174. Our total liabilities
decreased by the same amount for the same reasons as we do not have
long term liabilities.
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 December 31, 2019 was $71,197, which was derived
from the sale of convertible promissory notes and common stock. Our
monthly cash flow burn rate is approximately $28,700. Although we
have moderate short-term cash needs, as our operating expenses
increase, we will face strong medium to long term cash needs. We
anticipate that these needs will be satisfied through the sale of
our securities until such time as our cash flows from operations
will satisfy our cash flow needs.
22
Sources and Uses of Cash
Operations
Our net
cash used in operating activities for the years ended December 31,
2019 and 2018 was $344,180 and $444,878, respectively, a decrease
of $100,698, or 22%. The primary uses of our cash were purchasing
inventory and operating our pain management business, along with
the public company compliance costs.
Investments
Our net
cash used in investing activities for the years ended December 31,
2019 and 2018 was $4,850 and $2,029, respectively, a decrease of
$2,821. The slight decrease reflected a lack of purchases of
property and equipment in 2019 compared to 2018.
Financing
Our net
cash provided by financing activities for the years ended December
31, 2019 and 2018 was $333,400 and $450,030, respectively, a
decrease of $116,630, or 26%. The decrease was primarily a result
of a decrease in proceeds from the sale of stock of $150,000 in
2019.
Critical Accounting Policies and Estimates
See
Note 1 to the Financial Statements for the year ended December 31,
2019 on page F-6 which is incorporated herein by
reference.
ITEM 7A –
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
As a
smaller reporting company, we are not required to provide the
information required by this Item.
23
ITEM 8 - FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2019 and 2018
(Audited)
|
F-2
|
|
|
|
|
Consolidated
Statements of Operations for the years ended December 31, 2019 and
2018 (Audited)
|
F-3
|
|
|
|
|
Consolidated
Statement of Stockholders’ Equity (Deficit) for the years
ended December 31, 2019 and 2018 (Audited)
|
F-4
|
|
|
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2019 and
2018 (Audited)
|
F-5
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
F-6 to
F-20
|
24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and
Stockholders of Premier Biomedical, Inc.
Opinion on the Financial Statements
We have audited the accompanying Consolidated balance sheets of Premier Biomedical, Inc. (the
Company) as of December 31, 2019 and 2018, and the related
Consolidated statements of operations,
stockholders’ equity (deficit), and cash flows for each of
the years in the two-year period ended December 31, 2019, and the
related notes (collectively referred to as the financial
statements). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 2019 and 2018, and the results of its
operations and its cash flows for each of the years in the two-year
period ended December 31, 2019, in conformity with accounting
principles generally accepted in the United States of
America.
Basis for Opinion
These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note
2 to the financial statements, the Company suffered losses from
operations which raise substantial doubt about its ability to
continue as a going concern. Managements plans regarding those
matters are also described in Note 2. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since
2011.
Houston, TX
May 15, 2020
F-1
|
PREMIER
BIOMEDICAL, INC.
|
||
|
CONSOLIDATED
BALANCE SHEETS
|
||
|
|
|
|
|
|
December 31,
|
December 31,
|
|
|
2019
|
2018
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$71,197
|
$86,827
|
|
Accounts
receivable
|
2,266
|
3,092
|
|
Inventory
|
13,126
|
25,985
|
|
Other current
assets
|
7,131
|
43,883
|
|
Total current
assets
|
93,720
|
159,787
|
|
|
|
|
|
Property and
equipment, net
|
7,223
|
5,203
|
|
|
|
|
|
Total
assets
|
$100,943
|
$164,990
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$187,966
|
$264,398
|
|
Accounts payable,
related parties
|
33,634
|
25,944
|
|
Accrued
interest
|
64,283
|
22,099
|
|
Convertible notes
payable, net of discounts of $297,881 and $-0- at December 31,
2019
|
|
|
|
and 2018,
respectively, including $85,189 of principal currently in
default
|
160,748
|
309,637
|
|
Derivative
liabilities
|
1,487,130
|
1,690,304
|
|
Total current
liabilities
|
1,933,761
|
2,312,382
|
|
|
|
|
|
Total
liabilities
|
1,933,761
|
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 December 31, 2019 and 2018,
respectively
|
2,000
|
2,000
|
|
Series B
convertible preferred stock, $0.001 par value, 1,000,000 shares
designated, 133,780
|
|
|
|
and 150,000 shares
issued and outstanding at December 31, 2019 and 2018,
respectively
|
134
|
150
|
|
Common stock,
$0.00001 par value, 1,000,000,000 shares authorized, 262,111,480
and
|
|
|
|
5,652,410 shares
issued and outstanding at December 31, 2019 and 2018,
respectively
|
2,621
|
57
|
|
Additional paid in
capital
|
15,264,595
|
14,572,754
|
|
Subscriptions
payable, consisting of 276,960 shares at December 31,
2018
|
-
|
5,345
|
|
Accumulated
deficit
|
(17,102,168)
|
(16,727,698)
|
|
Total stockholders'
equity (deficit)
|
(1,832,818)
|
(2,147,392)
|
|
|
|
|
|
Total liabilities
and stockholders' equity (deficit)
|
$100,943
|
$164,990
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
||
F-2
|
PREMIER
BIOMEDICAL, INC.
|
||
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||
|
|
|
|
|
|
For the Years
|
|
|
|
Ended December
31,
|
|
|
|
2019
|
2018
|
|
|
|
|
|
Revenue
|
$14,281
|
$39,795
|
|
Cost of goods
sold
|
12,860
|
113,727
|
|
Gross profit
(loss)
|
1,421
|
(73,932)
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
General and
administrative
|
200,644
|
189,285
|
|
Professional
fees
|
127,512
|
429,625
|
|
Total operating
expenses
|
328,156
|
618,910
|
|
|
|
|
|
Net operating
loss
|
(326,735)
|
(692,842)
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
Interest
expense
|
(392,549)
|
(415,287)
|
|
Gain on early
extinguishment of debt
|
-
|
6,750
|
|
Change in
derivative liabilities
|
344,814
|
702,493
|
|
Total other income
(expense)
|
(47,735)
|
293,956
|
|
|
|
|
|
Net
loss
|
$(374,470)
|
$(398,886)
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares
|
|
|
|
outstanding - basic
and fully diluted
|
52,402,912
|
3,505,464
|
|
|
|
|
|
Net loss per share
- basic and fully diluted
|
$(0.01)
|
$(0.11)
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
||
F-3
|
PREMIER
BIOMEDICAL, INC.
|
||||||||||
|
CONSOLIDATED
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
|
$5,632,410
|
$57
|
$14,572,754
|
$5,345
|
$(16,727,698)
|
$(2,147,392)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued on conversions
of preferred stock
|
-
|
-
|
(16,220)
|
(16)
|
4,689,556
|
47
|
(31)
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued on
subscriptions payable
|
-
|
-
|
-
|
-
|
276,960
|
3
|
5,342
|
(5,345)
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued on debt
conversions
|
-
|
-
|
-
|
-
|
251,492,554
|
2,514
|
364,777
|
-
|
-
|
367,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to derivative liability
due to debt conversions
|
-
|
-
|
-
|
-
|
-
|
-
|
321,753
|
-
|
-
|
321,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended
December 31, 2019
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(374,470)
|
(374,470)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31,
2019
|
2,000,000
|
$2,000
|
133,780
|
$134
|
262,111,480
|
$2,621
|
$15,264,595
|
$-
|
$(17,102,168)
|
$(1,832,818)
|
The accompanying
notes are an integral part of these consolidated financial
statements.
F-4
|
PREMIER
BIOMEDICAL, INC.
|
||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||
|
|
|
|
|
|
For the Years
|
|
|
|
Ended December
31,
|
|
|
|
2019
|
2018
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
Net
loss
|
$(374,470)
|
$(398,886)
|
|
Adjustments to
reconcile net loss
|
|
|
|
to net cash used in
operating activities:
|
|
|
|
Change in allowance
for inventory obsolescence
|
(265)
|
87,650
|
|
Depreciation
|
2,830
|
2,304
|
|
Gain on early
extinguishment of debt
|
-
|
(6,750)
|
|
Loss on debt
default provisions
|
-
|
25,500
|
|
Change in fair
market value of derivative liabilities
|
(344,814)
|
(702,493)
|
|
Amortization of
debt discounts
|
320,412
|
366,653
|
|
Stock based
compensation, related parties
|
-
|
272,585
|
|
Stock based
compensation
|
-
|
24,359
|
|
Decrease (increase)
in assets:
|
|
|
|
Accounts
receivable
|
826
|
(2,780)
|
|
Inventory
|
13,124
|
(28,872)
|
|
Other current
assets
|
36,752
|
(9,059)
|
|
Increase (decrease)
in liabilities:
|
|
|
|
Accounts
payable
|
(76,432)
|
(82,416)
|
|
Accounts payable,
related parties
|
7,690
|
(15,438)
|
|
Accrued
interest
|
70,167
|
22,765
|
|
Net cash used in
operating activities
|
(344,180)
|
(444,878)
|
|
|
|
|
|
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 sale
of stock, net of offering costs
|
-
|
150,000
|
|
Proceeds from
exercise of warrants, related party
|
-
|
30
|
|
Proceeds from
convertible notes payable
|
333,400
|
300,000
|
|
Net cash provided
by financing activities
|
333,400
|
450,030
|
|
|
|
|
|
NET CHANGE IN
CASH
|
(15,630)
|
3,123
|
|
CASH AT BEGINNING
OF PERIOD
|
86,827
|
83,704
|
|
|
|
|
|
CASH AT END OF
PERIOD
|
$71,197
|
$86,827
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATION:
|
|
|
|
Interest
paid
|
$1,971
|
$369
|
|
Income taxes
paid
|
$-
|
$-
|
|
|
|
|
|
NON-CASH INVESTING
AND FINANCING ACTIVITIES:
|
|
|
|
Value of debt
discounts
|
$329,311
|
$300,000
|
|
Value of derivative
adjustment due to debt conversions
|
$321,753
|
$199,627
|
|
Value of shares
issued for conversion of debt
|
$367,291
|
$215,619
|
|
Value of preferred
stock converted to common stock
|
$44,913
|
$-
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
|
||
F-5
Note 1 – Basis of Presentation and Significant Accounting
Policies
Nature of Business
Premier
Biomedical, Inc. (“the Company”) was incorporated in
the State of Nevada on May 10, 2010 (“Inception”). The
Company was formed to develop and market medications and procedures
that address a significant number of the most highly visible health
issues currently affecting mankind. Our current focus is primarily
on the development and distribution of our pain
products.
These
statements reflect all adjustments, consisting of normal recurring
adjustments, which in the opinion of management are necessary for
fair presentation of the information contained
therein.
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. For
the periods presented, potential dilutive securities had an
anti-dilutive effect and were not included in the calculation of
diluted net loss per common share.
Stock-Based Compensation
Under
FASB ASC 718-10-30-2, all share-based payments to employees,
including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure
is no longer an alternative. The Company’s stock-based
compensation consisted of the following during the years ended
December 31, 2019 and 2018,
respectively:
|
|
December 31,
|
December 31,
|
|
|
2019
|
2018
|
|
|
|
|
|
Warrants issued for
services, related parties
|
$-
|
$272,585
|
|
Warrants issued for
services
|
-
|
24,359
|
|
Total stock-based
compensation
|
$-
|
$296,944
|
F-6
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.
Advertising and Promotion
All
costs associated with advertising and promoting products are
expensed as incurred. These expenses were $51,613 and $66,244 for
the years ended December 31, 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 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
year ended December 31, 2019, have had or are expected to have a
significant impact on the Company’s financial
statements.
F-7
Note 2 – Going Concern
As
shown in the accompanying financial statements, the Company has
incurred net losses from operations resulting in an accumulated
deficit of $17,102,168, and had negative working capital of
($1,840,041) at December 31, 2019. These factors raise
substantial doubt about the Company’s ability to continue as
a going concern. Management is actively pursuing new products and
services to begin generating revenues. In addition, the Company is
currently seeking additional sources of capital to fund short term
operations. The Company, however, is dependent upon its ability to
secure equity and/or debt financing and there are no assurances
that the Company will be successful; therefore, without sufficient
financing it would be unlikely for the Company to continue as a
going concern.
The
financial statements do not include any adjustments that might
result from the outcome of any uncertainty as to the
Company’s ability to continue as a going concern. The
financial statements also do not include any adjustments relating
to the recoverability and classification of recorded asset amounts,
or amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going
concern.
Note 3 – Related Parties
Accounts Payable
The
Company owed $31,826 and $24,116 as of December 31, 2019 and 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 $733 and $753 as of December 31, 2019 and 2018,
respectively, to the Company’s CEO for reimbursable
expenses.
The
Company owed $1,075 as of December 31, 2019 and 2018 amongst
members of the Company’s Board of Directors for reimbursable
expenses.
Common Stock Warrants Granted
On
December 15, 2018, the Company granted warrants to the following
officers and directors, which will allow them to purchase shares of
our common stock in the amounts indicated: William Hartman (842,000
shares); Mitchell Felder (842,000 shares), Heidi Carl (500,000
shares), John Borza (579,000 shares), Jay Rosen (52,500 shares),
Patricio Reyes (500,000 shares) and John Pauly (52,500 shares). The
exercise price of the foregoing warrants is nine cents ($0.09) per
share. The warrants are exercisable over seven (7) years. The total
fair value of the 3,368,000 common stock warrants using the
Black-Scholes option-pricing model is $272,585, or $0.08093 per
share, based on a volatility rate of 211%, a risk-free interest
rate of 2.72% and an expected term of 3.5 years, and was expensed
upon issuance.
On
December 15, 2018, we also issued warrants to purchase a total of
two hundred and eighty-eight thousand (288,000) shares of our
common stock amongst four members of our Scientific Advisory Board.
The exercise price of the foregoing warrants is nine cents ($0.09)
per share. The warrants are exercisable over seven (7) years. The
total fair value of the 288,000 common stock warrants using the
Black-Scholes option-pricing model is $24,359, or $0.08458 per
share, based on a volatility rate of 211%, a risk-free interest
rate of 2.81% and an expected term of 7 years, and was expensed
upon issuance.
Exercise of Common Stock Warrants, Related Party
On
November 5, 2018, the Company issued 12,000 shares of common stock
pursuant to the exercise of warrants by the Company’s
Chairman of the Board at $0.0025 per share for total proceeds of
$30.
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 December 31, 2019 and 2018, respectively:
|
|
Fair Value Measurements at
December 31, 2019
|
||
|
|
Level 1
|
Level 2
|
Level 3
|
|
Assets
|
|
|
|
|
Cash
|
$71,197
|
$-
|
$-
|
|
Total
assets
|
71,197
|
-
|
-
|
|
Liabilities
|
|
|
|
|
Convertible notes
payable, net of discounts
|
-
|
160,748
|
-
|
|
Derivative
liabilities
|
-
|
-
|
1,487,130
|
|
Total
liabilities
|
-
|
160,748
|
1,487,130
|
|
|
$71,197
|
$(160,748)
|
$(1,487,130)
|
F-8
|
|
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)
|
The
fair values of our related party debts are deemed to approximate
book value, and are considered Level 2 inputs as defined by
ASC Topic 820-10-35.
There
were no transfers of financial assets or liabilities between Level
1, Level 2 and Level 3 inputs for the years ended December 31,
2019 or 2018.
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.
F-9
Note 6 – Convertible Notes Payable
All notes outstanding, below, are currently in default due to
provisions within each note that require the Company reserve shares
issuable upon conversion. The Company does not currently have
enough shares issuable, relative to their total authorized shares
in order to fulfill these requirements.
Convertible
notes payable consists of the following at December 31, 2019 and
2018, respectively:
|
|
December 31,
|
December 31,
|
|
|
2019
|
2018
|
|
|
|
|
|
On October 3, 2019,
the Company received net proceeds of $25,000, carrying a $150,000
face value after a $125,000 commitment fee, pursuant to the first
tranche of the securities purchase agreement with Green Coast
Capital International SA (“First GCCI Note”) on a 12%
interest bearing; unsecured convertible promissory note; maturing
on October 3, 2020, with the first twelve (12) months of interest
guaranteed. 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. In addition, the holder is entitled to deduct
$1,000 from the conversion amount in each conversion to cover the
holder’s deposit fees.
|
$150,000
|
$-
|
|
|
|
|
|
On September 12,
2019, the Company received net proceeds of $22,000, carrying a
$25,750 face value, in exchange for a 12% interest bearing;
unsecured convertible promissory note maturing on
September 12, 2020 (“Third 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.
|
25,750
|
-
|
|
|
|
|
|
On August 15, 2019,
the Company received net proceeds of $40,000, carrying a $43,000
face value, in exchange for a 10% interest bearing; unsecured
convertible promissory note maturing on August 15, 2020
(“Fifth 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.
|
43,000
|
-
|
|
|
|
|
|
On August 2, 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 August 2, 2020
(“Fourth 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 July 2, 2019,
the Company received net proceeds of $31,400, carrying a $36,050
face value, in exchange for a 12% interest bearing; unsecured
convertible promissory note maturing on June 27, 2020
(“Second 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.
|
36,050
|
-
|
|
|
|
|
|
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. A total
of $39,900, consisting of $38,000 of principal and $1,900 of
interest, was converted into 45,969,063 shares of common stock from
October 28, 2019 through November 12, 2019.
|
-
|
-
|
|
|
|
|
|
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. A total of $10,360, consisting of
$8,860 of principal and $1,500 of holder’s deposit fees, was
converted into 15,600,000 shares of common stock from October 18,
2019 through November 5, 2019.
|
42,640
|
-
|
F-10
|
On March 26, 2019,
the Company received proceeds of $65,000 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.
A total of $71,400, consisting of $68,000 of principal and $3,400
of interest, was converted into 29,172,975 shares of common stock
from September 30, 2019 through October 21,
2019.
|
-
|
-
|
|
|
|
|
|
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 $121,863, consisting of 114,384 of principal and
$7,479, was converted into 135,741,667 shares of common stock over
various dates, between July 27, 2018 and
December 26, 2019. Currently in default.
|
5,616
|
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. A total of $32,553, consisting of $30,000 of principal and
$2,553 of interest, was converted into 11,110,400 shares of common
stock over various dates between August 8, 2019 and
September 3, 2019.
|
-
|
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. A total of $12,636 of principal was converted into 3,510,000
shares of common stock over various dates between
September 10, 2019 and
September 17, 2019.Currently in default.
|
17,364
|
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 $30,000 of principal was converted into an
aggregate of 4,262,416 shares of common stock at various dates
between January 2, 2019 and
August 15, 2019.
|
-
|
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
|
458,629
|
309,637
|
|
Less unamortized
derivative discounts:
|
297,881
|
-
|
|
Convertible notes
payable
|
160,748
|
309,637
|
|
Less: current
portion
|
160,748
|
309,637
|
|
Convertible notes
payable, less current portion
|
$-
|
$-
|
F-11
In
accordance with ASC 470-20 Debt with Conversion and Other Options,
the Company recorded total discounts of $484,211 and $300,000;
including $29,900 and $-0- of loan origination discounts, for the
variable conversion features of the convertible debts incurred
during the years ended December 31, 2019 and 2018,
respectively. The discounts are being amortized to interest expense
over the term of the debentures using the effective interest
method. The Company recorded $321,912 and $366,653 of interest
expense pursuant to the amortization of note discounts during the
years ended December 31, 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.