0001477932-17-003933.txt : 20170814 0001477932-17-003933.hdr.sgml : 20170814 20170814154026 ACCESSION NUMBER: 0001477932-17-003933 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 70 CONFORMED PERIOD OF REPORT: 20170630 FILED AS OF DATE: 20170814 DATE AS OF CHANGE: 20170814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Cure Pharmaceutical Holding Corp. CENTRAL INDEX KEY: 0001643301 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, FOIL & COATED PAPER BAGS [2673] IRS NUMBER: 371765151 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-204857 FILM NUMBER: 171029803 BUSINESS ADDRESS: STREET 1: 1620 BEACON PLACE CITY: OXNARD STATE: CA ZIP: 93033 BUSINESS PHONE: 805-824-0410 MAIL ADDRESS: STREET 1: 1620 BEACON PLACE CITY: OXNARD STATE: CA ZIP: 93033 FORMER COMPANY: FORMER CONFORMED NAME: Makkanotti Group Corp. DATE OF NAME CHANGE: 20150526 10-Q 1 curr_10q.htm FORM 10-Q curr_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2017

 

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

 

For the transition period from __________ to __________

 

Commission file number 333-204857

 

CURE PHARMACEUTICAL HOLDING CORP.

(Exact name of registrant as specified in its charter)

 

Nevada

 

2673

 

37-1765151

(State or other jurisdiction

of incorporation or organization)

 

(Primary Standard Industrial

Classification Number)

 

(IRS Employer

Identification Number)

 

1620 Beacon Place, Oxnard, California 93033

(Address of principal executive offices)

 

(805) 824-0410

(Issuer’s telephone number)

 

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

 

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

 

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

 

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

 

Emerging growth company

x

 

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

 

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

 

On August 10, 2017, we had 23,751,252 shares of common stock, par value $0.001 per share (the “Common Stock”) issued and outstanding.

 

 
 

TABLE OF CONTENTS

 

 

Page

 

PART I. FINANCIAL INFORMATION:

 

Item 1.

Unaudited Condensed Consolidated Financial Statements

 

3

 

Condensed Consolidated Balance Sheets as of June 30, 2017 (Unaudited) and December 31, 2016

 

3

 

Unaudited Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2017 and 2016

 

4

 

Unaudited Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2017 and 2016

 

5

 

Notes to the Unaudited Condensed Consolidated Financial Statements

 

6

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

21

 

Item 4.

Controls and Procedures

 

22

 

PART II. OTHER INFORMATION:

 

Item 1.

Legal Proceedings

 

23

 

Item 1A.

Risk Factors

 

23

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

23

 

Item 3.

Defaults Upon Senior Securities

 

23

 

Item 4.

Mine Safety Disclosure

 

23

 

Item 5.

Other Information

 

23

 

Item 6.

Exhibits

 

24

 

Signatures

 

25

 

 
2
 
Table of Contents

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

CURE PHARMACEUTICAL HOLDING CORP.

Condensed Consolidated Balance Sheets

 

 

 

June 30,

2017

 

 

December 31,

2016

 

 

 

(Unaudited)

 

 

 

 

Assets

Current assets:

 

 

 

 

 

 

Cash

 

$ 277,961

 

 

$ 1,106,142

 

Accounts receivable

 

 

13,443

 

 

 

7,049

 

Inventory

 

 

103,989

 

 

 

81,285

 

Prepaid expenses and other assets

 

 

1,695,930

 

 

 

223,879

 

Total current assets

 

 

2,091,323

 

 

 

1,418,355

 

Property and equipment, net

 

 

324,651

 

 

 

370,648

 

Intellectual property and patents, net

 

 

889,345

 

 

 

894,510

 

Other assets

 

 

133,878

 

 

 

151,579

 

Total assets

 

$ 3,439,197

 

 

$ 2,835,092

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$ 416,736

 

 

$ 265,386

 

Accrued expenses

 

 

36,441

 

 

 

26,305

 

Loan payable

 

 

11,460

 

 

 

33,277

 

Note payable, net of unamortized discount

 

 

695,250

 

 

 

50,000

 

Capital lease payable

 

 

3,234

 

 

 

9,453

 

Convertible promissory notes, net of unamortized discount

 

 

100,937

 

 

 

-

 

Derivative liability

 

 

412,777

 

 

 

-

 

Deferred revenue

 

 

192,600

 

 

 

173,618

 

Total current liabilities

 

 

1,869,435

 

 

 

558,039

 

License Fees

 

 

560,000

 

 

 

560,000

 

Total liabilities

 

 

2,429,435

 

 

 

1,118,039

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock: $0.001 par value; authorized 75,000,000 shares; 23,751,252 and 23,336,673 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively

 

 

23,752

 

 

 

23,337

 

Additional paid-in capital

 

 

16,866,149

 

 

 

12,412,430

 

Accumulated deficit

 

 

(15,880,139 )

 

 

(10,718,714 )

Total stockholders’ equity

 

 

1,009,762

 

 

 

1,717,053

 

Total liabilities and stockholders’ equity

 

$ 3,439,197

 

 

$ 2,835,092

 

 

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

 

 
3
 
Table of Contents

 

CURE PHARMACEUTICAL HOLDING CORP.

Condensed Consolidated Statements of Operations (Unaudited)

For the Three and Six Months Ended June 30, 2017 and 2016

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30, 

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Net product sales

 

$ 32,073

 

 

$ 14,151

 

 

$ 59,570

 

 

$ 42,662

 

Consulting research & development income

 

 

-

 

 

 

-

 

 

 

4,448

 

 

 

-

 

Shipping and other sales

 

 

6,812

 

 

 

3,000

 

 

 

6,812

 

 

 

3,098

 

Total revenues

 

 

38,885

 

 

 

17,151

 

 

 

70,830

 

 

 

45,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

39,598

 

 

 

10,579

 

 

 

75,148

 

 

 

37,744

 

Gross profit (loss)

 

 

(713 )

 

 

6,572

 

 

 

(4,318 )

 

 

8,016

 

Research and development expenses

 

 

205,648

 

 

 

171,447

 

 

 

425,268

 

 

 

298,799

 

Selling, general and administrative expenses

 

 

2,194,950

 

 

 

304,669

 

 

 

4,597,497

 

 

 

596,605

 

Total costs and expenses

 

 

2,400,598

 

 

 

476,116

 

 

 

5,022,765

 

 

 

895,404

 

Net loss from operations

 

 

(2,401,311 )

 

 

(469,544 )

 

 

(5,027,083 )

 

 

(887,388 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1

 

 

 

45

 

 

 

5

 

 

 

412

 

Other income

 

 

8,571

 

 

 

8,571

 

 

 

17,142

 

 

 

17,142

 

Loss on disposal of PP&E

 

 

(12,351 )

 

 

-

 

 

 

(12,351 )

 

 

(3,323 )

Change in derivative liability

 

 

(42,545 )

 

 

-

 

 

 

(42,545 )

 

 

-

 

Other expense

 

 

(6,394 )

 

 

(88,491 )

 

 

(7,388 )

 

 

(100,634 )

Interest expense

 

 

(87,054 )

 

 

(47,603 )

 

 

(89,205 )

 

 

(99,321 )

Other income (expense)

 

 

(139,772 )

 

 

(127,478 )

 

 

(134,342 )

 

 

(185,724 )

Net loss before income taxes

 

 

(2,541,083 )

 

 

(597,022 )

 

 

(5,161,425 )

 

 

(1,073,112 )

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss

 

$ (2,541,083 )

 

 

(597,022 )

 

$ (5,161,425 )

 

$ (1,073,112 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$ (0.11 )

 

 

(0.09 )

 

$ (0.22 )

 

$ (0.16 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic and diluted

 

 

23,436,696

 

 

 

6,629,260

 

 

 

23,593,105

 

 

 

6,629,260

 

 

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

 

 
4
 
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CURE PHARMACEUTICAL HOLDING CORP.

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Six Months Ended June 30, 2017 and 2016

 

 

 

For the Six

 

 

For the Six

 

 

 

Months Ended

 

 

Months Ended

 

 

 

June 30,

2017

 

 

June 30,

2016

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$ (5,161,425 )

 

$ (1,073,112 )

Adjustment to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

98,161

 

 

 

75,394

 

Loss from joint venture

 

 

5,488

 

 

 

-

 

Loss on disposal of PP&E

 

 

12,351

 

 

 

3,323

 

Amortization of prepaid stock –based compensation

 

 

552,010

 

 

 

-

 

Amortization of loan discounts

 

 

82,933

 

 

 

-

 

Change in derivative liabilities

 

 

42,545

 

 

 

-

 

Warrants issued for services

 

 

2,717,620

 

 

 

-

 

Change in other assets and liabilities:

 

 

 

 

 

 

 

 

Restricted cash

 

 

-

 

 

 

(50,000 )

Accounts receivable

 

 

(6,394 )

 

 

1,679

 

Inventory

 

 

(22,704 )

 

 

12,975

 

Prepaid expenses and other assets

 

 

(594,061 )

 

 

(703,838 )

Other assets

 

 

17,213

 

 

 

8,858

 

Accounts payable

 

 

151,350

 

 

 

(265,682 )

Accrued expenses

 

 

10,136

 

 

 

46,823

 

Deferred revenue

 

 

18,982

 

 

 

(28,539 )

Net cash used in operating activities

 

 

(2,075,795 )

 

 

(1,972,119 )

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Advanced on note receivable

 

 

-

 

 

 

(18,290 )

Purchase in intangible assets

 

 

(16,555 )

 

 

(25,527 )

Payment to joint venture investment

 

 

(5,000 )

 

 

-

 

Acquisition of property and equipment, net

 

 

(42,795 )

 

 

(48,830 )

Net cash used in investing activities

 

 

(64,350 )

 

 

(92,647 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from loan

 

 

1,340,000

 

 

 

4,371,963

 

Loan repayments

 

 

(21,817 )

 

 

(289,253 )

Capital lease payments

 

 

(6,219 )

 

 

(5,509 )

Net cash provided by financing activities

 

 

1,311,964

 

 

 

4,077,201

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(828,181 )

 

 

2,012,435

 

Cash and cash equivalents, beginning of period

 

 

1,106,142

 

 

 

13,352

 

Cash and cash equivalents, end of period

 

$ 277,961

 

 

$ 2,025,787

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest and income taxes:

 

 

 

 

 

 

 

 

Interest

 

$ 2,967

 

 

$ 28,892

 

Income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Non-cash financing activities:

 

 

 

 

 

 

 

 

Common stock to be issued for prepaid expense

 

$ 1,430,000

 

 

$ -

 

Loan discount relating to note payable

 

 

10,000

 

 

 

-

 

Loan discount relating to convertible promissory notes

 

 

676,746

 

 

 

-

 

 

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

 

 
5
 
Table of Contents

 

CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Cure Pharmaceutical Holding Corp (the “Company”), formerly known as Makkanotti Group Corp, was incorporated in the State of Nevada on May 15, 2014. The Company was formed to engage in the business of manufacturing food paper bags in Nicosia, Cyprus. On November 7, 2016, the Company changed its name to Cure Pharmaceutical Holding Corp.

 

On November 7, 2016, the Company, in a reverse take-over transaction, acquired Cure Pharmaceutical Corporation (“Cure Pharmaceutical”), a specialty pharmaceutical and bioscience company based in California that specializes in drug delivery technologies, by executing a Share Exchange Agreement and Conversion Agreement (“Exchange Agreement”) by and among the Company and a holder of a majority of the issued and outstanding capital stock of the registrant prior to the closing (the “Majority Stockholder”), on the one hand, and Cure Pharmaceutical, a California corporation, all of the shareholders of Cure Pharmaceutical’s issued and outstanding share capital (the “Cure Pharm Shareholders”) and the holders of certain convertible promissory notes of Cure Pharmaceutical (“Cure Pharm Noteholders”), on the other hand. Hereinafter, this share exchange transaction is described as the “Share Exchange.” As a result of the Share Exchange, Cure Pharmaceutical became a wholly owned subsidiary of the Company, and the Cure Pharm Shareholders and Cure Pharm Noteholders became the controlling shareholders of the Company.

 

For accounting purposes, Cure Pharmaceutical shall be the surviving entity. The transaction is accounted for using the reverse acquisition method of accounting. As a result of the recapitalization and change in control, Cure Pharmaceutical is the acquiring entity in accordance with ASC 805, Business Combinations.

 

Cure Pharmaceutical Corporation is a specialty pharmaceutical and bioscience company with a focus in drug delivery technologies. Cure leverages novel drug delivery technologies to develop and commercialize new applications of proven therapeutics through Oral Thin Film (“OTF”) via our proprietary patented CureFilm™ Technology as well as through transdermal applications. Our micro encapsulation of drug actives in our CureFilm™ Technology allows for a higher volume of an active and if required, multiple actives to be produced on a single oral thin film strip.

 

The Company is focused on partnering with pharmaceutical and biotech companies seeking to deliver drug actives utilizing and benefitting from our proprietary OTF and transdermal applications and when preferable to take our own products from clinical process to commercialization. We are focused on both the human and veterinary prescription, OTC and nutraceutical markets. Cure represents the complete solution for OTF drug delivery therapeutics from inception to finished product utilizing our CGMP/FDA registered manufacturing facility and processes.

 

In July 2017 the Company, Therapix Biosciences Ltd., a specialty clinical-stage pharmaceutical company dedicated to the development of cannabinoid-based drugs headquartered in Israel, and Assuta Medical Centers, Ltd., a medical services center located in Israel, entered into a nonbinding memorandum of understanding to collaborate to advance, research, develop and commercialize potential therapeutic products in the fields of personalized medicine and cannabinoids. The Company has not entered into any binding agreements or advanced any funds in connection with the foregoing.

 

The Company is still finalizing a research contract with Technion Research & Development Foundation Ltd. (“TRDF”) related to research regarding the effectiveness of certain cannabinoid strain extracts for specific genetic sub-types of cancer. On May 1, 2017, the Company paid $642,500 to initiate the research project with TRDF.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation and Basis of Presentation

 

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

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2017, and the results of operations and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2017 and 2016, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal period ended December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2017.

 

 
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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)

 

Use of Estimates

 

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

 

Cash and Cash Equivalents

 

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. As of June 30, 2017 and December 31, 2016, the Company had no cash equivalents. At June 30, 2017 and December 31, 2016, the Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions.

 

Investment in Associates

 

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

 

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

 

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

 

On January 8, 2016, the Company received 50% ownership in Cure Innovations, Inc (“CI”). CI was created in 2015 by IncuBrands Studio, Inc (“IncuBrands”). The Company and IncuBrands each own 50% of the common stock of CI. The Company and IncuBrands entered into a Joint Venture agreement in 2013 to distribute several OTF products utilizing IncuBrands marketing and contacts in various industries as well as utilize the Company’s technology and capabilities of manufacturing OTF’s.

 

On December 6, 2016, the Company entered into a Joint Venture Agreement (“Joint Venture”) with Pace Wellness, Inc. (“Pace”) to jointly develop three Active Pharmaceutical Ingredients (“API”) within the nonprescription and/or Over-the-Counter (OTC) medicines specifically utilizing the Company’s patented and proprietary CureFilm™ Technology. The three API’s to be jointly developed are Diphenhydramine HCL, Omeprazole and a third API to be determined at a later date (“Products”). Pace shall be the exclusive global distributor of the Products under the Solves Strips® branding or other private or branded labels. All benefits, advantages, and liabilities derived from, or incurred in respect of the Joint Venture shall be borne by the parties in proportion of their respective participating interests of 50/50 equal interest.

 

Property and Equipment

 

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

 

Manufacturing equipment

 

5-7 Years

 

Computer and other equipment

 

3-7 Years

 

Leasehold Improvements

 

Lesser of useful life or the term of the lease

 

 
7
 
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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)

 

Accounts Receivable

 

Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts.

 

Impairment of Long-Lived Assets

 

Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset.

 

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There were no impairments on our long-lived assets during the three and six month periods ended June 30, 2017 and 2016.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with the FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and/or service has been performed; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. The Company believes that these criteria are satisfied upon shipment from our facility. Freight billed to customers is presented as revenues, and the related freight costs are presented as cost of goods sold. Deferred revenue is recognized when earned and all significant obligations have been satisfied.

 

Advertising Expense

 

The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying statements of operations. The Company recorded advertising costs of $68,893 and $95,226, for the three and six month periods ended June 30, 2017, respectively, and none for the three and six month periods ended June 30, 2016.

 

Research and Development

 

Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred.

 

Income Taxes

 

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

 

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

 

 
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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)


Stock-Based Compensation

 

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

 

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

 

Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

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

 

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

 

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

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

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

 

The Company has assets or liabilities valued at fair value on a recurring basis for the six months ended June 30, 2017. The Company did not have assets or liabilities valued at fair value on a recurring basis for the year ended December 31, 2016.

 

Basic and diluted loss per share

 

Basic loss per share is computed by dividing the net loss to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing the net loss for the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares, which consist of stock options, warrants, and convertible notes payable, have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.

 

Going Concern

 

The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company had an accumulated deficit at June 30, 2017 of $15,880,139. The Company had a working capital of $221,888 as of June 30, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. The Company is continually analyzing its current costs and is attempting to make additional cost reductions where possible. We expect that we will continue to generate losses from operations throughout 2017.

 

 
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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)

 

In order to continue as a going concern and to develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include raising additional capital through borrowing and/or sales of equity and debt securities. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

 

Recently Issued Standards

 

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The purpose is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. This ASU is effective for the Company in the first quarter of 2018. Early adoption is not permitted except for limited provisions. The Company does not expect the adoption of this amendment to have a material effect on its financial condition and results of operations.

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The new standard requires recognition of the income tax effects of vested or settled awards in the income statement and involves several other aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This new standard became effective for the Company on January 1, 2017. The adoption of this standard did not have a material impact on its financial position, results of operations or statements of cash flows upon adoption.

 

In August, 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”). The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, Statement of Cash Flows. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This new standard will be effective for the Company on January 1, 2018; however, early adoption is permitted with prospective application to any business development transaction.

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation: Scope of Modification Accounting, which provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions or award classification and would not be required if the changes are considered non-substantive. The amendments of this ASU are effective for the Company in the first quarter of 2018, with early adoption permitted. The adoption of ASU 2017-09 is not expected to have an impact on the Company’s consolidated financial statements.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

 

 
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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)

 

NOTE 3 - INVENTORY

 

Inventory consists of raw materials, packaging components, work-in-process and finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or market. The carrying value of inventory consisted of the following at June 30, 2017 and December 31, 2016:

 

 

 

June 30,

2017

 

 

December 31,
2016

 

Raw materials

 

$ 74,678

 

 

$ 68,047

 

Packaging components

 

 

97,782

 

 

 

84,927

 

Work-in-process

 

 

23,461

 

 

 

17,406

 

Finished goods

 

 

-

 

 

 

-

 

 

 

 

195,921

 

 

 

170,380

 

Reserve for obsolescence

 

 

(91,932 )

 

 

(89,095 )

Total inventory

 

$ 103,989

 

 

$ 81,285

 

 

NOTE 4 – PREPAID EXPENSES AND OTHER ASSETS

 

As of June 30, 2017 and December 31, 2016, prepaid expenses and other assets consisted of the following:

 

 

 

June 30,

2017

 

 

December 31,
2016

 

 

 

 

 

 

 

 

Prepaid consulting services

 

$ 1,011,155

 

 

$ 150,168

 

Prepaid clinical study

 

 

642,500

 

 

 

-

 

Prepaid insurance

 

 

19,270

 

 

 

42,785

 

Other Receivables

 

 

10,178

 

 

 

10,948

 

Prepaid inventory

 

 

6,927

 

 

 

13,178

 

Prepaid expenses

 

 

5,900

 

 

 

6,800

 

Property and Equipment, net

 

$ 1,695,930

 

 

$ 223,879

 

 

NOTE 5 – PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

 

As of June 30, 2017 and December 31, 2016, property and equipment and intangible assets consisted of the following:

 

 

 

June 30,

2017

 

 

December 31,

2016

 

 

 

 

 

 

 

 

Manufacturing equipment

 

$ 769,074

 

 

$ 769,074

 

Computer and other equipment

 

 

147,192

 

 

 

116,747

 

Leasehold improvements

 

 

36,066

 

 

 

36,066

 

Less accumulated depreciation

 

 

(627,681 )

 

 

(551,239 )

Property and Equipment, net

 

$ 324,651

 

 

$ 370,648

 

 

 
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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)

 

Depreciation expense for the three and six months ended June 30, 2017 was $37,437 and $76,442, respectively, which includes depreciation of $2,160 and $4,320 for capitalized leased assets for the three and six months ended June 30, 2017, respectively. Depreciation expense for the three and six months ended June 30, 2016 was $26,507 and $54,062, respectively, which includes depreciation of $2,160 and $4,320 for capitalized leased assets for the three and six months ended June 30, 2016, respectively. The total amount of property held under a under a capital lease was $43,201 as of June 30, 2017 and December 31, 2016. Accumulated depreciation for property held under capital leases were $32,857 and $28,537 as of June 30, 2017 and December 31, 2016 respectively.

 

 

 

June 30,

2017

 

 

December 31,
2016

 

 

 

 

 

 

 

 

Intellectual Property

 

$ 814,582

 

 

$ 814,582

 

Patents

 

 

191,602

 

 

 

175,047

 

Less accumulated amortization

 

 

(116,839 )

 

 

(95,119 )

Intangible assets, net

 

$ 889,345

 

 

$ 894,510

 

 

The Company incurred $16,555 and $45,930 of legal patent costs that were capitalized during the six months ended June 30, 2017 and the year ended December 31, 2016, respectively. The Company did not write off any intangibles during the six months ended June 30, 2017 and wrote off $58,522 of intangibles during the year ended December 31, 2016. Amortization expense for the three and six months ended June 30, 2017 was $10,821 and $21,720, respectively. Amortization expense for the three and six months ended June 30, 2016 was $10,667 and $21,332, respectively.

 

The estimated aggregate amortization expense over each of the next five years is as follows:

 

2017

 

$ 21,798

 

2018

 

 

43,518

 

2019

 

 

43,518

 

2020

 

 

43,518

 

2021

 

 

43,518

 

Thereafter

 

 

557,303

 

Total Amortization

 

$ 753,172

 

 

 
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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)

 

NOTE 6 – LOAN PAYABLE

 

Loan payable consist of the following at June 30, 2017 and December 31, 2016:

 

 

 

2017

 

 

2016

 

Note to a company due September 29, 2017 including interest at 13.25% per annum; unsecured; interest due monthly

 

$ 11,460

 

 

$ 33,277

 

Current portion of loan payable

 

 

11,460

 

 

 

33,277

 

Loan payable, less current portion

 

$ -

 

 

$ -

 

 

NOTE 7 – NOTE PAYABLE

 

Notes payable consist of the following at June 30, 2017 and December 31, 2016:

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Note to a company due August 27, 2017, no interest shall accrue unless and until an event of default occurs, where interest at 10% per annum shall accrue beginning on the date of the applicable event of default, secured by the Company’s intellectual property

 

$ 650,000

 

 

$ -

 

Note to an individual, non-interest bearing, unsecured and has no fixed terms of repayment

 

 

50,000

 

 

 

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

700,000

 

 

 

50,000

 

Unamortized discount

 

 

(4,750 )

 

 

-

 

Current portion of loan payable

 

 

695,250

 

 

 

50,000

 

Loan payable, less current portion

 

$ -

 

 

$ -

 

 

During the three and six months ended June 30, 2017, the Company incurred $5,250 amortization of discount. During the three and six months ended June 30, 2016, the Company incurred $0 amortization of discount.

 

NOTE 8 – CONVERTIBLE PROMISSORY NOTES

 

Convertible promissory notes consist of the following at June 30, 2017 and December 31, 2016:

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Convertible promissory notes totaling $700,000 due between November 11, 2017 and December 30, 2017, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due between November 11, 2017 and December 30, 2017

 

$ 700,000

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

700,000

 

 

 

-

 

Unamortized discount

 

 

(599,063 )

 

 

-

 

Current portion of convertible promissory notes

 

 

100,937

 

 

 

-

 

Convertible promissory notes, less current portion

 

$ -

 

 

$ -

 

 

During the three and six months ended June 30, 2017, the Company incurred $77,683 amortization of discount. During the three and six months ended June 30, 2016, the Company incurred $0 amortization of discount. During the three and six months ended June 30, 2017, the Company incurred $3,306 interest expenses and accrued interest as of June 30, 2017. During the three and six months ended June 30, 2016, the Company incurred $0 interest expenses and accrued interest as of June 30, 2016.

 

 
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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)

 

NOTE 9 – DERIVATIVE LIABILITY

 

The following table summarizes fair value measurements by level at June 30, 2017 for assets and liabilities measured at fair value on a recurring basis:

 

 

 

Level I

 

 

Level II

 

 

Level III

 

 

Total

 

Cash

 

$ 277,961

 

 

$

 

 

$

 

 

$ 277,961

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

 

 

 

 

 

 

$ (412,777 )

 

$ (412,777 )

 

No financial assets or liabilities were measured on a recurring basis as of December 31, 2016.

 

The Company has issued convertible promissory notes during 2017. The convertible notes require us to record the value of the conversion feature as a liability, at fair value, pursuant to ASC 815, including provisions in the notes that protect the holders from declines in the Company’s stock price, which is considered outside the control of the Company. The derivative liabilities are marked-to-market each reporting period and changes in fair value are recorded as a non-operating gain or loss in our statement of operations, until they are completely settled. The fair value of the conversion feature is determined each reporting period using the Black-Scholes option pricing model, and is affected by changes in inputs to that model including our stock price, expected stock price volatility, interest rates and expected term. The assumptions used in valuing the derivative liability during 2017 were as follows:

 

 

 

June 30,

2017

 

Significant assumptions (weighted-average):

 

 

 

Risk-free interest rate at grant date

 

1.89%

Expected stock price volatility

 

79.92%

Expected dividend payout

 

-

 

Expected option life (in years)

 

1

 

Expected forfeiture rate

 

0%

 

The following is a reconciliation of the derivative liability for 2017:

 

 

 

June 30,

2017

 

Value at December 31, 2016

 

$ -

 

Initial value at the debt issuance

 

 

370,232

 

Increase in value

 

 

42,545

 

Value at June 30, 2017

 

$ 412,777

 

 

NOTE 10 – WARRANT AGREEMENTS

 

On January 3, 2017, the Company issued 1,300,000 warrants in connection with commissions earned in relation to the Company’s Private Label Exclusive Distribution and License agreement with Red Barn Pet Products, LLC.

 

From May 11, 2017 to June 30, 2017, the Company issued 140,000 warrants in connection with the issuance of $700,000 convertible promissory notes.

 

Warrants that vest at the end of a one-year period are amortized over the vesting period using the straight-line method.

 

The Company’s warrant activity was as follows:

 

 

 

Warrants

 

 

Weighted Average

Exercise Price

 

 

Weighted Average Contractual Remaining Life

 

Outstanding, December 31, 2016

 

 

4,392,107

 

 

 

1.97

 

 

 

6.17

 

Granted

 

 

1,440,000

 

 

 

2.49

 

 

 

0.75

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited/Expired

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding, June 30, 2017

 

 

5,832,107

 

 

 

2.10

 

 

 

5.92

 

Exercisable at June 30, 2017

 

 

3,6630,665

 

 

 

2.19

 

 

 

2.95

 

 

 
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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)

 

 

Range of

Exercise Price

 

Number of

Warrants

 

 

Weighted Average Remaining Contractual Life (years)

 

 

Weighted Average Exercise Price

 

 

Number of Warrants Exercisable

 

 

Weighted Average Exercise Price

 

$1.00 - $7.00

 

 

5,832,107

 

 

 

5.92

 

 

$ 2.10

 

 

 

3,630,665

 

 

$ 2.19

 

 

 

 

5,832,107

 

 

 

5.92

 

 

$ 2.10

 

 

 

3,630,665

 

 

$ 2.19

 

 

The weighted-average fair value of warrants granted to during the three months ended June 30, 2017 and year ended December 31, 2016, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows:

 

 

 

June 30,

2017

 

 

December 31,

2016

 

Significant assumptions (weighted-average):

 

 

 

 

 

 

Risk-free interest rate at grant date

 

 

1.89 %

 

 

1.83 %

Expected stock price volatility

 

 

79.92 %

 

 

84.42 %

Expected dividend payout

 

 

-

 

 

 

-

 

Expected option life (in years)

 

 

3

 

 

 

3

 

Expected forfeiture rate

 

 

0 %

 

 

0 %

 

NOTE 11 – STOCKHOLDERS’ EQUITY

 

Authorized Stock

 

The Company has authorized to issue is 75,000,000 common shares with a par value of $0.001 per share.

 

As of June 30, 2017 and December 31, 2016, there were 23,751,252 and 23,336,673, shares of the Company’s common stock issued and outstanding, respectively.

 

Common Share Issuances

 

On April 7, 2017, the Company issued 14,579 common stock shares at $6.86 per share for consulting services to be performed over a one year period. The total value of this issuance was $100,000 and as of June 30, 2017, $76,986 is included in prepaid expenses and other assets.

 

On April 24, 2017, the Company issued 100,000 common stock shares at $7.00 per share for consulting services to be performed over a six month period. The total value of this issuance was $700,000 and as of June 30, 2017, $443,716 is included in prepaid expenses and other assets.

 

On May 18, 2017, the Company issued 300,000 common stock shares at $2.10 per share for consulting services to be performed over a one year period. The total value of this issuance was $630,000 and as of June 30, 2017, $357,288 is included in prepaid expenses and other assets.

 

NOTE 12 - COMMITMENTS AND CONTINGENCIES

 

Litigation:

 

From time to time the Company may become a party to litigation in the normal course of business. Management believes that there are no current legal matters that would have a material effect on the Company’s financial position or results of operations.

 

 
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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2017

(UNAUDITED)

 

Operating leases

 

The Company maintains its corporate offices and manufacturing facility at 1620 Beacon Place, Oxnard, CA 93033, which contains approximately 25,000 square feet. The Company is currently on a month-to-month lease.

 

The Company also leases additional office and warehouse space at 1610 and 1612 Fiske Place, Oxnard, CA 93033, which contains approximately 6,547 square feet. The Company is currently on a month-to-month lease.

 

Total rent expense for the three and six month periods ended June 30, 2017 was $73,416 and $145,815, respectively. Total rent expense for the three and six month periods ended June 30, 2016 was $72,101 and $142,569, respectively.

 

NOTE 13 – LEGAL PROCEEDINGS

 

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. The only significant matter of which the Company is aware of is discussed below.

 

On May 22, 2017, Sandy Sierra Garate (“Applicant”), an employee of the Company, filed an application for benefits due to serious and willful misconduct of the employer pursuant to labor code section 4553 with the State of California Workers’ Compensation Appeals Board (WCAB Case No: ADJ 10686812) resulting in injury arising out of and in the course of the Applicant’s employment on August 5, 2016. The Applicant is requesting relief in this matter for a one half increase in all compensation recoverable in connection with the injury of August 5, 2016, for the allowance of costs and expenses in an amount to be determined and for such further relief as in deemed appropriate. The Company is currently unable to determine what the additional expenses will be incurred in order to defend this matter. As such, the Company cannot determine whether there is a reasonable possibility that a loss will be incurred nor can it estimate the range of any such potential loss. Accordingly, the Company has not accrued an amount for any potential loss associated with this action.

 

NOTE 14 – SUBSEQUENT EVENTS

 

On July 19, 2017, the Company entered into a Development Agreement (“Agreement”) with Aveneon Technology, Ltd (“Aveneon”) for the development and formulation of certain active ingredients utilizing our proprietary CureFilm™ technology. In consideration of the development activities specified hereunder, Aveneon paid the Company a non-refundable and non-creditable fee of $35,692 (the “Initial Fee”) within one (1) day of the Effective Date. Aveneon shall pay the Company the following non-refundable and non-creditable milestone payment of $35,692 (the “Milestone Payment”) within fifteen (15) days after initiation of Phase IV – Product Conformance.

 

On July 27, 2017, the Company received $300,000 by issuing a convertible promissory note (“Convertible Note”) to an individual that is due January 27, 2018 (“Maturity Date”). The Convertible Note shall accrue interest at 8% per annum and is unsecured. The conversion price of the Common Stock into which the Principal Amount, or the then outstanding interest due thereon, shall be the lower of $7.00 or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000. Pursuant to issuing this Convertible Note, the Company issued to the holder of this Convertible Note a warrant to purchase 60,000 shares of Common Stock at an exercise price at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000.

 

In July 2017 the Company, Therapix Biosciences Ltd., a specialty clinical-stage pharmaceutical company dedicated to the development of cannabinoid-based drugs headquartered in Israel, and Assuta Medical Centers, Ltd., a medical services center located in Israel, entered into a nonbinding memorandum of understanding to collaborate to advance, research, develop and commercialize potential therapeutic products in the fields of personalized medicine and cannabinoids. The Company has not entered into any binding agreements or advanced any funds in connection with the foregoing.

 

 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

 

BUSINESS

 

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

 

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

 

CURE Pharmaceutical Corporation

 

Our wholly owned subsidiary and operating business, Cure Pharmaceutical, located in Oxnard, California was originally incorporated in July 2011 as a developer of advanced oral thin film (“OTF”) for the delivery of nutraceutical, Over-The-Counter (“OTC”) and prescription products for human and veterinary markets. We utilize drug delivery technologies to develop and commercialize new applications of proven therapeutics through our CureFilm™ technology, as well as through sublingual and transdermal applications. Our exclusive micro encapsulation of drug actives allows for a higher volume of an active and if required, multiple actives to be produced on a single OTF strip. We expect this technology will allow us to produce a broad spectrum of pharmaceutical, OTC and nutraceutical products.

 

Our Product

 

CureFilm™ Technology and Value Proposition

 

Typical forms of drug delivery that consumers have been familiar with over the years, include tablets, capsules, chewables, gummies, and more recent developments, such as melts and sublingual drops and sprays. We believe that we are one of the companies at the forefront of OTF drug delivery technology. Our OTF product is about the size of a postage stamp using a matrix that maximizes the amount of “active” drug that can be delivered via OTF.

 

Our CureFilm™ Technology consists of patented, patent pending and trade secrets in two areas: OTF – Core Technology, Sublingual Technology and Transdermal (skin) Technology.

 

Our proprietary multi-layer CureFilm™ allows dosages of many pharmaceutical, OTC and nutraceutical products to be put onto a small strip applied to the cheek (buccal), or under the tongue (sublingual). We believe that what sets us apart from the competition is our proprietary patented CureFilm™ Technology, multi-layer systems and formulation technologies that:

 

 

·

Consists of two components - a liquid-based film layer that contains and stabilizes the active ingredients, and a powder matrix layer.

 

·

Provides improved stability as well as delivery of active ingredients.

 

·

Contains functional qualities to include extra flavoring ingredients, pliability enhancers, and mucosal permeation enhancers.

 

In a two-layer strip, the layers are designed to work together, in combination with the powder composition. The powder composition can be varied, as can the muco-adhesion properties of the strips, to alter the dissolution and absorption rates of the medicament. A complete multilayer system allows for increased stability, higher loading of active ingredients, and increased taste and palatability.

 

 
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Another recent advancement in our CureFilm™ Technology utilizes micro-encapsulation of selected active ingredients. In the micro-encapsulation process, microscopic particles or droplets envelop the active ingredients to protect and shield them. The technique used in the micro-encapsulation process depends on various factors including the physical and chemical properties of the active ingredients. This micro-encapsulation technology has allowed the delivery of higher dosing with better flavor masking.

 

We have various types of CureFilm™ dietary supplement products that are being commercialized and developed. These include:

 

Commercialized:

 

 

·

MacuStrip Vitamin complex (eye health product)

 

·

ID Life Sleep melatonin

 

·

Electrolyte (Adult and Pediatric)

 

·

E6 Berry Caffeine

 

·

Hang-Over Relief

 

In Development:

 

 

·

Aspirin

 

·

Loratadine

 

·

Tadalifil

 

·

Sildenafil

 

·

Loperamide

 

·

Vitamin B12

 

·

Vitamin D3

 

·

Folic Acid

 

Clinical Development

 

We partner with pharmaceutical companies looking for new methods to deliver drug actives. Under Section (505)(b)(2) of the Food, Drug, and Cosmetic Act, (“(505)(b)(2)”) the FDA may grant market exclusivity for a term of up to three years of exclusivity following approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage, dosage form, route of administration or combination. The 505(b)(2) pathway is also the regulatory approach to be followed if an applicant intends to file an application for a product containing a drug that is already approved by the FDA for a certain indication and for which the applicant is seeking approval for a new indication or for a new use, the approval of which is required to be supported by new clinical trials, other than bioavailability studies. We have implemented a strategy under which we actively look for such so-called “repurposing opportunities” and determine whether our proprietary CureFilm™ Technology adds value to the product.

 

We currently have five such drug repurposing projects in our development pipeline, although there can be no assurance that such projects will be fully developed. The companies we partner with are typically responsible for managing the regulatory approval process of the product with the FDA and/or other regulatory bodies, as well as for the marketing and distribution of the products. On a case-by-case basis, we may be responsible for providing all or part of the documentation required for the regulatory submission.

 

In addition to pursuing partnering arrangements that provide for the full funding of a drug development project, we may undertake development of selected product opportunities until the marketing and distribution stage. We would first assess the potential and associated costs for successful development of a product, and then determine at which stage it would be most prudent to seek a partner, balancing costs against the potential for higher returns later in the development process. We currently have five of such potential drug candidates in our product pipeline, all of which are in the formulation development and pre-clinical phase of development. However, there can be no assurance that we will be able to fully develop, market and distribute OTF products for these drug candidates.

 

 
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Memorandums of Understanding

 

In July 2017 the Company, Therapix Biosciences Ltd., a specialty clinical-stage pharmaceutical company dedicated to the development of cannabinoid-based drugs headquartered in Israel, and Assuta Medical Centers, Ltd., a medical services center located in Israel, entered into a nonbinding memorandum of understanding to collaborate to advance, research, develop and commercialize potential therapeutic products in the fields of personalized medicine and cannabinoids. The Company has not entered into any binding agreements or advanced any funds in connection with the foregoing.

 

The Company is still finalizing a research contract with Technion Research & Development Foundation Ltd. (“TRDF”) related to research regarding the effectiveness of certain cannabinoid strain extracts for specific genetic sub-types of cancer. On May 1, 2017, the Company paid $642,500 to initiate the research project with TRDF.

 

Competition

 

We face competition from other companies, academic institutions, governmental agencies and other public and private research organizations for collaborative arrangements with pharmaceutical and biotechnology companies, in recruiting and retaining highly qualified scientific and management personnel and for licenses to additional technologies. Many of our competitors, including Monosol, BioDelivery Sciences International, IntelGenx and LTS Lohmann, will have substantially greater financial, technical and human resources than we have. Our success will be based in part on our ability to build, obtain regulatory approval for and market acceptance of, and actively manage a portfolio of drugs that addresses unmet medical needs and creates value in patient therapy.

 

The OTF manufacturing industry is relatively new, having only emerged over the last ten years. Although currently there are just a handful of current players within this industry, we expect that we will be subject to competition from numerous other companies that currently operate or are planning to enter the markets in which we compete. To date, among manufacturers of OTF, some medications that either are or have been available by OTF manufacturers in the marketplace include:

 

 

·

Zuplenz (the first oral soluble film approved by the FDA as a prescription medication)

 

·

Benadryl (diphenhydramine product and anti-histamine used for allergies and mild sedative)

 

·

Gas-X (simethicone product for bloating, gas, and gastrointestinal complaint)

 

·

Melatonin PM (hormonal product sold as a “dietary supplement” marketed for insomnia)

 

·

Orajel Kids (benzocaine product for dental pain)

 

·

Suboxone (buprenorphine and naloxone fixed dosage combination product for opioid addiction)

 

·

Subutex (buprenorphine product for opioid addiction)

 

·

Sudafed (phenylephrine or pseudoephedrine product for nasal congestion)

 

·

TheraFlu (combination product of pain reliever, anti-pyretic and decongestant)

 

·

Triaminic (children’s anti-tussive product)

 

The barriers to enter this market are the “know how’s” of developing and formulating consumer desired products which taste great. Also, the high cost of entry by companies who have no expertise in the market makes entry by competitors risky since the technology to develop product is expensive and proprietary. The key factors affecting the development and commercialization of our drug delivery products are likely to include, among other factors:

 

 

·

The safety and efficacy of our products;

 

·

The relative speed with which we can develop products;

 

·

Generic competition for any product that we develop;

 

·

Our ability to defend our existing intellectual property and to broaden our intellectual property and technology base;

 

·

Our ability to differentiate our products;

 

·

Our ability to develop products that can be manufactured on a cost effective basis;

 

·

Our ability to manufacture our products in compliance with cGMP and any other regulatory requirements; and

 

·

Our ability to obtain financing.

 

In order to establish ourselves as a viable industry partner, we plan to continue to invest in our research and development activities and in our manufacturing technology expertise, in order to further strengthen our technology base and to develop the ability to manufacture our CureFilm™ products ourselves, at competitive costs. Our failure to compete effectively could have a material adverse effect on our business.

 

Office

 

Our office is located at 1620 Beacon Place, Oxnard, California 93033. Our phone number is (805) 824-0410.

 

 
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RESULTS OF OPERATIONS

 

Revenues for the Three and Six Months Ended June 30, 2017 and 2016.

 

Revenues for the three and six months ended June 30, 2017 has increased by $21,734 and $25,070, respectively, as compared to the three and six months ended June 30, 2016. The increase in both periods was principally due to the increase in sales to one customer for our Sleep OTF product. In addition, the increase in the six months ended June 30, 2017 compared to the same period in 2016 is due to the Company completing a couple of R&D phases with two customers. The Company did not generate this type of revenue in the six months ended June 30, 2016.

 

Cost of Goods Sold

 

Cost of goods sold was $39,958 and $75,148 in the three and six months ended June 30, 2017, respectively, compared to $10,759 and $37,744 in the three and six months ended June 30, 2016, respectively. Cost of goods sold increased in both periods due to the Company utilizing a new third party converter for one of our customers as well as incurring higher direct labor costs to package our Sleep OTF product. In addition, the Company incurred higher sales in both the three and six months ended June 30, 2017 compared to the same periods in 2016 resulting in higher cost of goods sold in the three and six months ended June 30, 2017 compared to the same periods in 2016.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the three and six months ended June 30, 2017 amounted to $2,194,950 and $4,597,497, respectively, and for three and six months ended June 30, 2016 amounted to $304,669 and $596,605, respectively. For the three and six months ended June 30, 2017 and 2016, selling, general and administrative expenses were mainly comprised of amortization, commission, insurance, payroll, consulting, marketing, legal, accounting, public market and rent expenses. The increase in the three and six months ended June 30, 2017 compared to the three and six months ended June 30, 2016 was due to the increase in payroll, insurances and public market expenses as well as noncash transactions relating to common stock to be issued for consulting services and recording the fair value of the warrants issued for services totaling $1,917,637 and $3,269,630 for the three and six months ended June 30, 2017, respectively. In addition, the Company has started to focus on rebranding the Company as well as strategizing which pharmaceutical markets, industries and particular indications the company will focus our efforts in.

 

Research and Development Expenses

 

For the three and six months ended June 30, 2017, research and development expenses increased to $205,648 and $425,268, respectively, compared to the three and six months ended June 30, 2016 of $171,447 and $298,799, respectively. As the Company was able to raise funds during 2016 by issuing convertible promissory notes, we were able to continue to focus on spending on improving our intellectual property. At the same time the Company focused on developing potential partnerships with pharmaceutical and bioscience companies and new OTC and prescription products.

 

LIQUIDITY AND CAPITAL RESOURCES

 

For the six months ended June 30, 2017

 

As of June 30, 2017, our total assets were $3,439,197 comprised of cash of $277,961, accounts receivable of $13,443, inventory of $103,989, prepaid expenses and other assets of $1,695,930, net property and equipment of $324,651, net intangibles of $889,345, and other assets of $133,878. Our total liabilities were $2,429,435 comprised of accounts payable of $416,736, accrued expenses of $36,441, current portion of loan and note payables of $706,710, current portion of capital lease payable of $3,234, current portion of convertible promissory notes of $100,937, derivative liability of $412,777, deferred revenue of $192,600 and license fees of $560,000.

 

Cash flows used in operating activities

 

For the months ended June 30, 2017, operating activities consumed $2,075,795 of cash. This was primarily the result of a net loss of $5,161,425, offset by depreciation and amortization of $98,162, amortization of prepaid stock-based compensation of $552,010, amortization of loan discounts of $82,933, warrants issued for services of $2,717,620 as well as the changes in inventory of $22,704, prepaid expenses of $594,061, accounts payable of $151,350 and deferred revenue of $18,982.

 

Cash flows used in investing activities

 

Investment activities used an additional $64,350 of cash during the six months ended June 30, 2017, primarily as a result of payments for patents and costs associated in the development and improvement of our intellectual property of $16,555, payment to joint venture investment of $5,000 and acquisition of property and equipment of $42,795.

 

Cash flows provided by financing activities

 

Financing activities provided $1,311,964 of cash for the six months ended June 30, 2017, primarily as the result of proceeds from loans of $1,340,000 and repayments of loan and capital lease payables of $28,036.

 

 
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CRITICAL ACCOUNTING POLICIES

 

The preparation of financial statements in conformity with generally accepted accounting principles of the United States (“U.S. GAAP”) requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. For additional information, see Note 2 – “Summary of Significant Accounting Policies”. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or condition

 

Impairment of Long-Lived Assets

 

Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset.

 

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There was no impairment on our long-lived assets during the three months ended June 30, 2017. For the year ended December 31, 2016, the Company wrote off $58,522 of patents.

 

Going Concern

 

The Company has an accumulated deficit balance as of June 30, 2017. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. The Company is continually analyzing its current costs and is attempting to make additional cost reductions where possible. We expect that we will continue to generate losses from operations throughout the remainder of 2017.

 

In order to continue as a going concern and to develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include raising additional capital through borrowing and/or sales of equity and debt securities. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

As of the date of this Quarterly Report, we do not have any 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.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not Applicable.

 

 
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ITEM 4. CONTROLS AND PROCEDURES

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(t) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

 

 

1.

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

 

2.

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and

 

3.

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

 

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

 

Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2017. Based on this assessment, management concluded that the Company did not maintain effective internal controls over financial reporting as a result of the identified material weakness in our internal control over financial reporting described below. In making this assessment, management used the framework set forth in the report entitled Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication and (v) monitoring.

 

Identified Material Weakness

 

A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement or the financial statements will not be prevented or detected. Management identified the segregation of duties as a material weakness during its assessment of internal controls over financial reporting as of June 30, 2017. As of June 30, 2017, we had one full-time employee with the requisite expertise in the key functional areas of finance and accounting. As a result, there is a lack of proper segregation of duties necessary to ensure that all transactions are accounted for accurately and in a timely manner. As our resources allow, we will add financial personnel to our management team.

 

Changes In Internal Control Over Financial Reporting

 

There were no changes in our internal controls over financial reporting during the fiscal quarter ended June 30, 2017 that materially affected, or is reasonably likely to have a material affect, on our internal control over financial reporting.

 

 
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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

The information set forth under Note 13 of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this report, is incorporated herein by reference. 

 

ITEM 1A. RISK FACTORS

 

Not Applicable.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On April 7, 2017, the Company issued 14,579 common stock shares at $6.86 per share for consulting services to be performed over a one year period.

 

On April 24, 2017, the Company issued 100,000 common stock shares at $7.00 per share for consulting services to be performed over a six month period.

 

On May 18, 2017, the Company issued 300,000 common stock shares at $2.10 per share for consulting services to be performed over a one year period.

 

The shares of common stock described above were issued without registration under the Securities Act of 1933 (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act promulgated thereunder and in reliance on similar exemptions under applicable state laws.

 

From May 11, 2017 to June 30, 2017, the Company issued 140,000 warrants in connection with the issuance of $700,000 convertible promissory notes. The warrants have an exercise price of the lower of $7.00 per share or the price per share in the Company’s latest debt or equity financing greater than $3,000,000 and a term of 3 years.

 

On April 27, 2017, the Company received $640,000 by issuing a senior secured promissory note in the face amount of $650,000 due August 27, 2017. No interest shall accrue on this note unless it is not repaid by the maturity date at which the note shall accrue interest at 10% per annum. The note is secured by the Company’s intellectual property.

 

From May 11, 2017 to June 30, 2017, the Company issued up to $700,000 convertible promissory notes due between November 11, 2017 and December 30, 2017. The notes bear interest at 8% per year and are convertible into common stock at the lower of $7.00 per share or the price per share in the Company’s latest debt or equity financing greater than $3,000,000.

 

The warrants and notes described above were issued and sold without registration under the Securities Act in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURE

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 
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ITEM 6. EXHIBITS

 

31.1

 

Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002

31.2

 

Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002

32.1

 

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

 

Certification of Chief Financial Officer pursuant to 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.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 
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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the Registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

CURE PHARMACEUTICAL HOLDING CORP.

 

Dated: August 14, 2017

By:

/s/ Robert Davidson

 

Robert Davidson

 

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:

 

/s/ Robert Davidson

 

Robert Davidson

 

Chief Executive Officer

 

August 14, 2017

 

/s/ Mark Udell

 

Mark Udell

 

Chief Financial Officer

 

August 14, 2017

 

 

25

 

EX-31.1 2 curr_ex311.htm CERTIFICATION curr_ex311.htm

EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

AND RULE 13A-14 OF THE EXCHANGE ACT OF 1934

 

CERTIFICATION

 

I, Robert Davidson, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of CURE Pharmaceutical Holding Corp.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures, to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: August 14, 2017

By:

/s/ Robert Davidson

 

Robert Davidson

 

Chief Executive Officer and

Principal Executive Officer

 

EX-31.2 3 curr_ex312.htm CERTIFICATION curr_ex312.htm

EXHIBIT 31.2

 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

AND RULE 13A-14 OF THE EXCHANGE ACT OF 1934

 

CERTIFICATION

 

I, Mark Udell, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of CURE Pharmaceutical Holding Corp.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: August 14, 2017

By:

/s/ Mark Udell

 

Mark Udell

 

Chief Financial Officer

EX-32.1 4 curr_ex321.htm CERTIFICATION curr_ex321.htm

EXHIBIT 32.1

 

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S. C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of CURE Pharmaceutical Holding Corp., (the “Company”) on Form 10-Q for the three months ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Davidson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

(1)

The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: August 14, 2017

By:

/s/ Robert Davidson

 

Robert Davidson

 

Chief Executive Officer and

Principal Executive Officer

 

EX-32.2 5 curr_ex322.htm CERTIFICATION wordproof.doc

EXHIBIT 32.2

 

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S. C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of CURE Pharmaceutical Holding Corp., (the “Company”) on Form 10-Q for the three months ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Udell, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

(1)

The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: August 14, 2017

By:

/s/ Mark Udell

 

Mark Udell

 

Chief Financial Officer

 

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Document and Entity Information - shares
6 Months Ended
Jun. 30, 2017
Aug. 10, 2017
Document And Entity Information    
Entity Registrant Name CURE PHARMACEUTICAL HOLDING CORP.  
Entity Central Index Key 0001643301  
Document Type 10-Q  
Document Period End Date Jun. 30, 2017  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   23,751,252
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2017  

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Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Current assets:    
Cash $ 277,961 $ 1,106,142
Accounts receivable 13,443 7,049
Inventory 103,989 81,285
Prepaid expenses and other assets 1,695,930 223,879
Total current assets 2,091,323 1,418,355
Property and equipment, net 324,651 370,648
Intellectual property and patents, net 889,345 894,510
Other assets 133,878 151,579
Total assets 3,439,197 2,835,092
Current liabilities:    
Accounts payable 416,736 265,386
Accrued expenses 36,441 26,305
Loan payable 11,460 33,277
Note payable, net of unamortized discount 695,250 50,000
Capital lease payable 3,234 9,453
Convertible promissory notes, net of unamortized discount 100,937
Derivative liability 412,777
Deferred revenue 192,600 173,618
Total current liabilities 1,869,435 558,039
License Fees 560,000 560,000
TOTAL LIABILITIES 2,429,435 1,118,039
Stockholders' equity:    
Common stock: $0.001 par value; authorized 75,000,000 shares; 23,751,252 and 23,336,673 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively 23,752 23,337
Additional paid-in capital 16,866,149 12,412,430
Accumulated deficit (15,880,139) (10,718,714)
Total stockholders' equity 1,009,762 1,717,053
Total liabilities and stockholders' equity $ 3,439,197 $ 2,835,092
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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2017
Dec. 31, 2016
STOCKHOLDERS' DEFICIT    
Common Stock, Par Value Per Share $ 0.001 $ 0.001
Common Stock, Shares Authorized 75,000,000 75,000,000
Common Stock, Shares Issued 23,751,252 23,336,673
Common Stock, Shares Outstanding 23,751,252 23,336,673
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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
REVENUE        
Net product sales $ 32,073 $ 14,151 $ 59,570 $ 42,662
Consulting research & development income 4,448
Shipping and other sales 6,812 3,000 6,812 3,098
Total revenues 38,885 17,151 70,830 45,760
Cost of goods sold 39,598 10,579 75,148 37,744
Gross profit (loss) (713) 6,572 (4,318) 8,016
Research and development expenses 205,648 171,447 425,268 298,799
Selling, general and administrative expenses 2,194,950 304,669 4,597,497 596,605
Total costs and expenses 2,400,598 476,116 5,022,765 895,404
Net loss from operations (2,401,311) (469,544) (5,027,083) (887,388)
Other income (expense):        
Interest income 1 45 5 412
Other income 8,571 8,571 17,142 17,142
Loss on disposal of PP&E (12,351) (12,351) (3,323)
Change in derivative liability (42,545) (42,545)
Other expense (6,394) (88,491) (7,388) (100,634)
Interest expense (87,054) (47,603) (89,205) (99,321)
Other income (expense) (139,772) (127,478) (134,342) (185,724)
Net loss before income taxes (2,541,083) (597,022) (5,161,425) (1,073,112)
Provision for income taxes
Net loss $ (2,541,083) $ (597,022) $ (5,161,425) $ (1,073,112)
Net loss per share, basic and diluted $ (0.11) $ (0.09) $ (0.22) $ (0.16)
Weighted average shares outstanding, basic and diluted 23,436,696 6,629,260 23,593,105 6,629,260
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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Cash Flows from Operating Activities:    
Net loss $ (5,161,425) $ (1,073,112)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 98,161 75,394
Loss from joint venture 5,488
Loss on disposal of PP&E 12,351 3,323
Amortization of prepaid stock –based compensation 552,010
Amortization of loan discounts 82,933
Change in derivative liabilities 42,545
Warrants issued for services 2,717,620
Change in other assets and liabilities:    
Restricted cash (50,000)
Accounts receivable (6,394) 1,679
Inventory (22,704) 12,975
Prepaid expenses and other assets (594,061) (703,838)
Other assets 17,213 8,858
Accounts payable 151,350 (265,682)
Accrued expenses 10,136 46,823
Deferred revenue 18,982 (28,539)
Net cash used in operating activities (2,075,795) (1,972,119)
Cash flows from investing activities:    
Advanced on note receivable (18,290)
Purchase in intangible assets (16,555) (25,527)
Payment to joint venture investment (5,000)
Acquisition of property and equipment, net (42,795) (48,830)
Net cash used in investing activities (64,350) (92,647)
Cash flows from financing activities:    
Proceeds from loan 1,340,000 4,371,963
Loan repayments (21,817) (289,253)
Capital lease payments (6,219) (5,509)
Net cash provided by financing activities 1,311,964 4,077,201
Net increase (decrease) in cash and cash equivalents (828,181) 2,012,435
Cash and cash equivalents, beginning of period 1,106,142 13,352
Cash and cash equivalents, end of period 277,961 2,025,787
Supplemental cash flow information:    
Cash paid for Interest 2,967 28,892
Cash paid for Income taxes
Non-cash financing activities:    
Common stock to be issued for prepaid expense 1,430,000
Loan discount relating to note payable 10,000
Loan discount relating to convertible promissory notes $ 676,746
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ORGANIZATION AND DESCRIPTION OF BUSINESS
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Cure Pharmaceutical Holding Corp (the “Company”), formerly known as Makkanotti Group Corp, was incorporated in the State of Nevada on May 15, 2014. The Company was formed to engage in the business of manufacturing food paper bags in Nicosia, Cyprus. On November 7, 2016, the Company changed its name to Cure Pharmaceutical Holding Corp.

 

On November 7, 2016, the Company, in a reverse take-over transaction, acquired Cure Pharmaceutical Corporation (“Cure Pharmaceutical”), a specialty pharmaceutical and bioscience company based in California that specializes in drug delivery technologies, by executing a Share Exchange Agreement and Conversion Agreement (“Exchange Agreement”) by and among the Company and a holder of a majority of the issued and outstanding capital stock of the registrant prior to the closing (the “Majority Stockholder”), on the one hand, and Cure Pharmaceutical, a California corporation, all of the shareholders of Cure Pharmaceutical’s issued and outstanding share capital (the “Cure Pharm Shareholders”) and the holders of certain convertible promissory notes of Cure Pharmaceutical (“Cure Pharm Noteholders”), on the other hand. Hereinafter, this share exchange transaction is described as the “Share Exchange.” As a result of the Share Exchange, Cure Pharmaceutical became a wholly owned subsidiary of the Company, and the Cure Pharm Shareholders and Cure Pharm Noteholders became the controlling shareholders of the Company.

 

For accounting purposes, Cure Pharmaceutical shall be the surviving entity. The transaction is accounted for using the reverse acquisition method of accounting. As a result of the recapitalization and change in control, Cure Pharmaceutical is the acquiring entity in accordance with ASC 805, Business Combinations.

 

Cure Pharmaceutical Corporation is a specialty pharmaceutical and bioscience company with a focus in drug delivery technologies. Cure leverages novel drug delivery technologies to develop and commercialize new applications of proven therapeutics through Oral Thin Film (“OTF”) via our proprietary patented CureFilm™ Technology as well as through transdermal applications. Our micro encapsulation of drug actives in our CureFilm™ Technology allows for a higher volume of an active and if required, multiple actives to be produced on a single oral thin film strip.

 

The Company is focused on partnering with pharmaceutical and biotech companies seeking to deliver drug actives utilizing and benefitting from our proprietary OTF and transdermal applications and when preferable to take our own products from clinical process to commercialization. We are focused on both the human and veterinary prescription, OTC and nutraceutical markets. Cure represents the complete solution for OTF drug delivery therapeutics from inception to finished product utilizing our CGMP/FDA registered manufacturing facility and processes.

 

In July 2017 the Company, Therapix Biosciences Ltd., a specialty clinical-stage pharmaceutical company dedicated to the development of cannabinoid-based drugs headquartered in Israel, and Assuta Medical Centers, Ltd., a medical services center located in Israel, entered into a nonbinding memorandum of understanding to collaborate to advance, research, develop and commercialize potential therapeutic products in the fields of personalized medicine and cannabinoids. The Company has not entered into any binding agreements or advanced any funds in connection with the foregoing.

 

The Company is still finalizing a research contract with Technion Research & Development Foundation Ltd. (“TRDF”) related to research regarding the effectiveness of certain cannabinoid strain extracts for specific genetic sub-types of cancer. On May 1, 2017, the Company paid $642,500 to initiate the research project with TRDF.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

 

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

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2017, and the results of operations and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2017 and 2016, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal period ended December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2017.

  

Use of Estimates

 

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

 

Cash and Cash Equivalents

 

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. As of June 30, 2017 and December 31, 2016, the Company had no cash equivalents. At June 30, 2017 and December 31, 2016, the Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions.

 

Investment in Associates

 

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

 

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

 

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

 

On January 8, 2016, the Company received 50% ownership in Cure Innovations, Inc (“CI”). CI was created in 2015 by IncuBrands Studio, Inc (“IncuBrands”). The Company and IncuBrands each own 50% of the common stock of CI. The Company and IncuBrands entered into a Joint Venture agreement in 2013 to distribute several OTF products utilizing IncuBrands marketing and contacts in various industries as well as utilize the Company’s technology and capabilities of manufacturing OTF’s.

 

On December 6, 2016, the Company entered into a Joint Venture Agreement (“Joint Venture”) with Pace Wellness, Inc. (“Pace”) to jointly develop three Active Pharmaceutical Ingredients (“API”) within the nonprescription and/or Over-the-Counter (OTC) medicines specifically utilizing the Company’s patented and proprietary CureFilm™ Technology. The three API’s to be jointly developed are Diphenhydramine HCL, Omeprazole and a third API to be determined at a later date (“Products”). Pace shall be the exclusive global distributor of the Products under the Solves Strips® branding or other private or branded labels. All benefits, advantages, and liabilities derived from, or incurred in respect of the Joint Venture shall be borne by the parties in proportion of their respective participating interests of 50/50 equal interest.

 

Property and Equipment

 

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

 

Manufacturing equipment   5-7 Years  
Computer and other equipment   3-7 Years  
Leasehold Improvements   Lesser of useful life or the term of the lease  

  

Accounts Receivable

 

Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts.

 

Impairment of Long-Lived Assets

 

Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset.

 

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There were no impairments on our long-lived assets during the three and six month periods ended June 30, 2017 and 2016.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with the FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and/or service has been performed; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. The Company believes that these criteria are satisfied upon shipment from our facility. Freight billed to customers is presented as revenues, and the related freight costs are presented as cost of goods sold. Deferred revenue is recognized when earned and all significant obligations have been satisfied.

 

Advertising Expense

 

The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying statements of operations. The Company recorded advertising costs of $68,893 and $95,226, for the three and six month periods ended June 30, 2017, respectively, and none for the three and six month periods ended June 30, 2016.

 

Research and Development

 

Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred.

 

Income Taxes

 

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

  

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

 

Stock-Based Compensation

 

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

 

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

 

Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

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

 

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

 

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

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

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

 

The Company has assets or liabilities valued at fair value on a recurring basis for the six months ended June 30, 2017. The Company did not have assets or liabilities valued at fair value on a recurring basis for the year ended December 31, 2016.

 

Basic and diluted loss per share

 

Basic loss per share is computed by dividing the net loss to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing the net loss for the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares, which consist of stock options, warrants, and convertible notes payable, have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.

 

Going Concern

 

The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company had an accumulated deficit at June 30, 2017 of $15,880,139. The Company had a working capital of $221,888 as of June 30, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. The Company is continually analyzing its current costs and is attempting to make additional cost reductions where possible. We expect that we will continue to generate losses from operations throughout 2017.

  

In order to continue as a going concern and to develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include raising additional capital through borrowing and/or sales of equity and debt securities. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

 

Recently Issued Standards

 

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The purpose is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. This ASU is effective for the Company in the first quarter of 2018. Early adoption is not permitted except for limited provisions. The Company does not expect the adoption of this amendment to have a material effect on its financial condition and results of operations.

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The new standard requires recognition of the income tax effects of vested or settled awards in the income statement and involves several other aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This new standard became effective for the Company on January 1, 2017. The adoption of this standard did not have a material impact on its financial position, results of operations or statements of cash flows upon adoption.

 

In August, 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”). The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, Statement of Cash Flows. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This new standard will be effective for the Company on January 1, 2018; however, early adoption is permitted with prospective application to any business development transaction.

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation: Scope of Modification Accounting, which provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions or award classification and would not be required if the changes are considered non-substantive. The amendments of this ASU are effective for the Company in the first quarter of 2018, with early adoption permitted. The adoption of ASU 2017-09 is not expected to have an impact on the Company’s consolidated financial statements.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.7.0.1
INVENTORY
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 3 - Inventory

Inventory consists of raw materials, packaging components, work-in-process and finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or market. The carrying value of inventory consisted of the following at June 30, 2017 and December 31, 2016:

 

   

June 30,

2017

    December 31,
2016
 
Raw materials   $ 74,678     $ 68,047  
Packaging components     97,782       84,927  
Work-in-process     23,461       17,406  
Finished goods     -       -  
      195,921       170,380  
Reserve for obsolescence     (91,932 )     (89,095 )
Total inventory   $ 103,989     $ 81,285  
XML 20 R9.htm IDEA: XBRL DOCUMENT v3.7.0.1
PREPAID EXPENSES AND OTHER ASSETS
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 4 - PREPAID EXPENSES AND OTHER ASSETS

As of June 30, 2017 and December 31, 2016 prepaid expenses and other assets consisted of the following:

 

   

June 30,

2017

    December 31,
2016
 
             
Prepaid consulting services   $ 1,011,155     $ 150,168  
Prepaid clinical study     642,500       -  
Prepaid insurance     19,270       42,785  
Other Receivables     10,178       10,948  
Prepaid inventory     6,927       13,178  
Prepaid expenses     5,900       6,800  
Property and Equipment, net   $ 1,695,930     $ 223,879  
XML 21 R10.htm IDEA: XBRL DOCUMENT v3.7.0.1
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 5 - PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

As of June 30, 2017 and December 31, 2016 property and equipment and intangible assets consisted of the following:

 

   

June 30,

2017

   

December 31,

2016

 
             
Manufacturing equipment   $ 769,074     $ 769,074  
Computer and other equipment     147,192       116,747  
Leasehold improvements     36,066       36,066  
Less accumulated depreciation     (627,681 )     (551,239 )
Property and Equipment, net   $ 324,651     $ 370,648  

  

Depreciation expense for the three and six months ended June 30, 2017 was $37,437 and $76,442, respectively, which includes depreciation of $2,160 and $4,320 for capitalized leased assets for the three and six months ended June 30, 2017, respectively. Depreciation expense for the three and six months ended June 30, 2016 was $26,507 and $54,062, respectively, which includes depreciation of $2,160 and $4,320 for capitalized leased assets for the three and six months ended June 30, 2016, respectively. The total amount of property held under a under a capital lease was $43,201 as of June 30, 2017 and December 31, 2016. Accumulated depreciation for property held under capital leases were $32,857 and $28,537 as of June 30, 2017 and December 31, 2016 respectively.

 

   

June 30,

2017

    December 31,
2016
 
             
Intellectual Property   $ 814,582     $ 814,582  
Patents     191,602       175,047  
Less accumulated amortization     (116,839 )     (95,119 )
Intangible assets, net   $ 889,345     $ 894,510  

 

The Company incurred $16,555 and $45,930 of legal patent costs that were capitalized during the six months ended June 30, 2017 and the year ended December 31, 2016, respectively. The Company did not write off any intangibles during the six months ended June 30, 2017 and wrote off $58,522 of intangibles during the year ended December 31, 2016. Amortization expense for the three and six months ended June 30, 2017 was $10,821 and $21,720, respectively. Amortization expense for the three and six months ended June 30, 2016 was $10,667 and $21,332, respectively.

 

The estimated aggregate amortization expense over each of the next five years is as follows:

 

2017   $ 21,798  
2018     43,518  
2019     43,518  
2020     43,518  
2021     43,518  
Thereafter     557,303  
Total Amortization   $ 753,172  

 

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.7.0.1
LOAN PAYABLE
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 6 - LOAN PAYABLE

Loan payable consist of the following at June 30, 2017 and December 31, 2016:

 

    2017     2016  
Note to a company due September 29, 2017 including interest at 13.25% per annum; unsecured; interest due monthly   $ 11,460     $ 33,277  
Current portion of loan payable     11,460       33,277  
Loan payable, less current portion   $ -     $ -  
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.7.0.1
NOTES PAYABLE
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 7 - NOTES PAYABLE

Notes payable consist of the following at June 30, 2017 and December 31, 2016:

 

    2017     2016  
             
Note to a company due August 27, 2017, no interest shall accrue unless and until an event of default occurs, where interest at 10% per annum shall accrue beginning on the date of the applicable event of default, secured by the Company’s intellectual property   $ 650,000     $ -  
Note to an individual, non-interest bearing, unsecured and has no fixed terms of repayment     50,000       50,000  
                 
      700,000       50,000  
Unamortized discount     (4,750 )     -  
Current portion of loan payable     695,250       50,000  
Loan payable, less current portion   $ -     $ -  

 

During the three and six months ended June 30, 2017, the Company incurred $5,250 amortization of discount. During the three and six months ended June 30, 2016, the Company incurred $0 amortization of discount.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
CONVERTIBLE PROMISSORY NOTES
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 8 - CONVERTIBLE PROMISSORY NOTES

Convertible promissory notes consist of the following at June 30, 2017 and December 31, 2016:

 

    2017     2016  
             
Convertible promissory notes totaling $700,000 due between November 11, 2017 and December 30, 2017, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due between November 11, 2017 and December 30, 2017   $ 700,000     $ -  
                 
      700,000       -  
Unamortized discount     (599,063 )     -  
Current portion of convertible promissory notes     100,937       -  
Convertible promissory notes, less current portion   $ -     $ -  

 

During the three and six months ended June 30, 2017, the Company incurred $77,683 amortization of discount. During the three and six months ended June 30, 2016, the Company incurred $0 amortization of discount. During the three and six months ended June 30, 2017, the Company incurred $3,306 interest expenses and accrued interest as of June 30, 2017. During the three and six months ended June 30, 2016, the Company incurred $0 interest expenses and accrued interest as of June 30, 2016.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
DERIVATIVE LIABILITY
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 9 - DERIVATIVE LIABILITY

The following table summarizes fair value measurements by level at June 30, 2017 for assets and liabilities measured at fair value on a recurring basis:

 

    Level I     Level II     Level III     Total  
Cash   $ 277,961     $     $     $ 277,961  
                                 
Derivative liability               $ (412,777 )   $ (412,777 )

 

No financial assets or liabilities were measured on a recurring basis as of December 31, 2016.

 

The Company has issued convertible promissory notes during 2017. The convertible notes require us to record the value of the conversion feature as a liability, at fair value, pursuant to ASC 815, including provisions in the notes that protect the holders from declines in the Company’s stock price, which is considered outside the control of the Company. The derivative liabilities are marked-to-market each reporting period and changes in fair value are recorded as a non-operating gain or loss in our statement of operations, until they are completely settled. The fair value of the conversion feature is determined each reporting period using the Black-Scholes option pricing model, and is affected by changes in inputs to that model including our stock price, expected stock price volatility, interest rates and expected term. The assumptions used in valuing the derivative liability during 2017 were as follows:

 

   

June 30,

2017

 
Significant assumptions (weighted-average):      
Risk-free interest rate at grant date   1.89%  
Expected stock price volatility   79.92%  
Expected dividend payout   -  
Expected option life (in years)   1  
Expected forfeiture rate   0%  

 

The following is a reconciliation of the derivative liability for 2017:

 

   

June 30,

2017

 
Value at December 31, 2016   $ -  
Initial value at the debt issuance     370,232  
Increase in value     42,545  
Value at June 30, 2017   $ 412,777  
XML 26 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
WARRANT AGREEMENTS
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 10 - Warrant Agreements

On January 3, 2017, the Company issued 1,300,000 warrants in connection with commissions earned in relation to the Company’s Private Label Exclusive Distribution and License agreement with Red Barn Pet Products, LLC.

 

From May 11, 2017 to June 30, 2017, the Company issued 140,000 warrants in connection with the issuance of $700,000 convertible promissory notes.

 

Warrants that vest at the end of a one-year period are amortized over the vesting period using the straight-line method.

 

The Company’s warrant activity was as follows:

 

    Warrants    

Weighted Average

Exercise Price

    Weighted Average Contractual Remaining Life  
Outstanding, December 31, 2016     4,392,107       1.97       6.17  
Granted     1,440,000       2.49       0.75  
Exercised     -       -       -  
Forfeited/Expired     -       -       -  
Outstanding, June 30, 2017     5,832,107       2.10       5.92  
Exercisable at June 30, 2017     3,6630,665       2.19       2.95  

  

 

Range of

Exercise Price

 

Number of

Warrants

    Weighted Average Remaining Contractual Life (years)     Weighted Average Exercise Price     Number of Warrants Exercisable     Weighted Average Exercise Price  
$1.00 - $7.00     5,832,107       5.92     $ 2.10       3,630,665     $ 2.19  
      5,832,107       5.92     $ 2.10       3,630,665     $ 2.19  

 

The weighted-average fair value of warrants granted to during the three months ended June 30, 2017 and year ended December 31, 2016, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows:

 

   

June 30,

2017

   

December 31,

2016

 
Significant assumptions (weighted-average):            
Risk-free interest rate at grant date     1.89 %     1.83 %
Expected stock price volatility     79.92 %     84.42 %
Expected dividend payout     -       -  
Expected option life (in years)     3       3  
Expected forfeiture rate     0 %     0 %
XML 27 R16.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCKHOLDERS' EQUITY
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 11 - Stockholders' Equity

Authorized Stock

 

The Company has authorized to issue is 75,000,000 common shares with a par value of $0.001 per share.

 

As of June 30, 2017 and December 31, 2016, there were 23,751,252 and 23,336,673, shares of the Company’s common stock issued and outstanding, respectively.

 

Common Share Issuances

 

On April 7, 2017, the Company issued 14,579 common stock shares at $6.86 per share for consulting services to be performed over a one year period. The total value of this issuance was $100,000 and as of June 30, 2017, $76,986 is included in prepaid expenses and other assets.

 

On April 24, 2017, the Company issued 100,000 common stock shares at $7.00 per share for consulting services to be performed over a six month period. The total value of this issuance was $700,000 and as of June 30, 2017, $443,716 is included in prepaid expenses and other assets.

 

On May 18, 2017, the Company issued 300,000 common stock shares at $2.10 per share for consulting services to be performed over a one year period. The total value of this issuance was $630,000 and as of June 30, 2017, $357,288 is included in prepaid expenses and other assets.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.7.0.1
COMMITMENTS AND CONTINGENCIES
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 12 - Commitments and Contingencies

Litigation:

 

From time to time the Company may become a party to litigation in the normal course of business. Management believes that there are no current legal matters that would have a material effect on the Company’s financial position or results of operations.

  

Operating leases

 

The Company maintains its corporate offices and manufacturing facility at 1620 Beacon Place, Oxnard, CA 93033, which contains approximately 25,000 square feet. The Company is currently on a month-to-month lease.

 

The Company also leases additional office and warehouse space at 1610 and 1612 Fiske Place, Oxnard, CA 93033, which contains approximately 6,547 square feet. The Company is currently on a month-to-month lease.

 

Total rent expense for the three and six month periods ended June 30, 2017 was $73,416 and $145,815, respectively. Total rent expense for the three and six month periods ended June 30, 2016 was $72,101 and $142,569, respectively.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.7.0.1
LEGAL PROCEEDINGS
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 13 - LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. The only significant matter of which the Company is aware of is discussed below.

 

On May 22, 2017, Sandy Sierra Garate (“Applicant”), an employee of the Company, filed an application for benefits due to serious and willful misconduct of the employer pursuant to labor code section 4553 with the State of California Workers’ Compensation Appeals Board (WCAB Case No: ADJ 10686812) resulting in injury arising out of and in the course of the Applicant’s employment on August 5, 2016. The Applicant is requesting relief in this matter for a one half increase in all compensation recoverable in connection with the injury of August 5, 2016, for the allowance of costs and expenses in an amount to be determined and for such further relief as in deemed appropriate. The Company is currently unable to determine what the additional expenses will be incurred in order to defend this matter. As such, the Company cannot determine whether there is a reasonable possibility that a loss will be incurred nor can it estimate the range of any such potential loss. Accordingly, the Company has not accrued an amount for any potential loss associated with this action.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
SUBSEQUENT EVENTS
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Note 14 - SUBSEQUENT EVENTS

On July 19, 2017, the Company entered into a Development Agreement (“Agreement”) with Aveneon Technology, Ltd (“Aveneon”) for the development and formulation of certain active ingredients utilizing our proprietary CureFilm™ technology. In consideration of the development activities specified hereunder, Aveneon paid the Company a non-refundable and non-creditable fee of $35,692 (the “Initial Fee”) within one (1) day of the Effective Date. Aveneon shall pay the Company the following non-refundable and non-creditable milestone payment of $35,692 (the “Milestone Payment”) within fifteen (15) days after initiation of Phase IV – Product Conformance.

 

On July 27, 2017, the Company received $300,000 by issuing a convertible promissory note (“Convertible Note”) to an individual that is due January 27, 2018 (“Maturity Date”). The Convertible Note shall accrue interest at 8% per annum and is unsecured. The conversion price of the Common Stock into which the Principal Amount, or the then outstanding interest due thereon, shall be the lower of $7.00 or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000. Pursuant to issuing this Convertible Note, the Company issued to the holder of this Convertible Note a warrant to purchase 60,000 shares of Common Stock at an exercise price at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000.

 

In July 2017 the Company, Therapix Biosciences Ltd., a specialty clinical-stage pharmaceutical company dedicated to the development of cannabinoid-based drugs headquartered in Israel, and Assuta Medical Centers, Ltd., a medical services center located in Israel, entered into a nonbinding memorandum of understanding to collaborate to advance, research, develop and commercialize potential therapeutic products in the fields of personalized medicine and cannabinoids. The Company has not entered into any binding agreements or advanced any funds in connection with the foregoing.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
6 Months Ended
Jun. 30, 2017
Summary Of Significant Accounting Policies Policies  
Principles of consolidation and basis of presentation

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

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of June 30, 2017, and the results of operations and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2017 and 2016, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal period ended December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2017.

Use of Estimates

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

Cash and Cash Equivalents

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. As of June 30, 2017 and December 31, 2016, the Company had no cash equivalents. At June 30, 2017 and December 31, 2016, the Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions.

Investment in Associates

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

 

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

 

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

 

On January 8, 2016, the Company received 50% ownership in Cure Innovations, Inc (“CI”). CI was created in 2015 by IncuBrands Studio, Inc (“IncuBrands”). The Company and IncuBrands each own 50% of the common stock of CI. The Company and IncuBrands entered into a Joint Venture agreement in 2013 to distribute several OTF products utilizing IncuBrands marketing and contacts in various industries as well as utilize the Company’s technology and capabilities of manufacturing OTF’s.

 

On December 6, 2016, the Company entered into a Joint Venture Agreement (“Joint Venture”) with Pace Wellness, Inc. (“Pace”) to jointly develop three Active Pharmaceutical Ingredients (“API”) within the nonprescription and/or Over-the-Counter (OTC) medicines specifically utilizing the Company’s patented and proprietary CureFilm™ Technology. The three API’s to be jointly developed are Diphenhydramine HCL, Omeprazole and a third API to be determined at a later date (“Products”). Pace shall be the exclusive global distributor of the Products under the Solves Strips® branding or other private or branded labels. All benefits, advantages, and liabilities derived from, or incurred in respect of the Joint Venture shall be borne by the parties in proportion of their respective participating interests of 50/50 equal interest.

Property and Equipment

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

 

Manufacturing equipment   5-7 Years  
Computer and other equipment   3-7 Years  
Leasehold Improvements   Lesser of useful life or the term of the lease  
Accounts receivable

Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts.

Impairment of Long-Lived Assets

Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset.

 

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There were no impairments on our long-lived assets during the three and six month periods ended June 30, 2017 and 2016.

Revenue Recognition

The Company recognizes revenue in accordance with the FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and/or service has been performed; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. The Company believes that these criteria are satisfied upon shipment from our facility. Freight billed to customers is presented as revenues, and the related freight costs are presented as cost of goods sold. Deferred revenue is recognized when earned and all significant obligations have been satisfied.

Advertising Expense

The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying statements of operations. The Company recorded advertising costs of $68,893 and $95,226, for the three and six month periods ended June 30, 2017, respectively, and none for the three and six month periods ended June 30, 2016.

Research and Development

Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred.

Income Taxes

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

  

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

Stock-Based Compensation

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

 

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

Fair Value Measurements

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

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

 

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

 

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

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

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

 

The Company has assets or liabilities valued at fair value on a recurring basis for the six months ended June 30, 2017. The Company did not have assets or liabilities valued at fair value on a recurring basis for the year ended December 31, 2016.

Basic and diluted loss per share

Basic loss per share is computed by dividing the net loss to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing the net loss for the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares, which consist of stock options, warrants, and convertible notes payable, have been excluded from the diluted loss per share calculation because their effect is anti-dilutive.

Going Concern

The Company’s financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company had an accumulated deficit at June 30, 2017 of $15,880,139. The Company had a working capital of $221,888 as of June 30, 2017. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it establishes a revenue stream and becomes profitable. The Company is continually analyzing its current costs and is attempting to make additional cost reductions where possible. We expect that we will continue to generate losses from operations throughout 2017.

  

In order to continue as a going concern and to develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include raising additional capital through borrowing and/or sales of equity and debt securities. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

Recently Issued Standards

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The purpose is to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. This ASU is effective for the Company in the first quarter of 2018. Early adoption is not permitted except for limited provisions. The Company does not expect the adoption of this amendment to have a material effect on its financial condition and results of operations.

 

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The new standard requires recognition of the income tax effects of vested or settled awards in the income statement and involves several other aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This new standard became effective for the Company on January 1, 2017. The adoption of this standard did not have a material impact on its financial position, results of operations or statements of cash flows upon adoption.

 

In August, 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”). The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, Statement of Cash Flows. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company has not yet completed the analysis of how adopting this guidance will affect its consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This new standard will be effective for the Company on January 1, 2018; however, early adoption is permitted with prospective application to any business development transaction.

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation: Scope of Modification Accounting, which provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions or award classification and would not be required if the changes are considered non-substantive. The amendments of this ASU are effective for the Company in the first quarter of 2018, with early adoption permitted. The adoption of ASU 2017-09 is not expected to have an impact on the Company’s consolidated financial statements.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
6 Months Ended
Jun. 30, 2017
Summary Of Significant Accounting Policies Tables  
Property and equipment

Manufacturing equipment   5-7 Years  
Computer and other equipment   3-7 Years  
Leasehold Improvements   Lesser of useful life or the term of the lease  

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
INVENTORY (Tables)
6 Months Ended
Jun. 30, 2017
Inventory Tables  
Inventory Of Carrying Value

   

June 30,

2017

    December 31,
2016
 
Raw materials   $ 74,678     $ 68,047  
Packaging components     97,782       84,927  
Work-in-process     23,461       17,406  
Finished goods     -       -  
      195,921       170,380  
Reserve for obsolescence     (91,932 )     (89,095 )
Total inventory   $ 103,989     $ 81,285  

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
PREPAID EXPENSES AND OTHER ASSETS (Tables)
6 Months Ended
Jun. 30, 2017
Prepaid Expenses And Other Assets Tables  
Prepaid expenses and other assets
   

June 30,

2017

    December 31,
2016
 
             
Prepaid consulting services   $ 1,011,155     $ 150,168  
Prepaid clinical study     642,500       -  
Prepaid insurance     19,270       42,785  
Other Receivables     10,178       10,948  
Prepaid inventory     6,927       13,178  
Prepaid expenses     5,900       6,800  
Property and Equipment, net   $ 1,695,930     $ 223,879  
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS (Tables)
6 Months Ended
Jun. 30, 2017
Property And Equipment And Intangible Assets Tables  
Property and equipment and intangible assets
   

June 30,

2017

   

December 31,

2016

 
             
Manufacturing equipment   $ 769,074     $ 769,074  
Computer and other equipment     147,192       116,747  
Leasehold improvements     36,066       36,066  
Less accumulated depreciation     (627,681 )     (551,239 )
Property and Equipment, net   $ 324,651     $ 370,648  
Intangible assets, net
   

June 30,

2017

    December 31,
2016
 
             
Intellectual Property   $ 814,582     $ 814,582  
Patents     191,602       175,047  
Less accumulated amortization     (116,839 )     (95,119 )
Intangible assets, net   $ 889,345     $ 894,510  
Amortization expense

The estimated aggregate amortization expense over each of the next five years is as follows:

 

2017   $ 21,798  
2018     43,518  
2019     43,518  
2020     43,518  
2021     43,518  
Thereafter     557,303  
Total Amortization   $ 753,172  

XML 36 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
LOAN PAYABLE (Tables)
6 Months Ended
Jun. 30, 2017
Loan Payable Tables  
Loan Payable

Loan payable consist of the following at June 30, 2017 and December 31, 2016:

 

    2017     2016  
Note to a company due September 29, 2017 including interest at 13.25% per annum; unsecured; interest due monthly   $ 11,460     $ 33,277  
Current portion of loan payable     11,460       33,277  
Loan payable, less current portion   $ -     $ -  

XML 37 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
NOTES PAYABLE (Tables)
6 Months Ended
Jun. 30, 2017
Notes Payable Tables  
Notes Payable

Notes payable consist of the following at June 30, 2017 and December 31, 2016:

 

    2017     2016  
             
Note to a company due August 27, 2017, no interest shall accrue unless and until an event of default occurs, where interest at 10% per annum shall accrue beginning on the date of the applicable event of default, secured by the Company’s intellectual property   $ 650,000     $ -  
Note to an individual, non-interest bearing, unsecured and has no fixed terms of repayment     50,000       50,000  
                 
      700,000       50,000  
Unamortized discount     (4,750 )     -  
Current portion of loan payable     695,250       50,000  
Loan payable, less current portion   $ -     $ -  

XML 38 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
CONVERTIBLE PROMISSORY NOTES (Tables)
6 Months Ended
Jun. 30, 2017
Convertible Promissory Notes Tables  
Convertible promissory
    2017     2016  
             
Convertible promissory notes totaling $700,000 due between November 11, 2017 and December 30, 2017, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due between November 11, 2017 and December 30, 2017   $ 700,000     $ -  
                 
      700,000       -  
Unamortized discount     (599,063 )     -  
Current portion of convertible promissory notes     100,937       -  
Convertible promissory notes, less current portion   $ -     $ -  
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
DERIVATIVE LIABILITY (Tables)
6 Months Ended
Jun. 30, 2017
Derivative Liability Tables  
Derivative liability
    Level I     Level II     Level III     Total  
Cash   $ 277,961     $     $     $ 277,961  
                                 
Derivative liability               $ (412,777 )   $ (412,777 )
Derivative liability assumptions used
   

June 30,

2017

 
Significant assumptions (weighted-average):      
Risk-free interest rate at grant date   1.89%  
Expected stock price volatility   79.92%  
Expected dividend payout   -  
Expected option life (in years)   1  
Expected forfeiture rate   0%  
Reconciliation of the derivative liability
   

June 30,

2017

 
Value at December 31, 2016   $ -  
Initial value at the debt issuance     370,232  
Increase in value     42,545  
Value at June 30, 2017   $ 412,777  
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
WARRANT AGREEMENTS (Tables)
6 Months Ended
Jun. 30, 2017
Warrant Agreements Tables  
Company stock option activity

The Company’s warrant activity was as follows:

 

    Warrants    

Weighted Average

Exercise Price

    Weighted Average Contractual Remaining Life  
Outstanding, December 31, 2016     4,392,107       1.97       6.17  
Granted     1,440,000       2.49       0.75  
Exercised     -       -       -  
Forfeited/Expired     -       -       -  
Outstanding, June 30, 2017     5,832,107       2.10       5.92  
Exercisable at June 30, 2017     3,6630,665       2.19       2.95  

 

 

Range of

Exercise Price

 

Number of

Warrants

    Weighted Average Remaining Contractual Life (years)     Weighted Average Exercise Price     Number of Warrants Exercisable     Weighted Average Exercise Price  
$1.00 - $7.00     5,832,107       5.92     $ 2.10       3,630,665     $ 2.19  
      5,832,107       5.92     $ 2.10       3,630,665     $ 2.19  

Weighted Average fair value of warrants granted

The weighted-average fair value of warrants granted to during the three months ended June 30, 2017 and year ended December 31, 2016, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows:

 

   

June 30,

2017

   

December 31,

2016

 
Significant assumptions (weighted-average):            
Risk-free interest rate at grant date     1.89 %     1.83 %
Expected stock price volatility     79.92 %     84.42 %
Expected dividend payout     -       -  
Expected option life (in years)     3       3  
Expected forfeiture rate     0 %     0 %

XML 41 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2017
May 01, 2017
State of Incorporation State of Nevada  
Date of Incorporation May 15, 2014  
TRDF [Member]    
Payment of research project   $ 642,500
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)
6 Months Ended
Jun. 30, 2017
Manufacturing Equipment [Member] | Minimum [Member]  
Estimated useful lives 5 years
Manufacturing Equipment [Member] | Maximum [Member]  
Estimated useful lives 7 years
Computer and other equipment [Member] | Minimum [Member]  
Estimated useful lives 3 years
Computer and other equipment [Member] | Maximum [Member]  
Estimated useful lives 7 years
Leasehold Improvements [Member]  
Estimated useful lives description Lesser of useful life or the term of the lease
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2017
Dec. 31, 2016
Jan. 08, 2016
Summary Of Significant Accounting Policies Details Narrative        
Federal deposit insurance corporation $ 250,000 $ 250,000 $ 250,000  
Ownership interest       50.00%
Advertising Expense 68,893 95,226    
Valuation allowance percentage     100.00%  
Accumulated deficit (15,880,139) (15,880,139) $ (10,718,714)  
Working capital deficit $ 221,888 $ 221,888    
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
INVENTORY (Details) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Inventory Details    
Raw Materials $ 74,678 $ 68,047
Packaging Components 97,782 84,927
Work-In-Process 23,461 17,406
Finished Goods
Inventory, Gross 195,921 170,380
Reserve for Obsolescence (91,932) (89,095)
Total inventory $ 103,989 $ 81,285
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.7.0.1
PREPAID EXPENSES AND OTHER ASSETS (Details) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Prepaid Expenses And Other Assets Details    
Prepaid consulting services $ 1,011,155 $ 150,168
Prepaid clinical study 642,500
Prepaid insurance 19,270 42,785
Other Receivables 10,178 10,948
Prepaid inventory 6,927 13,178
Prepaid expenses 5,900 6,800
Property and Equipment, net $ 1,695,930 $ 223,879
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.7.0.1
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS (Details) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Less accumulated depreciation $ (627,681) $ (551,239)
Property and Equipment, net 324,651 370,648
Computer and other equipment [Member]    
Property and Equipment 147,192 116,747
Leasehold Improvements [Member]    
Property and Equipment 36,066 36,066
Manufacturing equipmentt [Member]    
Property and Equipment $ 769,074 $ 769,074
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.7.0.1
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS (Details 1) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Less accumulated amortization $ (116,839) $ (95,119)
Intangible assets, net 889,345 894,510
Intellectual Property [Member]    
Intellectual Property 814,582 814,582
Patents [Member]    
Intellectual Property $ 191,602 $ 175,047
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.7.0.1
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS (Details 2)
Jun. 30, 2017
USD ($)
Property And Equipment And Intangible Assets Details 2  
2017 $ 21,798
2018 43,518
2019 43,518
2020 43,518
2021 43,518
Thereafter 557,303
Total Amortization $ 753,172
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.7.0.1
PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Dec. 31, 2016
Depreciation expense $ 37,437 $ 26,507 $ 76,442 $ 54,062  
Wrote off intangible         $ 58,522
Amortization expense 10,821 10,667 21,720 21,332  
Patents [Member]          
Patent costs capitalized 16,555   16,555   45,930
Depreciation on capitalized leased [Member]          
Depreciation expense 2,160 $ 2,160 4,320 $ 4,320  
Assets Held under Capital Leases [Member]          
Capital lease 43,201   43,201   43,201
Accumulated depreciation $ 32,857   $ 32,857   $ 28,537
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.7.0.1
LOAN PAYABLE (Details) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Loan payable $ 11,460 $ 33,277
Loan payable, less current portion
Loans Payable [Member]    
Loan payable 11,460 33,277
Current portion of loan payable 11,640 33,277
Loan payable, less current portion
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.7.0.1
LOAN PAYABLE (Details Narrative) - Loans Payable [Member]
6 Months Ended
Jun. 30, 2017
Interest rate 13.25%
Maturity date Sep. 29, 2017
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.7.0.1
NOTES PAYABLE (Details) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Total notes payable $ 700,000 $ 50,000
Unamortized discount (4,750)
Current portion of loan payable 695,250 50,000
Loan payable, less current portion
Individual Counterparty [Member]    
Total notes payable 50,000 50,000
Company [Member]    
Total notes payable $ 650,000
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.7.0.1
NOTES PAYABLE (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Notes Payable Details Narrative        
Amortization of discount $ 5,250 $ 0 $ 5,250 $ 0
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.7.0.1
CONVERTIBLE PROMISSORY NOTES (Details) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Total Convertible promissory notes $ 700,000
Unamortized discount (599,063)
Current portion of convertible promissory notes 100,937
Convertible promissory notes, less current portion
Convertible Promissory Notes [Member]    
Total Convertible promissory notes $ 700,000
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.7.0.1
CONVERTIBLE PROMISSORY NOTES (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Convertible Promissory Notes Details Narrative        
Amortization of discount $ 77,683 $ 0 $ 77,683 $ 0
Accrued interest 3,306 0 3,306 0
Interest expenses $ 3,306 $ 0 $ 3,306 $ 0
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.7.0.1
DERIVATIVE LIABILITY (Details) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Jun. 30, 2016
Dec. 31, 2015
Cash $ 277,961 $ 1,106,142 $ 2,025,787 $ 13,352
Derivative liability (412,777)    
Fair Value, Inputs, Level 1 [Member]        
Cash 277,961      
Derivative liability      
Fair Value, Inputs, Level 2 [Member]        
Cash      
Derivative liability      
Fair Value, Inputs, Level 3 [Member]        
Cash      
Derivative liability $ (412,777)      
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.7.0.1
DERIVATIVE LIABILITY (Details 1)
6 Months Ended
Jun. 30, 2017
Significant assumptions (weighted-average):  
Risk-free interest rate at grant date 1.89%
Expected stock price volatility 79.92%
Expected dividend payout
Expected option life (in years) 1 year
Expected forfeiture rate 0.00%
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.7.0.1
DERIVATIVE LIABILITY (Details 2)
6 Months Ended
Jun. 30, 2017
USD ($)
Derivative Liability Tables  
Value at December 31, 2016
Initial value at the debt issuance 370,232
Increase in value 42,545
Value at June 30, 2017 $ 412,777
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.7.0.1
WARRANT AGREEMENTS (Details)
6 Months Ended
Jun. 30, 2017
$ / shares
shares
Warratns  
Outstanding, June 30, 2017 | shares 5,832,107
Exercisable at June 30, 2017 | shares 3,630,665
Weighted Average Exercise Price  
Outstanding, June 30, 2017 | $ / shares $ 2.10
Exercisable at June 30, 2017 | $ / shares $ 2.19
Outstanding, December 31, 2016 5 years 11 months 1 day
Warrant [Member]  
Warratns  
Outstanding, December 31, 2016 | shares 4,392,107
Granted | shares 1,440,000
Exercised | shares
Forfeited/Expired | shares
Outstanding, June 30, 2017 | shares 5,832,107
Exercisable at June 30, 2017 | shares 3,630,665
Weighted Average Exercise Price  
Outstanding, December 31, 2016 | $ / shares $ 1.97
Granted | $ / shares 2.49
Exercised | $ / shares
Forfeited/Expired | $ / shares
Outstanding, June 30, 2017 | $ / shares 2.10
Exercisable at June 30, 2017 | $ / shares $ 2.19
Outstanding, December 31, 2016 6 years 2 months 1 day
Granted 9 months
Outstanding, June 30, 2017 5 years 11 months 1 day
Exercisable at June 30, 2017 2 years 11 months 1 day
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.7.0.1
WARRANT AGREEMENTS (Details 1)
6 Months Ended
Jun. 30, 2017
$ / shares
shares
Number of Warrants | shares 5,832,107
Weighted Average Remaining Contractual Life (years) 5 years 11 months 1 day
Weighted Average Exercise Price $ 2.10
Number of Warrants Exercisable | shares 3,630,665
Weighted Average Exercise Price $ 2.19
$1.00 - $7.00 [Member]  
Range of Exercise Price Lower Limit 1.00
Range of Exercise Price Upper Limited $ 7.00
Number of Warrants | shares 5,832,107
Weighted Average Remaining Contractual Life (years) 5 years 11 months 1 day
Weighted Average Exercise Price $ 2.10
Number of Warrants Exercisable | shares 3,630,665
Weighted Average Exercise Price $ 2.19
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.7.0.1
WARRANT AGREEMENTS (Details 2)
6 Months Ended 12 Months Ended
Jun. 30, 2017
Dec. 31, 2016
Significant assumptions (weighted-average):    
Risk-free interest rate at grant date 1.89%  
Expected stock price volatility 79.92%  
Expected dividend payout  
Expected option life (in years) 1 year  
Expected forfeiture rate 0.00%  
Warrant [Member]    
Significant assumptions (weighted-average):    
Risk-free interest rate at grant date 1.89% 1.83%
Expected stock price volatility 79.92% 84.42%
Expected dividend payout
Expected option life (in years) 3 years 3 years
Expected forfeiture rate 0.00% 0.00%
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.7.0.1
WARRANT AGREEMENTS (Details Narrative) - License agreement [Member] - USD ($)
2 Months Ended
Jan. 03, 2017
Jun. 30, 2017
Warrants granted 1,300,000 140,000
Issuance of convertible promissory note   $ 700,000
XML 63 R52.htm IDEA: XBRL DOCUMENT v3.7.0.1
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($)
Jun. 30, 2017
May 18, 2017
Apr. 24, 2017
Apr. 07, 2017
Dec. 31, 2016
Common stock, par value per share $ 0.001       $ 0.001
Common stock, shares authorized 75,000,000       75,000,000
Common stock, shares issued 23,751,252       23,336,673
Common Stock, Shares Outstanding 23,751,252       23,336,673
Common Stock [Member]          
Common stock, par value per share   $ 2.10 $ 7.00 $ 6.86  
Common stock, shares issued   300,000 100,000 14,579  
Common share issuances value   $ 630,000 $ 700,000 $ 100,000  
Common Stock [Member] | Prepaid Expenses And Other Assets [Member]          
Common share issuances value $ 76,986        
Common Stock [Member] | Prepaid Expenses And Other Assets One [Member]          
Common share issuances value 443,716        
Common Stock [Member] | Prepaid Expenses And Other Assets Two [Member]          
Common share issuances value $ 357,288        
XML 64 R53.htm IDEA: XBRL DOCUMENT v3.7.0.1
COMMITMENTS AND CONTINGENCIES (Details Narrative)
3 Months Ended 6 Months Ended
Jun. 30, 2017
USD ($)
ft²
Jun. 30, 2016
USD ($)
Jun. 30, 2017
USD ($)
ft²
Jun. 30, 2016
USD ($)
Total rent expense | $ $ 73,416 $ 72,101 $ 145,815 $ 142,569
Offices And Manufacturing Facility [Member]        
Offices and manufacturing facility area 25,000   25,000  
Office And Warehouse Space [Member]        
Offices and manufacturing facility area 6,547   6,547  
XML 65 R54.htm IDEA: XBRL DOCUMENT v3.7.0.1
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - USD ($)
1 Months Ended
Jul. 27, 2017
Jul. 19, 2017
Non-refundable fee   $ 35,692
Milestone Payment [Member]    
Non-refundable fee   $ 35,692
Individual Counterparty [Member]    
Proceeds from convertible promissory note $ 300,000  
Maturity date Jan. 27, 2018  
Interest rate 8.00%  
Note conversion description

The conversion price of the Common Stock into which the Principal Amount, or the then outstanding interest due thereon, shall be the lower of $7.00 or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000.

 
Warrant to purchase common shares 60,000  
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