UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2018March 31, 2019

¨ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission file number 333-204857

1620 Beacon Place, Oxnard, California 93033

(Address of principal executive offices)

(805) 824-0410

(Issuer’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

On November 12, 2018,May 13, 2019, we had 25,845,87130,547,469 shares of common stock, par value $0.001 per share (the “Common Stock”) issued and outstanding.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CURE PHARMACEUTICAL HOLDING CORP.

Condensed Consolidated Balance Sheets

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CURE PHARMACEUTICAL HOLDING CORP.

Condensed Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended September 30,March 31, 2019 and 2018 and 2017

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CURE PHARMACEUTICAL HOLDING CORP.

Condensed Consolidated Statements of Cash FlowsChanges in Stockholders’ Deficit (Unaudited)

For the NineThree Months Ended September 30,March 31, 2019 and 2018 and 2017

										Additional
		Common Stock								Paid-in				Stock				Accumulated				Noncontrolling
		Shares				Par				Capital				Payable				Deficit				Interest				Total
Balance, December 31, 2018			26,784,019			$	26,785			$	23,424,737			$	645,575			$	(29,269,000	)		$	16,412			$	(5,155,491	)
Issuance of common stock for professional services			86,744				87				165,371				355,952												521,410
Issuance of common stock for extension of maturity dates relating to convertible promissory notes			105,000				105				320,744																320,849
Issuance of common stock for conversion of convertible promissory notes			2,844,156				2,844				8,620,784				938,260												9,561,888
Issuance of common stock from the equity incentive plan			130,208				130				(130	)															-
Issuance of common stock for cash			416,667				416				499,584																500,000
Issuance of common stock for cancellation of accounts payable															64,520												64,520
Warrants granted											3,035,190																3,035,190
Beneficial conversion features											801,331																801,331
Fair value of stock options and restricted stock granted											230,291																230,291
Noncontrolling interest of Oak Therapeutics, Inc.																							(6,691	)			(6,691	)
Net loss																			(10,028,168	)							(10,028,168	)
Balance, March 31, 2019			30,366,794			$	30,367			$	37,097,902			$	2,004,307			$	(39,297,168	)		$	9,721			$	(154,871	)

										Additional
		Common Stock								Paid-in				Stock				Accumulated				Noncontrolling
		Shares				Par				Capital				Payable				Deficit				Interest				Total
Balance, December 31, 2017			23,901,252			$	23,902			$	16,483,632			$	324,995			$	(18,868,599	)		$	46,885			$	(1,989,185	)
Issuance of common stock for professional services			50,000				50				73,950				1,228,333												1,302,333
Warrants granted											37,137																37,137
Beneficial conversion features											646,126																646,126
Noncontrolling interest of Oak Therapeutics, Inc.																							(6,676	)			(6,676	)
Net loss																			(1,901,836	)							(1,901,836	)
Balance, March 31, 2018			23,951,252			$	23,952			$	17,240,845			$	1,553,328			$	(20,770,435	)		$	40,209			$	(1,912,101	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CURE PHARMACEUTICAL HOLDING CORP.

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Three Months Ended March 31, 2019 and 2018

		For the Three Months Ended
		March 31, 2019				March 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(10,034,859	)		$	(1,908,512	)
Adjustment to reconcile net loss to net cash used in operating activities:
Stock based compensation - services			91,833				-
Stock based compensation - prepaid			468,146				237,689
Stock issued for amending convertible promissory notes			320,850				-
Loss on conversion of convertible promissory notes			3,659,518				-
Warrant expense from convertible promissory notes			2,173,056				-
Depreciation and amortization			40,437				34,954
Amortization of loan discounts			488,274				360,089
Recovery of bad debt expense			(7,500	)			-
Inventory reserve for obsolesce			2,436				-
Change of fair value in derivative liabilities			152,620				(24,777	)
Fair value of vested stock options			230,291				-
Warrants granted for commission expense			590,933				37,137
Warrants granted for broker fee expense			271,201				-
Change in other assets and liabilities:
Accounts receivable			110,299				(35,543	)
Inventory			(4,461	)			(24,991	)
Prepaid expenses and other assets			41,466				58,813
Other assets			10,684				8,687
Accounts payable			151,747				14,225
Accrued expenses			193,128				53,621
Deferred revenue			(72,000	)			35,022
License fees			97,500				-
Cash used in operating activities			(1,024,401	)			(1,153,586	)
Cash flows from investing activities
Purchase in intangible assets			(21,180	)			(6,638	)
Acquisition of property and equipment, net			(23,122	)			(15,549	)
Cash used in investing activities			(44,302	)			(22,187	)
Cash flows from financing activities
Proceeds from convertible notes payable			3,425,000				2,025,000
Proceeds from common stock issuance			500,000				-
Repayment of convertible notes payable			(725,000	)			-
Repayment of loans payable			(38,283	)			(116,899	)
Cash provided by financing activities			3,161,717				1,908,101
Net increase in cash and cash equivalents			2,093,014				732,328
Cash and cash equivalents, beginning of period			500,962				108,249
Cash and cash equivalents, end of period		$	2,593,976			$	840,577
Supplemental cash flow information
Cash paid for interest and income taxes:
Interest		$	81,341			$	19,973
Income taxes		$	-			$	-
Non-cash financing activities:
Common stock related to prepaid expense		$	-			$	1,323,562
Warrants granted for discount on convertible promissory notes		$	-			$	646,127
Common stock issued for conversion of promissory notes and accrued interest		$	5,373,781			$	-
Common stock payable for note conversion		$	528,589			$	-
Common issued for settlement of accounts payable		$	64,520			$	-
Beneficial conversion features for convertible promissory notes		$	801,331			$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2018MARCH 31, 2019

(UNAUDITED)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Business Operations

CURE Pharmaceutical Holding Corp. (the “Company”) was incorporated in the State of Nevada on May 15, 2014. The Company was formerly named Makkanotti Group Corp. which was formed to engage in the business of manufacturing food paper bags in Nicosia, Cyprus.

On November 7, 2016, the board of directors and the majority stockholder of the then outstanding shares of the registrant’s common stock executed a written consent to change the registrant’s name to CURE Pharmaceutical Holdings Corp. from Makkanotti Group Corp. The Certificate of Amendment to Articles of Incorporation was filed with the State of Nevada on November 30, 2016.

Our wholly owned subsidiary and operating business,, its wholly-owned subsidiaries, CURE Pharmaceutical Corporation located in Oxnard, California was originally incorporated in July 2011.

The Company(“CURE Pharmaceutical”) and its 63% majority owned subsidiary Oak Therapeutics, Inc. (“Oak”) (collectively (the “Company,” “we,” “our,” “us,” or “CURE”) is aan emerging growth company focusing on drug formulation and delivery technology company that researches and manufactures novel dosage forms to improve drug safety, efficacy and patient adherence. Our mission is to improve lives by redefining how medications are delivered and experienced. Our business strategy is to develop products using our proprietary technology, license the product rights to partners responsible for clinical development, regulatory approval, marketing and sales and retain exclusive manufacturing rights. We operate a 25,000 sqftsquare foot cGMP manufacturing plant in Oxnard, CA.

Our technology platform includes oral dissolving film (ODF) and transdermal formulations. We apply our technology to pharmaceutical drugs and dietary supplements. ODF products are about the size of a postage stamp and composed of excipients such as polymers, stabilizers, lipids and surfactants which are all generally recognized as safe. They can be designed to deliver active ingredients to the gastrointestinal tract (GI) when placed on the tongue and swallowed, or directly to the blood stream when placed under the tongue (sublingual) or on the inner lining of the cheek and lip (buccal).

OurWe currently have two commercial strategy seeks to mitigate risk by pursuing a diversified model.

1. Dietary supplements. We manufacture select dietary supplements that complement our portfolioproducts and align with our mission which are white labeled and distributed by third parties. Dietary supplements are regulated under the Dietary Supplement Health and Education Act of 1994 (DSHEA) under which supplements are effective by the FDA for Good Manufacturing Practices under 21 CFR Part 111 but do not require FDA approval. By developing, manufacturing and selling dietary supplements, we can generate modest short term revenue while improving our production capabilities and generating platform-wide intellectual property.

2. Pharmaceuticals. We partner with companies that are responsible for clinicalseveral development regulatory approval, marketing and sales of the products. We provide the Chemistry, Manufacturing, and Controls (CMC) documentation required for regulatory submissions and in some instances, we may conduct preclinical and clinical testing. Deal terms may include upfront licensing fees, development costs, milestone payments, royalties and exclusive manufacturing rights. Within this category, we are further diversifying risk and return by pursuing both competitive differentiation of marketed drugs (product life cycle opportunities) and improved pharmacokinetics of investigational drugs. While we currently commercially manufacture dietary supplements in our facility, we are undertaking steps to scale up manufacturing of pharmaceutical drugs for clinical and commercial use.programs underway:

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3. Cannabinoids. We are researching and developing drugsBackground

CURE, formerly known as Makkanotti Group Corp, was incorporated in the cannabinoid familyState of molecules.Nevada on May 15, 2014. The oral bioavailabilityCompany was originally formed to engage in the business of cannabinoids is very low duemanufacturing food paper bags in Nicosia, Cyprus. On November 7, 2016, the Company changed its name to extensive gutCURE Pharmaceutical Holding Corp.

On November 7, 2016, the Company, in a reverse take-over transaction, acquired CURE Pharmaceutical Corporation (“CURE Pharmaceutical”), a specialty pharmaceutical and liver metabolism. Consequently, potencybioscience company based in California that specializes in drug delivery technologies, by executing a Share Exchange Agreement and release times are unpredictableConversion Agreement (“Exchange Agreement”) by and inconsistent. Moreover, cannabinoids don’t readily dissolve in water which addsamong the Company and a holder of a majority of the issued and outstanding capital stock of the registrant prior to dosing difficultiesthe closing (the “Majority Stockholder”), on the one hand, and discrepancies. In addition to improving bioavailability, CUREfilm technology enablesCURE Pharmaceutical, a California corporation, all of the loadingshareholders of combinations of cannabinoidsCURE Pharmaceutical’s issued and other plant extracts that, together, provide maximum therapeutic benefit. Development and manufacturing of cannabinoid drugs are regulated by the FDAoutstanding share capital (the “CURE Pharm Shareholders”) and the Drug enforcement Agency (DEA). A research license filed withholders of certain convertible promissory notes of CURE Pharmaceutical (“CURE Pharm Noteholders”), on the DEA in January 2018 was determined to be submitted in error given our proposed activities.other hand. Hereinafter, this share exchange transaction is described as the “Share Exchange.” As such, we have applied for a Schedule 1 manufacturer license withresult of the DEA which is under review.Share Exchange, CURE Pharmaceutical became a wholly owned subsidiary of the Company, and the CURE Pharm Shareholders and CURE Pharm Noteholders became the controlling shareholders of the Company.

4. Underserved patient populations. ConsistentFor accounting purposes, CURE Pharmaceutical was the surviving entity. The transaction was accounted for using the reverse acquisition method of accounting. As a result of the recapitalization and change in control, CURE Pharmaceutical was the acquiring entity in accordance with our mission of improving the lives of all people in need, regardless of geography or economic status, weASC 805, Business Combinations.

We licensed our technology available to a private company, Oak Therapeutics (“Oak”), to develop products for sale in the developing world (“Territory”). On November 10, 2017, we received 269,000 shares of Oak as consideration for an exclusive license to our majority-owned subsidiary,patent rights in the Territory, along with a royalty-free non-exclusive license to any improvements made by Oak. As a result of this transaction, we owned approximately 63% of Oak’s outstanding shares and have consolidated Oak’s financial statements as of the fourth quarter 2017. Due to the lack of performance by Oak Therapeutics, forunder the development of novel drug formulations for patientslicense agreement, on April 15, 2019, we terminated all contractual relationships with Oak, including the license and surrendered our Oak shares to Oak. Further information can be found in developing nations such as a rapidly dissolving film to treat tuberculosis.NOTE 15 – SUBSEQUENT EVENTS.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PrincipalBasis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity.

Principle of Consolidation and Basis of Presentation

The condensed consolidated financial statements include the accounts of CURE Pharmaceutical Holding Corp (“CPHC”), its wholly-owned subsidiary, CURE Pharmaceutical Corporation (“CURE”) and its 63% majority owned subsidiary Oak Therapeutics, Inc. (“OAK”), collectively referred to as (“CURE”, “we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s film strip product represents the principal operations of the Company.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2018,March 31, 2019, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30,March 31, 2019 and 2018, and 2017, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal period ended December 31, 20172018 filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2018.April 1, 2019.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates.

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Cash and Cash Equivalents

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. As of September 30, 2018March 31, 2019 and December 31, 2017,2018, the Company had no cash equivalents. At September 30, 2018March 31, 2019 and December 31, 2017,2018, the Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions.

Investment in Associates

An associate is an entity over which the Company has significant influence through a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or joint control over those policies.

The results of assets and liabilities of associates are incorporated in the condensed consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Company’s share of the net assets of the associate, less any impairment in the value of the investment. Losses of an associate in excess of the Company’s interest in that associate are not recognized. Additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognized at the date of acquisition is recognized as goodwill. The goodwill is included within the carrying amount of the investment.

On January 8, 2016, the Company received 50% ownership in Cure Innovations, Inc (“CI”). CI was created in 2015 by IncuBrands Studio, Inc (“IncuBrands”). The Company and IncuBrands each own 50% of the common stock of CI. The Company and IncuBrands entered into a Joint Venture agreement in 2013 to distribute several OTF products utilizing IncuBrands marketing and contacts in various industries as well as utilize the Company’s technology and capabilities of manufacturing OTF’s. On December 28, 2018, in agreement with IncuBrands, the Company dissolved CI as we did not see a viable future relating to this joint venture.

On December 6, 2016, the Company entered into a Joint Venture Agreement (“Joint Venture”) with Pace Wellness, Inc. (“Pace”) to jointly develop three Active Pharmaceutical Ingredients (“API”) within the nonprescription and/or Over-the-Counter (OTC) medicines specifically utilizing the Company’s patented and proprietary CUREFilm™ Technology. The three API’s to be jointly developed are Diphenhydramine HCL, Omeprazole and a third API to be determined at a later date (“Products”). Pace shall be the exclusive global distributor of the Products under the Solves Strips® branding or other private or branded labels. All benefits, advantages, and liabilities derived from, or incurred in respect of the Joint Venture shall be borne by the parties in proportion of their respective participating interests of 50/50 equal interest. As of September 30, 2018,March 31, 2019, the Company has only contributed $5,000 to the Joint Venture. The Company is looking to dissolve this Joint Venture due to Pace’s insolvency and we are no longer looking to develop these Products.

Property and Equipment

The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred. Depreciation has been provided using the straight-line method on the following estimated useful lives:

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Accounts Receivable

Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. At March 31, 2019 and December 31, 2018, management determined that an allowance was necessary which amounted to approximately $0 and $7,500, respectively.

Inventory

Inventory is stated at the lower of cost or net realizable value. The Company determines the cost of its inventory, which includes amounts related to materials, direct labor, and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period and writes down any excess and obsolete inventories to their realizable value in the period in which the impairment is first identified.

Impairment of Long-Lived Assets

Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying valuereview all of our long-lived asset groups whenassets for impairment indicators ofthroughout the year and perform detailed testing whenever impairment exist and recognize anindicators are present. In addition, we perform detailed impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset.testing for indefinite-lived intangible assets, at least annually, at December 31. When necessary, we record charges for impairments. Specifically:

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There was

Management determined that no impairment on our long-lived assets during the threeindicators were present and nine month periods ended September 30, 2018 and 2017.that no impairment charges were necessary as of March 31, 2019 or December 31, 2018.

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue Recognition”. The Company adopted Topic 606 using a modified retrospective approach for the years ended December 31, 2017 and will beprior and has been applied prospectively in the Company’s financial statements frombeginning January 1, 2018 forward.2018. Revenues under Topic 606 are required to be recognized either at a “point in time” or “ over“over time”, depending on the facts and circumstances of the arrangement, and will be evaluated using a five-step model. The adoption of Topic 606 did not have a material impact on the Company’s financial statements, at initial implementation nor will it have a material impact on an ongoing basis. 

To achieve the core principle of Topic 606, we perform the following steps:

We derive revenues from two primary sources: products and services. Product revenue includes the shipment of product according to the agreement with our customers. Services include research and development contracts for the development of OTF products utilizing our CureFilm™ Technology or our other proprietary technologies. Rarely, contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices are typically estimated based on observable transactions when these services are sold on a standalone basis.

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The Company’s consulting researchformulation and product development income include services for the development of OTF products utilizing our CureFilm™ Technology. Most of ourOur development contracts have up to four phases. Revenue is recognized based on progress toward completion of the performance obligation in each phase. The method to measure progress toward completion requires judgment and is based on the nature of the products or services to be provided. The Company generally uses the input method to measure progress for its contracts because it best depicts the transfer of assets to the customer, which occurs as the Company incurs costs for the contracts. Under the cost-to-cost measure of progress, the progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenue is recorded proportionally as costs are incurred. Costs to fulfill these obligations mainly include materials, labor, supplies and consultants.

Deferred revenue is shown separately in the condensed consolidated balance sheets. At September 30,March 31, 2019 and December 31, 2018 we had deferred revenuerevenues of $404,517. At December 31, 2017, we had deferred revenue of $361,462.$311,275 and $383,275, respectively.

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Advertising Expense

The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying statements of operations. The Company recordeddid not record advertising costs of $45,775 and $144,598 for the three and nine monthmonths periods ended September 30, 2018, respectively. The Company recorded advertising costs of $8,567March 31, 2019 and $13,062, for the three and nine month periods ended September 30, 2017, respectively.2018.

Research and Development

Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred. The Company recorded research and development expenses of $291,624$360,870 and $1,094,993$426,529 for the three and nine monthmonths periods ended September 30,March 31, 2019 and 2018, respectively. The Company recorded research and development expenses of $239,663 and $664,931 for the three and nine month periods ended September 30, 2017, respectively.

Income Taxes

The Company utilizes FASB ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

The Company generated a deferred tax asset through net operating loss carry-forward. However, a valuation allowance of 100% has been established due to the uncertainty of the Company’s realization of the net operating loss carry forward prior to its expiration.

Stock-Based Compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.

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Convertible Debentures

Beneficial Conversion Feature

If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 ““Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.

Derivative Liabilities

ASC 815-40 (formerly SFAS No. 133 “Accounting for derivative instruments and hedging activities”), requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 (formerly EITF 00-19 “Accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock”) to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula and present value pricing. At September 30, 2018March 31, 2019 and December 31, 2017,2018, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement of operations and comprehensive loss.

Fair Value Measurements

The Company adopted the provisions offollows FASB ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), which definesfor assets and liabilities measured at fair value as used in numerouson a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting pronouncements,principles that require the use of fair value measurements and establishes a framework for measuring fair value and expands disclosure ofabout such fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

ASC 820 defines fair value as the exchange price that would be received forto sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants onat the measurement date. Additionally, ASC 820 also establishes a fair value hierarchy, which requires an entity tothe use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:are prioritized below:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

Level 1:	Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:	Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:	Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

The Company has no assets or liabilities valued atcarrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable, accrued expenses and notes and loans payable approximate their estimated fair market value based on the short-term maturity of these instruments. The carrying amount of the notes and convertible promissory notes approximates the estimated fair value for these instruments as management believes that such notes constitute substantially all of the Company’s debt and the interest payable on a recurring basis.the notes approximates the Company’s incremental borrowing rate. We measured the liability for price adjustable warrants and embedded derivative features in the convertible notes, using the probability adjusted Black-Scholes option pricing model (“Black-Scholes”), which management has determined approximates values using more complex methods, using Level 3 inputs. (See Note 10)

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Basic and diluted lossNet Loss per shareCommon Share

Basic net loss per common share is computed by dividing the net loss to common stockholders for the period by the weighted average number of common shares outstanding during the period.period, excluding any unvested restricted stock awards. Diluted net loss per share includes the effect of common stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive. Net loss is computed by dividing the net lossadjusted for the period bydilutive effect of the weighted averagechange in fair value liability for price adjustable warrants, if applicable.

The following number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares, which consist of stock options and warrants, have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.net income (loss) since such inclusion would be anti-dilutive: