Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2021 | Nov. 12, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | CURE PHARMACEUTICAL HOLDING CORP. | |
Entity Central Index Key | 0001643301 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | true | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Sep. 30, 2021 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2021 | |
Entity Ex Transition Period | true | |
Entity Common Stock Shares Outstanding | 65,060,044 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 333-204857 | |
Entity Incorporation State Country Code | DE | |
Entity Tax Identification Number | 37-1765151 | |
Entity Address Address Line 1 | 1620 Beacon Place | |
Entity Address City Or Town | Oxnard | |
Entity Address State Or Province | CA | |
Entity Address Postal Zip Code | 93033 | |
City Area Code | 805 | |
Local Phone Number | 824-0410 | |
Entity Interactive Data Current | Yes |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Current assets: | ||
Cash | $ 164,000 | $ 1,725,000 |
Accounts receivable, net | 208,000 | 224,000 |
Note receivable, net | 0 | 0 |
Inventory, net | 960,000 | 449,000 |
Prepaid expenses and other assets | 431,000 | 1,452,000 |
Total current assets | 1,763,000 | 3,850,000 |
Property and equipment, net | 1,902,000 | 2,074,000 |
Finance lease right-of-use assets, net | 43,000 | 52,000 |
Operating lease right-of-use assets, net | 280,000 | 343,000 |
Note receivable | 200,000 | 0 |
Investment | 509,000 | 509,000 |
Goodwill | 13,868,000 | 13,868,000 |
Intellectual property and patents, net | 15,027,000 | 1,711,000 |
In-process research and development, net | 329,000 | 14,288,000 |
Customer relationships, Tradename, and Non-compete, net | 7,875,000 | 9,606,000 |
Other assets | 83,000 | 58,000 |
Total assets | 41,879,000 | 46,359,000 |
Current liabilities: | ||
Accounts payable | 2,242,000 | 2,135,000 |
Accrued expenses | 4,295,000 | 1,299,000 |
Finance lease payable, current | 13,000 | 12,000 |
Operating lease payable, current | 104,000 | 93,000 |
Loan payable | 60,000 | 265,000 |
Paycheck protection program loan | 0 | 605,000 |
Related party payable | 1,440,000 | 1,040,000 |
Notes payable | 1,800,000 | 800,000 |
Convertible promissory notes | 550,000 | 550,000 |
Fair value convertible promissory notes, net | 6,583,000 | 6,674,000 |
Contract liabilities | 611,000 | 994,000 |
Total current liabilities | 17,698,000 | 14,467,000 |
License fees | 0 | 80,000 |
Finance lease payable | 30,000 | 40,000 |
Operating lease payable | 199,000 | 278,000 |
Fair value convertible promissory notes, net current | 3,109,000 | 7,010,000 |
Contingent share considerations | 2,258,000 | 3,205,000 |
Total liabilities | 23,294,000 | 25,080,000 |
Stockholders' equity: | ||
Common stock: $0.001 par value; authorized 150,000,000 shares;65,060,044 and 59,476,268 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 66,000 | 60,000 |
Additional paid-in capital | 108,004,000 | 101,807,000 |
Common stock issuable | 603,000 | 665,000 |
Accumulated deficit | (90,088,000) | (81,253,000) |
Total stockholders' equity | 18,585,000 | 21,279,000 |
Total liabilities and stockholders' equity | $ 41,879,000 | $ 46,359,000 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2021 | Dec. 31, 2020 |
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 | 65,060,044 | 59,476,268 |
Common stock, shares outstanding | 65,060,044 | 59,476,268 |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenue: | ||||
Product sales, net of discounts and refunds | $ 1,345,000 | $ 167,000 | $ 4,817,000 | $ 533,000 |
Consulting research & development income | 0 | 0 | 52,000 | 169,000 |
Shipping and other sales | 14,000 | 25,000 | 70,000 | 39,000 |
Total revenues | 1,359,000 | 192,000 | 4,939,000 | 741,000 |
Cost of goods sold: | ||||
Cost of goods solds | 512,000 | 145,000 | 1,725,000 | 346,000 |
Gross profit | 847,000 | 47,000 | 3,214,000 | 395,000 |
Operating expenses: | ||||
Research and development expenses | 601,000 | 744,000 | 1,944,000 | 2,284,000 |
Selling, general and administrative expenses | 4,584,000 | 2,075,000 | 14,925,000 | 6,711,000 |
Change in fair value of contingent stock consideration | 608,000 | 0 | (947,000) | 5,658,000 |
Total operating expenses | 5,793,000 | 2,819,000 | 15,922,000 | 14,653,000 |
Net operating loss before other income (expense) | (4,946,000) | (2,772,000) | (12,708,000) | (14,258,000) |
Other income (expense): | ||||
Interest income | 2,000 | 12,000 | 4,000 | 32,000 |
Gain from settlement | 0 | 35,000 | 2,434,000 | 61,000 |
Gain on extinguishment of debt | 7,000 | 0 | 741,000 | 0 |
Loss on sale of property, plant and equipment | 0 | 0 | (41,000) | 0 |
Change in fair value of derivative liability | 0 | 13,000 | 0 | 88,000 |
Change in fair value of convertible promissory notes | 772,000 | 0 | 1,112,000 | 0 |
Interest expense | (178,000) | (39,000) | (377,000) | (67,000) |
Total other income (expense) | 603,000 | 21,000 | 3,873,000 | 114,000 |
Net loss before income taxes | (4,343,000) | (2,751,000) | (8,835,000) | (14,144,000) |
Provision for income taxes | 0 | 0 | 0 | 0 |
Net loss | $ (4,343,000) | $ (2,751,000) | $ (8,835,000) | $ (14,144,000) |
Net loss per share | ||||
Basic net income per share | $ (0.07) | $ (0.07) | $ (0.18) | $ (0.32) |
Diluted net income per share | $ (0.07) | $ (0.07) | $ (0.18) | $ (0.32) |
Weighted average common shares outstanding | ||||
Basic | 62,174,822 | 41,344,256 | 49,294,190 | 43,647,388 |
Diluted | 62,174,822 | 41,344,256 | 49,294,190 | 43,647,388 |
Unaudited Consolidated Statemen
Unaudited Consolidated Statements of Stockholders' Equity - USD ($) | Total | Common Stock | Additional Paid-In Capital | Common Stock Issuable | Accumulated Deficit |
Balance, shares at Dec. 31, 2019 | 38,001,543 | ||||
Balance, amount at Dec. 31, 2019 | $ 13,507,000 | $ 38,000 | $ 63,035,000 | $ 1,066,000 | $ (50,632,000) |
Issuance of common stock for professional services, shares | 31,250 | ||||
Issuance of common stock for professional services, amount | 231,000 | $ 0 | 68,000 | 163,000 | |
Fair value of stock options and restricted stock granted | 469,000 | 469,000 | |||
Fair value of restricted stock units granted | 60,000 | 60,000 | |||
Net loss | 2,046,000 | 2,046,000 | |||
Balance, shares at Mar. 31, 2020 | 38,032,793 | ||||
Balance, amount at Mar. 31, 2020 | 16,313,000 | $ 38,000 | 63,632,000 | 1,229,000 | (48,586,000) |
Balance, shares at Dec. 31, 2019 | 38,001,543 | ||||
Balance, amount at Dec. 31, 2019 | 13,507,000 | $ 38,000 | 63,035,000 | 1,066,000 | (50,632,000) |
Net loss | (14,144,000) | ||||
Balance, shares at Sep. 30, 2020 | 51,219,519 | ||||
Balance, amount at Sep. 30, 2020 | 24,624,000 | $ 51,000 | 88,777,000 | 572,000 | (64,776,000) |
Balance, shares at Mar. 31, 2020 | 38,032,793 | ||||
Balance, amount at Mar. 31, 2020 | 16,313,000 | $ 38,000 | 63,632,000 | 1,229,000 | (48,586,000) |
Issuance of common stock for professional services, shares | 218,750 | ||||
Issuance of common stock for professional services, amount | 189,000 | $ 0 | 600,000 | (411,000) | |
Fair value of stock options and restricted stock granted | 479,000 | 479,000 | |||
Fair value of restricted stock units granted | 60,000 | 60,000 | |||
Net loss | (13,439,000) | (13,439,000) | |||
Issuance of common stock from the equity incentive plan, shares | 8,003 | ||||
Issuance of common stock from the equity incentive plan, amount | 0 | $ 0 | 0 | ||
Issuance of common stock from exercise of warrants, shares | 708,467 | ||||
Issuance of common stock from exercise of warrants, amount | 1,418,000 | $ 1,000 | 1,417,000 | ||
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 | 21,701,000 | $ 12,000 | 21,935,000 | (246,000) | |
Balance, shares at Jun. 30, 2020 | 51,026,636 | ||||
Balance, amount at Jun. 30, 2020 | 26,721,000 | $ 51,000 | 88,123,000 | 572,000 | (62,025,000) |
Issuance of common stock for professional services, shares | 31,250 | ||||
Issuance of common stock for professional services, amount | 49,000 | $ 0 | 49,000 | 0 | |
Fair value of stock options and restricted stock granted | 515,000 | 515,000 | |||
Fair value of restricted stock units granted | 68,000 | 68,000 | |||
Net loss | (2,751,000) | (2,751,000) | |||
Issuance of common stock from the equity incentive plan, shares | 161,633 | ||||
Issuance of common stock from the equity incentive plan, amount | 22,000 | $ 0 | 22,000 | ||
Balance, shares at Sep. 30, 2020 | 51,219,519 | ||||
Balance, amount at Sep. 30, 2020 | 24,624,000 | $ 51,000 | 88,777,000 | 572,000 | (64,776,000) |
Balance, shares at Dec. 31, 2020 | 59,476,268 | ||||
Balance, amount at Dec. 31, 2020 | 21,279,000 | $ 60,000 | 101,807,000 | 665,000 | (81,253,000) |
Issuance of common stock for professional services, shares | 265,512 | ||||
Issuance of common stock for professional services, amount | 508,000 | $ 0 | 363,000 | 145,000 | |
Fair value of stock options and restricted stock granted | 961,000 | 961,000 | |||
Fair value of restricted stock units granted | 144,000 | 144,000 | |||
Net loss | (3,171,000) | (3,171,000) | |||
Issuance of common stock from the equity incentive plan, shares | 157,693 | ||||
Issuance of common stock from the equity incentive plan, amount | 138,000 | $ 0 | 190,000 | (52,000) | |
Issuance of common stock for exercise of warrants, shares | 26,936 | ||||
Issuance of common stock for exercise of warrants, amount | 0 | $ 0 | 0 | 0 | |
Balance, shares at Mar. 31, 2021 | 59,926,409 | ||||
Balance, amount at Mar. 31, 2021 | 19,859,000 | $ 60,000 | 103,465,000 | 758,000 | (84,424,000) |
Balance, shares at Dec. 31, 2020 | 59,476,268 | ||||
Balance, amount at Dec. 31, 2020 | 21,279,000 | $ 60,000 | 101,807,000 | 665,000 | (81,253,000) |
Net loss | (8,835,000) | ||||
Balance, shares at Sep. 30, 2021 | 65,060,044 | ||||
Balance, amount at Sep. 30, 2021 | 18,585,000 | $ 66,000 | 108,004,000 | 603,000 | (90,088,000) |
Balance, shares at Mar. 31, 2021 | 59,926,409 | ||||
Balance, amount at Mar. 31, 2021 | 19,859,000 | $ 60,000 | 103,465,000 | 758,000 | (84,424,000) |
Issuance of common stock for professional services, shares | 381,000 | ||||
Issuance of common stock for professional services, amount | 243,000 | $ 0 | 243,000 | ||
Fair value of stock options and restricted stock granted | 591,000 | 591,000 | |||
Fair value of restricted stock units granted | 143,000 | 143,000 | |||
Net loss | (1,321,000) | (1,321,000) | |||
Issuance of common stock from the equity incentive plan, shares | 141,693 | ||||
Issuance of common stock from the equity incentive plan, amount | (157,000) | $ 0 | (2,000) | (155,000) | |
Issuance of common stock from conversion of convertible promissory notes, shares | 2,428,857 | ||||
Issuance of common stock from conversion of convertible promissory notes, amount | 1,835,000 | $ 3,000 | 1,832,000 | ||
Balance, shares at Jun. 30, 2021 | 62,877,959 | ||||
Balance, amount at Jun. 30, 2021 | 21,193,000 | $ 63,000 | 106,272,000 | 603,000 | (85,745,000) |
Issuance of common stock for professional services, amount | 0 | ||||
Fair value of stock options and restricted stock granted | 532,000 | 532,000 | |||
Fair value of restricted stock units granted | 156,000 | 156,000 | |||
Net loss | (4,343,000) | (4,343,000) | |||
Issuance of common stock from the equity incentive plan, shares | 572,975 | ||||
Issuance of common stock from the equity incentive plan, amount | 0 | $ 1,000 | (1,000) | ||
Issuance of common stock from conversion of convertible promissory notes, shares | 1,609,110 | ||||
Issuance of common stock from conversion of convertible promissory notes, amount | 1,047,000 | $ 2,000 | 1,045,000 | ||
Balance, shares at Sep. 30, 2021 | 65,060,044 | ||||
Balance, amount at Sep. 30, 2021 | $ 18,585,000 | $ 66,000 | $ 108,004,000 | $ 603,000 | $ (90,088,000) |
Unaudited Condensed Consolida_2
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Unaudited Condensed Consolidated Statements of Cash Flows | ||
Net loss | $ (8,835,000) | $ (14,144,000) |
Adjustment to reconcile net loss to net cash used in operating activities: | ||
Stock based compensation - services | 752,000 | 469,000 |
Stock based compensation - prepaid | 0 | 342,000 |
Stock issued from equity incentive plan | (19,000) | 22,000 |
Gain from settlement of accounts payable | 0 | (26,000) |
Gain from extinguishment of debt | (741,000) | 0 |
Change in fair value of contingent share consideration | (947,000) | 5,658,000 |
Change in fair value of convertible promissory notes | (1,112,000) | 0 |
Depreciation and amortization | 2,584,000 | 277,000 |
Bad debt expenses | 41,000 | 31,000 |
Recovery of bad debt expense | (221,000) | 0 |
Loss on disposal of property, plant and equipment | 41,000 | 0 |
Inventory reserve for obsolescence | (113,000) | 5,000 |
Change of fair value in derivative liabilities | 0 | (88,000) |
Fair value of vested stock options and restricted stock | 2,527,000 | 1,652,000 |
Change in operating assets and liabilities: | ||
Accounts receivable | (25,000) | 65,000 |
Inventory | (398,000) | (77,000) |
Prepaid expenses and other assets | 1,042,000 | 227,000 |
Other assets | (25,000) | 0 |
Accounts payable | 139,000 | 550,000 |
Accrued expenses | 3,126,000 | 63,000 |
Finance lease payable | (9,000) | (8,000) |
Contract liabilities | (383,000) | (140,000) |
License fees | (80,000) | (8,000) |
Cash used in operating activities | (2,656,000) | (5,130,000) |
Cash flows from investing activities | ||
Investment in company | 0 | (250,000) |
Purchase of intangible assets | (68,000) | (11,000) |
Acquisition of property and equipment, net | (32,000) | (642,000) |
Purchase of note receivable | (200,000) | (550,000) |
Collection of note receivable | 200,000 | 0 |
Cash used in investing activities | (100,000) | (1,453,000) |
Cash flows from financing activities | ||
Proceeds from exercise of warrants | 0 | 1,417,000 |
Proceeds from notes payable | 1,000,000 | 2,299,000 |
Proceeds from related party payable | 400,000 | 0 |
Repayment of loans payable | (205,000) | (127,000) |
Cash provided by financing activities | 1,195,000 | 3,589,000 |
Net decrease in cash and cash equivalents | (1,561,000) | (2,994,000) |
Cash and cash equivalents, beginning of year | 1,725,000 | 4,096,000 |
Cash and cash equivalents, end of period | 164,000 | 1,102,000 |
Cash paid for interest and income taxes: | ||
Interest | 102,000 | 3,000 |
Income taxes | 0 | 0 |
Non-cash investing and financing activities: | ||
Common stock issued for conversion of promissory notes and accrued interest | 2,881,000 | 0 |
Common stock issued for settlement of earnout liabilities from the acquisiton of Chemistry Holdings, Inc | $ 0 | $ 21,701,000 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2021 | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS | NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Business Operations CURE Pharmaceutical Holding Corp. (“CPHC”), its wholly-owned subsidiary, CURE Pharmaceutical Corporation (“CURE Pharmaceutical”), Cure Chemistry Inc. and its 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. On November 7, 2016, we changed our name from Makkanotti Group Corp to CURE Pharmaceutical Holding Corp. 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 CPHC, and the CURE Pharmaceutical Shareholders and CURE Pharmaceutical Noteholders became CPHC stockholders owning, at such time, approximately 65% of our issued and outstanding common stock. 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. The COVID-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 remainder of 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 pandemic remains unclear, the Company has considered, among other things, whether the global operational disruptions indicate a change in circumstances that may trigger asset impairments and whether it needs to revisit accounting estimates and projections or its expectations about collectability of receivables. Additionally, the Company has considered the potential impacts on its fair value disclosures and on its internal control over financial reporting. During the nine months ended September 30, 2021 there was no significant direct impact on the Company’s operations as a result of the economic downturn. While significant uncertainty still exists concerning the magnitude of the impact and duration of the COVID-19 pandemic on the global economy, the Company has determined that there was no triggering event for an impairment with respect to any of its assets nor has there been an adverse change in the probability related to the collectability of its receivables. The Company continues to assess the potential impact of the global economic situation on its consolidated financial statements. Please see Item 1A. Risk Factors of this Quarterly Report on Form 10-Q. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2021, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2021 and 2020, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal period ended December 31, 2020 filed with the SEC on March 31, 2021. Principle of Consolidation The unaudited condensed financial statements include the accounts of CPHC and its wholly-owned subsidiaries, CURE Pharmaceutical, CHI and Sera Labs, 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. 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 condensed 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 September 30, 2021, we had an accumulated deficit of approximately $90.1 million and a working capital deficit of approximately $15.9 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 the date of this report, the Company had approximately $0.1 million of cash on hand. We have previously funded, and intend to continue funding, our losses primarily through the issuance of common stock and/or convertible promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations. The Company believes the funds available through these potential financings will be sufficient to meet the Company’s working capital requirements during the coming year. If we are 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 unaudited condensed consolidated financial statements. The accompanying unaudited condensed 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, 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 values of the purchase price allocations and convertible promissory notes. 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 September 30, 2021 and December 31, 2020, the Company had no cash equivalents. Investment in Associates An associate is an entity over which the Company has significant influence through a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or joint control over those policies. The results of assets and liabilities of associates are incorporated in the condensed consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Company’s share of the net assets of the associate, less any impairment in the value of the investment. Losses of an associate in excess of the Company’s interest in that associate are not recognized. Additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognized at the date of acquisition is recognized as goodwill. The goodwill is included within the carrying amount of the investment. On November 1, 2019, the Company purchased a convertible loan (the “Releaf Loan”) with Releaf Europe BV (“Releaf”) in the amount of $0.2 million. Releaf shall accrue interest on the Releaf 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 Releaf Loan is repaid or at 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 amount of the Releaf Loan and any unpaid accrued interest 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 $2.0 million of debt and/or equity (“Releaf Qualified Financing”), the outstanding amount of the Releaf Loan and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf Qualified Financing less a discount of 20% on the subscription price. In addition, both the Company and Releaf agree in the event that the pre-money valuation of the Releaf 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 September 30, 2021, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to the Releaf 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 $2.0 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 September 30, 2021, 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. On May 26, 2021, the Company purchased a convertible loan (the “May 2021 Loan”) with Biopharmaceutical Research Company (“BRC”) for a total amount of $0.2 million, which is one of a series of notes “(Notes”) pursuant to the terms of the Note Purchase Agreement (“NPA”) offered by BRC. BRC shall accrue interest on the May 2021 Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date or the maturity date of May 26, 2023. In the event of a request for conversion by the Company, the outstanding amount of the May 2021 Loan and any unpaid accrued interest shall be converted into shares of BRC, rounded down to the nearest whole share, by dividing the May 2021 Loan by the price per share obtained by dividing $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (i) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes and (ii) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC. In the event the Company has not requested for conversion, the May 2021 Loan can automatically convert if BRC sells shares of preferred stock (the “Qualified Financing Securities”) to one or more investors in a single transaction or series of related transactions for aggregate proceeds to BRC (including cancellation of indebtedness under the Notes or any other convertible debt) of at least $4 million (a “Qualified Financing”). The May 2021 Loan shall automatically convert at the initial closing of and on the same terms and conditions of the Qualified Financing into a total number of Qualified Financing Securities, rounded down to the nearest whole share, obtained by dividing the May 2021 Loan by the lesser of (i) 80% of the price per share paid for the Qualified Financing Securities by investors in the Qualified Financing and (ii) $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (a) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes, (b) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC and (c) any equity incentive or similar plan to be created or increased in connection with the Qualified Financing). The Company follows Accounting Standards Codification (“ASC”) 325-20, Cost Method Investments (“ASC 325-20”), to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. The Company has determined that there was no impairment of our investment in Releaf during the nine months ended September 30, 2021. Accounts Receivable Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. At September 30, 2021 management determined that an allowance of $0.08 million was necessary. At December 31, 2020 management determined that an allowance of $0.04 million was necessary. 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, 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 and trademark discussed in Note 19. As of September 30, 2021 and December 31, 2020, there has been no impairment of goodwill and intangible assets. Business Combinations The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the value of the assets acquired and liabilities assumed is recognized as goodwill. 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 nine months ended September 30, 2021 and 2020. 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 Note 19 for a full discussion of these liabilities. Revenue Recognition The Company recognizes revenue in accordance with ASC 606, “Revenue Recognition”. Revenues under Topic 606 are required to be recognized either at a “point in time” or “over time”, depending on the facts and circumstances of the arrangement, and are evaluated using a five-step model. 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 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. Cure Pharmaceutical’s formulation and product development income include services for the development of OTF products utilizing our CureFilm Technology. Our development contracts can 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. Cure Pharmaceutical has entered into a Collaboration and Joint Development Agreement (“Agreement”) with Medolife Rx (“Medolife”) on February 1, 2021 (“Effective Date”) for Medolife to produce Medolife Products (“Products”) in Cure Pharmaceutical’s cGMP facility. The term of this agreement is for five (5) years from the Effective Date (“Term”). Medolife is to pay $0.3 million to assist in completing the jointly developed production line at Cure Pharmaceutical’s cGMP facility. In addition, Cure Pharmaceutical will produce Products on behalf of Medolife and will grant access to Medolife for a joint production area within Cure Pharmaceutical’s production facility for the Term of this Agreement. The Company has determined that there are no distinct obligations for the $0.3 million and Cure Pharmaceutical does have further obligations as stated in the Agreement, thus the Company will recognize the revenue monthly over the Term, beginning February 1, 2021. 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; · 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 September 30, 2021 and December 31, 2020, we had contract liabilities of $0.6 million and $1.0 million, respectively. Contract liabilities is made up of the following as of September 30, 2021 and December 31, 2020 (in thousands): 2021 2020 Customer deposits for commercial products $ 611 $ 281 Customer deposits for personal protective equipment - 713 Total contract liabilities $ 611 $ 994 The following table summarizes the changes in contract liabilities during the nine months ended September 30, 2021 and year ended December 31, 2020 (in thousands): Balance at December 31, 2019 $ 456 Additions 1,033 Transfers to Revenue (495 ) Balance at December 31, 2020 994 Additions 435 Customer deposits returned (713 ) Transfers to Revenue (105 ) Balance at September 30, 2021 $ 611 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 statements of operations. The Company recorded advertising costs of $0.7 million and $2.4 million for the three and nine month periods ended September 30, 2021, respectively. The Company did not record advertising costs for the three and nine month periods ended September 30, 2020. 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 $0.6 million and $1.9 million for the three and nine month periods ended September 30, 2021, respectively. The Company r |
PREPAID EXPENSES AND OTHER ASSE
PREPAID EXPENSES AND OTHER ASSETS | 9 Months Ended |
Sep. 30, 2021 | |
PREPAID EXPENSES AND OTHER ASSETS | |
NOTE 3 - PREPAID EXPENSES AND OTHER ASSETS | NOTE 3 - PREPAID EXPENSES AND OTHER ASSETS As of September 30, 2021 and December 31, 2020, prepaid expenses and other assets consisted of the following (in thousands): September 30, 2021 December 31, 2020 Prepaid consulting services $ - $ 14 Prepaid clinical study - 32 Prepaid insurance 113 347 PPE deposits - 700 Prepaid equipment 67 61 Prepaid deposit for inventory 165 211 Prepaid expenses 40 66 Other assets 129 79 Prepaid expenses and other assets 514 1,510 Current portion of prepaid expenses and other assets (431 ) (1,452 ) Prepaid expenses and other assets less current portion $ 83 $ 58 |
INVENTORY
INVENTORY | 9 Months Ended |
Sep. 30, 2021 | |
INVENTORY | |
NOTE 4 - 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 at September 30, 2021 and December 31, 2020 (in thousands): September 30, 2021 December 31, 2020 Raw materials $ 98 $ 64 Packaging components 133 54 Work-in-process 40 22 Finished goods 877 603 1,148 743 Reserve for obsolescence (188 ) (294 ) Total inventory $ 960 $ 449 For the three months ended September 30, 2021 and 2020, inventory reserves amounted to $0.003 million and $0.001 million, respectively. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2021 | |
PROPERTY AND EQUIPMENT | |
NOTE 5 - PROPERTY AND EQUIPMENT | NOTE 5 - PROPERTY AND EQUIPMENT As of September 30, 2021 and December 31, 2020, property and equipment consisted of the following (in thousands): September 30, 2021 December 31, 2020 Equipment not yet placed in service $ 1,413 $ 1,465 Manufacturing equipment 1,093 1,047 Computer and other equipment 626 626 Less accumulated depreciation (1,230 ) (1,091 ) Property and Equipment, net $ 1,902 $ 2,074 For the three and nine month periods ended September 30, 2021, depreciation expense amounted to $0.05 million and $0.14 million, respectively. Depreciation expense for the three and nine month periods ended September 30, 2020 was $0.06 million and $0.16 million, respectively. |
NOTES RECEIVABLE
NOTES RECEIVABLE | 9 Months Ended |
Sep. 30, 2021 | |
NOTES RECEIVABLE | |
NOTE 6 - NOTES RECEIVABLE | NOTE 6 – NOTES RECEIVABLE On November 12, 2019, the Company purchased a $0.2 million convertible promissory note (the “Coeptis Note”) issued by Coeptis Pharmaceuticals, Inc.(“Coeptis”), a privately held biopharmaceutical company engaged in the acquisition, development and commercialization of pharmaceutical products. The Coeptis Note is due June 15, 2020, pays interest at the rate of 9% per annum and gives us the right, at any time, to convert the Coeptis Note into shares of common stock of Coeptis, at a price per share equal to $2.60 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 19. On May 26, 2021, the Company purchased a convertible loan (the “May 2021 Loan”) with Biopharmaceutical Research Company (“BRC”) for a total amount of $0.2 million, which is one of a series of notes “(Notes”) pursuant to the terms of the Note Purchase Agreement (“NPA”) offered by BRC. BRC shall accrue interest on the May 2021 Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date or the maturity date of May 26, 2023. In the event of a request for conversion by the Company, the outstanding amount of the May 2021 Loan and any unpaid accrued interest shall be converted into shares of BRC, rounded down to the nearest whole share, by dividing the May 2021 Loan by the price per share obtained by dividing $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (i) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes and (ii) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC. In the event the Company has not requested for conversion, the May 2021 Loan can automatically convert if BRC sells shares of preferred stock (the “Qualified Financing Securities”) to one or more investors in a single transaction or series of related transactions for aggregate proceeds to BRC (including cancellation of indebtedness under the Notes or any other convertible debt) of at least $4 million(a “Qualified Financing”). The May 2021 Loan shall automatically convert at the initial closing of and on the same terms and conditions of the Qualified Financing into a total number of Qualified Financing Securities, rounded down to the nearest whole share, obtained by dividing the May 2021 Loan by the lesser of (i) 80% of the price per share paid for the Qualified Financing Securities by investors in the Qualified Financing and (ii) $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (a) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes, (b) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC and (c) any equity incentive or similar plan to be created or increased in connection with the Qualified Financing). Note receivable consists of the following (in thousands): September 30, 2021 December 31, 2020 Coeptis Pharmaceuticals, Inc. $ - $ 200 Biopharmaceutical Research Company 200 - Less: allowance for doubtful accounts - (200 ) Current portion of note receivable, net - - Note receivable, net less current portion $ 200 $ - 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. 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 recorded the collection of the Coeptis Note as a recovery of bad debt during the three months ended March 31, 2021. |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2021 | |
GOODWILL AND INTANGIBLE ASSETS | |
NOTE 7 - GOODWILL AND INTANGIBLE ASSETS | NOTE 7 – GOODWILL AND INTANGIBLE ASSETS The Company incurred $0.07 and $0.01 million of legal patent costs that were capitalized during the nine months ended June, 2021 and 2020, 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 September 30, 2021 and December 31, 2020, goodwill and intangible assets, net, consisted of the following (in thousands): September 30, 2021 December 31, 2020 Goodwill (1) $ 13,868 $ 13,868 Intangible assets: Acquired IPR&D – Chemistry (2) $ 502 $ 14,460 Pending patents – Cure Pharmaceutical 327 259 Intangible assets subject to amortization: Customer relationships (2) 7,110 7,110 Acquired IPR&D – Chemistry (2) 13,958 - Tradename (2) 2,610 2,610 Noncompete (2) 462 462 Intellectual property 972 972 Issued patents 1,034 1,044 Total intangible assets 26,975 26,917 Accumulated amortization (3,744 ) (1,312 ) Intangible assets, net $ 23,231 $ 25,605 (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 19). In 2020, the Company recorded additional goodwill of $4.7 million as a result of the Sera Labs acquisition. (2) See Note 19 for information on the Mergers which were consummated in May 2019 and October 2020. During the three and nine months ended September 30, 2021 the Company completed a portion of their IPR&D project and begin amortizing $3.5 million and $13.9 million over its estimated useful life of 10 years on a straight-line basis. Amortization expense was $1.0 million and $0.03 million for the three months ended September 30, 2021 and 2020, respectively. Amortization expense was $2.4 million and $0.09 million for the nine months ended September 30, 2021 and 2020, respectively. The estimated aggregate amortization expense over each of the next five years is as follows (in thousands): 2021 (remaining) $ 953 2022 3,765 2023 3,592 2024 3,429 2025 2,583 Thereafter 8,080 Total Amortization $ 22,402 |
ACCRUED EXPENSES
ACCRUED EXPENSES | 9 Months Ended |
Sep. 30, 2021 | |
PREPAID EXPENSES AND OTHER ASSETS | |
NOTE 8 - ACCRUED EXPENSES | NOTE 8 – ACCRUED EXPENSES As of September 30, 2021 and December 31, 2020, accrued expenses consisted of the following (in thousands): September 30, 2021 December 31, 2020 Accounts payable factoring $ 2,325 $ - Refunds and returns liability 434 - Accrued interest 417 194 Accrued payroll 270 308 Accrued vacation leave 221 180 Accrued expenses 301 306 Sales tax payable 327 311 Accrued Expenses $ 4,295 $ 1,299 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2021 | |
RELATED PARTY TRANSACTIONS | |
NOTE 9 - RELATED PARTY TRANSACTIONS | NOTE 9 – 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 January 2, 2019, Sera Labs entered into an administrative service agreement (“Service Agreement”) with Visionworx, an affiliate of Sera 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 (“Board Investor”), 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. The Board Investor did not elect to convert their August Note into a convertible promissory note, with the same principal 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. As of the date of this report, both the Company and the Board Investor agreed to extend the August Note and are currently negotiating the terms of the amendment. 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 September 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 September 30, 2021, total outstanding due to Mrs. Duitch was $0.9 million. As of the date of this report, both the Company and Mrs. Duitch agreed to extend the Duitch Note and are currently negotiating the terms of the amendment. On May 3, 2021 and September 16, 2021, the Company received $0.2 million and $0.2 million, respectively, from one of the Company’s board members (“Second Board Investor”) in exchange for two promissory notes. Both the Company and Second Board Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Second Board Investor are still negotiating the terms of the promissory notes. Interest expense in regard to related party payables for the three months ended September 30, 2021 and 2020 was $0.029 million and $0.002 million, respectively. Interest expense in regard to related party payables for the nine months ended September 30, 2021 and 2020 was $0.075 million and $0.002 million, respectively. |
LOAN PAYABLE
LOAN PAYABLE | 9 Months Ended |
Sep. 30, 2021 | |
LOAN PAYABLE | |
NOTE 10 - LOAN PAYABLE | NOTE 10 – LOAN PAYABLE Loan payable consists of the following at September 30, 2021 and December 31, 2020 (in thousands): September 30, 2021 December 31, 2020 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 September 6, 2021, including interest at 6.55% per annum; unsecured; interest due monthly - 83 Note to a company due June 6, 2022, including interest at 4.42% per annum; unsecured; interest due monthly 60 - Current portion of loan payable (60 ) (265 ) Loan payable, less current portion $ - $ - Interest expense for the three and nine month periods ended September 30, 2021 was $0.001 million and $0.003 million, respectively. Interest expense for the three and nine month periods ended September 30, 2020 was $0.001 million and $0.002 million, respectively. |
NOTES PAYABLE AND PPP LOAN
NOTES PAYABLE AND PPP LOAN | 9 Months Ended |
Sep. 30, 2021 | |
NOTES PAYABLE AND PPP LOAN | |
NOTE 11 - NOTES PAYABLE AND PPP LOAN | NOTE 11 – NOTES PAYABLE AND PPP LOAN Notes payable consist of the following at September 30, 2021 and December 31, 2020 (in thousands): September 30, 2021 December 31, 2020 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 250 250 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 500 500 Promissory note to a company due January 13, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note 500 - Promissory note to a company due April 8, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note 250 - Promissory note to a company due October 30, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note 250 Current portion of note payable $ 1,800 $ 800 On May 18, 2020 and August 12, 2020, the Company entered into unsecured promissory notes (“Notes”) with an investor for $0.3 million and $0.5 million, 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. The investor did not elect to convert their Notes into a convertible promissory note, with the same principal 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. As of the date of this report, both the Company and the investor agreed to extend the $0.3 million and $0.5 million unsecured promissory notes and are currently negotiating the terms of the amendment. On September 25, 2020 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 13. 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 April 8, 2021 and September 24, 2021, the Company received $0.3 million and $0.3 million, respectively, from an investment company (“Investor”) in exchange for two promissory notes. Both the Company and Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory notes. Paycheck protection program consist of the following at September 30, 2021 and December 31, 2020 (in thousands): September 30, 2021 December 31, 2020 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. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act. - 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 and the Company recorded a gain on extinguishment of debt during the three months ended March 31, 2021. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act and the Company recorded a gain on extinguishment of debt during the three months ended September 30, 2021. Interest expense for the three months ended September 30, 2021 and 2020 was $0.05 million and $0.01 million, respectively. Interest expense for the nine months ended September 30, 2021 and 2020 was $0.11 million and $0.01 million, respectively. |
CONVERTIBLE PROMISSORY NOTES
CONVERTIBLE PROMISSORY NOTES | 9 Months Ended |
Sep. 30, 2021 | |
RELATED PARTY TRANSACTIONS | |
NOTE 12 - CONVERTIBLE PROMISSORY NOTES | NOTE 12 – CONVERTIBLE PROMISSORY NOTES Convertible promissory notes consist of the following at September 30, 2021 and December 31, 2020 (in thousands): September 30, 2021 December 31, 2020 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 CONVERTIBLE PROMISSO
FAIR VALUE CONVERTIBLE PROMISSORY NOTES | 9 Months Ended |
Sep. 30, 2021 | |
FAIR VALUE CONVERTIBLE PROMISSORY NOTES | |
NOTE 13 - FAIR VALUE CONVERTIBLE PROMISSORY NOTES | NOTE 13 – FAIR VALUE CONVERTIBLE PROMISSORY NOTES Fair value of convertible promissory notes consists of the following at September 30, 2021 and December 31, 2020 (in thousands): September 30, 2021 December 31, 2020 Series A subordinated convertible note at fair value $ 3,109 $ 7,010 Series B subordinated convertible note at fair value 11,583 11,674 Total convertible promissory notes 14,692 18,684 Less: Investor Note offset – Series B Note (5,000 ) (5,000 ) Carrying value of convertible promissory notes at fair value 9,692 13,684 Less: current portion of convertible promissory notes at fair value (6,583 ) (6,674 ) Convertible promissory notes, less current portion $ 3,109 $ 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 363,636shares 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%. As of the filing date of this report, the Series B Note has matured and is due according to its terms (see Note 22). The Company and Investor are currently negotiating to extend the maturity date of the Series B Note on terms satisfactory to the Company. 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: 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 gain of $0.1 million and $0.6 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 three months period ended September 30, 2021 and were recorded in the consolidated statement of operations. The Company recorded a gain of $1.0 million and $0.1 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 nine months period ended September 30, 2021 and were recorded in the consolidated statement of operations. 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 and from January 1, 2021 to September 30, 2021. 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 | 9 Months Ended |
Sep. 30, 2021 | |
DERIVATIVE LIABILITY | |
NOTE 14 - DERIVATIVE LIABILITY | NOTE 14 – 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 presents a reconciliation of the derivative liability measured at fair value on a recurring basis from December 31, 2019 to September 30, 2021 (in thousands): Fair value of derivative liabilities Balance at December 31, 2019 $ 91 Loss on change in fair value included in earnings (91 ) Balance at December 31, 2020 - Gain on change in fair value included in earnings - Balance at September 30, 2021 $ - |
WARRANT AGREEMENTS
WARRANT AGREEMENTS | 9 Months Ended |
Sep. 30, 2021 | |
WARRANT AGREEMENTS | |
NOTE 15 - WARRANT AGREEMENTS | NOTE 15 – WARRANT AGREEMENTS Warrants that vest at the end of a one-year period are amortized over the vesting period using the straight-line method. 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. 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, 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 Granted - - - Exercised (96,250 ) 1.00 - Forfeited/Expired (818,152 ) 5.01 - Outstanding, September 30, 2021 1,565,447 2.18 0.92 Exercisable at September 30, 2021 1,565,447 $ 2.18 0.92 Warrant summary as of September 30, 2021: 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–$2.31 1,565,447 0.92 $ 2.18 1,565,447 $ 2.18 1,565,447 0.92 $ 2.18 1,565,447 $ 2.18 Warrant summary as of 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 The change in warrant value for the three months ended September 30, 2021 and 2020 was $0 and $0.1 million, respectively. The change in warrant value for the nine months ended September 30, 2021 and 2020 was $0 and $0 million, respectively. There were no warrants granted during the three and nine months ended September 30, 2021. The weighted-average fair value of warrants granted to during the three and nine months ended September 30, 2020, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes option pricing model are as follows: September 30, 2021 September 30, 2020 Significant assumptions (weighted-average): Risk-free interest rate at grant date - % 0.29 % Expected stock price volatility - % 74.46 % Expected dividend payout - - Expected option life (in years) - 3 Expected forfeiture rate - % 0 % The aggregate intrinsic value of warrants outstanding and exercisable at September 30, 2021 was $0. |
STOCK INCENTIVE PLANS
STOCK INCENTIVE PLANS | 9 Months Ended |
Sep. 30, 2021 | |
STOCK INCENTIVE PLANS | |
NOTE 16 - STOCK INCENTIVE PLANS | NOTE 16 – 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 1,395,801 Nonstatutory Stock Options (“NSO”) to employees of the Company and 338,443 Restricted Common Stock (“Restricted Common Stock”) to various consultants of the Company. The Company did not issue any Incentive Stock Options (“ISO”) or Restricted Stock Units (“RSU”) during the nine months ended September 30, 2021. The Company issued 90,000 ISO’s to an officer of the Company, 150,000 RCS to a consultant and 431,578 RSU’s to the members of the Board of Directors during the nine months period ended September 30, 2020. The Company did not issue any NSO’s during the nine months ended September 30, 2020. 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. The Company issued 1,518,194 stock options to a consultant that contains performance-based vesting conditions where revenue milestones are to be met over a certain period. Such stock option awards would be valued using a Monte Carlo simulation based on the probability of the performance condition being met and the underlying expense would be recognized as the associated vesting conditions are met. No stock options that contain performance-based vesting conditions vested during the nine months ended September 30, 2021 and the likelihood of meeting the performance-based condition is currently nil. Stock Options The Company’s stock option activity was as follows: Options Weighted Average Exercise Price Weighted Average Contractual Remaining Life 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 Granted 1,395,801 0.98 9.43 Exercised - - - Forfeited/Expired (371,250 ) 0.73 - Outstanding, September 30, 2021 7,310,343 1.46 8.45 Exercisable at September 30, 2021 3,845,124 1.52 7.91 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 7,310,343 8.45 $ 1.46 3,845,124 $ 1.52 7,310,343 8.45 $ 1.46 3,845,124 $ 1.52 The aggregate intrinsic value of options outstanding and exercisable at September 30, 2021 was $0.2 million. The aggregate grant date fair value of options granted during the nine months ended September 30, 2021 and year ended December 31, 2020 amounted to $1.1 and $4.3 million, respectively. Compensation expense related to stock options for the three and nine month periods ended September 30, 2021 was $0.4 million and $1.7 million, respectively. Compensation expense related to stock options was $0.1 million and $0.4 million for the three and nine month periods ended September 30, 2020, respectively. As of September 30, 2021, the total unrecognized fair value compensation cost related to unvested stock options was $2.5 million, which is to be recognized over a remaining weighted average period of approximately 9.03 years. The weighted-average fair value of options granted during the three months ended September 30, 2021 and 2020, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes option pricing model are as follows: September 30, 2021 September 30, 2020 Significant assumptions (weighted-average): Risk-free interest rate at grant date - % 0.29 % Expected stock price volatility - % 74.46 % Expected dividend payout - - Expected option life (in years) - 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: Restricted Stock Shares Weighted Average Grant Date Fair Value 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 Granted 338,443 1.86 Vested (330,751 ) 2.07 Forfeited/Expired - - Non-vested, September 30, 2021 57,692 $ 1.30 Compensation expense related to restricted shares for the three and nine months ended September 30, 2021 was $0.1 million and $0.4 million, respectively. Compensation expense related to restricted shares for the three and nine months ended September 30, 2020 was $0.1 million and $0.3 million, respectively. At September 30, 2021 and December 31, 2020, the Company had approximately $0.1 million and $0.1 million, respectively, of total unrecognized compensation expense related to restricted stock awards. Compensation will be recognized over a weighted-average period of approximately 0.17 years and 0.14 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, 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 Granted 65,600 1.00 Vested (497,178 ) 1.29 Forfeited/Expired - - Outstanding, September 30, 2021 - - At September 30, 2021 and December 31, 2020, the Company had approximately $0 and $0.6 million, respectively, of total unrecognized compensation expense related to restricted stock units. As of September 30, 2021 and December 31, 2020, compensation will be recognized over a weighted-average period of approximately 0 years 0.64 years, respectively. Compensation expense related to restricted stock units for the three and nine month periods ended September 30, 2021 was $0.2 million and $0.4 million, respectively. Compensation expense related to restricted stock units was $0.1 million and $0.2 million for the three and nine month periods ended September 30, 2020, respectively. All compensation expense related to restricted stock units were included in selling, general and administrative expenses. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2021 | |
STOCKHOLDERS' EQUITY | |
NOTE 17 - STOCKHOLDERS' EQUITY | NOTE 17 – 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 September 30, 2021 and December 31, 2020, there were 65,060,044 shares of the Company’s common stock issued and outstanding, respectively. Common Share Issuances 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. From January 1, 2021 to September 30, 2021, the Company issued 872,361 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.2 million. From January 1, 2021 to September 30, 2021, the Company issued 646,512 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to several consulting agreements. The total value of these issuances was $0.7 million. From January 1, 2021 to September 30, 2021, the Company issued 26,936 common stock shares, at a price of $1.30 per share, from a cash-less exercise of certain warrants. Total value of these issuances was $0.03 million. From January 1, 2021 to September 30, 2021, the Company issued 1,439,394 common stock shares, at a price per share of $1.32 in connection to conversion of $1.9 million of the Series A Note plus 2,597,951 common stock shares at a price per share ranging from $0.43 to $0.64 in connection to the make-whole-amounts totaling $1.3 million 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-Q, 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-Q, the Company has not yet issued these common stock shares and has recorded a stock issuable of $0.3 million. From January 1, 2021 to September 30, 2021, the Company entered into Consulting Agreements (“Agreements”) with individuals. Per the terms of the Agreements, the Company is to issue 18,104 common stock shares of the Company at a price per share of $1.72. As of our filing of this Current Report on Form 10-Q, the Company has not yet issued these common stock shares and has recorded a stock payable of $0.03 million. |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Sep. 30, 2021 | |
SEGMENT REPORTING | |
NOTE 18 - SEGMENT REPORTING | NOTE 18 – 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 for the nine months ending September 30, 2021 is as follows (in thousands): Cure Sera Labs Eliminations Consolidated Net Sales $ 386 $ 4,654 $ (126 ) $ 4,914 Operating Loss $ (7,019 ) $ (5,689 ) $ - $ (12,708 ) Assets $ 46,604 $ 9,450 $ (14,175 ) $ 41,879 Accounts receivable, net $ 22 $ 186 $ - $ 208 Inventory, net $ 368 $ 592 $ - $ 960 Summary financial information for the two reportable segments for the nine months ending September 30, 2020 is as follows (in thousands): Cure Sera Labs Eliminations Consolidated Net Sales $ 741 $ - $ - $ 741 Operating Loss $ (14,258 ) $ - $ - $ (14,258 ) Assets $ 30,066 $ - $ - $ 30,066 Accounts receivable, net $ 46 $ - $ - $ 46 Inventory, net $ 228 $ - $ - $ 228 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 three and nine months September 30, 2021 and 2020: Three Months Ended Nine months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 CureFilm™ sales 21 % 98 % 14 % 75 % Research & Development services - - 1 23 Product sales - CBD 78 - 77 - Product sales – PPE - - 7 - Other sales less than 10% 1 2 1 2 Total 100 % 100 % 100 % 100 % The Company did not receive revenue from one customer that individually represents 10% or more of consolidated revenues for the three and nine months ended September 30, 2021. The Company received revenue from two customers that individually represent greater than 10% of consolidated revenues, representing 81% of consolidated revenues for the three months ended September 30, 2020, and three customers that individually represent greater than 10% of consolidated revenues, representing 74% of consolidated revenues for the nine months ended September 30, 2020. Accounts receivable from these customers was $0.04 million and $0.13 million at September 30, 2021 and December 31, 2020, respectively. |
BUSINESS COMBINATION AND DECONS
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY | 9 Months Ended |
Sep. 30, 2021 | |
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY | |
NOTE 19 - BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY | NOTE 19 – 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. The following table presents the change in fair value of contingent consideration (in thousands): (Dollars in thousands) Fair Value of the Contingent Share Consideration Fair value at December 31, 2020 $ 3,205 Fair value at September 30, 2021 2,258 Net change in fair value for the nine months ended September 30, 2021 $ (947 ) 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 of the transaction (the “Closing Date”); (ii) 7,128,913 shares to be held in escrow, subject to indemnification and clawback rights that lapse upon the achievement of certain milestones; (iii) up to 3,207,228 shares that may be issued pursuant to an earn-out over five years upon the achievement of certain technological implementations; (iv) up to 8,018,071 shares that may be issued pursuant to an earn-out over two years upon the achievement of certain revenue goals; and (v) up to 8,018,071 shares issuable upon exercise of warrants (“Acquisition Warrant Shares”) 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 from Chemistry Holdings pursuant to a convertible note. Such convertible note, on the Closing Date, became an intercompany payable and was cancelled. 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) all 7,128,913 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 purchase 708,467 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 Shares 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 for the year ended December 31, 2020: (Dollars in thousands) Fair Value of the Contingent Share Consideration 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 $ - Supplemental Pro Forma Information The following unaudited supplemental pro forma financial information is based on our historical consolidated financial statements and Sera Lab’s historical consolidated financial statements as adjusted to give effect to 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, 2020 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 CPHC, and net loss attributable to the Company per common share data assuming Sera Labs and CHI were acquired at the beginning of 2020 fiscal year. For the three months ended September 30, 2020 (in thousands, except per share data): Cure Pharmaceutical Sera Labs Pro forma Adjustments Consolidated Net product sales $ 192 $ 1,744 $ - $ 1,936 Net income (loss) $ (2,751 ) $ (970 ) $ - $ (3,721 ) Net income (loss) attributable to Cure per common share: Basic $ (0.07 ) $ (0.08 ) $ (0.07 ) Diluted $ (0.07 ) $ (0.08 ) $ (0.07 ) For the nine months ended September 30, 2020 (in thousands, except per share data): Cure Pharmaceutical Sera Labs Pro forma Adjustments Consolidated Net product sales $ 741 $ 5,685 $ - $ 6,426 Net loss $ (14,144 ) $ (1,327 ) $ - $ (15,471 ) Net loss attributable to Cure per common share: Basic $ (0.32 ) $ (0.11 ) $ 0.30 ) Diluted $ (0.32 ) $ (0.11 ) $ (0.30 ) |
INTELLECTUAL PROPERTY AND COLLA
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | 9 Months Ended |
Sep. 30, 2021 | |
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | |
NOTE 20 - INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | NOTE 20 - INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS On September 4, 2018, Cure Pharmaceutical entered into its first multi-year licensing agreement (the “Licensing Agreement”) with Canopy Growth Corporation (“Canopy”), a company that engages in the production and sale of medical cannabis. Under the terms of the Licensing Agreement, Canopy will have an exclusive license to certain of Cure Pharmaceutical’s intellectual property rights, including Cure Pharmaceutical’s patented, multi-layer oral thin film (OTF), CUREfilm™ technology for use with cannabis extracts and biosynthetic cannabinoids and the Cure Pharmaceutical’s trademarks in markets around the world where it is legal for Canopy to sell such products, excluding Asia. Cure Pharmaceutical 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 to third parties internationally, excluding Canada, from the November 7, 2019 until December 31, 2020. However, Cure Pharmaceutical may not sell any cannabinoid CUREfilm products that are specifically developed for Canopy, as identified in the Development Agreement between the Company and Canopy, dated 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. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million will be paid to the Company’s attorneys within 45 calendar days. During the three months ended September 30, 2021 and 2020, the Company recognized $0 and $0.05 million of revenue relating to work completed in regard to the transfer of technology fee as discussed in the License Agreement with Canopy, respectively. During the nine months ended September 30, 2021 and 2020, the Company recognized $0 and $0.01 million of revenue relating to work completed in regard to the transfer of technology fee as discussed in the License Agreement with Canopy, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2021 | |
COMMITMENTS AND CONTINGENCIES | |
NOTE 21 - COMMITMENTS AND CONTINGENCIES | NOTE 21 - 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. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million will be paid to the Company’s attorneys within 45 calendar days. On March 26, 2021, a vendor that the Company utilized for consulting services relating to various quality, compliance and regulatory filed a complaint against the Company for breach of contract. On May 18, 2021, the Company responded to the compliant denying their claims and also filed a cross complaint against this vendor for breach of contract by failing to provide deliverables as required by the contract. The Company is currently unable to determine what additional expenses will be incurred in order to defend this matter. As such, the Company cannot determine whether there is a reasonable possibility that a loss will be incurred, nor can it estimate the range of any such potential loss. Accordingly, the Company has not accrued an amount for any potential loss associated with this action. 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 September 30, 2021, 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 September 30, 2021, 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 nine -month period; (ii) for a period of nine 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 nine 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 September 30, 2021 and December 31, 2020. 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 $0.1 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 $0.1 million and $0.07 million for the three months ended September 30, 2021 and 2020, respectively. Total rent expense was $0.3 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively. 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 September 30, 2021, the current portion and long-term portion of operating lease liability is $0.1 million and $0.2 million, respectively. The future payments due under the operating lease as of September 30, 2021 are as follows (in thousands): Years 2021 (remaining) $ 33 2022 134 2023 138 2024 46 2025 - Undiscounted cash flow 351 Effects of discounting (48 ) Lease liabilities recognized $ 303 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 during the year ended 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 $0.1 million or less annually based on a discount rate of 9.0%. As of September 30, 2021, the current portion and long-term portion of finance capital lease liability was $0.013 million and $0.03 million, respectively. As of December 31, 2020, the Company the current and long-term portion of finance capital lease liability was $0.01 million and $0.04 million, respectively. Future minimum lease payments under non-cancellable capital leases as of September 30, 2021 are as follows (in thousands): 2021 (remaining) 6 2022 14 2023 14 2024 9 2025 - Thereafter - Finance lease liabilities recognized $ 43 Operating and Financing leases The following table presents supplemental balance sheet information related to operating and financing leases as of September 30, 2021 and December 31, 2020 (in thousands, except lease term and discount rate): September 30, 2021 December 31, 2020 Operating leases Right-of-use assets, net $ 280 343 Right-of-use lease liabilities, current $ 104 93 Right-of-use lease liabilities, noncurrent 199 278 Total operating lease liabilities $ 303 371 Financing Leases Finance lease right-to-use assets, net $ 43 52 Current liabilities $ 13 12 Noncurrent liabilities 30 40 Total financing lease liabilities $ 43 52 Weighted average remaining lease term Operating leases 2.55 years 3.31 years Financing leases 3.06 years 3.82 years Weighted average discount rate Operating leases 11.30 % 11.3 % Financing leases 9.0 % 9.0 % |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2021 | |
SUBSEQUENT EVENTS | |
NOTE 22 - SUBSEQUENT EVENTS | NOTE 22 – SUBSEQUENT EVENTS On October 7, 2021 and October 19, 2021, the Company received $0.05 million and $0.02 million, respectively, from one of the Company’s board members (“Second Board Investor”) in exchange for two promissory notes. Both the Company and Second Board Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Second Board Investor are still negotiating the terms of the promissory notes. On October 15, 2021, the Company received $0.3 million as an initial deposit from a distribution company (“Distributor”) for the distribution rights of the Company’s sildenafil OTF product (“Distribution Rights”). As of the date of this report, the Company and the Distributor are still negotiating a definitive agreement to finalize the terms of the Distribution Rights per territory. On October 27, 2021, the Company received $0.3 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 notes and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory notes. On October 30, 2021, the Series B Note matured and is due according to its terms (see Note 13). On November 3, 2021 the Company received an Event of Default Redemption Notice from the Investor citing non-payment of the maturity amount, and requesting payment of a default amount, including penalties, of $9.1 million by November 10, 2021. The Company reviewed and does not agree with the amount due. As of the filing date of this report, the Company is negotiating an extension of the maturity date and the amount due on terms satisfactory to the Company. There can be no guaranty that the Company will be successful in this effort in which case the Investor may endeavor to exercise its remedies. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of Consolidation | The unaudited condensed financial statements include the accounts of CPHC and its wholly-owned subsidiaries, CURE Pharmaceutical, CHI and Sera Labs, 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. |
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 condensed 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 September 30, 2021, we had an accumulated deficit of approximately $90.1 million and a working capital deficit of approximately $15.9 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 the date of this report, the Company had approximately $0.1 million of cash on hand. We have previously funded, and intend to continue funding, our losses primarily through the issuance of common stock and/or convertible promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations. The Company believes the funds available through these potential financings will be sufficient to meet the Company’s working capital requirements during the coming year. If we are 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 unaudited condensed consolidated financial statements. The accompanying unaudited condensed 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, 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 values of the purchase price allocations and convertible promissory notes. 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 September 30, 2021 and December 31, 2020, the Company had no cash equivalents. |
Investment in Associates | An associate is an entity over which the Company has significant influence through a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or joint control over those policies. The results of assets and liabilities of associates are incorporated in the condensed consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Company’s share of the net assets of the associate, less any impairment in the value of the investment. Losses of an associate in excess of the Company’s interest in that associate are not recognized. Additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognized at the date of acquisition is recognized as goodwill. The goodwill is included within the carrying amount of the investment. On November 1, 2019, the Company purchased a convertible loan (the “Releaf Loan”) with Releaf Europe BV (“Releaf”) in the amount of $0.2 million. Releaf shall accrue interest on the Releaf 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 Releaf Loan is repaid or at 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 amount of the Releaf Loan and any unpaid accrued interest 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 $2.0 million of debt and/or equity (“Releaf Qualified Financing”), the outstanding amount of the Releaf Loan and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf Qualified Financing less a discount of 20% on the subscription price. In addition, both the Company and Releaf agree in the event that the pre-money valuation of the Releaf 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 September 30, 2021, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to the Releaf 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 $2.0 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 September 30, 2021, 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. On May 26, 2021, the Company purchased a convertible loan (the “May 2021 Loan”) with Biopharmaceutical Research Company (“BRC”) for a total amount of $0.2 million, which is one of a series of notes “(Notes”) pursuant to the terms of the Note Purchase Agreement (“NPA”) offered by BRC. BRC shall accrue interest on the May 2021 Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date or the maturity date of May 26, 2023. In the event of a request for conversion by the Company, the outstanding amount of the May 2021 Loan and any unpaid accrued interest shall be converted into shares of BRC, rounded down to the nearest whole share, by dividing the May 2021 Loan by the price per share obtained by dividing $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (i) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes and (ii) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC. In the event the Company has not requested for conversion, the May 2021 Loan can automatically convert if BRC sells shares of preferred stock (the “Qualified Financing Securities”) to one or more investors in a single transaction or series of related transactions for aggregate proceeds to BRC (including cancellation of indebtedness under the Notes or any other convertible debt) of at least $4 million (a “Qualified Financing”). The May 2021 Loan shall automatically convert at the initial closing of and on the same terms and conditions of the Qualified Financing into a total number of Qualified Financing Securities, rounded down to the nearest whole share, obtained by dividing the May 2021 Loan by the lesser of (i) 80% of the price per share paid for the Qualified Financing Securities by investors in the Qualified Financing and (ii) $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (a) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes, (b) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC and (c) any equity incentive or similar plan to be created or increased in connection with the Qualified Financing). The Company follows Accounting Standards Codification (“ASC”) 325-20, Cost Method Investments (“ASC 325-20”), to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. The Company has determined that there was no impairment of our investment in Releaf during the nine months ended September 30, 2021. |
Accounts Receivable | Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. At September 30, 2021 management determined that an allowance of $0.08 million was necessary. At December 31, 2020 management determined that an allowance of $0.04 million was necessary. |
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, 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 and trademark discussed in Note 19. As of September 30, 2021 and December 31, 2020, there has been no impairment of goodwill and intangible assets. |
Business combinations | The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the value of the assets acquired and liabilities assumed is recognized as goodwill. |
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 nine months ended September 30, 2021 and 2020. |
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 Note 19 for a full discussion of these liabilities. |
Revenue Recognition | The Company recognizes revenue in accordance with ASC 606, “Revenue Recognition”. Revenues under Topic 606 are required to be recognized either at a “point in time” or “over time”, depending on the facts and circumstances of the arrangement, and are evaluated using a five-step model. 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 | 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. Cure Pharmaceutical’s formulation and product development income include services for the development of OTF products utilizing our CureFilm Technology. Our development contracts can 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. Cure Pharmaceutical has entered into a Collaboration and Joint Development Agreement (“Agreement”) with Medolife Rx (“Medolife”) on February 1, 2021 (“Effective Date”) for Medolife to produce Medolife Products (“Products”) in Cure Pharmaceutical’s cGMP facility. The term of this agreement is for five (5) years from the Effective Date (“Term”). Medolife is to pay $0.3 million to assist in completing the jointly developed production line at Cure Pharmaceutical’s cGMP facility. In addition, Cure Pharmaceutical will produce Products on behalf of Medolife and will grant access to Medolife for a joint production area within Cure Pharmaceutical’s production facility for the Term of this Agreement. The Company has determined that there are no distinct obligations for the $0.3 million and Cure Pharmaceutical does have further obligations as stated in the Agreement, thus the Company will recognize the revenue monthly over the Term, beginning February 1, 2021. |
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; · 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 September 30, 2021 and December 31, 2020, we had contract liabilities of $0.6 million and $1.0 million, respectively. Contract liabilities is made up of the following as of September 30, 2021 and December 31, 2020 (in thousands): 2021 2020 Customer deposits for commercial products $ 611 $ 281 Customer deposits for personal protective equipment - 713 Total contract liabilities $ 611 $ 994 The following table summarizes the changes in contract liabilities during the nine months ended September 30, 2021 and year ended December 31, 2020 (in thousands): Balance at December 31, 2019 $ 456 Additions 1,033 Transfers to Revenue (495 ) Balance at December 31, 2020 994 Additions 435 Customer deposits returned (713 ) Transfers to Revenue (105 ) Balance at September 30, 2021 $ 611 |
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 statements of operations. The Company recorded advertising costs of $0.7 million and $2.4 million for the three and nine month periods ended September 30, 2021, respectively. The Company did not record advertising costs for the three and nine month periods ended September 30, 2020. |
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 $0.6 million and $1.9 million for the three and nine month periods ended September 30, 2021, respectively. The Company recorded research and development expenses of $0.7 million and $2.3 million for the three and nine month periods ended September 30, 2020, respectively. |
Income Taxes | The utilizes FASB ASC 740, “ Income Taxes 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 December 31, 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 has been reflected in the year ended December 31, 2020 financial statements. It is uncertain if and to what extent various states will conform to the 2017 Tax 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 ASC 2018-07 (“Topic 718”) for share-based payments to employees, consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the 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 the closing stock price of the Company’s common stock reported on the OTC Bulletin Board. 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 Accounting Standards Update (“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. |
Fair value measurements | The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements and establishes a framework for measuring fair value and expands disclosure about such fair value measurements. ASC 820 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following: · Level 1 – Quoted prices in active markets for identical assets and liabilities. · Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. · Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 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 September 30, 2021 and December, 31, 2020, 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 3 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 14). 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 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 September 30, 2021, 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 nine months ended September 30, 2021 (in thousands): Fair value at December 31, 2020 $ 18,684 Change in fair value of Series A Note (1,020 ) Change in fair value of Series B Notes (91 ) Conversion of Series A Notes (2,881 ) Fair value of Series A and B Notes at September 30, 2021 $ 14,692 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 September 30, 2021 December 31, 2020 Stock price $ 0.73 $ 1.30 Conversion price $ 1.32 $ 1.32 Term (in years) – Series A Note 1.08 1.83 Term (in years) – Series B Note 0.08 0.83 Volatility – Series A Note 85 % 86 % Volatility – Series B Note 80 % 80 % Risk-free interest rate – Series A Note 0.11 % 0.12 % Risk-free interest rate – Series B Note 0.07 % 0.09 % Interest rate 18 % 1 % The Company recorded a loss of $0.7 million and $1.1 million due to the change in fair value of Series A and B convertible notes for the three and nine months ended September 30, 2021 and $0 for the three and nine months ended September 30, 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. |
Series A and B Convertible Notes | As described further in Note 13 - the Company has elected the fair value option to record its Series A and Series B convertible debentures, which were issued in October 2020. The fair value of the Notes is classified within Level 3 of the fair value hierarchy because the fair values were estimated utilizing a Monte Carlo simulation model. 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. |
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 September 30, 2021 and December 2020, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement of operations. |
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 three months ended (in thousands, except per share data): For the Three Months Ended For the Nine months Ended (Dollars in thousands) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Net income (loss) $ (4,343 ) $ (2,751 ) $ (8,835 ) $ (14,144 ) Weighted average outstanding shares of common stock 62,174,822 41,344,256 49,294,190 43,647,388 Dilutive potential common stock shares from: - - - Vested Stock options from the Company’s 2017 Equity Incentive Plan - - - Conversion of convertible notes - - - Common stock and common stock equivalents 62,174,822 41,344,256 49,294,190 43,647.388 Income per share: Basic net income per share (0.07 ) (0.07 ) (0.18 ) (0.32 ) Diluted net income per share (0.07 ) (0.07 ) (0.18 ) (0.32 ) The following number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive: Three and nine months ended September 30, 2021 2020 Vested stock options from the Company’s 2017 Equity Incentive Plan 3,845,124 3,517,577 Warrants 1,565,447 6,648,446 Shares to be issued upon conversion of convertible payable 115,047 115,047 Total 5,525,618 10,281,070 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. |
Basis of Presentation | The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2021, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2021 and 2020, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal period ended December 31, 2020 filed with the SEC on March 31, 2021. |
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” as defined in the Jumpstart our Business Startups Act of 2012 (“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. |
Recent Accounting Pronouncements Adopted | In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815. ASU 2020-01 addresses the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. Observable transactions that require a company to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with ASC 321, Investments – Equity Securities, should be considered immediately before applying or upon discontinuing the equity method. Certain non-derivative forward contracts or purchased call options to acquire equity securities generally will be measured using the fair value principles of ASC 321 before settlement or exercise and consideration shall not be given to how entities will account for the resulting investments on eventual settlement or exercise. ASU 2020-01 is effective for the Company beginning in the first quarter of 2021 and early adoption is permitted. ASU 2020-01 should be applied prospectively. The adoption of this ASU did not have any impact on the Company’s consolidated financial statements. |
Recent Accounting Pronouncements Not Yet Adopted | 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 2020-06 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, 2021 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) | 9 Months Ended |
Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of contract liabilities | Contract liabilities is made up of the following as of September 30, 2021 and December 31, 2020 (in thousands): 2021 2020 Customer deposits for commercial products $ 611 $ 281 Customer deposits for personal protective equipment - 713 Total contract liabilities $ 611 $ 994 |
Summary of changes in contract liabilities | The following table summarizes the changes in contract liabilities during the nine months ended September 30, 2021 and year ended December 31, 2020 (in thousands): Balance at December 31, 2019 $ 456 Additions 1,033 Transfers to Revenue (495 ) Balance at December 31, 2020 994 Additions 435 Customer deposits returned (713 ) Transfers to Revenue (105 ) Balance at September 30, 2021 $ 611 |
Schedule of assets and liabilities measured at fair value | Fair value at December 31, 2020 $ 18,684 Change in fair value of Series A Note (1,020 ) Change in fair value of Series B Notes (91 ) Conversion of Series A Notes (2,881 ) Fair value of Series A and B Notes at September 30, 2021 $ 14,692 |
Schedule of financial instruments | Date of valuation September 30, 2021 December 31, 2020 Stock price $ 0.73 $ 1.30 Conversion price $ 1.32 $ 1.32 Term (in years) – Series A Note 1.08 1.83 Term (in years) – Series B Note 0.08 0.83 Volatility – Series A Note 85 % 86 % Volatility – Series B Note 80 % 80 % Risk-free interest rate – Series A Note 0.11 % 0.12 % Risk-free interest rate – Series B Note 0.07 % 0.09 % Interest rate 18 % 1 % |
Schedule of basic and diluted loss per share | For the Three Months Ended For the Nine months Ended (Dollars in thousands) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Net income (loss) $ (4,343 ) $ (2,751 ) $ (8,835 ) $ (14,144 ) Weighted average outstanding shares of common stock 62,174,822 41,344,256 49,294,190 43,647,388 Dilutive potential common stock shares from: - - - Vested Stock options from the Company’s 2017 Equity Incentive Plan - - - Conversion of convertible notes - - - Common stock and common stock equivalents 62,174,822 41,344,256 49,294,190 43,647.388 Income per share: Basic net income per share (0.07 ) (0.07 ) (0.18 ) (0.32 ) Diluted net income per share (0.07 ) (0.07 ) (0.18 ) (0.32 ) |
Schedule of diluted net income (loss) | Three and nine months ended September 30, 2021 2020 Vested stock options from the Company’s 2017 Equity Incentive Plan 3,845,124 3,517,577 Warrants 1,565,447 6,648,446 Shares to be issued upon conversion of convertible payable 115,047 115,047 Total 5,525,618 10,281,070 |
PREPAID EXPENSES AND OTHER AS_2
PREPAID EXPENSES AND OTHER ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
PREPAID EXPENSES AND OTHER ASSETS (Tables) | |
Schedule of prepaid expenses and other assets | September 30, 2021 December 31, 2020 Prepaid consulting services $ - $ 14 Prepaid clinical study - 32 Prepaid insurance 113 347 PPE deposits - 700 Prepaid equipment 67 61 Prepaid deposit for inventory 165 211 Prepaid expenses 40 66 Other assets 129 79 Prepaid expenses and other assets 514 1,510 Current portion of prepaid expenses and other assets (431 ) (1,452 ) Prepaid expenses and other assets less current portion $ 83 $ 58 |
INVENTORY (Tables)
INVENTORY (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
INVENTORY (Tables) | |
Schedule of inventory | September 30, 2021 December 31, 2020 Raw materials $ 98 $ 64 Packaging components 133 54 Work-in-process 40 22 Finished goods 877 603 1,148 743 Reserve for obsolescence (188 ) (294 ) Total inventory $ 960 $ 449 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment, net | September 30, 2021 December 31, 2020 Equipment not yet placed in service $ 1,413 $ 1,465 Manufacturing equipment 1,093 1,047 Computer and other equipment 626 626 Less accumulated depreciation (1,230 ) (1,091 ) Property and Equipment, net $ 1,902 $ 2,074 |
NOTES RECEIVABLE (Tables)
NOTES RECEIVABLE (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
NOTES RECEIVABLE | |
Schedule of note receivable | September 30, 2021 December 31, 2020 Coeptis Pharmaceuticals, Inc. $ - $ 200 Biopharmaceutical Research Company 200 - Less: allowance for doubtful accounts - (200 ) Current portion of note receivable, net - - Note receivable, net less current portion $ 200 $ - |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
GOODWILL AND INTANGIBLE ASSETS | |
Schedule of intangible assets, net | September 30, 2021 December 31, 2020 Goodwill (1) $ 13,868 $ 13,868 Intangible assets: Acquired IPR&D – Chemistry (2) $ 502 $ 14,460 Pending patents – Cure Pharmaceutical 327 259 Intangible assets subject to amortization: Customer relationships (2) 7,110 7,110 Acquired IPR&D – Chemistry (2) 13,958 - Tradename (2) 2,610 2,610 Noncompete (2) 462 462 Intellectual property 972 972 Issued patents 1,034 1,044 Total intangible assets 26,975 26,917 Accumulated amortization (3,744 ) (1,312 ) Intangible assets, net $ 23,231 $ 25,605 |
Schedule of future amortization expense | 2021 (remaining) $ 953 2022 3,765 2023 3,592 2024 3,429 2025 2,583 Thereafter 8,080 Total Amortization $ 22,402 |
ACCRUED EXPENSES (Tables)
ACCRUED EXPENSES (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
ACCRUED EXPENSES (Tables) | |
Schedule of accrued expenses | September 30, 2021 December 31, 2020 Accounts payable factoring $ 2,325 $ - Refunds and returns liability 434 - Accrued interest 417 194 Accrued payroll 270 308 Accrued vacation leave 221 180 Accrued expenses 301 306 Sales tax payable 327 311 Accrued Expenses $ 4,295 $ 1,299 |
LOAN PAYABLE (Tables)
LOAN PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
LOAN PAYABLE | |
Schedule of loan Payable | September 30, 2021 December 31, 2020 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 September 6, 2021, including interest at 6.55% per annum; unsecured; interest due monthly - 83 Note to a company due June 6, 2022, including interest at 4.42% per annum; unsecured; interest due monthly 60 - Current portion of loan payable (60 ) (265 ) Loan payable, less current portion $ - $ - |
NOTES PAYABLE AND PPP LOAN (Tab
NOTES PAYABLE AND PPP LOAN (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
NOTES PAYABLE AND PPP LOAN | |
Schedule of notes payable | September 30, 2021 December 31, 2020 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 250 250 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 500 500 Promissory note to a company due January 13, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note 500 - Promissory note to a company due April 8, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note 250 - Promissory note to a company due October 30, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note 250 Current portion of note payable $ 1,800 $ 800 |
Schedule of paycheck protection program | September 30, 2021 December 31, 2020 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. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act. - 206 Payment protection program loan $ - $ 605 |
CONVERTIBLE PROMISSORY NOTES (T
CONVERTIBLE PROMISSORY NOTES (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
RELATED PARTY TRANSACTIONS | |
Schedule of convertible promissory notes | September 30, 2021 December 31, 2020 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 PROMI
FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
FAIR VALUE CONVERTIBLE PROMISSORY NOTES | |
Schedule of assumptions | September 30, 2021 December 31, 2020 Series A subordinated convertible note at fair value $ 3,109 $ 7,010 Series B subordinated convertible note at fair value 11,583 11,674 Total convertible promissory notes 14,692 18,684 Less: Investor Note offset – Series B Note (5,000 ) (5,000 ) Carrying value of convertible promissory notes at fair value 9,692 13,684 Less: current portion of convertible promissory notes at fair value (6,583 ) (6,674 ) Convertible promissory notes, less current portion $ 3,109 $ 7,010 |
Schedule of promissory notes | 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) | 9 Months Ended |
Sep. 30, 2021 | |
DERIVATIVE LIABILITY | |
Schedule of fair value measurements on recurring basis | Fair value of derivative liabilities Balance at December 31, 2019 $ 91 Loss on change in fair value included in earnings (91 ) Balance at December 31, 2020 - Gain on change in fair value included in earnings - Balance at September 30, 2021 $ - |
WARRANT AGREEMENTS (Tables)
WARRANT AGREEMENTS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
WARRANT AGREEMENTS | |
Schedule of change in warrant | Warrants Weighted Average Exercise Price Weighted Average Contractual Remaining Life 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 Granted - - - Exercised (96,250 ) 1.00 - Forfeited/Expired (818,152 ) 5.01 - Outstanding, September 30, 2021 1,565,447 2.18 0.92 Exercisable at September 30, 2021 1,565,447 $ 2.18 0.92 |
Schedule of warrant summary | 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–$2.31 1,565,447 0.92 $ 2.18 1,565,447 $ 2.18 1,565,447 0.92 $ 2.18 1,565,447 $ 2.18 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 |
Schedule of fair value of warrant valuation assumptions | September 30, 2021 September 30, 2020 Significant assumptions (weighted-average): Risk-free interest rate at grant date - % 0.29 % Expected stock price volatility - % 74.46 % Expected dividend payout - - Expected option life (in years) - 3 Expected forfeiture rate - % 0 % |
STOCK INCENTIVE PLANS (Tables)
STOCK INCENTIVE PLANS (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
STOCK INCENTIVE PLANS | |
Schedule of stock option activity | Options Weighted Average Exercise Price Weighted Average Contractual Remaining Life 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 Granted 1,395,801 0.98 9.43 Exercised - - - Forfeited/Expired (371,250 ) 0.73 - Outstanding, September 30, 2021 7,310,343 1.46 8.45 Exercisable at September 30, 2021 3,845,124 1.52 7.91 |
Weighted-average fair value of options granted | 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 7,310,343 8.45 $ 1.46 3,845,124 $ 1.52 7,310,343 8.45 $ 1.46 3,845,124 $ 1.52 |
Schedule of non-vested restricted award shares | September 30, 2021 September 30, 2020 Significant assumptions (weighted-average): Risk-free interest rate at grant date - % 0.29 % Expected stock price volatility - % 74.46 % Expected dividend payout - - Expected option life (in years) - 10 Expected forfeiture rate 0 % 0 % |
Schedule of restricted stock unit | Restricted Stock Shares Weighted Average Grant Date Fair Value 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 Granted 338,443 1.86 Vested (330,751 ) 2.07 Forfeited/Expired - - Non-vested, September 30, 2021 57,692 $ 1.30 Restricted Stock Units Weighted Average Grant Date Fair Value 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 Granted 65,600 1.00 Vested (497,178 ) 1.29 Forfeited/Expired - - Outstanding, September 30, 2021 - - |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
SEGMENT REPORTING | |
Schedule of business segments | Cure Sera Labs Eliminations Consolidated Net Sales $ 386 $ 4,654 $ (126 ) $ 4,914 Operating Loss $ (7,019 ) $ (5,689 ) $ - $ (12,708 ) Assets $ 46,604 $ 9,450 $ (14,175 ) $ 41,879 Accounts receivable, net $ 22 $ 186 $ - $ 208 Inventory, net $ 368 $ 592 $ - $ 960 Cure Sera Labs Eliminations Consolidated Net Sales $ 741 $ - $ - $ 741 Operating Loss $ (14,258 ) $ - $ - $ (14,258 ) Assets $ 30,066 $ - $ - $ 30,066 Accounts receivable, net $ 46 $ - $ - $ 46 Inventory, net $ 228 $ - $ - $ 228 |
Schedule of disaggregation of revenue | Three Months Ended Nine months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 CureFilm™ sales 21 % 98 % 14 % 75 % Research & Development services - - 1 23 Product sales - CBD 78 - 77 - Product sales – PPE - - 7 - Other sales less than 10% 1 2 1 2 Total 100 % 100 % 100 % 100 % |
BUSINESS COMBINATION AND DECO_2
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY | |
Schedule of Sera labs net contingent share consideration | (Dollars in thousands) Fair Value of the Contingent Share Consideration Fair value at December 31, 2020 $ 3,205 Fair value at September 30, 2021 2,258 Net change in fair value for the nine months ended September 30, 2021 $ (947 ) |
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 estimated acquisition costs | (Dollars in thousands) Fair Value of the Contingent Share Consideration 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 $ - |
Net loss attributable | Cure Pharmaceutical Sera Labs Pro forma Adjustments Consolidated Net product sales $ 192 $ 1,744 $ - $ 1,936 Net income (loss) $ (2,751 ) $ (970 ) $ - $ (3,721 ) Net income (loss) attributable to Cure per common share: Basic $ (0.07 ) $ (0.08 ) $ (0.07 ) Diluted $ (0.07 ) $ (0.08 ) $ (0.07 ) Cure Pharmaceutical Sera Labs Pro forma Adjustments Consolidated Net product sales $ 741 $ 5,685 $ - $ 6,426 Net loss $ (14,144 ) $ (1,327 ) $ - $ (15,471 ) Net loss attributable to Cure per common share: Basic $ (0.32 ) $ (0.11 ) $ 0.30 ) Diluted $ (0.32 ) $ (0.11 ) $ (0.30 ) |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of future lease payments | Years 2021 (remaining) $ 33 2022 134 2023 138 2024 46 2025 - Undiscounted cash flow 351 Effects of discounting (48 ) Lease liabilities recognized $ 303 |
Schedule of future minimum lease payments | 2021 (remaining) 6 2022 14 2023 14 2024 9 2025 - Thereafter - Finance lease liabilities recognized $ 43 |
Schedule of operating and financing leases | September 30, 2021 December 31, 2020 Operating leases Right-of-use assets, net $ 280 343 Right-of-use lease liabilities, current $ 104 93 Right-of-use lease liabilities, noncurrent 199 278 Total operating lease liabilities $ 303 371 Financing Leases Finance lease right-to-use assets, net $ 43 52 Current liabilities $ 13 12 Noncurrent liabilities 30 40 Total financing lease liabilities $ 43 52 Weighted average remaining lease term Operating leases 2.55 years 3.31 years Financing leases 3.06 years 3.82 years Weighted average discount rate Operating leases 11.30 % 11.3 % Financing leases 9.0 % 9.0 % |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Customer deposits for commercial products | $ 611 | $ 281 |
Customer deposits for personal protective equipment | 0 | 713 |
Total contract liabilities | $ 611 | $ 994 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Contract liabilities beginning balance | $ 994,000 | $ 456,000 |
Additions | 435,000 | 1,033,000 |
Customer deposits returned | (713,000) | 0 |
Transfers to Revenue | (105,000) | (495,000) |
Contract liabilities ending balance | $ 611,000 | $ 994,000 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Fair value at December 31, 2020 | $ 18,684 |
Change in fair value of Series A Note | (1,020,000) |
Change in fair value of Series B Notes | (91,000) |
Conversion of Series A Notes | (2,881,000) |
Fair value of Series A and B Notes at September 30, 2021 | $ 14,692 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Conversion price | $ 1.32 | $ 1.32 |
Stock price | $ 0.73 | $ 1.30 |
Interest Rate | 18.00% | 1.00% |
Series A Note [Member] | ||
Interest Rate | 0.11% | 0.12% |
Volatility | 85.00% | 86.00% |
Term | 1 year 29 days | 1 year 9 months 29 days |
Series B Note [Member] | ||
Interest Rate | 0.07% | 0.09% |
Volatility | 80.00% | 80.00% |
Term | 9 months 29 days | 29 days |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||
Net income (loss) attributable to the Company | $ (4,343) | $ (2,751) | $ (8,835) | $ (14,144) |
Weighted average outstanding shares of common stock | 62,174,822,000 | 41,344,256,000 | 49,294,190,000 | 43,647,388,000 |
Common stock and common stock equivalents | 62,174,822,000 | 41,344,256,000 | 49,294,190,000 | 43,647,388,000 |
Income (loss) per share: | ||||
Basic net income per share | $ (0.07) | $ (0.07) | $ (0.18) | $ (0.32) |
Diluted net income per share | $ (0.07) | $ (0.07) | $ (0.18) | $ (0.32) |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) - shares | 3 Months Ended | 9 Months Ended |
Sep. 30, 2021 | Sep. 30, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Vested stock options from the company's 2017 Equity Incentive plan | 3,845,124 | 3,517,577 |
Warrants | 1,565,447 | 6,648,446 |
Shares to be issued upon conversion of convertible notes | 115,047 | 115,047 |
Total | 5,525,618 | 10,281,070 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | May 03, 2021 | Nov. 09, 2020 | Sep. 16, 2021 | Oct. 31, 2019 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Jun. 30, 2021 | May 26, 2021 | Dec. 31, 2020 | Oct. 31, 2020 | Oct. 30, 2020 | Nov. 01, 2019 | Nov. 10, 2017 |
Research and development expenses | $ 600,000 | $ 700,000 | $ 1,900,000 | $ 2,300,000 | |||||||||||
Revenue | 300,000 | ||||||||||||||
Outstanding shares of common stock | 20,000,000 | ||||||||||||||
Working capital deficit | 15,900,000 | 15,900,000 | |||||||||||||
Accumulated deficits | (90,100,000) | (90,100,000) | |||||||||||||
Federal deposit insurance corporation insured limit | 250,000 | 250,000 | |||||||||||||
Gain on change of fair value | 700,000 | $ 0 | 1,100,000 | $ 0 | |||||||||||
Amount in excess of FDIC limit | 1,500,000 | 1,500,000 | $ 1,500,000 | ||||||||||||
Allowance for doubtful accounts | 80,000 | 80,000 | 40,000 | ||||||||||||
Contract liabilities | $ 600,000 | $ 600,000 | $ 1,000,000 | ||||||||||||
Valuation allowance percentage | 100.00% | 100.00% | |||||||||||||
Advertising costs | $ 700,000 | $ 2,400,000 | |||||||||||||
Non-controlling Interests | $ 0 | 0 | |||||||||||||
Payment for legal and broker fees | $ 700,000 | ||||||||||||||
Ownership interest | 65.00% | 65.00% | |||||||||||||
Outstanding contingent consideration liability | $ 3,200,000 | ||||||||||||||
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”) | ||||||||||||||
Conversion price | $ 1.32 | $ 1.32 | $ 1.32 | $ 1.32 | $ 1.32 | ||||||||||
Cash | $ 700,000 | $ 700,000 | |||||||||||||
Initial Principal Payment | $ 200,000 | $ 300,000 | $ 200,000 | ||||||||||||
Accrued interest rate | 18.00% | 18.00% | |||||||||||||
Borrower [Member] | |||||||||||||||
Accrued interest rate | 6.00% | ||||||||||||||
Convertible debt | $ 4,000,000 | $ 2,000,000 | |||||||||||||
Releaf Qualified Financing | $ 15,000,000 | ||||||||||||||
Pre money valuation | $ 14,500,000 | ||||||||||||||
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 amount of the Releaf Loan and any unpaid accrued interest 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 Qualified Financing”), the outstanding amount of the Releaf Loan and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf Qualified Financing less a discount of 20% on the subscription price. | ||||||||||||||
February 5, 2020 And February 13, 2020 [Member] | Two Convertible Loans [Member] | |||||||||||||||
Accrued interest rate | 6.00% | 6.00% | |||||||||||||
Convertible debt | $ 300,000 | $ 300,000 | |||||||||||||
Releaf Qualified Financing | 15,000 | ||||||||||||||
Pre money valuation | $ 14,500,000 | ||||||||||||||
Maturity date | Oct. 31, 2021 | ||||||||||||||
Request for conversion description | 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 $2.0 million of debt and/or equity (“Releaf February 2020 Qualified Financing”), the outstanding amount of the February 2020 Loans and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf February 2020 Qualified Financing, less a discount of 20% on the subscription price | ||||||||||||||
Oak Therapeutics [Member] | |||||||||||||||
Ownership interest | 63.00% | 63.00% | 63.00% |
PREPAID EXPENSES AND OTHER AS_3
PREPAID EXPENSES AND OTHER ASSETS (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
PREPAID EXPENSES AND OTHER ASSETS (Details) | ||
Prepaid consulting services | $ 0 | $ 14,000 |
Prepaid clinical study | 0 | 32,000 |
Prepaid insurance | 113,000 | 347,000 |
PPE deposits | 0 | 700,000 |
Prepaid equipment | 67,000 | 61,000 |
Prepaid deposit for inventory | 165,000 | 211,000 |
Prepaid expenses | 40,000 | 66,000 |
Other assets | 129,000 | 79,000 |
Total Prepaid expenses and other assets | 514,000 | 1,510,000 |
Current portion of prepaid expenses and other assets | (431,000) | (1,452,000) |
Prepaid expenses and other assets less current portion | $ 83,000 | $ 58,000 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 | Jun. 30, 2020 |
INVENTORY (Tables) | |||
Raw Materials | $ 98 | $ 64 | |
Packaging Components | 133 | 54 | |
Work-in-process | 40 | 22 | |
Finished goods | 877 | 603 | |
Inventory, Gross | 1,148 | 743 | |
Reserve for Obsolescence | (188) | (294) | |
Total inventory | $ 960 | $ 449 | $ 228 |
INVENTORY (Details Narrative)
INVENTORY (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
INVENTORY (Tables) | ||||
Inventory reserves | $ 3 | $ 1 | $ 200 | $ 4 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Less accumulated depreciation | $ (1,230) | $ (1,091) |
Property and Equipment, net | 1,902 | 2,074 |
Manufacturing equipmentt [Member] | ||
Property and Equipment | 1,093 | 1,047 |
Computer and other equipment [Member] | ||
Property and Equipment | 626 | 626 |
Equipment not yet placed in service [Member] | ||
Property and Equipment | $ 1,413 | $ 1,465 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
PROPERTY AND EQUIPMENT | ||||
Depreciation expense | $ 50 | $ 60 | $ 140 | $ 160 |
NOTES RECEIVABLE (Details)
NOTES RECEIVABLE (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Current portion of note receivable, net | $ 0 | $ 0 |
Note receivable, net | 200,000 | 0 |
Less: allowance for doubtful accounts | 0 | (200,000) |
Biopharmaceutical Research Company [Member] | ||
Note receivable, net | 200,000 | 0 |
Coeptis Pharmaceuticals, Inc. [Member] | ||
Note receivable, net | $ 0 | $ 200,000 |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Goodwill (1) | $ 13,868,000 | $ 13,868,000 |
Less accumulated amortization | (3,744,000) | (1,312,000) |
Customer relationships | 7,110,000 | 7,110,000 |
Issued patents | 26,975,000 | 26,917,000 |
Intangible assets net | 23,231,000 | 25,605,000 |
Acquired IPR&D - Chemistry [Member] | ||
Total intangible assets | 502,000 | 14,460,000 |
Acquired IPR&D - Chemistry 2 [Member] | ||
Total intangible assets | 13,958,000 | 0 |
Non-compete [Member] | ||
Intangible assets net | 462,000 | 462,000 |
Tradename [Member] | ||
Intangible assets net | 2,610,000 | 2,610,000 |
Pending patents - Cure Pharmaceutical [Member] | ||
Total intangible assets | 327,000 | 259,000 |
Intellectual Property [Member] | ||
Intangible assets net | 972,000 | 972,000 |
Issued Patents [Member] | ||
Intangible assets net | $ 1,034,000 | $ 1,044,000 |
GOODWILL AND INTANGIBLE ASSET_3
GOODWILL AND INTANGIBLE ASSETS (Details 1) $ in Thousands | Sep. 30, 2021USD ($) |
GOODWILL AND INTANGIBLE ASSETS | |
2021 | $ 953 |
2022 | 3,765 |
2023 | 3,592 |
2024 | 3,429 |
2025 | 2,583 |
Thereafter | 8,080 |
Total Amortization | $ 22,402 |
GOODWILL AND INTANGIBLE ASSET_4
GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | |
In-process research and development received from the acquisition of Chemistry Holdings, Inc | $ 14,500,000 | |||||
Patents received from the acquisition of Chemistry Holdings, Inc | 700,000 | |||||
Amortization expense | $ 1,000,000 | $ 30,000 | $ 2,400,000 | $ 90,000 | ||
Goodwill net | $ 9,200,000 | |||||
Goodwill from the acquisition of Chemistry Holdings, Inc | 9,200 | $ 4,700,000 | ||||
Patents [Member] | ||||||
Patent costs capitalized | 70,000 | $ 10,000 | ||||
Tradename [Member] | ||||||
Acquired intangible assets | 2,600,000 | |||||
Non-compete [Member] | ||||||
Acquired intangible assets | 500,000 | |||||
Sera Labs Customer Relationships [Member] | ||||||
Acquired intangible assets | $ 7,100,000 | |||||
IPR&D Project [Member] | ||||||
Amortization expense | $ 3,500,000 | $ 13,900,000 | ||||
Estimated useful life | 10 years |
ACCRUED EXPENSES (Details)
ACCRUED EXPENSES (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
GOODWILL AND INTANGIBLE ASSETS | ||
Accounts payable factoring | $ 2,325 | $ 0 |
Refunds and returns liability | 434 | 0 |
Accrued interest | 417 | 194 |
Accrued payroll | 270 | 308 |
Accrued vacation leave | 221 | 180 |
Accrued expenses | 301 | 306 |
Sales tax payable | 327 | 311 |
Accrued Expenses net | $ 4,295 | $ 1,299 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) $ in Thousands | May 03, 2021 | Nov. 09, 2020 | Sep. 16, 2021 | Aug. 06, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Jun. 30, 2021 |
Interest expense - related party | $ 29 | $ 2 | $ 75 | $ 2 | ||||||
Principal payment | $ 200 | $ 300 | $ 200 | |||||||
Interest rate | 18.00% | 1.00% | ||||||||
Outstanding amount | $ 9,692 | $ 9,692 | $ 13,684 | |||||||
Mrs. Duitch [Member] | ||||||||||
Outstanding amount | $ 900 | |||||||||
Unsecured Promissory Note [Member] | ||||||||||
Principal amount | $ 150,000 | |||||||||
Due date | Aug. 6, 2021 | |||||||||
Interest rate | 8.00% | |||||||||
October 2, 2020 [Member] | Sera labs [Member] | ||||||||||
Principal amount | $ 1,100 | |||||||||
Upfront payment connection | 1,000 | |||||||||
Certain liabilities | $ 100 | |||||||||
Due date | September 30, 2021 |
LOAN PAYABLE (Details)
LOAN PAYABLE (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Current portion of loan payable | $ (60,000) | $ (265,000) |
Loan payable, less current portion | 0 | 0 |
Current portion of loan payable | 60,000 | 265,000 |
Loans Payable One [Member] | ||
Current portion of loan payable | 0 | 182,000 |
Loans Payable Two [Member] | ||
Current portion of loan payable | 0 | 83,000 |
Loan Payable Three [Member] | ||
Current portion of loan payable | $ 60,000 | $ 0 |
LOAN PAYABLE (Details Narrative
LOAN PAYABLE (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
LOAN PAYABLE | ||||
Loan payable | $ 1 | $ 1 | $ 3 | $ 2 |
NOTES PAYABLE AND PPP LOAN (Det
NOTES PAYABLE AND PPP LOAN (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 |
Current portion of note payable | $ 1,800,000 | $ 800,000 |
Notes payable | (60,000) | (265,000) |
Individual [Member] | ||
Notes payable | 50,000 | 50,000 |
Promissory Note 4[Member] | ||
Notes payable | 250,000 | |
Promissory note 3 [Member] | ||
Notes payable | 250,000 | 0 |
Promissory note 1 [Member] | ||
Notes payable | 500,000 | 500,000 |
Promissory Note [Member] | ||
Notes payable | 250,000 | 250,000 |
Promissory note 2 [Member] | ||
Notes payable | $ 500,000 | $ 0 |
NOTES PAYABLE AND PPP LOAN (D_2
NOTES PAYABLE AND PPP LOAN (Details 1) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Payment protection program loan | $ 0 | $ 605 |
Paycheck Protection Program One [Member] | ||
Payment protection program loan | 0 | 206 |
Paycheck Protection Program [Member] | ||
Payment protection program loan | $ 0 | $ 399 |
NOTES PAYABLE AND PPP LOAN (D_3
NOTES PAYABLE AND PPP LOAN (Details Narrative) - USD ($) | Apr. 08, 2021 | Aug. 12, 2020 | Sep. 24, 2021 | Feb. 05, 2021 | Sep. 25, 2020 | May 18, 2020 | Apr. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 |
Total balance repaid of outstanding | $ 1,100,000 | |||||||||||
Gross proceeds, net | $ 1,000,000 | 100,000 | ||||||||||
Interest Rate | 18.00% | 1.00% | ||||||||||
Board Members [Member] | ||||||||||||
Interest Rate | 8.00% | 8.00% | ||||||||||
Unsecured promissory note | $ 500,000 | $ 300,000 | $ 300,000 | |||||||||
Maturity date | Aug. 12, 2021 | May 18, 2021 | ||||||||||
Investor [Member] | ||||||||||||
Proceeds from loan | $ 300,000 | $ 300,000 | 500,000 | |||||||||
Sera Lab [Member] | ||||||||||||
Proceeds from loan | $ 400,000 | |||||||||||
Promissory Note [Member] | LLC [Member] | ||||||||||||
Gross proceeds, net | 1,000,000 | 100,000 | ||||||||||
Principal, amount | $ 1,100,000 | |||||||||||
Notes Payable And Paycheck Protection Program [Member] | ||||||||||||
Interest expense | $ 50,000 | $ 10,000 | $ 110,000 | $ 10,000 | ||||||||
Paycheck Protection Program [Member] | ||||||||||||
Proceeds from loan | $ 200,000 | |||||||||||
Loan forgiveness | $ 400,000 |
CONVERTIBLE PROMISSORY NOTES (D
CONVERTIBLE PROMISSORY NOTES (Details) - USD ($) | Sep. 30, 2021 | Dec. 31, 2020 | Sep. 25, 2020 |
PREPAID EXPENSES AND OTHER ASSETS | |||
Convertible promissory notes | $ 550,000 | $ 550,000 | $ 1,100,000 |
Current portion of convertible promissory notes | $ 550,000 | $ 550,000 |
FAIR VALUE CONVERTIBLE PROMIS_2
FAIR VALUE CONVERTIBLE PROMISSORY NOTES (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
PREPAID EXPENSES AND OTHER ASSETS | ||
Series A subordinated convertible note at fair value | $ 3,109 | $ 7,010 |
Series B subordinated convertible note at fair value | 11,583 | 11,674 |
Total convertible promissory notes | 14,692 | 18,684 |
Less: Investor Note offset - Series B Note | (5,000) | (5,000) |
Carrying value of convertible promissory notes at fair value | 9,692 | 13,684 |
Less: current portion of convertible promissory notes at fair value | (6,583) | (6,674) |
Convertible promissory notes, less current portion | $ 3,109 | $ 7,010 |
FAIR VALUE CONVERTIBLE PROMIS_3
FAIR VALUE CONVERTIBLE PROMISSORY NOTES (Details 1) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Significant assumptions (weighted-average): | |
Risk-free interest rate at grant date | 0.36% |
Expected stock price volatility | 81.14% |
Expected dividend payout | $ 0 |
Expected warrant life (in years) | 2 years |
Expected forfeiture rate | 0 |
FAIR VALUE CONVERTIBLE PROMIS_4
FAIR VALUE CONVERTIBLE PROMISSORY NOTES (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Oct. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2021 | Sep. 25, 2020 | |
Proceeds from investor note | $ 1,000,000 | |||||||
Remaining balance of investor note | $ 5,000,000 | |||||||
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 363,636shares 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, | |||||||
Conversion price | $ 1.32 | $ 1.32 | $ 1.32 | $ 1.32 | $ 1.32 | |||
Convertible promissory notes | $ 550,000 | $ 550,000 | $ 550,000 | $ 1,100,000 | ||||
Interest rate | 18.00% | 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 | |||||||
Warranty exercise price per share | $ 1.32 | |||||||
Warrant, exercisable shares | 363,636 | |||||||
Private Placement [Member] | ||||||||
Net cash proceeds | $ 2,340,000 | |||||||
Financial advisory fee | 480,000 | |||||||
Proceeds from Private Placement | 8,850,000 | |||||||
Placement agent fee | 306,000 | |||||||
Convertible Promissory Note [Member] | ||||||||
Debt issuance cost | 700 | $ 100,000 | ||||||
Series A Subordinated Convertible Note [Member] | ||||||||
Cash consideration | $ 4,000,000 | |||||||
Initial principal amount | 4,600,000,000 | |||||||
Original issue discount | 600,000 | |||||||
Securities Purchase Agreement [Member] | Institutional Investor [Member] | ||||||||
Aggregate principal amount | 11,500,000 | |||||||
Series B Senior Secured Convertible Note [Member] | ||||||||
Initial principal amount | 6,900,000 | |||||||
Original issue discount | 900,000 | |||||||
Secured Convertible Note [Member] | ||||||||
Initial principal amount | $ 6,000,000 | |||||||
Series A Note [Member] | ||||||||
Loss on fair value option | 4,400,000 | |||||||
Gain (Loss) on change in fair value | 1,000,000 | $ 100,000 | (4,600,000) | |||||
Series B Note [Member] | ||||||||
Loss on fair value option | 5,100,000 | |||||||
Gain (Loss) on change in fair value | $ 100,000 | $ 600,000 | $ 500,000 | $ 4,700,000 | ||||
Series A and Series B Note [Member] | Placement Agent Warrants [Member] | ||||||||
Purchase of warrant description | 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.” |
WARRANT AGREEMENTS (Details)
WARRANT AGREEMENTS (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Warrants, beginning balance | 6,285,792 | 3,467,650 |
Forfeited/Expired | (371,250) | (752,222) |
Warrants, ending balance | 7,310,343 | 6,285,792 |
Weighted Average Contractual Remaining Life, Granted | 9 years 5 months 4 days | 9 years 2 months 8 days |
Warrants [Member] | ||
Warrants, beginning balance | 2,479,849 | 14,666,518 |
Granted | 303,030 | |
Exercised | (96,250) | (771,318) |
Forfeited/Expired | (818,152) | (11,718,381) |
Warrants, ending balance | 1,565,447 | 2,479,849 |
Exercisable at December 31, 2019 | 1,565,447 | 2,479,849 |
Weighted average exercise price beginning balance | $ 1.86 | $ 3.70 |
Weighted Average Exercise Price, Granted | 1.32 | |
Weighted Average Exercise Price, Exercised | 1 | 1.92 |
Weighted Average Exercise Price, Forfeited/Expired | 5.01 | 5.01 |
Weighted Average Exercise Price, ending balance | 2.18 | 1.86 |
Weighted Average Exercise Price, Exercisable | $ 2.18 | $ 1.86 |
Weighted Average Contractual Remaining Life, beginning balance | 1 year 2 months 23 days | 2 years 11 months 26 days |
Weighted Average Contractual Remaining Life, Granted | 1 year 10 months 9 days | |
Weighted Average Contractual Remaining Life, ending balance | 11 months 1 day | 1 year 2 months 23 days |
Weighted Average Contractual Remaining Life, Exercisable | 11 months 1 day |
WARRANT AGREEMENTS (Details 1)
WARRANT AGREEMENTS (Details 1) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Number of Warrants | 1,565,447 | 2,479,849 |
Weighted Average Remaining Contractual Life (years) | 11 months 1 day | 1 year 2 months 23 days |
Weighted Average Exercise Price | $ 2.18 | $ 1.86 |
Number of Warrants Exercisable, Weighted Average Exercise Price | $ 2.18 | $ 1.86 |
Number of Warrants Exercisable | 1,565,447 | 2,479,849 |
$ 1.00-$2.31 [Member] | ||
Number of Warrants | 1,565,447 | |
Weighted Average Remaining Contractual Life (years) | 11 months 1 day | |
Weighted Average Exercise Price | $ 2.18 | |
Number of Warrants Exercisable, Weighted Average Exercise Price | $ 2.18 | |
Number of Warrants Exercisable | 1,565,447 | |
1.00 - $6.00 [Member] | ||
Number of Warrants | 2,479,849 | |
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 Exercisable | 2,479,849 |
WARRANT AGREEMENTS (Details 2)
WARRANT AGREEMENTS (Details 2) | 6 Months Ended | 9 Months Ended |
Jun. 30, 2020 | Sep. 30, 2021 | |
Risk-free interest rate at grant date | 0.36% | |
Significant assumptions (weighted-average): | ||
Expected stock price volatility | 81.14% | |
Expected option life (in years)s | 2 years | |
Warrants [Member] | ||
Risk-free interest rate at grant date | 0.29% | 0.00% |
Significant assumptions (weighted-average): | ||
Expected stock price volatility | 74.46% | 0.00% |
Expected option life (in years)s | 3 years | |
Expected forfeiture rate | 0.00% | 0.00% |
WARRANT AGREEMENTS (Details Nar
WARRANT AGREEMENTS (Details Narrative) - USD ($) | Dec. 08, 2020 | Oct. 02, 2020 | Jun. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 |
Change in warrant value | $ 0 | $ 100,000 | $ 0 | $ 0 | $ 0 | |||
Warrant, exercisable shares | 363,636 | |||||||
Warrants [Member] | ||||||||
Warrants issued | 8,018,071 | |||||||
Fair market value | $ 1,400,000 | |||||||
Warrant exercise price | $ 5.01 | $ 2 | ||||||
Warrants [Member] | October 2, 2020 [Member] | ||||||||
Warrants issued | 62,851 | 242,424 | 708,467 | 60,606 | ||||
Warrant exercise price | $ 1 | $ 1.32 | $ 1.32 | |||||
Warrant, exercisable shares | 363,636 | |||||||
Stock issued during period shares | 26,936 |
STOCK INCENTIVE PLANS (Details)
STOCK INCENTIVE PLANS (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Option | ||
Warrants, beginning balance | 6,285,792 | 3,467,650 |
Granted | 1,395,801 | 3,600,364 |
Exercised | (30,000) | |
Forfeited/Expired | (371,250) | (752,222) |
Warrants, ending balance | 7,310,343 | 6,285,792 |
Exercisable Ending Balance | 3,845,124 | |
Weighted Average Exercise Price | ||
Outstanding Beginning Balance | $ 1.52 | $ 1.84 |
Granted | 0.98 | 1.26 |
Exercised | 0 | 0.74 |
Forfeited/Expired | 0.73 | 1.76 |
Outstanding Ending Balance | 1.46 | $ 1.52 |
Exercisable Ending Balance | $ 1.52 | |
Weighted Average Contractual Remaining Life | ||
Outstanding Beginning Balance | 8 years 10 months 9 days | 8 years 8 months 26 days |
Granted | 9 years 5 months 4 days | 9 years 2 months 8 days |
Outstanding Ending Balance | 8 years 5 months 12 days | 8 years 10 months 10 days |
Exercisable Ending Balance | 7 years 10 months 28 days |
STOCK INCENTIVE PLANS (Details
STOCK INCENTIVE PLANS (Details 1) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Weighted Average Remaining Contractual Life (years) | 11 months 1 day | 1 year 2 months 23 days |
Weighted Average Exercise Price | $ 2.18 | $ 1.86 |
0.61-$4.01 [Member] | ||
Number of Awards | 7,310,343 | |
Weighted Average Remaining Contractual Life (years) | 8 years 5 months 12 days | |
Weighted Average Exercise Price | $ 1.46 | |
Number of Awards Exercisable | 3,845,124 | |
Range of Exercise Price Lower Limit | $ 1.52 | |
Range of Exercise Price Upper Limited | $ 1.52 | |
Stock Options [Member] | ||
Number of Awards | 7,310,343 | |
Weighted Average Remaining Contractual Life (years) | 8 years 5 months 12 days | |
Weighted Average Exercise Price | $ 1.46 | |
Number of Awards Exercisable | 3,845,124 |
STOCK INCENTIVE PLANS (Detail_2
STOCK INCENTIVE PLANS (Details 2) - USD ($) | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Significant assumptions (weighted-average): | ||
Expected dividend payout | $ 0 | |
Expected forfeiture rate | 0 | |
Stock Options [Member] | ||
Risk-free interest rate at grant date | 0.29 | |
Significant assumptions (weighted-average): | ||
Expected stock price volatility | 74.46 | |
Expected dividend payout | $ 0 | $ 0 |
Expected option life (in years) | 10 years | |
Expected forfeiture rate | 0% | 0 |
SEGMENT REPORTING (Details Narr
SEGMENT REPORTING (Details Narrative ) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Accounts receivable | $ 40 | $ 130 | ||
Revenue received | 10 | 74 | ||
Revenues | 10 | 10 | 81 |
STOCK INCENTIVE PLANS (Detail_3
STOCK INCENTIVE PLANS (Details 3) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Forfeited/Expired | (371,250) | (752,222) |
Stock Options [Member] | ||
Non-vested, beginning balance | 50,000 | 82,086 |
Granted | 338,443 | 150,000 |
Vested | (330,751) | (181,849) |
Forfeited/Expired | (237) | |
Non-vested, ending balance | 57,692 | 50,000 |
Weighted Average Exercise Price, Non-vested, beginning balance | $ 1.60 | $ 2.69 |
Weighted Average Exercise Price, Granted | 1.86 | 1.60 |
Weighted Average Exercise Price, Vested | 2.07 | 2.08 |
Weighted Average Exercise Price, Forfeited/Expired | 0 | 0 |
Weighted Average Exercise Price, Non-vested, ending balance | $ 1.30 | $ 1.60 |
STOCK INCENTIVE PLANS (Detail_4
STOCK INCENTIVE PLANS (Details 4) - Stock Options [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Outstanding beginning balance | 431,578 | 60,759 |
Granted | 65,600 | 431,578 |
Vested | (497,178) | (60,759) |
Outstanding, ending balance | 431,578 | |
Weighted Average Grant Date Fair Value Outstanding, ending balance | $ 1.33 | $ 3.66 |
Weighted Average Grant Date Fair Value Granted | 1 | 1.33 |
Weighted Average Grant Date Fair Value Vested | 1.29 | 3.66 |
Weighted Average Grant Date Fair Value Outstanding | $ 1.33 | $ 1.33 |
STOCK INCENTIVE PLANS (Detail_5
STOCK INCENTIVE PLANS (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||
Nov. 28, 2020 | Dec. 29, 2017 | Jun. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Sep. 30, 2019 | Feb. 25, 2019 | |
Compensation expense to restricted shares | $ 100,000 | $ 100,000 | $ 400,000 | $ 300,000 | |||||
Fair value of options granted | 1,100,000 | 4,300,000 | |||||||
Compensation expense | 400,000 | 100,000 | $ 1,700,000 | 400,000 | |||||
Common stock issued | 65,060,044 | 59,476,268 | |||||||
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. | ||||||||
Equity Incentive Plan [Member] | Stock Purchase Agreement Four [Member] | |||||||||
Common stock issued | 324,791 | ||||||||
Consultant [Member] | |||||||||
Restricted common stock issued | 150,000 | ||||||||
Stock options issued, shares | 1,518,194 | ||||||||
Stock Options [Member] | |||||||||
Unrecognized fair value of compensation cost | 3,000,000 | ||||||||
Weighted Average Remaining Contractual Life (years) | 9 years 3 months 7 days | ||||||||
Aggregate Intrinsic Value, Outstanding | 200,000 | ||||||||
Restricted Stock Units [Member] | |||||||||
Compensation expense | 200,000 | $ 100,000 | $ 400,000 | $ 200,000 | |||||
Restricted common stock issued | 431,578 | ||||||||
Unrecognized fair value of compensation cost | 0 | $ 600,000 | |||||||
Weighted Average Remaining Contractual Life (years) | 2 months 23 days | 7 months 12 days | |||||||
Restricted Common Stock [Member] | |||||||||
Restricted common stock issued | 338,443 | ||||||||
Unrecognized fair value of compensation cost | $ 100,000 | $ 100,000 | |||||||
Weighted Average Remaining Contractual Life (years) | 3 months 15 days | 1 month 21 days | |||||||
Nonstatutory Stock Options [Member] | |||||||||
Common stock, shares issued during the period, shares | 135,801 | ||||||||
Awarded vesting period | 4 years | ||||||||
Term of exercise period | 10 years |
STOCKHOLDERS EQUITY (Details Na
STOCKHOLDERS EQUITY (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2021 | Dec. 31, 2020 | Jun. 05, 2020 | |
Common stock, shares authorized | 150,000,000 | 150,000,000 | |
Common stock, shares par value | $ 0.001 | $ 0.001 | |
Common stock, shares outstanding | 65,060,044 | 59,476,268 | |
Series A Note plus [Member] | |||
Conversion price description | ranging from $0.43 to $0.64 | ||
Debt instrument converted into common stock | 2,597,951 | ||
Debt instrument converted amount, principal | $ 1,300,000 | ||
CHI [Member] | |||
Common stock, shares issued | 12,058,623 | ||
Proceed from issuance of common stock | 21,900,000 | ||
Price per share | $ 1.82 | ||
Proceeds from common stock issuable | $ 200,000 | ||
Several Consulting Agreement [Member] | |||
Debt instrument converted into common stock | 18,104 | ||
Price per share | $ 1.72 | ||
Convertible debt | $ 30,000 | ||
January 1, 2021 to September 30, 2021[Member] | 1[Member] | |||
Conversion price description | ranging from $0.98 to $1.85 | ||
Debt instrument converted into common stock | 872,361 | ||
Debt instrument converted amount, principal | $ 200,000 | ||
January 1, 2021 to September 30, 2021[Member] | 2 [Member] | |||
Conversion price description | ranging from $0.98 to $1.85 | ||
Debt instrument converted into common stock | 646,512 | ||
Debt instrument converted amount, principal | $ 700,000 | ||
January 1, 2021 to September 30, 2021[Member] | 3 [Member] | |||
Common stock, shares issued | 26,936 | ||
Proceed from issuance of common stock | $ 30,000 | ||
Price per share | $ 1.30 | ||
January 1, 2021 to September 30, 2021[Member] | 4 [Member] | |||
Common stock, shares issued | 1,439,394 | ||
Proceed from issuance of common stock | $ 1,900,000 | ||
Price per share | $ 1.32 | ||
June 5, 2020 [Member] | |||
Common stock, shares issued | 708,467 | ||
Proceed from issuance of common stock | $ 1,400,000 | ||
Price per share | $ 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 | $ 1.38 | ||
From January 1, 2020 to December 31, 2020 [Member] | |||
Conversion price description | ranging from $1.40 to $3.93 | ||
Debt instrument converted into common stock | 281,250 | ||
Debt instrument converted amount, principal | $ 500,000 | ||
From January 1, 2020 to December 31, 2020 [Member] | 2017 Equity Plan [Member] | |||
Conversion price description | ranging from $1.60 to $3.15 | ||
Debt instrument converted into common stock | 194,016 | ||
Debt instrument converted amount, principal | $ 20,000 | ||
December 9, 2020 [Member] | |||
Debt instrument converted into common stock | 757,576 | ||
Debt instrument converted amount, principal | $ 1,000,000 | ||
Price per share | $ 1.32 | ||
On February 1, 2019 [Member] | |||
Price per share | $ 2.32 |
NOTES RECEIVABLE (Details Narra
NOTES RECEIVABLE (Details Narrative) - USD ($) | May 03, 2021 | Feb. 10, 2021 | Nov. 09, 2020 | Sep. 16, 2021 | May 26, 2021 | Sep. 16, 2020 | Jul. 31, 2020 | Nov. 12, 2019 | Sep. 30, 2021 | Dec. 31, 2020 | Nov. 01, 2019 |
Convertible promissory note | $ 200,000 | ||||||||||
Outstanding shares of common stock | 20,000,000 | ||||||||||
Principal amount | $ 200,000 | $ 300,000 | $ 200,000 | ||||||||
Conversion price | $ 1.32 | $ 1.32 | |||||||||
Interest Rate | 18.00% | 1.00% | |||||||||
Coeptis Pharmaceuticals, Inc. [Member] | |||||||||||
Outstanding shares of common stock | 20,000,000 | ||||||||||
Request for conversion description | (a “Qualified Financing”). The May 2021 Loan shall automatically convert at the initial closing of and on the same terms and conditions of the Qualified Financing into a total number of Qualified Financing Securities, rounded down to the nearest whole share, obtained by dividing the May 2021 Loan by the lesser of (i) 80% of the price per share paid for the Qualified Financing Securities by investors in the Qualified Financing and (ii) $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (a) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes, (b) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC and (c) any equity incentive or similar plan to be created or increased in connection with the Qualified Financing). | ||||||||||
Convertible debt | $ 4,000,000 | $ 200,000 | |||||||||
Principal amount | $ 200 | ||||||||||
Conversion price | $ 2.60 | ||||||||||
Maturity date | Jun. 15, 2020 | ||||||||||
The Sera Labs, Inc. [Member] | |||||||||||
Convertible promissory note | $ 500,000 | ||||||||||
Principal amount | $ 550,000 | ||||||||||
Maturity date | Dec. 31, 2020 | ||||||||||
Interest Rate | 9.00% | ||||||||||
Interest upon principal amount | $ 500,000 | ||||||||||
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 $0.05 million of the principal amount from and after September 16, 2020. |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Jun. 30, 2020 | |
Net sales | $ 4,914 | $ 741 | ||||
Operating loss | $ (4,946) | $ (2,772) | (12,708) | (14,258) | ||
Assets | 41,879 | 41,879 | $ 46,359 | $ 30,066 | ||
Accounts receivable, net | 208 | 208 | 224 | 46 | ||
Inventory | 960 | 960 | $ 449 | 228 | ||
Cure Operations [Member] | ||||||
Net sales | 386 | 741 | ||||
Operating loss | (7,019) | (14,258) | ||||
Assets | 46,604 | 46,604 | 30,066 | |||
Accounts receivable, net | 22 | 22 | 46 | |||
Inventory | 368 | 368 | 228 | |||
Sera Labs Operations [Member] | ||||||
Net sales | 4,654 | 0 | ||||
Operating loss | (5,689) | 0 | ||||
Assets | 9,450 | 9,450 | 0 | |||
Accounts receivable, net | 186 | 186 | 0 | |||
Inventory | 592 | 592 | 0 | |||
Eliminations [Member] | ||||||
Net sales | (126) | 0 | ||||
Operating loss | 0 | $ 0 | ||||
Assets | (14,175) | (14,175) | 0 | |||
Accounts receivable, net | 0 | 0 | 0 | |||
Inventory | $ 0 | $ 0 | $ 0 |
DERIVATIVE LIABILITY (Details)
DERIVATIVE LIABILITY (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
ACCRUED EXPENSES (Tables) | ||
Derivative liability measured at fair value, beginning balance | $ 0 | $ 91,000 |
Loss on change in fair value included in earnings | 0 | (91,000) |
Derivative liability measured at fair value, ending balance | $ 0 | $ 0 |
SEGMENT REPORTING (Details 1)
SEGMENT REPORTING (Details 1) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenues and Concentration Risk | 100.00% | 100.00% | 100.00% | 100.00% |
Other sales less than 10% [Member] | ||||
Revenues and Concentration Risk | 1.00% | 2.00% | 1.00% | 2.00% |
CureFilm? sales [Member] | ||||
Revenues and Concentration Risk | 21.00% | 98.00% | 14.00% | 75.00% |
Research & Development services [Member] | ||||
Revenues and Concentration Risk | 1.00% | 23.00% | ||
Product sales - CBD [Member] | ||||
Revenues and Concentration Risk | 78.00% | 77.00% | ||
Product sales - PPE [Member] | ||||
Revenues and Concentration Risk | 7.00% |
BUSINESS COMBINATION AND DECO_3
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY | |
Fair Value of the Contingent Share Consideration | $ 3,205 |
Fair value of contingent liability | 2,258,000 |
Net change in fair value | $ (947,000) |
BUSINESS COMBINATION AND DECO_4
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 5) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Net revenues | $ 1,359 | $ 192 | $ 4,939 | $ 741 |
Net loss | (4,343) | $ (2,751) | (8,835) | $ (14,144) |
Cure Pharmaceutical [Member] | ||||
Net revenues | 192 | 741 | ||
Net loss | $ (2,751) | $ (14,144) | ||
Net loss attributable to Cure per common share, basic | $ (0.07) | $ (0.32) | ||
Net loss attributable to Cure per common share diluted | $ (0.07) | $ (0.32) | ||
Pro forma Adjustment [Member] | ||||
Net revenues | $ 0 | $ 0 | ||
Net loss | 0 | 0 | ||
Consolidated Pro Forma [Member] | ||||
Net revenues | 1,936 | 6,426 | ||
Net loss | $ (3,721) | $ (15,471) | ||
Net loss attributable to Cure per common share, basic | $ (0.07) | $ (0.30) | ||
Net loss attributable to Cure per common share diluted | $ (0.07) | $ (0.30) | ||
Sera Labs [Member] | ||||
Net revenues | $ 1,744 | $ 5,685 | ||
Net loss | $ (970) | $ (1,327) | ||
Net loss attributable to Cure per common share, basic | $ (0.08) | $ (0.11) | ||
Net loss attributable to Cure per common share diluted | $ (0.08) | $ (0.11) |
BUSINESS COMBINATION AND DECO_5
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 1) - October 2, 2020 [Member] | 9 Months Ended |
Sep. 30, 2021USD ($)shares | |
Upfront Consideration Shares, value | $ 1,000,000 |
Closing Merger Consideration Shares, shares | shares | 6,909,091 |
Closing Merger Consideration Shares, value | $ 9,535,000 |
Contingent Consideration Shares (Clawback Shares), shares | shares | 5,988,024 |
Contingent Consideration Shares (Clawback Shares), value | $ 3,083,000 |
Liabilities assumed, value | $ 550,000 |
Total purchase price, shares | shares | 12,897,115,000 |
Total purchase price, value | $ 14,168 |
BUSINESS COMBINATION AND DECO_6
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 2) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Net assets acquired: | ||
Other assests | $ 83 | $ 58 |
Contract liabilities | 611 | $ 994 |
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_7
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 3) $ in Thousands | 9 Months Ended |
Sep. 30, 2021USD ($) | |
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_8
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 4) | 9 Months Ended |
Sep. 30, 2021USD ($) | |
Fair Value of the Contingent Share Consideration | |
Fair value Beginning Balance | $ 16,043,000 |
Settlement of contingent consideration liability | (21,701,000) |
Net change in fair value | (5,658,000) |
Fair value Ending Balance | $ 0 |
BUSINESS COMBINATION AND DECO_9
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details Narrative) - USD ($) | Jun. 05, 2020 | May 14, 2019 | Sep. 30, 2021 | Dec. 31, 2020 |
Total potential shares to be issued | 32,072,283 | 26,372,283 | ||
Warrants issue purchase additional shares | 4,143,706,000,000 | |||
Upfront payment consideration | 5,700,000 | |||
Claw back shares | 7,128,913 | |||
Acheivment shares | 3,207,228 | |||
Earnout shares | 8,018,071 | |||
Estimated acquisition costs | $ 4,000,000 | |||
Convertible Note [Member] | ||||
Debt instrument converted amount, principal | $ 14,600,000 | |||
CHI [Member] | ||||
Total purchase price, shares | 8,410,875 | |||
Common stock shares including escrow shares decriptions | a) all 7,128,913 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 purchase 708,467 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. | up to 8,018,071 shares issuable upon exercise of warrants (“Acquisition Warrant Shares”) 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 from Chemistry Holdings pursuant to a convertible note | ||
Gross proceeds | 1,400,000 | |||
Warrants purchase upon common stock | 7,309,605 | 708,467 | ||
Purchase price for acquision | $ 34,100,000 | |||
Preliminary purchase price desriptions | 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 | |||
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 | $ 100,000 | |||
Aggregate amount | $ 20,000,000 | |||
Total purchase price, shares | 12,897,115 | |||
Liability Contingent shares consideration | $ 3,100,000 | |||
Fair value of preliminary purchase price | $ 14,200,000 | |||
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 ($1.38) on October 2, 2020 for the closing merger consideration shares |
INTELLECTUAL PROPERTY AND COL_2
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS (Details Narrative) - USD ($) $ in Thousands | May 06, 2021 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Nov. 07, 2019 |
Revenue | $ 0 | $ 50 | $ 0 | $ 10 | ||
Feasibility study and technology cost | $ 300 | |||||
License Agreement [Member] | ||||||
Settlement payment | $ 2,300 | $ 3,900 | ||||
Amount payable | $ 1,600 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands | Sep. 30, 2021USD ($) |
COMMITMENTS AND CONTINGENCIES | |
2021 | $ 33 |
2022 | 134 |
2023 | 138 |
2024 | 46 |
2025 | 0 |
Undiscounted cash flow | 351 |
Effect of discounting | (48) |
Lease liabilities recognized | $ (303) |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details 1) $ in Thousands | Sep. 30, 2021USD ($) |
COMMITMENTS AND CONTINGENCIES | |
2021 (remainning) | $ 6 |
2022 | 14 |
2023 | 14 |
2024 | 9 |
2025 | 0 |
Thereafter | 0 |
Finance lease liabilities recognized | $ 43 |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details 2) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2021 | Dec. 31, 2020 | |
Operating leases | ||
Right-of-use assets, net | $ 280 | $ 343 |
Right-of-use lease liabilities, current | 104 | 93 |
Right-of-use lease liabilities, noncurrent | 199 | 278 |
Total operating lease liabilities | $ 303 | $ 371 |
Weighted average remaining lease term, operating lease | 2 years 6 months 18 days | 3 years 3 months 21 days |
Weighted average discount rate | 11.30 | 11.3 |
Finance leases weighted price | 9.0 | 9.0 |
Finance lease right-to-use assets, net | $ 43 | $ 52 |
Current liabilities | 13 | 12 |
Noncurrent liabilities | 30 | 40 |
Total financing lease liabilities | $ 43 | $ 52 |
Weighted average remaining lease term, finance lease | 3 years 21 days | 3 years 9 months 25 days |
COMMITMENTS AND CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Details Narrative) | May 06, 2021USD ($) | May 08, 2020 | Oct. 21, 2020USD ($) | Sep. 30, 2021USD ($)ft² | Sep. 30, 2020USD ($) | Sep. 30, 2021USD ($)ft² | Sep. 30, 2020USD ($) | Dec. 31, 2020USD ($) |
Operating lease rent expense | $ 100,000 | $ 70,000 | $ 300,000 | $ 200,000 | ||||
Weighted average discount rate | 11.30 | 11.3 | ||||||
Right of use asset | 200,000 | $ 200,000 | ||||||
Finance lease payable, current | 100 | 100 | ||||||
Operating capital lease liability, long term portion | 30 | 30 | ||||||
Operating capital lease liability, current portion | 13 | 13 | ||||||
Finance capital lease liability, long-term portion | 40,000 | $ 40,000 | $ 100,000 | |||||
Lease term | 5 years | |||||||
Finance lease liability, current | $ 10,000 | $ 10,000 | $ 40,000 | |||||
Sum of installment payment, description | a gross sum of $93,461.54, paid in equal installments over a nine -month period | |||||||
Description of finance lease | 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 during the year ended 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 $0.1 million or less annually based on a discount rate of 9.0% | |||||||
Offices And Manufacturing Facility [Member] | ||||||||
Offices and manufacturing facility area | ft² | 25,000 | 25,000 | ||||||
License Agreement [Member] | ||||||||
Agreed to pay | $ 2,300,000 | $ 3,900,000 | ||||||
Amount payable | $ 1,600,000 | |||||||
Lease Agreement [Member] | May 1, 2019 [Member] | ||||||||
Offices and manufacturing facility area | ft² | 3,822 | 3,822 | ||||||
Lease agreement description | 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 $0.01 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3% |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - USD ($) $ in Thousands | Oct. 15, 2021 | Oct. 07, 2021 | Oct. 27, 2021 | Oct. 19, 2021 | Nov. 10, 2021 |
Penaltie amount | $ 9,100 | ||||
Proceeds from initial deposit from distributor | $ 300 | ||||
Investor [Member] | |||||
Proceeds from issuance of promissory note | $ 50 | $ 300 | $ 20 |