Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Mar. 25, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Entity Registrant Name | CURE PHARMACEUTICAL HOLDING CORP. | ||
Entity Central Index Key | 0001643301 | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Entity Voluntary Filers | No | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | true | ||
Entity Current Reporting Status | Yes | ||
Document Period End Date | Dec. 31, 2020 | ||
Entity Filer Category | Non-accelerated Filer | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 | ||
Entity Ex Transition Period | true | ||
Entity Common Stock Shares Outstanding | 59,517,936 | ||
Entity Public Float | $ 62,767,794 | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Entity Interactive Data Current | Yes |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash | $ 1,725 | $ 4,096 |
Accounts receivable, net | 224 | 142 |
Note receivable, net | 0 | 0 |
Inventory, net | 449 | 156 |
Prepaid expenses and other assets | 1,452 | 1,794 |
Total current assets | 3,850 | 6,188 |
Property and equipment, net | 2,074 | 641 |
Finance lease right-of-use assets, net | 52 | 63 |
Operating lease right-of-use assets, net | 343 | 0 |
Investment | 509 | 259 |
Goodwill | 13,868 | 9,178 |
Intellectual property and patents, net | 1,711 | 1,808 |
In-process research and development, net | 14,288 | 14,288 |
Customer relationships | 6,755 | 0 |
Tradename, net | 2,447 | 0 |
Non-compete, net | 404 | 0 |
Other assets | 58 | 35 |
Total assets | 46,359 | 32,460 |
Current liabilities: | ||
Accounts payable | 2,135 | 1,260 |
Accrued expenses | 680 | 223 |
Payroll liabilities | 308 | 0 |
Sales tax payable | 311 | 0 |
Finance lease payable | 12 | 11 |
Operating lease payable | 93 | 0 |
Loan payable | 265 | 127 |
Paycheck protection program loan | 605 | 0 |
Related party payable | 1,040 | 0 |
Notes payable | 800 | 50 |
Convertible promissory notes | 550 | 550 |
Fair value convertible promissory notes, net | 6,674 | 0 |
Derivative liability | 0 | 91 |
Contract liabilities | 994 | 456 |
Contingent share considerations | 0 | 9,068 |
Total current liabilities | 14,467 | 11,836 |
License fees | 80 | 90 |
Finance lease payable | 40 | 52 |
Operating lease payable | 278 | 0 |
Fair value convertible promissory notes, net | 7,010 | 0 |
Contingent share considerations | 3,205 | 6,975 |
Total liabilities | 25,080 | 18,953 |
Commitments and Contingencies (see Note 20) | 0 | 0 |
Stockholders' equity: | ||
Common stock: $0.001 par value; authorized 150,000,000 shares; 59,476,268 and 38,001,543 shares issued and outstanding as of December 31, 2020 and 2019, respectively | 60 | 38 |
Additional paid-in capital | 101,807 | 63,035 |
Common stock issuable | 665 | 1,066 |
Accumulated deficit | (81,253) | (50,632) |
Total stockholders' equity | 21,279 | 13,507 |
Total liabilities and stockholders' equity | $ 46,359 | $ 32,460 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2020 | Dec. 31, 2019 |
Stockholders' equity | ||
Common stock, shares par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 59,476,268 | 38,001,543 |
Common stock, shares outstanding | 59,476,268 | 38,001,543 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Revenue: | ||
Product sales, net of discounts and refunds | $ 1,744 | $ 361 |
PPE sales | 9 | 0 |
Consulting research & development income | 232 | 247 |
Shipping and other sales | 66 | 15 |
Total revenues | 2,051 | 623 |
Cost of goods sold: | ||
Cost of goods sold | 1,076 | 231 |
Gross profit | 975 | 392 |
Operating expenses: | ||
Research and development expenses | 2,789 | 2,308 |
Selling, general and administrative expenses | 11,365 | 10,119 |
Change in fair value of contingent stock consideration | 5,779 | 1,657 |
Total operating expenses | 19,933 | 14,084 |
Net operating loss before other income (expense) | (18,958) | (13,692) |
Other income (expense): | ||
Interest income | 37 | 57 |
Other income | 0 | 15 |
Gain on deconsolidation | 0 | 81 |
Gain from settlement of payables | 61 | 0 |
Change in fair value of derivative liability | 91 | 527 |
Change in fair value of convertible promissory notes | (9,380) | 0 |
Other expense | 0 | (590) |
Interest expense | (2,472) | (4,111) |
Loss on conversion of convertible promissory notes | 0 | (3,660) |
Total other expense | (11,663) | (7,681) |
Net loss before income taxes | (30,621) | (21,373) |
Provision for income taxes | 0 | 0 |
Net Loss | (30,621) | (21,373) |
Net loss attributable to non-controlling interest | 0 | (10) |
Net loss attributable to Cure Pharmaceutical Holding Corp | $ (30,621) | $ (21,363) |
Net loss per share | ||
Basic | $ (0.65) | $ (0.62) |
Diluted | $ (0.65) | $ (0.62) |
Weighted average common shares outstanding | ||
Basic | 47,308,158 | 34,540,461 |
Diluted | 47,308,158 | 34,540,461 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Common Stock Issuable | Accumulated Deficit | Noncontrolling Interest |
Balance, shares at Dec. 31, 2018 | 26,784,019 | |||||
Balance, amount at Dec. 31, 2018 | $ (5,155) | $ 27 | $ 23,425 | $ 646 | $ (29,269) | $ 16 |
Issuance of common stock for professional services, shares | 495,719 | |||||
Issuance of common stock for professional services, amount | 1,326 | $ 1 | 1,356 | (31) | ||
Issuance of common stock for extension of maturity dates relating to convertible promissory notes, shares | 105,000 | |||||
Issuance of common stock for extension of maturity dates relating to convertible promissory notes, amount | 321 | $ 0 | 321 | |||
Issuance of common stock for conversion of convertible promissory notes, shares | 3,129,879 | |||||
Issuance of common stock for conversion of convertible promissory notes, amount | 9,562 | $ 3 | 9,559 | |||
Issuance of common stock for cancellation of accounts payable, shares | 34,876 | |||||
Issuance of common stock for cancellation of accounts payable, amount | 70 | $ 0 | 70 | |||
Issuance of common stock for cash, shares | 1,153,790 | |||||
Issuance of common stock for cash, amount | 2,495 | $ 1 | 2,494 | |||
Issuance of common stock from the equity incentive plan, shares | 475,832 | |||||
Issuance of common stock from the equity incentive plan, amount | 0 | $ 0 | 0 | |||
Issuance of common stock for exercise of warrants, shares | 92,428 | |||||
Issuance of common stock for exercise of warrants, amount | 60 | $ 0 | 60 | |||
Issuance of common stock for acquisition of Chemistry Holdings, Inc, shares | 5,700,000 | |||||
Issuance of common stock for acquisition of Chemistry Holdings, Inc, amount | 19,038 | $ 6 | 19,032 | |||
Issuance of common stock for purchase of patents, shares | 30,000 | |||||
Issuance of common stock for purchase of patents, amount | 0 | $ 0 | 43 | (43) | ||
Common stock shares to be issued for issuance of note payable | 91 | 91 | ||||
Common stock shares to be issued for purchase of intellectual property | 157 | 157 | ||||
Common stock shares to be released from escrow and issued for earnouts from acquisition of Chemistry Holdings, Inc. | 246 | 246 | ||||
Warrants granted for debt and services | 3,761 | 3,761 | ||||
Beneficial conversion features on convertible promissory notes | 801 | 801 | ||||
Fair value of stock options and restricted stock granted | 2,032 | 2,032 | ||||
Fair value of restricted stock units granted | 81 | 81 | ||||
Noncontrolling interest of Oak Therapeutics, Inc. | (10) | (10) | ||||
Deconsolidation of Oak Therapeutics, Inc. | (6) | (6) | ||||
Net loss | (21,373) | (21,363) | ||||
Balance, shares at Dec. 31, 2019 | 38,001,543 | |||||
Balance, amount at Dec. 31, 2019 | 13,507 | $ 38 | 63,035 | 1,066 | (50,632) | 0 |
Issuance of common stock for professional services, shares | 281,250 | |||||
Issuance of common stock for professional services, amount | 563 | $ 1 | 717 | (155) | ||
Issuance of common stock from the equity incentive plan, shares | 194,016 | |||||
Issuance of common stock from the equity incentive plan, amount | 22 | $ 0 | 22 | |||
Warrants granted for debt and services | 119 | 119 | ||||
Fair value of stock options and restricted stock granted | 2,507 | 2,507 | ||||
Fair value of restricted stock units granted | 332 | 332 | ||||
Net loss | (30,621) | (30,621) | ||||
Issuance of common stock from exercise of warrants, shares | 708,467 | |||||
Issuance of common stock from exercise of warrants, amount | 1,418 | $ 1 | 1,417 | |||
Issuance of common stock from settlement with Chemistry Holdings, Inc., shares | 12,058,623 | |||||
Issuance of common stock from settlement with Chemistry Holdings, Inc., amount | 21,701 | $ 12 | 21,935 | (246) | ||
Issuance of common stock from conversion of convertible promissory notes, shares | 1,323,278 | |||||
Issuance of common stock from conversion of convertible promissory notes, amount | 2,196 | $ 1 | 2,195 | |||
Issuance of common stock from acquisition of Sera Labs, Inc., shares | 6,909,091 | |||||
Issuance of common stock from acquisition of Sera Labs, Inc., amount | 9,535 | $ 7 | 9,528 | |||
Balance, shares at Dec. 31, 2020 | 59,476,268 | |||||
Balance, amount at Dec. 31, 2020 | $ 21,279 | $ 60 | $ 101,807 | $ 665 | $ (81,253) | $ 0 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Consolidated Statements of Cash Flows | ||
Net loss | $ (30,621) | $ (21,373) |
Adjustment to reconcile net loss to net cash used in operating activities: | ||
Stock based compensation - services | 563 | 769 |
Stock based compensation - prepaid | 0 | 1,255 |
Stock issued from equity incentive plan | 22 | 0 |
Stock issued for amending convertible promissory notes | 0 | 321 |
Gain from settlement of accounts payable | (62) | (15) |
Gain from desconsolidation of Oak Therapeutics, Inc. | 0 | (81) |
Change in fair value of contingent share consideration | 5,779 | 1,657 |
Change in fair value of convertible promissory notes | 9,380 | 0 |
Loss on conversion of convertible promissory notes | 0 | 3,660 |
Warrant expense from convertible notes | 0 | 2,173 |
Depreciation and amortization | 908 | 577 |
Amortization of right of use asset | 31 | 2 |
Amortization of loan discounts | 1,500 | 1,255 |
Bad debt expenses | 46 | 200 |
Recovery of bad debt expense | 0 | (8) |
Inventory reserve for obsolescence | 292 | 1 |
Change of fair value in derivative liabilities | (91) | (527) |
Fair value of vested stock options and restricted stock | 2,839 | 2,115 |
Warrants granted for commission expense | 0 | 1,178 |
Warrants granted for broker fee expense | 119 | 410 |
Change in operating assets and liabilities: | ||
Accounts receivable | (59) | (32) |
Inventory | (147) | (119) |
Prepaid expenses and other assets | 300 | (1,314) |
Other assets | (2) | 35 |
Accounts payable | 493 | 231 |
Accrued expenses | 118 | (633) |
Payroll liabilities | 308 | 0 |
Sales tax payable | 29 | 0 |
Finance lease payable | (11) | (2) |
Operating lease payable | (21) | 0 |
Contract liabilities | (1,425) | 73 |
License fees | (10) | 90 |
Cash used in operating activities | (9,722) | (8,102) |
Cash flows from investing activities | ||
Investment in company | (250) | (259) |
Purchase of intangible assets | (15) | (50) |
Proceeds from common stock issuance for acquisition of Chemistry Holdings, Inc. | 0 | 8,487 |
Proceeds from common stock issuance for acquisition of Sera Labs, Inc. | 1,357 | 0 |
Acquisition of property and equipment, net | (673) | (408) |
Collection of notes receivable | 1,000 | 0 |
Purchase of notes receivable | (1,550) | (200) |
Cash provided by (used in) investing activities | (131) | 7,570 |
Cash flows from financing activities | ||
Proceeds from convertible notes payable | 5,000 | 3,425 |
Proceeds from common stock issuance | 0 | 2,495 |
Proceeds from loans payable | 204 | 127 |
Proceeds from notes payable | 1,850 | 0 |
Proceeds from related party payable | 150 | 0 |
Proceeds from payroll protection program loan | 399 | 0 |
Proceeds from exercise of warrants | 1,418 | 60 |
Repayment of convertible notes payable | 0 | (1,225) |
Repayment of notes payable | (1,100) | (650) |
Repayment of related party payable | (250) | 0 |
Repayment of loans payable | (189) | (105) |
Cash provided by financing activities | 7,482 | 4,127 |
Net (decrease) increase in cash and cash equivalents | (2,371) | 3,595 |
Cash and cash equivalents, beginning of year | 4,096 | 501 |
Cash and cash equivalents, end of year | 1,725 | 4,096 |
Cash paid for interest and income taxes: | ||
Interest | 3 | 90 |
Income taxes | 0 | 0 |
Non-cash investing and financing activities: | ||
Common stock issued for conversion of promissory notes and accrued interest | 2,196 | 5,902 |
Common stock payable for purchase of intellectual property | 0 | 157 |
Common stock issued for settlement of accounts payable | 0 | 70 |
Fixed assets received from the acquisition of Chemistry Holdings, Inc | 0 | 83 |
Patents received from the acquisition of Chemistry Holdings, Inc | 0 | 650 |
In-process research and development received from the acquisition of Chemistry Holdings, Inc. | 0 | 14,460 |
Goodwill resulting from the acquisition of Chemistry Holdings, Inc. | 0 | 9,178 |
Contingent share considerations for acquisition of Chemistry Holdings, Inc. | 0 | 14,632 |
Liabilities assumed from the acquisition of Chemistry Holdings, Inc. | 0 | 1,189 |
Convertible promissory note payable eliminated from the acquisition of Chemistry Holdings, Inc. | 0 | 2,000 |
Liabilities released as a result of deconsolidation of Oak Therapeutics, Inc. | 0 | 76 |
Non-controlling interest released as a result of deconsolidation of Oak Therapeutics, Inc. | 0 | 7 |
Beneficial conversion features | 0 | 801 |
Common stock to be issued for note payable | 0 | 91 |
Common stock to be issued for Chemistry Holdings, Inc. earn-out | 0 | 246 |
Issuance of common stock for acquisition of Chemistry Holdings, Inc. | 0 | 19,038 |
Common stock issued for settlement of earnout liabilities from the acquisition of Chemistry Holdings, Inc. | 21,701 | 0 |
Assets received from acquisition of The Sera Labs, Inc. | 1,830 | 0 |
Goodwill received from acquisition of The Sera Labs, Inc. | 4,687 | 0 |
Customer relationship, non-compete, and trademark resulting from acquisition of The Sera Labs, Inc. | 10,182 | 0 |
Liabilities assumed from acquisition of The Sera Labs, Inc. | 4,091 | 0 |
Contingent shares consideration for acquisition of The Sera Labs, Inc. | 3,083 | 0 |
Related party note payable resulting from acquisition of The Sera Labs, Inc. | 1,141 | 0 |
PPP loan assumed from acquisition of The Sera Labs, Inc.Common stock issued for acquisition of Sera Labs, Inc. | $ 206 | $ 0 |
ORGANIZATION AND BUSINESS OPERA
ORGANIZATION AND BUSINESS OPERATIONS | 12 Months Ended |
Dec. 31, 2020 | |
ORGANIZATION AND BUSINESS OPERATIONS | |
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS | Business Operations CURE Pharmaceutical Holding Corp., its wholly-owned subsidiary, CURE Pharmaceutical Corporation (“CURE Pharmaceutical”), Cure Chemistry Inc. and its recently acquired related subsidiaries (collectively referred to as “CHI”) and The Sera Labs, Inc. (“Sera Labs”) (collectively (the “Company,” “we,” “our,” “us,” or “CURE”) is a biopharmaceutical company focusing on the development and manufacturing of drug formulation and drug delivery technologies in 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 primary business model is to develop wellness and drug products using our proprietary technology, which development may include preclinical and clinical studies and regulatory approval, and grant product rights to partners responsible for marketing, sales and distribution, while retaining exclusive manufacturing rights. We operate in a 25,000 square foot cGMP manufacturing plant in Oxnard, CA. Our technology platform includes oral dissolving film (“OTF”), and encapsulation systems (“microCURE”) compatible with OTF, chews, oral solutions, topical and transdermal dose forms. We apply our technology to pharmaceutical drugs and dietary supplements for the wellness market. OTF 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, or GI, tract 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). Background We were 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 September 27, 2019, the Company reincorporated from the State of Nevada to the State of Delaware. On November 7, 2016, the board of directors and the majority stockholder of the then outstanding shares of registrant’s common stock executed a written consent to change registrant’s name from Makkanotti Group Corp. to CURE Pharmaceutical Holding Corp. The Certificate of Amendment to Articles of Incorporation was filed with the State of Nevada on November 30, 2016. Further, on November 7, 2016, we, in a reverse take-over transaction, acquired a specialty pharmaceutical and bioscience company based in California that specializes in drug delivery technologies, by executing a Share Exchange Agreement and Conversion Agreement (“Exchange Agreement”) by and among us and a holder of a majority of our issued and outstanding capital stock prior to the closing (the “Majority Stockholder”), on the one hand, and CURE Pharmaceutical, all of the shareholders of CURE Pharmaceutical’s issued and outstanding share capital (the “CURE Pharm Shareholders”) and the holders of certain convertible promissory notes of CURE Pharmaceutical (“CURE Pharm Noteholders”), on the other hand. Hereinafter, this share exchange transaction is described as the “Share Exchange.” As a result of the Share Exchange, CURE Pharmaceutical became a wholly owned subsidiary of the Company, and the CURE Pharmaceutical Shareholders and CURE Pharmaceutical Noteholders became our controlling shareholders owning, at such time, approximately 65% of our issued and outstanding common stock. 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 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 consolidated Oak’s financial statements as of the fourth quarter 2017. Due to the lack of performance by Oak under the license agreement, on April 15, 2019, we terminated all contractual relationships with Oak, including the license and surrendered our Oak shares to Oak. The parties terminated all contractual relationships between them, whether written or verbal, express or implied. All license or other rights previously granted by Oak to the Company or the Company to Oak were terminated, including all licenses or rights of any kind granted by the Company. On May 14, 2019 (the “Closing Date”), the Company, and CURE Chemistry Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), completed the transactions contemplated by the Agreement and Plan of Merger and Reorganization, dated March 31, 2019 (the “Merger Agreement”), with CHI., a Delaware corporation. As agreed in the Merger Agreement, the Company acquired CHI pursuant to a merger of the Merger Sub with and into CHI (the “Merger”). Pursuant to the Merger, CHI became a wholly-owned subsidiary of the Company and the stockholders of CHI received shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) in exchange for all of the issued and outstanding shares of CHI. On October 2, 2020, the Company completed its acquisition of The Sera Labs, Inc. (“Sera Labs”) a Delaware corporation pursuant to an Agreement and Plan of Merger and Reorganization, dated as of September 23, 2020 (the “Sera Labs Merger Agreement”), by and among the Company, Cure Labs, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Sera Labs Merger Sub”), Sera Labs and Nancy Duitch, in her capacity as the security holders representative (“Ms. Duitch”; collectively with the Company, Sera Labs and Sera Labs Merger Sub, the “Parties”). The Sera Labs Merger Agreement provides for the acquisition of Sera Labs by the Company through the merger of Sera Labs Merger Sub with and into Sera Labs, with Sera Labs surviving as a wholly owned subsidiary of the Company (the “Sera Labs Merger”). The Coronavirus Disease 2019 (COVID-19) Pandemic The COVID-19 pandemic was declared a global pandemic by the World Health Organization on March 11, 2020, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19, or other public health epidemic poses the risk that the Company or its employees, suppliers, and other partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the future impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by the governments of countries affected and in which the Company operates could continue to disrupt the operation of the Company’s business. TheCOVID-19 outbreak and mitigation measures have had an adverse impact on global economic conditions, and may continue to have such adverse impact, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company undertook temporary precautionary measures intended to help minimize the risk of the virus to its employees (with such measures still currently in effect), including temporarily requiring a majority of our employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Due to the speed with which the COVID-19 situation is developing, the Company is not able at this time to estimate the impact of COVID-19 on its consolidated financial statements and related disclosures, but the impact could be material for the fiscal year 2021 in all business aspects and could be material during any future period affected either directly or indirectly by this pandemic. While the extent and duration of the economic downturn from the COVID- 19 may 19 no |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of Presentation The accompanying 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. Principles of Consolidation The consolidated financial statements include the accounts of CURE Pharmaceutical Holding Corp (“CPHC”) and its wholly-owned subsidiaries, CURE Pharmaceutical, CHI, The Sera Labs, Inc. and its 63% majority owned subsidiary Oak Therapeutics, Inc. (“Oak”) through April 15, 2019 as the Company entered into a Termination and Release Agreement with Oak to surrender all of the Company’s shares of Oak and terminate any rights the Company may have to acquire additional shares or interest in 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. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition. The Company’s purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Going Concern and Management’s Liquidity Plans In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, The Company assesses going concern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to The Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, The Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent The Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15. The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2020, we had an accumulated deficit of approximately $81.3 million and a working capital deficit of approximately $10.6 million. Our operating activities consume the majority of our cash resources. We anticipate that we will continue to incur operating losses and negative cash flows from operations, at least into the near future, as we execute our commercialization and development plans and strategic and business development initiatives. As of December 31, 2020, the Company had approximately $1.7 million of cash on hand. As further described in Note 11, on October 30, 2020, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Investor”), pursuant to which it sold to the Investor a Series A subordinated convertible note, with an initial principal amount of $4.6 million (the “Series A Note”), and a Series B senior secured convertible note, with an initial principal amount of $6.9 million (the “Series B Note,” and together with the Series A Note, the “Convertible Notes” and, each a “Convertible Note”), for an aggregate principal amount of $11.5 million (the “Private Placement”). The Company received gross proceeds from the Series A and Series B Notes of $5.0 million during the year ended December 31, 2020. The Company paid legal and broker fees totaling $0.7 million and $1.1 million promissory note due to the Investor from the gross proceeds from the Series A and Series B Notes during the year ended December 31, 2020. The Series A Note was sold with an original issue discount of $0.6 million and the Series B Note was sold with an original issue discount of $0.9 million. The Investor paid for the Series A Note issued to the Investor by delivering $4.0 million in cash consideration and paid for the Series B Note issued to the Investor by delivering a secured promissory note (the “Investor Note”) with an initial principal amount of $6.0 million. The Investor will be required to prepay the Investor Note in certain amounts (each a “Mandatory Prepayment”) on the first date after the effectiveness of a resale registration statement (or the availability of Rule 144 promulgated under the Securities Act of 1933, as amended) if certain other conditions are satisfied as of such date. While the Company believes the funds available through this financing will be sufficient to meet the Company’s working capital requirements during the coming year, if the Company is unable to satisfy the conditions required to initiate the Mandatory Prepayment under the Investor Note, then it will need to obtain alternative financing. There can be no assurance that if such alternative financing is needed that it will be available on terms acceptable to the Company or will be enough to fully sustain the Company’s operations. If the Company is unable to raise sufficient additional funds it will have to develop and implement a plan to extend payables, reduce expenditures, or scale back our business plan until sufficient additional capital is raised to support further operations. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. Reclassifications Certain reclassifications have been made to prior year’s consolidated financial statements to enhance comparability with the current year’s consolidated financial statements. These reclassifications had no effect on the previously reported net loss. Use of Estimates The preparation of the accompanying consolidated 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 and the reported amounts of revenue and expenses during the reported period. Significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts, inventory reserves, valuation of intangible assets and goodwill, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock based compensation, beneficial conversion features, warrant values, deferred taxes and the assumptions used to calculate derivative liabilities and fair valued of the purchase price allocations. Actual results could differ materially from such estimates under different assumptions or circumstances. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of December 31, 2020, and 2019, the Company had no cash equivalents. 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. At December 31, 2020 and 2019, the Company had $1.5 million and $3.8 million in excess of the federal insurance limit, respectively. Investment in Associates An associate is an entity over which the Company has significant influence through an investment. 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 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 November 1, 2019, the Company purchased a Convertible Loan (“Loan”) with a Releaf Europe BV (“Releaf”) in the amount of $0.2 million. Releaf shall accrue interest on the Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Loan is repaid or at the maturity date of October 31, 2021 (“Maturity Date”). In the event of a request for conversion by the Company (“Request for Conversion”) or at the end of the Maturity Date, the outstanding amount of the Loan and any unpaid accrued interest shall be converted into shares of Releaf (“Shares”) based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2 million of debt and/or equity (“Qualified Financing”), the outstanding amount of the Loan Agreement and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Qualified Financing less a discount of 20% on the subscription price. In addition, both the Company and Releaf agree in the event the pre-money valuation of the Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of December 31, 2020, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to this Loan. On February 5, 2020 and February 13, 2020, the Company purchased two convertible loans (the “February 2020 Loans”) with Releaf for a total amount of $0.3 million. Releaf shall accrue interest on the February 2020 Loans at 6% per annum and they shall become due and payable to the Company at the earlier of the conversion date or the maturity date of October 31, 2021. In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amounts of the February 2020 Loans and any unpaid accrued interests shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2 million of debt and/or equity (“Releaf February 2020 Qualified Financing”), the outstanding amount of the February 2020 Loans and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf February 2020 Qualified Financing, less a discount of 20% on the subscription price. In addition, in the event that the pre-money valuation of the Releaf February 2020 Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of December 31, 2020, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to the foregoing Releaf loans. The Company follows Accounting Standards Codification (“ASC”) 325-20, Cost Method Investments Allowances for Credit Losses Accounts receivable are generally unsecured. The Company closely monitors accounts receivable balances and estimates the allowance for credit losses. These estimates are based on historical collection experience and other factors, including those related to current market conditions and events. The Company’s allowances for accounts receivable have not historically been material. At December 31, 2020 management determined that an allowance of $0.044 million was necessary. At December 31, 2019, management determined that no allowance was necessary. 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: Manufacturing equipment 5-7 years Computer and other equipment 3-7 years Leasehold improvements 3-7 years In accordance with ASC 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Leases Effective January 2019, the Company accounts for its leases under ASC 842. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. The adoption of ASC 842 did not have a material impact to the Company’s consolidated financial statements because the Company did not have any significant operating leases at the time of adoption. During the years ended December 31, 2020 and 2019, the Company as a result of its acquisition has various operating leases in accordance with ASC 842 discussed in Note 20. The Company’s accounting for financing leases (previously referred to as “capital leases”) remained substantially unchanged. In calculating the right of use and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial term of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. Inventory Inventory is stated at the lower of cost or net realizable value (“NRV”). NRV is the amount by which the estimated selling price of the product exceeds the sum of any additional costs expected to be incurred on the sale of such product in the ordinary course of business. 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. In order to state the inventory at the lower of cost or NRV, we maintain reserves against individual stocking units. Inventory reserves, once established, are not reversed until the related inventories have been sold or scrapped. If future demand or market conditions are less favorable than our projections, a write-down of inventory may be required, and would be reflected in cost of product revenues sold in the period the revision is made. Goodwill and intangible assets In accordance with ASC 350, Intangibles – Goodwill and Other Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill, similar to IPR&D, is not amortized but is tested for impairment at least annually, or if circumstances indicate its value may no longer be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company’s business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. The Company operates in two segments as result of the Sera Labs, Inc., acquisition in October 2020 and considered to be the two reporting units and, therefore, goodwill is tested for impairment at the segment level. The Company does not have intangible assets with indefinite useful lives other than goodwill, Trademark, and the acquired IPR&D discussed in Note 17. As of December 31, 2020, there has been no impairment of goodwill and intangible assets. Impairment of Long-Lived Assets Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an 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. 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 cashflow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There was no impairment on our long-lived assets during the twelve months ended December 31, 2020 and 2019. Contingent consideration liabilities Certain of The Company’s asset and business acquisitions involve the potential for future payment of consideration to third-parties and former selling shareholders in amounts determined upon attainment of revenue milestones, from product sales, as applicable. The fair value of such liabilities is determined using unobservable inputs. These inputs include the estimated amount and timing of projected cash flows and the risk-adjusted discount rate used to present value the cash flows. These obligations are referred to as contingent consideration. ASC 805 requires that contingent consideration be estimated and recorded at fair value as of the acquisition date as part of the total consideration transferred. Contingent consideration is an obligation of the acquirer to transfer additional assets or equity interests to the selling shareholders in the future if certain future events occur or conditions are met, such as the attainment of product development milestones. Contingent consideration also includes additional future payments to selling shareholders based on achievement of components of earnings, such as “earn-out” provisions or percentage of future revenues, including royalties paid to the selling shareholders based on a percentage of revenues generated from the Sera Labs’ products. The fair value of contingent consideration after the acquisition date is reassessed by the Company as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in the consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that the Company records in its consolidated financial statements. See Notes 17 for a full discussion of these liabilities. Revenue Recognition The Company recognizes revenue in accordance with ASC 606, “ Revenue Recognition To achieve the core principle of Topic 606, we perform the following steps: · Identify the contract(s) with customer; · Identify the performance obligations in the contract; · Determine the transactions price; · Allocate the transactions price to the performance obligations in the contract; and · Recognize revenue when (or as) we satisfy a performance obligation. Under Topic 606, the Company recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer. Cure Pharmaceutical Revenue The Cure Pharmaceutical derives revenues from two primary sources: products and services. Product revenue includes the shipment of products according to agreements with the Cure Pharmaceutical’s customers. Services include research and development contracts for the development of OTF products utilizing the Cure Pharmaceutical’s CureFilm Technology or our other proprietary technologies. Cure Pharmaceutical’s contracts with customers rarely contain multiple performance obligations. For these contracts, Cure Pharmaceutical 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. The Cure Pharmaceutical’s formulation and product development income include services for the development of OTF products utilizing our CureFilm Technology. Our 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. Cure Pharmaceutical 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 we incur 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. Sera Labs Revenue Sera Labs recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer. Revenue from eCommerce sales, including direct-to-consumer sales, are recognized upon shipment of merchandise. We also elected to adopt the practical expedient related to shipping and handling fees which allows us to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Therefore, shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred. Shipping revenue are recorded upon delivery to the customer. Practical Expedients and Exemptions The Company has elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows: · The Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception; · The Company made the accounting policy election to exclude any sales and similar taxes from the transaction price; and · The Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less Sales Tax The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to a customer, excluding sales taxes. The net amount of sales tax payable to the taxation authority is included sales tax payable in the balance sheet. Sales Returns, Discounts and Warranties Sales returns, discount and warranties are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns, discounts and warranties which may occur with distributors and retailers. When evaluating the adequacy of sales returns, discounts and warranties, the Company analyzes the following: historical credit allowances, current sell-through of inventory of the Company’s products, current trends in retail industry, changes in customer demand, acceptance of products, and other related factors. Cost to Obtain a Contract The Company pays sales commission to its employees and outside sales representatives for contracts that they obtain relating to wholesale and personal protective equipment. The Company applies the optional practical expedient to immediately expense costs to obtain a contract if the amortization period of the asset that would have been recognized is one year or less. As such, sales commissions are immediately recognized as an expense and included as part of sales and marketing expenses. Contract Liabilities Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded as deferred revenues when customers remit contractual cash payments in advance before satisfying performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied. Advance payments and billings in excess of revenue recognized are included in deferred revenue, which is classified as current or noncurrent based on the timing of when the Company expects to recognize revenue. At December 31, 2020 and 2019, we had contract liabilities of $1.0 million and $0.5 million, respectively. Contract liabilities is made up of the following as of December 31, 2020 and 2019 (in thousands): 2020 2019 Customer deposits for commercial products $ 281 $ 456 Customer deposits for personal protective equipment 713 - Total contract liabilities $ 994 $ 456 The following table summarizes the changes in contract liabilities during the years ended December 31, 2020 and 2019 (in thousands): Balance at December 31, 2018 $ 383 Additions 493 Transfers to Revenue (420 ) Balance at December 31,2019 456 Additions 1,033 Transfers to Revenue (495 ) Balance at December 31, 2020 $ 994 Cost of Revenues Cost of revenues primarily consists of labor and manufacturing costs for our products. Advertising Expense The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying consolidated statements of operations. The Company recorded advertising costs of $1.1 million and $0.5 for the years ended December 31, 2020 and 2019, respectively. 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 $2.8 million and $2.3 million for the years ended December 31, 2020 and 2019, 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. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the outbreak of a novel strain of the coronavir |
PREPAID EXPENSES AND OTHER ASSE
PREPAID EXPENSES AND OTHER ASSETS | 12 Months Ended |
Dec. 31, 2020 | |
PREPAID EXPENSES AND OTHER ASSETS | |
NOTE 3 - PREPAID EXPENSES AND OTHER ASSETS | As of December 31, 2020, and 2019, prepaid expenses and other assets consisted of the following (in thousands): December 31, 2020 December 31, 2019 Prepaid consulting services $ 14 $ 285 Prepaid clinical study 32 175 Prepaid insurance 347 146 PPE deposits 700 - Prepaid equipment 61 1,135 Prepaid inventory 211 5 Prepaid expenses 66 48 Other assets 79 35 Prepaid expenses and other assets $ 1,510 $ 1,829 Current portion of prepaid expenses and other assets $ (1,452 ) $ (1,794 ) Prepaid expenses and other assets less current portion $ 58 $ 35 |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2020 | |
INVENTORY | |
NOTE 4 - INVENTORY | Inventory consists of raw materials, packaging components, work-in-process and finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or Net Realized Value. The carrying value of inventory consisted of the following (in thousands): December 31, 2020 December 31, 2019 Raw Materials $ 64 $ 78 Packaging Components 54 50 Work-In-Process 22 18 Finished Goods 603 15 $ 743 $ 161 Reserve for Obsolescence (294 ) (5 ) Total inventory $ 449 $ 156 For the years ended December 31, 2020 and 2019, inventory reserves amounted $0.3 million and $0.002 million, respectively. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2020 | |
PROPERTY AND EQUIPMENT | |
NOTE 5 - PROPERTY AND EQUIPMENT | As of December 31, 2020, and 2019, property and equipment consisted of the following (in thousands): December 31, 2020 December 31, 2019 Equipment not yet placed in service $ 1,465 $ - Manufacturing equipment 1,074 902 Computer and other equipment 626 585 Leasehold improvements - 77 Less accumulated depreciation (1,091 ) (923 ) Property and Equipment, net $ 2,074 $ 641 For the years ended December 31, 2020 and 2019, depreciation expense amounted to $0.2 million and $0.2 million, respectively. |
NOTES RECEIVABLE
NOTES RECEIVABLE | 12 Months Ended |
Dec. 31, 2020 | |
NOTES RECEIVABLE | |
NOTE 6 - NOTES RECEIVABLE | On November 12, 2019, the Company purchased a $0.2 million convertible promissory note (the “Convertible Promissory Note”) issued by Coeptis Pharmaceuticals, Inc., a Delaware corporation a privately held biopharmaceutical company engaged in the acquisition, development and commercialization of pharmaceutical products (“Coeptis”). The Convertible Promissory Note is due June 15, 2020, pays interest at the rate of 9% per annum and gives the holder the right, at any time from the date thereof, to convert the Convertible Promissory Note into shares of Common Stock of Coeptis at a price per share equal to $2.60 (the “Optional Conversion Price”) or the share price set by the latest qualified financing, whichever is less. On July 31,2020, the Company purchased a $0.5 million secured promissory note (the “Sera Labs Note”) issued by Sera Labs, in connection with the execution of the Memorandum of Understanding summarizing the terms and conditions of a proposed acquisition, pursuant to which Sera Labs will become a wholly-owned subsidiary of the Company. The Sera Labs Note bears an interest at the rate of 9% per annum and has a maturity date of December 31, 2020. On September 16, 2020, a Note Modification Agreement was signed, modifying the principal amount to $0.55 million with interest on $0.5 million of the principal amount accruing from and after July 31, 2020 and on $0.05 million of the principal amount from and after September 16, 2020. The note was settled as part of the Sera Labs acquisition, see Note 17. Note receivable consists of the following (in thousands): December 31, 2020 December 31, 2019 Coeptis Pharmaceuticals, Inc. $ 200 $ 200 Less: allowance for doubtful accounts (200 ) (200 ) Note receivable, net $ - $ - The Company has allowed in full this note receivable due to the uncertainty of repayment as of December 31, 2020. |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2020 | |
GOODWILL AND INTANGIBLE ASSETS | |
NOTE 7 - GOODWILL AND INTANGIBLE ASSETS | The Company incurred $0.02 million and $0.05 million of legal patent costs that were capitalized during the year ended December 31, 2020 and 2019, respectively. During the year ended December 31, 2020, the Company acquired from Sera Labs customer relationships at a fair value of $7.1 million, $2.6 million in Tradename intangibles, $0.5 million in non-compete and $4.7 million in Goodwill from the acquisition of Sera Labs. During the year ended December 31, 2019, the Company acquired from the CHI acquisition patents at a fair value of $0.7 million, $14.5 million in Intellectual Property Research & Development and $9.2 million in Goodwill from the acquisition of CHI. Intangible Asset Summary As of December 31, 2020 and 2019, goodwill and intangible assets, net, consisted of the following (in thousands): 2020 2019 Goodwill (1) $ 13,868 $ 9,178 Intangible assets: Acquired IPR&D – Chemistry (2) $ 14,460 $ 14,460 Pending patents – Cure Pharmaceutical 259 289 Intangible assets subject to amortization: Customer relationships (2) 7,110 - Tradename (2) 2,610 - Noncompete (2) 462 - Intellectual property 972 972 Issued patents 1,044 990 Total intangible assets 26,917 16,711 Accumulated amortization (1,312 ) (615 ) Intangible assets, net $ 25,605 $ 16,096 ________ (1) Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in the Merger (see Note 17). In 2020, the Company recorded additional goodwill of $4.7 million as a result of the Sera Labs acquisition. (2) See Note 17 for information on the Mergers which were consummated in May 2019 and October 2020. Amortization expense was $0.7 million and $0.1 million for the years ended December 31, 2020 and 2019, respectively. The estimated aggregate amortization expense over each of the next five years is as follows (in thousands): 2021 $ 2,427 2022 2,369 2023 2,196 2024 2,033 2025 1,543 Thereafter 318 Total Amortization $ 10,886 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2020 | |
RELATED PARTY TRANSACTIONS | |
NOTE 8 - RELATED PARTY TRANSACTIONS | Due to Related Party The Company and other related entities have had a commonality of ownership and/or management control, and as a result, the reported operating results and /or financial position of the Company could significantly differ from what would have been obtained if such entities were autonomous. On November 1, 2018, the Company entered into a financial services agreement with a related party, Eventus Consulting, P.C. (“Eventus”), of which Mr. Alex Katz, the Company’s former Chief Financial Officer, is a Director. Pursuant to the agreement Eventus will provide certain accounting, financial and strategic consulting services to the Company for a period of one year, unless otherwise terminated. The Company shall pay Eventus $22,500 per month for all work performed. This agreement with Eventus ended in the 1 st On January 2, 2019, Sera Labs entered into an administrative service agreement ("Service Agreement”) with Visionworx, an affiliate of Sear Labs. Visionworx will process payments related to Sera Lab’s operations using Visionworx’s contractual relationship with JPMorgan Chase Bank, N.A. via its Chase Paymentech Select Merchant Payment Instrument Processing Agreement. In consideration for the services, Sera Labs will pay to Visionworx a management fee equal to all associated fees and expenses in connection with the Service Agreement. The Service Agreement is effective on January 2, 2019 and will continue for a period of two years. The term of the Service Agreement will be renewed automatically for additional one-year periods until terminated. The Service Agreement may be terminated by (a) either party for any reason at least thirty days’ prior written notice to the other party; or (b) immediately upon the mutual consent of the parties. On August 6, 2020, the Company entered into an unsecured promissory note (the “August Note”) with one of the Company’s board members, for a principal amount of $150,000. The August Note is due on August 6, 2021 and has an interest rate of 8% per annum, payable in quarterly payments. The principal and accrued interest under the August Note can convert into a convertible promissory note if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the August Note. Upon notice by the Company of such debt financing, the holder of the August Note shall have the right, but not the obligation, to convert the August Note into a convertible promissory note, with the same principal amount and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. On October 2, 2020, the Company completed its acquisition of Sera Labs and pursuant to the Sera Labs Merger Agreement, the Company issued a promissory note in the principal amount of $1.1 million owed to the CEO of Sera Labs (“Duitch Note”), of which $1.0 million is the upfront payment in connection with the closing of the Sera Labs Merger, and $0.1 million is for certain liabilities of Sera Labs due to Mrs. Duitch. The Duitch Note is due June 30, 2021 and has an interest rate of 8% per annum.On November 9, 2020, a payment of $0.3 million was made and applied to principal only. As of December 31, 2020, total outstanding due to Mrs. Duitch was $0.9 million. Interest expense in regard to related party payables for the years ended December 31, 2020 and 2019 was $0.02 million and $0, respectively. |
LOAN PAYABLE
LOAN PAYABLE | 12 Months Ended |
Dec. 31, 2020 | |
LOAN PAYABLE | |
NOTE 9 - LOAN PAYABLE | Loan payable consists of the following at December 31, 2020 and 2019 (in thousands): December 31, 2020 December 31, 2019 Note to a company due September 29, 2020, including interest at 4.95% per annum; unsecured; interest due monthly $ - $ 127 Note to a company due September 29, 2021, including interest at 4.32% per annum; unsecured; interest due monthly 182 - Note to a company due June 6, 2021, including interest at 6.55% per annum; unsecured; interest due monthly 83 Current portion of loan payable (265 ) (127 ) Loan payable, less current portion $ - $ - Interest expense for the years ended December 31, 2020 and 2019 was $0.003 million and $0.003 million, respectively. |
NOTES PAYABLE AND PAYCHECK PROT
NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN | 12 Months Ended |
Dec. 31, 2020 | |
NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN | |
NOTE 10 - NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN | Notes payable consist of the following at December 31, 2020 and 2019 (in thousands): December 31, 2020 December 31, 2019 Note to an individual, non-interest bearing, unsecured and due on demand $ 50 $ 50 Promissory note to a company due May 18, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note 250 - Promissory note to a company due August 12, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note 500 - Current portion of note payable $ 800 $ 50 On May 18, 2020 and August 12, 2020, the Company entered into unsecured promissory notes (“Notes”) with an investor for $250,000 and $500,000, respectively. The Notes are due on May 18, 2021 and August 12, 2021, respectively, and have an interest rate of 8% per annum, payable in quarterly payments. The principal and accrued interest under the Notes can convert into convertible promissory notes if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the Notes. Upon notice by the Company of such debt financing, the holder of the Notes shall have the right, but not the obligation, to convert the Notes into convertible promissory notes, with the same principal amount and interest accruing from the date of issuance of the Notes, on the same terms as the convertible promissory notes issued to such new investors. On September 25, the Company issued a demand secured promissory note to Ionic Ventures, LLC ("Ionic”), dated September 25, 2020 (the "Promissory Note”), in the principal amount of $1.1 million with the Company receiving gross proceeds of $1.0 million and $0.1 million being an original issue discount. The Promissory Note is secured by certain assets of the Company as further set forth therein, bears no interest rate and is subject to payment on demand of Ionic after the earlier of either (a) the initial date after September 25, 2020 of any offering of securities by the Company with gross proceeds of at least $1.0 million or (b) October 31, 2020. The outstanding principal amount and any unpaid accrued Late Charges (as defined below) may be prepaid at any time, without notice, premium or penalty. Payments will be credited first to the accrued Late Charges then due and payable and the remainder applied to the outstanding principal. On October 30, 2020, the Company repaid in full the outstanding principal balance and all accrued but unpaid interest expense of $1.1 million from the proceeds of the Series A Note further described in Note 11. Paycheck protection program consist of the following at December 31, 2020 and 2019 (in thousands): December 31, 2020 December 31, 2019 Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act. $ 399 $ - Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured 206 - Payment protection program loan $ 605 $ - In April 2020, the CURE Pharmaceutical and Sera Labs received loan proceeds in the amount of approximately $0.4 million and $0.2 million under the Paycheck Protection Program (“PPP”). The PPP, established as part of the CARES Act, provides for loans to qualifying businesses. A portion of the loans and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries. No collateral or guarantees were provided in connection with the PPP loans. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act. The unforgiven portion of the PPP loans is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company intends to use the proceeds for purposes consistent with the PPP. While the Company currently believes that its use of the PPP loan proceeds will meet the conditions for forgiveness of the PPP loans, we cannot assure you that we will not take actions that could cause the Company to be ineligible for forgiveness of the remaining loans not forgiven, in whole or in part. Interest expense for the year ended December 31, 2020 and 2019 was $0.03 million and $0.3 million, respectively. |
CONVERTIBLE PROMISSORY NOTES AN
CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES | 12 Months Ended |
Dec. 31, 2020 | |
CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES | |
NOTE 11 - CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES | Convertible promissory notes consist of the following at December 31, 2020 and 2019 (in thousands): December 31, 2020 December 31, 2019 Convertible promissory notes totaling $550,000 due January 31, 2019, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due January 31, 2019 and currently in default. The Company has offered to either repay the convertible promissory notes or request to have them converted into common stock shares of the Company. The beneficial owners of the convertible promissory notes have not yet communicated their intent to either receive payment or convert. $ 550 $ 550 Current portion of convertible promissory notes $ 550 $ 550 Fair value of convertible promissory notes consist of the following at December 31, 2020 and 2019 (in thousands): December 31, 2020 December 31, 2019 Series A subordinated convertible note at fair value $ 7,010 $ - Series B subordinated convertible note at fair value 11,674 - Total convertible promissory notes 18,684 - Less: Investor Note offset – Series B Note (5,000 ) - Carrying value of convertible promissory notes at fair value 13,684 - Less: current portion of convertible promissory notes at fair value (6,674 ) - Convertible promissory notes, less current portion $ 7,010 $ - On October 30, 2020, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Investor”) for the purchase of two new series of convertible notes with an aggregate principal amount of $11,500,000. Concurrently the Company consummated the sale to the Investor of a Series A subordinated convertible note (the “Series A Note”) with an initial principal amount of $4,600,000 and a Series B senior secured convertible note (the “Series B Note,” and together with the Series A Note, the “Convertible Notes” and, each a “Convertible Note”) with an initial principal amount of $6,900,000 in a private placement (the “Private Placement”). The Series A Note was sold with an original issue discount of $600,000 and the Series B Note was sold with an original issue discount of $900,000. The Investor paid for the Series A Note to be issued to the Investor by delivering $4,000,000 in cash consideration and paid for the Series B Note to be issued to the Investor by delivering a secured promissory note (the “Investor Note”) with an initial principal amount of $6,000,000. The Company will receive cash in respect of a Series B Note only upon cash repayment of the corresponding Investor Note. In certain circumstances, the Investor Note may be automatically satisfied through netting against the Series B Note, as described more fully below, rather than through the payment of cash. Until an Investor Note is repaid, the original issue discount and the rest of the principal under the corresponding Series B Note is considered to be “restricted.” Upon any repayment of the Investor Note, the principal of the corresponding Series B Note becomes “unrestricted” on dollar-for-dollar basis, along with a proportional amount of the original issue discount. During the year ended December 31, 2020, the Company received $1.0 million from the Investor Note, leaving a remaining balance of $5.0 million of the Investor Note as of December 31, 2020, which is netted against the Series B Note and included in convertible promissory notes in the balance sheet. The placement agent received a placement agent fee of $306,000 at the closing of the Private Placement, representing 8% of the gross cash proceeds at the closing. After deducting the placement agent fee, the Company’s estimated expenses associated with the Private Placement and the repayment of the September Note, the Company’s net cash proceeds at the closing were approximately $2,340,000. If the Investor Note is subsequently satisfied in full by payment in cash, the additional financial advisory fee on the cash proceeds received from the Investor Note will be another $480,000, and the aggregate net cash proceeds from the Private Placement as a whole will be approximately $8,850,000. In addition, the placement agent received a warrant (the “Warrant”) exercisable for two years for the purchase of an aggregate of up to 242,424 shares of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock (collectively with the shares underlying the Warrant, the “Warrant Shares”). The Warrant Shares, when issued, will have the same rights, preferences and privileges (including the registration rights described under "Registration Rights Agreement” below) as the shares underlying the Convertible Notes. The Convertible Notes mature on October 30, 2022 with respect to the Series A Note and October 30, 2021 with respect to the Series B Note (the “Maturity Date”), subject to extension in certain circumstances, including bankruptcy and outstanding events of default. On the Maturity Date, the Company shall pay to the Investor an amount in cash (other than restricted amounts under a Series B Note) presenting all outstanding principal, Make-Whole Amount (as defined in the Convertible Notes), if any, accrued and unpaid interest and accrued and unpaid Late Charges (as defined in the Convertible Notes) on such principal, except that any restricted amount under the Series B Note will be automatically satisfied on the Maturity Date (in lieu of a cash payment) by Maturity Netting (as defined in the Investor Note described below). The Company may not prepay any amounts due under the Convertible Notes. The Convertible Notes shall bear no interest unless there is an occurrence, and during the continuance, of an Event of Default at which point interest shall be 18%. Each Convertible Note (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. Promptly after the consummation of the sale of the Convertible Notes, the Company repaid in full the outstanding principal balance and all accrued but unpaid interest expense on the Senior Promissory Note issued on September 25, 2020 to the Investor (the “September Note”). The cash payment to the Investor to satisfy the September Note was in the amount $1,100,000. Payment of Amounts Due under the Convertible Notes On the Maturity Date, the Company shall pay to the Investor an amount in cash (other than restricted amounts under a Series B Note) presenting all outstanding principal, Make-Whole Amount (as defined in the Convertible Notes), if any, accrued and unpaid interest and accrued and unpaid Late Charges (as defined in the Convertible Notes) on such principal, except that any restricted amount under the Series B Note will be automatically satisfied on the Maturity Date (in lieu of a cash payment) by Maturity Netting (as defined in the Investor Note described below). The Company may not prepay any amounts due under the Convertible Notes. Interest The Convertible Notes shall bear no interest unless there is an occurrence, and during the continuance, of an Event of Default (as defined in the Convertible Notes). During any such Event of Default, the Convertible Notes will accrue interest at the rate of 18% per annum. See " —Events of Default Conversion; Alternate Conversion upon Event of Default Each Convertible Note (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. Conversion Limitation The Investor will not have the right to convert any portion of a Convertible Notes, to the extent that, after giving effect to such conversion, the Investor (and other certain related parties) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such conversion. This limit may, from time to time, be increased, up to 9.99%, or decreased; provided that any such increase will not be effective until the 61st day after delivery of a notice to the Company of such increase. Events of Default The Convertible Notes include certain customary and other Events of Default. In connection with an Event of Default, the Investor may require the Company to redeem in cash any or all of the Convertible Notes. The redemption price will be at a premium to the amount due under the Convertible Notes as described therein. Change of Control In connection with a Change of Control (as defined in the Convertible Notes), the Investor may require the Company to redeem all or any portion of the Convertible Notes. The redemption price per share will be at a premium to the amount due under the Convertible Notes as described therein. Covenants The Company will be subject to certain customary affirmative and negative covenants including those regarding the payment of dividends, maintenance of its property, transactions with affiliates, and issue notes and certain securities. Placement Agent Warrants On October 2, 2020 and December 31, 2020, in connection with the Series A Note and Series B Note, respectively, a placement agent is to receive a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock. The Company used the Black-Scholes model to determine the fair value of the Warrants issued to the Placement Agent. The Company has elected the Fair Value Option for the Series A Note and Series B Note, accordingly the fair value of the Warrants issued to the placement agent were expensed. The following table sets forth the assumptions used and calculated aggregated fair values of the warrants: October 30, 2020 Significant assumptions (weighted-average): Risk-free interest rate at grant date 0.36 % Expected stock price volatility 81.14 % Expected dividend payout - Expected warrant life (in years) 2 Expected forfeiture rate 0 % Fair Value Option for the Series A and Series B Notes The Company elected the fair value option under ASC 825, Financial Instruments The Company recorded a loss of $4.6 million and $4.7 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the year ended December 31, 2020 and were recorded in the consolidated statement of operations. The Company incurred debt issuance cost of $0.7 million and $0.1 million attributed to the Series A and Series B Notes, respectively, which were expensed as incurred. |
DERIVATIVE LIABILITY
DERIVATIVE LIABILITY | 12 Months Ended |
Dec. 31, 2020 | |
DERIVATIVE LIABILITY | |
NOTE 12 - DERIVATIVE LIABILITY | The Company evaluates its convertible instruments, options, warrants or other contracts, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instruments, the instrument is marked to fair value at the conversion date then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date. The following table summarizes fair value measurements by level at December 31, 2020 for assets and liabilities measured at fair value on a recurring basis (in thousands): Total Level 1 Level 2 Level 3 Fair value of Derivative Liability $ - $ - $ - $ - The following table summarizes fair value measurements by level at December 31, 2019 for assets and liabilities measured at fair value on a recurring basis (in thousands): Total Level 1 Level 2 Level 3 Fair value of Derivative Liability $ 91 $ - $ - $ 91 The Company has issued Series A and B Notes in addition to convertible promissory notes during 2020 and 2018. The convertible notes require us to record the value of the conversion feature as a liability, at fair value, pursuant to ASC 815, including provisions in the notes that protect the holders from declines in the Company’s stock price, which is considered outside the control of the Company. The derivative liabilities are marked-to-market each reporting period and changes in fair value are recorded as a non-operating gain or loss in our statement of operations, until they are completely settled. The fair value of the conversion feature is determined each reporting period using the Black-Scholes option pricing model and is affected by changes in inputs to that model including our stock price, expected stock price volatility, dividends, interest rates and expected term. The assumptions used in valuing the derivative liability during 2020 were as follows: Significant assumptions: Risk-free interest rate at grant date 0.28%-0.37 % Expected stock price volatility 68.23%-81.14 % Expected dividend payout - Expected option life (in years) 1 Expected forfeiture rate 0 The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis from December 31, 2018 to December 31, 2020 (in thousands): Fair value of derivative liabilities Balance at December 31, 2018 $ 618 Loss on change in fair value included in earnings (527 ) Balance at December 31, 2019 91 Loss on change in fair value included in earnings (91 ) Balance at December 31, 2020 $ - |
WARRANT AGREEMENTS
WARRANT AGREEMENTS | 12 Months Ended |
Dec. 31, 2020 | |
WARRANT AGREEMENTS | |
NOTE 13 - WARRANT AGREEMENTS | On February 13, 2019, the Company issued 657,655 warrants at a fair market value of $1.8 million and with an exercise price of $2.31 per share in connection with the conversion of $1.3 million convertible promissory notes. The Company also issued 99,476 warrants at a fair market value of $0.3 million and with an exercise price of $2.31 per share in connection with the broker fees earned from the conversion of those convertible promissory notes. On February 15, 2019, the Company issued 312,500 warrants at a fair market value of $0.9 million and with an exercise price of $2.00 per share in connection with the conversion of $500,000 convertible promissory notes. On February 15, 2019, the Company issued 295,879 warrants at a fair market value of $0.8 million and with an exercise price of $2.31 per share in connection with the conversion of $1,000,000 convertible promissory notes. On May 10, 2019, the Company issued 52,879 warrants at a fair market value of $0.1 million and with an exercise price of $5.01 per share in connection with an engagement agreement with a licensed brokerage company for $1,745,000 of funds raised. On May 10, 2019, the Company issued 52,879 warrants at a fair market value of $0.1 million and with an exercise price of $6.00 per share in connection with eight stock purchase agreements with accredited investors totaling $1,745,000. On May 14, 2019, in connection with the acquisition of CHI, the Company issued warrants to purchase up to 8,018,071 shares of the Company’s common stock at an exercise price of $5.01. The total number of shares to vest is subject to certain revenue milestones earned during the 3 rd th In June 2020, as part of the Company’s settlement with CHI we amended the warrants to purchase up 8,018,071 common stock shares which vest based on various revenue achievement during year 3 and year 4 post the CHI acquisition Closing Date. As part of the settlement the Company reduced the number of warrants to 708,467 common stock shares at an exercise price of $2.00 per share which was reduced from the original exercise price of $5.01 per share. In addition, the expiration date of the warrants was amended to expire on June 5, 2020. The warrants were exercisable on the date of issuance and were exercised by the warrant holders and the Company received $1.4 million. The Company determined based on Black-Scholes value calculated for pre and post modification, there was no incremental value to the warrant modification as the exercise price was more than the fair value of the stock. On October 2, 2020 and December 31, 2020, in connection with the Series A Note and Series B Note, respectively, a placement agent is to receive a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock. On December 8, 2020, an individual exercised 62,851 warrants by means of a cashless exercise with an exercise price of $1.00 per share. As a result of the exercise, the Company is to issue 26,936 common stock shares of the Company. As of the filing of this report, the Company has not yet issued these shares and is included in common stock issuable as of December 31, 2020. Warrants that vest at the end of a one-year period are amortized over the vesting period using the straight-line method. The Company’s warrant activity was as follows: Warrants Weighted Average Exercise Price Weighted Average Contractual Remaining Life Outstanding, December 31, 2018 5,340,751 $ 2.20 3.80 Granted 9,489,340 $ 4.62 4.10 Exercised (163,573 ) $ 1.83 - Forfeited/Expired - $ - - Outstanding, December 31, 2019 14,666,518 $ 3.70 2.99 Granted 303,030 1.32 1.86 Exercised (771,318 ) 1.92 - Forfeited/Expired (11,718,381 ) 5.01 - Outstanding, December 31, 2020 2,479,849 $ 1.86 1.23 Exercisable at December 31, 2020 2,479,849 $ 1.86 1.23 Warrant summary for the year ended December 31, 2020: Range of Exercise Price Number of Warrants Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number of Warrants Exercisable Weighted Average Exercise Price $ 1.00–$6.00 2,479,849 1.23 $ 1.86 2,479,849 $ 1.86 2,479,849 1.23 $ 1.86 2,479,849 $ 1.86 Warrant summary for the year ended December 31, 2019: Range of Exercise Price Number of Warrants Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number of Warrants Exercisable Weighted Average Exercise Price $ 1.00-$7.00 14,666,518 2.99 $ 3.70 6,648,446 $ 2.07 14,666,518 2.99 $ 3.70 6,648,446 $ 2.07 The change in warrant value for the year ended December 31, 2020 and 2019 was $0.1 million and $3.7 million, respectively. The weighted-average fair value of warrants granted during the years ended December 31, 2020 and 2019, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows: December 31, 2020 December 31, 2019 Significant assumptions (weighted-average): Risk-free interest rate at grant date 0.36 % 1.69 % Expected stock price volatility 81.14 % 82.66 % Expected dividend payout - - Expected warrant life (in years) 3 3 Expected forfeiture rate 0 % 0 % The aggregate intrinsic value of warrants outstanding and exercisable at December 31, 2020 was $0.2 million. |
STOCK INCENTIVE PLANS
STOCK INCENTIVE PLANS | 12 Months Ended |
Dec. 31, 2020 | |
STOCK INCENTIVE PLANS | |
NOTE 14 - STOCK INCENTIVE PLANS | On December 29, 2017 (“Effective Date”), the Company adopted the CURE Pharmaceutical Holding Corp. 2017 Equity Incentive Plan (the “2017 Equity Plan”), pursuant to which an aggregate of 5,000,000 shares of the common stock of the Company are available for grant. On November 28, 2020, the Company registered an additional 5,000,000 shares of common stock of the Company that are available to be granted by filing a Form S-3 Registration Statement under the Securities Act of 1933. The Board of Directors have determined that it is in the best interests of the Company and its stockholders to provide an additional incentive for certain employees, including executive officers, and non-employee members of the Board of Directors of the Company by granting to them awards with respect to the common stock of the Company pursuant to the Plan. The Plan seeks to achieve this purpose by providing for awards in the form of Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards (“Awards”). The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date. The Company issued 90,000 Incentive Stock Options to an officer of the Company during the year ended December 31, 2020. The Company did not issue any ISO’s during the year ended December 31, 2019. The Company issued 3,510,364 Nonstatutory Stock Options (“NSO”), 150,000 Restricted Common Stock (“RCS”), and 431,578 Restricted Stock Units (“RSU”) to employees, including executive officers, and non-employee members of the Board of Directors of the Company during the year ended December 31, 2020. During the year ended December 31, 2020, 30,000 NSO’s were exercised at $0.74 per share in exchange for $22,200. The Company issued 1,170,000 NSO’s to employees, including executive officers, and non-employee members of the Board of Directors of the Company during the year ended December 31, 2019. During the year ended December 30, 2019, no NSO’s or ISO’s were exercised. Vesting periods for awarded RCS, ISO’s and NSO’s range from immediate to quarterly over a 4 year period. Vesting period for RSU’s is the earlier of (i) the day prior to the next Annual Meeting of Shareholders following the date of grant, and (ii) one (1) year from the Date of Grant. For ISO’s and NSO’s awarded, the term to exercise their ISO or NSO is 10 years. Stock Options The Company’s stock option activity was as follows: Options Weighted Average Exercise Price Weighted Average Contractual Remaining Life Outstanding, December 31, 2018 2,313,050 $ 0.79 9.27 Granted 1,390,000 $ 3.54 7.36 Exercised - $ - - Forfeited/Expired (235,400 ) $ 1.59 - Outstanding, December 31, 2019 3,467,650 $ 1.84 8.74 Granted 3,600,364 1.26 9.19 Exercised (30,000 ) 0.74 - Forfeited/Expired (752,222 ) 1.76 - Outstanding, December 31, 2020 6,285,792 $ 1.52 8.86 Exercisable at December 31, 2020 2,757,687 $ 1.50 8.05 Range of Exercise Price Number of Awards Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number of Awards Exercisable Weighted Average Exercise Price $ 0.61-$4.01 6,285,792 8.86 $ 1.52 2,757,687 $ 1.50 6,285,792 8.86 $ 1.52 2,757,687 $ 1.50 The aggregate intrinsic value of options outstanding and exercisable at December 31, 2020 was $0.1 million. The aggregate grant date fair value of options granted during the year ended December 31, 20120 and 2019 amounted to $2.2 million and $4.3 million, respectively. Compensation expense related to stock options for the year ended December 31, 2020 and 2019 was $2.0 million and $1.5 million, respectively. As of December 31, 2020, the total unrecognized fair value compensation cost related to unvested stock options was $3.1 million, which is to be recognized over a remaining weighted average period of approximately 9.5 years. The weighted-average fair value of options granted during the years ended December 31, 2020 and 2019, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows: December 31, 2020 December 31, 2019 Significant assumptions (weighted-average): Risk-free interest rate at grant date 0.59 % 1.69 % Expected stock price volatility 81.14 % 82.66 % Expected dividend payout - - Expected option life (in years) 10 10 Expected forfeiture rate 0 % 0 % Restricted Stock Subject to the restrictions set with respect to the particular Award, a recipient of Restricted Stock generally shall have the rights and privileges of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld for the recipient’s account, and interest may be credited on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the recipient in cash or, at the discretion of the Board or Committee, in shares of common stock having a fair market value equal to the amount of such dividends, if applicable, upon the release of restrictions on the Restricted Stock and, if the Restricted Stock is forfeited, the recipient shall have no right to the dividends. The Company’s restricted stock activity was as follows: Compensation expense related to restricted shares for the years ended December 31, 2020 and 2019 was $0.5 million and $0.5 million, respectively. Information relating to non-vested restricted award shares is as follows: Restricted Stock Shares Weighted Average Grant Date Fair Value Non-vested, December 31, 2018 317,708 $ 1.44 Granted 84,177 3.17 Vested (319,799 ) 1.57 Forfeited/Expired - - Non-vested, December 31, 2019 82,086 2.69 Granted 150,000 1.60 Vested (181,849 ) 2.08 Forfeited/Expired (237 ) - Non-vested, December 31, 2020 50,000 $ 1.60 At December 31, 2020 and 2019, the Company had approximately $0.1 million and $0.2 million, respectively, of total unrecognized compensation expense related to restricted stock awards. Compensation will be recognized over a weighted-average period of approximately 0.14 years and 2.19 years, respectively. Restricted Stock Units The terms and conditions of a grant of Restricted Stock Units shall be determined by the Board or Committee. No shares of common stock shall be issued at the time a Restricted Stock Unit is granted. A recipient of Restricted Stock Units shall have no voting rights with respect to the Restricted Stock Units. Upon the expiration of the restrictions applicable to a Restricted Stock Unit, The Company will either issue to the recipient, without charge, one share of common stock per Restricted Stock Unit or cash in an amount equal to the fair market value of one share of common stock The Company’s restricted stock unit activity was as follows: Restricted Stock Units Weighted Average Grant Date Fair Value Outstanding, December 31, 2018 - $ - Granted 60,759 3.66 Vested - Forfeited/Expired - Outstanding, December 31, 2019 60,759 3.66 Granted 431,578 1.33 Vested (60,759 ) 3.66 Forfeited/Expired - - Outstanding, December 31, 2020 431,578 $ 1.33 At December 31, 2020 and 2019, the Company had approximately $0.6 million and $0.2 million, respectively, of total unrecognized compensation expense related to restricted stock units. Compensation will be recognized over a weighted-average period of approximately 0.64 years and 0.60 years, respectively. Compensation expense related to restricted stock units for the years ended December 31, 2020 and 2019 was $0.3 million and $0.08 million, respectively. All compensation expense related to restricted stock units were included in selling, general and administrative expenses for the years ended December 31, 2020 and 2019. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2020 | |
STOCKHOLDERS' EQUITY | |
NOTE 15 - STOCKHOLDERS' EQUITY | Authorized Stock The Company has authorized to issue is 150,000,000 common shares with a par value of $0.001 per share. As of December 31, 2020 and 2019, there were 59,476,268 and 38,001,543 shares of the Company’s common stock issued and outstanding, respectively. Common Share Issuances On February 1, 2019, the Company amended two convertible promissory notes totaling $600,000 to extend the maturity dates to February 28, 2019. For extending the maturity date, the Company will issue a total of 30,000 common stock shares of the Company at $2.32 price per share. The total value of this issuance was $69,600. The Company considered if the amendment of the convertible promissory note was a debt modification or extinguishment based on the guidelines of ASC 470-50, and concluded that the amendments of the convertible promissory notes were debt modifications. The Company recorded the fair market value of the 30,000 common stock shares issued as a debt discount that has been fully amortized as of March 31, 2019. On February 13, 2019, the Company entered into Debt Conversion Agreements (“Agreements”) with thirty convertible promissory note holders totaling $1,325,000 plus accrued interest and penalties of $213,859 that were converted into 832,365 common stock shares of the Company with a conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock on the OTC Markets for five consecutive trading days. As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $812,241. In connection with the conversion of the convertible promissory notes, the Company will issue 657,655 warrants that were priced at $2.31 price per share. On February 14, 2019, the Company entered into a Debt Conversion Agreement (“Agreement”), where $250,000 (Two Hundred Fifty Thousand Dollars) of $650,000 (Six Hundred Fifty Thousand Dollars) of the Outstanding Balance under the Senior Secured Promissory Note effective April 27, 2017 which was replaced with an Amended and Restated Senior Secured Promissory Note dated August 27, 2017 (the “Note”) shall be converted into 135,135 (One Hundred Thirty-Five Thousand, One Hundred Thirty-Five) shares of Common Stock of the Company (the “Conversion Shares”) at a conversion price of $1.85 per share (a discounted rate calculated as an approximation based on 20% discount on 5 days volume weighted average price of the market rate). As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $201,351. On February 14, 2019, the Company entered into a First Amendment to Amended and Restated Senior Secured Promissory Note, that amends the Senior Secured Promissory Note effective April 27, 2017 which was replaced with an Amended and Restated Senior Secured Promissory Note effective August 27, 2017 (“Amended Agreement”) with the Note Holder (“Holder”). The Company and the Holder have agreed that the Maturity Date shall be extended to February 27, 2019 in exchange for 75,000 common stock shares of the Company at a price per share of $3.35. The total value of this issuance was $251,250. The Company considered if the amendment of the convertible promissory note was a debt modification or extinguishment based on the guidelines of ASC 470-50, and concluded that the amendments of the convertible promissory notes were debt modifications. The Company recorded the fair market value of the 75,000 common stock shares issued as a debt discount that has been fully amortized as of March 31, 2019. On February 15, 2019, the Company entered into a Debt Conversion Agreement (“Agreement”) to convert $400,000 of convertible promissory notes plus accrued interest of $71,342 into 254,779 common stock shares of the Company with a conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock on the OTC Markets for five consecutive trading days. As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $630,238. On February 15, 2019, the Company entered into a Debt Conversion Agreement (“Agreement”) with a convertible promissory note holder totaling $1,000,000 plus accrued interest of $94,750 that were converted into 591,757 common stock shares of the Company with a conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock on the OTC Markets for five consecutive trading days. As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $860,087. In connection with the conversion of the convertible promissory notes, the Company will issue 295,879 warrants that were priced at $2.31 price per share. On February 15, 2019, the Company entered into a Debt Conversion Agreement (“Agreement”) with a convertible promissory note holder totaling $1,575,000 plus accrued interest of $18,406 that were converted into 861,301 common stock shares of the Company with a conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock on the OTC Markets for five consecutive trading days. As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $745,929. On February 19, 2019, the Company entered into a Debt Conversion Agreement (“Agreement”) with a convertible promissory note holder totaling $425,000 plus accrued interest of $425 that were converted into 168,819 common stock shares of the Company with a conversion price per share $2.52 which was based on a 20% discount to the average closing price of the Company’s common stock on the OTC Markets for five consecutive trading days. On February 19, 2019, the Company entered into a Consulting Agreement (“Agreement”) with a company. Per the terms of the Agreement, the Company is to issue 25,000 common stock shares of the Company for providing investor relations services, where 12,500 common stock shares of the Company are due immediately and the remaining 12,500 common stock shares of the Company is due June 19, 2019. On February 19, 2019, the Company issued 12,500 common stock shares of the Company at $3.39 per share. On July 1, 2019, the Company issued 12,500 common stock shares of the Company at $4.19 per share On February 25, 2019, the Company issued 46,875 and 83,333 common stock shares of the Company at $0.74 and $1.81 per share, respectively, relating to restricted stock issued from the Company’s 2017 Equity Incentive Plan. On April 16, 2019, the Company issued a total of 25,675 common stock shares at $2.31 per share from the cashless exercise of 88,769 warrants held by 5 warrant holders. The share price on the date of exercise was $3.25 per share. On April 29, 2019, the Company issued 45,000 common stock shares at $1.52 per share in regard to a Consulting Agreement (“Agreement”), dated January 4, 2019, with an individual for providing financial and investor relations services. On April 29, 2019 the Company issued 50,000 common stock shares at $1.84 per share in regard to an Advisory Consulting Agreement (“Agreement”), dated January 15, 2019, with an individual for providing financial advisory and business development services. On April 29, 2019 the Company issued 60,000 common stock shares at $3.78 per share in regard to a Media Advertising Agreement (“Agreement”), dated February 26, 2019, with a company for providing investor relations and media coverage services. On May 14, 2019, in connection with the Company’s acquisition of CHI (See Note 13), the Company issued 5,700,000 common stock shares as upfront consideration and estimated as of the Closing Date that approximately 8,410,875 common stock shares, of which 7,128,913 common stock shares are held in escrow, may be issued and released over a period of 5 months to 5 years related potential post-closing claims relating to, among other things, breaches of representations, warranties and covenants contained in the Merger Agreement and the future earn-out and achievement of a variety of milestones as defined in the Merger Agreement. From July 1, 2019 to September 30, 2019, the Company issued 137,309 common stock shares at price per shares ranging from $2.25 to $3.60 regarding various consulting and advisory services. From July 1, 2019 to September 30, 2019, the Company issued 285,723 common stock shares of the Company at a conversion prices per share of $1.85 in regard to a Debt Conversion Agreement (“Agreement”) with a convertible promissory note holder totaling $500,000 plus accrued interest of $28,588. As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $409,672. In connection with the conversion of the convertible promissory notes, the Company issued 312,500 warrants that were priced at $2.00 price per share. During the three months period ending September 30, 2019, the Company issued 34,876 common stock shares at a price per share of $1.85 in regard to a Stock Purchase Agreement (“SPA”) with an individual (“Landlord”) for the cancellation of two months rent and overages for property tax and general liability insurance. During the three months period ending September 30, 2019, the Company issued 528,780 common stock shares at a price per share of $3.30 in regard to a Securities Purchase Agreement (the “SPA”) with several accredited investors for a total purchase price of $1,745,000. During the three months period ending September 30, 2019, the Company issued 324,791 common stock shares of the Company at prices per share ranging from $0.74 and $1.81 in regard to restricted stock issued from the Company’s 2017 Equity Incentive Plan. During the three months period ending September 30, 2019, the Company issued a total of 66,753 common stock shares at $1.00 per share from the cashless exercise of 14,324 warrants and cash exercise of 60,480 warrants. The share price on the date of exercise was $4.11 per share. During the three months period ending September 30, 2019, the Company issued 30,000 common stock shares at a price per share of $1.42 in regard to a Patent Purchase Agreement (“Patent Agreement”) with an individual (“Assignor”) who is the owner of all rights, title and interest in and to certain Assigned Patents to purchase the rights to the Assigned Patents. On October 1, 2019 (“Effective Date”), the Company entered into a Consulting Agreement (“Agreement”) with an individual (“Consultant”). Per the terms of the Agreement, the Company will issue up to 75,000 restricted common stock shares (“Shares”), where two thousand (2,000) Shares will vest monthly over a fifteen-month period following the Effective Date, subject to Consultant’s continuous service as a consultant to the Company under this Agreement and the remaining Shares will vest based on the achievement of certain milestones as set forth in Exhibit A of the Agreement. The Company will issue 8,539 vested Shares at $3.15 per share for providing intellectual property management services over a fifteen-month period. The total value of the vested issuances was $26,898. From October 1, 2019 to December 31, 2019, the Company issued 20,833 common stock shares at a price per share of $1.81 regarding consulting services. From January 1, 2020 to December 31, 2020, the Company issued 281,250 common stock shares, at prices per share ranging from $1.40 to $3.93 in consideration for certain consulting services. The total value of these issuances was $0.5 million. From January 1, 2020 to December 31, 2020, the Company issued 194,016 common stock shares, at prices per share ranging from $1.60 to $3.15 in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.02 million. On June 5, 2020, the Company issued 12,058,623 shares of its common stock, at a price per share equal to$1.82, in connection with the Release, Waiver, and Amendment Agreement entered into with CHI. The total value of these issuances was $21.9 million. $0.2 million related to common stock issuable as of December 31, 2019 that was issued in during 2020. On June 5, 2020, the Company issued 708,467 common stock shares, at a price of $2.00 per share, from the exercise of certain warrants. Total value of these issuances was $1.4 million. On October 2, 2020, the Company issued 6,909,091 common stock shares at a price per share of $1.38, in connection with the Sera Labs Merger. The total value of this issuance was $9,534,546 On December 9, 2020, the Company issued 757,576 common stock shares, at a price per share of $1.32 in connection to conversion of $1,000,000 of the Series A Note plus 565,702 common stock shares at a price per share of $0.89 in connection to the make-whole-amount of $500,000 per the terms of the Series A Note. Common Stock Issuable In 2018, the Company entered into an amendment to extend the maturity date of a convertible promissory note. As compensation for extending the note, the Company is to issue 150,000 common stock shares of the Company at a price of $2.05 per share. As of the filing of this Current Report on Form 10-K, the Company has not yet issued these common stock shares and has recorded a stock issuable of $0.3 million. In 2018, convertible promissory notes and accrued interests totaling $0.3 million was converted into 297,288 shares of common stock of the Company at a price of $0.89 per share. As of the filing of this Current Report on Form 10-K, the Company has not yet issued these common stock shares and has recorded a stock issuable of $0.3 million. From October to December 2020, the Company entered into Consulting Agreements (“Agreements”) with individuals. Per the terms of the Agreements, the Company is to issue 108,186 common stock shares of the Company at prices ranging from $1.00 to $1.28 per share. As of our filing of our Form 10-K for the year ended December 31, 2020, the Company has not yet issued these common stock shares and has recorded a stock payable of $0.09 million. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2020 | |
NOTE 16 - SEGMENT REPORTING | Business Segments The Company manages its operations through two business segments: Cure, which develops and manufactures pharmaceutical and wellness products, and Sera Labs, which sells wellness products through direct to consumer and wholesale channels. The Company evaluates performance based on net operating profit. Administrative functions such as finance, treasury, and information systems are centralized. However, where applicable, portions of the administrative function expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. In the event any materials and/or services are provided to one operating segment by the other, the transaction is valued according to the company’s transfer policy, which approximates market price. The costs of operating the manufacturing plant is captured discretely in the Cure segment. The Company’s property, plant and equipment, inventory, and accounts receivable are captured and reported discretely within each operating segment. Summary financial information for the two reportable segments is as follows (in thousands): 2020 2019 Cure Operations: Net sales $ 1,007 $ 623 Operating loss (17,377 ) (13,692 ) Assets 30,148 32,460 Accounts receivable 131 142 Inventory 209 156 2020 2019 Sera Labs Operations: Net sales $ 1,044 $ - Operating loss (1,581 ) - Assets 16,211 - Accounts receivable 93 - Inventory 240 - 2020 2019 Consolidated Operations: Net sales $ 2,051 $ 623 Operating loss (18,958 ) (13,692 ) Assets 46,359 32,460 Accounts receivable 224 142 Inventory 449 156 Disaggregation of Revenues and Concentration Risk The following table presents the percentage of consolidated revenues attributable to products or services classes that represent greater than ten percent of consolidated revenues for the years ended December 31, 2020 and 2019: Year Ended December 31, 2020 2019 CureFilm™ sales 37 % 59 % Research & Development services 11 % 40 % Product sales - CBD 49 % - Total 97 % 99 % The Company received revenue from one customer that individually represents greater than ten percent of consolidated revenues. Revenue for this customer represents 16% of consolidated revenues for the year ended December 31, 2020 and 49% of consolidated revenues for the year ended December 31, 2019. Accounts receivable from this customer at December 31 2020 and 2019 was $0.03 million and $0.1 million, respectively. |
BUSINESS COMBINATION AND DECONS
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY | 12 Months Ended |
Dec. 31, 2020 | |
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY | |
NOTE 17 - BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY | Sera Labs Acquisition On October 2, 2020, the Company acquired all of the issued and outstanding stock of Sera Labs. All issued and outstanding shares of the capital stock of Sera Labs were converted into the right to receive, subject to customary adjustments, an aggregate of approximately (i) $1.0 million in cash (the “Upfront Payment”) and (ii) up to 6,909,091 shares of the Company’s common stock. On October 1, 2020, the Parties entered into a Waiver of Closing Condition, pursuant to which the Company’s obligation to pay the Upfront Payment at the Effective Time was extended to October 13, 2020. Pursuant to the Sera Labs Merger Agreement, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as set forth in the Sera Labs Merger Agreement. Subsequent to the Effective Time and for a period of two years, the Company agreed to make available to Sera Labs $4.0 million for working capital, less the outstanding amount of the Secured Promissory Note previously issued by the Company to Sera Labs. Sera Labs is a trusted leader in the health, wellness, and beauty sectors of innovative products with cutting edge technology and superior ingredients such as CBD. Sera Labs creates high quality products that use science-backed, proprietary formulations. Its more than 20 products are sold under the brand names Seratopical™, SeraLabs™, and Gordon’s Herbals™. Sera Labs sells its products at affordable prices, making them easily accessible on a global scale. Strategically positioned in the growth market categories of beauty, health & wellness, and pet care, Sera Labs products are sold in major national drug, grocery chains and mass retailers. The company also sells products under private label to major retailers and multi-level marketers, as well as direct-to-consumer (DTC), via online website orders, including opt-in subscriptions. The acquisition was accounted for in accordance with ASC 805, Business Combinations. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 12,897,115 total potential shares to be issued, 5,988,024 shares are considered contingent shares based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as described in the Sera Labs Merger Agreement. (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent Shares of $3.1 million will be recorded as a liability as contingent share consideration as of October 2, 2020. (Dollars in thousands) Fair Value of the Contingent Share Consideration Fair value at December 31, 2019 $ - Fair value at October 2, 2020 3,083 Fair value at December 31, 2020 3,204 Net change in fair value during the year ended December 31, 2020 $ (121 ) The Company estimated the fair value of the preliminary purchase price for the acquisition of Sera Labs is approximately $14.2 million. The Company acquired Sera Labs through the issuance of shares of Common Stock of the Company with $1 million of cash consideration to be provided. The preliminary total purchase price was determined based on the following: i) $1 million of the Upfront Payment ii) Company’s closing price ($1.38) on October 2, 2020 for the closing merger consideration shares; and iii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over a 24 month performance period applied to the Clawback Shares. (Dollars in thousands) Shares Amount Upfront Payment - $ 1,000 Closing Merger Consideration Shares 6,909,091 9,535 Contingent Consideration Shares (Clawback Shares) 5,988,024 3,083 Liabilities assumed - 550 Total purchase price 12,897,115 $ 14,168 The Company allocated the acquisition consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value of the acquired tangible and identifiable intangible assets were determined based on inputs that are unobservable and significant to the overall fair value measurement. It is also based on estimates and assumptions made by management at the time of the acquisition. As such, this was classified as Level 3 fair value hierarchy measurements and disclosures. The excess of the purchase price over the estimated fair values is assigned to goodwill. The following table summarizes the preliminary estimated fair values of the assets and liabilities assumed in the Sera Labs acquisition, which is subject to change during measurement period: (Dollars in thousands) Net assets acquired: Cash $ 1,357 Other assets 1,440 Property, plant and equipment 6 Other long term assets 384 Intangibles assets 10,182 Goodwill 4,687 Accounts payable and accrued expenses (1,063 ) Contract liabilities (1,963 ) Other current liabilities (462 ) Other long-term liabilities (400 ) Net assets acquired $ 14,168 Information regarding identifiable intangible assets acquired in the Sera Labs acquisition is presented below: (Dollars in thousands) Weighted-average Estimated useful life Preliminary Estimated Asset Fair Value Finite-lived intangible assets: Customer relationships 5.0 years $ 7,110 Tradename 4.0 years $ 2,610 Non-compete 2.0 years $ 462 Total finite-lived intangible assets acquired 4.6 years $ 10,182 CHI Acquisition On May 14, 2019, the Company acquired all of the issued and outstanding stock of CHI for shares of the Company’s Common Stock. The maximum number of shares of Common Stock to be issued, including escrowed shares and shares issuable pursuant to a variety of earn-out provisions and warrants, is 32,072,283 shares. The shares are allocated as follows: (i) 5,700,000 shares of Common Stock as upfront consideration issued at the Closing (the “ Upfront Consideration Shares Principal Amount Note On June 5, 2020 (the “Release Effective Date”), the Company and CHI, entered into a Release, Waiver, and Amendment (the “Agreement”) and a related Warrant Amendment Agreement (“Warrant Amendment”), in order to make a full resolution of the shares issuable pursuant to the CHI Merger. The Agreement provided as follows: (a) all7,128,913 shares held in escrow were released to the Holders as of the Release Effective Date, of which 140,828shares were returned to the Company for cancellation in consideration for the Company committing to pay certain outstanding liabilities, (b) of the 11,225,299 total shares issuable pursuant to the earn-out provisions in the CHI Merger Agreement, 5,612,654 shares were issued to the Holders as of the Release Effective Date (310,821 of which were assigned back to the Company as of the Release Effective Date) and the obligation of the Company to issue any further earn-out shares was terminated, and (c) certain Holders exercised warrants issued in the CHI Merger to purchase708,467 shares of Common Stock on the Release Effective Date at a price of $2.00 per share (which reflects a reduced exercise price as a result of the Warrant Amendment) for gross proceeds to the Company of approximately $1.4million and the remaining warrants to purchase 7,309,605 shares of Common Stock issued in the CHI Merger expired on the Release Effective Date as a result of an amendment of such warrants effected pursuant to the Warrant Amendment. As previously disclosed, the Company undertook to issue warrants to purchase an additional 4,143,706 shares of common stock to certain affiliates of CHI in consideration for consulting and advisory services to be provided following the closing of the CHI Merger (the “Service Warrants”). Pursuant to the Agreement, the undertaking by the Company to issue the Service Warrants was terminated as of the Release Effective Date. CHI has developed a novel chewable delivery system, nanoemulsions, microemulsions, microcapsules and taste masking solutions. These technologies complement and expand the CUREfilm™ platform to enable the delivery of a wider range of active ingredients at higher doses. The combined technologies create a versatile platform for both immediate and controlled-release drug delivery. The acquisition was accounted for in accordance with ASC 805, Business Combinations. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 32,072,283 total potential shares to be issued, 26,372,283 shares are considered contingent shares to be released or issued over a period from 5 months to 5 years based on the various contingency as described in the Merger Agreement. (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent and Acquisition Warrant Shares of $14.6 million will be recorded as a liability as contingent share consideration as of May 14, 2019. Below is the change of contingent share consideration during the year ended December 31, 2020: (Dollars in thousands) Fair Value of the Contingent Share Consideration Fair value at December 31, 2018 $ - Fair value at May 14, 2019 14,632 Net change in fair value during the year ended December 31, 2019 1,657 Fair value of common stock shares to be released from escrow and to be issued (246 ) Fair Value at December 31, 2019 16,043 Settlement of contingent consideration liability (21,701 ) Net change in fair value during the year ended December 31, 2020 5,658 Fair Value at December 31, 2020 $ - The Company estimated the fair value of the preliminary purchase price for the acquisition of CHI is approximately $34.1 million. The Company acquired CHI through the issuance of shares of Common Stock of the Company with no cash consideration provided. The preliminary total purchase price was determined based on the following: i) Company’s closing price ($3.34) on May 14, 2019 for the Upfront Consideration Share; ii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over a 66 month performance period applied to the total number of contingent shares, which consists of the Clawback Shares, Achievement Shares and Earnout Shares, as determined based on the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished (“Adjusted Contingent Shares”); iii) the fair value of the Acquisition Warrant Shares based on using the Black-Scholes valuation using the a risk free rate of 2.4%, stock price volatility of 134.7%, no dividend payout, 1 year expected life, exercise price of $5.01 and an estimated stock price of $0.39 based on the end of the earn-out period, year 4 (as determine by using a Monte-Carlo simulation model); and iv) the Company estimated acquisition costs of $0.4 million, of which $0.3 million were included in general and administrative expenses for the period ended December 31, 2020. (Dollars in thousands) Shares Amount Upfront Consideration Shares 5,700,000 $ 19,038 Adjusted Contingent Shares 8,410,875 14,627 Acquisition Warrant Shares 8,018,071 5 Acquisition costs - 400 Total purchase price 22,128,946 $ 34,070 The Company estimated the fair value of acquired in-process research and development technology using the relief from royalty method. The fair values of acquired patents and developed technology were estimated using the multi-period excess earnings method. Under both the relief from royalty and multi-period excess earnings methods, the fair value models incorporate estimates of future cash flows, estimates of allocations of certain assets and cash flows, estimates of future growth rates, and management’s judgment regarding the applicable discount rates to use to discount such estimates of cash flows. The Company allocated the acquisition consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value of the acquired tangible and identifiable intangible assets were determined based on inputs that are unobservable and significant to the overall fair value measurement. It is also based on estimates and assumptions made by management at the time of the acquisition. As such, this was classified as Level 3 fair value hierarchy measurements and disclosures. The excess of the purchase price over the estimated fair values is assigned to goodwill. The following table summarizes the preliminary estimated fair values of the assets and liabilities assumed in the CHI acquisition, which is subject to change during measurement period: (Dollars in thousands) Net assets acquired: Cash $ 8,487 Note receivable from CURE 2,000 Property, plant and equipment 83 Patents and development technology 650 In-process research and development 14,460 Goodwill 9,178 Accounts payable (354 ) Payroll tax liabilities (834 ) Net assets acquired 33,670 Acquisition costs 400 Net assets acquired and acquisition costs incurred $ 34,070 Information regarding identifiable intangible assets acquired in the CHI acquisition is presented below: (Dollars in thousands) Weighted-average Estimated useful life Preliminary Estimated Asset Fair Value Finite-lived intangible assets: Patent and developed technology 11.0 years $ 650 Total finite-lived intangible assets acquired 11.0 years $ 650 Supplemental Pro Forma Information The following unaudited supplemental pro forma financial information is based on our historical consolidated financial statements, CHI’s historical consolidated financial statements and Sera Lab’s historical consolidated financial statements as adjusted to give effect to the May 14, 2019 acquisition of CHI’s and the October 2, 2020 acquisition of Sera Labs. The unaudited supplemental pro forma financial information for the periods presented gives effect to the acquisition for CHI as if it had occurred on January 1, 2018 and January 1, 2019 for Sera Labs. This unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the periods presented. In addition, the unaudited pro forma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable. The following table presents pro forma sales, net loss attributable to Cure Pharmaceutical Holding, Inc., and net loss attributable to the Company per common share data assuming Sera Labs and CHI were acquired at the beginning of 2019 fiscal year. For the year ended December 31, 2020 (in thousands, except per share data): Cure Pharmaceutical Sera Labs Pro forma Adjustments Consolidated Pro Forma Net product sales $ 1,049 $ 6,728 $ (34 ) $ 7,743 Net loss $ (29,059 ) $ (3,051 ) $ 162 $ (31,948 ) Net loss attributable to Cure per common share, basic and diluted $ (0.65 ) $ (0.26 ) $ (0.68 ) For the year ended December 31, 2019 (in thousands, except per share data): Cure Pharmaceutical Sera Labs Chemistry Holdings Pro forma Adjustments Consolidated Pro Forma Net revenues $ 623 $ 3,621 $ - - $ 4,244 Net loss $ (21,363 ) $ (2,621 ) $ (330 ) - $ (24,314 ) Net loss attributable to Cure per common share, basic and diluted $ (0.62 ) $ (0.22 ) $ (0.01 ) $ (0.67 ) Deconsolidation of Oak Therapeutics, Inc. On April 15, 2019, the Company entered into a Termination and Release Agreement (“Agreement”) with Oak Therapeutics (“Oak”) to surrender all of its Oak shares to Oak and terminating any rights the Company might have to acquire additional shares or interest in Oak. The parties terminated all contractual relationships between them, whether written or verbal, express or implied. All license or other rights previously granted by Oak to the Company or the Company to Oak were terminated, including all licenses or rights of any kind granted by the Company. As of the date of deconsolidation, Oak has a negative net assets, which resulted in a gain of $0.08 million. In the Company’s consolidated financial statements for the year ended December 31, 2019, the Company’s investment in Oak has been written off and was reflected at a value of zero. The following information summarizes the results of operations of Oak for the period January 1, 2019 through April 15, 2019, the date of deconsolidation: (Dollars in thousands) January 1, 2019 through April 15, 2019 Revenue $ - Net loss $ 16 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2020 | |
INCOME TAXES | |
NOTE 18 - INCOME TAXES | The Company accounts for income taxes under ASC Topic 740: Income Taxes which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The Company generated a deferred tax asset through net operating loss carry-forwards. Management of the Company’s analysis indicates the net operating losses would be subject to significant limitations pursuant to Internal Revenue Code Section 382/383. The Company has not completed its IRC Section 382 Valuation, as required and the NOL’s because of potential Change of Ownerships might limit the usage or render the NOL’s completely worthless. Therefore, Management of the Company based upon Management’s evaluation has recorded a Full Valuation Reserve (100%), since it is more likely than not that no benefit will be realized for the Deferred Tax Assets. Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. The Company does not have any uncertain tax positions. The total deferred tax asset is calculated by multiplying a domestic (US) 21 percent marginal tax rate by the cumulative Net Operating Loss Carryforwards (“NOL”). The Company currently has NOL’s of approximately $16.1 million, which expire through 2037, in general, and NOL’s of approximately $41.6 million, which has an infinite life. The deferred tax asset related to the NOL carryforwards Management has determined based on all the available information that a 100% Valuation reserve is required. The change in the valuation allowance was $7.3 million and $4.2 million for the years ended December 31, 2020 and 2019, respectively The provision for incomes taxes for the years ending December 31 is as follows (in thousands): 2020 2019 Current expense Federal $ - $ - State - - Deferred expense Federal $ - $ - State - - Total income tax expense $ - $ - Deferred income tax (liabilities) assets at December 31 are as follows (in thousands): 2020 2019 Deferred income tax assets Net operating loss carryforward $ 14,359 $ 12,007 Change in fair value of convertible promissory notes 2,627 - Noncash compensation 1,018 - Deferred revenue 180 135 Lease liability 118 - Other intangibles 195 - Inventory reserve 82 Stock based compensation 79 - Allowance for doubtful accounts 96 66 Accrued expenses 131 31 Total deferred tax assets 18,885 12,239 Deferred income tax liabilities State income taxes - (922 ) ROU assets (110 ) - Prepaid expenses and other assets (84 ) - Depreciation and amortization (48 ) (16 ) Valuation allowance (18,643 ) (11,301 ) Total deferred tax liabilities (18,885 ) (12,239 ) Deferred income tax, net $ - $ - Open income tax years for audit purposes (Federal and State) are from 2017 through 2020. The Company has not been serviced with any audit notices, as of the year ended December 31, 2020. In addition, the Company is current in filing our sales and income tax returns. Internal Revenue Code Section 382 places a limitation (“Section 382 Limitation”) on the amount of taxable income that can be offset by NOL carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. California has similar rules. Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the NOL and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods. In general, the Company is no longer subject to tax examination by the Internal Revenue Service or state taxing authorities for years before 2016. Although the federal and state statutes are closed for purposes of assessing additional income tax in those prior years, the taxing authorities may still make adjustments to the NOL and credit carryforwards used in open years. Therefore, the tax statutes should be considered open as it relates to the NOL and credit carryforwards used in open years. For tax years that remain open to examination, potential examinations may include questioning of the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with the Internal Revenue Code or state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Company’s practice is to recognize interest and penalties related to income tax matters in tax expense. As of December 31, 2020 and 2019, The Company has no accrued interest and penalties. |
INTELLECTUAL PROPERTY AND COLLA
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | 12 Months Ended |
Dec. 31, 2020 | |
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | |
NOTE 19 - INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | On September 4, 2018, Cure Pharmaceutical Holding Corp., through its subsidiary, Cure Pharmaceutical Corp. (together, the “Company”) entered into its first multi-year licensing agreement (the “Licensing Agreement”) with Canopy Growth Corporation, a company that engages in the production and sale of medical cannabis (“Canopy”). Under the terms of the Licensing Agreement, Canopy will have an exclusive license to certain of the Company’s intellectual property rights, including the Company’s patented, multi-layer OTF, CUREfilm™ technology for use with cannabis extracts and biosynthetic cannabinoids (“Products”) and the Company’s trademarks in markets around the world where it is legal for Canopy to sell the Products, excluding Asia. The Company will retain the right to manufacture synthetic cannabinoids for pharmaceutical applications. On November 7, 2019, the Company and Canopy entered into an Amendment Agreement (“Amendment”) to allow the Company to sell cannabinoid CUREfilm products (“Product”) to third parties internationally, excluding Canada, from the Effective Date until December 31, 2020. However, the Company shall not be allowed to sell any Product that are being specifically developed for Canopy, as identified per the Development Agreement between the Company and Canopy, which is dated on June 17, 2019. Canopy will manufacture CUREfilms that deliver cannabis extracts, expanding the commercialization and monetization of the CUREfilm technology. The parties will collaborate on new products and uses for the products. Canopy shall pay the Company approximately $0.3 million for costs associated with a feasibility study and technology transfer as well as certain milestone payments and royalties on product sales by Canopy with minimum royalties starting in 2020. On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement. During the year ended December 31, 2020 and 2019, the Company recognized $0.01 million and $0, respectively, of revenue relating to work completed regarding the transfer of technology fee as discussed in the License Agreement with Canopy. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
NOTE 20 - COMMITMENTS AND CONTINGENCIES | Litigation From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement (see Note 18). Tax Filings The Company tax filings are subject to audit by taxing authorities in jurisdictions where it conducts business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. As of December 31, 2020, the Company is not subject to any such these audits. Employment Contracts The Company has entered into employment and severance benefit contracts with certain executive officers. Under the provisions of the contracts, The Company may be required to incur severance obligations for matters relating to changes in control, as defined, and certain terminations of executives. As of December 31, 2020, The Company had such severance obligations for certain executive officers, in accordance with the severance benefit provisions of their respective employment and severance benefit agreements. On May 8, 2020 the Company entered into a separation agreement (the "Separation Agreement”) with Jessica Rousset whereby the parties have agreed to a mutual separation of Mrs. Rousset’s employment as the Company’s Chief Operating Officer, effective May 8, 2020. Pursuant to the terms of the Separation Agreement, Mrs. Rousset will be entitled to the following severance benefits: (i) a gross sum of $93,461.54, paid in equal installments over a six-month period; (ii) for a period of six months, an amount equal to the cost of her COBRA health benefits if she enrolls for COBRA coverage; (iii) acceleration of vesting of each equity award held by her to the extent the award would have vested had she remained employed for six months following her resignation; and (iv) an extended exercise period for certain equity awards held by her such that she may exercise vested shares under such outstanding equity awards until May 8, 2021. The Separation Agreement contains a release and certain restrictive covenants that are binding upon Mrs. Rousset Indemnification In the normal course of business, The Company may provide indemnification of varying scope under The Company’s agreements with other companies or consultants, typically The Company’s clinical research organizations, suppliers and others. Pursuant to these agreements, The Company will generally agree to indemnify, hold harmless, and reimburse the indemnified parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of The Company’s products. Indemnification provisions could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to The Company’s products. The Company’s office and laboratory facility leases also will generally contain indemnification obligations, including obligations for indemnification of the lessor for environmental law matters and injuries to persons or property of others, arising from The Company’s use or occupancy of the leased property. The term of these indemnification agreements will generally continue in effect after the termination or expiration of the particular research, development, services, lease, or license agreement to which they relate. Historically, The Company has not been subject to any claims or demands for indemnification. The Company also maintains various liability insurance policies that limit The Company’s financial exposure. As a result, The Company management believes that the fair value of these indemnification agreements is minimal. Accordingly, The Company has not recorded any liabilities for these agreements as of December 31, 2020 and 2019. Operating leases The Company maintains its corporate offices and manufacturing facility at 1620 Beacon Place, Oxnard, CA 93033, which contains approximately 25,000 square feet. The Company is currently on a month-to-month lease. Sera Labs will pay base monthly rent in the amount of $0.01 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%.. If the Lease is terminated based on the occurrence of an “event of default,” The Company will be obligated to pay the abated rent to the lessor. On May 1, 2019, Sera Labs entered into a lease agreement to lease a 3,822 square feet office space and was absorbed by the Company upon acquisition of Sera Labs on October 2, 2020. The agreement contains an option to extend the lease for an additional 36 months and the Company will reassess the lease term of the contract when it has determined it is reasonably certain to exercise the option. Sera Labs will pay base monthly rent in the amount of $0.01 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%. If the Lease is terminated based on the occurrence of an “event of default,” The Company will be obligated to pay the abated rent to the lessor. Total rent expense was $0.3 million for the years ended December 31, 2020 and 2019. The Company classified the Sera Labs lease as an operating lease in accordance with ASC 842 and has recognized a right-of-use asset and a lease liability based on the present values of its lease payments over its respective lease term. The Company used the services of a valuation company to compute the IBR which is necessary to determine the present value of its lease payments since a borrowing rate is not explicitly available on the lease agreement. The concluded IBR is 11.30%. Operating lease payments and lease expense are recognized on a straight-line basis over the lease term. As of December 31, 2020, the current portion and long-term portion of operating lease liability is $0.1 million and $0.3 million, respectively. The future payments due under the operating lease for the years ended December 31 are as follows: Years 2021 $ 130 2022 134 2023 138 2024 46 2025 - Undiscounted cash flow 448 Effects of discounting (77 ) Lease liabilities recognized $ 371 Finance leases During 2019, the Company entered into a 5-year equipment lease rental which requires the company to pay monthly payments of $0.02 million. The Company determined the payments represented substantially all of the fair value of the asset and recorded a right of use asset for $0.06 million and a finance lease liability for $0.06 million as of December 31, 2019 within other assets and liabilities. The company will make payment of $0.02 annually until October 2024. Interest associated with the lease is $0.01 million or less annually based on a discount rate of 9.0%. For the year ended December 31, 2020, the current portion and long-term portion of finance capital lease liability is $0.01 million and $0.04 million, respectively. For the year ended December 31, 2019 the Company did not have any current or long-term portion of finance capital lease liability. Future minimum lease payments under non-cancellable finance leases as of December 31, 2020 are as follows (in thousands): 2021 $ 14 2022 14 2023 14 2024 10 2025 - Thereafter - Finance lease liabilities recognized $ 52 Operating and Financing leases The following table presents supplemental balance sheet information related to operating and financing leases as of December 31, 2020 and 2019 (in thousands, except lease term and discount rate): 2020 2019 Operating leases Right-of-use assets, net $ 343 - Right-of-use lease liabilities, current $ 93 - Right-of-use lease liabilities, noncurrent 278 - Total operating lease liabilities $ 371 - Financing Leases Finance lease right-to-use assets, net $ 52 63 Current liabilities $ 12 11 Noncurrent liabilities 40 52 Total financing lease liabilities $ 52 63 Weighted average remaining lease term Operating leases 3.31 years N/A Financing leases 3.82 years 4.83 years Weighted average discount rate Operating leases 11.3 % N/A Financing leases 9.0 % 9.0 % |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2020 | |
SUBSEQUENT EVENTS | |
NOTE 21 - SUBSEQUENT EVENTS | Except for the event(s) discussed below, there were no subsequent events that required recognition or disclosure. The Company evaluated subsequent events through the date the consolidated financial statements were issued and filed with the Securities and Exchange Commission. On January 13, 2021 and February 25, 2021, the Company received a total of $0.5 million from an investment company (“Investor”) in exchange for a promissory note. Both the Company and Investor agreed to negotiate the terms of the promissory note and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory note. On January 20, 2021 and February 10, 2021, the Company collected a total of $0.2 million from Coeptis relating to a convertible promissory note issued from Coeptis on November 7, 2019 (“Coeptis Note”). The total payment of $0.2 million was full satisfaction of the principal amount and accrued interest until February 10, 2021.The Coeptis Note had a maturity date of June 15, 2020, which was not paid by the maturity date and was considered in default as of December 31, 2020 and fully reserved for. The Company will record the collection of the Coeptis Note as a recovery of bad debt during the first quarter of 2021. On February 1, 2021, the Company entered into a collaboration and joint venture agreement (“Collaboration Agreement”) with Medolife Rx (“Medolife”) to produce Medolife’s products in the Company’s facility.The Company will grant access to Medolife for a joint production area within the Company’s production facility for the term of the Collaboration Agreement (5 years).In exchange for granting access to the Company’s production area, Medolife will pay a total of $0.3 million to the Company. On February 5, 2021, $0.4 million of the PPP Loan was forgiven as permitted under Section 1106 of the CARES Act. On February 25, 2021, the Company obtained and entered into a Consent and Waiver Agreement (the “Consent and Waiver”) to that certain Securities Purchase Agreement, dated as of October 30, 2020 by and between the Company and the Investor pursuant to which the Investor purchased the Notes. Pursuant to the Consent and Waiver, the Investor has agreed to waive the applicable provisions of the Purchase Agreement and the Notes with respect to the issuance of 1.5 million shares Common Stock and/or options to purchase Common Stock of the Company to consultants and other service providers of the Company and its subsidiaries from time to time and shall hereafter be deemed to be Excluded Securities (as defined in each of the Purchase Agreement and the Notes). |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | The accompanying 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. |
Principles of Consolidation | The consolidated financial statements include the accounts of CURE Pharmaceutical Holding Corp (“CPHC”) and its wholly-owned subsidiaries, CURE Pharmaceutical, CHI, The Sera Labs, Inc. and its 63% majority owned subsidiary Oak Therapeutics, Inc. (“Oak”) through April 15, 2019 as the Company entered into a Termination and Release Agreement with Oak to surrender all of the Company’s shares of Oak and terminate any rights the Company may have to acquire additional shares or interest in 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. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition. The Company’s purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. |
Going Concern and Management's Liquidity Plans | In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, The Company assesses going concern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to The Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, The Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent The Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15. The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2020, we had an accumulated deficit of approximately $81.3 million and a working capital deficit of approximately $10.6 million. Our operating activities consume the majority of our cash resources. We anticipate that we will continue to incur operating losses and negative cash flows from operations, at least into the near future, as we execute our commercialization and development plans and strategic and business development initiatives. As of December 31, 2020, the Company had approximately $1.7 million of cash on hand. As further described in Note 11, on October 30, 2020, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Investor”), pursuant to which it sold to the Investor a Series A subordinated convertible note, with an initial principal amount of $4.6 million (the “Series A Note”), and a Series B senior secured convertible note, with an initial principal amount of $6.9 million (the “Series B Note,” and together with the Series A Note, the “Convertible Notes” and, each a “Convertible Note”), for an aggregate principal amount of $11.5 million (the “Private Placement”). The Company received gross proceeds from the Series A and Series B Notes of $5.0 million during the year ended December 31, 2020. The Company paid legal and broker fees totaling $0.7 million and $1.1 million promissory note due to the Investor from the gross proceeds from the Series A and Series B Notes during the year ended December 31, 2020. The Series A Note was sold with an original issue discount of $0.6 million and the Series B Note was sold with an original issue discount of $0.9 million. The Investor paid for the Series A Note issued to the Investor by delivering $4.0 million in cash consideration and paid for the Series B Note issued to the Investor by delivering a secured promissory note (the “Investor Note”) with an initial principal amount of $6.0 million. The Investor will be required to prepay the Investor Note in certain amounts (each a “Mandatory Prepayment”) on the first date after the effectiveness of a resale registration statement (or the availability of Rule 144 promulgated under the Securities Act of 1933, as amended) if certain other conditions are satisfied as of such date. While the Company believes the funds available through this financing will be sufficient to meet the Company’s working capital requirements during the coming year, if the Company is unable to satisfy the conditions required to initiate the Mandatory Prepayment under the Investor Note, then it will need to obtain alternative financing. There can be no assurance that if such alternative financing is needed that it will be available on terms acceptable to the Company or will be enough to fully sustain the Company’s operations. If the Company is unable to raise sufficient additional funds it will have to develop and implement a plan to extend payables, reduce expenditures, or scale back our business plan until sufficient additional capital is raised to support further operations. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. |
Reclassifications | Certain reclassifications have been made to prior year’s consolidated financial statements to enhance comparability with the current year’s consolidated financial statements. These reclassifications had no effect on the previously reported net loss. |
Use of Estimates | The preparation of the accompanying consolidated 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 and the reported amounts of revenue and expenses during the reported period. Significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts, inventory reserves, valuation of intangible assets and goodwill, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock based compensation, beneficial conversion features, warrant values, deferred taxes and the assumptions used to calculate derivative liabilities and fair valued of the purchase price allocations. Actual results could differ materially from such estimates under different assumptions or circumstances. |
Cash and Cash Equivalents | The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of December 31, 2020, and 2019, the Company had no cash equivalents. 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. At December 31, 2020 and 2019, the Company had $1.5 million and $3.8 million in excess of the federal insurance limit, respectively. |
Investment in Associates | An associate is an entity over which the Company has significant influence through an investment. 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 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 November 1, 2019, the Company purchased a Convertible Loan (“Loan”) with a Releaf Europe BV (“Releaf”) in the amount of $0.2 million. Releaf shall accrue interest on the Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Loan is repaid or at the maturity date of October 31, 2021 (“Maturity Date”). In the event of a request for conversion by the Company (“Request for Conversion”) or at the end of the Maturity Date, the outstanding amount of the Loan and any unpaid accrued interest shall be converted into shares of Releaf (“Shares”) based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2 million of debt and/or equity (“Qualified Financing”), the outstanding amount of the Loan Agreement and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Qualified Financing less a discount of 20% on the subscription price. In addition, both the Company and Releaf agree in the event the pre-money valuation of the Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of December 31, 2020, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to this Loan. On February 5, 2020 and February 13, 2020, the Company purchased two convertible loans (the “February 2020 Loans”) with Releaf for a total amount of $0.3 million. Releaf shall accrue interest on the February 2020 Loans at 6% per annum and they shall become due and payable to the Company at the earlier of the conversion date or the maturity date of October 31, 2021. In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amounts of the February 2020 Loans and any unpaid accrued interests shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2 million of debt and/or equity (“Releaf February 2020 Qualified Financing”), the outstanding amount of the February 2020 Loans and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf February 2020 Qualified Financing, less a discount of 20% on the subscription price. In addition, in the event that the pre-money valuation of the Releaf February 2020 Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of December 31, 2020, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to the foregoing Releaf loans. The Company follows Accounting Standards Codification (“ASC”) 325-20, Cost Method Investments |
Allowances for Credit Losses | Accounts receivable are generally unsecured. The Company closely monitors accounts receivable balances and estimates the allowance for credit losses. These estimates are based on historical collection experience and other factors, including those related to current market conditions and events. The Company’s allowances for accounts receivable have not historically been material. At December 31, 2020 management determined that an allowance of $0.044 million was necessary. At December 31, 2019, management determined that no allowance was necessary. |
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: Manufacturing equipment 5-7 years Computer and other equipment 3-7 years Leasehold improvements 3-7 years In accordance with ASC 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. |
Leases | Effective January 2019, the Company accounts for its leases under ASC 842. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. The adoption of ASC 842 did not have a material impact to the Company’s consolidated financial statements because the Company did not have any significant operating leases at the time of adoption. During the years ended December 31, 2020 and 2019, the Company as a result of its acquisition has various operating leases in accordance with ASC 842 discussed in Note 20. The Company’s accounting for financing leases (previously referred to as “capital leases”) remained substantially unchanged. In calculating the right of use and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial term of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term. |
Inventory | Inventory is stated at the lower of cost or net realizable value (“NRV”). NRV is the amount by which the estimated selling price of the product exceeds the sum of any additional costs expected to be incurred on the sale of such product in the ordinary course of business. 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. In order to state the inventory at the lower of cost or NRV, we maintain reserves against individual stocking units. Inventory reserves, once established, are not reversed until the related inventories have been sold or scrapped. If future demand or market conditions are less favorable than our projections, a write-down of inventory may be required, and would be reflected in cost of product revenues sold in the period the revision is made. |
Goodwill and intangible assets | In accordance with ASC 350, Intangibles – Goodwill and Other Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill, similar to IPR&D, is not amortized but is tested for impairment at least annually, or if circumstances indicate its value may no longer be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company’s business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. The Company operates in two segments as result of the Sera Labs, Inc., acquisition in October 2020 and considered to be the two reporting units and, therefore, goodwill is tested for impairment at the segment level. The Company does not have intangible assets with indefinite useful lives other than goodwill, Trademark, and the acquired IPR&D discussed in Note 17. As of December 31, 2020, there has been no impairment of goodwill and intangible assets. |
Impairment of Long-Lived Assets | Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an 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. 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 cashflow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There was no impairment on our long-lived assets during the twelve months ended December 31, 2020 and 2019. |
Contingent consideration liabilities | Certain of The Company’s asset and business acquisitions involve the potential for future payment of consideration to third-parties and former selling shareholders in amounts determined upon attainment of revenue milestones, from product sales, as applicable. The fair value of such liabilities is determined using unobservable inputs. These inputs include the estimated amount and timing of projected cash flows and the risk-adjusted discount rate used to present value the cash flows. These obligations are referred to as contingent consideration. ASC 805 requires that contingent consideration be estimated and recorded at fair value as of the acquisition date as part of the total consideration transferred. Contingent consideration is an obligation of the acquirer to transfer additional assets or equity interests to the selling shareholders in the future if certain future events occur or conditions are met, such as the attainment of product development milestones. Contingent consideration also includes additional future payments to selling shareholders based on achievement of components of earnings, such as “earn-out” provisions or percentage of future revenues, including royalties paid to the selling shareholders based on a percentage of revenues generated from the Sera Labs’ products. The fair value of contingent consideration after the acquisition date is reassessed by the Company as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in the consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that the Company records in its consolidated financial statements. See Notes 17 for a full discussion of these liabilities. |
Revenue Recognition | The Company recognizes revenue in accordance with ASC 606, “ Revenue Recognition To achieve the core principle of Topic 606, we perform the following steps: · Identify the contract(s) with customer; · Identify the performance obligations in the contract; · Determine the transactions price; · Allocate the transactions price to the performance obligations in the contract; and · Recognize revenue when (or as) we satisfy a performance obligation. Under Topic 606, the Company recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer. |
Cure Pharmaceutical Revenue | The Cure Pharmaceutical derives revenues from two primary sources: products and services. Product revenue includes the shipment of products according to agreements with the Cure Pharmaceutical’s customers. Services include research and development contracts for the development of OTF products utilizing the Cure Pharmaceutical’s CureFilm Technology or our other proprietary technologies. Cure Pharmaceutical’s contracts with customers rarely contain multiple performance obligations. For these contracts, Cure Pharmaceutical 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. The Cure Pharmaceutical’s formulation and product development income include services for the development of OTF products utilizing our CureFilm Technology. Our 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. Cure Pharmaceutical 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 we incur 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. |
Sera Labs Revenue | Sera Labs recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer. Revenue from eCommerce sales, including direct-to-consumer sales, are recognized upon shipment of merchandise. We also elected to adopt the practical expedient related to shipping and handling fees which allows us to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Therefore, shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred. Shipping revenue are recorded upon delivery to the customer. |
Practical Expedients and Exemptions | The Company has elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows: · The Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception; · The Company made the accounting policy election to exclude any sales and similar taxes from the transaction price; and · The Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less |
Sales Tax | The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to a customer, excluding sales taxes. The net amount of sales tax payable to the taxation authority is included sales tax payable in the balance sheet. |
Sales Returns, Discounts and Warranties | Sales returns, discount and warranties are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns, discounts and warranties which may occur with distributors and retailers. When evaluating the adequacy of sales returns, discounts and warranties, the Company analyzes the following: historical credit allowances, current sell-through of inventory of the Company’s products, current trends in retail industry, changes in customer demand, acceptance of products, and other related factors. |
Cost to Obtain a Contract | The Company pays sales commission to its employees and outside sales representatives for contracts that they obtain relating to wholesale and personal protective equipment. The Company applies the optional practical expedient to immediately expense costs to obtain a contract if the amortization period of the asset that would have been recognized is one year or less. As such, sales commissions are immediately recognized as an expense and included as part of sales and marketing expenses. |
Contract Liabilities | Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded as deferred revenues when customers remit contractual cash payments in advance before satisfying performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied. Advance payments and billings in excess of revenue recognized are included in deferred revenue, which is classified as current or noncurrent based on the timing of when the Company expects to recognize revenue. At December 31, 2020 and 2019, we had contract liabilities of $1.0 million and $0.5 million, respectively. Contract liabilities is made up of the following as of December 31, 2020 and 2019 (in thousands): 2020 2019 Customer deposits for commercial products $ 281 $ 456 Customer deposits for personal protective equipment 713 - Total contract liabilities $ 994 $ 456 The following table summarizes the changes in contract liabilities during the years ended December 31, 2020 and 2019 (in thousands): Balance at December 31, 2018 $ 383 Additions 493 Transfers to Revenue (420 ) Balance at December 31,2019 456 Additions 1,033 Transfers to Revenue (495 ) Balance at December 31, 2020 $ 994 |
Cost of Revenues | Cost of revenues primarily consists of labor and manufacturing costs for our products. |
Advertising Expense | The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying consolidated statements of operations. The Company recorded advertising costs of $1.1 million and $0.5 for the years ended December 31, 2020 and 2019, respectively. |
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 $2.8 million and $2.3 million for the years ended December 31, 2020 and 2019, 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. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the outbreak of a novel strain of the coronavirus, COVID-19. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Under the CARES Act, net operating losses (“NOLs”) arising in tax years beginning after December 31, 2017, and before January 1, 2021 may be carried back to each of the five tax years preceding the tax year of such loss. Moreover, under the 2017 Tax Act as modified by the CARES Act, federal NOLs of our corporate subsidiaries generated in tax years ending after December31, 2017 may be carried forward indefinitely, but the deductibility of federal NOLs, particularly for tax years beginning on or after January 1, 2021, may be limited. The accounting for the material income tax impacts will be reflected in the 2020 financial statements. It is uncertain if and to what extent various states will conform to the 2017Tax Act or the CARES Act. The Company is currently assessing the impact the CARES Act will have on the Company’s consolidated financial statements. |
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 ASU 2018-07 (Topic 718) for share-based payments to employees, consultants and other third-parties, compensation expense is determined at the “grant 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 grant date. The Company uses the Black-Scholes option valuation model for estimating fair value at the date of grant. The Company accounts for restricted stock awards and stock options issued at fair value, based on an exercise price per share equal to the volume-weighted average of the high and low selling prices of the Company’s common stock reported on the OTC Bulletin Board for the five (5) trading days in the Company’s common stock beginning with the third (3rd) such trading following the Filing Date and ending with the seventh (7th) such trading day following the Filing Date. Compensation expense is recognized for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to the Company generally using the straight-line single option method. In the case of award modifications, the Company accounts for the modification in accordance with ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, whereby the Company recognizes the effect of the modification in the period the award is modified. As of January 1, 2019, the Company adopted ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting of share-based payment awards issued to employees and nonemployees. The adoption did not materially impact our consolidated financial statements. |
Business combinations and fair value measurements | The Company accounts for business combinations in accordance with ASC 805, which requires the purchase consideration transferred to be measured at fair value on the acquisition date in accordance with ASC 820, Fair Value Measurement · Level 1 · Level 2 · Level 3 When a part of the purchase consideration consists of shares of the Company common stock, the Company calculates the purchase price attributable to those shares, a Level 1 security, by determining the fair value of those shares quoted on the OTC as of the acquisition date. The Company recognizes estimated fair values of the tangible assets and identifiable intangible assets acquired, including in-process research and development, and liabilities assumed, including any contingent consideration, as of the acquisition date. Goodwill is recognized as any amount of the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in excess of the consideration transferred. ASC 805 precludes the recognition of an assembled workforce as an asset, effectively subsuming any assembled workforce value into goodwill. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. At December 31, 2020 and 2019, the Company had no financial assets or liabilities recorded at fair value on a recurring basis, except for cash and cash equivalents consisting of money market funds and the Series A and Series B Notes, which we elected the fair value option. These assets are measured at fair value using the period-end quoted market prices as a Level 1 input. The Company also has certain derivative liabilities and contingent consideration liabilities which are carried at fair value based on Level 3 inputs (see Note 12). The carrying amounts of cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair values because of the short-term nature of these items. The carrying amount of the PPP loan approximates fair value because of the SBA guarantee on the terms of the loan and the relatively recent funding date of the loan (see Note 10). The following table summarizes fair value measurements by level at December 31, 2020 for assets and liabilities measured at fair value on a recurring basis (in thousands): (Dollars in thousands) Total Level 1 Level 2 Level 3 Fair value of contingent stock consideration $ 3,205 $ - $ - $ 3,205 Fair value of Series A Note $ 7,010 $ - $ - $ 7,010 Fair value of Series B Note $ 11,674 $ - $ - $ 11,674 Fair value of derivative liability $ - $ - $ - $ - The following table summarizes fair value measurements by level at December 31, 2019 for assets and liabilities measured at fair value on a recurring basis (in thousands): (Dollars in thousands) Total Level 1 Level 2 Level 3 Fair value of contingent stock consideration $ 16,043 $ - $ - $ 16,043 Fair value of derivative liability $ 91 $ - $ - $ 91 The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earnouts may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from the date of acquisition to December 31, 2020, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in a decrease of the fair value of the contingent stock consideration. In June 2020, the Company settled all of its outstanding contingent consideration liabilities outstanding with CHI. In October 2020, the Company acquired Sera Labs and had an outstanding contingent consideration liability of $3.2 million in relation to the Sera Labs Merger. The Company has elected the fair value option to account for the Series A and B Notes that were issued on October 30, 2020 and records this at fair value with changes in fair value recorded in the Consolidated Statements of Operations. As a result of applying the fair value option, direct costs and fees related to the Series A and B Notes were recognized in earnings as incurred and not deferred. The following table summarizes the changes in Level 3 financial instruments during the year ended December 31, 2020 (in thousands): Fair value at December 31, 2019 $ — Initial fair value of Series A Note 9,042 Initial fair value of Series B Note 11,990 Change in fair value of Series A Note 165 Change in fair value of Series B Notes (316 ) Conversion of Series A Notes (2,197 ) Fair value of Series A and B Notes at December 31, 2020 $ 18,684 Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Series A and Series B Notes are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy is as follows: Date of valuation October 30, 2020 December 31, 2020 Stock price $ 1.25 $ 1.30 Conversion price $ 1.32 $ 1.32 Term (in years) – Series A Note 2.00 1.83 Term (in years) – Series B Note 1.00 0.83 Volatility – Series A Note 87 % 86 % Volatility – Series B Note 81 % 80 % Risk-free interest rate – Series A Note 0.14 % 0.12 % Risk-free interest rate – Series A Note 0.13 % 0.09 % Interest rate 18 % 18 % The Company recorded a loss of $9.3 million due to the change in fair value of Series A and B convertible notes for the year ended December 31, 2020. |
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. |
Accounting for warrants | The Company determines the accounting classification of warrants it issues, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock |
Derivative Liabilities | ASC 815-40, 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 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 December 31, 2020 and 2019, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement of operations. |
Non-controlling Interests in Consolidated Financial Statements | The Company follows ASC 810-10-65, “Non-controlling Interests in Consolidated Financial Statements.” This statement clarifies that a non-controlling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and non-controlling interest, with disclosure on the face of the consolidated income statement of the amounts attributed to the parent and to the non-controlling interest. In accordance with ASC 810-10-45-21, the losses attributable to the parent and the non-controlling interest in subsidiary may exceed their interests in the subsidiary’s equity. The excess and any further losses attributable to the parent and the non-controlling interest shall be attributed to those interests even if that attribution results in a deficit non-controlling interest balance. As of December 31, 2020, and 2019, the Company did not have any non-controlling interest in connection with our majority-owned subsidiary, Oak in the accompanying consolidated balance sheets as we deconsolidated Oak on April 15, 2019. |
Contingencies | We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. |
Net Loss per Common Share | Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, excluding any unvested restricted stock awards. Diluted net earnings per share is computed by dividing net earnings by the weighted average common shares outstanding during the period plus dilutive securities or other contracts to issue common stock as if these securities were exercised or converted to common stock. 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 adjusted for the dilutive effect of the change in fair value liability for price adjustable warrants, if applicable. The following table sets forth the computation of basic and diluted net income per share for the year ended (in thousands, except per share data): (Dollars in thousands) December 31, 2020 December 31, 2019 Net loss attributable to the Company $ (30,621 ) $ (21,363 ) Weighted average outstanding shares of common stock 47,308,158 34,540,461 Dilutive potential common stock shares from: Vested Stock options from the Company’s 2017 Equity Incentive Plan - - Warrants - Conversion of convertible notes - - Issuance of contingent shares relating to CHI acquisition - - Common stock and common stock equivalents 47,308,158 34,540,461 Income per share: Basic net loss per share $ (0.65 ) $ (0.62 ) Diluted net loss per share $ (0.65 ) $ (0.62 ) The following number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive (in thousands, except per share data): December 31, 2020 December 31, 2019 Vested stock options from the Company’s 2017 Equity Incentive Plan 2,757,687 1,481,391 Warrants 2,479,849 6,648,446 Shares to be issued upon conversion of convertible notes 115,047 115,047 Total 5,352,583 8,244,884 In connection with Sera Labs Merger, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the "Clawback Shares”) based on the achievement of certain sales milestones. Due to the uncertainty of the number of Clawback Shares to be issued, these Clawback Shares were not included in the table above. The Series A and B Notes (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. Due to the uncertainty of the number of shares to be issued, the shares to be issued from the conversion of the Series A and B Notes were also not included in the table above. |
Segment Reporting | The Company uses the "management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it does have segment reporting relating to Cure Pharmaceutical and Sera Labs. |
Emerging Growth Company | We are an “emerging growth company” under the JOBS Act. For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i), and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable. |
Risks and Uncertainties | The COVID-19 pandemic has had, and may continue to have, an unfavorable impact on certain areas of the Company's business. The broader implications of the COVID-19 pandemic on the Company's financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, and the availability, distribution, and effectiveness of vaccines to address the COVID-19 virus. The impact on the Company's customers and suppliers and the range of governmental and community reactions to the pandemic are uncertain. The Company may experience reduced customer demand or constrained supply that could materially adversely impact business, financial condition, results of operations, liquidity and cash flows in future periods. Series A and Series B convertible notes: The Company has elected the fair value option to record its Series A and Series B convertible debentures, which were issued in October 2020. Accordingly, the notes are marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the Consolidated Statement of Operations. All issuance costs related to the debentures were expensed as incurred in the Consolidated Statement of Operations. |
Recent Accounting Pronouncements Adopted | ASU 2016-01 For financial liabilities measured using the fair value option in ASC 825, ASU 2016-01, Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, issued in January 2016, requires entities to recognize the changes in fair value of liabilities caused by a change in instrument specific credit risk (own credit risk) in other comprehensive income. The ASU is effective for calendar-year public business entities beginning in 2018. For all other calendar-year entities, it is effective for annual periods beginning in 2019 and interim periods beginning in 2020. Entities can early adopt certain provisions of the new standard, including this provision related to financial liabilities measured under the fair value option. We have considered this guidance and its impact on this debt accounted for at fair value. Based on discussions with our valuation expert and knowledge of the Company there was no change in valuation caused by a change in the Company’s credit risk during the period from October 30, 2020 to December 31, 2020. ASU-2018-09 ASU 2018-09, Codification improvements, clarifies the accounting for a debt extinguishment when the fair value option is elected. Upon extinguishment an entity shall include in net income the cumulative amount of the gain or loss previously recorded in other comprehensive income for the extinguished debt that resulted from changes in instrument-specific credit risk. The ASU is effective for calendar-year public business entities beginning in 2019. For all other calendar-year entities, it is effective for annual periods beginning in 2020 and interim periods beginning in 2021. Early adoption is permitted for any fiscal year or interim period for which an entity’s financial statements have not yet been issued or have not been made available to be issued. We have considered this guidance and its impact on this debt accounted for at fair value. Based on discussions with our valuation expert and knowledge of the Company there was no change in valuation caused by a change in the Company’s credit risk during the period from October 30, 2020 to December 31, 2020. Since there is no change accounted for as a change in Credit Risk (included in other comprehensive income/loss) there is no impact to the Company’s financial statements from this new guidance. ASU 2018-13 In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements ASU 2017 - 04 In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other ASU 2016-02 In February 2016, the FASB issued ASU 2016-02, “ Leases The new standard provides optional practical expedients in transition. We did not elect the package of practical expedients where, under the new standard, prior conclusions about lease identification, lease classification and initial direct costs do not need to be reassessed. The new standard also provides practical expedients for ongoing accounting where we elected the practical expedients on adoption and did not record any ROU asset with terms of less than 12 months. ASU 2018-07 In June 2018, the FASB issued ASU No. 2018-7, Compensation – Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting. This guidance supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The guidance permits early adoption and was adopted by the Company in the first quarter of fiscal year 2019. The adoption of this ASU did not have any impact on the Company’s consolidated financial statements. |
Recent Accounting Pronouncements Not Yet Adopted | ASU 2016-13 In June 2016, the FASB issued ASU 2016-13 (as amended through November 2019), Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ASU 2019-12 In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within that fiscal year. Early adoption is permitted. The Company is in the process of evaluating the impacts of this guidance on its consolidated financial statements and related disclosures. ASU 2020-01 In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions Between Topic 321, Topic 323,and Topic 815 Investments – Equity Securities ASU 2020-06 In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivative and Hedging - Contracts in Entity’s Own Equity, which simplifies the accounting for convertible instruments. This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is required to be adopted by us in the first quarter of 2023 and must be applied using either a modified or full retrospective approach. We are currently evaluating the impact this guidance will have on our consolidated financial statements. Other accounting standard updates effective for interim and annual periods beginning after December 31, 2020 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. There are various other updates recently issued, however, they are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of property and equipment | Manufacturing equipment 5-7 years Computer and other equipment 3-7 years Leasehold improvements 3-7 years |
Schedule of contract liabilities | 2020 2019 Customer deposits for commercial products $ 281 $ 456 Customer deposits for personal protective equipment 713 - Total contract liabilities $ 994 $ 456 |
Summary of changes in contract liabilities | Balance at December 31, 2018 $ 383 Additions 493 Transfers to Revenue (420 ) Balance at December 31,2019 456 Additions 1,033 Transfers to Revenue (495 ) Balance at December 31, 2020 $ 994 |
Schedule of assets and liabilities measured at fair value | The following table summarizes fair value measurements by level at December 31, 2020 for assets and liabilities measured at fair value on a recurring basis (in thousands): (Dollars in thousands) Total Level 1 Level 2 Level 3 Fair value of contingent stock consideration $ 3,205 $ - $ - $ 3,205 Fair value of Series A Note $ 7,010 $ - $ - $ 7,010 Fair value of Series B Note $ 11,674 $ - $ - $ 11,674 Fair value of derivative liability $ - $ - $ - $ - The following table summarizes fair value measurements by level at December 31, 2019 for assets and liabilities measured at fair value on a recurring basis (in thousands): (Dollars in thousands) Total Level 1 Level 2 Level 3 Fair value of contingent stock consideration $ 16,043 $ - $ - $ 16,043 Fair value of derivative liability $ 91 $ - $ - $ 91 |
Schedule of financial instruments | Fair value at December 31, 2019 $ — Initial fair value of Series A Note 9,042 Initial fair value of Series B Note 11,990 Change in fair value of Series A Note 165 Change in fair value of Series B Notes (316 ) Conversion of Series A Notes (2,197 ) Fair value of Series A and B Notes at December 31, 2020 $ 18,684 |
Schedule of fair value measurments | Date of valuation October 30, 2020 December 31, 2020 Stock price $ 1.25 $ 1.30 Conversion price $ 1.32 $ 1.32 Term (in years) – Series A Note 2.00 1.83 Term (in years) – Series B Note 1.00 0.83 Volatility – Series A Note 87 % 86 % Volatility – Series B Note 81 % 80 % Risk-free interest rate – Series A Note 0.14 % 0.12 % Risk-free interest rate – Series A Note 0.13 % 0.09 % Interest rate 18 % 18 % |
Schedule of basic and diluted loss per share | (Dollars in thousands) December 31, 2020 December 31, 2019 Net loss attributable to the Company $ (30,621 ) $ (21,363 ) Weighted average outstanding shares of common stock 47,308,158 34,540,461 Dilutive potential common stock shares from: Vested Stock options from the Company’s 2017 Equity Incentive Plan - - Warrants - Conversion of convertible notes - - Issuance of contingent shares relating to CHI acquisition - - Common stock and common stock equivalents 47,308,158 34,540,461 Income per share: Basic net loss per share $ (0.65 ) $ (0.62 ) Diluted net loss per share $ (0.65 ) $ (0.62 ) |
Schedule of diluted net income (loss) | December 31, 2020 December 31, 2019 Vested stock options from the Company’s 2017 Equity Incentive Plan 2,757,687 1,481,391 Warrants 2,479,849 6,648,446 Shares to be issued upon conversion of convertible notes 115,047 115,047 Total 5,352,583 8,244,884 |
PREPAID EXPENSES AND OTHER AS_2
PREPAID EXPENSES AND OTHER ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
PREPAID EXPENSES AND OTHER ASSETS (Tables) | |
Schedule of prepaid expenses and other assets | December 31, 2020 December 31, 2019 Prepaid consulting services $ 14 $ 285 Prepaid clinical study 32 175 Prepaid insurance 347 146 PPE deposits 700 - Prepaid equipment 61 1,135 Prepaid inventory 211 5 Prepaid expenses 66 48 Other assets 79 35 Prepaid expenses and other assets $ 1,510 $ 1,829 Current portion of prepaid expenses and other assets $ (1,452 ) $ (1,794 ) Prepaid expenses and other assets less current portion $ 58 $ 35 |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
INVENTORY (Tables) | |
Schedule of inventory | December 31, 2020 December 31, 2019 Raw Materials $ 64 $ 78 Packaging Components 54 50 Work-In-Process 22 18 Finished Goods 603 15 $ 743 $ 161 Reserve for Obsolescence (294 ) (5 ) Total inventory $ 449 $ 156 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment, net | December 31, 2020 December 31, 2019 Equipment not yet placed in service $ 1,465 $ - Manufacturing equipment 1,074 902 Computer and other equipment 626 585 Leasehold improvements - 77 Less accumulated depreciation (1,091 ) (923 ) Property and Equipment, net $ 2,074 $ 641 |
NOTES RECEIVABLE (Tables)
NOTES RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
NOTES RECEIVABLE | |
Schedule of note receivable | December 31, 2020 December 31, 2019 Coeptis Pharmaceuticals, Inc. $ 200 $ 200 Less: allowance for doubtful accounts (200 ) (200 ) Note receivable, net $ - $ - |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
GOODWILL AND INTANGIBLE ASSETS | |
Schedule of intangible assets, net | 2020 2019 Goodwill (1) $ 13,868 $ 9,178 Intangible assets: Acquired IPR&D – Chemistry (2) $ 14,460 $ 14,460 Pending patents – Cure Pharmaceutical 259 289 Intangible assets subject to amortization: Customer relationships (2) 7,110 - Tradename (2) 2,610 - Noncompete (2) 462 - Intellectual property 972 972 Issued patents 1,044 990 Total intangible assets 26,917 16,711 Accumulated amortization (1,312 ) (615 ) Intangible assets, net $ 25,605 $ 16,096 ________ (1) Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in the Merger (see Note 17). In 2020, the Company recorded additional goodwill of $4.7 million as a result of the Sera Labs acquisition. (2) See Note 17 for information on the Mergers which were consummated in May 2019 and October 2020. |
Schedule of future amortization expense | 2021 $ 2,427 2022 2,369 2023 2,196 2024 2,033 2025 1,543 Thereafter 318 Total Amortization $ 10,886 |
LOAN PAYABLE (Tables)
LOAN PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
RELATED PARTY TRANSACTIONS | |
Schedule of loan Payable | December 31, 2020 December 31, 2019 Note to a company due September 29, 2020, including interest at 4.95% per annum; unsecured; interest due monthly $ - $ 127 Note to a company due September 29, 2021, including interest at 4.32% per annum; unsecured; interest due monthly 182 - Note to a company due June 6, 2021, including interest at 6.55% per annum; unsecured; interest due monthly 83 Current portion of loan payable (265 ) (127 ) Loan payable, less current portion $ - $ - |
NOTES PAYABLE AND PAYCHECK PR_2
NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
PREPAID EXPENSES AND OTHER ASSETS | |
Schedule of notes payable | December 31, 2020 December 31, 2019 Note to an individual, non-interest bearing, unsecured and due on demand $ 50 $ 50 Promissory note to a company due May 18, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note 250 - Promissory note to a company due August 12, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note 500 - Current portion of note payable $ 800 $ 50 |
Schedule of paycheck protection program | December 31, 2020 December 31, 2019 Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act. $ 399 $ - Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured 206 - Payment protection program loan $ 605 $ - |
CONVERTIBLE PROMISSORY NOTES _2
CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
PREPAID EXPENSES AND OTHER ASSETS | |
Schedule of convertible promissory notes | December 31, 2020 December 31, 2019 Convertible promissory notes totaling $550,000 due January 31, 2019, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due January 31, 2019 and currently in default. The Company has offered to either repay the convertible promissory notes or request to have them converted into common stock shares of the Company. The beneficial owners of the convertible promissory notes have not yet communicated their intent to either receive payment or convert. $ 550 $ 550 Current portion of convertible promissory notes $ 550 $ 550 Fair value of convertible promissory notes consist of the following at December 31, 2020 and 2019 (in thousands): December 31, 2020 December 31, 2019 Series A subordinated convertible note at fair value $ 7,010 $ - Series B subordinated convertible note at fair value 11,674 - Total convertible promissory notes 18,684 - Less: Investor Note offset – Series B Note (5,000 ) - Carrying value of convertible promissory notes at fair value 13,684 - Less: current portion of convertible promissory notes at fair value (6,674 ) - Convertible promissory notes, less current portion $ 7,010 $ - |
Schedule of black scholes model | October 30, 2020 Significant assumptions (weighted-average): Risk-free interest rate at grant date 0.36 % Expected stock price volatility 81.14 % Expected dividend payout - Expected warrant life (in years) 2 Expected forfeiture rate 0 % |
DERIVATIVE LIABILITY (Tables)
DERIVATIVE LIABILITY (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
WARRANT AGREEMENTS | |
Schedule of fair value measurements on recurring basis | The following table summarizes fair value measurements by level at December 31, 2020 for assets and liabilities measured at fair value on a recurring basis (in thousands): Total Level 1 Level 2 Level 3 Fair value of Derivative Liability $ - $ - $ - $ - The following table summarizes fair value measurements by level at December 31, 2019 for assets and liabilities measured at fair value on a recurring basis (in thousands): Total Level 1 Level 2 Level 3 Fair value of Derivative Liability $ 91 $ - $ - $ 91 |
Schedule of derivative liability assumptions used | Significant assumptions: Risk-free interest rate at grant date 0.28%-0.37 % Expected stock price volatility 68.23%-81.14 % Expected dividend payout - Expected option life (in years) 1 Expected forfeiture rate 0 |
Reconciliation of derivative liabilities | Fair value of derivative liabilities Balance at December 31, 2018 $ 618 Loss on change in fair value included in earnings (527 ) Balance at December 31, 2019 91 Loss on change in fair value included in earnings (91 ) Balance at December 31, 2020 $ - |
WARRANT AGREEMENTS (Tables)
WARRANT AGREEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
WARRANT AGREEMENTS | |
Schedule of change in warrant | Warrants Weighted Average Exercise Price Weighted Average Contractual Remaining Life Outstanding, December 31, 2018 5,340,751 $ 2.20 3.80 Granted 9,489,340 $ 4.62 4.10 Exercised (163,573 ) $ 1.83 - Forfeited/Expired - $ - - Outstanding, December 31, 2019 14,666,518 $ 3.70 2.99 Granted 303,030 1.32 1.86 Exercised (771,318 ) 1.92 - Forfeited/Expired (11,718,381 ) 5.01 - Outstanding, December 31, 2020 2,479,849 $ 1.86 1.23 Exercisable at December 31, 2020 2,479,849 $ 1.86 1.23 |
Schedule of warrant summary | Warrant summary for the year ended December 31, 2020: Range of Exercise Price Number of Warrants Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number of Warrants Exercisable Weighted Average Exercise Price $ 1.00–$6.00 2,479,849 1.23 $ 1.86 2,479,849 $ 1.86 2,479,849 1.23 $ 1.86 2,479,849 $ 1.86 Warrant summary for the year ended December 31, 2019: Range of Exercise Price Number of Warrants Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number of Warrants Exercisable Weighted Average Exercise Price $ 1.00-$7.00 14,666,518 2.99 $ 3.70 6,648,446 $ 2.07 14,666,518 2.99 $ 3.70 6,648,446 $ 2.07 |
Schedule of fair value of warrant valuation assumptions | December 31, 2020 December 31, 2019 Significant assumptions (weighted-average): Risk-free interest rate at grant date 0.36 % 1.69 % Expected stock price volatility 81.14 % 82.66 % Expected dividend payout - - Expected warrant life (in years) 3 3 Expected forfeiture rate 0 % 0 % |
STOCK INCENTIVE PLANS (Tables)
STOCK INCENTIVE PLANS (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
STOCK INCENTIVE PLANS | |
Schedule of stock option activity | Options Weighted Average Exercise Price Weighted Average Contractual Remaining Life Outstanding, December 31, 2018 2,313,050 $ 0.79 9.27 Granted 1,390,000 $ 3.54 7.36 Exercised - $ - - Forfeited/Expired (235,400 ) $ 1.59 - Outstanding, December 31, 2019 3,467,650 $ 1.84 8.74 Granted 3,600,364 1.26 9.19 Exercised (30,000 ) 0.74 - Forfeited/Expired (752,222 ) 1.76 - Outstanding, December 31, 2020 6,285,792 $ 1.52 8.86 Exercisable at December 31, 2020 2,757,687 $ 1.50 8.05 Range of Exercise Price Number of Awards Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number of Awards Exercisable Weighted Average Exercise Price $ 0.61-$4.01 6,285,792 8.86 $ 1.52 2,757,687 $ 1.50 6,285,792 8.86 $ 1.52 2,757,687 $ 1.50 |
Weighted-average fair value of options granted | December 31, 2020 December 31, 2019 Significant assumptions (weighted-average): Risk-free interest rate at grant date 0.59 % 1.69 % Expected stock price volatility 81.14 % 82.66 % Expected dividend payout - - Expected option life (in years) 10 10 Expected forfeiture rate 0 % 0 % |
Schedule of non-vested restricted award shares | Restricted Stock Shares Weighted Average Grant Date Fair Value Non-vested, December 31, 2018 317,708 $ 1.44 Granted 84,177 3.17 Vested (319,799 ) 1.57 Forfeited/Expired - - Non-vested, December 31, 2019 82,086 2.69 Granted 150,000 1.60 Vested (181,849 ) 2.08 Forfeited/Expired (237 ) - Non-vested, December 31, 2020 50,000 $ 1.60 |
Schedule of restricted stock unit | Restricted Stock Units Weighted Average Grant Date Fair Value Outstanding, December 31, 2018 - $ - Granted 60,759 3.66 Vested - Forfeited/Expired - Outstanding, December 31, 2019 60,759 3.66 Granted 431,578 1.33 Vested (60,759 ) 3.66 Forfeited/Expired - - Outstanding, December 31, 2020 431,578 $ 1.33 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
SEGMENT REPORTING (Tables) | |
Schedule of business segments | 2020 2019 Cure Operations: Net sales $ 1,007 $ 623 Operating loss (17,377 ) (13,692 ) Assets 30,148 32,460 Accounts receivable 131 142 Inventory 209 156 2020 2019 Sera Labs Operations: Net sales $ 1,044 $ - Operating loss (1,581 ) - Assets 16,211 - Accounts receivable 93 - Inventory 240 - 2020 2019 Consolidated Operations: Net sales $ 2,051 $ 623 Operating loss (18,958 ) (13,692 ) Assets 46,359 32,460 Accounts receivable 224 142 Inventory 449 156 |
Schedule of disaggregation of revenue | Year Ended December 31, 2020 2019 CureFilm™ sales 37 % 59 % Research & Development services 11 % 40 % Product sales - CBD 49 % - Total 97 % 99 % |
BUSINESS COMBINATION AND DECO_2
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | |
Schedule of Sera labs net contingent share consideration | (Dollars in thousands) Fair Value of the Contingent Share Consideration Fair value at December 31, 2019 $ - Fair value at October 2, 2020 3,083 Fair value at December 31, 2020 3,204 Net change in fair value during the year ended December 31, 2020 $ (121 ) |
Schedule of estimated fair value of preliminary price | (Dollars in thousands) Shares Amount Upfront Payment - $ 1,000 Closing Merger Consideration Shares 6,909,091 9,535 Contingent Consideration Shares (Clawback Shares) 5,988,024 3,083 Liabilities assumed - 550 Total purchase price 12,897,115 $ 14,168 |
Schedule of preliminary estimated fair value of assets | (Dollars in thousands) Net assets acquired: Cash $ 1,357 Other assets 1,440 Property, plant and equipment 6 Other long term assets 384 Intangibles assets 10,182 Goodwill 4,687 Accounts payable and accrued expenses (1,063 ) Contract liabilities (1,963 ) Other current liabilities (462 ) Other long-term liabilities (400 ) Net assets acquired $ 14,168 |
Schedule of sera labs acquisitions | (Dollars in thousands) Weighted-average Estimated useful life Preliminary Estimated Asset Fair Value Finite-lived intangible assets: Customer relationships 5.0 years $ 7,110 Tradename 4.0 years $ 2,610 Non-compete 2.0 years $ 462 Total finite-lived intangible assets acquired 4.6 years $ 10,182 |
Schedule of contingent share consideration | (Dollars in thousands) Fair Value of the Contingent Share Consideration Fair value at December 31, 2018 $ - Fair value at May 14, 2019 14,632 Net change in fair value during the year ended December 31, 2019 1,657 Fair value of common stock shares to be released from escrow and to be issued (246 ) Fair Value at December 31, 2019 16,043 Settlement of contingent consideration liability (21,701 ) Net change in fair value during the year ended December 31, 2020 5,658 Fair Value at December 31, 2020 $ - |
Schedule of estimated acquisition costs | (Dollars in thousands) Shares Amount Upfront Consideration Shares 5,700,000 $ 19,038 Adjusted Contingent Shares 8,410,875 14,627 Acquisition Warrant Shares 8,018,071 5 Acquisition costs - 400 Total purchase price 22,128,946 $ 34,070 |
Schedule of estimated fair values of the assets and liabilities assumed | (Dollars in thousands) Net assets acquired: Cash $ 8,487 Note receivable from CURE 2,000 Property, plant and equipment 83 Patents and development technology 650 In-process research and development 14,460 Goodwill 9,178 Accounts payable (354 ) Payroll tax liabilities (834 ) Net assets acquired 33,670 Acquisition costs 400 Net assets acquired and acquisition costs incurred $ 34,070 |
Schedule of intangible assets acquired | (Dollars in thousands) Weighted-average Estimated useful life Preliminary Estimated Asset Fair Value Finite-lived intangible assets: Patent and developed technology 11.0 years $ 650 Total finite-lived intangible assets acquired 11.0 years $ 650 |
Schedule of net income per common share | For the year ended December 31, 2020 (in thousands, except per share data): Cure Pharmaceutical Sera Labs Pro forma Adjustments Consolidated Pro Forma Net product sales $ 1,049 $ 6,728 $ (34 ) $ 7,743 Net loss $ (29,059 ) $ (3,051 ) $ 162 $ (31,948 ) Net loss attributable to Cure per common share, basic and diluted $ (0.65 ) $ (0.26 ) $ (0.68 ) For the year ended December 31, 2019 (in thousands, except per share data): Cure Pharmaceutical Sera Labs Chemistry Holdings Pro forma Adjustments Consolidated Pro Forma Net revenues $ 623 $ 3,621 $ - - $ 4,244 Net loss $ (21,363 ) $ (2,621 ) $ (330 ) - $ (24,314 ) Net loss attributable to Cure per common share, basic and diluted $ (0.62 ) $ (0.22 ) $ (0.01 ) $ (0.67 ) |
Schedule of deconsolidation | (Dollars in thousands) January 1, 2019 through April 15, 2019 Revenue $ - Net loss $ 16 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
INCOME TAXES | |
Schedule of income tax expense benefit | 2020 2019 Current expense Federal $ - $ - State - - Deferred expense Federal $ - $ - State - - Total income tax expense $ - $ - |
Schedule of deferred income tax, net | 2020 2019 Deferred income tax assets Net operating loss carryforward $ 14,359 $ 12,007 Change in fair value of convertible promissory notes 2,627 - Noncash compensation 1,018 - Deferred revenue 180 135 Lease liability 118 - Other intangibles 195 - Inventory reserve 82 Stock based compensation 79 - Allowance for doubtful accounts 96 66 Accrued expenses 131 31 Total deferred tax assets 18,885 12,239 Deferred income tax liabilities State income taxes - (922 ) ROU assets (110 ) - Prepaid expenses and other assets (84 ) - Depreciation and amortization (48 ) (16 ) Valuation allowance (18,643 ) (11,301 ) Total deferred tax liabilities (18,885 ) (12,239 ) Deferred income tax, net $ - $ - |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of future lease payments | Years 2021 $ 130 2022 134 2023 138 2024 46 2025 - Undiscounted cash flow 448 Effects of discounting (77 ) Lease liabilities recognized $ 371 |
Schedule of future minimum lease payments | 2021 $ 14 2022 14 2023 14 2024 10 2025 - Thereafter - Finance lease liabilities recognized $ 52 |
Schedule of operating and financing leases | 2020 2019 Operating leases Right-of-use assets, net $ 343 - Right-of-use lease liabilities, current $ 93 - Right-of-use lease liabilities, noncurrent 278 - Total operating lease liabilities $ 371 - Financing Leases Finance lease right-to-use assets, net $ 52 63 Current liabilities $ 12 11 Noncurrent liabilities 40 52 Total financing lease liabilities $ 52 63 Weighted average remaining lease term Operating leases 3.31 years N/A Financing leases 3.82 years 4.83 years Weighted average discount rate Operating leases 11.3 % N/A Financing leases 9.0 % 9.0 % |
ORGANIZATION AND BUSINESS OPE_2
ORGANIZATION AND BUSINESS OPERATIONS (Details Narrative) | 12 Months Ended | |
Dec. 31, 2020ft²$ / shares | Nov. 10, 2017shares | |
Ownership percentage | 65.00% | |
Oxnard, CA [Member] | ||
Area of cGMP manufacturing plant | ft² | 25,000 | |
Oak Therapeutics [Member] | ||
Ownership percentage | 63.00% | 63.00% |
Shares received | shares | 269,000 | |
CPHC [Member] | ||
Ownership percentage | 65.00% | |
Merger Agreement [Member] | ||
Common stock par value | $ / shares | $ 0.001 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Manufacturing Equipment [Member] | Minimum [Member] | |
Estimated useful lives | 5 years |
Manufacturing Equipment [Member] | Maximum [Member] | |
Estimated useful lives | 7 years |
Computer and other equipment [Member] | Minimum [Member] | |
Estimated useful lives | 3 years |
Computer and other equipment [Member] | Maximum [Member] | |
Estimated useful lives | 7 years |
Leasehold Improvements [Member] | Minimum [Member] | |
Estimated useful lives | 3 years |
Leasehold Improvements [Member] | Maximum [Member] | |
Estimated useful lives | 7 years |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Customer deposits for commercial products | $ 281 | $ 456 |
Customer deposits for personal protective equipment | 713 | 0 |
Total contract liabilities | $ 994 | $ 456 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Contract liabilities beginning balance | $ 456 | $ 383 |
Additions | 1,033 | 493 |
Transfers to Revenue | (495) | (420) |
Contract liabilities ending balance | $ 994 | $ 456 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Fair value of contingent stock consideration | $ 3,205 | $ 16,043 |
Fair value of Series A Note | 7,010 | |
Fair value of Series B Note | 11,674 | |
Fair value of derivative liability | 0 | 91 |
Fair Value, Inputs, Level 1 [Member] | ||
Fair value of contingent stock consideration | 0 | 0 |
Fair value of Series A Note | 0 | 0 |
Fair value of Series B Note | 0 | 0 |
Fair value of derivative liability | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ||
Fair value of contingent stock consideration | 0 | 0 |
Fair value of Series A Note | 0 | 0 |
Fair value of Series B Note | 0 | 0 |
Fair value of derivative liability | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | ||
Fair value of contingent stock consideration | 3,205 | 16,043 |
Fair value of Series A Note | 7,010 | |
Fair value of Series B Note | 11,674 | |
Fair value of derivative liability | $ 0 | $ 91 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) $ in Thousands | 12 Months Ended |
Dec. 31, 2020USD ($) | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Fair value at December 31, 2019 | $ 0 |
Initial fair value of Series A Note | 9,042 |
Initial fair value of Series B Note | 11,990 |
Change in fair value of Series A Note | 165 |
Change in fair value of Series B Notes | (316) |
Conversion of Series A Notes | (2,197) |
Fair value of Series A and B Notes at December 31, 2020 | $ 18,684 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) - $ / shares | 1 Months Ended | 12 Months Ended |
Oct. 30, 2020 | Dec. 31, 2020 | |
Conversion price | $ 1.32 | $ 1.32 |
Stock price | $ 1.25 | $ 1.30 |
Interest rate | 18.00% | 18.00% |
Risk-free interest rate | 0.36% | |
Series A Note [Member] | ||
Risk-free interest rate | 0.14% | 0.12% |
Volatility | 87.00% | 86.00% |
Term | 2 years | 1 year 9 months 29 days |
Series B Note [Member] | ||
Risk-free interest rate | 0.13% | 0.09% |
Volatility | 81.00% | 80.00% |
Term | 1 year | 9 months 29 days |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 6) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Net loss attributable to the Company | $ (30,621) | $ (21,363) |
Weighted average outstanding shares of common stock | 47,308,158 | 34,540,461 |
Vested Stock options from the Company's 2017 Equity Incentive Plan | ||
Warrants | $ 0 | $ 0 |
Conversion of convertible notes | ||
Issuance of contingent shares relating to CHI acquisition | ||
Common stock and common stock equivalents | 47,308,158 | 34,540,461 |
Income per share: | ||
Basic net income per share | $ (0.65) | $ (0.62) |
Diluted net income per share | $ (0.65) | $ (0.62) |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 7) - shares shares in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Vested stock options from the company's 2017 Equity Incentive plan | 2,757,687 | 1,481,391 |
Warrants | 2,479,849 | 6,648,446 |
Shares to be issued upon conversion of convertible notes | 115,047 | 115,047 |
Total | 5,352,583 | 8,244,884 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Nov. 09, 2020 | Nov. 01, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Oct. 31, 2020 | Oct. 30, 2020 | Dec. 31, 2018 | Nov. 10, 2017 |
Working capital deficit | $ (1,060) | |||||||
Accumulated deficit | (81,253) | $ (50,632) | ||||||
Federal deposit insurance corporation insured limit | 250 | 250 | ||||||
Amount in excess of FDIC limit | 1,500 | 3,800 | ||||||
Allowance for doubtful accounts | 440 | |||||||
Research and development expenses | 2,800 | 2,300 | ||||||
Contract liabilities | $ 1,000 | 500 | ||||||
Valuation allowance percentage | 100.00% | |||||||
Advertising costs | $ 1,100 | 500 | ||||||
Non-controlling Interests | 0 | 0 | ||||||
Payment for legal and broker fees | $ 119 | 410 | ||||||
Ownership interest | 65.00% | |||||||
Outstanding contingent consideration liability | $ 3,200 | |||||||
Merger agreements description | In connection with Sera Labs Merger, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the "Clawback Shares”) based on the achievement of certain sales milestones. | |||||||
Conversion price per share | $ 1.32 | $ 1.32 | ||||||
Cash | $ 1,725 | $ 4,096 | $ 501 | |||||
Initial Principal Payment | $ 300 | |||||||
Accrued interest rate | 18.00% | |||||||
Oak Therapeutics [Member] | ||||||||
Ownership interest | 63.00% | 63.00% | ||||||
February 5, 2020 And February 13, 2020 [Member] | Two Convertible Loans [Member] | ||||||||
Convertible debt | $ 300 | |||||||
Releaf Qualified Financing | 15,000 | |||||||
Pre money valuation | $ 14,500 | |||||||
Accrued interest rate | 6.00% | |||||||
Maturity date | Oct. 31, 2021 | |||||||
Request for conversion description | In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amounts of the February 2020 Loans and any unpaid accrued interests shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2 million of debt and/or equity (“Releaf February 2020 Qualified Financing”), the outstanding amount of the February 2020 Loans and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf February 2020 Qualified Financing, less a discount of 20% on the subscription price. | |||||||
Securities Purchase Agreement [Member] | ||||||||
Initial Principal Payment | $ 11,500 | |||||||
Borrower [Member] | ||||||||
Convertible debt | $ 200 | |||||||
Releaf Qualified Financing | 15,000 | |||||||
Pre money valuation | $ 14,500 | |||||||
Accrued interest rate | 6.00% | |||||||
Maturity date | Oct. 31, 2021 | |||||||
Request for conversion description | In the event of a request for conversion by the Company (“Request for Conversion”) or at the end of the Maturity Date, the outstanding amount of the Loan and any unpaid accrued interest shall be converted into shares of Releaf (“Shares”) based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2 million of debt and/or equity (“Qualified Financing”), the outstanding amount of the Loan Agreement and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Qualified Financing less a discount of 20% on the subscription price. | |||||||
Series A and Series B stock [Member] | ||||||||
Proceeds from private placement | 5,000 | |||||||
Loss on change in fair value of convertible notes | 9,300 | |||||||
Series A and Series B stock [Member] | Investor [Member] | ||||||||
Proceeds from related party | 1,100 | |||||||
Series B stock [Member] | ||||||||
Debt instrument original issue discount | 900 | |||||||
Series B stock [Member] | Securities Purchase Agreement [Member] | ||||||||
Initial Principal Payment | 6,900 | |||||||
Series B stock [Member] | Investor [Member] | ||||||||
Share issued upon cash consideration | 4,000 | |||||||
Initial Principal Payment | 0 | |||||||
Series A stock [Member] | ||||||||
Debt instrument original issue discount | 600 | |||||||
Series A stock [Member] | Securities Purchase Agreement [Member] | ||||||||
Initial Principal Payment | $ 4,600 |
PREPAID EXPENSES AND OTHER AS_3
PREPAID EXPENSES AND OTHER ASSETS (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
PREPAID EXPENSES AND OTHER ASSETS (Details) | ||
Prepaid consulting services | $ 14 | $ 285 |
Prepaid clinical study | 32 | 175 |
Prepaid insurance | 347 | 146 |
PPE deposits | 700 | 0 |
Prepaid equipment | 61 | 1,135 |
Prepaid inventory | 211 | 5 |
Prepaid expenses | 66 | 48 |
Other assets | 79 | 35 |
Prepaid expenses and other assets | 1,510 | 1,829 |
Current portion of prepaid expenses and other assets | (1,452) | (1,794) |
Prepaid expenses and other assets less current portion | $ 58 | $ 35 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
INVENTORY (Tables) | ||
Raw Materials | $ 64 | $ 78 |
Packaging Components | 54 | 50 |
Work-In-Process | 22 | 18 |
Finished Goods | 603 | 15 |
Inventory, Gross | 743 | 161 |
Reserve for Obsolescence | (294) | (5) |
Total inventory | $ 449 | $ 156 |
INVENTORY (Details Narrative)
INVENTORY (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
INVENTORY (Tables) | ||
Inventory reserves | $ 300 | $ 2 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Less accumulated depreciation | $ (1,091) | $ (923) |
Property and Equipment, net | 2,074 | 641 |
Manufacturing equipmentt [Member] | ||
Property and Equipment | 1,074 | 902 |
Computer and other equipment [Member] | ||
Property and Equipment | 626 | 585 |
Equipment not yet placed in service [Member] | ||
Property and Equipment | 1,465 | 0 |
Leasehold Improvements [Member] | ||
Property and Equipment | $ 0 | $ 77 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
PROPERTY AND EQUIPMENT | ||
Depreciation expense | $ 200 | $ 200 |
NOTES RECEIVABLE (Details)
NOTES RECEIVABLE (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Less: allowance for doubtful accounts | $ (200) | $ (200) |
Note receivable, net | 0 | 0 |
Coeptis Pharmaceuticals, Inc. [Member] | ||
Note receivable, net | $ 200 | $ 200 |
NOTES RECEIVABLE (Details Narra
NOTES RECEIVABLE (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Nov. 09, 2020 | Sep. 16, 2020 | Jul. 31, 2020 | Nov. 12, 2019 | Dec. 31, 2020 | Oct. 30, 2020 |
Conversion price | $ 1.32 | $ 1.32 | ||||
Principal amount | $ 300 | |||||
Coeptis Pharmaceuticals, Inc. [Member] | ||||||
Convertible promissory note | $ 200 | |||||
Interest rate | 9.00% | |||||
Conversion price | $ 2.60 | |||||
Maturity date | Jun. 15, 2020 | |||||
The Sera Labs, Inc. [Member] | ||||||
Convertible promissory note | $ 500 | |||||
Interest rate | 9.00% | |||||
Maturity date | Dec. 31, 2020 | |||||
Principal amount | $ 550 | |||||
Interest upon principal amount | $ 500 | |||||
Promissory note, description | The principal amount to $0.55 million with interest on $0.5 million of the principal amount accruing from and after July 31, 2020 and on $0.05 million of the principal amount from and after September 16, 2020. |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 | ||
Goodwill (1) | $ 13,868 | [1] | $ 9,178 | [2] |
Less accumulated amortization | (1,312) | (615) | ||
Total intangible assets | 26,917 | 16,711 | ||
Customer relationships | 7,110 | [3] | 0 | |
Intangible assets net | 25,605 | 16,096 | ||
Acquired IPR&D - Chemistry [Member] | ||||
Total intangible assets | 14,460 | [4] | 14,460 | [5] |
Non-compete [Member] | ||||
Intangible assets net | 462 | [6] | 0 | |
Tradename [Member] | ||||
Intangible assets net | 2,610 | [7] | 0 | |
Pending patents - Cure Pharmaceutical [Member] | ||||
Total intangible assets | 259 | 289 | ||
Intellectual Property [Member] | ||||
Intangible assets net | 972 | 972 | ||
Issued Patents [Member] | ||||
Intangible assets net | $ 1,044 | $ 990 | ||
[1] | Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in the Merger (see Note 17). In 2020, the Company recorded additional goodwill of $4.7 million as a result of the Sera Labs acquisition. | |||
[2] | Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in the Merger (see Note 17). In 2020, the Company recorded additional goodwill of $4.7 million as a result of the Sera Labs acquisition. | |||
[3] | See Note 17 for information on the Mergers which were consummated in May 2019 and October 2020. | |||
[4] | See Note 17 for information on the Mergers which were consummated in May 2019 and October 2020. | |||
[5] | See Note 17 for information on the Mergers which were consummated in May 2019 and October 2020. | |||
[6] | See Note 17 for information on the Mergers which were consummated in May 2019 and October 2020. | |||
[7] | See Note 17 for information on the Mergers which were consummated in May 2019 and October 2020. |
GOODWILL AND INTANGIBLE ASSET_3
GOODWILL AND INTANGIBLE ASSETS (Details 1) $ in Thousands | Dec. 31, 2020USD ($) |
GOODWILL AND INTANGIBLE ASSETS | |
2021 | $ 2,427 |
2022 | 2,369 |
2023 | 2,196 |
2024 | 2,033 |
2025 | 1,543 |
Thereafter | 318 |
Total Amortization | $ 10,886 |
GOODWILL AND INTANGIBLE ASSET_4
GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Patents received from the acquisition of Chemistry Holdings, Inc | $ 700 | |
In-process research and development received from the acquisition of Chemistry Holdings, Inc | 14,500 | |
Amortization expense | $ 700 | 100 |
Goodwill | 4,700 | |
Goodwill from the acquisition of Chemistry Holdings, Inc | 9,200 | |
Patents [Member] | ||
Patent costs capitalized | 20 | $ 50 |
Tradename [Member] | ||
Acquired intangible assets | 2,600 | |
Non-compete [Member] | ||
Acquired intangible assets | 500 | |
Sera Labs Customer Relationships [Member] | ||
Acquired intangible assets | $ 7,100 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) $ in Thousands | Nov. 09, 2020 | Aug. 06, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Interest expense - related party | $ 20 | $ 0 | ||
Principal payment | $ 300 | |||
Due to related party (monthly) | 1,040 | 0 | ||
Gain loss on settlement of debt | (62) | (15) | ||
Outstanding amount | 13,684 | $ 0 | ||
Mrs. Duitch [Member] | ||||
Outstanding amount | 900 | |||
Unsecured Promissory Note [Member] | ||||
Principal amount | $ 150 | |||
Interest rate | 8.00% | |||
Due date | Aug. 6, 2021 | |||
October 2, 2020 [Member] | Sera labs [Member] | ||||
Principal amount | $ 1,100 | |||
Interest rate | 8.00% | |||
Upfront payment connection | $ 1,000 | |||
Certain liabilities | $ 100 | |||
Due date | Jun. 30, 2021 | |||
On November 1, 2018 [Member] | Eventus Consulting [Member] | ||||
Due to related party (monthly) | $ 22,500 | |||
Gain loss on settlement of debt | $ 200 |
LOAN PAYABLE (Details)
LOAN PAYABLE (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Current portion of loan payable | $ (265) | $ (127) |
Loan payable, less current portion | 0 | 0 |
Loans Payable One [Member] | ||
Current portion of loan payable | (182) | 0 |
Loans Payable [Member] | ||
Current portion of loan payable | 0 | (127) |
Loans Payable Two [Member] | ||
Current portion of loan payable | $ (83) | $ 0 |
LOAN PAYABLE (Details Narrative
LOAN PAYABLE (Details Narrative) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |
Sep. 25, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
LOAN PAYABLE | |||
Interest expense | $ 1,100 | $ 3 | $ 3 |
NOTES PAYABLE AND PAYCHECK PR_3
NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Current portion of note payable | $ 800 | $ 50 |
Individual [Member] | ||
Notes payable | 50 | 50 |
Promissory note 1 [Member] | ||
Notes payable | 500 | 0 |
Promissory Note [Member] | ||
Notes payable | $ 250 | $ 0 |
NOTES PAYABLE AND PAYCHECK PR_4
NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN (Details 1) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Payment protection program loan | $ 605 | $ 0 |
Paycheck Protection Program One [Member] | ||
Payment protection program loan | 206 | 0 |
Paycheck Protection Program [Member] | ||
Payment protection program loan | $ 399 | $ 0 |
NOTES PAYABLE AND PAYCHECK PR_5
NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN (Details Narrative) - USD ($) $ in Thousands | Feb. 05, 2021 | Aug. 12, 2020 | Feb. 05, 2021 | Oct. 30, 2020 | Sep. 25, 2020 | May 18, 2020 | Apr. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Interest expense | $ 1,100 | $ 3 | $ 3 | ||||||
Gross proceeds, net | $ 1,000 | 1,000 | |||||||
Proceeds from loan | $ 204 | $ 127 | |||||||
Interest rate | 18.00% | 18.00% | |||||||
Board Members [Member] | |||||||||
Interest rate | 8.00% | 8.00% | |||||||
Unsecured promissory note | $ 500 | $ 250 | |||||||
Maturity date | Aug. 12, 2021 | May 18, 2021 | |||||||
Paycheck Protection Program [Member] | |||||||||
Proceeds from loan | $ 200 | ||||||||
Interest rate | 1.00% | ||||||||
Subsequent Event [Member] | |||||||||
Loan forgiveness | $ 400 | ||||||||
Subsequent Event [Member] | Paycheck Protection Program Loan [Member] | |||||||||
Loan forgiveness | 400 | ||||||||
Sera Lab [Member] | |||||||||
Proceeds from loan | $ 400 | ||||||||
Promissory Note [Member] | LLC [Member] | |||||||||
Gross proceeds, net | $ 1,000 | 100 | |||||||
principal, amount | $ 1,100 |
CONVERTIBLE PROMISSORY NOTES _3
CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
PREPAID EXPENSES AND OTHER ASSETS | ||
Convertible promissory notes | $ 550 | $ 550 |
Current portion of convertible promissory notes | $ 550 | $ 550 |
CONVERTIBLE PROMISSORY NOTES _4
CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES (Details 1) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
PREPAID EXPENSES AND OTHER ASSETS | ||
Series A subordinated convertible note at fair value | $ 7,010 | $ 0 |
Series B subordinated convertible note at fair value | 11,674 | 0 |
Total convertible promissory notes | 18,684 | 0 |
Less: Investor Note offset - Series B Note | (5,000) | 0 |
Carrying value of convertible promissory notes at fair value | 13,684 | 0 |
Less: current portion of convertible promissory notes at fair value | (6,674) | 0 |
Convertible promissory notes, less current portion | $ 7,010 | $ 0 |
CONVERTIBLE PROMISSORY NOTES _5
CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES (Details 2) | 1 Months Ended | 12 Months Ended |
Oct. 30, 2020 | Dec. 31, 2020 | |
Significant assumptions (weighted-average): | ||
Risk-free interest rate at grant date | 0.36% | |
Expected stock price volatility | 81.14% | |
Expected dividend payout | 0.00% | 0.00% |
Expected warrant life (in years) | 2 years | 1 year |
Expected forfeiture rate | 0.00% |
CONVERTIBLE PROMISSORY NOTES _6
CONVERTIBLE PROMISSORY NOTES AND FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |
Oct. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Proceeds from investor note | $ 1,000 | ||
Remaining balance of investor note | $ 5,000 | ||
Purchase of warrant description | In addition, the placement agent received a warrant (the “Warrant”) exercisable for two years for the purchase of an aggregate of up to 242,424 shares of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock (collectively with the shares underlying the Warrant, the “Warrant Shares”). | ||
Conversion price | $ 1.32 | $ 1.32 | |
Cash payment | $ 11,000 | ||
Accrue interest rate | 18.00% | ||
Conversion price description | The Investor will not have the right to convert any portion of a Convertible Notes, to the extent that, after giving effect to such conversion, the Investor (and other certain related parties) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such conversion. This limit may, from time to time, be increased, up to 9.99%, or decreased; provided that any such increase will not be effective until the 61st day after delivery of a notice to the Company of such increase. | ||
Warranty exercise price per share | $ 1.32 | ||
Cash consideration | $ 34,070 | ||
Series B Note [Member] | |||
Loss on fair value option | 5,100 | ||
Loss on change in fair value | $ 4,700 | ||
Series A and Series B Note [Member] | Placement Agent Warrants [Member] | |||
Purchase of warrant description | On October 2, 2020 and December 31, 2020, in connection with the Series A Note and Series B Note, respectively, a placement agent is to receive a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock. | ||
Series A Note [Member] | |||
Loss on fair value option | $ 4,400 | ||
Loss on change in fair value | 4,600 | ||
Private Placement [Member] | |||
Net cash proceeds | 2,340 | ||
Financial advisory fee | 480 | ||
Proceeds from Private Placement | 8,850 | ||
Placement agent fee | 306 | ||
Securities Purchase Agreement [Member] | Institutional Investor [Member] | |||
Aggregate principal amount | $ 11,500 | ||
Series A Subordinated Convertible Note [Member] | |||
Initial principal amount | 4,600 | ||
Original issue discount | 600 | ||
Cash consideration | 4,000 | ||
Series B Senior Secured Convertible Note [Member] | |||
Initial principal amount | 6,900 | ||
Original issue discount | 900 | ||
Secured Convertible Note [Member] | |||
Initial principal amount | $ 6,000 | ||
Convertible Promissory Note [Member] | |||
Debt issuance cost | $ 700 | $ 100 |
DERIVATIVE LIABILITY (Details)
DERIVATIVE LIABILITY (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Fair value of Derivative Liability | $ 0 | $ 91 |
Fair Value, Inputs, Level 1 [Member] | ||
Fair value of Derivative Liability | 0 | 0 |
Fair Value, Inputs, Level 2 [Member] | ||
Fair value of Derivative Liability | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | ||
Fair value of Derivative Liability | $ 0 | $ 91 |
DERIVATIVE LIABILITY (Details 1
DERIVATIVE LIABILITY (Details 1) | 1 Months Ended | 12 Months Ended |
Oct. 30, 2020 | Dec. 31, 2020 | |
Significant assumptions: | ||
Expected dividend payout | 0.00% | 0.00% |
Expected option life (in years) | 2 years | 1 year |
Expected forfeiture rate | 0.00% | |
Risk-free interest rate at grant date | 0.36% | |
Expected stock price volatility | 81.14% | |
Maximum [Member] | ||
Significant assumptions: | ||
Risk-free interest rate at grant date | 0.28% | |
Expected stock price volatility | 68.23% | |
Minimum [Member] | ||
Significant assumptions: | ||
Risk-free interest rate at grant date | 0.37% | |
Expected stock price volatility | 81.14% |
DERIVATIVE LIABILITY (Details 2
DERIVATIVE LIABILITY (Details 2) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
DERIVATIVE LIABILITY (Details 2) | ||
Derivative liability measured at fair value, beginning balance | $ 91 | $ 618 |
Loss on change in fair value included in earnings | (91) | (527) |
Derivative liability measured at fair value, ending balance | $ 0 | $ 91 |
WARRANT AGREEMENTS (Details)
WARRANT AGREEMENTS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Weighted Average Contractual Remaining Life, Granted | 9 years 2 months 9 days | 7 years 4 months 10 days |
Weighted Average Contractual Remaining Life, ending balance | 1 year 2 months 23 days | 2 years 11 months 27 days |
Warrants [Member] | ||
Warrants, beginning balance | 14,666,518 | 5,340,751 |
Granted | 303,030 | 9,489,340 |
Exercised | (771,318) | (163,573) |
Forfeited/Expired | (11,718,381) | |
Warrants, ending balance | 2,479,849 | 14,666,518 |
Exercisable at December 31, 2019 | 2,479,849 | |
Weighted Average Exercise Price, beginning balance | $ 3.70 | $ 2.20 |
Weighted Average Exercise Price, Granted | 1.32 | 4.62 |
Weighted Average Exercise Price, Exercised | 1.92 | 1.83 |
Weighted Average Exercise Price, Forfeited/Expired | 5.01 | |
Weighted Average Exercise Price, ending balance | 1.86 | $ 3.70 |
Weighted Average Exercise Price, Exercisable | $ 1.86 | |
Weighted Average Contractual Remaining Life, beginning balance | 2 years 11 months 27 days | 3 years 9 months 18 days |
Weighted Average Contractual Remaining Life, Granted | 1 year 10 months 10 days | 4 years 1 month 6 days |
Weighted Average Contractual Remaining Life, ending balance | 1 year 2 months 23 days | 2 years 11 months 27 days |
Weighted Average Contractual Remaining Life, Exercisable | 1 year 2 months 23 days |
WARRANT AGREEMENTS (Details 1)
WARRANT AGREEMENTS (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Weighted Average Remaining Contractual Life (years) | 1 year 2 months 23 days | 2 years 11 months 27 days |
Weighted Average Exercise Price | $ 1.86 | $ 3.70 |
Number of Warrants Exercisable, Weighted Average Exercise Price | $ 1.86 | $ 2.07 |
Number of Warrants | 2,479,849 | 14,666,518 |
Number of Warrants Exercisable | 2,479,849 | 14,666,518 |
1.00 - $7.00 [Member] | ||
Weighted Average Remaining Contractual Life (years) | 2 years 11 months 27 days | |
Number of Warrants Exercisable, Weighted Average Exercise Price | $ 2.07 | |
Number of Warrants | 14,666,518 | |
Number of Warrants Exercisable | 6,648,446 | |
Weighted Average Exercise Price | $ 3.70 | |
Range of Exercise Price Upper Limited | $ 7 | |
Range of Exercise Price Lower Limit | $ 1 | |
1.00 - $6.00 [Member] | ||
Weighted Average Remaining Contractual Life (years) | 1 year 2 months 23 days | |
Weighted Average Exercise Price | $ 1.86 | |
Number of Warrants Exercisable, Weighted Average Exercise Price | $ 1.86 | |
Number of Warrants | 2,479,849 | |
Number of Warrants Exercisable | 2,479,849 | |
Range of Exercise Price Upper Limited | $ 6 | |
Range of Exercise Price Lower Limit | $ 1 |
WARRANT AGREEMENTS (Details 2)
WARRANT AGREEMENTS (Details 2) | 1 Months Ended | 12 Months Ended | |
Oct. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
Risk-free interest rate at grant date | 0.36% | ||
Expected stock price volatility | 81.14% | ||
Expected dividend payout | 0.00% | 0.00% | |
Expected option life (in years) | 2 years | 1 year | |
Expected forfeiture rate | 0.00% | ||
Warrants [Member] | |||
Risk-free interest rate at grant date | 0.36% | 1.69% | |
Expected stock price volatility | 81.14% | 82.66% | |
Expected dividend payout | 0.00% | 0.00% | |
Expected option life (in years) | 3 years | 3 years | |
Expected forfeiture rate | 0.00% | 0.00% |
WARRANT AGREEMENTS (Details Nar
WARRANT AGREEMENTS (Details Narrative) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | Dec. 08, 2020 | Oct. 02, 2020 | May 14, 2019 | May 10, 2019 | Jun. 30, 2020 | Feb. 15, 2019 | Feb. 13, 2019 | Dec. 31, 2020 | Dec. 31, 2019 |
Change in warrant value | $ 100 | $ 3,700 | |||||||
Aggregate Intrinsic Value, Outstandin | $ 200 | ||||||||
Warrant 1 [Member] | |||||||||
Warrants issued | 52,879 | 295,879 | 99,476 | ||||||
Fair market value | $ 100 | $ 800 | $ 300 | ||||||
Warrant exercise price | $ 6 | $ 2.31 | $ 2.31 | ||||||
Warrant 1 [Member] | Convertible promissory note [Member] | |||||||||
Debt instrument fair value | $ 1,745 | $ 1,000 | |||||||
Warrant 2 [Member] | |||||||||
Warrants issued | 62,851 | 242,424 | 60,606 | ||||||
Warrant exercise price | $ 1 | $ 1.32 | $ 1.32 | ||||||
Warrant, exercisable shares | 363,636 | ||||||||
Stock issued during period shares | 26,936 | ||||||||
Warrants [Member] | |||||||||
Warrants issued | 8,018,071 | 52,879 | 8,018,071 | 312,500 | 657,655 | ||||
Fair market value | $ 5 | $ 100 | $ 1,400 | $ 900 | $ 1,800 | ||||
Warrant exercise price | $ 5.01 | $ 5.01 | $ 2 | $ 2 | $ 2.31 | ||||
Warrants [Member] | Convertible promissory note [Member] | |||||||||
Debt instrument fair value | $ 1,745 | $ 500 | $ 1,300 |
STOCK INCENTIVE PLANS (Details)
STOCK INCENTIVE PLANS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Option | ||
Outstanding Beginning Balance | 3,467,650 | 2,313,050 |
Granted | 3,600,364 | 1,390,000 |
Exercised | (30,000) | |
Forfeited/Expired | (752,222) | (235,400) |
Outstanding Ending Balance | 6,285,792 | 3,467,650 |
Exercisable Ending Balance | 2,757,687 | |
Weighted Average Exercise Price | ||
Outstanding Beginning Balance | $ 1.84 | $ 0.79 |
Granted | 1.26 | 3.54 |
Exercised | 0.74 | |
Forfeited/Expired | 1.76 | 1.59 |
Outstanding Ending Balance | 1.52 | $ 1.84 |
Exercisable Ending Balance | $ 1.50 | |
Weighted Average Contractual Remaining Life | ||
Outstanding Beginning Balance | 8 years 8 months 27 days | 9 years 3 months 7 days |
Granted | 9 years 2 months 9 days | 7 years 4 months 10 days |
Outstanding Ending Balance | 8 years 10 months 10 days | 8 years 8 months 27 days |
Exercisable Ending Balance | 8 years 18 days |
STOCK INCENTIVE PLANS (Details
STOCK INCENTIVE PLANS (Details 1) | 12 Months Ended |
Dec. 31, 2020$ / sharesshares | |
0.61-$4.01 [Member] | |
Number of Awards | shares | 6,285,792 |
Weighted Average Remaining Contractual Life (years) | 8 years 10 months 10 days |
Weighted Average Exercise Price | $ / shares | $ 1.52 |
Number of Awards Exercisable | shares | 2,757,687 |
Range of Exercise Price Lower Limit | $ / shares | $ 0.61 |
Range of Exercise Price Upper Limited | $ / shares | $ 4.01 |
Stock Options [Member] | |
Number of Awards | shares | 6,285,792 |
Weighted Average Remaining Contractual Life (years) | 8 years 10 months 10 days |
Weighted Average Exercise Price | $ / shares | $ 1.52 |
Number of Awards Exercisable | shares | 2,757,687 |
STOCK INCENTIVE PLANS (Detail_2
STOCK INCENTIVE PLANS (Details 2) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Significant assumptions (weighted-average): | ||
Expected forfeiture rate | 0.00% | |
Stock Options [Member] | ||
Significant assumptions (weighted-average): | ||
Risk-free interest rate at grant date | 0.59% | 1.69% |
Expected dividend payout | 0.00% | 0.00% |
Expected stock price volatility | 81.14% | 82.66% |
Expected option life (in years) | 10 years | 10 years |
Expected forfeiture rate | 0.00% | 0.00% |
STOCK INCENTIVE PLANS (Detail_3
STOCK INCENTIVE PLANS (Details 3) - Stock Options [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Non-vested, beginning balance | 82,086 | 317,708 |
Granted | 150,000 | 84,177 |
Vested | (181,849) | (319,799) |
Forfeited/Expired | (237) | |
Non-vested, ending balance | 50,000 | 82,086 |
Weighted Average Exercise Price, Non-vested, beginning balance | $ 2.69 | $ 1.44 |
Weighted Average Exercise Price, Granted | 1.60 | 3.17 |
Weighted Average Exercise Price, Vested | 2.08 | 1.57 |
Weighted Average Exercise Price, Non-vested, ending balance | $ 1.60 | $ 2.69 |
STOCK INCENTIVE PLANS (Detail_4
STOCK INCENTIVE PLANS (Details 4) - Stock Options [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Outstanding beginning balance | 60,759 | |
Granted | 431,578 | 60,759 |
Vested | (60,759) | |
Outstanding, ending balance | 431,578 | 60,759 |
Weighted Average Grant Date Fair Value Outstanding, beginning balance | $ 3.66 | |
Weighted Average Grant Date Fair Value Granted | 1.33 | $ 3.66 |
Weighted Average Grant Date Fair Value Vested | 3.66 | |
Weighted Average Grant Date Fair Value Outstanding | $ 1.33 | $ 3.66 |
STOCK INCENTIVE PLANS (Detail_5
STOCK INCENTIVE PLANS (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | |||
Nov. 28, 2020 | Dec. 29, 2017 | Dec. 31, 2020 | Dec. 31, 2019 | Feb. 25, 2019 | |
Fair value of options granted | $ 2,200 | $ 4,300 | |||
Compensation expense | 2,000 | $ 1,500 | |||
Unrecognized fair value of compensation cost | $ 79 | ||||
Weighted Average Remaining Contractual Life (years) | 1 year 2 months 23 days | 2 years 11 months 27 days | |||
Common stock issued | 59,476,268 | 38,001,543 | |||
Equity Incentive Plan [Member] | |||||
Common stock issued | 46,875 | ||||
Common stock available for grant | 5,000,000 | 5,000,000 | |||
Equity incentive plan, description | The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date. | ||||
Stock Options [Member] | |||||
Unrecognized fair value of compensation cost | $ 3,100 | ||||
Weighted Average Remaining Contractual Life (years) | 9 years 5 months 30 days | ||||
Aggregate Intrinsic Value, Outstanding | $ 100 | ||||
Restricted Stock Units [Member] | |||||
Compensation expense | 300 | $ 80 | |||
Unrecognized fair value of compensation cost | $ 600 | $ 200 | |||
Weighted Average Remaining Contractual Life (years) | 7 months 21 days | 7 months 6 days | |||
Nonstatutory Stock Options [Member] | |||||
Number of shares exercised | 30,000 | ||||
Exercised price | $ 0.74 | ||||
Common stock issued in exchange | $ 22,200 | ||||
Common stock issued | 3,510,364 | ||||
Common stock issued to members | 1,170,000 | ||||
Restricted shares of common stock | 150,000 | ||||
Awarded vesting period | 4 years | ||||
Restricted Stock Units | 431,578 | ||||
Term of exercise period | 10 years | ||||
Restricted Common Stock [Member] | |||||
Unrecognized fair value of compensation cost | $ 100 | $ 200 | |||
Weighted Average Remaining Contractual Life (years) | 1 month 21 days | 2 years 2 months 9 days | |||
Incentive Stock Options [Member] | |||||
Common stock issued | 90,000 | ||||
Restricted Stocks [Member] | |||||
Compensation expense | $ 500 | $ 500 |
STOCKHOLDERS EQUITY (Details Na
STOCKHOLDERS EQUITY (Details Narrative) $ / shares in Units, $ in Thousands | Dec. 09, 2020USD ($)shares | May 14, 2019shares | Apr. 16, 2019integer$ / sharesshares | Feb. 19, 2019USD ($)$ / sharesshares | Feb. 15, 2019USD ($)$ / sharesshares | Feb. 14, 2019USD ($)$ / sharesshares | Feb. 13, 2019USD ($)$ / sharesshares | Sep. 30, 2019USD ($)$ / sharesshares | Dec. 31, 2020USD ($)$ / sharesshares | Dec. 31, 2018USD ($)shares | Oct. 30, 2020$ / shares | Jun. 05, 2020$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | Apr. 29, 2019$ / sharesshares | Feb. 25, 2019USD ($)$ / sharesshares |
Common stock, shares authorized | 150,000,000 | 150,000,000 | |||||||||||||
Common stock, shares par value | $ / shares | $ 0.001 | $ 0.001 | |||||||||||||
Common stock, shares outstanding | 59,476,268 | 38,001,543 | |||||||||||||
Investor funded amount | $ | $ 250 | ||||||||||||||
Debt conversion, converted instrument, warrants issued | 312,500 | ||||||||||||||
Warrants exercised price | $ / shares | $ 2.31 | $ 1.32 | |||||||||||||
Common stock shares issued upon exercise of warrants | 25,675 | ||||||||||||||
Number of warrants exercised | 88,769 | ||||||||||||||
Number of holders | integer | 5 | ||||||||||||||
Common stock, shares issued | 59,476,268 | 38,001,543 | |||||||||||||
Stock payable | $ | $ 90 | ||||||||||||||
Debt instrument, convertible, conversion price description | The Investor will not have the right to convert any portion of a Convertible Notes, to the extent that, after giving effect to such conversion, the Investor (and other certain related parties) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such conversion. This limit may, from time to time, be increased, up to 9.99%, or decreased; provided that any such increase will not be effective until the 61st day after delivery of a notice to the Company of such increase. | ||||||||||||||
Conversion price | $ / shares | $ 1.32 | $ 1.32 | |||||||||||||
Business acquisition consideration transferred, shares issued | 22,128,946 | ||||||||||||||
Common stock issuances, value | $ | $ 665 | $ 1,066 | |||||||||||||
Convertible promissory note [Member] | Accrued Interest [Member] | |||||||||||||||
Stock payable | $ | $ 300 | ||||||||||||||
Debt instrument converted into common stock | 297,288 | ||||||||||||||
Convertible debt | $ | $ 300 | ||||||||||||||
2017 Equity Incentive Plan [Member] | |||||||||||||||
Common stock, shares issued | 83,333 | ||||||||||||||
Price per share | $ / shares | $ 1.81 | ||||||||||||||
Equity Incentive Plan [Member] | |||||||||||||||
Common stock, shares issued | 46,875 | ||||||||||||||
Price per share | $ / shares | $ 0.74 | ||||||||||||||
CHI [Member] | |||||||||||||||
Common stock, shares issued | 12,058,623 | ||||||||||||||
Stock payable | $ | 200 | ||||||||||||||
Proceed from issuance of common stock | $ | 21,900 | ||||||||||||||
Price per share | $ / shares | $ 1.82 | ||||||||||||||
Business acquisition consideration transferred, shares issued | 8,410,875 | ||||||||||||||
Common stock shares held in escrow | 7,128,913 | ||||||||||||||
Proceeds from common stock issuable | $ | $ 200 | ||||||||||||||
Business acquisition consideration transferred, shares issued as upfront consideration | 5,700,000 | ||||||||||||||
Term of escrow account | escrow, may be issued and released over a period of 5 months to 5 years related potential post-closing claims | ||||||||||||||
Intellectual Property Management Services [Member] | |||||||||||||||
Vesting period description | Over a fifteen-month period | ||||||||||||||
Vested shares issued | 8,539 | ||||||||||||||
Vesting price per share | $ / shares | $ 3.15 | ||||||||||||||
Total value of vested issuance | $ | $ 26,898 | ||||||||||||||
Debt Conversion Agreements [Member] | |||||||||||||||
Debt conversion, converted instrument, warrants issued | 657,655 | ||||||||||||||
Warrants exercised price | $ / shares | $ 2.31 | ||||||||||||||
Debt instrument converted into common stock | 135,135 | 832,365 | |||||||||||||
Debt instrument converted amount, principal | $ | $ 250 | $ 1,325 | |||||||||||||
Debt instrument, convertible, conversion price description | Conversion price of $1.85 per share (a discounted rate calculated as an approximation based on 20% discount on 5 days volume weighted average price of the market rate) | Conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock | |||||||||||||
Loss on conversion | $ | $ 201,351 | $ 812,241 | |||||||||||||
Debt instrument converted amount, interest | $ | $ 213,859 | ||||||||||||||
Conversion price | $ / shares | $ 1.85 | $ 1.85 | |||||||||||||
Debt Conversion Agreements [Member] | Convertible Promissory Note [Member] | |||||||||||||||
Common stock, shares issued | 254,779 | ||||||||||||||
Debt instrument converted amount, principal | $ | $ 400 | ||||||||||||||
Debt instrument, convertible, conversion price description | Conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock | ||||||||||||||
Loss on conversion | $ | $ 630,238 | ||||||||||||||
Debt instrument converted amount, interest | $ | $ 71,342 | ||||||||||||||
Conversion price | $ / shares | $ 1.85 | ||||||||||||||
Debt Conversion Agreements [Member] | Convertible Promissory Note Holder [Member] | |||||||||||||||
Debt conversion, converted instrument, warrants issued | 295,879 | ||||||||||||||
Warrants exercised price | $ / shares | $ 2.31 | ||||||||||||||
Debt instrument converted into common stock | 168,819 | 591,757 | |||||||||||||
Debt instrument converted amount, principal | $ | $ 425 | $ 1,000 | |||||||||||||
Debt instrument, convertible, conversion price description | Conversion price per share $2.52 which was based on a 20% discount to the average closing price of the Company’s common stock | Conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock | |||||||||||||
Loss on conversion | $ | $ 860,087 | ||||||||||||||
Debt instrument converted amount, interest | $ | $ 425 | $ 94,750 | |||||||||||||
Conversion price | $ / shares | $ 1.85 | ||||||||||||||
Debt Conversion Agreements [Member] | Convertible Promissory Note Holder One [Member] | |||||||||||||||
Debt instrument converted into common stock | 861,301 | ||||||||||||||
Debt instrument converted amount, principal | $ | $ 1,575 | ||||||||||||||
Debt instrument, convertible, conversion price description | Conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock | ||||||||||||||
Loss on conversion | $ | $ 745,929 | ||||||||||||||
Debt instrument converted amount, interest | $ | $ 18,406 | ||||||||||||||
Conversion price | $ / shares | $ 1.85 | ||||||||||||||
Media Advertising Agreement [Member] | |||||||||||||||
Common stock, shares issued | 60,000 | ||||||||||||||
Price per share | $ / shares | $ 3.78 | ||||||||||||||
Consulting Agreement [Member] | |||||||||||||||
Common stock, shares issued | 12,500 | 45,000 | |||||||||||||
Price per share | $ / shares | $ 3.39 | $ 1.52 | |||||||||||||
Term of agreement description | Per the terms of the Agreement, the Company is to issue 25,000 common stock shares of the Company for providing investor relations services, where 12,500 common stock shares of the Company are due immediately and the remaining 12,500 common stock shares of the Company is due June 19, 2019. | ||||||||||||||
Series A Note plus [Member] | |||||||||||||||
Debt instrument converted into common stock | 565,702 | ||||||||||||||
Debt instrument converted amount, principal | $ | $ 500 | ||||||||||||||
Price per share | $ / shares | $ 0.89 | ||||||||||||||
Stock Purchase Agreement Five [Member] | Warrants [Member] | |||||||||||||||
Common stock, shares issued | 66,753 | ||||||||||||||
Cashless exercise of warrants | $ | $ 14,324 | ||||||||||||||
Common stock, price per share | $ / shares | $ 1 | ||||||||||||||
Excercise price per share | $ / shares | $ 4.11 | ||||||||||||||
Cash exercise of warrants | $ | $ 60,480 | ||||||||||||||
Senior Secured Promissory Note [Member] | Debt Conversion Agreements [Member] | |||||||||||||||
Outstanding Balance | $ | $ 650 | ||||||||||||||
Advisory Consulting Agreement [Member] | |||||||||||||||
Common stock, shares issued | 50,000 | ||||||||||||||
Price per share | $ / shares | $ 1.84 | ||||||||||||||
Patent Purchase Agreement [Member] | |||||||||||||||
Common stock, shares issued | 30,000 | ||||||||||||||
Common stock, price per share | $ / shares | $ 1.42 | ||||||||||||||
Stock Purchase Agreement Four [Member] | Equity Incentive Plan [Member] | |||||||||||||||
Common stock, shares issued | 324,791 | ||||||||||||||
Conversion price description | Ranging from $0.74 and $1.81 | ||||||||||||||
Stock Purchase Agreement Three [Member] | |||||||||||||||
Common stock, shares issued | 528,780 | ||||||||||||||
Common stock, price per share | $ / shares | $ 3.30 | ||||||||||||||
Total purchase price | $ | $ 1,745 | ||||||||||||||
Stock Purchase Agreement One [Member] | |||||||||||||||
Common stock, shares issued | 34,876 | ||||||||||||||
Common stock, price per share | $ / shares | $ 1.85 | ||||||||||||||
From January 1, 2020 to December 31, 2020 [Member] | |||||||||||||||
Conversion price description | ranging from $1.40 to $3.93 | Ranging from $0.89 to $2.05 per share. | |||||||||||||
Debt instrument converted into common stock | 281,250 | 447,288 | |||||||||||||
Debt instrument converted amount, principal | $ | 250 | $ 1,325 | $ 500 | ||||||||||||
From January 1, 2020 to December 31, 2020 [Member] | 2017 Equity Plan [Member] | |||||||||||||||
Conversion price description | ranging from $1.60 to $3.15 | Ranging from $0.89 to $2.05 per share. | |||||||||||||
Debt instrument converted into common stock | 194,016 | 447,288 | |||||||||||||
Debt instrument converted amount, principal | $ | $ 250 | $ 1,325 | $ 20 | ||||||||||||
June 5, 2020 [Member] | |||||||||||||||
Common stock, shares issued | 708,467 | ||||||||||||||
Proceed from issuance of common stock | $ | $ 1,400 | ||||||||||||||
Price per share | $ / shares | $ 2 | ||||||||||||||
October 2, 2020 [Member] | Sera labs [Member] | |||||||||||||||
Common stock, shares issued | 6,909,091 | ||||||||||||||
Proceed from issuance of common stock | $ | $ 9,534,546 | ||||||||||||||
Price per share | $ / shares | $ 1.38 | ||||||||||||||
Business acquisition consideration transferred, shares issued | 12,897,115 | ||||||||||||||
Maturity date | Jun. 30, 2021 | ||||||||||||||
December 9, 2020 [Member] | |||||||||||||||
Debt instrument converted into common stock | 757,576 | ||||||||||||||
Debt instrument converted amount, principal | $ | $ 1,000 | ||||||||||||||
Price per share | $ / shares | $ 1.32 | ||||||||||||||
April 27, 2017 [Member] | Senior Secured Promissory Note [Member] | Debt Conversion Agreements [Member] | |||||||||||||||
Common stock, shares issued | 75,000 | ||||||||||||||
Price per share | $ / shares | $ 3.35 | ||||||||||||||
Common stock issuances, value | $ | $ 251,250 | ||||||||||||||
Stock issuable | 75,000 | ||||||||||||||
On February 1, 2019 [Member] | |||||||||||||||
Common stock, shares issued | 30,000 | ||||||||||||||
Price per share | $ / shares | $ 2.32 | ||||||||||||||
Common stock issuances, value | $ | $ 69,600 | ||||||||||||||
Amended promissory note | $ | $ 600 | ||||||||||||||
Maturity date | Feb. 28, 2019 | ||||||||||||||
From July 1, 2019 to September 30, 2019 [Member] | Debt Conversion Agreements [Member] | Convertible Promissory Note Holder Two [Member] | |||||||||||||||
Debt instrument converted amount, principal | $ | $ 500 | ||||||||||||||
Conversion price | $ / shares | $ 1.85 | ||||||||||||||
Loss on conversion | $ | $ 409,672 | ||||||||||||||
From July 1, 2019 to September 30, 2019 [Member] | Stock Purchase Agreement [Member] | Landlord [Member] | |||||||||||||||
Stock payable | $ | $ 285,723 | ||||||||||||||
Conversion price description | Shares ranging from $2.25 to $3.60 | ||||||||||||||
Restricted shares to be granted under agreement | 137,309 |
SEGMENT REPORTING (Details )
SEGMENT REPORTING (Details ) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Net sales | $ 2,051 | $ 623 |
Operating loss | (18,958) | (13,692) |
Assets | 46,359 | 32,460 |
Accounts receivable, net | 224 | 142 |
Inventory | 449 | 156 |
Cure Operations [Member] | ||
Net sales | 1,007 | 623 |
Operating loss | (17,377) | (13,692) |
Assets | 30,148 | 32,460 |
Accounts receivable, net | 131 | 142 |
Inventory | 209 | 156 |
Sera Labs Operations [Member] | ||
Net sales | 1,044 | 0 |
Operating loss | (1,581) | 0 |
Assets | 16,211 | 0 |
Accounts receivable, net | 93 | 0 |
Inventory | $ 240 | $ 0 |
SEGMENT REPORTING (Details 1 )
SEGMENT REPORTING (Details 1 ) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Revenues and Concentration Risk | 97.00% | 99.00% |
CureFilm? sales [Member] | ||
Revenues and Concentration Risk | 37.00% | 59.00% |
Product sales - CBD [Member] | ||
Revenues and Concentration Risk | 49.00% | 0.00% |
Research & Development services [Member] | ||
Revenues and Concentration Risk | 11.00% | 40.00% |
SEGMENT REPORTING (Details Narr
SEGMENT REPORTING (Details Narrative ) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Accounts receivable | $ 30 | $ 100 |
Revenues | 16.00% | 49.00% |
BUSINESS COMBINATION AND DECO_3
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details) - USD ($) $ in Thousands | Oct. 02, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Fair Value of the Contingent Share Consideration | |||
Fair value of contingent liability | $ 3,083 | $ 3,204 | $ 0 |
Net change in fair value | $ (121) |
BUSINESS COMBINATION AND DECO_4
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 1) $ in Thousands | 12 Months Ended |
Dec. 31, 2020USD ($)shares | |
Upfront Consideration Shares, value | $ 19,038 |
Total purchase price, shares | shares | 22,128,946 |
Total purchase price, value | $ 34,070 |
October 2, 2020 [Member] | |
Upfront Consideration Shares, value | $ 1,000 |
Closing Merger Consideration Shares, shares | shares | 6,909,091 |
Closing Merger Consideration Shares, value | $ 9,535 |
Contingent Consideration Shares (Clawback Shares), shares | shares | 5,988,024 |
Contingent Consideration Shares (Clawback Shares), value | $ 3,083 |
Liabilities assumed, value | $ 550 |
Total purchase price, shares | shares | 12,897,115 |
Total purchase price, value | $ 14,168 |
BUSINESS COMBINATION AND DECO_5
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 2) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Net assets acquired: | ||
Cash | $ 8,487 | |
Other assests | 58 | $ 35 |
Property, plant and equipment | 83 | |
Contract liabilities | 994 | $ 456 |
Net assets acquired | 33,670 | |
October 2, 2020 [Member] | ||
Net assets acquired: | ||
Cash | 1,357 | |
Other assests | 1,440 | |
Property, plant and equipment | 6 | |
Other long term assets | 384 | |
Intangibles assets | 10,182 | |
Goodwill | 4,687 | |
Accounts payable and accrued expenses | (1,063) | |
Contract liabilities | (1,963) | |
Other current liabilities | (462) | |
Other long-term liabilities | (400) | |
Net assets acquired | $ 14,168 |
BUSINESS COMBINATION AND DECO_6
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 3) $ in Thousands | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Finite-lived intangible assets: | |
Weighted-average Estimated useful life | 4 years 7 months 6 days |
Preliminary Estimated Asset Fair Value | $ 10,182 |
Non-compete [Member] | |
Finite-lived intangible assets: | |
Weighted-average Estimated useful life | 2 years |
Preliminary Estimated Asset Fair Value | $ 462 |
Tradename [Member] | |
Finite-lived intangible assets: | |
Weighted-average Estimated useful life | 4 years |
Preliminary Estimated Asset Fair Value | $ 2,610 |
Customer relationships [Member] | |
Finite-lived intangible assets: | |
Weighted-average Estimated useful life | 5 years |
Preliminary Estimated Asset Fair Value | $ 7,110 |
BUSINESS COMBINATION AND DECO_7
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 4) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Fair Value of the Contingent Share Consideration | ||
Fair value Beginning Balance | $ 16,043 | $ 0 |
Fair value at May 14, 2019 | 14,632 | |
Settlement of contingent consideration liability | (21,701) | |
Net change in fair value | $ (5,658) | 1,657 |
Fair value of common stock shares to be released from escrow and to be issued | (246) | |
Fair Value Ending Balance | $ 16,043 |
BUSINESS COMBINATION AND DECO_8
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 5) $ in Thousands | 12 Months Ended |
Dec. 31, 2020USD ($)shares | |
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY | |
Upfront Consideration Shares, shares | shares | 5,700,000 |
Upfront Consideration Shares, value | $ 19,038 |
Adjusted Contingent Shares shares | shares | 8,410,875 |
Adjusted Contingent Shares, value | $ 14,627 |
Acquisition Warrant Shares, shares | shares | 8,018,071 |
Acquisition Warrant Shares, value | $ 5 |
Acquisition costs | $ 400 |
Total purchase price, shares | shares | 22,128,946 |
Total purchase price, value | $ 34,070 |
BUSINESS COMBINATION AND DECO_9
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 6) $ in Thousands | Dec. 31, 2020USD ($) |
Net assets acquired: | |
Cash | $ 8,487 |
Note receivable from CURE | 2,000 |
Property, plant and equipment | 83 |
Patents and development technology | 650 |
In-process research and development | 14,460 |
Goodwill | 9,178 |
Accounts payable | (354) |
Payroll tax liabilities | (834) |
Net assets acquired | 33,670 |
Acquisition costs | 400 |
Net assets acquired and acquisition costs incurred | $ 34,070 |
BUSINESS COMBINATION AND DEC_10
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 7) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Finite-lived intangible assets: | ||
Weighted-average Estimated useful life | 4 years 7 months 6 days | |
Preliminary Estimated Asset Fair Value | $ 10,182 | |
Patent And Developed Technology [Member] | ||
Finite-lived intangible assets: | ||
Weighted-average Estimated useful life | 11 years | |
Preliminary Estimated Asset Fair Value | $ 650 | |
Total Finite-Lived Intangible Assets Acquired [Member] | ||
Finite-lived intangible assets: | ||
Weighted-average Estimated useful life | 11 years | |
Preliminary Estimated Asset Fair Value | $ 650 |
BUSINESS COMBINATION AND DEC_11
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 8) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Net revenues | $ 2,051 | $ 623 |
Net loss | (30,621) | (21,363) |
Cure Pharmaceutical [Member] | ||
Net revenues | 1,049 | 623 |
Net loss | $ (29,059) | $ (21,363) |
Net loss attributable to Cure per common share, basic and dilued | $ (0.65) | $ (0.62) |
Sera Labs [Member] | ||
Net revenues | $ 6,728 | $ 3,621 |
Net loss | $ (3,051) | $ (2,621) |
Net loss attributable to Cure per common share, basic and dilued | $ (0.26) | $ (0.22) |
Pro forma Adjustment [Member] | ||
Net revenues | $ (34) | $ 0 |
Net loss | 162 | 0 |
Consolidated Pro Forma [Member] | ||
Net revenues | 7,743 | 4,244 |
Net loss | $ (31,948) | $ (24,314) |
Net loss attributable to Cure per common share, basic and dilued | $ (0.68) | $ (0.67) |
Chemistry Holdings [Member] | ||
Net revenues | $ 0 | |
Net loss | $ (330) | |
Net loss attributable to Cure per common share, basic and dilued | $ (0.01) |
BUSINESS COMBINATION AND DEC_12
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 9) $ in Thousands | 4 Months Ended |
Apr. 15, 2019USD ($) | |
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY | |
Net loss | $ 16 |
BUSINESS COMBINATION AND DEC_13
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details Narrative) - USD ($) $ in Thousands | Jun. 05, 2020 | May 14, 2019 | Apr. 15, 2019 | Dec. 31, 2020 | Dec. 31, 2019 |
Total potential shares to be issued | 32,072,283 | 32,072,283 | |||
Warrants issue purchase additional shares | 4,143,706 | ||||
Upfront payment consideration | 5,700,000 | ||||
Claw back shares | 7,128,913 | ||||
Acheivment shares | 3,207,228 | ||||
Earnout shares | 8,018,071 | 80 | |||
Estimated acquisition costs | $ 400 | $ 300 | |||
Upfront Consideration Shares, value | $ 19,038 | ||||
Total purchase price, shares | 22,128,946 | ||||
Convertible Note [Member] | |||||
Debt instrument converted amount, principal | $ 14,600 | ||||
CHI [Member] | |||||
Total purchase price, shares | 8,410,875 | ||||
Common stock shares including escrow shares decriptions | The Agreement provided as follows: (a) all7,128,913 shares held in escrow were released to the Holders as of the Release Effective Date, of which 140,828shares were returned to the Company for cancellation in consideration for the Company committing to pay certain outstanding liabilities, (b) of the 11,225,299 total shares issuable pursuant to the earn-out provisions in the CHI Merger Agreement, 5,612,654 shares were issued to the Holders as of the Release Effective Date (310,821 of which were assigned back to the Company as of the Release Effective Date) and the obligation of the Company to issue any further earn-out shares was terminated, and (c) certain Holders exercised warrants issued in the CHI Merger to purchase708,467 shares of Common Stock on the Release Effective Date at a price of $2.00 per share ( | up to 8,018,071 shares issuable upon exercise of warrants (“Acquisition Warrants”) that become exercisable upon achieving certain revenue goals between the second and fourth anniversary of the Closing Date at an exercise price of $5.01 per share, exercisable, to the extent vested, for five years from the Closing Date. In exchange for the assets and liabilities acquired, the Company received an investment of $2 million (the “Principal Amount”) from Chemistry Holdings pursuant to a convertible note (the “Note”). | |||
Gross proceeds | 1,400,000 | ||||
Warrants purchase upon common stock | 7,309,605 | ||||
Purchase price for acquision | $ 34,100 | ||||
Preliminary purchase price desriptions | The preliminary total purchase price was determined based on the following: i) Company’s closing price ($3.34) on May 14, 2019 for the Upfront Consideration Share; ii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over a 66 month performance period applied to the total number of contingent shares, which consists of the Clawback Shares, Achievement Shares and Earnout Shares, as determined based on the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished (“Adjusted Contingent Shares”); iii) the fair value of the Acquisition Warrant Shares based on using the Black-Scholes valuation using the a risk free rate of 2.4%, stock price volatility of 134.7%, no dividend payout, 1 year expected life, exercise price of $5.01 and an estimated stock price of $0.39 based on the end of the earn-out period, year 4 (as determine by using a Monte-Carlo simulation model); | ||||
October 2, 2020 [Member] | Sera labs [Member] | |||||
Closing Merger Consideration Shares, shares | 6,909,091 | ||||
Contingent Consideration Shares (Clawback Shares), shares | 5,988,024 | ||||
Upfront Consideration Shares, value | $ 1,000 | ||||
Aggregate amount | $ 20,000 | ||||
Total purchase price, shares | 12,897,115 | ||||
Liability Contingent shares consideration | $ 3,100 | ||||
Fair value of preliminary purchase price | $ 14,200 | ||||
Acquisition descriptions | The Company acquired Sera Labs through the issuance of shares of Common Stock of the Company with $1 million of cash consideration to be provided. The preliminary total purchase price was determined based on the following: i) $1 million of the Upfront Payment ii) Company’s closing price ($1.38) on October 2, 2020 for the closing merger consideration shares |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Current expense | ||
Federal | $ 0 | $ 0 |
State | 0 | 0 |
Deferred expense | ||
Federal | 0 | 0 |
State | 0 | 0 |
Total income tax expense | $ 0 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred income tax assets | ||
Net operating loss carryforward | $ 14,359 | $ 12,007 |
Change in fair value of convertible promissory notes | 2,627 | |
Non cash compensation | 1,018 | |
Deferred revenue | 180 | 135 |
Lease liability | 118 | |
Other intangibles | 195 | |
Inventory reserve | 82 | |
Stock based compensation | 79 | |
Allowance for doubtful accounts | 96 | 66 |
Accrued expenses | 131 | 31 |
Total deferred tax assets | 18,885 | 12,239 |
Deferred income tax liabilities | ||
State income taxes | 0 | (922) |
ROU Assets | (110) | 0 |
Prepaid expenses and other assets | (84) | 0 |
Depreciation and amortization | (48) | (16) |
Valuation allowance | (18,643) | (11,301) |
Total deferred tax liabilities | (18,885) | (12,239) |
Deferred income tax, net | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
INCOME TAXES | ||
Net operating loss carryforwards | $ 16,100 | $ 41,600 |
Net operating loss carryforwards expiration date | 2037 | |
Valuation reserve allowance percentage | 100.00% | |
Change in valuation allowance | $ 7,300 | $ 4,200 |
INTELLECTUAL PROPERTY AND COL_2
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Nov. 07, 2018 | |
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | |||
Revenue | $ 10 | $ 0 | |
Feasibility study and technology cost | $ 300 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands | Dec. 31, 2020USD ($) |
COMMITMENTS AND CONTINGENCIES | |
2021 | $ 130 |
2022 | 134 |
2023 | 138 |
2024 | 46 |
2025 | 0 |
Undiscounted cash flow | 448 |
Effect of discounting | (77) |
Lease liabilities recognized | $ 371 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details 1) $ in Thousands | Dec. 31, 2020USD ($) |
COMMITMENTS AND CONTINGENCIES | |
2021 | $ 14 |
2022 | 14 |
2023 | 14 |
2024 | 10 |
2025 | 0 |
Thereafter | 0 |
Finance lease liabilities recognized | $ 52 |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details 2) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Operating leases | ||
Right-of-use assets, net | $ 343 | $ 0 |
Right-of-use lease liabilities, current | 93 | |
Right-of-use lease liabilities, noncurrent | 278 | |
Total operating lease liabilities | $ 371 | |
Weighted average remaining lease term, operating lease | 3 years 3 months 22 days | |
Weighted average discount rate | 11.30% | |
Finance lease right-to-use assets, net | $ 52 | 63 |
Current liabilities | 12 | 11 |
Noncurrent liabilities | 40 | 52 |
Total financing lease liabilities | $ 52 | $ 63 |
Weighted average remaining lease term, finance lease | 3 years 9 months 26 days | 4 years 9 months 29 days |
Weighted average discount rate | 9.00% | 9.00% |
COMMITMENTS AND CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Details Narrative) | 12 Months Ended | |
Dec. 31, 2020USD ($)ft² | Dec. 31, 2019USD ($) | |
Operating lease rent expense | $ 300,000 | $ 300,000 |
Weighted average discount rate | 11.30% | |
Monthly payments | $ 10,000 | 20,000 |
Right of use asset | 60 | |
Finance lease payable, current | 10 | |
Operating capital lease liability, current portion | 100,000 | |
Finance capital lease liability, long-term portion | $ 40,000 | $ 52,000 |
Lease term | 5 years | |
Finance lease liability | $ 60,000 | |
Sum of installment payment, description | A gross sum of $93,461.54, paid in equal installments over a six-month period | |
Description of finance lease | The company will make payment of $0.02 annually until October 2024. Interest associated with the lease is $0.01 million or less annually based on a discount rate of 9.0%. For the year ended December 31, 2020, | |
Offices And Manufacturing Facility [Member] | ||
Offices and manufacturing facility area | ft² | 25,000 | |
Lease Agreement [Member] | ||
Offices and manufacturing facility area | ft² | 3,822 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) shares in Thousands, $ in Thousands | Feb. 10, 2021 | Feb. 05, 2021 | Jan. 13, 2021 | Nov. 09, 2020 | Feb. 25, 2021 | Jan. 20, 2021 | Dec. 31, 2020 |
Principal payment | $ 300 | ||||||
Subsequent Event [Member] | |||||||
Proceeds from issuance of common stock | 1,500 | ||||||
Debt Instrument, Forgiveness | $ 400 | ||||||
Subsequent Event [Member] | Coeptis [Member] | |||||||
Promissory note | $ 200 | $ 200 | |||||
Principal payment | $ 200 | ||||||
Subsequent Event [Member] | Investor [Member] | |||||||
Promissory note | $ 500 | $ 500 | |||||
February 1, 2021 [Member] | |||||||
Total investment amount | $ 300 |