BIEI Premier Biomedical Inc (PK)

Premier Biomedical, Inc.

(Exact name of registrant as specified in its charter)

 

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

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:

 

– Cancer	– Fibromyalgia
– Multiple Sclerosis (MS)	– Traumatic Brain Injury (TBI)
– Neuropathic Pain	– Alzheimer’s Disease (AD)
– Amyotrophic Lateral Sclerosis (ALS/Lou Gehrig’s Disease)	– Blood Sepsis and Viremia

 

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.

 

 ______________________________

1

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.

 

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

 

The Company recognized interest expense for the years ended December 31, 2019 and 2018, respectively, as follows:

 

	December 31,	December 31,
	2019	2018
Interest on convertible notes	$68,666	$22,765
Amortization of debt discounts	321,912	366,653
Loss on default provisions	-	25,500
Interest on credit cards	1,971	369
Total interest expense	$392,549	$415,287

 

Note 7 – Derivative Liabilities

 

As discussed in Note 6 under Convertible Notes Payable, the Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date.

 

The fair values of the Company’s derivative liabilities were estimated at the issuance date and are revalued at each subsequent reporting date, using a lattice model. The Company recognized current derivative liabilities of $1,487,130 and $1,690,304 at December 31, 2019 and 2018, respectively. The change in fair value of the derivative liabilities resulted in a gain of $344,814 and $702,493 for the years ended December 31, 2019 and 2018, respectively, which has been reported within other income in the statements of operations. The gain of $344,814 for the years ended December 31, 2019 consisted of a gain of $207,756 due to the value attributable to the warrants and a gain in market value of $137,058 on the convertible notes. The gain of $702,493 for the year ended December 31, 2018 consisted of a gain of $766,632 due to the value attributable to the warrants and a net loss in market value of $64,139 on the convertible notes.

 

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

 

	Derivative
	Liability
	Total
Balance, December 31, 2017	$2,255,781
Increase in derivative value due to issuances of convertible promissory notes	336,643
Change in fair market value of derivative liabilities due to the mark to market adjustment	(702,493)
Debt conversions	(199,627)
Balance, December 31, 2018	$1,690,304
Increase in derivative value due to issuances of convertible promissory notes	463,393
Change in fair market value of derivative liabilities due to the mark to market adjustment	(344,814)
Debt conversions	(321,753)
Balance, December 31, 2019	$1,487,130

 

 

F-12

 

 

Key inputs and assumptions used to value the convertible debentures and warrants issued during the year ended December 31, 2019:

 

●

Stock price ranging from $0.0066 to $0.0004 during these periods would fluctuate with projected volatility.

●

The notes convert with variable conversion prices and fixed conversion prices (tainted notes).

●

An event of default would occur -0-% of the time, increasing 2% per month to a maximum of 10%.

●

The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company in the range of 294.1% - 428.3%.

●

The Company would redeem the notes -0-% of the time, increasing 1% per month to a maximum of 5%.

●

All notes are assumed to be extended at maturity – the time required to convert out this volume of stock.

●

A change of control and fundamental transaction would occur initially -0-% of the time and increase monthly by -0-% to a maximum of -0-%.

●

The monthly trading volume would average $370,728 to $351,905 and would increase at 1% per month.

●

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

●

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

●

Reset events were projected to occur by 3/31/20 – the option expires 5/30/20.

●

The stock price would fluctuate with an annual volatility. The projected annual volatility curve for each valuation period was based on the historical annual volatility of the company and the term remaining in the range 369.2% - 369.2%.

●

The Holder would exercise the warrant at maturity in 2020 if the stock price was above the reset exercise price.

 

Note 8 – Commitments and Contingencies

 

Collaborative Patent License Agreements

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

 

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

 

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

 

On October 31, 2017 we entered into an Agreement, Final Payment under Contract, and Release of all Claims, whereby we agreed to pay them a total of $326,336 arising out of the research and development agreements with an initial payment of $22,211, and monthly payments of varying amounts between $5,000 and $20,000 thereafter for twenty eight months until the balance is paid in full. Subject to the compliance of all terms, the intellectual property rights established and arising out of the collaborative agreements remain in full force and effect and the parties agreed to a mutual release upon the final contracted payment. The full amount of the liability has been recognized as accounts payable, with $135,024 outstanding as of the end of this period, which is currently in default.

 

 

F-13

 

 

Note 9 – Stockholders’ Equity

 

Reverse Stock Split

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

 

Convertible Preferred Stock

The Company has 10,000,000 authorized shares of Preferred Stock, of which 2,000,000 shares of $0.001 par value Series A Convertible Preferred Stock (“Series A Preferred Stock”) have been designated, and another 1,000,000 shares of $0.001 par value Series B Convertible Preferred Stock (“Series B Preferred Stock”) were designated on November 23, 2018. The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares sufficient to effect the conversions, and agreed to reserve no less than 225 million shares.

 

Convertible Preferred Stock, Series A

Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time after the issuance of such share into one (1) fully paid and non-assessable share of Common Stock. Each outstanding share of Series A Preferred Stock is entitled to one hundred (100) votes per share on all matters to which the shareholders of the Corporation are entitled or required to vote.

 

Convertible Preferred Stock, Series B

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

 

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

 

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

 

 

F-14

 

 

Common Stock Issuances for Series B Preferred Stock Conversions (2019)

On August 8, 2019, the Company issued 925,927 shares of common stock pursuant to the conversion of 2,500 of Series B Convertible Preferred Stock held by RedDiamond Partners. The stock was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On August 2, 2019, the Company issued 851,853 shares of common stock pursuant to the conversion of 2,300 of Series B Convertible Preferred Stock held by RedDiamond Partners. The stock was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On July 29, 2019, the Company issued 796,297 shares of common stock pursuant to the conversion of 2,150 of Series B Convertible Preferred Stock held by RedDiamond Partners. The stock was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On July 23, 2019, the Company issued 741,741 shares of common stock pursuant to the conversion of 2,470 of Series B Convertible Preferred Stock held by RedDiamond Partners. The stock was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On July 16, 2019, the Company issued 707,071 shares of common stock pursuant to the conversion of 3,500 of Series B Convertible Preferred Stock held by RedDiamond Partners. The stock was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On July 8, 2019, the Company issued 666,667 shares of common stock pursuant to the conversion of 3,300 of Series B Convertible Preferred Stock held by RedDiamond Partners. The stock was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Sale of Convertible Preferred Stock, Series B (2018)

On November 23, 2018, we sold 75,000 shares of Series B Convertible Preferred Stock to RedDiamond Partners LLC, and another 75,000 shares of Series B Convertible Preferred Stock to SEG-RedaShex, LLC for $150,000 in total. Pursuant to the sale, the purchasers have the right to participate in any future financing up to 100% of the financing for the next 12 months. We also agreed to refrain from issuing any shares of common stock or equivalents for 30 days after the sale. The agreement also prohibits the Company from entering into any agreement involving a Variable Rate Transaction for eight months after the sale. In addition, we agreed to grant the purchasers a most-favored nation provision whereby the purchasers may exchange their shares of Series B Preferred Stock for securities issued in a subsequent financing on the same terms and conditions. The purchasers also have anti-dilution rights that allow them to acquire shares of common stock at a lower conversion price if a person acquires shares of our common stock or equivalents at a price per share lower than the conversion price of the Series B Preferred Stock.

 

Common Stock

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

 

Common Stock Issuances for Debt Conversions (2019)

 

First Crown Bridge Partners Note

On various dates from October 18, 2019 through November 5, 2019, the Company issued a total of 15,600,000 shares of common stock pursuant to the conversion of $10,360, consisting of $8,860 of principal and $1,500 of selling fees, from the First Crown Bridge Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Second Power Up Lending Note

On various dates from October 28, 2019 through November 12, 2019, the Company issued a total of 45,969,063 shares of common stock pursuant to the conversion of $39,900, consisting of $38,000 of principal and $1,900 of interest, from the Second Power Up Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

First Power Up Lending Note

On various dates from September 30, 2019 through October 21, 2019, the Company issued a total of 29,172,975 shares of common stock pursuant to the conversion of $71,400 of convertible debt, consisting of $68,000 of principal and $3,400 of interest, from the First Power Up Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Third Red Diamond Note

On various dates from September 6, 2019 through December 26, 2019, the Company issued a total of 135,393,000 shares of common stock pursuant to the conversion of $95,943, consisting of $88,464 of principal and $7,479 of interest, from the Third RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

 

F-15

 

 

Second Red Diamond Note

On various dates from August 12, 2019 through September 3, 2019, the Company issued a total of 11,110,400 shares of common stock pursuant to the conversion of $32,553, consisting of $30,000 of principal and $2,553, from the Second RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Second SEG-RedaShex Note

On various dates from September 10, 2019 through September 17, 2019, the Company issued a total of 3,510,000 shares of common stock pursuant to the conversion of $12,636 of principal from the Second SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

First SEG-RedaShex Note

On various dates from January 2, 2019 through August 15, 2019, the Company issued a total of 4,262,416 shares of common stock pursuant to the conversion of $30,000 of principal from the First SEG-RedaShex Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Second Diamond Rock Note

On various dates from January 11, 2019 through June 7, 2019, the Company issued a total of 4,672,200 shares of common stock pursuant to the conversion of $66,207, consisting of $55,057 of principal and $11,150, from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

First Diamond Rock Note

On various dates from June 17, 2019 through June 27, 2019, the Company issued a total of 1,802,500 shares of common stock pursuant to the conversion of $8,292 of principal from the First Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Common Stock Issuances for Debt Conversions (2018)

On December 31, 2018, the Company granted 276,960 shares of common stock pursuant to the conversion of $5,345 of principal from the Second Diamond Rock Note. The shares were subsequently issued on January 1, 2019. As such, the $5,345 was presented as a subscription payable at December 31, 2018. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On December 12, 2018, the Company issued 258,193 shares of common stock pursuant to the conversion of $6,506 of interest from the First SEG Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On December 12, 2018, the Company issued 220,000 shares of common stock pursuant to the conversion of $4,598 of principal from the Second Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On November 30, 2018, the Company issued 211,550 shares of common stock pursuant to the conversion of $8,462 of principal from the First Diamond Rock Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

On November 12, 2018, the Company issued 150,000 shares of common stock pursuant to the conversion of $7,650 of principal from the First SEG Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

 

F-16

 

 

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

 

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

 

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

 

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

 

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

 

On September 24, 2018, the Company issued 172,176 shares of common stock pursuant to the conversion of $12,500 of principal from the First SEG Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Common Stock Issuances on Subscriptions Payable (2019)

On January 1, 2019, the Company issued 276,960 shares to DiamondRock, LLC for the conversion of $5,345 of debt on December 31, 2018.

 

Common Stock Issuances on Subscriptions Payable (2018)

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

 

Common Stock Warrants Exercised (2018)

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.

 

 

F-17

 

 

Note 10 – Common Stock Warrants

 

Common Stock Warrants Granted (2019)

No warrants were granted during the year ended December 31, 2019.

 

Common Stock Warrants Granted (2018)

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 (2018)

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.

 

Expiration of Common Stock Warrants, Related Party (2019)

A total of 11,760 warrants exercisable at $362.50 per share expired during the year ended December 31, 2019.

 

The following is a summary of information about the Common Stock Warrants outstanding at December 31, 2019.

 

				Shares Underlying
Shares Underlying Warrants Outstanding				Warrants Exercisable
		Weighted
	Shares	Average	Weighted	Shares	Weighted
Range of	Underlying	Remaining	Average	Underlying	Average
Exercise	Warrants	Contractual	Exercise	Warrants	Exercise
Prices	Outstanding	Life	Price	Exercisable	Price
$0.09-$62.50	3,890,000	5.87	$0.97	3,890,000	$0.97

 

The fair value of each warrant grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants under the fixed option plan:

 

	December 31,	December 31,
	2019	2018
Average risk-free interest rates	N/A	2.73%
Average expected life (in years)	N/A	3.78

 

The Black-Scholes option pricing model was developed for use in estimating the fair value of short-term traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock price volatility. Because the Company’s common stock warrants have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of its common stock warrants. During the years ended December 31, 2019 and 2018 there were no warrants granted with an exercise price below the fair value of the underlying stock at the grant date.

 

The weighted average fair value of warrants granted with exercise prices at the current fair value of the underlying stock was approximately $0.09 per warrant granted during the year ended December 31, 2018.

 

 

F-18

 

 

The following is a summary of activity of outstanding common stock warrants:

 

		Weighted
		Average
	Number of	Exercise
	Shares	Price
Balance, December 31, 2017	257,760	$29.85
Warrants granted	3,656,000	0.09
Warrants exercised	(12,000)	(0.0025)
Balance, December 31, 2018	3,901,760	$2.05
Warrants expired	(11,760)	(362.50)
Balance, December 31, 2019	3,890,000	$0.97
Exercisable, December 31, 2019	3,890,000	$0.97

 

Note 11 – Income Taxes

 

The Company accounts for income taxes under FASB ASC 740-10, which requires use of the liability method. FASB ASC 740-10-25 provides that deferred tax assets and liabilities are recorded based on the differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, referred to as temporary differences.

 

For the years ended December 31, 2019 and 2018, the Company incurred a net operating loss and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2019 and 2018, the Company had approximately $5,670,000 and $5,277,000 of federal net operating losses, respectively. The net operating loss carry forwards, if not utilized, will begin to expire in 2031.

 

The components of the Company’s deferred tax asset are as follows:

 

	December 31,	December 31,
	2019	2018
Deferred tax assets:
Net operating loss carry forwards	$1,190,700	$1,108,170
Net deferred tax assets before valuation allowance	$1,190,700	$1,108,170
Less: Valuation allowance	(1,190,700)	(1,108,170)
Net deferred tax assets	$-	$-

 

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

 

 

F-19

 

 

A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and state statutory income tax rate to pre-tax loss is as follows:

 

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

 

In accordance with FASB ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.

 

Note 12 – Subsequent Events

 

Common Stock Issuances for Debt Conversions

 

First Crown Bridge Partners Note

On various dates from February 4, 2020 through April 21, 2020, the Company issued a total of 371,401,700 shares of common stock pursuant to the conversion of $37,096, consisting of $31,596 of principal and $5,500 of selling fees, from the First Crown Bridge Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Third Power Up Lending Note

On various dates from January 8, 2020 through April 1, 2020, the Company issued a total of 196,477,777 shares of common stock pursuant to the conversion of $24,244 of principal from the Third Power Up Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Third Red Diamond Note

On various dates from January 2, 2020 through March 24, 2020, the Company issued a total of 169,990,001 shares of common stock pursuant to the conversion of $18,987, consisting of $2,434 of principal and $16,553, from the Third RedDiamond Note. The note was converted in accordance with the conversion terms; therefore, no gain or loss has been recognized.

 

Chairman of the Board of Directors’ Resignation

On May 2, 2020, Dr. Mitchell S. Felder resigned as the Company’s Chairman of the Board. The Company’s CEO, William Hartman, was appointed Interim Chairman.

 

Default Notice Received

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.

 

 

F-20

 

 

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

There are no events required to be disclosed under this Item.

 

ITEM 9A - CONTROLS AND PROCEDURES

 

(a)            

Disclosure Controls and Procedures

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of December 31, 2019, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2019, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in Item 9A(b).

 

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

 

(b)            

Management Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that:

 

●

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and any disposition of our assets;

●

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

●

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 Framework). Based on this assessment, Management identified the following three material weaknesses that have caused management to conclude that, as of December 31, 2019, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:

 

 

25

 

 

1.           We do not have a formal policy or written procedures for the approval, identification and reporting of related-party transactions. Our controls are not adequate to ensure that all material transactions and developments with related parties will be properly identified, approved and reported. In our assessment of our disclosure controls and procedures, management evaluated the impact of our failure to have policies and procedures for the identification, approval and reporting of related-party transactions and has concluded that the control deficiency that resulted represented a material weakness.

 

2.           We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. In our assessment of our disclosure controls and procedures, management evaluated the impact of our failure to have written documentation of our internal controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

 

3.           We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. In our assessment of our disclosure controls and procedures, management evaluated the impact of our failure to have segregation of duties and has concluded that the control deficiency that resulted represented a material weakness.

 

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

 

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only our management’s report in this Annual Report.

 

(c)            

Remediation of Material Weaknesses

 

To remediate the material weakness in our documentation, evaluation and testing of internal controls we plan to engage a third-party firm to assist us in remedying this material weakness once resources become available.

 

We also intend to remedy our material weakness with regard to insufficient segregation of duties by hiring additional employees in order to segregate duties in a manner that establishes effective internal controls once resources become available.

 

(d)            

Changes in Internal Control over Financial Reporting

 

No change in our system of internal control over financial reporting occurred during the period covered by this report, fourth quarter of the fiscal year ended December 31, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B – OTHER INFORMATION

 

There are no events required to be disclosed by the Item.

 

26

 

PART III

 

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Directors and Executive Officers

 

The following table sets forth the names, ages, and biographical information of each of our current directors and executive officers, and the positions with the Company held by each person, and the date such person became a director or executive officer of the Company. Our executive officers are elected annually by the Board of Directors. The directors serve one-year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Family relationships among any of the directors and officers are described below.

 

Name	Age	Position(s)
William A. Hartman	78	President, Chief Executive Officer, and acting Chairman since May 2, 2020
Dr. Mitchell S. Felder	66	Chairman of the Scientific Advisory Board (June 2010)
Heidi H. Carl	50	Chief Financial Officer, Secretary, Treasurer and Director (June 2010)
Dr. Patricio F. Reyes	73	Chief Technology Officer and Director (August 2016)
John S. Borza	66	Vice President and Director (August 2012)
Jay Rosen	66	Director (June 2010)
John Pauly	59	Director (December 2017)

 

William A. Hartman, age 78, is our President and Chief Executive Officer and a member of our Board of Directors. From March 2008 until June 2010, Mr. Hartman was not directly employed but was planning the formation of Premier Biomedical, Inc. From October 2006 to March 2008, Mr. Hartman was the Chief Operating Officer of Nanologix, Inc. From July 1991 to July 2000, Mr. Hartman was a Director at TRW Automotive. From 1984 to 1991, Mr. Hartman was Chief Engineer at TRW Automotive and from 1979 to 1984 he was Division Quality Compliance Manager at Ford Motor Company. At TRW Automotive, Mr. Hartman was one of the auto industry pioneers of the concept of grouping related components into systems and modules and shipping just-in-time to the vehicle assembly plants. He founded and headed a separate business group within TRW Automotive with plants in the U.S., Mexico and Europe with combined annual sales of $1.3 Billion. Academic credentials include a BSME degree from Youngstown State University and a MSIA degree (Industrial Administration/Management) from the University of Michigan.

 

Dr. Mitchell S. Felder, age 66, is Chairman of our Scientific Advisory Board. Dr. Felder was a member of our Board of Directors until his resignation on May 2, 2020. Dr. Felder is a practicing Board Certified Neurologist. Dr. Felder acquired a B.A. Degree from the University of Pennsylvania in 1975 and an M.D. Degree from the University of Rome, Faculty of Medicine in 1983. He has been Board Certified by both the American Academy of Clinical Neurology and the American Board of Psychiatry and Neurology. Dr. Felder has authored or co-authored six publications, three studies, and has 18 issued patents. Dr. Felder is the former President, Chairman, and founder of Infectech/Nanologix (from its founding in 1989 through March 2007)—growing the company from startup to a $100 million market cap. During the past five years, Dr. Felder has had as his principal occupation and employment work as an attending neurologist. Dr. Felder is presently an attending neurologist at the William Beaumont Army Medical Center in El Paso, Texas. Dr. Felder has more than 20 years of management experience.

 

Heidi H. Carl, age 50, is our Chief Financial Officer, Secretary, Treasurer, and a member of our Board of Directors. From May 2009 until June 2010, Ms. Carl was not directly employed but was working with Mr. Hartman in planning the formation of Premier Biomedical, Inc. From June 2007 to May 2009, Ms. Carl was the Product Development Specialist at General Motors Corporation. From May 2006 to May 2007, Ms. Carl was the Associate Marketing Manager at General Motors Corporation. From May 2003 to May 2006, Ms. Carl was the Marketing Specialist at General Motors Corporation and from May 1999 to May 2003, Ms. Carl was the District Area Parts Manager at General Motors Corporation. Academic credentials include a BSBA degree from Madonna University and an ASBA degree from Oakland Community College.

 

Dr. Patricio F. Reyes, MD, FAAN, age 73, is a board certified neurologist and neuropathologist, has served as the Chief Medical Officer and Board Member of the Retired National Football League Players Association since 2013. Dr. Reyes has been a board member of the Association of Ringside Physicians since 2008 and was previously its Chair of the Education Committee and 2009 Distinguished Educator. Dr. Reyes has worked as a neurologist and neuropathologist for the Phoenix VA Hospital since 2014. Dr. Reyes is the co-founder, Chief Medical Officer and Chair of the Scientific Advisory Board of Yuma Therapeutics, Inc. where he has worked since 2012. He is a Fellow of the American Academy of Neurology and was former Professor of Neurology and Neuropathology at Thomas Jefferson Medical School in Philadelphia, Pennsylvania, and Professor of Neurology, Pathology and Psychiatry at Creighton University School of Medicine in Omaha, Nebraska.

 

 

27

 

 

John S. Borza, PE, AVS, age 66, is our Vice President and was appointed to our Board of Directors on August 17, 2012. Mr. Borza is currently the President and Chief Executive Officer of Value Innovation, LLC, a consulting firm focused on value engineering and creative problem solving, where he has served since August 2009. Prior to Value Innovation, Mr. Borza was a Specialist with TRW Automotive from September 2007 to September 2009, and a Director at TRW Automotive from May 1999 to September 2007. Earlier in his career, Mr. Borza worked in R&D for 12 years on a variety of products and technologies in various capacities ranging from Engineer to Chief Engineer, before moving into launch and production support roles. Mr. Borza is an Altshuller Institute certified TRIZ Practitioner, and a SAVE International certified Associate Value Specialist. He is active in the local chapter of SAVE International and currently serves as the chapter Past-President. Mr. Borza holds a BS degree in Electrical Engineering and an MBA from the University of Michigan.

 

Jay Rosen, age 66, has been a member of our Board of Directors since our inception in June 2010. Mr. Rosen has been a partner at Rosen Associates, a real estate holding and management company, since 1971. He is also a partner at Midway Industrial Terminal, a real estate holding and management company, and has been since 2005. Mr. Rosen privately owns and manages the Rosen Farm, cellular towers and various other real estate properties, is the President of XintCorp, a small start-up company for developing intellectual property, and is a former member of the NY Mercantile Exchange and the New York Futures Exchange. Mr. Rosen studied economics and finance at New York University and Columbia University.

 

John Pauly, age 59, has served as Executive Vice President at HealthWarehouse.com, Inc., an online Verified Internet Pharmacy Practice Site (VIPPS), since October 2017. From January 2017 through March 2017, Mr. Pauly served as the interim Chief Executive Officer of HealthWarehouse.com. From January 2016 until his time at HealthWarehouse.com, he was the Chief Operating Officer of Specialty Medical Drug Store, also a VIPPS accredited online pharmacy business.

 

Since January 2014, Mr. Pauly has been an independent consultant and investor to businesses in the pharmaceutical industry. From August 2013 through December 2013, he was Vice President at Acton Pharmaceuticals where he was responsible for the strategy and operations to commercialize its first FDA approved product, handling all implementation activities through outsourced third-parties.

 

From January 2013 through August 2013, Mr. Pauly was a consultant to the Chief Executive Officer of Crown Laboratories, Inc., a fully integrated specialty pharmaceutical company. There he assisted in creating and implementing corporate strategy, and OTC and Rx drug development, manufacturing and commercialization.

 

Prior to his time at Crown Laboratories, Mr. Pauly was at Merz Pharmaceuticals, LLC, a specialty healthcare company and subsidiary of Merz Pharmaceuticals GmbH, where he served as Vice President of Commercial Operations from May 2011 to June 2012 and Executive Director of OCG Strategy and Operations from March 2009 to April 2011. His duties at Merz included management of a unit of 98 people covering a wide-range of business functions. He played a major role in corporate strategy and evaluating licensing and M&A opportunities.

 

Mr. Pauly has also served in a variety of management positions within the healthcare and pharmaceutical industries since 1990 and brings a wide range of skills and expertise to the Board of Directors.

 

Family Relationships

 

Heidi H. Carl is the daughter of William A. Hartman.

 

Other Directorships; Director Independence

 

Other than as set forth above, none of our officers and directors is a director of any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

 

For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCQB on which shares of common stock are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Officer” means a person other than an Executive Officer or employee of the Company or any other individual having a relationship which, in the opinion of the Company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. According to the NASDAQ definition, only Mr. Rosen is an independent director.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

 

To the Company’s knowledge, no officers, directors, or greater than ten percent shareholders failed to file, or filed late, required reports.

 

 

28

 

 

Board Committees

 

Our Board of Directors does not maintain a separate audit, nominating or compensation committee. Functions customarily performed by such committees are performed by its Board of Directors as a whole. We are not required to maintain such committees under the applicable rules of the OTCQB of the OTC Markets. We do not currently have an “audit committee financial expert” since we currently do not have an audit committee in place. We intend to create board committees, including an independent audit committee, in the near future. We have a Scientific Advisory Board that serves an advisory role to management and the Board of Directors.

 

              We do not currently have a process for security holders to send communications to the Board.

 

During the fiscal years ended December 31, 2019 and 2018, the Board of Directors met approximately on a bi-weekly basis. Only Mr. Rosen attended fewer than 75 percent of the meetings. We have no policy with regard to attendance at meetings of the Board of Directors.

 

Involvement in Certain Legal Proceedings

 

None of our officers or directors has, in the past ten years, filed bankruptcy, been convicted in a criminal proceeding or named in a pending criminal proceeding, been the subject of any order, judgment, or decree of any court permanently or temporarily enjoining him or her from any securities activities, or any other disclosable event required by Item 401(f) of Regulation S-K.

 

Code of Ethics

 

We have not adopted a written code of ethics, primarily because we believe and understand that our officers and directors adhere to and follow ethical standards without the necessity of a written policy.

 

Scientific Advisory Board

 

Our Board of Directors has established a Scientific Advisory Board that  assists management and the Board of Directors on an advisory basis with respect to the research, development, clinical, regulatory and commercial plans and activities relating to research, manufacture, use and sale of our pain management products and drug candidates. The Scientific Advisory Board meets on an ad hoc basis and may attend meetings of the Board at the Board’s request. Its current members are Mitchell S. Felder, MD, Patricio F. Reyes, MD, FAAN, Carl E. Meyer, DO, MBA, and Kathryn Meyer, DO. All members of the Scientific Advisory Board are doctors and have extensive knowledge, experience and training in the fields of medicine relevant to our business.

 

Scientific Advisory Board members are not entitled to receive compensation, but warrants or other benefits may be awarded at the discretion of the Board of Directors. We granted warrants, to purchase 500,000 shares of our common stock at an exercise price of $0.005 over seven (7) years from the grant date on December 22, 2017, to each of Carl Meyer and Katherine Meyer for their services on the Scientific Advisory Board.

 

ITEM 11 - EXECUTIVE COMPENSATION

 

Narrative Disclosure of Executive Compensation

 

Effective on September 28, 2012, we entered into employment agreements with our President and Chief Executive Officer, William A. Hartman, and our Chairman of the Scientific Advisory Board, Dr. Mitchell S. Felder. In December 2012, the Company and Dr. Felder agreed to terminate his employment agreement, effective as of its date of inception.

 

Pursuant to the employment agreement with Hartman, he will be compensated in the amount of $150,000 per year for the duration of the agreement. Pursuant to the agreement, Hartman has waived the salary and the accrual thereof in exchange for being issued a Common Stock Purchase Warrant whereby Hartman may purchase a maximum of 105,000 shares of our common stock at a purchase price of $1.45 per share. The agreement has a one-year term and provides for two (2) years of severance at his then-current salary in the event Hartman is terminated due to death, disability or without cause. Mr. Hartman is still employed under the terms of the agreement.

 

We do not currently have a written employment agreement with our other executives. All other executives are at-will employees or consultants whose compensation is set forth in the Summary Compensation Table below.

 

 

29

 

 

Summary Compensation Table

 

The following table sets forth information with respect to compensation earned by our Chief Executive Officer, President, and Chief Financial Officer for the years ended December 31, 2019 and 2018.

 

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation ($)	All Other Compensation ($)	Total ($)
William A.	2019	-0-	-0-	-0-	-0-	-0-	-0-	-0-	-0-
Hartman, Chief Executive Officer (1)	2018	-0-	-0-	-0-	68,146(2)	-0-	-0-	-0-	68,146
Heidi H. Carl,	2019	5,000	-0-	-0-	-0-	-0-	-0-	-0-	5,000
Chief Financial Officer(4)	2018	2,000	-0-	-0-	-0-	-0-	-0-	-0-	2,000

 

(1) 

Mr. Hartman does not receive a salary for his services as Chief Executive Officer.

(2) 

Option awards consist of warrants to purchase 842,000 shares of our common stock at an exercise price of $0.05 over seven (7) years from the grant date on December 15, 2018.

(3) 

Option awards consist of warrants to purchase 34,000 shares of our common stock at an exercise price of $1.25 over seven (7) years from the grant date on December 22, 2017.

(4) 

Ms. Carl does not receive a salary for her services as Secretary and Treasurer.

(5) 

Option awards consist of warrants to purchase 500,000 shares of our common stock at an exercise price of $0.09 over seven (7) years from the grant date on December 15, 2018.

(6) 

Option awards consist of warrants to purchase 24,000 shares of our common stock at an exercise price of $1.25 over seven (7) years from the grant date on December 22, 2017.

 

Officer and Director Compensation

 

On December 20, 2018, we issued 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), Patricio Reyes (500,000 shares), John Pauly (52,500 shares) and Jay Rosen (52,500 shares). We also issued warrants to purchase shares of our common stock to three members of our Scientific Advisory Board in the amounts indicated: Heleno Souza (131,000 shares), Carl Meyer (26,000 shares) and Katherine Meyer (26,000 shares). The exercise price of the foregoing warrants is Nine Cents ($0.09) per share. The warrants also have a cashless exercise option.

 

The warrants were issued with respect to services provided in 2018 and vested immediately upon issuance. The issuance of the warrants was fully approved by our Board of Directors on December 20, 2018, the date a fully executed resolution authorizing the issuance was delivered to us.

 

On December 22, 2017, we issued warrants to the following officers and directors, which will allow them to purchase shares of our common stock in the amounts indicated: William Hartman (8,500,000 shares); Mitchell Felder (8,500,000 shares), Heidi Carl (6,000,000 shares), John Borza (7,250,000 shares), Patricio Reyes (4,000,000 shares) and Jay Rosen (1,000,000 shares). We also issued warrants to purchase shares of our common stock to three members of our Scientific Advisory Board in the amounts indicated: Heleno Souza (2,500,000 shares), Carl Meyer (500,000 shares) and Katherine Meyer (500,000 shares). The exercise price of the foregoing warrants is One Half Cent ($0.005) per share. The warrants also have a cashless exercise option.

 

The warrants were issued with respect to services provided in 2017 and vested immediately upon issuance. The issuance of the warrants was fully approved by our Board of Directors on December 22, 2017, the date a fully executed resolution authorizing the issuance was delivered to us.

 

Also, on December 22, 2017, we issued a warrant to John Pauly as an initial incentive award following his appointment to the Board of Directors, which will allow him to purchase 2,000,000 shares of our common stock. The terms of this warrant are the same as those in the warrants issued to the other directors on this date, having an exercise price of One-Half Cent ($0.005) and a cashless exercise option.

 

We do not currently have an established policy to provide compensation to members of our Board of Directors for their services in that capacity. We intend to develop such a policy in the near future.

 

Outstanding Equity Awards at Fiscal Year-End

 

We do not currently have a stock option or grant plan.

 

30

 

 

ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of May 1, 2020, certain information with respect to the Company’s equity securities owned of record or beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 5% of each class of the Company’s outstanding equity securities; and (iii) all Directors and Executive Officers as a group.

 

Name and Address (1)	Common Stock Ownership	Percentage of Common Stock Ownership (2)	Series A Preferred Stock Ownership	Percentage of Series A Preferred Stock Ownership (3)
William A. Hartman (4)(10)	971,020(8)	*	1,000,000	50.0%
Dr. Mitchell S. Felder (4) (5)	19,225,508(9)	1.92%	1,000,000	50.0%
Heidi H. Carl (4)(10)	537,080(12)	*	-	-
Jay Rosen (4)	63,180(13)	*	-	-
John S. Borza (4)	5,619,904(11)	*	-	-
John Pauly(4) (6)	60,500(15)	*	-	-
Dr. Patricio Reyes(4) (7)	520,680(14)	*	-	-
All Officers and Directors as a Group (7 Persons)	26,997,872 (8)(9)(11)(12)(13)(14)(15)	2.69%	2,000,000	100.0%

 

* 

Less than 1%

(1) 

Unless otherwise indicated, the address of the shareholder is c/o Premier Biomedical, Inc.

(2) 

Unless otherwise indicated, based on 999,980,958 shares of common stock issued and outstanding. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person or group holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.

(3) 

Unless otherwise indicated, based on 2,000,000 shares of Series A Convertible Preferred Stock issued and outstanding.

(4) 

Indicates one of our officers or directors.

(5) 

Dr. Felder’s address is P.O. Box 1332, Hermitage, PA 16148. Dr. Felder was a member of our Board of Directors until his resignation on May 2, 2020.

(6) 

Mr. Pauly’s address is 900 Squire Oaks Drive, Villa Hills, KY 41017.

(7) 

Dr. Reyes’ address is 10618 North Eleventh Place, Phoenix, AZ 85020.

(8) 

Includes 4,000 shares of common stock that may be acquired upon the conversion of 1,000,000 shares of Series A Convertible Preferred Stock, 200 shares of common stock that may be acquired at $362.50 per share, 420 shares of common stock that may be acquired at $362.50 per share if the Company’s common stock reaches a closing bid price of $750.00 per share and remains at or above $750.00 per share for thirty (30) consecutive trading days on any and all markets or exchanges on which the Company’s common stock is traded, 6,400 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 4,000 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, 34,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 842,000 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(9) 

Includes 12,000 shares of common stock that may be acquired upon the exercise of warrants at $0.0025 per share, 4,000 shares of common stock that may be acquired upon the conversion of 1,000,000 shares of Series A Convertible Preferred Stock, 200 shares of common stock that may be acquired at $362.50 per share, 420 shares of common stock that may be acquired at $362.50 per share if the Company’s common stock reaches a closing bid price of $750.00 per share and remains at or above $750.00 per share for thirty (30) consecutive trading days on any and all markets or exchanges on which the Company’s common stock is traded, 6,400 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 4,000 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, 34,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 579,000 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(10) 

William A. Hartman is the father of Heidi H. Carl. Mr. Hartman disclaims ownership of shares held by his daughter.

(11) 

Includes 110 shares of common stock owned members of Mr. Borza’s household, 4,200 shares of common stock that may be acquired by Mr. Borza at $362.50 per share upon the exercise of warrants, 280 shares of common stock that may be acquired at $362.50 per share upon the exercise of warrants if the Company’s common stock reaches a closing bid price of $750.00 per share and remains at or above $750.00 per share for thirty (30) consecutive trading days on any and all markets or exchanges on which the Company’s common stock is traded, 4,800 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 2,400 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, 29,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 579,000 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

 

31

 

 

(12)

Includes 200 shares of common stock that may be acquired upon the exercise of warrants at $362.50 per share, 280 shares of common stock that can be acquired at $362.50 per share if the Company’s common stock reaches a closing bid price of $750.00 per share and remains at or above $750.00 per share for thirty (30) consecutive trading days on any and all markets or exchanges on which the Company’s common stock is traded, 5,600 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 3,000 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, 24,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 500,000 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(13)

Includes 200 shares of common stock that may be acquired upon the exercise of warrants at $362.50 per share, 1,600 shares of common stock that may be acquired upon the exercise of warrants at $62.50 per share, 800 shares of common stock that may be acquired upon the exercise of warrants at $12.50 per share, 4,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 52,500 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(14)

Includes 2,800 shares or the Company’s common stock that may be acquired upon the exercise of warrants at $62.50 per share, 1,400 per share, 16,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 500,000 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

(15)

Consists of 8,000 shares of common stock that may be acquired upon the exercise of warrants at $1.25 per share, and 52,500 shares of common stock that may be acquired upon the exercise of warrants at $0.09 per share.

 

Other than as set forth above, the issuer is not aware of any person who owns of record, or is known to own beneficially, five percent (5%) or more of the outstanding securities of any class of the issuer.

 

There are no current arrangements which will result in a change in control.

 

Recent Sale of Unregistered Securities

 

Equity Purchase Agreement

 

On October 4, 2019, we entered into an Equity Purchase Agreement dated October 3, 2019 with Green Coast Capital International SA, a Panama corporation, pursuant to which we agreed to sell, and Green Coast, or its assigns, agreed to purchase, up to Five Million Dollars ($5,000,000) of our common stock. Pursuant to the terms of the Purchase Agreement, we may issue a Put Notice directing Green Coast to purchase our common stock at a 10% discount to the lowest trade price of our common stock during the five (5) Trading Days immediately following the Clearing Date associated with our Put Notice and in an amount of the lesser of (i) $1,000,000 or (ii) 200% of the average daily trading volume of our common stock in the ten (10) Trading Days immediately preceding the date we give notice to Green Coast. We may issue multiple Put Notices to Green Coast, subject to these limitations, but we may not issue a Put Notice to Green Coast within ten (10) Trading Days of a prior Put Notice. We must have a registration statement in effect under the Securities Act that covers the resale of any shares of common stock sold to Green Coast pursuant to the Purchase Agreement.

 

Registration Rights Agreement

 

On October 4, 2019, in connection with the Purchase Agreement, we entered into a Registration Rights Agreement with Green Coast (the “Rights Agreement”), pursuant to which we agreed to register the resale of shares to be issued under the Purchase Agreement. We filed the required registration statement on December 10, 2019, but later withdrew it on January 8, 2020.

 

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

License Agreements

 

On May 12, 2010, we entered into two separate license agreements. One license agreement was entered into with Altman Enterprises, LLC, wherein we obtained certain exclusive rights in (i) proprietary technology that is the subject of one pending PCT patent application relating to the treatment of auto-immune diseases, and (ii) the Feldetrex® trademark. The other license agreement was entered into with Marv Enterprises, LLC, wherein we obtained certain exclusive rights in proprietary technology that is the subject of two PCT patent applications relating to the treatment of blood borne carcinomas and sequential extracorporeal treatment of blood. Authority to execute the license agreements on behalf of Altman and Marv is vested in Dr. Mitchell S. Felder, the Chairman of our Scientific Advisory Board. Because the licensors are controlled by one of our directors, there may exist a conflict of interest in decisions made by the Company with respect to the licenses.

 

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 already 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. Licensor shall have 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 licensor may pay said expenses and our licensed rights in those countries will revert to the licensor.

 

As of December 31, 2019, our sales did not include any products using the licensed technology and thus have not paid any license fees. We have, however, reimbursed expenses associated with the technology we have licensed, and owe them an additional $31,826.

 

 

32

 

 

Stock Issuances

 

Preferred Stock

 

On January 2, 2016, two of our officers and directors, William A. Hartman and Mitchell Felder, each exercised warrants to acquire one million (1,000,000) shares of Series A Convertible Preferred Stock each. Each share of Series A Convertible Preferred Stock is convertible, at the election of the holder thereof, into one (1) share of our common stock, and has one hundred (100) votes per share. We issued the warrants on June 21, 2010 and they had an exercise price of $0.001 per share.

 

The Preferred Stock also contains protective provisions as follows:

 

The Company may not take any of the following actions without the approval of a majority of the holders of the outstanding Series A Convertible Preferred Stock: (i) effect a sale of all or substantially all of the Company’s assets or which results in the holders of the Company’s capital stock prior to the transaction owning less than fifty percent (50%) of the voting power of the Company’s capital stock after the transaction, (ii) alter or change the rights, preferences, or privileges of the Series A Convertible Preferred Stock, (iii) increase or decrease the number of authorized shares of Series A Convertible Preferred Stock, (iv) authorize the issuance of securities having a preference over or on par with the Series A Convertible Preferred Stock, or (v) effectuate a forward or reverse stock split or dividend of the Company’s common stock.

 

Warrant Exercise

 

On November 5, 2018, we issued 12,000 shares of common stock, restricted in accordance with Rule 144, to Mitchell Felder, a then-director of the Company, upon the exercise of warrants at $0.0025 per share.

 

On November 22, 2017, we issued 28,000 shares of common stock, restricted in accordance with Rule 144, to William Hartman, an officer and director of the Company, upon the exercise of warrants at $0.0025 per share.

 

On December 20, 2016, we issued 24,000 shares of common stock, restricted in accordance with Rule 144, to each of William Hartman and Mitchell Felder, officers and directors of the Company, upon the exercise of warrants at $0.0025 per share.

 

On August 19, 2016, we issued 16,000 shares of common stock, restricted in accordance with Rule 144, to each of William Hartman and Mitchell Felder, officers and directors of the Company, upon the exercise of warrants at $0.0025 per share.

 

ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES

 

M&K CPAS, PLLC (“M&K”) was the Company’s independent registered public accounting firm for the years ended December 31, 2019 and 2018 and has served the Company as its independent registered public accounting firm since our inception.

 

Audit and Non-Audit Fees

 

The following table presents fees for professional services rendered by M&K for the audit of the Company’s annual financial statements for the years ended December 31, 2019 and 2018.

 

	Years Ended December 31,
	2019	2018
Audit Fees (1)	$10,372	$12,000
Audit Related Fee (2)	13,500	13,000
Tax Fees	-	-
All Other Fees	-	-
Total	$23,872	$25,000

 

(1)           Audit fees were principally for audit services.

 

(2)           Audit related fees were principally for work performed in the preparation and review of the Company’s quarterly reports on Form 10-Q.

 

Of the fees described above for the years ended December 31, 2019 and 2018, all were approved by the entire Board of Directors.

 

33

 

PART IV

 

ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1)                      

Financial Statements

 

The following financial statements are filed as part of this report:

 

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

10.5 (1)		Common Stock Purchase Warrant issued to Mitchell Felder
10.6 (1)		Common Stock Purchase Warrant issued to William A. Hartman
10.7 (3)		First Addendum to License Agreement dated August 17, 2011 with Marv Enterprises, LLC.
10.8 (3)		Frist Addendum to License Agreement dated August 17, 2011 with Altman Enterprises, LLC.
10.9 (4)		Collaboration Agreement with the University of Texas System dated May 9, 2012
10.10 (5)		Employment Agreement with William A. Hartman, dated September 28, 2012
10.11 (6)		Cooperative Research and Development Agreement with U.S. Army Medical Research and Material Command
10.13 (7)		Patent License Agreement dated March 4, 2015
10.13 (8)		Amendment No. 1 to Patent License Agreement dated June 19, 2015.
10.14 (10)		Form of 8% Convertible Promissory Note, dated March 1, 2018
10.15 (10)		Securities Purchase Agreement, dated March 1, 2018, by and among the Company, RedDiamond Partners LLC and SEG-RedaShex, LLC
10.16 (10)		Registration Rights Agreement, dated March 1, 2018, by and among the Company, RedDiamond Partners LLC and SEG-RedaShex, LLC
10.17 (16)		Securities Purchase Agreement, dated November 23, 2018, by and between the Company and each of RedDiamond Partners LLC and SEG-RedaShex, LLC
10.18 (12)		Securities Purchase Agreement with Power Up Lending Group Ltd. dated March 26, 2019
10.19 (12)		Convertible Promissory Note with Power Up Lending Group Ltd. dated March 26, 2019
10.20 (13)		Securities Purchase Agreement with Crown Bridge Partners, LLC entered into on March 27, 2019
10.21 (13)		Convertible Promissory Note with Crown Bridge Partners, LLC entered into on March 27, 2019
10.22 (13)		Securities Purchase Agreement with Power Up Lending Group, Ltd. entered into on April 23, 2019
10.23 (13)		Convertible Promissory Note with Power Up Lending Group, Ltd. entered into on April 23, 2019
10.24 (13)		Securities Purchase Agreement with Power Up Lending Group, Ltd. entered into on June 7, 2019
10.25 (13)		Convertible Promissory Note with Power Up Lending Group, Ltd. entered into on June 7, 2019
10.26 (14)		Equity Purchase Agreement dated October 3, 2019 with Green Coast Capital International SA
10.27 (14)		Registration Rights Agreement dated October 3, 2019 with Green Coast Capital International SA
10.28 (14)		Convertible Promissory Note dated October 3, 2019 with Green Coast Capital International SA

10.29 (15)		Technology Acquisition and Financing Agreement dated May 8, 2020
10.30 (15)		Intellectual Property Agreement dated May 12, 2020
10.31 (15)		Third Addendum to License Agreement with Marv Enterprises, LLC dated May 11, 2020
101.INS		XBRL Instance Document
101.SCH		XBRL Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.DEF		XBRL Definition Linkbase Document
101.LAB		XBRL Labels Linkbase Document
101.PRE		XBRL Presentation Linkbase Document

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Premier Biomedical, Inc.
Dated: May 15, 2020		/s/ William A. Hartman
	By:	William A. Hartman
	Its:	Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Dated: May 15, 2020		/s/ William A. Hartman
	By:	William A. Hartman
	Its:	Chief Executive Officer and Director
Dated: May 15, 2020		/s/ Heidi H. Carl
	By:	Heidi H. Carl
	Its:	Chief Financial Officer, Treasurer and Principal Accounting Officer
Dated: May 15, 2020		/s/ John Pauly
	By:	John Pauly, Director
Dated: May 15, 2020		/s/ John S. Borza
	By:	John S. Borza, Director

 

37