10-K 1 s102868_10k.htm 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014

o	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 333-192997

NuGene International, Inc.

(Exact name of registrant as specified in its charter)

Nevada		46-3999052
(State of incorporation)		(I.R.S. Employer Identification No.)

17912 Cowan, Suite A, Irvine, California 92614		714-641-2640
(Address of principal executive offices)		(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:
Title of each class registered:	Name of each exchange on which registered:
None	None

Securities registered under Section 12(g) of the Act: None (Title of class)

Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No þ

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein and, will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company þ

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

The aggregate market value of the common stock held by non-affiliates as of March 27, 2015 was $21,954,941 based on the closing price of the registrant's common stock reported by the OTCQB market on March 27, 2015. The determination of affiliate status is not necessarily a conclusive determination for other purposes.

The outstanding number of shares of common stock as of March 28, 2016 was: 39,924,673

Documents incorporated by reference: None

TABLE OF CONTENTS

PART I		3
ITEM 1.	DESCRIPTION OF BUSINESS	3
ITEM 1A.	RISK FACTORS	15
ITEM 1B.	UNRESOLVED STAFF COMMENTS	34
ITEM 2.	DESCRIPTION OF PROPERTIES	34
ITEM 3.	LEGAL PROCEEDINGS	34
ITEM 4.	MINE SAFETY DISCLOSURES	35
PART II		35
ITEM 5.	MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	35
ITEM 6.	SELECTED FINANCIAL DATA.	36
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	37
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	46
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	46
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	66
ITEM 9A.	CONTROLS AND PROCEDURES	66
ITEM 9B.	OTHER INFORMATION	67
PART III		67
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	67
ITEM 11.	EXECUTIVE COMPENSATION	69
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	70
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	72
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES.	73
PART IV		74
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	74
SIGNATURES		75

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K, including (but not limited to) "Management's Discussion and Analysis of Financial Condition and Results of Operations" include forward-looking statements. Information in this report contains “forward looking statements” which may be identified by the use of forward-looking terminology, such as “may”, “shall”, “will”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, “believes”, “estimates”, “projects”, “targets”, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. Statements in this report concerning the following are forward looking statements:

future financial and operating results;

our ability to fund operations and business plans, and the timing of any funding or corporate development transactions we may pursue;

the ability of our suppliers to provide products or services in the future of an acceptable quality on a timely and cost-effective basis;

our ability to continue as a going concern in the face of limited current sales, material negative stockholders’ equity and working capital;

the ability to manage our considerable short term debt;

expectations concerning market acceptance of our products;

current and future economic and political conditions;

overall industry and market trends;

the outcome of existing litigation described under “Legal Proceedings” below and other filings which we make with the Commission;

management’s goals and plans for future operations; and

other assumptions described in this report underlying or relating to any forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

Unless otherwise noted, the terms "Company", "we", "us", and "our" refer to the ongoing business operations of NuGene International, Inc. and our wholly-owned subsidiaries, NuGene, Inc., NuGene BioPharma, Inc., The Aesthetics Group, Inc. as well as, the past operations of NuGene, Inc. The terms “Bling Marketing, Inc.” or “Bling” refer to the operations of Bling Marketing, Inc. prior to December 29, 2014.

PART I

ITEM 1.

DESCRIPTION OF BUSINESS

Unless otherwise noted, the terms "NuGene Int’l", the "Company", "we", "us", and "our" refer to the ongoing business operations of NuGene International, Inc. and our wholly-owned subsidiaries, NuGene, Inc. and NuGene BioPharma, Inc., as well as, the past operations of NuGene, Inc. The terms “Bling Marketing, Inc.” or “Bling” refer to the operations of Bling Marketing, Inc. prior to December 29, 2014.

ORGANIZATIONAL HISTORY

We were incorporated in the State of Nevada on October 30, 2013 under the name “Bling Marketing, Inc.” Until December 29, 2014, we were a wholesaler of jewelry, principally earrings, rings and pendants (“BMI Business”). We recognized a minimal amount of sales from operations prior to the three months ended September 30, 2014. During the three months ended September 30, 2014, we began working with several distributors to sell our jewelry products to retail outlets and as a result, recognized sales revenue of $22,025. On September 11, 2014, we filed a Current Report on Form 8-K indicating that we were no longer a shell company as defined by Rule12b-2 of the Exchange Act in light of our operations through the quarter ended September 30, 2014.

On December 26, 2014, we entered into an Agreement and Plan of Merger (“Merger Agreement”) with NuGene Inc., a California corporation (“NuGene”), and on December 29, 2014 (the “Closing Date”) we filed a certificate of merger in the State of California whereby our subsidiary, NG Acquisition Inc. (“Acquisition Sub”) merged with NuGene. As a result, NuGene (the surviving entity) became our wholly owned subsidiary. The transaction contemplated under the Merger Agreement is deemed to be a reverse merger. Under reverse merger accounting, our Company (the legal acquirer) is considered to have been acquired by NuGene. The assets, liabilities and operations of NuGene have been brought forward at their book value and no goodwill has been recognized.

In connection with the Merger Agreement, we entered into a Business Transfer and Indemnity Agreement dated December 29, 2014 (the “Indemnity Agreement”) with our former Chief Executive Officer and Director, Dena Kurland providing for:

The transfer of our jewelry business operations existing on the date of the Indemnity Agreement (the “BMI Business”);

The assumption by Ms. Kurland of all liabilities of our Company and the indemnification by Ms. Kurland holding our Company harmless for any and all liabilities arising at or before the date of the Indemnity Agreement;

The payment by NuGene to Ms. Kurland of $350,000 in cash; and

The surrender by Ms. Kurland of 15,000,000 shares (before giving effect to the Stock Split discussed below) (the "Indemnity Shares") of our Company’s common stock representing 95% of the then outstanding common stock (all of which shares have been deemed cancelled by our Company).

Pursuant to the terms of the Merger Agreement, our Company issued 26,052,760 shares of Company common stock and 1,917,720 Company Series A Preferred Stock to the former NuGene, Inc. shareholders. The Series A Preferred Stock is initially convertible into common stock at a ratio of one to one. Additionally, as long as there are a minimum of 900,000 shares of Series A Preferred Stock outstanding, the holders of the Series A Preferred Stock have the right to elect a majority of the board of directors as long as there are a minimum of 900,000 shares of Series A Preferred Stock outstanding. Finally, the holders of the Series A Preferred Stock, generally voting as a class with the holders of common stock, have for each share of Series A Preferred Stock owned, three times the number of votes permitted to each share of common stock.

On December 26, 2014, our board of directors approved a 15.04 to one stock split (“Stock Split”) in the form of a stock dividend to holders of our common stock as of that date. To effect that board action, shareholders received as a stock dividend 14.04 additional shares of common stock for every share of common stock held. Unless otherwise noted, all share numbers shown in this Quarterly Report give effect to the Stock Split.

On December 29, 2014, we completed the sale of 2,000,000 shares of our common stock to 18 purchasers (“Stock Placement”) for proceeds totaling $2,000,000, including (a) $1,625,000 of cash and (b) automatic conversion of promissory notes in the principal amount of $375,000.

At the Closing Date subsequent to the transactions described above (and giving effect to the Stock Split), we had approximately 39,197,400 shares of common stock outstanding and 1,917,720 shares of Series A Preferred Stock outstanding. At the time of the merger, an outstanding warrant to acquire shares of NuGene Inc. was exchanged for a warrant of Bling Marketing Inc. The warrant on its issuance, after giving effect to the Stock Split, evidenced the right of the holder to acquire up to 500,000 shares of common stock of our Company. The warrant has a strike price of $2.50 per share and was not exercisable for 12 months (the "Initial Exercise Date"). Any shares acquired thereunder upon exercise thereafter cannot be sold for six months following the Initial Exercise Date.

On January 22, 2015 we were advised that the Financial Industry Regulatory Association had approved our (i) 15.04 to one Stock Split, (ii) name change from Bling Marketing Inc. to NuGene International, Inc., and (iii) change of trading symbol from BLMK to NUGN.

NUGENE HISTORY AND BUSINESS

NuGene was incorporated in California in December 2006 and formed and funded by our founders, Ali Kharazmi and Mohammed Kharazmi, M.D. The initial focus of the NuGene was to develop and market customized skin care products. As part of that focus, NuGene sought to leverage the working relationships developed by our founders with the plastic surgery community. NuGene directed significant time and resources on developing anti-aging and scar treatment/reduction products.

In 2007 we continued to focus on age defying products utilizing peptide complexes (see further description, below) and nano-encapsulation for absorption into the skin (see further description, below). We introduced a limited product line under the NuGene name, and co-branded the products with an affiliated entity, Genetic Institute of Anti Aging, Inc. (“GIAA”), which is also owned by our founders. We utilized the services of a Korean based contract manufacturer to supply our products. This product line (the “GIAA Line”) was based on the use of peptides and did not utilize stem cells. We had very modest sales in 2007, with our sole customer being GIAA, a related party.

In 2008 we stopped production of the GIAA Line and sales were limited to selling remaining inventory through medical offices and through GIAA. With the GIAA Line discontinued, we spent the remainder of 2008 considering different formulations and methodologies for improved anti-aging products. In 2009 and 2010 we had limited activity and very limited sales. Our sales were mostly overseas and limited to the remaining inventory of the GIAA Line. We continued to explore how we might advance our formulations and methodologies. We expended funds on research and development, carried out mostly by scientists engaged by the Company.

In 2011 our founders decided to use adult adipose human stem cells (undifferentiated cells found throughout the body that multiply by cell division to replenish dying cells and regenerate tissues) as the foundation of the formulation for its products. During 2011 the Company developed a proprietary process to extract human adult stem cells from fat cells that the Company then used in its customized NuGene line made specifically for those client(s). Throughout 2011 we continued to provide autologous, or mature, fat-derived stem cells for use in clinical procedures, utilizing this technology. Through this process, the Company refined its ability to culture adult human stem cells to render human conditioned stem cell media at a proprietary concentration which is a primary ingredient in the NuGene line of cosmeceuticals.

In 2012 we completed our initial line of cosmeceutical products based on these adipose derived stem cells. We branded this advanced skin care line solely under the NuGene name (the “NuGene Line”). We were able to eliminate the unpleasant odor associated with stem cells by adding a fragrance with a very low incidence of allergic reaction. The packaging of this new product line bears no resemblance to the prior GIAA Line. We also manufactured the NuGene Line ourselves at a small laboratory facility that we leased from an affiliated entity owned by one of our founders. Throughout 2013, we continued to expand the product offerings of the NuGene Line. The Company focused its stem cell work in the surgical arena and orthopedic regeneration. These services were delivered to one client, which was an affiliated entity. Sales of the NuGene Line were limited as we were in an initial rollout and branding phase.

During 2014, we focused our efforts on transitioning to a cosmeceutical skincare business for mass distribution. With this transition and expanded attention to our consumer products, we sought to develop our marketing plan and distribution channels. By the end of 2014, we had wholesalers distributing products from the NuGene Line to medical offices and medical spas throughout the United States. In addition to the NuGene Line, we generated revenues from an affiliate, Advanced Surgical Partners (“ASP”) which is also owned by our CEO and Chairman of the Board, Messrs. Ali and Mohammed Kharazmi, respectively. Revenues generated from AdvSP resulted from NuGene providing Plasma Rich Platelet and Stem Cell injections for orthopedic and plastic surgery procedures to ASP. We provided these products and services to AdvSP as we transitioned into the commercialization of our cosmeceutical product lines. We had no such product sales nor provided services to AdvSP subsequent to the Merger Agreement in December 2014.

The Company currently is principally engaged in marketing its NuGene Line of products. We will need to seek substantial additional funding to remain a going concern, maintain operations and to activate our business plan. Without adequate funding to support our operations for at least the next 12 months, our ability to expend funds on advertising, retain channels of distribution, retain supplier relationships, build inventory and recruit experienced sales personnel cannot be assured. Additionally, we were unsuccessful in several attempts to raise capital during 2015 and early 2016 and these failures have put our Company under significant financial strain. We continue to attempt to procure new sources of funding, whether from the issuance of debt or shares of our common stock or a combination of both. Even if we are able to obtain such additional funding, no assurance can be given that the amounts of funding we might secure will prove to be adequate or that we will be able to accomplish our goals within the timeframes projected. In addition, no assurance can be given that we will be able to obtain any additional financing on commercially reasonable terms or otherwise. If we are unable to obtain adequate funding, we may be unable to manage our existing outstanding debt, and may be required to significantly curtail or even discontinue our operations.

Overview

“Cosmeceuticals” refer to the combinations of cosmetics and pharmaceuticals that may offer medicinal or drug-like benefits. The term is more of a marketing term rather than a legal term, with the cosmetics industry having adopted the term in the late 1990’s. The US Food and Drug Administration (the “FDA”) does not recognize the term. While drugs are subject to a review and approval process by the FDA, cosmetics and cosmeceuticals are not subject to the same stringent regulatory regime and scrutiny. As such, if a product has drug properties, it must be approved as a drug. However, cosmeceuticals are not subject to this review and approval process.

Cosmeceuticals offer consumers cosmetic-like treatments with active ingredients, which in our view give them pharmaceutical-like efficacy. Driven by aesthetic-consciousness, according to the May 2014 RNCOS research publication entitled, “Global Cosmeceuticals Market Outlook 2018” the global market for cosmeceutical products has reached an estimated size of $35.1 billion in 2013. We believe that this market benefits from the growing segment of a younger generation of consumers as well as baby boomers who want to preserve their youthful looks. In our view the U.S. cosmeceutical market will continue to be favorably influenced by these growing segments of people who want beautiful and younger looking skin while aging.

Two of the fastest growing cosmeceuticals segments are the age-defying and hair restoration markets which focus on mechanisms that control the aging of skin and prevent/restore hair loss. Also according to the same RNCOS research, skin care garnered a material share of the cosmeceutical market in 2013 with a 60%, $21 billion worldwide market share, followed by hair care which represented a 14%, $4.75 billion market share. The global skincare cosmeceutical market is expected to reach $30.3 billion by 2018, accounting for a 62% share in the total cosmeceutical markets. In particular it is anticipated that with an aging baby boomer population and increased male grooming, skin whitening, facial care and sun-damaged products will drive the expected global demand.

The use of stem cell based media as a foundation for cosmeceutical products is designed to promote the age-defying process. Every human being has stem cells in his or her body. These cells exist from the early stages of human development until the end of a person’s life. Throughout our lives, our body continues to produce stem cells that regenerate to produce differentiated cells that make up various aspects of the body such as skin, blood, muscles, and nerves. These are generally referred to as adult stem cells (non-embryonic). These cells are important for the purpose of medical therapies aiming to replace lost or damaged cells or tissues or to otherwise treat disorders. Our NuGene Line of products uses human adult stem cells culture media that we believe, when applied to human skin cells, may reduce the appearance of aging skin. We have not yet commenced widespread marketing efforts of the NuGene Line, however we are in the process of developing relationships with distributors to provide access to national and international channels of distribution.

Strategy

In our view, age-defying products represent (and will continue to represent) a significant portion of the facial skincare market. In key markets, we believe that the facial skincare market is positioned for significant growth with limited downside risks from the overall condition of the economy. In order to make claims that products can diminish the signs of aging, marketers are constantly looking for new combinations of specialty ingredients. The category of skincare products based on biotechnology such as human stem cell is in our view just beginning to be developed, and therefore we expect that it has significant growth potential. Our goal is to leverage our knowledge in human adult stem cell technology to develop and commercialize advanced anti-aging skincare products for the retail and professional channels. We intend to develop, manufacture, and market cosmetic skin care and hair products to address this significant market opportunity.

Our business plan entails having our NuGene Line of products continue to be sold domestically and internationally through professional channels, including dermatologists, plastic surgeons, medical offices, and day and resort spas. We also expect to directly market our product through television sales-dedicated channels. We plan to promote brand awareness through advertising, our own sales personnel, other marketing and public relations. We will also partially rely upon the name recognition of Kathy Ireland secured under the License Agreement discussed below. We propose to further expand our sales efforts through our branded website (www.nugene.com) and additional online commerce channels.

In addition to our product enhancement and marketing activities, our success will also depend on our ability to develop and protect our proprietary technology. We intend to rely on a combination of patent, trade secret and know-how, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and other agreements, to establish and protect our proprietary rights. Our success will also depend upon our ability to avoid infringing upon the proprietary rights of others. If we are judicially determined to have infringed such rights, we may :

incur significant costs of defense;

be ordered to pay damages;

become obligated to alter our services, products or processes;

be required to obtain licenses for products or process at additional cost; or

cease certain marketing activities.

Our Products

All of our products listed below have been formulated, fully developed and are currently being marketed. We have formulated and are testing other products which we expect to introduce (financial resources permitting) once product testing and marketing materials are completed. None of our products are licensed from third parties.

NuGene Skincare Products

Universal Cream: Our moisturizer works to smooth fine lines and wrinkles, improve aging skin tone and texture, increase collagen production, and reduce puffiness and dark circles—without any heaviness or oiliness.

Universal Serum: Formulated with multiple human growth factors, polypeptides, vitamins, minerals and amino acids, our signature serum encourages skin’s natural production of collagen and elastin while boosting other vital matrix protein syntheses, enabling it to repair and prevent environmental damage, improve texture and thickness, and restore skin’s natural luminosity.

Eye Serum: Designed to prevent and correct wrinkles, fine lines, puffiness, dryness and dark circles, this innovative product relies on our cutting-edge stem cell technology, along with multiple growth factors and other nourishing ingredients, to help reverse skin damage, minimize the appearance of future signs of aging, and restore youthful luminosity around the eyes, fostering skin that looks younger, smoother and fresher.

Light & Bright Gel: This potent product works to break down excess melanin in the skin without any of the harsh ingredients typically found in brightening products. And, in addition to quickly reducing the look of dark spots and excess pigmentation, it works to increase overall radiance, restoring a youthful glow.

Face Wash: As an anti-aging cleanser, our Face Wash is formulated with a unique blend of multiple growth factors, cytokines and rich pentapeptide complexes. NuGene’s Face Wash minimizes the visibility of pores and softens imperfections while the natural cleansing agents gently wash away dirt, oil, and makeup leaving the skin refreshed, smooth, clean and hydrated.

Hair care Products

Regenerative Shampoo: Rich in growth factors, polypeptide complexes and vitamins, this product has been formulated to rejuvenate the hair and scalp. In addition to increasing hydration, vibrancy and shine, it works to protect hair from environmental assault, preventing and correcting breakage, thinning and split ends.

Regenerative Conditioner: This hydrating, shine-enhancing conditioner utilizes additional key ingredients, vitamins and polypeptide complexes, to name a few, to instantly smooth even the coarsest, most damaged strands. With regular use, it fosters stronger, shinier, younger-looking hair that’s easier to style.

Anti-Hair Loss Serum: Our stem cell based technology replenishes the hair follicles with essential growth factors and cytokines to reduce and prevent further hair loss, as well as to stimulate follicular regeneration.

Pharmaceutical Products

In 2014, we initiated research and formulation for a new topical burn cream for treatment of burns that we expect may reduce infection and could improve healing time. Burns are the fourth most common type of trauma worldwide according to RNCOS research. Despite recent advances in wound management, infection continues to be a significant problem in treating burns. This has resulted in the routine use of prophylactic topical antimicrobial agents. The most common topical antimicrobial agent used is silver sulfadiazine cream. However, the side effects of delayed wound healing have remained a challenge to overcome.

Tissue healing research has demonstrated adipose-derived stem cell culture conditioned media exhibit human dermal fibroblast proliferation and enhanced secretion of type I, III collagen and fibronectin. These properties are well suited for dermal wound healing. In order to develop and bring this product to market, we intend to work with a contract manufacturer to combine the product with our stem cell media technology. Preclinical FDA work consists of in vitro and in vivo efficacy studies, experimental toxicology testing, formulation study, storage condition, stability testing, and ensuring Good Manufacturing Practices are all followed in the manufacturing process. This topical product will require FDA approval and we can give no assurance that we will obtain that approval.

Strategic Relationships and Licensing Arrangements

kiWW License Agreement

In November 2014 we entered into a License Agreement with kathy ireland Worldwide^® ("kiWW^®") whereby we licensed the right to utilize the trademarks and rights to the name, likeness and visual representations of Kathy Ireland in connection with our cosmeceutical line of products containing adult human adipose stem cell derived or containing biologically active or biologically derived ingredients. The initial term of the license is for eight years and it may be renewed for up to an additional four years.

In accordance with the License Agreement, we are required to submit a Business Plan to the kiWW^®within ninety days of the effective date of the License Agreement. We have submitted our Business Plan to the Licensor within the required time frame and received the necessary approvals. The License Agreement defines the Licensed Products as those NuGene products containing stem cell derived or containing biologically active or biologically derived ingredients including: NuGene Face Wash, NuGene Universal Cream, NuGene Universal Serum, NuGene Light and Bright, NuGene Eye Serum, NuGene Anti-Hair Loss Serum, NuGene Regenerative Shampoo & Conditioner, and Advanced Infusion Serums as well as the following products which have not yet been commercially launched and/or developed: NuGene FaceMask, NuGene Melasma Serum, NuGene Acne Serum, NuGene Revitalizing Night Cream, NuGene Toner, NuGene Body Lotion, NuGene Specialty Soap, NuGene Neck and Décolleté Lotion, and other age defying products that are stem cell derived or which contain biologically active or biologically derived ingredients. On March 5, 2015, we announced the launch of the NuGene kathy ireland^® brand. The campaign includes a re-branded internet presence and new videos featuring Ms. Ireland. We have initiated the launch of a larger multi-media campaign to promote the product line.

NuGene is obligated to utilize commercially reasonable efforts to meet the following minimum totals of net sales of Licensed Products for the specified periods:

Period	Forecasted Minimum Net Sales

Contract Year 1	$	1,500,000

Contract Year 2	$	2,500,000

Contract Year 3	$	3,750.000

Contract Year 4	$	5,000,000

A "Contract Year" corresponds to a calendar year ending December 31 and commences with the year 2015.

For each of these Contract Years we are obligated to pay a minimum royalty as follows:

Period	Minimum Royalty

Contract Year 1	$	100,000

Contract Year 2	$	150,000

Contract Year 3	$	200,000

Contract Year 4	$	250,000

Additionally, we are obligated to pay an annual Brand Participation fee to kiWW^®which provides for general advertising, good will and promotion of the overall kathy ireland brand. NuGene paid kiWW $350,000 effective upon execution of the License. This onetime fee includes a "Brand Participation" fee for Contract Year 1. Brand Participation fees for Contract Years 2 through 8 are $50,000 annually with an additional 1% of the total gross sales of Licensed Products of the prior year beginning in Contract Year 4.

This description of the License Agreement is a summary and does not purport to describe all material conditions, obligations and payments that are the responsibility of NuGene to the Licensor. The description provided of the License Agreement in this Annual Report is qualified in its entirety by reference to the License Agreement attached as an Exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on January 6, 2015, and that agreement is incorporated herein by this reference as if fully set forth in this Report.

Advisory Board

In an effort to improve our product line and retain the latest and most forward looking state of the art services, the Company has assembled an Advisory Board consisting of Board Certified Dermatologists and Plastic Surgeons consisting of medical professionals whom the Company believes are leaders in their respective fields. We anticipate that our Advisory Board members, among other things, will provide us with strategic and business development ideas, insight into major trends in the highly competitive cosmeceutical marketplace and input regarding their specific expertise.

Competition

NuGene experiences and will experience intense competition from companies developing cosmeceuticals with stem cell derived active ingredients as well other ingredients. Our pharmaceutical division will have competition from companies developing stem cell based pharmaceuticals. Our cosmeceutical line of products also competes with other companies that offer a plant derived stem cell skin care line or stem-cell derived extracts. Many of these companies have substantially greater financial, technological, research and development, marketing and personnel resources.

Governmental Regulation

U.S. Government Regulation

The health care industry is highly regulated in the United States. The federal government, through various departments and agencies, state and local governments, and private third-party accreditation organizations regulate and monitor the health care industry, associated products, and operations. The following is a general overview of the laws and regulations pertaining to our business.

FDA Regulation of Stem Cell Treatment and Products

The FDA regulates the manufacture of human stem cell treatments and associated products under the authority of the Public Health Safety Act (“PHSA”) and the Federal Food, Drug, and Cosmetic Act (“FDCA”). Stem cell derived products can be regulated under FDA’s Human Cells, Tissues, and Cellular and Tissue-Based Products Regulations (“HCT/Ps”), or may also be subject to FDA’s drug, biological product, or medical device regulations.

Cosmetic and Skin Care Regulation

Depending upon product claims and formulation, skin care products may be regulated as cosmetics, drugs, devices, or combination cosmetics and drugs. We currently only market cosmetic skin care products and are evaluating entry into the pharmaceutical market. The FDA has authority to regulate cosmetics marketed in the United States under the FDCA and the Fair Packaging and Labeling Act (“FPLA”) and implementing regulations. The Federal Trade Commission (the “FTC”) regulates the advertising of cosmetics under the FTCA.

The FDCA prohibits the marketing of adulterated and misbranded cosmetics. Cosmetic ingredients must also comply with the FDA’s ingredient, quality, and labeling requirements and the FTC’s requirements pertaining to truthful and non-misleading advertising. Cosmetic products and ingredients, with the exception of color additives, are not required to have FDA premarket approval. Manufacturers of cosmetics are also not required to register their establishments, file data on ingredients, or report cosmetic-related injuries to the FDA.

We will be responsible for substantiating the safety and product claims of the cosmetic products and ingredients before marketing. The FDA or FTC may disagree with our characterization of one or more of the skin care products as a cosmetic or the product claims. This could result in a variety of enforcement actions which could require the reformulation or relabeling of our products, the submission of information in support of the product claims or the safety and effectiveness of our products, or more punitive action, all of which could have a material adverse effect on our business. If the FDA determines we have failed to comply with applicable requirements under the FDCA or FPLA, it can impose a variety of enforcement actions from public warning letters, injunctions, consent decrees, and civil penalties to seizure of our products, total or partial shutdown of our production, and criminal prosecutions. If any of these events were to occur, it could materially adversely affect us. If the FTC determines we have failed to substantiate our claims, it can pursue a variety of actions including disgorgement of profits, injunction from further violative conduct, and consent decrees.

Some types of skin-care products are regulated as both cosmetics and drugs under the FDCA. Examples of drug-cosmetic combination products are facial moisturizers that contain sunscreen and skin protectant hand lotions. Products that are both cosmetics and drugs because of ingredients or intended use must satisfy the regulatory requirements for both cosmetics and drugs. The drug requirements include either FDA premarket approval under an NDA or an abbreviated new drug application (“ANDA”), or, more typically, implicit approval through conformance with the applicable FDA final regulation (also known as an over-the-counter drug monograph) that specifies the conditions that must be met for the drug to be generally recognized as safe and effective.

At present, we do not anticipate that any of the products we market will be regulated as a combination cosmetic and drug or solely as a drug or device. However, the FDA may disagree with such a determination which could result in a variety of enforcement actions and significant additional expenditure to comply with regulations which the FDA may deem applicable to such products. We are in the process of researching new products that may be classified as combination cosmetics and drugs which would require FDA approval.

Domestic State and Local Government Regulation

Some states and local governments in the United States regulate the labeling, operation, sale, and distribution of our skin care products. To the extent additional state or local laws apply, we intend to comply with them.

Foreign Government Regulation

In general, we will need to comply with the government regulations of each individual country in which our products are to be distributed and sold. These regulations vary in complexity and can be as stringent, and on occasion even more stringent, than FDA regulations in the United States. The level of complexity and stringency is not always precisely understood today for each country, creating greater uncertainty for the international regulatory process. Furthermore, government regulations can change with little to no notice and may result in up-regulation of our product(s), thereby creating a greater regulatory burden for us. We have not yet thoroughly explored the applicable laws and regulations that we will need to comply with in foreign jurisdictions. As a result it is possible that we may not be permitted to sell our products in foreign markets or expand our business into one or more foreign jurisdictions.

THE SCIENCE BEHIND OUR PRODUCTS

Human Stem Cells

Cells are the basic living units that make up humans, animals, plants and other organisms. Stem cells have two important characteristics that distinguish them from other types of cells. First, they can renew themselves for long periods of time. Second, they are unspecialized and under certain conditions can be induced to become cells with special functions such as metabolically active cells of the liver or transparent and protective cells of the eye. Until recently, scientists have worked with two major kinds of stem cells, embryonic stem cells and adult stem cells each category of which has different properties and characteristics.

Adipose Stem Cell-Derived Media

We use human fat tissue (adipose tissue) to derive adult human stem cells. Adipose stem cell derived growth factors have been shown to contribute to exerting diverse regenerative effects on skin cells. These growth factors help in stimulating collagen synthesis and migration of dermal fibroblasts (a major contributor in skin repair, regeneration, and revitalization). Using a proprietary technique for the isolation of these cytokines from adipose derived stem cells, NuGene has been able to incorporate these proteins into its cosmeceutical line of products.

Peptides

Peptides are molecular links of amino acids that help your skin to produce the anti-wrinkle protein known as collagen. Peptides are closely related to proteins. Peptides and proteins are present in every living cell and are responsible for many biochemical activities including acting in enzymes, hormones, antibiotics, etc. Peptides are listed in many better skin care products, and they perform important functions in the skin. As people age, they lose collagen which results in sagging and wrinkled skin. Since collagen is a protein composed of long chains of amino acids linked together by peptide bonds, peptides play an important role in replacing lost collagen. As collagen breaks down, the protein chains break up into smaller chains of peptides. The resulting peptide chains send signals to the body to produce more collagen. Since peptides are small, they can penetrate the skin’s protective barriers. Applying peptides directly to the skin through good skin care products tricks the skin into thinking that it has lost collagen recently and needs to produce more. Research has identified a number of peptides which mimic the function of the naturally produced growth factors in the human body. The advantage of using peptides over growth factors in skin care formula is their stability, but they are not complete in structural integrity as expressed by proteins in vivo.

Mass Production of Growth Factors

NuGene has been able to produce a sufficient quantity of biologically active growth factors derived from adipose stem cells to meet its current product requirements. With patent-pending technology, the process has achieved a high yield rate and superior quality of biomolecules. Our purification technique enables NuGene to have a high concentration of growth factors and cytokines in our skincare line.

Nano-encapsulation

One of the material challenges of the skincare science is the delivery of the active ingredients to the skin. At NuGene, we met this challenge by using nano-encapsulation technology. This technology allowed us to effectively deliver adipose stem cell derived cytokines and growth factors through embedding them within a nanosome or capsule. This added step enhances the penetration of these biomolecules into the skin cells. Additionally, it prevents these growth factors/cytokines from becoming degraded by proteases present in the mixture. We believe this enhances the effectiveness of our products.

NuGene’s Anti-Aging Mechanism

Based upon research on adipose derived stem cell cultured media, we have discovered the following benefits:

Increases the proliferation of epithelial cells;

Increases the synthesis of hyaluronic acid;

Increases the synthesis of collagen and elastin;

Adipose stem cell-derived EGF, bFGF increases the proliferation of fibroblast which synthesizes collagen and elastin; and

Adipose stem cell-derived EGF, IGF, bFGF, aFGF increases the skin elasticity by up-regulation of collagen, elastin, hyaluronic acid, and other extracellular matrixes (ECMs).

OFFICES

Our principal executive offices are located at 17912 Cowan, Suite A, Irvine, California, 92614. Our telephone number is (714) 614-2640. Our website is www.nugene.com. Our internet website and the information contained therein or connected thereto are not intended to be incorporated by reference into this Report.

EMPLOYEES

We currently have eight full-time and one part-time employees. Additionally, for selling, marketing, IT and business development work that is not handled by our employees we have outsourced such work to various qualified contractors and consultants as deemed necessary.

WEBSITE

We currently maintain our corporate website at www.nugene.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and other related information will be available, free of charge, on our website after we electronically file those documents with, or otherwise furnish them to, the SEC. Our Internet website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Annual Report on Form 10-K or any other SEC filing.

INTELLECTUAL PROPERTY

We have invested, and continue to invest, significantly in intellectual properties, which consist of patents, trademarks and URLs. We have a program to file applications for and obtain patents in the United States and in selected foreign countries where we believe filing for such protection is appropriate. We have two patent applications pending in the U.S. and one international patent application pending. The principal claims made in these applications cover wound scar and burn treatment creams, the methods of preparing stem cells and the formulations for stem cell media containing products.

ITEM 1A:

RISK FACTORS

An investment in our common stock involves a very high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Annual Report, before making an investment decision. Our future operating results may vary substantially from anticipated results due to a number of risks and uncertainties, many of which are beyond our control. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. The following discussion highlights some of these risks and uncertainties and the possible impact of these risks on future results of operations. If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, the market value of our stock could decline substantially and you could lose part or all of your investment.

RISKS RELATED TO OUR BUSINESS

Our products and product candidates may not achieve or maintain widespread market acceptance.

We may not achieve or maintain widespread market acceptance of our products or product candidates among physicians, patients or healthcare providers. Our products are highly susceptible to physician and patient preference and market acceptance. We have a limited history of promoting our cosmeceutical products. Significant marketing efforts to date have been focused primarily on dermatologists and plastic surgeons.

We believe that market acceptance of our products will depend on many factors including:

The perceived advantages of our products over competing products;

The effectiveness of our sales and marketing efforts;

The convenience and ease of administration of our products;

The safety and efficacy of our products and the prevalence and severity of any possible adverse side effects;

The availability and success of alternative treatments;

Our product pricing and cost effectiveness;

Publicity concerning our products, product candidates or competitive products;

Whether or not patients routinely use our products and purchase additional product, and

Our ability to respond to changes in physician, aestheticians and patient preferences for the treatment of dermatological conditions and the improvement of the appearance of skin.

If our products fail to achieve or maintain market acceptance or if new products or technologies are introduced by others that are more favorably received than our products, are more cost effective or that otherwise render our products obsolete, we may experience a decline in the demand for our products.

If we are unable to market and sell our products successfully, our business, financial condition, results of operation and future growth would suffer. Our ability to compete depends upon the success of our business development activities and our ability, and the ability of our collaborators, to innovate, develop and commercialize new products and product enhancements, as well as to identify new markets for our products

Our business strategy requires us to develop or acquire new and innovative applications of our products, identify new markets for our existing products, and develop or acquire new technology. We are currently developing products for the treatment of burns and exploring several delivery technologies to improve our existing products. However, our development efforts may not lead to new commercial products. To successfully expand our product offerings, we must:

Develop or acquire new products that either add to or significantly improve our current product lines;

Convince our target customers that any new cosmeceutical products or line extensions would be an attractive revenue-generating addition to their practices;

Protect our products with defensible intellectual property; and

Satisfy and maintain all regulatory requirements for commercialization.

The process of developing product candidates involves a high degree of risk and may take several years. Product candidates we may acquire or license in the future that appear promising in the early phases of development may fail to reach the market for several reasons, including:

Pharmaceutical product candidates may fail to receive regulatory approvals required to bring the products to market;

Manufacturing costs or other factors may make our pharmaceutical and cosmeceutical product candidates uneconomical;

The proprietary rights of others and their competing products and technologies may prevent our product candidates from being commercialized;

Success of pharmaceutical product candidates in nonclinical and early clinical studies does not ensure that later stage clinical trials will be successful;

The length of time necessary to complete clinical trials and to submit an application for marketing approval of pharmaceutical product candidates for a final decision by a regulatory authority varies significantly and may be difficult to predict; and

Developing pharmaceutical and cosmeceutical product candidates is very expensive and will have a significant impact on our operating expenses.

We may be unable to continue to develop new products, enhancements to our existing products and other technologies in the near term, if at all, in part because new products or enhancements to our existing products must meet regulatory standards and receive requisite regulatory approvals.

Our failure to introduce new products or enhancements to our existing products for any one of these reasons could adversely affect our expected growth rate and adversely affect our overall business and financial results.

Our marketed products and our products under development could be rendered obsolete by technological or medical advances.

The development of medical advances to treat the conditions that our products are designed to address may render our marketed products and our products under development obsolete or uneconomical. The enhancement to the appearance of skin, the regeneration of hair growth and the treatment of burns, acne or other skin disorders are the subjects of active research and development by many potential competitors, including major pharmaceutical companies, specialized biotechnology firms, universities and other research institutions, as well as other major cosmeceutical companies which develop wrinkle reduction or age defying skin and hair care products. While we intend to expand our technological capabilities to remain competitive, research and development by others may render our technology or products obsolete or noncompetitive or result in treatments superior to any therapy we develop.

Technological advances affecting costs of production also could adversely affect our ability to sell products. Our products could become more expensive to produce, or not competitive, which would decrease our revenues and adversely affect our results of operations and financial condition.

During the year ended December 31, 2015, the majority of our revenues were derived from two wholesale distributors. The loss of the distributors could have a material negative effect on our financial condition.

During the year ended December 31, 2015, we derived 31.1% and 15.7% of our sales from two wholesale distributors. These two distributors purchase products from us on a purchase order basis on negotiated terms of payment. The distributors are under no obligation to continue to purchase our products. The loss of either of the distributors, a material reduction in their purchases or the cancellation of product orders or unexpected returns of unsold products could decrease our revenues and impede our future growth prospects. We do not have long-term purchase commitments with our distributors. We are actively seeking to expand our products’ distribution channels in order to reduce the impact the loss of any one distributor would have on our Company, however we can give no assurance that we will be successful in doing so.

If we breach any of our key license or supply agreements, we could lose exclusivity rights or the agreements could be terminated.

We have an international licensing agreement with kiWW for all cosmetic products for a term of eight years. These rights are important to our business, and any breach of the related agreements could result in a termination of the respective rights, which, in turn, would prevent us from marketing the affected products or developing the affected product candidates. Our agreements with kiWW require milestone and royalty payments, minimum revenue requirements or minimum annual royalty payments and other obligations. If we have insufficient demand for these products or otherwise fail to meet the minimum purchase requirements or any of the other requirements set forth in these agreements, we could lose the exclusive nature of our right to market products under the kiWW brand. Additionally, we are overdue in payments owed to kiWW. Should we not be able to cure this breach of our payment obligations under the agreement within a mutually agreeable timeframe, we face the possibility that the agreement could be terminated.

If we fail to comply with any of the requirements under our key license and supply agreements, we may lose exclusive rights under these agreements or they may be terminated in their entirety. Because at the time of this report, we remain overdue in payments owing to many of the counterparties to these agreements, there is a risk that such loss or termination is enhanced at present. In that event, others could obtain rights to sell products that compete directly with our products and our revenues and market share would correspondingly decrease. The loss of any rights under any of our license and supply agreements would adversely affect our ability to sell our products and adversely affect our revenues and results of operations

We rely on third parties to perform many necessary commercial services for our products, including services related to the distribution, storage, transportation and regulatory monitoring of our products. We rely on third parties to perform a variety of functions related to the sale and distribution of our cosmeceutical products. These services include distribution, logistics management, inventory storage and transportation, invoicing and collections, the key aspects of which are out of our direct control. If any third-party service provider fails to comply with applicable laws and regulations, fails to meet expected deadlines or otherwise does not carry out its contractual duties to us, our ability to deliver products to meet commercial demand would be significantly impaired. In addition, we may retain one or more third parties to perform various regulatory monitoring services for our products, including adverse event reporting, safety database management and other product maintenance services. If the quality or accuracy of the data maintained by these regulatory service providers is insufficient, our ability to continue to market our approved products could be jeopardized or we could be subject to regulatory sanctions.

If our competitors develop and market products faster than we do or if the products of our competitors are considered more desirable than our products, revenues of our existing or new products may be adversely affected.

The dermatology market in particular, is highly competitive and includes a number of established, large and mid-sized pharmaceutical and cosmeceutical companies, as well as smaller emerging companies and specialty pharmaceutical and cosmeceutical companies, whose activities are focused on our target markets and areas of expertise. We face and will continue to face, competition for our products and in the commercialization, development, licensing and discovery of our product candidates. This could negatively impact our ability to achieve significant market acceptance of our products and product candidates. Furthermore, new developments including the development of other drug technologies, delivery methods and improved formulations, occur in the pharmaceutical industry at a rapid pace. These developments may render our currently marketed products and product candidates or technologies obsolete or noncompetitive.

Compared to us, many of our competitors and potential competitors have substantially greater:

	•		Capital resources;
	•		Research and development resources, including personnel and technology;
	•		Regulatory experience; Favorable brand name awareness;
	•		Clinical trial experience; and
	•		Manufacturing, distribution and sales and marketing experience.

As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than us. Our competitors may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates or technologies. Our competitors may also develop pharmaceutical and cosmeceutical products that are more effective and less costly than ours and may also be more successful than us in manufacturing and marketing their products.

Other competitors may invest significant amounts in achieving production economies of scale.

It is possible that our competitors may be able to reduce their cost of production so that they can aggressively price their products and secure a greater market share. Our competitors may also be able to attract and retain qualified personnel and to secure capital resources. Any of these events could adversely affect our ability to compete and our results of operations could suffer.

If we are unable to attract and retain key personnel, our business will suffer.

Our success depends on our continued ability to attract, retain and motivate highly qualified management, business development, sales and marketing, manufacturing, product development and other personnel. We may not be able to recruit and retain qualified personnel (particularly for senior sales and marketing and research and development positions) in the future due to intense competition for personnel among businesses like ours. The failure to do so could have a significant negative impact on our future product revenues and business results. Our success depends on a number of key management and technical personnel, including Ali Kharazmi, our President and Chief Executive Officer, Saeed Kharazmi, our Chairman of the Board, Acting Chief Financial Officer, and Sanjay Dhar, Ph.D, our Director of Research and Development. We are not aware of any present intention of these persons or any of our other executive officers to leave our company. In addition, we do not have “key person” insurance policies on any of our executive officers that would compensate us for the loss of their services. If we lose the services of one or more of these individuals, replacement could be difficult and may take an extended period of time and could impede significantly the achievement of our business objectives. This may have a material adverse effect on our results of operations and financial condition.

Our products and product candidates may cause undesirable side effects that could limit their use.

Skin irritation is a reported side effect of cosmeceutical products. Although these side effects generally are not severe, they may limit the use of our products, particularly if physicians or patients perceive the risks to outweigh the benefits or the side effects of competitive products to be less significant. If more severe side effects associated with any of our cosmeceutical products were to be reported or observed, we could be required to suspend our marketing of the products, conduct additional safety tests and potentially cease the sale of the products. In addition, we face the potential for product liability claims from any patients who experience side effects, whether or not any action is taken by a regulatory authority.

Undesirable side effects caused by our product candidates could interrupt, delay or halt our development programs, including clinical trials, and could result in the denial of any required regulatory approval by the FDA or other regulatory authorities.

We may face liability and indemnity claims that could result in unexpected costs and damage to our reputation.

Our business exposes us to potential liability risks that arise from the testing, manufacture and sale of our cosmeceutical products. Plaintiffs in the past have received substantial damage awards against pharmaceutical companies based upon claims for injuries allegedly caused by the use of their products. Although we currently maintain product liability insurance, there is no guarantee that any claims brought against us would be within our existing or future insurance policy coverage or limits. Any judgment against us that is in excess of our policy limits would have to be paid from our cash reserves, which would reduce our capital resources. Further, we may not have sufficient capital resources to pay a judgment, in which case our creditors could levy against our assets. Also, it may be necessary for us to recall products that do not meet approved specifications, which would result in adverse publicity, potentially significant costs in connection with the recall and a loss of revenues. Any product liability claim or series of claims brought against us could harm our business significantly, particularly if a claim resulted in adverse publicity or damage awards outside or in excess of our insurance policy limits.

Failure to adequately comply with information security policies or to safeguard against breaches of such policies could adversely affect our operations and could damage our business, reputation, financial position and results of operations.

In the process of making sales using consumer credit cards as a method of payment, we may handle and transfer such information as part of our business. These activities are subject to laws and regulations, as well as industry standards, in the United States and other jurisdictions in which our products and services are available. These requirements, which often differ materially and sometimes conflict among the many jurisdictions in which we operate, are designed to protect the privacy of consumers’ personal information and to prevent that information from being inappropriately used or disclosed. We maintain and review technical and operational safeguards designed to protect this information and generally require others with whom we work to do so as well. However, despite those safeguards, it is possible that hackers, employees acting contrary to our policies, third-party agents or others could improperly access relevant systems or improperly obtain or disclose data about our consumers, or that we may be determined not to be in compliance with applicable legal requirements and industry standards for data security, such as the Payment Card Industry guidelines. A breach or purported breach of relevant security policies that compromises consumer data or determination of non-compliance with applicable legal requirements or industry standards for data security could expose us to regulatory enforcement actions, card association or other monetary fines or sanctions, or contractual liabilities, limit our ability to provide our products and services, subject us to legal action and related costs and damage our business reputation, financial position, and results of operations.

Changes in economic conditions could materially affect our ability to maintain or increase sales.

The cosmeceutical industry depends on consumer discretionary spending. The United States in general or the specific markets in which we operate may suffer from depressed economic activity, recessionary economic cycles, higher fuel or energy costs, low consumer confidence, high levels of unemployment, reduced home values, increases in home foreclosures, investment losses, personal bankruptcies, reduced access to credit or other economic factors that may affect consumers discretionary spending. Economic conditions may remain volatile and may continue to depress consumer confidence and discretionary spending for the near term. Negative economic conditions might cause consumers to make changes to their discretionary spending behavior, including spending currently made on our cosmeceutical line of products. If such sales decrease, our profitability could decline as we spread fixed costs across a lower level of sales and this could materially adversely affect our business, financial condition or results of operations.

Our business is subject to intense competition and we may be unable to compete effectively against entrenched companies with larger resources and established channels of distribution.

Competition from other cosmeceutical businesses could impact sales and seriously harm our business, financial condition and results of operations. We strive to provide direct and indirect benefits to our distributors that are superior to, or competitive with, other cosmeceutical companies. If we are unable to provide our distributors with adequate benefits, or if any significant number of our distributors are not successful, we may be unable to maintain or renew our contractual relationships with distributors, causing our business, financial condition and results of operations to suffer.

The cosmeceutical industry in which we operate is highly competitive and increased competition could reduce our sales and profitability.

We compete in different markets within the cosmeceutical industry on the basis of the uniqueness of our product offerings, the quality of our products, customer service, price and distribution. Our markets are highly competitive. Our competitors vary in size and many may have greater financial and marketing resources than we do. If we cannot maintain quality and pricing that are comparable or superior to our competitors, we may not be able to grow our revenues and operating profits and we may lose market share. Competitive conditions could result in our experiencing reduced revenues, gross margins and operating results and could cause an investor in our Company to lose a substantial amount or all of its investment in our Company.

The loss of suppliers or shortages in ingredients could harm our business.

We acquire ingredients and products from third-party suppliers and manufacturers. A loss of any of these suppliers and any difficulties in finding or transitioning to alternative suppliers could harm our business. In addition, we obtain some of our products from sole suppliers that own or control the product formulations, ingredients, or other intellectual property rights associated with such products. In the event we are unable to renew these contracts, we may need to discontinue some products or develop substitute products, which could harm our revenue. In addition, if we experience supply shortages or regulatory impediments with respect to the raw materials and ingredients we use in our products, we may need to seek alternative supplies or suppliers and may experience difficulties in finding ingredients that are comparable in quality and price. Some of our products incorporate products that may have limited supplies. If demand exceeds forecasts, we may have difficulties in obtaining additional supplies to meet the excess demand. If we are unable to successfully respond to such issues, our business could be harmed.

FINANCIAL RISKS

Our financial statements have been prepared assuming that our Company will continue as a going concern and we will need to obtain additional funding if we are to continue operations.

The factors described elsewhere herein raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from this uncertainty. To date we have incurred significant cash losses that have materially impaired our liquidity and working capital. Additionally, during the last ninety days as we have sought to procure additional financing but were unsuccessful. We have been under severe liquidity restraints such that our CEO was required to personally guarantee borrowings may by our Company from our bank. This has resulted in the substantial increase in balances outstanding and owing to our suppliers that has put our relationships with them in jeopardy. We continue to attempt to procure the needed funding to maintain our operations. Should we be successful, we will need to quickly reverse the historical trend of our operations through generating significantly higher levels of revenue (at or about historical margins) and reducing our operating expenses. If we cannot generate the revenues and gross margin (while reducing operating expenses) at levels required to achieve profitability or obtain sufficient additional capital on acceptable terms, we will need to substantially revise our business plan or cease operations. Should that happen, an investor could suffer the loss of a significant portion or all of his investment in our Company.

We have a limited operating history and investors will have no ability to gauge market acceptance for our products or the ability of management to execute on our business plan.

We are an early-stage company with a limited operating history and limited revenues derived from our operations. Our operations to date have been primarily focused on our formation, the hiring of our management team, acquiring, licensing and developing our technology and products, building and expanding our sales force, marketing department and investor relations and commencing the commercial launch of our products.

It is difficult to predict future performance and our ability to maintain operations is dependent upon a number of factors over which we have limited control. As a result, it is difficult to predict our quarterly financial results and they are likely to fluctuate significantly. We are a relatively new company with a limited operating history and our sales prospects are uncertain. We also have relatively limited experience selling our products. Accordingly, we cannot predict with any certainty the timing or level of sales of our products in the future. If our quarterly sales or operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. In addition to the other factors discussed under these “Risk Factors,” specific factors that may cause fluctuations in our operating results include:

Demand and pricing for our products, including any change in wholesaler purchasing patterns for our products;

Physician and patient acceptance of our products;

Timing of new product offerings, acquisitions, licenses or other significant events by us, our partners or our competitors;

Regulatory approvals and legislative changes affecting our cosmeceutical products;

Any interruption in the manufacturing or distribution of our products, including events affecting our third-party suppliers and any failure to comply with manufacturing specifications;

Changes in treatment practices of physicians or other providers that currently recommend our products;

Significant product returns and rebates;

Implementation of new or revised accounting or tax rules or policies; and

The effect of competing technological and market developments.

Because we have a limited operating history, we are subject to all of the risks and uncertainties of a new business.

We only initiated the rollout of the NuGene Line in 2013. We are subject to all of the risks and uncertainties normally associated with an early stage business, including potential manufacturing issues, difficulties establishing our marketing and distribution operations, lack of name recognition, lack of adequate capital, difficulties hiring and retaining qualified employees and difficulties in complying with all applicable federal, state and local regulatory and administrative requirements. As an early stage company, we expect to incur operating losses until (if ever) we successfully release and market a line of products that will generate enough revenues and gross margin to become profitable or thereafter maintain profitability. There is no assurance that we will be able to validate and market products that will generate enough revenues for us to become profitable or thereafter maintain profitability. As a result, our Company cannot predict when, if ever, it might achieve profitability and cannot be certain that it will be able to sustain profitability, if achieved. Our lack of an operating history may make it difficult for you to evaluate our business prospects in connection with an investment in our securities.

We have had operating losses since the Merger and we expect to continue to incur net losses for the near term.

As of December 31, 2015, we had an accumulated deficit of approximately $350,000 and we have reported a net loss of approximately $5.2 million for the year ended December 31, 2015. Our working capital deficit as of that date amounted to approximately $577,000 and was not adequate to sustain our operations. Unless our sales revenues increase significantly, we anticipate that we will continue to incur net losses in the near term and we may not be able to sustain operations at current levels.

We need to raise additional capital to continue our operations, which may not be available on commercially reasonable terms, or at all, and which materially may dilute your investment.

To attain profitability, we must increase our revenues and manage our product, operating and administrative expenses, as to which each of which we can give no assurance. Because we have been to date unable to generate sufficient revenues to pay our expenses and our existing sources of cash and cash flows are otherwise insufficient to fund our activities, we currently must raise additional funds to continue our operations and to manage our current short-term debt load. Further, recent efforts to raise additional capital have been unsuccessful. We do not have any arrangements in place for additional funds and no assurance can be given that those funds will become available on favorable terms, or at all. Furthermore, if we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we are unsuccessful in obtaining additional funds on commercially reasonable terms or at all, and thereafter in achieving profitability, we may be required to curtail significantly or cease our operations, which could result in the loss of all of your investment in our stock.

Should we be able to obtain additional financing and thereafter be successful in growing our revenues according to our operating plans, we may not be able to manage our growth effectively, which could adversely affect our operations and financial performance.

The ability to manage and operate our business as we execute our growth strategy will require further substantial capital and effective planning. Additionally, we have not been able to maintain adequate levels of capital to fund existing operations. Significant rapid growth on top of our current operations could greatly strain our internal resources, leading to a much lower quality of customer service, reporting problems and delays in meeting important deadlines resulting in substantial loss of market share and other problems that could adversely affect our financial performance. Our efforts to grow could place a significant strain on our personnel, management systems, infrastructure, liquidity and other resources. If we do not manage our growth effectively, our operations could be adversely affected, resulting in slower, no or negative growth, critical shortages of cash and a failure to achieve or sustain profitability.

We will not pay dividends for the foreseeable future, and we may never pay dividends and, consequently, the only opportunity for investors to achieve a return on their investment is if a trading market develops and investors are able to sell their shares for a profit or if our business is sold at a price that enables investors to recognize a profit.

We currently intend to retain future earnings (if any) to support the development and expansion of our business and will not pay cash dividends for the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our common stock may be limited by state law. Accordingly, we cannot assure investors any return on their investment, other than in connection with a sale of their shares or a sale of our business. The trading market for our shares has been volatile and holders of our securities (which are highly speculative) may experience fluctuations and losses.

Significant differences between actual and estimated demand for our products could adversely affect us.

If we overestimate demand, we may be required to write off inventories and increase our reserves for product returns or liabilities to customers in future periods. If we underestimate demand, we may not have sufficient inventory of products to ship to our customers. Our cosmeceutical products have expiration dates that generally range from 24 to 36 months from the date of manufacture. Judgment is required in estimating these reserves. The actual amounts could be materially different from our estimates, and differences will need to be accounted for in the period in which they become known. If we determine that the actual amounts exceed our reserve amounts, we will record a charge to earnings to approximate the difference. A material reduction in earnings resulting from a charge could have a material adverse effect on our net income, results of operations and financial condition.

We currently need to raise additional funds to continue our operations and still pursue our growth strategy and if we are unable to raise that capital, we will need to curtail or even to cease operations.

Our current cash and cash equivalents are insufficient to fund our operations through the end of our first fiscal quarter in 2016. We need to raise additional funds to finance our operations and to fund product development programs, sales and marketing initiatives for our current products. Factors affecting our product development expenses include, but are not limited to:

The number of our products in early-stage development ;

Our licensing or other partnership activities, including the timing and amount of related development funding, licensee fees or milestone payments;

The number and outcome of clinical trials conducted by us and/or our collaborators; and

Our future levels of revenue.

We hope to satisfy our future cash needs through private equity offerings, debt financings or collaboration, licensing and other similar arrangements. Additional funding may not be available to us on acceptable terms, or at all, and without that funding we may not be able to continue operations. To the extent that we raise additional capital by issuing equity securities, our stockholders’ ownership will be diluted and possibly substantially.

If we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish potentially valuable rights to our current products, potential products or proprietary technologies, or grant licenses on terms that are not favorable to us.

If adequate funds are not available, our ability to achieve profitability or to respond to competitive pressures would be significantly limited and we may be required to delay, significantly curtail or eliminate the sales of one or more of our current products and/or the development of one or more of our potential products.

CORPORATE AND OTHER RISKS

Our executive officers, directors and principal stockholders beneficially own or control a substantial portion of our outstanding common stock, which may limit the ability of our stockholders, whether acting alone or together, to propose or direct the management on the overall direction of our Company.

Additionally, this concentration of ownership could discourage or prevent a potential takeover of our Company that might otherwise result in an investor receiving a premium over the market price for his shares. A substantial portion of our outstanding shares of common stock is beneficially owned and controlled by a group of insiders, including our officers and directors. Accordingly, our principal stockholders together with our directors, Chief Executive Officer and insider shareholders would have the power to control the election of our directors and the approval of actions for which the approval of our stockholders is required. If you acquire shares of our common stock, you may have no effective voice in the management of our Company. Such concentrated control of our Company may adversely affect the price of our common stock. Our principal stockholders may be able to control matters requiring approval by our stockholders, including the election of directors, mergers or other business combinations. Such concentrated control may also make it difficult for our stockholders to receive a premium for their shares of our common stock in the event we merge with a third party or enter into different transactions that require stockholder approval. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock.

Our Chief Executive Officer and our Chief Financial Officer have limited experience in these roles in a public company.

To serve in the roles of officer and/or director for a public company, an individual needs to be aware of responsibilities in addition to those shouldered by the leader of a private company. Among such additional responsibilities, a senior executive officer must be able to communicate fairly and effectively with the stakeholders of a public company, be aware of the controls required to be maintained by a public company and act in accordance with the legal requirements incumbent upon such senior executives and directors. Neither of our officers (who serve as our only directors), have such experience, the absence of which could increase our exposure to untimely compliance with applicable regulation that could result in possible added liability and cost to the material detriment of our operations and financial interests. Our CFO is a medical doctor by training and has assumed the title and responsibility of a chief financial officer but has not had any prior experience in the traditional services to be rendered but has rather relied on staff and consultants in his acting in this capacity.

We do not have an Audit Committee and we have no independent persons serving on our Board of Directors.

As of the date of this Annual Report, we do not have an independent Audit Committee. An Audit Committee qualitatively enhances a company’s internal controls over financial reporting. Among its functions, independent Audit Committees review the financial reporting, internal controls safeguarding Company assets, interact with auditors, may oversee material financial decisions and provide a sounding board for individuals who believe that there are irregularities in a Company’s accounting policies and procedures. Our Board of Directors consists of our CEO and our CFO and no other persons currently serve on our board. With our lack of an independent Audit Committee and other outside board members at this time, we run a greater risk that a significant error or irregularity could occur that could be materially damaging to our shareholders.

Issuances of our Series A Preferred Stock or other authorized shares of preferred stock may make it more difficult for a third party to effect a change-of-control.

Our articles of incorporation authorize the Board of Directors to issue up to 25,000,000 shares of "blank check" preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors without further action by the stockholders. These terms may include preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. In connection with the Merger, we issued (in addition to common stock) 1,917,720 shares of Series A Preferred Stock to NuGene's two founders. The Series A Preferred Stock is initially convertible into common stock at a ratio of one to one, has the right to elect a majority of the board of directors and has in connection with any other vote of shareholders three votes for every vote available to the common stock. These outstanding shares of Series A Preferred Stock diminish and any future issuances of other series of preferred stock could further diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, the Series A Preferred Stock could be used to restrict our ability to merge with, or sell assets to, a third party. The Series A Preferred Stock specifically, and the ability of the Board of Directors generally, to issue preferred stock make it more difficult, and could delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock. The summary description of the Series A Preferred Stock contained in this Annual Report is qualified in its entirety by reference to the Certificate of Designations filed with Secretary of State of Nevada on December 24, 2014 and included in our Current Report on Form 8-K filed with the SEC on January 6, 2015.

We have incurred significantly increased costs as a result of being a public company.

In reviewing the past operations of NuGene and future prospects, investors should recognize that we have incurred and will continue to incur significant legal, accounting and other expenses that NuGene did not incur as a private company, particularly if we are no longer characterized as an "emerging growth company" as defined under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, as well as under the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), and the JOBS Act, have created uncertainty for public companies and increased costs and time that boards of directors and management must devote to complying with these rules and regulations. The Sarbanes-Oxley Act and related rules of the U.S. Securities and Exchange Commission, or SEC, and the Nasdaq markets regulate corporate governance practices of public companies. Compliance with these rules and regulations has and will continue to increase our legal and financial compliance costs and lead to a diversion of management time and attention from revenue generating activities. For example, we may be required to adopt new internal controls and disclosure controls and procedures as well as incurring additional expenses associated with our SEC reporting requirements.

For as long as we remain an "emerging growth company" as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies."

These exceptions provide for, but are not limited to, relief from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved and an extended transition period for complying with new or revised accounting standards. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." We may remain an "emerging growth company" for up to five years. To the extent we use exemptions from various reporting requirements under the JOBS Act, we may be unable to realize our anticipated cost savings from those exemptions.

Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for so long as we are characterized as an "emerging growth company." Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we file with the SEC as a public company, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an "emerging growth company."

CAPITAL MARKET RISKS

The recent public market for our shares has been and may continue to be volatile. This volatility may affect the ability of our investors to sell their shares as well as the price at which they sell their shares.

The market price for our shares may be significantly affected by factors such as variations in the volume of trading activity, quarterly and yearly operating results, general trends in the markets we serve, press releases announcing developments and changes in state or federal regulations affecting us and our industry. Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies. Such broad market fluctuations may adversely affect the market price of our common stock.

The application of the “penny stock” rules to our common stock could limit the trading and liquidity of the common stock, adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

As long as the trading price of our common stock is below $5 per share, the open-market trading of our common stock will be subject to the “penny stock” rules, unless we otherwise qualify for an exemption from the “penny stock” definition. The “penny stock” rules impose additional sales practice requirements on certain broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets, excluding principal residence, in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). These regulations, if they apply, require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser’s written agreement to a transaction prior to sale. These regulations may have the effect of limiting the trading activity of our common stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases of our common stock as compared to other securities. The stock market in general and the market prices for penny stock companies in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance. Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include 1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; 2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; 3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; 4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and 5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices could increase the volatility of our share price.

We may not be able to attract the attention of brokerage firms, which could have a material adverse impact on the market value of our common stock.

Security analysts of brokerage firms are unlikely to provide coverage of our common stock since there is no incentive to brokerage firms to recommend the purchase of our common stock. The absence of such coverage limits the likelihood that an active market will develop or be maintained for our common stock. It will also likely make it more difficult to attract new investors at times when we require additional capital.

Future sales of our equity securities could put downward selling pressure on our securities, and adversely affect the stock price.

There is a risk that this downward pressure may make it impossible for an investor to sell his or her securities at any reasonable price, if at all. Future sales of substantial amounts of our equity securities in the public market, or the perception that such sales could occur, could put downward selling pressure on our securities, and adversely affect the market price of our common stock.

Risks Related to Regulatory Matters

While we believe that that our principal cosmeceutical products and product candidates do not require FDA approval as new drugs, the FDA could disagree and we may be required to conduct clinical trials to establish efficacy and safety or cease to market these products.

Our cosmeceutical products are marketed without FDA approval on the basis that they are generally recognized as safe and effective for their intended use and thus do not require new drug approval. The FDA has not challenged this position. The FDA may at any time disagree with our position for a variety of reasons, including new information about the particular product or its active ingredients, how the product is promoted, if another company obtains FDA approval for a prescription drug with the same active ingredient, or based on a change of FDA regulatory policy. This could require us to seek new drug approval for these products to remain on the market or to withdraw a product until required clinical trials are performed and new drug approval is obtained.

If the active ingredients of the products are finally determined by the FDA not to be generally recognized as safe and effective for OTC use, the FDA may seek to apply those findings to prescription products as well, leading to potential objections to the continued marketing of the products or a demand that marketing continue only on the basis of a new drug approval. Either of these outcomes could affect the way our products are marketed or our ability to market them at all. Further, the FDA could decide that growth factors derived from human adipose stem cells do not come within this policy and thus must seek new drug approval to remain on the market or must be withdrawn until approval is obtained.

Our pharmaceutical products under development may not be approved by the FDA or foreign regulatory authorities, and any failure or delay associated with our product development and clinical trials or obtaining regulatory approval of these products would increase our product development costs and time to market. We face substantial risks of failure inherent in developing pharmaceutical products. The pharmaceutical industry is subject to stringent regulation by many different agencies at the federal, state and international levels. Our pharmaceutical products must satisfy rigorous standards of safety and efficacy before the FDA approves them, and before any foreign regulatory authorities approve them for commercial use in any countries outside the U.S. where we decide to market them. Even if a regulatory filing is accepted, the FDA or foreign regulatory authorities may request additional information from us, including data from additional clinical trials, and, ultimately, may not grant marketing approval for some of our products or may grant approval only under conditions that are less commercially attractive than anticipated. To the extent that these products do not perform successfully in our planned pivotal clinical trials, we may need to develop alternative candidates. Product development is generally a long, expensive and uncertain process. Successful development of our new pharmaceutical product formulations, including our burn cream will depend on many factors, including:

Our ability to select key components, establish a stable formulation and optimize characteristics;

Our ability to develop a formulation that demonstrates our intended safety and efficacy profile; and

Our ability to transfer from an early-stage company to commercial-scale operations and the costs associated with commercial manufacturing.

If we are unable to develop suitable clinical formulations of our pharmaceutical products or are significantly delayed in doing so, our ability to commercialize these products will be adversely affected. Once we have manufactured a formulation that we believe is suitable for pivotal clinical testing, we will need to complete our clinical testing, and failure can occur at any stage of testing. These clinical tests must comply with FDA and other applicable regulations. We may suffer significant setbacks in advanced clinical trials, even after showing promising results in earlier trials. The results of later clinical trials may not replicate the results of prior clinical trials. Based on results at any stage of clinical trials, we may decide to discontinue development of a product candidate. We, or the FDA, may suspend clinical trials at any time if the patients participating in the trials are exposed to unacceptable health risks or if the FDA finds deficiencies in our applications to conduct the clinical trials or in the conduct of our trials. Moreover, not all products in clinical testing will receive timely, or any, regulatory approval. Even if clinical trials are completed as planned, their results may not support our assumptions or our product claims. The clinical process may fail to demonstrate that our products are safe for humans or effective for intended uses. In addition, these failures could cause us to abandon a product entirely. If we fail to take any current or future product from the development stage to market, we will have incurred significant expenses without the possibility of generating revenues, and our business will be adversely affected.

We will be subject to ongoing regulatory review of products currently under development that may be marketed in the future.

Any pharmaceutical products under development will be subject to extensive regulation. These regulations will impact many aspects of our operations, including the manufacture, labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping related to the products. The FDA also may require post-marketing testing and surveillance to monitor the effects of approved products or place conditions on any approvals that could restrict the commercial applications of these products. In addition, the subsequent discovery of previously unknown problems with a product may result in restrictions on the product, including withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, injunctions against their distribution, disgorgement of money, operating restrictions and criminal prosecution.

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. Violations of the federal anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions under the federal anti-kickback statute, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing, arranging for or recommending prescription or purchase may be subject to scrutiny if they do not qualify for a statutory exemption or safe harbor. Federal false claims laws prohibit any person from knowingly making, or causing to be made, a false claim to the federal government, or knowingly making, or causing to be made a false statement to have a false claim paid. The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines and imprisonment.

In addition, as part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians. This practice is overseen by the FDA and other governmental authorities under regulations that include, in particular, requirements concerning record keeping and control procedures. Any failure to comply with these regulations may result in significant criminal and civil penalties as well as damage to our credibility in the marketplace. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of these laws, which could have a material adverse effect on our business, financial condition and results of operations.

The regulatory status of our cosmeceutical products could change, and we may be required to conduct clinical trials to establish efficacy and safety or cease to market these products.

The Federal Food, Drug, and Cosmetic Act does not recognize “cosmeceuticals” as a category of products. We use the term “cosmeceuticals” as a marketing term to describe our non-prescription, cosmetic products. The FDA does not have a premarket approval system for cosmetic products outside of new color additive, and we believe we are permitted to market our cosmeceutical products and have them manufactured without submitting safety or efficacy data to the FDA. However, the FDA may in the future determine to regulate what we term as cosmeceuticals or the ingredients included in our cosmeceuticals as drugs or biologics, rather than cosmetics. If any of our products are deemed to be drugs or biologics, rather than cosmetics, we would be required to conduct clinical trials to demonstrate the safety and efficacy of our cosmeceutical products in order to continue to market and sell them. In such event, we may not have sufficient resources to conduct any required clinical trials and we may not be able to establish sufficient efficacy or safety data to resume the sale of our cosmeceutical products. Any inquiries by the FDA or any foreign regulatory authorities into the regulatory status of our cosmeceutical products and any related interruption in the marketing and sale of our cosmeceutical products could severely damage our brands and image in the marketplace, including our relationships with physicians and their patients.

If our manufacturers do not comply with U.S. and federal regulations, our supply of product could be disrupted or terminated.

Our manufacturers must comply with U.S. regulations and corresponding foreign standards, including the FDA’s current Good Manufacturing Practice regulations for drug manufacturing and processing, or cGMPs, applicable to the manufacturing processes related to ingredients sold to us for use in our products, and their facilities must be inspected and approved by the FDA and other regulatory agencies as part of their business. We will have limited control over the FDA compliance of our third-party manufacturers. If any of our manufacturers fail to meet or are found to be non-compliant with the cGMPs or any other FDA requirements or similar regulatory requirements outside of the U.S., obtaining the required regulatory approvals, including from the FDA, to use alternative suppliers may be a lengthy and uncertain process. A lengthy interruption in the manufacturing of one or more of our products as a result of non-compliance could adversely affect our product inventories and supply of products available for sale which could reduce our sales, margins and market share, as well as harm our overall business and financial results. Additionally, the Federal Drug and Cosmetic Act (“FDCA”) may hold labelers/specification developers (brands selling a product) criminally and civilly liable for the violations, acts, and omission of their manufacturers.

Under the FDCA, cosmetics (which we refer to as cosmeceuticals) are defined as articles applied to the human body to cleanse, beautify or alter the appearance. The manufacturing of cosmetics is subject to the misbranding and adulteration sections of the FDCA applicable to cosmetics. Cosmetics are not subject to premarket approval by the FDA but the product and ingredients must be tested to assure safety. If the product or ingredients are not tested for safety, a specific warning is required. The FDA monitors compliance of cosmetic products through random inspections of cosmetic manufacturers and distributors. The FDA utilizes an “intended use” doctrine to determine whether a product is a drug or cosmetic by the labeling claims made for the product. If a cosmetic product is intended for a disease condition or to affect the structure or any function of the human body, the FDA will regulate the product as a drug rather than as a cosmetic. The product will then be subject to all drug requirements under the FDCA. The labeling of cosmetic products is subject to the requirements of the FDCA, the Fair Packaging and Labeling Act and other FDA regulations.

We have only limited experience in regulatory affairs, which may affect our ability or the time we require to obtain necessary regulatory approvals. We have only limited experience in regulatory affairs, including the preparation and filing of applications to gain the regulatory approvals necessary for pharmaceutical product candidates. Moreover, some of the products that are likely to result from our product development, licensing and acquisition programs may be based on new technologies that have not been extensively tested in humans. As a result, we may experience a longer regulatory process in connection with obtaining regulatory approvals for any products that we develop, license or acquire.

If we move forward with production of an FDA regulated product, then our operations could be harmed if we are found not to be in compliance with Good Manufacturing Practices.

In the United States, FDA regulations on Good Manufacturing Practices and Adverse Event Reporting requirements require us and our vendors to maintain good manufacturing processes, including stringent vendor qualifications, ingredient identification, manufacturing controls and record keeping. The ingredient identification requirement, which requires us to confirm the levels, identity and potency of ingredients listed on our product labels within a narrow range, is particularly burdensome and difficult for us with respect to products that contain many different ingredients. We are also required to report serious adverse events associated with consumer use of our products. Our operations could be harmed if regulatory authorities make determinations that we, or our vendors, are not in compliance with these regulations or public reporting of adverse events harms our reputation for quality and safety. A finding of noncompliance may result in administrative warnings, penalties or actions impacting our ability to continue selling certain products. In addition, compliance with these regulations has increased and may further increase the cost of manufacturing certain of our products as we work with our vendors to assure they are qualified and in compliance.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

If we are unable to obtain and maintain protection for our intellectual property, the value of our technology and products may be adversely affected, which would materially affect our business.

Patents. Our commercial success will continue to depend in part on the patent rights we plan to obtain related to future products we may market. Our success also depends on our and our licensors’, collaborators’, and suppliers’ ability to maintain these patent rights against third-party challenges to their validity, scope or enforceability of these patent rights.

Our patent position (and those of our licensors, collaborators and suppliers) is subject to the same uncertainty as other pharmaceutical and consumer product companies. Our patents and patent applications (as well as those of our licensors, collaborators and suppliers) may not protect our technologies and products because, among other things, our pending applications may not result in issued patents; we may develop additional proprietary technologies that are not patentable; patents issued to us may not provide a basis for future commercially viable products; and patents issued to us may not provide us with any competitive advantage, or may be challenged, circumvented, invalidated or rendered unenforceable by third parties. For example, the USPTO or the courts may deny, narrow or invalidate patent claims, particularly those that concern biotechnology and pharmaceutical inventions. Inventors or third parties of whom we are unaware, may challenge the ownership of patents and applications we own, license or benefit from through supply agreements with our collaborators and suppliers. We, our licensors, collaborators and suppliers may not be successful in securing or maintaining proprietary or patent protection for our products, and protection that is secured may be challenged and possibly lost.

Our competitors may develop products similar to ours using methods and technologies that are beyond the scope of our intellectual property rights.

Composition of matter patents on active pharmaceutical ingredients may provide protection for competing products without regard to formulation or other type of limitation.

Our primary patent protection strategy consists of obtaining patents for the formulation and methods of manufacturing our products and product candidates when appropriate, in addition to our pending composition patent claims. Our competitors or other third parties, including generic drug companies, may challenge the scope, validity or enforceability of our patent claims. As a result, these patents may be narrowed in scope, invalidated or deemed unenforceable and may fail to provide us with any market exclusivity or competitive advantage even after significant investment in efforts to obtain and maintain a meaningful competitive patent position. Additionally, rights we issue to U.S. and foreign patents that we own or license will be limited to the terms of the patents in the respective countries where the patents issued.

We also may not be able to protect our intellectual property rights against third-party infringement, which may be difficult to detect, especially for infringement of patent claims for methods of manufacturing. If we become involved in any dispute regarding our intellectual property rights, regardless of whether we prevail, we could be required to engage in costly, distracting and time-consuming litigation that could harm our business. As a result of general uncertainties in the patent prosecution process, we cannot be sure that any additional patents will ever be issued. Issued patents generally require the payment of maintenance or similar fees. Failure to make these payments could result in the unenforceability of patents not maintained.

Trade Secrets and Proprietary Know-how. We, our licensors, collaborators and suppliers also rely upon trade secrets, proprietary know-how and other technological innovation, particularly when patent protection is not appropriate or available. However trade secrets are difficult to protect, and we have limited control over the protection of trade secrets used by our licensors, collaborators and suppliers. Although we attempt to protect our trade secrets by requiring our employees, consultants, advisors and current and prospective business partners to enter into confidentiality agreements prohibiting them from disclosing or taking our proprietary information and technology, these agreements may not provide meaningful protection for our trade secrets and proprietary know-how. If our employees or consultants breach these agreements, we may not have adequate remedies for any of these breaches. Further, third parties that are not parties to confidentiality agreements may obtain access to our trade secrets or know-how. Others may independently develop similar or equivalent trade secrets or know-how. If our confidential or proprietary information is divulged to third parties, including our competitors, our competitive position in the marketplace will be harmed and our ability to successfully penetrate our target markets could be severely compromised.

Trademarks. Our trademarks will continue to be important to our success and competitive position. We have received U.S. trademark registration for our corporate name, NuGene^®, and own or have rights to use our product and component names. We also have license regarding the use of Kathy Ireland^®who acts as our brand ambassador. We also will need to pursue trademark registration for any new trademarks that we select. We may not be able to secure any of our trademark registrations with the PTO or comparable foreign authorities. If we do not adequately protect our rights in our various trademarks from infringement (and we are involved in two separate ongoing disputes with respect to trademarks), any goodwill that has been developed in those marks would be lost or impaired. We could also be forced to cease using any of our trademarks that are found to infringe upon or otherwise violate the trademark or service mark rights of another company, and, as a result, we could lose all the goodwill that has been developed in those marks and could be liable for damages caused by any infringement or violation.

Our ability to market our products may become subject to the intellectual property rights of third parties, and we may have to engage in costly litigation to enforce or defend challenges to our intellectual property by third parties, which may harm our results of operations, financial condition and cash flow.

Our commercial success will continue to depend in part on our ability, as well as the ability of our collaborators and suppliers, to make, use and sell our products without infringing the patents or proprietary rights of third parties. Our competitors, many of which have substantially greater resources than we have and have made significant investments in competing technologies or products, may seek to apply for and obtain patents that will prevent, limit or interfere with our ability to make, use and sell products either in the U.S. or international markets. We may not be aware of all of the patents and other intellectual property rights of others potentially adverse to our interests that may be owned by third parties.

Our third-party suppliers may also be notified of alleged infringement, and potentially be sued for infringement of patents or other proprietary rights. We may have limited control or involvement over the defense of these claims, and these third parties could be subject to injunctions and temporary or permanent exclusionary orders in the U.S. or in the countries in which they are based. Because of the uncertainty inherent in any patent or other litigation involving proprietary rights, we (or our licensors, collaborators or suppliers) may not be successful in defending claims of intellectual property infringement by third parties. This could likely have a material adverse effect on our results of operations. Regardless of the outcome of any litigation, defending the litigation may be expensive, time-consuming and distracting to management.

If we or our third-party licensors and suppliers are unsuccessful in any challenge to our rights to market and sell our products, we may (among other things) be required to:

•

pay actual damages, royalties, lost profits and/or increased damages and the third party’s attorneys’ fees, which may be substantial;

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cease the development, manufacture, use and/or sale of products that use the intellectual property in question through a court-imposed sanction called an injunction;

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expend significant resources to modify or redesign our products, manufacturing processes or other technology so that it does not infringe others’ intellectual property rights or to develop or acquire non-infringing technology (which may not be possible); or

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obtain licenses to the disputed rights that could require us to pay substantial upfront fees and future royalty payments and may not be available to us on acceptable terms, if at all, or to cease marketing the challenged products.

Ultimately, we could be prevented from selling a product, commercializing a product candidate, or otherwise forced to cease some aspect of our business operations as a result of any intellectual property litigation. Even if we (or our collaborators and suppliers) are successful in defending an infringement claim, the expense, time delay, and burden on management of litigation and negative publicity could have a material adverse effect on our business.

We may be subject to claims that we, or our employees, have inadvertently or otherwise used or disclosed alleged trade secrets or other proprietary information of our employees' former employers.

We employ individuals who were previously employed at other personal care product or nutritional supplement companies, including our competitors or potential competitors. To the extent that our employees are involved in research areas that are similar to those in which they were involved with their former employers, we may be subject to claims that such employees have inadvertently or otherwise used or disclosed the alleged trade secrets or other proprietary information of the former employers. Litigation may be necessary to defend against such claims.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. DESCRIPTION OF PROPERTIES

We previously sub-leased of our sole corporate facilities at 17912 Cowan, Suite A, Irvine, California, in Orange County, California from AdvSP, an affiliate of our Company, for approximately $16,637 per month (including common area maintenance), consistent with the amount that is charged to AdvSP by the property owner. On February 5, 2015, AdvSP entered into a new five-year lease for the property directly with the owner beginning July 1, 2015 and subsequently amended to begin June 1, 2015. The lease was subsequently amended to increase the square footage under lease beginning in January 2016. The lease includes annual increases in the monthly lease payments of approximately 3% each year.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events.

On July 10, 2015 Stemage Skin Care, LLC (the “Plaintiff”) filed a complaint in the U.S. District Court for the Central District of California entitled “Stemage Skin Care LLC, a North Carolina limited liability company vs. NuGene International, Inc. et al.” (Civil Action No.8:15-cv-01078-AG-JCG). The complaint also names as defendants NuGene, Inc., Ali Kharazmi, Saeed Kharazmi, Kathy Ireland Worldwide, Stephen Roseberry, Steve Rosenblum and Erik Sterling. The complaint contains allegations of damage asserted to be grounded on: (i) copyright infringement; (ii) interference with contract; (iii) intentional interference with prospective economic advantage; (iv) negligent interference with prospective economic advantage; and (v) conspiracy. The complaint allegedly arises out of an August 20, 2012 agreement among the Plaintiff and kathy ireland inc. ("KI") pursuant to which KI made Kathy Ireland available to perform “Ambassador Services" as defined within that agreement. That agreement effectively terminated in October 2014 and is the subject of a separate arbitration with KI and Kathy Ireland before the American Arbitration Association. We filed a response denying all claims and based on our review of the matter, we believe that the complaint is without merit. These proceedings are at an early stage of discovery and of motions and no assurance of outcome currently can be given.

On July 31, 2015 Star Health & Beauty, LLC (“SH&B”) filed a complaint in the U.S. District Court for the Northern District of Georgia entitled “Star Health & Beauty, LLC vs. NuGene, Inc. and NuGene International, Inc. Defendants” (Case No. 1:15-cv-02634-CAP). The complaint alleges that our use of the NUGENE name and trademark infringes on SH&B’s NUGEN name. SH&B seeks cancelation of our NUGENE trademark, as well as unspecified monetary damages. We are in the process of early discovery to assist us in evaluating the merits of this lawsuit and intend to defend our intellectual property rights vigorously. As this matter is at an early stage, no assurance of outcome currently can be given.

In October 2015, NSE Products, Inc., (“NSE”) a Delaware corporation based in Provo, Utah, initiated actions in the US Patent and Trademark Office contesting several of the Company's trademark registrations and applications. These actions, including Oppositions to trademark applications and Petitions to Revoke registered marks, rely on assertions made by NSE regarding the purported likelihood of confusion and dilution of NSE's trademarks that include the words NU SKIN. The Company is defending its registered marks and pending applications against these actions.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information. Since January 22, 2015, our common stock has been traded in the over-the-counter market on the OTCQB trading platform under the symbol “NUGN.” Prior thereto, our common stock was listed on the OTC Bulletin Board under the symbol “BLMK.”

To our knowledge, there was limited or no trading in our common stock under the BLMK trading symbol prior to the Merger Agreement on December 29, 2014. Accordingly, the following table only sets forth the high and low bid information for our common stock for the periods indicated since the completion of the Merger Agreement on December 29, 2014. The following price information reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions:.

	Completion of Merger Agreement (December 29, 2014) through
	December 31, 2015
	High		Low
Period ended December 31, 2014	$	0.002	$	0.002
Period ended March 31, 2015	$	2.500	$	0.002
Period ended June 30, 2015	$	4.310	$	2.115
Period ended September 30, 2015	$	3.871	$	1.450
Period ended December 31, 2015	$	1.850	$	1.120

As of March 28, 2016, the last reported sales price or our common stock on the OTCQB market was $0.63 per share.

Holders of Record. As of March 28, 2016, an aggregate of 39,924,637 shares of our common stock were issued and outstanding and were owned by approximately 61 holders of record, based on information provided by our transfer agent. The foregoing number of record holders does not include any persons who may be deemed to hold their shares of stock in a “street name.”

Recent Sales of Unregistered Securities.

None.

Re-Purchase of Equity Securities.

None.

Dividends.

We have never declared or paid cash dividends on our capital stock and we do not anticipate declaring or paying cash dividends on our capital stock in the foreseeable future. Any payments of cash dividends will be at the discretion of our board of directors, and will depend upon our results of operations, earnings, capital requirements, legal and contractual restrictions, and other factors deemed relevant by our board of directors.

Securities Authorized for Issuance Under Equity Compensation Plans.

We have no compensation plans under which our equity securities are authorized for issuance.

ITEM 6. SELECTED FINANCIAL DATA.

We are a smaller reporting company, as defined by § 229.10(f)(1) of Regulation S-K, that is not required to provide the information required by this Item.

ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The following discussion and analysis of the results of operations and financial condition of the Company is for the years ended December 31, 2015 and 2014. Such analysis should be read in conjunction with the NuGene International, Inc. financial statements and the notes to those financial statements that are included elsewhere in this Annual Report on Form 10-K. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors and Business sections in this Form 10-K. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” or similar expressions, variations of those terms or the negative of those terms to identify forward-looking statements. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

We were incorporated in the State of Nevada on October 30, 2013 under the name “Bling Marketing, Inc.” Until December 29, 2014, we were a wholesaler of jewelry, principally earrings, rings and pendants (“BMI Business”). We recognized a minimal amount of revenues from operations prior to the three months ended September 30, 2014. During the three month ended September 30, 2014, we began working with several distributors to sell our jewelry products to retail outlets and as a result, recognized sales revenue of $22,025. On September 11, 2014, we filed a Current Report on Form 8-K indicating that we were no longer a shell company as defined by Rule12b-2 of the Exchange Act in light of our operations through the quarter ended September 30, 2014.

On December 26, 2014, we entered into an Agreement and Plan of Merger (“Merger Agreement”) with NuGene Inc., a California corporation (“NuGene”), and on December 29, 2014 (the “Closing Date”) we filed a certificate of merger in the State of California whereby our subsidiary, NG Acquisition Inc. (“Acquisition Sub”) merged with NuGene. As a result, NuGene (the surviving entity) became our wholly owned subsidiary. The transaction contemplated under the Merger Agreement is deemed to be a reverse merger. Under reverse merger accounting, our Company (the legal acquirer) was considered to have been acquired by NuGene. The assets, liabilities and operations of NuGene were brought forward at their book value and no goodwill was recognized.

The transfer of our jewelry business operations existing on the date of the Indemnity Agreement (the “BMI Business”);

The payment by NuGene to Ms. Kurland of $350,000 in cash; and

On January 22, 2015, we were advised that the Financial Industry Regulatory Association had approved our (i) 15.04 to one Stock Split, (ii) name change from Bling Marketing Inc. to NuGene International, Inc., and (iii) change of trading symbol from BLMK to NUGN.

RESULTS OF OPERATIONS

For the year ended December 31, 2015 as compared to the year ended December 31, 2014

	2015						2014
	$			% of Revenues			$			% of Revenues

Revenues	$	2,084,939			100.0	%	$	723,438			100.0	%
Cost of goods sold		588,882			28.2	%		293,162			40.5	%
Gross margin		1,496,057			71.8	%		430,276			59.5	%

Operating expenses:
Selling, general and administrative		6,658,109			319.3	%		743,057			102.7	%

Loss from operations		(5,162,052	)		(247.6	)%		(312,781	)		43.2	%

Other expense
Interest expense, net		(57,015	)		(2.7	)%		-			-	%

Net loss	$	(5,219,067	)		(250.3	)%	$	(312,781	)		43.2	%

Revenues.

Revenues generated during the year ended December 31, 2015 totaling $2,084,939 resulted primarily from the sales of our cosmeceutical products to distributors, online marketers and consumer online sales. Sales revenues for the year ended December 31, 2014 totaled $723,438 and consisted primarily of sales to AdvSP, totaling $481,000.

Cost of goods sold.

Cost of goods sold during the year ended December 31, 2015 of $588,882 represented 28.2% of revenues. Such costs related primarily to the cost of raw materials, product packaging, and direct labor in the manufacturing of our cosmeceutical products, as well as shipping and handling. Cost of goods sold during the year ended December 31, 2014 totaled $293,162 or 40.5% of sales and related primarily to direct labor and the materials used in our products.

Selling, general and administrative.

Selling, general and administrative consisted of the following during the years ended December 31, 2015 and 2014:

	2015					2014
	Amount		Percentage			Amount		Percentage
Marketing and advertising	$	650,597		9.77	%	$	90,021		12.11	%
Bad debt		223,631		3.36	%		300		0.04	%
Business development		5,000		0.08	%		245,020		32.97	%
Corporate		169,831		2.55	%		2,304		0.31	%
Insurance		158,358		2.38	%		1,288		0.17	%
Personnel		691,600		10.39	%		19,044		2.56	%
Professional fees		928,392		13.94	%		142,301		19.15	%
Rent and utilities		208,517		3.13	%		33,354		4.49	%
Research and development		350,669		5.27	%		19,105		2.57	%
Stock based compensation and stock issued for services		2,989,680		44.90	%		8,833		1.19	%
Supplies		78,832		1.18	%		38,830		5.23	%
Taxes		72,020		1.08	%		21,022		2.83	%
Other		130,982		1.97	%		121,635		16.37	%

	$	6,658,109		100.00	%	$	743,057		100.00	%

Our Company greatly increased its expenditures on marketing and advertising as we sought to publicize the superior qualities of our products during 2015. In prior years, a significant percentage of our revenues came from sales to related parties and did not involve cosmeceutical products. Bad debt expense arose primarily from sales to two customers that we do not intend to sell to in the future absent satisfaction of previously due amounts. Business development in 2014 primarily consisted of payments to a firm that attempted to employ our stem cell technology with other companies. Corporate expenses were amounts paid to investor communications firms, news wires and investor relations consulting firms.

Insurance expenses increased primarily due to our Company’s carrying directors and officers liability insurance that was not previously carried as well as increased amounts paid for general and product liability policies. Personnel expenses increased with the volume of new employees hired in 2015 to meet the demands of the product business in the areas of manufacturing, marketing and administration as well as additional personnel added to fulfill our Company’s responsibilities as a public company. Our founders and officers continued to work at our Company without compensation through December 31, 2015.

Professional fees included accounting ($61,054 in 2015); cash fees paid to our Advisory Board members ($173,000 and $9,000 in 2015 and 2014, respectively); auditor fees ($25,000 and $24,000 in 2015 and 2014, respectively); consulting services ($253,516 in 2015); legal fees ($308,154 and $47,351 in 2015 and 2014, respectively); and public relations ($98,097 in 2015). Rent and utilities of $208,517 were significantly higher in 2015 over 2014’s $33,354 due to the leasing of additional space for manufacturing, administrative and sales offices required in 2015 given the different focus over that of 2014. Research and development increased significantly in 2015 and included the purchase and charge to operations of in process technology totaling $150,000.

Stock based compensation and stock issued for services resulted from the grant of warrants and options to purchase our common stock to consultants and employees, respectively. The related grants and terms of the derivatives issued is described in complete detail in the accompanying notes to our financial statements for 2015. Supplies increased proportionally with the increased number of employees and activities in 2015 as compared to 2014. Taxes included payroll taxes ($65,653 and $14,851 in 2015 and 2014, respectively) that increased proportionally with the number of employees and amounts paid during the year for salaries.

Interest expense.

Interest expense of $31,479 was recognized in connection with two notes payable that were issued in September and November 2015 totaling $550,000. Additionally, we recognized interest expense totaling $24,411 in connection with estimates of ultimate interest expense that will be owing on as yet undocumented advances made to our Company from November 30, 2015 through the end of December 2015. Interest expense resulted from both the expected interest that will be ultimately due to the Lenders as well as the amortization of the estimated ultimate value of the warrants issued with the advances.

Net Loss.

During the year ended December 31, 2015, we reported a net loss of $5,219,067 and during the year ended December 31, 2014, we reported net loss of $312,781. As discussed above, the net loss during the year ended December 31, 2015 includes non-cash expenses totaling $2,989,680 relating to stock based compensation and stock issued for services over the current contract period. We anticipate continuing to incur net losses as we build new sales channels for our products prior to the realization of significant sales and gross margin from such efforts.

Related Party Transactions

During the year ended December 31, 2015, our Company utilized employees of AdvSP for legal and administrative services. Management estimated the time associated with the services provided and recognized approximately $99,390 during the year ended December 31, 2015, $70,890 of which is owing as of December 31, 2015. We intend to pay AdvSP these amounts once we our current liquidity challenges are remedied (although no assurance can be given that we will be successful in remedying these challenges).

During December 2014, AdvSP provided our Company a $45,000, interest free, short-term loan to cover operating expenses. NuGene repaid the loan during January 2015.

During August 2015, the Center for Weight Management and Plastic Surgery, Inc. (“CWM”), a company affiliated with us, provided services totaling $34,000 to our consultants as compensation for advertising and marketing services provided to our Company. Such amounts remained an outstanding liability at December 31, 2015.

Mr. Ali Kharazmi has purchased equipment and paid for various expenses on behalf of NuGene. As of December 31, 2015, our Company owed Mr. Kharazmi approximately $25,641 related to expense reimbursements.

Dr. Saeed Kharazmi has incurred various business expenses on behalf of NuGene. As of December 31, 2015, our Company owed Dr. Kharazmi approximately $2,405 in expense reimbursements.

Messrs. Ali and Saeed Kharazmi, our CEO and our Chairman of the Board, respectively, have been foregoing salaries since our Company was incorporated in 2006. Mr. Kharazmi has personally guaranteed payment of our building sublease as noted elsewhere.

For the year ended December 31, 2014 as compared to the year ended December 31, 2013

Sales.

Sales generated during the year ended December 31, 2014 totaled $723,438 of which $481,000 or 66% were received from an affiliated company, AdvSP. AdvSP was co-founded by our Chief Executive Officer and Chairman of the Board, Messrs. M. Ali and M. Saeed Kharazmi. Revenues received from AdvSP resulted from our Company having provided Plasma Rich Platelet and Stem Cell injections for orthopedic and plastic surgery procedures to AdvSP. The remaining 34% of our revenues resulted primarily from sales of our cosmeceutical products to select wholesale distributors.

Cost of Goods Sold.

Cost of sales during the year ended December 31, 2014 totaled $293,162, or 41% of sales. Such costs related primarily to the cost of raw materials, product packaging, and direct labor in the manufacturing of our cosmeceutical products, as well as shipping and handling.

Operating Expenses.

Total operating expenses for the year ended December 31, 2014 totaled $743,057 and are detailed above.

Net Loss.

During the year ended December 31, 2014, we reported a net loss of $312,781.

Related Party Transactions

As discussed above, during the year ended December 31, 2014, 66% of our revenues were received from ASP, an affiliated company. The revenues generated through AdvSP were contracted at rates that would have been charged to a non-affiliated company. AdvSP also provided the Company with office space, free of charge, through November 30, 2014. Our CEO, M. Ali Kharazmi, has personally guaranteed the payment of the lease between AdvSP and the landlord.

During December 2014, AdvSP provided NuGene a $45,000, interest free, short-term loan to cover operating expenses. NuGene repaid the loan during January 2015. During 2014, Mr. M. Ali Kharazmi purchased equipment and paid for various expenses on behalf of NuGene. As of December 31, 2014, the Company owed Mr. Kharazmi approximately $17,000 related to such payments.

Liquidity and Capital Resources.

We had cash and cash equivalents of $22,907 as of December 31, 2015 and a working capital deficit of $613,037 as of December 31, 2015. During the fourth quarter of 2015 and through the date of this Annual Report, we have faced an increasingly challenging liquidity situation that has severely hamstrung our operations and ability to execute our operating plan. Further, we have increasingly fallen behind on agreed upon repayment terms with our lenders, products and service providers. We attempted to obtain from multiple sources new capital required to alleviate these liquidity shortfalls, but to date the amounts provided have been insufficient to meet our operating needs. Our officers have personally advanced our Company over $57,700 in funding through the date of this Annual Report, however we believe that new funding totaling at least $1.5 million will be required to satisfy the outstanding claims of our lenders and suppliers and to provide sufficient funds to execute our current operating plan. There is no assurance that our Company will be able to secure such funding on acceptable (or any) terms.

During the year ended December 31, 2015, we reported a net loss of $5,219,067, and had negative cash flows from operating activities totaling $2,434,789 for the same period. Combined with $187,041 in cash flows used for investing activities, we had total negative cash flows of $2,615,800 in 2015 that was offset by cash flows from financing activities of $1,300,000 ($960,000 from the issuance of notes payable from September 25, 2015 through December 31, 2015 and $340,000 from the sale of shares of our common stock during 2015). Combined with a beginning cash balance of $1,344,737 at January 1, 2015, we had a negative net change in cash during 2015 of $1,321,830.

On September 25, 2015, we entered into a Securities Purchase Agreement and issued a 15% Promissory Note with the principal face value of $500,000 (the “15% Note”) to an accredited investor. Under the terms of the 15% Note, all principal and related accrued interest outstanding are due and payable to the noteholder upon the earlier of: (i) September 25, 2016; or (ii) within ten business days after the consummation of an equity or convertible debt financing with aggregate gross proceeds of at least $1,000,000.

Borrowings made pursuant to the 15% Note bear interest at the annual rate of 15% (or $75,000), irrespective of whether paid at or prior to September 25, 2016. If any amount payable pursuant to the note payable is not paid when due (without regard to any applicable grace periods as set forth in the Note), whether at stated maturity, by acceleration or otherwise, such overdue amount shall bear interest at the rate of 15% from the date of such non-payment until such amount is paid in full.

During November 2015, we issued a one year 10% promissory notes payable (the “10% Note”) to a purchaser for cash proceeds totaling $50,000. In the event that we secure any future financing with aggregate gross proceeds of at least $1 million while the 10% Note is outstanding, the 10% Note and all accrued interest therefrom will be immediately due and payable within ten business days of the closing of such financing. The holder may also convert any unpaid principal under the 10% Note into any funding instrument entered into by our Company for a period of 180 days after the date of the 10% Note. The full interest of 10% of the borrowings under the 10% Note ($5,000) is due irrespective of whether paid at maturity or when required to be prepaid.

On November 30, 2015 and on four subsequent dates during December 2015, four individuals (the “Lenders”) advanced a total of $410,000 to the Company. The borrowings (“Advances”) were not accompanied by documentation of the terms of the Advances. However, there were various discussions as to the repayment terms, the interest expected to be paid to the Lenders and additional equity of our Company to be issued to the Lenders in connection with the Advances. Accordingly, we have accounted for the Advances based on estimates of their final terms.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Inflation

Inflation and changing prices have had no effect on our net sales and revenues or on our income from continuing operations over our two most recent fiscal years.

Critical Accounting Policies and Estimates

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.

The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below.

We have identified the following critical accounting policies that are most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The following is a review of the more critical accounting policies and methods used by us:

Inventories

Our Company’s skincare inventories consist of raw materials and finished goods and are valued at the lower of cost (first-in, first-out) or net realizable value. Our Company evaluates its inventory for excess and obsolescence on a regular basis. To determine if the cost of our inventory should be written down, current and anticipated demand, customer preferences and age of the merchandise are considered. For the years ending December 31, 2015 and 2014, we did not recognize any charges to expense associated with excess and obsolete inventory cost adjustments.

Revenue Recognition

In accordance with ASC 605 - Revenue Recognition, the Company recognizes revenue from product sales when the product has been ordered by the customer, the selling price is fixed or determinable, the product is shipped to the customer, title has transferred and collectability is reasonably assured.

Cost of Goods Sold

Cost of sales includes all of the costs to manufacture the Company’s products. For products manufactured in the Company’s own facilities, such costs include raw materials and supplies, direct labor and factory overhead. For products manufactured for the Company by third-party contractors, such cost represents the amounts invoiced by the contractors.

Royalty Expense

The Company recognizes royalty expenses according to its license agreement. The licensee will pay the licensor up to 5% of net sales or a minimum guaranteed royalty of $100,000 beginning in year one and increasing in annual increments of $50,000 for the first eight years of the contract. Royalties are expensed in the statements of operation in the period that the related revenues are recognized, in cost of goods sold.

Research and Development

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Our allowance for doubtful accounts was $177,140 and $3,000 at December 31, 2015 and 2014, respectively.

Share Based Payments

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 - Share-based payments. Under fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for share–based payments granted to non–employees in accordance with ASC 505 - Equity Based Payments to Non–Employees. The Company determines the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

Earnings Per Share of Common Stock

The Company computes earnings per share in accordance with ASC 260 - Earnings Per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all potential dilutive common shares, such as stock issuable pursuant to the exercise of stock warrants or the conversion of preferred stock into common stock.

Common stock equivalents totaling, 2,367,720 and 2,417,720 on December 31, 2015 and 2014, respectively, were not included in the computation of diluted earnings per share in 2015 and 2014 on the consolidated statement of operations because the Company reported a net loss in 2015 and 2014 and to do so would be anti-dilutive.

Income Taxes

Income taxes are accounted for in accordance with ASC Topic 740 - Income Taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future consequences of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases (temporary differences). Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are recovered or settled. Valuation allowances for deferred tax assets are established when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Management evaluates its tax positions on an annual basis and has determined that as of and for the years December 31, 2015 and 2014, no additional accrual for income taxes is necessary. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.

Fair Value of Financial Instruments

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to measure fair value:

- Level 1: Quoted prices in active markets for identical instruments;

- Level 2: Other significant observable inputs (including quoted prices in active markets for similar instruments);

- Level 3: Significant unobservable inputs (including assumptions in determining the fair value of certain investments).

The carrying values for cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities, and deferred revenue approximate their fair value due to their short maturities.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

CONTENTS:		PAGE #

Report of Independent Registered Public Accounting Firm		48

Consolidated Balance Sheets as of December 31, 2015 and 2014		49

Consolidated Statement of Operations for the years ended December 31, 2015 and 2014		50

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2015 and 2014		51

Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014		52

Notes to the Consolidated Financial Statements		53

REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

NuGene International, Inc.

We have audited the accompanying consolidated balance sheets of NuGene International, Inc. and subsidiaries (“the Company”) as of December 31, 2015 and 2014 and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of NuGene International, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of its operations and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the notes to the financial statements, the Company has not established sufficient revenues to cover its operating costs and has suffered from continued losses from operations. As of December 31, 2015, the Company has a working capital deficit and does not have the sufficient cash resources available to meet its planned business objectives. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in the notes to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Dov Weinstein & Co. C.P.A. (Isr)

www.wcpa.co.il

Jerusalem, Israel

March 30, 2016

NuGene International, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2015 and 2014

	2015			2014

Assets
Current assets:
Cash	$	22,907		$	1,344,737
Accounts receivable, net of allowance for doubtful accounts of $177,140 and $3,000 in 2015 and 2014, respectively		347,048			15,567
Inventories		177,492			110,953
Brand participation fee, net		-			300,000
Other current assets		100,555			15,520

Total current assets		648,002			1,786,777

Property and equipment, net of accumulated depreciation of $40,620 and $1,255 at 2015 and 2014, respectively		208,350			60,674
Deposits		21,321			12,800

	$	877,673		$	1,860,251

Liabilities and Stockholders' Equity (Deficiency)

Current liabilities:
Accounts payable and accrued expenses	$	327,623		$	135,563
Accounts payable - related parties		37,936			122,084
Deferred revenues		-			234,916
Notes payable		842,504			-
Accrued interest		35,052			-
Other current liabilities		17,924			-

Total current liabilities		1,261,039			492,563

Commitments and contingencies

Stockholders’ equity (deficiency):

Series A convertible preferred stock; $0.0001 par value; 25,000,000 shares authorized; 1,917,720 shares issued and outstanding on December 31, 2015 (1,917,720 at December 31, 2014)		192			192
Common stock; $0.0001 par value; 100,000,000 shares authorized; 39,894,673 and 39,197,400 shares issued and outstanding on December 31, 2015 and 2014, respectively		3,990			3,920
Common stock earned but unissued; 302,283 shares as of December 31, 2015		30			-
Additional paid-in capital		6,180,929			2,713,016
Accumulated deficit		(6,568,507	)		(1,349,440	)

Total stockholders' equity (deficiency)		(383,366	)		1,367,688

	$	877,673		$	1,860,251

See accompanying notes.

NuGene International, Inc. and Subsidiaries

Consolidated Statements of Operations

For the years ended December 31, 2015 and 2014

	2015			2014

Revenues	$	2,084,939		$	723,438

Cost of goods sold		588,882			293,162

		1,496,057			430,276

Operating expenses:
Selling, general and administrative		6,658,109			743,057

Loss from operations		(5,162,052	)		(312,781	)

Interest expense, net		(57,015	)		—

Net loss	$	(5,219,067	)	$	(312,781	)


Weighted average number of common shares
outstanding - basic and diluted		39,730,875			20,865,881

Net loss per share - basic and diluted	$	(0.13	)	$	(0.01	)

See accompanying notes.

NuGene International, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity (Deficiency)

For the years ended December 31, 2015 and 2014

																						Total
									Common Stock Earned but				Additional									Stockholders'
	Preferred Stock				Common Stock				Unissued				Paid-In			Treasury			Accumulated			Equity
	Shares		Par Value		Shares		Par Value		Shares		Par Value		Capital			Stock			Deficit			(Deficiency)

Balance at December 31, 2013		-	$	-		20,552,760	$	2,055		-	$	-	$	1,054,907	$		-		$	(1,036,659	)	$	20,303

Issuance of common stock		-		-		4,000,000		400		-		-		933			-			-			1,333
Stock based compensation		-		-		1,500,000		150		-		-		8,683			-			-			8,833
Issuance of common stock from debt conversion		-		-		375,000		38		-		-		374,962			-			-			375,000
Issuance of common stock in private placement		-		-		1,625,000		163		-		-		1,624,837			-			-			1,625,000
Recapitalization		1,917,720		192		11,144,640		1,114		-		-		(1,306	)		-			-			-
Treasury stock acquired		-		-		-		-		-		-		-			(350,000	)		-			(350,000	)
Cancellation of treasury stock		-		-		-		-		-		-		(350,000	)		350,000			-			-
Net loss		-		-		-		-		-		-		-			-			(312,781	)		(312,781	)

Balance at December 31, 2014		1,917,720		192		39,197,400		3,920		-		-		2,713,016			-			(1,349,440	)		1,367,688

Issuance of common stock for services		-		-		460,000		46		302,283		30		1,505,737			-			-			1,505,813
Stock based compensation		-		-		-		-		-		-		1,483,867			-			-			1,483,867
Issuance of warrants in connection with notes payable		-		-		-		-		-		-		138,333			-			-			138,333
Issuance of common stock in exchange for cash		-		-		237,273		24		-		-		339,976			-			-			340,000
Net loss		-		-		-		-		-		-		-			-			(5,219,067	)		(5,219,067	)

Balance at December 31, 2015		1,917,720	$	192		39,894,673	$	3,990		302,283	$	30	$	6,180,929	$		-		$	(6,568,507	)	$	(383,366	)

See accompanying notes.

NuGene International, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31, 2015 and 2014

	2015			2014

Cash flows from operating activities:
Net loss	$	(5,219,067	)	$	(312,781	)
Adjustments to reconcile net loss to cash flows from operating activities:
Stock based compensation and stock issued for services		2,989,680			8,833
Noncash portion of interest expense		55,889			-
Depreciation and amortization		39,365			51,255
Bad debt expense		223,631			3,000
Changes in operating assets and liabilities:
Accounts receivable		(555,112	)		(11,315	)
Inventories		(66,539	)		(110,953	)
Brand participation fee		300,000			(350,000	)
Other assets		(93,556	)		(28,320	)
Accounts payable and accrued expenses		192,060			134,312
Accounts payable - related parties		(84,148	)		122,085
Deferred revenues		(234,916	)		234,916
Other liabilities		17,924			-

Cash flows from operating activities		(2,434,789	)		(258,968	)

Cash flows from investing activities:
Purchases of property and equipment		(187,041	)		(61,929	)

Cash flows from financing activities:
Acquisition of treasury stock		-			(350,000	)
Proceeds from notes payable		960,000			-
Proceeds from issuance of common stock		340,000			1,626,333
Proceeds from issuance of convertible debt		-			375,000

Cash flows from financing activities		1,300,000			1,651,333

Change in cash		(1,321,830	)		1,330,436

Cash, beginning of year		1,344,737			14,301

Cash, end of year	$	22,907		$	1,344,737

Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	1,126		$	-
Income taxes	$	-		$	-

See accompanying notes.

NUGENE INTERNATIONAL, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015

NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION

NuGene International, Inc. (the “Company” or “NGI”) was incorporated in the State of Nevada on October 31, 2013. On January 22, 2015, we changed our name to NuGene International, Inc. and effected a 15.04 to one stock split in the form of a stock dividend (“Stock Split”). All amounts shown for common stock and additional paid in capital included in these financial statements have been adjusted to reflect the Stock Split. NuGene, Inc. (our wholly owned subsidiary) was incorporated in the state of California in December 2006. On January 20, 2015, we formed NuGene BioPharma, Inc. (“BioPharma”) as a wholly owned California incorporated subsidiary of NGI. On November 6, 2015, we formed The Aesthetic Group, Inc. (“TAG”) as a wholly owned California incorporated subsidiary of NGI. Both BioPharma and TAG had no significant independent operations during 2015.

Basis of Presentation

The accompanying consolidated financial statements of our Company have been prepared in accordance with accounting principles generally accepted in the United States. The consolidated financial statements reflect the accounts of NuGene International, Inc. and its wholly owned subsidiaries BioPharma and TAG. All significant inter-company balances and transactions have been eliminated in consolidation.

We have incurred net losses through the date of these financial statements and have yet to establish profitable operations. Our financial statements have been presented on the basis that our business is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We are subject to the risks and uncertainties associated with a business with high short-term debt, limited commercial product revenues, including limitations on our operating capital resources and uncertain demand for our products. We have incurred recurring operating losses and negative operating cash flows in 2015, and we expect to continue to incur operating losses and negative operating cash flows in the near future. As a result, management has concluded that there is substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm, in its report on our 2015 consolidated financial statements, has raised substantial doubt about our ability to continue as a going concern.

Our consolidated financial statements as of and for the year ended December 31, 2015 do not contain any adjustments for this uncertainty. In response to our Company’s cash needs, we raised funding as described in our footnotes that follow. Any additional amounts raised will be used for our future investing and operating cash flow needs. However, there can be no assurance that we will be successful in raising additional amounts of financing.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Conformity with Generally Accepted Accounting Principles (“GAAP”) requires the use of estimates and judgments that affect the reported amounts in the financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities that are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. GAAP requires us to make estimates and judgments in several areas, including but not limited to, those related to revenue recognition, collectability of accounts receivable, contingent liabilities, fair value of financial instruments, fair value of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, excess and obsolete inventory, deferred tax asset valuation and income taxes. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ materially from those estimates.

Risks and Uncertainties

Our Company operates in an industry that is subject to rapid change. Our Company's operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks, including the potential of business failure.

Reclassifications

For comparability, certain prior period amounts have been reclassified, where appropriate, to conform to the current year’s financial statement presentation. These reclassifications have no impact on net loss.

Cash Equivalents

Cash equivalents include investments with initial maturities of three months or less. Our Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000.

Inventories

Our Company’s skin and hair care inventories consist of raw materials and finished goods and are valued at the lower of cost (first-in, first-out) or market. Our Company evaluates its inventory for excess quantities and obsolescence on a regular basis. To determine if the cost of our Company's inventory should be written down, current and anticipated demand, customer preferences and the age of the merchandise are considered. For the years ended December 31, 2015 and 2014, our Company did not recognize any significant charges to operations associated with excess and obsolete inventory.

Property and Equipment

Property and equipment consist of office furniture, computer equipment, laboratory equipment, purchased software, website development and improvements made to our leased offices. Property and equipment is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the three-year useful life of the assets or the remaining term of the lease. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Expenditures for maintenance and repairs are expensed as incurred.

Website Development

Costs and expenses incurred during the planning and operating stages of our Company’s website development are expensed as incurred. Our Company accounts for the development of its website by expensing all costs associated with the planning of the website as incurred and capitalizing the costs to develop the website. Once the website is available for use, the related costs will be amortized over their estimated useful life on a straight-line basis (generally estimated to be 3 years) and tested for impairment annually.

Intangible Assets

Identifiable intangible assets with indefinite lives are not amortized but instead are tested for impairment annually or more frequently if circumstances indicate a possible impairment may exist. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives, generally on a straight-line basis, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Deferred Revenue

As of December 31, 2015, we had no deferred revenue. As of December 31, 2014, we had a remaining balance of $234,916 in deferred revenues included in current liabilities related to the sale of products undelivered at that date that was ultimately recognized in 2015.

Revenue Recognition

Our Company recognizes revenue from product sales when the product has been ordered by the customer, the selling price is fixed or determinable, the product is shipped to the customer, title has transferred and collectability is reasonably assured. During 2014, we generated revenues from an affiliate, Advanced Surgical Partners (“AdvSP”). Revenues generated from AdvSP resulted from NuGene providing plasma rich platelet and adipose derived stem cells for orthopedic and plastic surgery procedures to AdvSP.

Concentration of Revenues

During the year ended December 31, 2015, we derived 31.1% and 15.7% of our revenues from two wholesale distributors (ending balances in accounts receivable totaling $173,790 and $327,893, respectively). During the year ended December 31, 2014, we derived 66% or $481,000 of our revenues from AdvSP. Excluding sales to ASP, 51% of our revenues during the year ended December 31, 2014 were derived from a single wholesale distributor. Our distributors purchase products from us on a purchase order basis on standard terms. The distributors are under no obligation to continue to purchase our products. The loss of any of our major distributors, a material reduction in their purchases or the cancellation of product orders or unexpected returns of unsold products could significantly decrease our revenues and impede our future growth prospects. We do not have long-term purchase commitments with our distributors.

Cost of Goods Sold

Cost of goods sold include all of the costs to manufacture our Company’s products. For products manufactured in our Company’s own facilities, such costs include raw materials and supplies, direct labor and factory overhead. For products manufactured for our Company by third-party contractors, such cost represents the amounts invoiced by the contractors.

Royalty Expense

We recognize royalty expenses in accordance with the terms of our license agreement with a celebrity product endorser.

Royalties are expensed in the statements of operation in the period that the related revenues are recognized, in cost of goods sold.

Research and Development

Internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed. Research and development consists of consulting fees, direct labor and raw materials associated with the development of new products to be commercialized by our Company. Research and development expenses totaled $350,669 and $65,830 in 2015 and 2014, respectively.

Allowance for Doubtful Accounts

Our Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Our allowance for doubtful accounts was $177,140 and $3,000 at December 31, 2015 and 2014, respectively. Bad debt expense totaled $223,631 and $300, for the years ended December 31, 2015 and 2014, respectively.

Share Based Payments

We recognize equity–based compensation net of an estimated forfeiture rate and recognize compensation cost only for those shares expected to vest over the requisite service period of the award. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the accompanying statements of operations based on the fair values of the related payments. Such expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). We account for share–based payments granted to non–employees by calculating the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

Earnings per Share of Common Stock

We present both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is calculated by dividing the profit or loss attributable to our common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all potential dilutive common shares (common stock equivalents or “CSE”).

Income Taxes

We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future consequences of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases (temporary differences). Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are recovered or settled. Valuation allowances for deferred tax assets are established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. We determined that as of December 31, 2015, no additional accrual for income taxes was necessary. The federal and state income tax returns of our Company are subject to examination by the IRS and state taxing authorities, generally for three years after filing.

Fair Value of Financial Instruments

We measure assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements. Fair value represents the estimated amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs used in valuation techniques are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

- Level 1:

Quoted prices in active markets for identical instruments;

- Level 2:

Other significant observable inputs (including quoted prices in active markets for similar instruments);

- Level 3:

Significant unobservable inputs (including assumptions in determining the fair value of certain investments).

Recent Accounting Standards Updates

In February 2016, the FASB issued ASU No. 2016-02 - Leases (Topic 842): Simplifying the Measurement of Inventory (“Topic 842”). Topic 842 requires lessees to recognize a right-of-use asset and lease liability for virtually all of their leases. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Topic 842 is effective for our Company on January 1, 2019 and includes interim periods within that year. Topic 842 will be applied using a modified retrospective transition, providing for certain practical expedients. Early application is permitted and our Company is currently evaluating the potential impact that adoption may have on its financial statements.

In July 2015, the FASB issued ASU No. 2015-11 - Inventory (Topic 330): Simplifying the Measurement of Inventory (“Topic 330”). Topic 330 requires measuring inventory at the lower of cost and net realizable value based on estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation (changed from the previous guidance of lower of cost or market). This update also clarified various other inventory measurement and disclosure requirements. The update does not apply to inventory measured using the LIFO or retail inventory methods. The guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and should be applied prospectively. Early application is permitted and our Company is currently evaluating the potential impact that adoption may have on its financial statements.

In May 2014, the FASB issued ASU No. 2014-09 - Revenue from Contracts with Customers (“ASU 2014-09). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. Our Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. Our Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

NOTE 3 – INVENTORIES

Inventories consist of the following:

	December 31, 2015		December 31, 2014
Raw materials	$	72,287	$	52,045
Finished goods		105,205		58,908
Total Inventories	$	177,492	$	110,953

NOTE 4 – INTANGIBLE ASSETS

Licensee Agreement

In November 2014, we entered into a License Agreement with kathy ireland Worldwide^® ("kiWW^®") under which we licensed the right to utilize the trademarks and rights to the name, likeness and visual representations of Kathy Ireland (“KI”) in connection with our cosmeceutical line of products. The initial term of the license is for eight years and it may be renewed at the option of our Company for up to an additional four years. In accordance with the License Agreement, we will pay 5% of the net sales for all licensed products sold and collected under the licensed marks or a minimum guaranteed royalty of $100,000 in year one, which includes the period from approximately November 4, 2014 through December 31, 2015 (“Contract Year 1”) of the License Agreement. The minimum guaranteed royalty increases $50,000 each year in years two through eight of the License Agreement. We recognized $100,000 in royalty fees during the year ended December 31, 2015.

Additionally, we are obligated to pay an annual Brand Participation Fee to kiWW^®which provides for general advertising, good will and promotion of the KI brand. NuGene prepaid kiWW $350,000 effective upon execution of the License as a Brand Participation fee for Contract Year 1. Accordingly, we amortized this initial Brand Participation Fee over the 14-month period of Contract Year 1. The net carrying value of the Brand Participation Fee at December 31, 2014 was $300,000. The Brand Participation Fee for Contract Years 2 through 8 is $50,000 annually with an additional 1% of the total gross sales of Licensed Products of the prior year beginning in Contract Year 4.

SkinGuardian Intellectual Property

On March 17, 2015, we entered into an Intellectual Property Asset Purchase Agreement (“IP Agreement”) with an individual (“IP Seller”) to acquire all of the rights, title and interest in certain intellectual property connected with a product named SkinGuardian (“SGIP”). Upon the acquisition of SGIP, our Company issued 150,000 shares of restricted common stock (net, as amended) to the IP Seller valued at $150,000. The consideration paid for SGIP was expensed during the year ended December 31, 2015.

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment, net consist of the following:

	December 31, 2015			December 31, 2014
Software / website development	$	8,219		$	2,139
Equipment		136,585			35,698
Leasehold improvements		104,166			24,092

Property and equipment, gross		248,970			61,929
Accumulated depreciation		(40,620	)		(1,255	)
Property and equipment, net	$	208,350		$	60,674

Depreciation expense for the years ended December 31, 2015 and 2014 was $39,365 and $1,255, respectively.

NOTE 6 – PROMISSORY NOTES PAYABLE AND ADVANCES

On November 30, 2015 and on four subsequent dates during December 2015, four individuals (the “Lenders”) advanced a total of $410,000 to the Company. The borrowings (“Advances”) were not accompanied by documentation of the nature of the Advances. However, there were general discussions as to the repayment terms, the interest expected to be paid to the Lenders and additional equity of the Company to be issued to the Lenders in connection with the Advances. Accordingly, we have accounted for the Advances based on estimates of their final terms.

In connection with the expected value of the warrants, we have recorded an equity contribution of $138,333 in December 2015 ($15,259 of which was amortized and charged to interest expense through December 31, 2015). We calculated an original issue discount of $51,111 on the borrowings ($5,578 of which was charged to interest expense through December 31, 2015) and we have recognized $2,190 of accrued interest through December 31, 2015 for the expected interest to be paid on the non-discounted face value of the borrowings. The borrowings are carried at $430,838 as of December 31, 2015.

Borrowings under notes payable and advances as of December 31, 2015 are summarized as follows:

	Company Proceeds		Carrying Value at December 31, 2015		Accrued Interest at December 31, 2015		Principal Value at Maturity

15% Note	$	500,000	$	500,000	$	31,479	$	500,000
10% Note		50,000		50,000		1,383		50,000
Advances		410,000		292,504		2,190		461,111

	$	960,000	$	842,504	$	35,052	$	1,011,111

NOTE 7 – STOCKHOLDERS’ EQUITY

Preferred Stock

Our Company’s articles of incorporation authorize 25,000,000 shares of Preferred Stock with a par value of $0.0001. We designated 2,000,000 shares of Preferred Stock as Series A Convertible Preferred Stock. The Series A Preferred Stock is convertible into common stock at a ratio of one to one. Additionally, as long as there are a minimum of 900,000 shares of Series A Preferred Stock outstanding, the holders of the Series A Preferred Stock have the right to elect a majority of our Company’s Board of Directors. Finally, in all manners brought to a vote of the shareholders, the holders of the Series A Preferred Stock have three votes to every one vote of common stock. As of December 31, 2015 and December 31, 2014, there were 1,917,720 shares of Series A Preferred Stock outstanding which were issued to the founders of NuGene, Ali and Saeed Kharazmi. Ali and Saeed Kharazmi each own 50% of the outstanding Series A Preferred Stock and are our Company’s Chief Executive Officer and Chairman of the Board, respectively.

Common Stock Split

We have 100,000,000 shares of common stock authorized with a par value of $0.0001. On December 26, 2014, our Board of Directors approved a 15.04 to one stock split (“Stock Split”) in the form of a stock dividend to holders of our common stock as of that date. To effect that Board action, we delivered to each recipient of the stock dividend 14.04 additional shares of common stock for every share of common stock held. Unless otherwise noted, all share numbers shown in these condensed consolidated financial statements give effect to the Stock Split as approved by our Board of Directors.

Merger Agreement

On December 29, 2014, we completed a merger (the “Merger”) whereby NuGene, Inc. became a wholly owned subsidiary of our Company. In connection with the merger, we entered into a Business Transfer and Indemnity Agreement with our former Chief Executive Officer and Director providing for:

The transfer of our jewelry business operations existing on the date of the Indemnity Agreement;

The assumption by our former CEO of all liabilities of our Company and her indemnification holding our Company harmless for all liabilities arising at or before December 29, 2014;

The payment of $350,000 in cash to our former CEO; and

The surrender by our former CEO of 15,000,000 shares (before giving effect to the Stock Split discussed below) (the "Indemnity Shares") of our Company’s common stock representing 95% of the then outstanding common stock (all of which shares have been cancelled by our Company and are now included in our Company’s pool of authorized but unissued shares).

At the time of the Merger, all of the issued and outstanding shares of NuGene, Inc. were exchanged (after giving effect to the Stock Split), for 26,052,760 shares of our common stock and 1,917,720 our Series A Preferred Stock. On December 29, 2014, we completed the sale of 2,000,000 shares of our common stock to 18 purchasers (“Stock Placement”) for proceeds totaling $2,000,000, including (a) $1,625,000 of cash and (b) automatic conversion of $375,000 of outstanding promissory notes. Prior to the Merger, NuGene, Inc. received proceeds totaling $1,333 in exchange for 4,000,000 shares of its common stock from five persons and issued 1,500,000 shares of common stock, valued at $500, to a consultant for services rendered during the last quarter of 2014.

On March 31, 2015, we entered into a stock purchase agreement with a shareholder of our Company (the “Buyer”) resulting in the issuance of 50,000 shares of common stock to the Buyer for proceeds of $50,000. Under the agreement, we extended to the Buyer an option to purchase an additional 60,000 shares of common stock at $1 per share within 45 days of the Closing. On May 8, 2015, the Buyer exercised his option to purchase the remaining shares under the stock purchase agreement and accordingly, we issued the Buyer an additional 60,000 shares of our common stock for cash proceeds of $60,000. On April 20, 2015, our Company entered into a stock purchase agreement with an unaffiliated accredited investor for the sale of 27,273 shares of common stock at $1.10 per share, resulting in total cash proceeds of $30,000. On June 2, 2015, our Company entered into a stock purchase agreement with an unaffiliated accredited investor for the sale of 100,000 shares of common stock at $2.00 per share, resulting in total cash proceeds of $200,000.

Common Stock

As of December 31, 2015, our Company had entered into Advisory Agreements with members of its Advisory Board. The terms of the individual Advisory Agreements vary and provide for up to 50,000 initial sign-on shares vesting for a maximum of an 18-month period, and up to 50,000 shares of common stock per annum issued on the anniversary of the effective date of the agreement. Expenses for the issuance of common stock for services related to these share issuances was recognized over the service period in which the shares are earned or over the respective vesting period, as applicable, and was calculated based on the average closing price per share of our common stock, during the respective quarter, as quoted on the OTC Marketplace. Selling, general and administrative expenses (“SGA”) recognized in connection with the Advisory Agreements totaled $572,216 for the year ended December 31, 2015.

During 2015, offered positions on our Company’s Board of Directors to two individuals, although one of the offers was later rescinded. In addition to annual cash stipends of $30,000, the candidates were granted a total of 200,000 shares of our Company’s common stock vesting 25% on the third, sixth, ninth and twelfth month following the inception of the proposed Board service. SGA totaling $164,416 was recognized in connection with these shares over the service periods in which the shares were earned and was calculated based on the average closing price per share of our common stock, during the respective quarter, as quoted on the OTC Marketplace.

In February 2015, we entered into a six-month consulting agreement with an investor relations firm. In addition to a $27,000 retainer, the consulting agreement (as amended) called for the vesting of 110,000 shares of our common stock over the six-month term, issuable upon the conclusion of the agreement. On August 17, 2015, we issued the 110,000 shares of common stock owed to the investor relations firm. We recognized $167,092 of SGA in connection with the consulting agreement during the year ended December 31, 2015.

In March 2015, we purchased technology from an individual in exchange for 150,000 (as amended) shares of our common stock. The common stock was valued at the closing price per share of our common stock, on the date of issuance resulting in the recognition of $150,000 in SGA for the year ended December 31, 2015. During 2015, we issued 200,000 fully vested shares of our common stock to three consultants as compensation for services rendered. The common stock was valued at the closing price per share of our common stock, on the date of issuance, as quoted on the OTC Marketplace resulting in the recognition of $452,100 in stock based compensation for the year ended December 31, 2015.

Common Stock Options

On August 14, 2015, we granted an option to purchase up to 1,000,000 shares of our common stock to each of two employees. The options have a strike price of $1.50 per share, have a term of five years from the date of grant, vest evenly over 24 months and have a cashless exercise feature. The fair value of these options was estimated using the Black-Scholes option-pricing model based on the following assumptions: expected dividend yield 0%, expected volatility 130%, risk-free interest rate 1.61% and expected life of 5 years. We recognized $483,719 of SGA as stock based compensation in connection with the vesting of the options during year ended December 31, 2015.

Common Stock Warrants

Our Company has issued warrants to purchase shares of our common stock to accredited investors and consultants as compensation for services rendered, as well as, in conjunction with the purchase of our common stock. A summary of the Company’s warrants activity and related information as of December 31, 2015 is provided below.

On August 14, 2015, we granted a five-year fully vested warrant to purchase up to 150,000 shares of our common stock to each of two consultants as compensation for financial services rendered. The warrants have a strike price of $2.00 per share and have a cashless exercise feature. The fair value of the warrants was estimated to be $377,327 using the Black-Scholes option-pricing model based on the following assumptions: expected dividend yield 0%, expected volatility 130%, risk-free interest rate 1.61%, and expected life of 5 years and is included in SGA as stock based compensation in the accompanying statement of operations.

On August 14, 2015, we granted a three-year fully vested warrant to purchase up to 50,000 shares of our common stock to a former consultant of our Company in satisfaction of amounts previously owed to him. The warrant has a strike price of $1.50 per share and has a cashless exercise feature. The fair value of the warrants was estimated to be $55,821 using the Black-Scholes option-pricing model based on the following assumptions: expected dividend yield 0%, expected volatility 130%, risk-free interest rate 1.08%, and expected life of 3 years and is included in SGA as stock based compensation in the accompanying statement of operations.

On December 11, 2015, we entered into a service agreement (the “SA”) with KBHJJ, LLC (“KBHJJ”). KBHJJ will provide media awareness services to the Company over the five-year life of the SA. In consideration for these services, our Company agreed to compensate KBHJJ as follows:

· The grant of a two-year warrant to purchase up to 1,350,000 shares at an exercise price of $0.001 per share of the Company’s Common Stock vested as follows: 450,000 shares upon execution of the agreement; 450,000 shares upon the six-month anniversary of the SA; and 450,000 shares upon the one-year anniversary of the SA, contingent upon the completion of certain conditions.

· Payment of $50,000 upon execution of the SA.

· Payment of $50,000 due January 4, 2016.

· Up to 500,000 shares of the Company’s Common Stock that can be earned over the first 18 months of the SA, contingent on hitting benchmarks defined in the SA.

We recognized $567,000 of SGA as stock based compensation in connection with the SA in the accompanying statement of operations in the year ended December 31, 2015.

We have a warrant outstanding held by an investor to purchase up to 500,000 shares of our common stock at a price of $2.50 per share through December 26, 2020, exercisable beginning on December 26, 2015. Any shares acquired thereunder upon exercise may not be sold until June 26, 2016.

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Stock Warrants Outstanding as of December 31, 2015

Exercise Warrants Remaining Warrants

Price Granted Life (Years) Exercisable

$ 0.001 1,350,000 1.97 450,000

$ 1.50 50,000 2.87 50,000

$ 2.00 300,000 4.88 300,000

$ 2.50 500,000 5.25 -

2,200,000 800,000

NOTE 8 – RELATED PARTY TRANSACTIONS

The following individuals and entities have been identified as related parties based on their affiliation with our CEO and Chairman of the Board:

Ali Kharazmi Chief Executive Officer, President, Board Member and greater than 10% shareholder

Saeed  Kharazmi Chairman of the Board, Acting Chief Financial Officer and greater than 10% shareholder

Genetics Institute of Anti-Aging Company with common ownership and management

Applied M.A.K. Enterprises, Inc. (“MAK”) Company with common ownership and management

Advanced Surgical Partners, LLC (“AdvSP”) Company with common ownership and management

Center for Weight Management & Plastic Surgery (“CWM”) Company with common ownership and management

Center for Regenerative Science, LLC Company with common ownership and management

The following amounts were owed to related parties, affiliated with the CEO and Chairman of the Board, at the dates indicated:

December 31,
2015 December 31,
2014

AdvSP $ 70,890 $ 45,000

MAK - 40,084

CWM 34,000 -

Ali Kharazmi 25,641 37,000

Saeed Kharazmi 2,405 -

Less amounts advanced to AdvSP and repaid in January 2016 (95,000 ) -

Accounts payable - related parties $ 37,936 $ 122,084

The amount owed to AdvSP at December 31, 2015 of $70,890 relates to legal and administrative services provided by AdvSP employees to our Company. Our Company temporarily advanced $95,000 to AdvSP prior to December 31, 2015 and was repaid in full prior to January 5, 2016. Prior to December 31, 2014, all managerial, legal and administrative services were provided to our Company by related parties, free of charge. The amount owed to CWM relates to medical procedures provided to NuGene consultants as compensation for advertising and marketing services provided to NuGene. The amount owed to Ali Kharazmi and all amounts outstanding at December 31, 2015 and December 31, 2014 represent advances that bore no interest and were due on demand or expense reimbursements incurred in the ordinary course of business. The amounts owed to Saeed Kharazmi at December 31, 2015 related to expense reimbursements incurred in the ordinary course of business.

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For the year ended December 31, 2014, our Company recognized revenues from AdvSP in the amount of approximately $481,000. We had no revenues from AdvSP during the year ended December 31, 2015. Beginning on December 1, 2014, our Company sublet office space from AdvSP. Prior to December 1, 2014, our Company utilized corporate office space at AdvSP, free of charge. Messrs. Ali and Saeed Kharazmi, our CEO and our Acting CFO, respectively, have been foregoing salaries since NuGene, Inc. was incorporated in 2006.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Commitments

We sub-lease our sole corporate facilities at 17912 Cowan, Suite A, Irvine, California, 92614 from AdvSP, an affiliate of our Company, for approximately $16,637 per month (including common area maintenance), consistent with the amount that is charged to AdvSP by the property owner. On February 5, 2015, AdvSP entered into a new five-year lease for the property with the owner beginning July 1, 2015 and subsequently amended to begin June 1, 2015. The lease was subsequently amended to increase the square footage under lease beginning in January 2016. The lease includes annual increases in the monthly lease payments of approximately 3% each year.

At December 31, 2015, aggregate future minimum payments under the lease, including common area maintenance costs, are as follows:

2016 $ 193,285

2017 198,935

2018 204,585

2019 210,234

2020 106,530

Total $ 913,569

During the years ended December 31, 2015 and 2014, we incurred rent expense totaling $167,454 and $31,314, respectively.

Legal Proceedings

On July 10, 2015 Stemage Skin Care, LLC (the “Plaintiff”) filed a complaint in the U.S. District Court for the Central District of California entitled “Stemage Skin Care LLC, a North Carolina limited liability company vs. NuGene International, Inc. et al.” (Civil Action No.8:15-cv-01078-AG-JCG). The complaint also names as defendants NuGene, Inc., Ali Kharazmi, Saeed Kharazmi, Kathy Ireland Worldwide, Stephen Roseberry, Steve Rosenblum and Erik Sterling. The complaint contains allegations of damage asserted to be grounded on: (i) copyright infringement; (ii) interference with contract; (iii) intentional interference with prospective economic advantage; (iv) negligent interference with prospective economic advantage; and (v) conspiracy. The complaint allegedly arises out of an August 20, 2012 agreement among the Plaintiff and kathy ireland inc. ("KI") pursuant to which KI made Kathy Ireland available to perform “Ambassador Services" as defined within that agreement. That agreement effectively terminated in October 2014 and is the subject of a separate arbitration with KI and Kathy Ireland before the American Arbitration Association. We filed a response denying all claims and based on our review of the matter, we believe that the complaint is without merit. These proceedings are at an early stage of discovery and of motions and no assurance of outcome currently can be given.

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On July 31, 2015 Star Health & Beauty, LLC (“SH&B”) filed a complaint in the U.S. District Court for the Northern District of Georgia entitled “Star Health & Beauty, LLC vs. NuGene, Inc. and NuGene International, Inc. Defendants” (Case No. 1:15-cv-02634-CAP). The complaint alleges that our use of the NUGENE name and trademark infringes on SH&B’s NUGEN name. SH&B seeks cancelation of our NUGENE trademark, as well as unspecified monetary damages. We are in the process of early discovery to assist us in evaluating the merits of this lawsuit and intend to defend our intellectual property rights vigorously. As this matter is at an early stage, no assurance of outcome currently can be given.

In October 2015, NSE Products, Inc., (“NSE”) a Delaware corporation based in Provo, Utah, initiated actions in the US Patent and Trademark Office contesting several of the Company's trademark registrations and applications. These actions, including Oppositions to trademark applications and Petitions to Revoke registered marks, rely on assertions made by NSE regarding the purported likelihood of confusion and dilution of NSE's trademarks that include the words NU SKIN. The Company is defending its registered marks and pending applications against these actions.

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome (including any for the actions described above), whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events.

Other than that described above, we are not currently a party to any other material legal proceedings. We are not aware of any pending or threatened litigation against us that in our view would have a material adverse effect on our business, financial condition, liquidity, or operating results. However, legal claims are inherently uncertain, and we cannot assure you that we will not be adversely affected in the future by legal proceedings.

NOTE 10 – SUBSEQUENT EVENTS

Subsequent to December 31, 2015 and through the date of these financial statements, our Company suffered continued losses from operations with accompanying lack of liquidity. In order to fund operations on a temporary basis while our Company attempted to procure a more permanent form of financing, our Chief Executive Officer arranged for our bank to cover amounts overdrawn on our bank accounts up to $60,000 (the “Temporary Financing”). The Temporary Financing is personally guaranteed by our Chief Executive Officer until such time as all amounts advanced are repaid to the bank. Our Company’s officers have also personally advanced our Company over $57,700 in funding through the date of this Annual Report.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company's management, including the Company's Chief Executive Officer ("CEO") and the Company's Acting Chief Financial Officer ("Acting CFO"), of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the year ended December 31, 2015. Based upon that evaluation, the Company's CEO and Acting CFO concluded that the Company's disclosure controls and procedures were not effective as of December 31, 2015 due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review.

Management is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed in this annual report on Form 10-K has been recorded, processed, summarized and reported accurately. Our management acknowledges the existence of this problem, and intends to developed procedures to address them to the extent possible given limitations in financial and manpower resources. While management is working on a plan, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.



Management's annual report on internal control over financial reporting.

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act, as amended). Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on our assessment, management identified significant deficiencies related to: (i) our internal review functions, and (ii) a lack of segregation of duties within accounting functions. As a result, management concluded that, as of December 31, 2015, the Company’s internal control over financial reporting were not effective based on the criteria established in Internal Control–Integrated Framework. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with any policies and procedures may deteriorate. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. We are in the process of determining how best to change our current system and implement a more effective system however there can be no assurance that implementation of any change will be completed in a timely manner or that it will be adequate once implemented. To the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals. We believe that the foregoing steps will help remediate the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

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This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting since one is not required.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the year ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers and Directors
.

The following table sets forth information regarding our executive officers and directors.

Name Position Held Age Date First Appointed

Ali Kharazmi Chief Executive Officer, President and Director 58 December 29, 2014

M. Saeed Kharazmi Chairman of the Board, Secretary, Treasurer, Acting Chief Financial Officer 53 December 29, 2014

Biographical Information

As our Board of Directors consists of our Chief Executive Officer, Ali Kharazmi, and his brother, M. Saeed Kharazmi, it is not considered independent as defined in the NASDAQ rules governing members of boards of directors.

The following describes the backgrounds of current executive officers and directors.

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M. Ali Kharazmi – Chief Executive Officer

Ali Kharazmi was the co-founder of NuGene in November 2006 and was appointed Chief Executive Officer, President and a Board Member of the Company on December 29, 2014. He has worked extensively in the medical industry since 1986. In 1998, Ali co-founded Medical Information Networks, one of the first medical technology companies to provide electronic prescription services and formulary control with e-detailing to physicians by pharmaceutical companies. In 2003, he co-founded Newport Beach Plastic Surgery, one of the largest staff model plastic surgery multi-site medical groups in California. In 2005, Ali co-founded the Genetic Institute of Anti-Aging, the Center for Weight Management and the Plastic Surgery Institute, as well as, Advanced Surgical Partners. In 2012, he founded the Regenerative Institute, a research lab that works exclusively on stem cell related research and treatment methods and also co-founded Ortho Regeneration, a sport and orthopedic regenerative company specializing in Platelet Rich Plasma (“PRP”) and Adult Human Adipose stem cell based regenerative services.

Mr. Kharazmi received his Bachelors of Arts in Economics from University of California, Irvine in 1980, his Masters in Business Administration from American Graduate School of International Management, Thunderbird in 1983 and his Juris Doctorate from Western States College of Law in 1997.

M. Saeed Kharazmi, MD – Chairman of the Board, Acting Chief Financial Officer

Dr. Kharazmi obtained his Medical Degree from University of California, Irvine in 1992 and completed his Residency and Chief Residency at St. Mary’s Medical Center/UCLA in 1996. In 2014 Dr. Kharazmi joined University of California, Riverside (“UCR”) as Health Services Assistant Clinical Professor and became the Medical Director of UCRHealth, a university hospitalist group. He is also the acting Medical Director for Advanced Surgical Partners, a multispecialty surgical facility that he and his brother started in 2005. His interest in age management and research led to the development of Genetic Institute of Anti-Aging in 2005 where he became co-founder of NuGene, a cosmeceutical company. Dr. Kharazmi led the NuGene scientific team to introduce new active ingredients for skin rejuvenation, and wound healing.

As our Board of Directors consists of our Chief Executive Officer, M. Ali Kharazmi, and his brother, M. Saeed Kharazmi, we have no independent directors as defined in the NASDAQ rules governing members of boards of directors. Neither of our directors are being compensated for their service as Board Members or officers of the Company.

Director Qualifications and Diversity

Our Board of Directors has not adopted a formal policy with regard to the consideration of diversity when evaluating candidates for election to the Board. However, our Board believes that membership should reflect diversity in its broadest sense, but should not be chosen nor excluded based on race, color, gender, national origin or sexual orientation. In this context, the Board does consider a candidate’s experience, education, industry knowledge, history with the Company, and differences of viewpoint when evaluating his or her qualifications for election to the Board. Whenever our Board evaluates a potential candidate, the Board considers that individual in the context of the composition of the Board as a whole.

The standards that our Board considers in selecting candidates (although candidates need not possess all of the following characteristics, and not all factors are weighted equally) include the director’s or nominee’s, Industry knowledge and contacts in industries served by the Company, independent judgment, ability to broadly represent the interests of all stockholders and other constituencies, maturity and experience in policy making decisions, business skills, background and relevant expertise that are useful to the company and its future needs, and other factors determined to be relevant by the Board.

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Board Committees

We presently do not have an audit committee, compensation committee or nominating committee or committee performing similar functions. Our new Board has not formulated any plan to establish an audit or compensation committee in the near future. We envision that the audit committee, should it be formed, will be primarily responsible for reviewing the services performed by our independent auditors and evaluating our accounting policies and systems of internal controls. We envision that the compensation committee, should it be formed, will be primarily responsible for reviewing and approving our salary and benefits policies and other compensation of our executive officers. Until these committees are established, these decisions will continue to be made by our Board of Directors.

Family Relationships

M. Ali Kharazmi, our Chief Executive Officer and M. Saeed Kharazmi, our Chairman of the Board, are brothers. Aside from these individuals, there are no family relationships among the Company’s directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers.

Involvement in Certain Legal Proceedings

To our knowledge except as may be noted above or under "Legal Proceedings", none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement.

Code of Business Conduct and Ethics.

We have adopted a Code of Business Conduct and Ethics (the “Code”) that applies to our directors, officers and employees, including our principal executive officer and principal financial and accounting officer. A copy of our code of ethics will be furnished without charge to any person upon written request. Requests should be sent to: NuGene International, Inc., 17912 Cowan, Suite A, Irvine, California 92614

Compliance with Section 16(a) of the Exchange Act.

Not applicable.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth the compensation for the fiscal years ended December 31, 2015 and 2014 for services rendered to us by all persons who served as executive officers and directors during that time.

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Summary Compensation Table

Name and
Principal Position Fiscal
Year
Ended
12/31
Salary

($)

Bonus

($)

Stock
Awards

($)

Option
Awards

($)

All Other
Compensation

($)

Total

($)

M. Ali Kharazmi, CEO 2015 - - - - - -

2014 - - - - - -

M. Saeed Kharazmi, Acting CFO 2015 - - - - - -

2014 - - - - - -

Donna Queen, Director⁽³⁾ 2015 - - $ 130,705 - $ 17,500 $ 148,205

2014 - - - - - -

Dena Kurland, Former CEO⁽²⁾ 2015 - - - - - -

2014 - - - - - -

⁽¹⁾Messrs. Ali and Saeed Kharazmi are the founders of NuGene and received no compensation in 2015 or 2014. They were appointed to their executive positions at NuGene Int’l on December 29, 2014.

⁽²⁾ Ms. Dena Kurland was the Chief Executive Officer of Bling for 2013 and in 2014 until her resignation on December 29, 2014.

⁽³⁾Donna Queen was a member of our Company’s Board of Directors from May 26, 2015 to January 19, 2016. Her agreement with the Company called for her to be paid an annual stipend of $30,000 and to receive 100,000 shares of our common stock that vested quarterly.

Grants of Stock Awards

There were no grants of plan-based awards to our named executive officer during the years ended December 31, 2015 and 2014.

Option Exercises and Stock Vested

There were no option exercises or vesting of stock awards to our named executive officers during the years ended December 31, 2015 and 2014.

Outstanding Equity Awards at Fiscal Year End

None.

Director Compensation

Our officers who served as directors received no compensation for their services as members of our Board of Directors. Donna Queen was a member of our Company’s Board of Directors from May 26, 2015 to January 19, 2016. Her agreement with the Company called for her to be paid an annual stipend of $30,000 and to receive 100,000 shares of our common stock that vested quarterly. She was paid $17,500 for her service as a director through December 31, 2015.

Employment Agreements

Our Company currently has no long-term employment agreements but generally enters into at will agreements with its employees governing terms of their employment. We have one employment agreement with a non-officer executive that governs the terms of his employment and while not specifying a stated term of employment, includes a provision to pay him three months’ salary should his employment be terminated without cause .

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information as of March 28, 2016, regarding the beneficial ownership of our common stock by (i) each stockholder known by us to be the beneficial owner of more than five percent of our common stock, (ii) by each of our executive officers named in the Summary Compensation Table and our directors and (iii) by all of our executive officers and directors as a group. Each of the persons named in the table has sole voting and investment power with respect to common stock beneficially owned. Unless otherwise noted in the table, the address for each of the persons identified is 17912 Cowan, Irvine, California.

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Name and Address

of Beneficial Owner

Amount and Nature

of Beneficial
Ownership⁽¹⁾

Percent

of Common
Stock

M. Ali Kharazmi⁽²⁾

CEO and President
10,735,240 shares 26.26 %⁽⁴⁾

M. Saeed Kharazmi⁽³⁾

Chairman of the Board
11,235,240 shares 26.91 %⁽⁵⁾

All directors and named executive officers as a group (2 persons) 21,970,480 shares 51.37 %⁽⁶⁾

___________________

⁽¹⁾ Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting power with respect to the number of shares of common stock actually outstanding.

⁽²⁾ Common stock beneficially owned by M. Ali Kharazmi includes 958,860 shares of common stock issuable upon conversion of Series A Preferred Stock and 1,500,000 shares of common stock held of record by his spouse. Mr. Kharazmi disclaims ownership in these shares held by his spouse .

⁽³⁾ Common stock beneficially owned by M. Saeed Kharazmi includes 958,860 shares of common stock issuable upon conversion of Series A Preferred Stock .

⁽⁴⁾ Percentage of common stock beneficially owned by Ali Kharazmi is calculated by dividing the total amount of common stock beneficially owned by 40,883,533, which includes 39,924,673 shares of common stock outstanding and committed to be issued and 958,860 shares of common stock issuable to him upon conversion of Series A Preferred Stock owned.

⁽⁵⁾ Percentage of common stock beneficially owned by M. Saeed Kharazmi is calculated by dividing the total amount of common stock beneficially owned by 40,883,533, which includes 39,924,673 shares of common stock outstanding and committed to be issued and 958,860 shares of common stock issuable to him upon conversion of Series A Preferred Stock owned.

⁽⁶⁾ Percentage of common stock beneficially owned by all named executives is calculated by dividing the total amount of common stock beneficially owned by 41,842,393, which includes 39,924,673 shares of common stock outstanding and 1,917,720 shares of common stock issuable upon conversion of Series A Preferred Stock owned.

Changes in Control. We are not aware of any arrangements that may result in “changes in control” as that term is defined by the provisions of Item 403 of Regulation S-K.

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

Director Independence. We have two directors, who are also brothers. Our directors are not independent within the definition of “independence” as defined in the NASDAQ rules governing members of boards of directors.

Related Party Transactions. Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial and operating decisions. A related party transaction is considered to be a transfer of resources or obligations between related parties, regardless of whether or not a price is charged.

The following individuals and entities have been identified as related parties based on their affiliation with our CEO and Chairman of the Board:

Ali Kharazmi Chief Executive Officer, President, Board Member and greater than 10% shareholder

Saeed  Kharazmi Chairman of the Board, Acting Chief Financial Officer and greater than 10% shareholder

Genetics Institute of Anti-Aging Company with common ownership and management

Applied M.A.K. Enterprises, Inc. (“MAK”) Company with common ownership and management

Advanced Surgical Partners, LLC (“AdvSP”) Company with common ownership and management

Center for Weight Management & Plastic Surgery (“CWM”) Company with common ownership and management

Center for Regenerative Science, LLC Company with common ownership and management

The following amounts were owed to related parties, affiliated with the CEO and Chairman of the Board, at the dates indicated:

December 31,
2015 December 31,
2014

AdvSP $ 70,890 $ 45,000

MAK - 40,084

CWM 34,000 -

Ali Kharazmi 25,641 37,000

Saeed Kharazmi 2,405 -

Less amounts advanced to AdvSP and repaid in January 2016 (95,000 ) -

Accounts payable - related parties $ 37,936 $ 122,084

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The amount owed to AdvSP at December 31, 2015 of $70,890 relates to legal and administrative services provided by AdvSP employees to our Company. Our Company temporarily advanced $95,000 to AdvSP prior to December 31, 2015 and was repaid in full prior to January 5, 2016. Prior to December 31, 2014, all managerial, legal and administrative services were provided to our Company by related parties, free of charge. The amount owed to CWM relates to medical procedures provided to NuGene consultants as compensation for advertising and marketing services provided to NuGene. The amount owed to Ali Kharazmi and all amounts outstanding at December 31, 2015 and 2014 represent advances that bore no interest and were due on demand or expense reimbursements incurred in the ordinary course of business. The amounts owed to Saeed Kharazmi at December 31, 2015 related to expense reimbursements incurred in the ordinary course of business.

For the year ended December 31, 2014, our Company recognized revenues from AdvSP in the amount of approximately $481,000. We had no revenues from AdvSP during the year ended December 31, 2015. Beginning on December 1, 2014, our Company sublet office space from AdvSP. Prior to December 1, 2014, our Company utilized corporate office space at AdvSP, free of charge. Messrs. Ali and Saeed Kharazmi, our CEO and our Acting CFO, respectively, have been foregoing salaries since NuGene, Inc. was incorporated in 2006.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The Board of Directors has appointed Weinstein & Co. CPA as our independent registered public accounting firm. The following table shows the fees that were paid or accrued by us for audit and other services provided by Weinstein & Co. CPA:

2015 2014

Audit Fees ⁽¹⁾ $ 25,000 $ 24,000

Audit-Related Fees ⁽²⁾ - -

Tax Fees ⁽³⁾ - -

All Other Fees - -

Total $ 25,000 $ 24,000

⁽¹⁾ Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review of our quarterly financial statements and those services normally provided in connection with statutory or regulatory filings or engagements including comfort letters, consents and other services related to SEC matters. This information is presented as of the latest practicable date for this annual report.

⁽²⁾ Audit-related fees represent fees for consultation on accounting related services that are reasonably related to the performance of the audit or review of our financial statements and not reported above under “Audit Fees.”

⁽³⁾ Weinstein & Co. CPA does not provide us with tax compliance, tax advice or tax planning services.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

EXHIBIT INDEX

The Company’s financial statements and related notes thereto are listed and included in this Annual Report (Item 8). The following exhibits are filed with, or are incorporated by reference into, this Annual Report.

2.1 Agreement and Plan of Merger dated December 26, 2014, among the Company, NG Acquisition, Inc. and NuGene Inc. +

3.1 Certificate of Amendment of Articles of Incorporation of the Registrant, (increase of authorized, new class of preferred). +

3.2 Certificate of Amendment of Articles of Incorporation of the Registrant, name change. +

4.1 Certificate of Designation of Series A Preferred Stock. +

10.1 Form of Lock Up Agreement-NuGene Shareholders+

10.2 Form of Lock Up/Leak Out Agreement— Stock Placement Investors+

10.3 License Agreement between the Registrant and kathy ireland Worldwide, Inc. +

10.4 Sublease Agreement between the Registrant and Advanced Surgical Partners, Inc. +

10.5 Form of Convertible Promissory Note. +

10.6 Business Transfer and Indemnity Agreement, dated December 29, 2014, between the Registrant and Dena Kurland. +

21.1 List of subsidiaries of the Registrant. *

31.1 Certification of Principal Executive Officer of NuGene International, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *

31.2 Certification of Principal Financial and Accounting Officer of NuGene International, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1 Certifications of Principal Executive Officer and Principal Financial and Accounting Officer of NuGene International, Inc.  pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

101.INS XBRL Instance Document.

101.SCH XBRL Taxonomy Extension Schema Document.

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB XBRL Taxonomy Extension Label Linkbase Document.

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF XBRL Taxonomy Extension Definition Linkbase Document.

* Included herein.

+ Incorporated by reference to the registrant’s filing on a Form 8-K, filed with the Securities and Exchange Commission on January 6, 2015.

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Signatures

In accordance with Section 13 or 15(d) of the Exchange Act, the company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NuGene International, Inc.

(Registrant)




Date: March 30, 2016 By: /s/ M. ALI KHARAZMI

      Ali Kharazmi

      Chief Executive Officer

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

Name Title Date

/s/ M. Ali Kharazmi Chief Executive Officer, President and Director (Principal March 30, 2016

Executive Officer)

/s/ M. Saeed Kharazmi Chairman of the Board, Treasurer, Secretary, and Acting March 30, 2016

Chief Financial Officer



75

Stock Warrants Outstanding as of December 31, 2015
Exercise		Warrants		Remaining		Warrants
Price		Granted		Life (Years)		Exercisable
$	0.001		1,350,000		1.97		450,000
$	1.50		50,000		2.87		50,000
$	2.00		300,000		4.88		300,000
$	2.50		500,000		5.25		-
			2,200,000				800,000

Ali Kharazmi		Chief Executive Officer, President, Board Member and greater than 10% shareholder
Saeed Kharazmi		Chairman of the Board, Acting Chief Financial Officer and greater than 10% shareholder
Genetics Institute of Anti-Aging		Company with common ownership and management
Applied M.A.K. Enterprises, Inc. (“MAK”)		Company with common ownership and management
Advanced Surgical Partners, LLC (“AdvSP”)		Company with common ownership and management
Center for Weight Management & Plastic Surgery (“CWM”)		Company with common ownership and management
Center for Regenerative Science, LLC		Company with common ownership and management

	December 31, 2015			December 31, 2014
AdvSP	$	70,890		$	45,000
MAK		-			40,084
CWM		34,000			-
Ali Kharazmi		25,641			37,000
Saeed Kharazmi		2,405			-
Less amounts advanced to AdvSP and repaid in January 2016		(95,000	)		-
Accounts payable - related parties	$	37,936		$	122,084

2016	$	193,285
2017		198,935
2018		204,585
2019		210,234
2020		106,530
Total	$	913,569

Name	Position Held	Age	Date First Appointed
Ali Kharazmi	Chief Executive Officer, President and Director	58	December 29, 2014
M. Saeed Kharazmi	Chairman of the Board, Secretary, Treasurer, Acting Chief Financial Officer	53	December 29, 2014

Name and Principal Position	Fiscal Year Ended 12/31	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		All Other Compensation ($)		Total ($)

M. Ali Kharazmi, CEO	2015		-		-		-		-		-		-
	2014		-		-		-		-		-		-

M. Saeed Kharazmi, Acting CFO	2015		-		-		-		-		-		-
	2014		-		-		-		-		-		-

Donna Queen, Director⁽³⁾	2015		-		-	$	130,705		-	$	17,500	$	148,205
	2014		-		-		-		-		-		-

Dena Kurland, Former CEO⁽²⁾	2015		-		-		-		-		-		-
	2014		-		-		-		-		-		-

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership⁽¹⁾	Percent of Common Stock
M. Ali Kharazmi⁽²⁾ CEO and President	10,735,240 shares		26.26	%⁽⁴⁾

M. Saeed Kharazmi⁽³⁾ Chairman of the Board	11,235,240 shares		26.91	%⁽⁵⁾

All directors and named executive officers as a group (2 persons)	21,970,480 shares		51.37	%⁽⁶⁾

	2015		2014
Audit Fees ⁽¹⁾	$	25,000	$	24,000
Audit-Related Fees ⁽²⁾		-		-
Tax Fees ⁽³⁾		-		-
All Other Fees		-		-
Total	$	25,000	$	24,000

2.1		Agreement and Plan of Merger dated December 26, 2014, among the Company, NG Acquisition, Inc. and NuGene Inc. +
3.1		Certificate of Amendment of Articles of Incorporation of the Registrant, (increase of authorized, new class of preferred). +
3.2		Certificate of Amendment of Articles of Incorporation of the Registrant, name change. +
4.1		Certificate of Designation of Series A Preferred Stock. +
10.1		Form of Lock Up Agreement-NuGene Shareholders+
10.2		Form of Lock Up/Leak Out Agreement— Stock Placement Investors+
10.3		License Agreement between the Registrant and kathy ireland Worldwide, Inc. +
10.4		Sublease Agreement between the Registrant and Advanced Surgical Partners, Inc. +
10.5		Form of Convertible Promissory Note. +
10.6		Business Transfer and Indemnity Agreement, dated December 29, 2014, between the Registrant and Dena Kurland. +
21.1		List of subsidiaries of the Registrant. *
31.1		Certification of Principal Executive Officer of NuGene International, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2		Certification of Principal Financial and Accounting Officer of NuGene International, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certifications of Principal Executive Officer and Principal Financial and Accounting Officer of NuGene International, Inc. pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

	NuGene International, Inc. (Registrant)

Date: March 30, 2016	By:	/s/ M. ALI KHARAZMI
		Ali Kharazmi
		Chief Executive Officer

Name	Title	Date

/s/ M. Ali Kharazmi	Chief Executive Officer, President and Director (Principal	March 30, 2016
	Executive Officer)

/s/ M. Saeed Kharazmi	Chairman of the Board, Treasurer, Secretary, and Acting	March 30, 2016
	Chief Financial Officer