10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

or

☐ 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)

Delaware	37-1765151
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1620 Beacon Place, Oxnard, California 93033

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (805) 824-0410

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Title of each class:	Trading symbol(s)	Name of exchange on which registered
Common stock, par value $0.001	CURR	OTCQB Markets

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

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

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ 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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

As of June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of its shares held by non-affiliates was approximately $23.4 million, as computed by reference to the closing price of such common stock on the OTC Markets on such date.

There were 69,866,902 shares outstanding of the registrant’s common stock, par value $0.001 per share, as of March 28, 2022.

DOCUMENTS INCORPORATED BY REFERENCE

None.

CURE PHARMACEUTICAL HOLDING CORP.

2021 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

		Page
PART I
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	15
ITEM 1B.	UNRESOLVED STAFF COMMENTS	36
ITEM 2.	PROPERTIES	36
ITEM 3.	LEGAL PROCEEDINGS	36
ITEM 4.	MINE SAFETY DISCLOSURES	36
PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	37
ITEM 6.	[RESERVED]	37
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	38
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	48
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	48
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	48
ITEM 9A.	CONTROLS AND PROCEDURES	48
ITEM 9B.	OTHER INFORMATION	50
ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	50
PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	51
ITEM 11.	EXECUTIVE COMPENSATION	58
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	61
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	63
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	64
PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	66
ITEM 16.	FORM 10-K SUMMARY	68
SIGNATURES		69

2

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve risks and uncertainties, including statements based on our current expectations, assumptions, estimates and projections about future events, our business, financial condition, results of operations and prospects, our industry and the regulatory environment in which we operate. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms, or other comparable terms intended to identify statements about the future. Forward-looking statements include, but are not limited to, statements about:

· the length and severity of the COVID-19 pandemic and its impact on the global economy and our financial results;

· our ability to obtain additional and substantial funding for our company on an immediate basis, whether pursuant to a capital raising transaction arising from the sale of our securities, a strategic transaction or otherwise;

· our ability to maintain compliance with the terms and conditions of our existing financing arrangements;

· our ability to attract and/or maintain research, development, commercialization and manufacturing partners;

· the ability of our company and/or a partner to successfully complete product research and development, including pre-clinical and clinical studies and commercialization;

· the ability of our company and/or a partner to obtain required governmental approvals, including product patent approvals;

· the ability of our company and/or a partner to develop and commercialize products that can compete favorably with those of our competitors;

· the timing of costs and expenses related to the research and development programs of our company and/or our partners;

· the timing and recognition of revenue from milestone payments and other sources not related to product sales;

· our ability to obtain suitable facilities in which to conduct our planned business operations on acceptable terms and on a timely basis;

· our ability to satisfy our disclosure obligations under the Exchange Act, and to maintain the registration of our common stock thereunder;

· our ability to attract and retain qualified officers, employees and consultants as necessary; and

· costs associated with any product liability claims, patent prosecution, patent infringement lawsuits and other lawsuits.

The forward-looking statements included herein are based on current expectations of our management based on available information and involve a number of risks and uncertainties, all of which are difficult or impossible to predict accurately and many of which are beyond our control. As such, our actual results may differ significantly from those expressed in any forward-looking statements. Factors that may cause or contribute to such differences include, but are not limited to, those discussed in more detail in Item 1 “Business” and Item 1A “Risk Factors” of Part I and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II of this Annual Report on Form 10-K. Readers should carefully review these risks, as well as the additional risks described in other documents we file from time to time with the Securities and Exchange Commission (“SEC”). In light of the significant risks and uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that such results will be achieved, and readers are cautioned not to place undue reliance on such forward-looking statements. Except as required by law, we undertake no obligation to revise the forward-looking statements contained herein to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. You should read this Annual Report on Form 10-K and the documents we file with the SEC, with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Unless otherwise indicated or the context requires otherwise, as used in this Annual Report on Form 10-K, the words “we,” “us,” “our,” the “Company” “our Company” or “CURE” refer to CURE Pharmaceutical Holding Corp., a Delaware corporation, and our subsidiaries taken as a whole, unless otherwise noted.

This Annual Report on Form 10-K includes our trademarks and trade names, including, without limitation, CureFilm™ Technology, which is our property and is protected under applicable intellectual property laws. This Annual Report on Form 10-K also includes trademarks and trade names that are the property of other organizations. Solely for convenience, trademarks and trade names referred to in this Annual Report on Form 10-K may appear without the ® and ™ symbols, but those references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

2

PART I

ITEM 1. BUSINESS

Overview

CURE Pharmaceutical Holding Corp. (“CPHC”), its wholly-owned subsidiaries, CURE Pharmaceutical Corporation (“CURE Pharmaceutical”), Cure Chemistry Inc. and its subsidiaries (collectively referred to as “CHI”) and The Sera Labs, Inc. (“Sera Labs”) (CPHC, CURE Pharmaceutical, CHI and Sera Labs, collectively the “Company,” “we,” “our,” “us,” or “CURE”) is a biopharmaceutical company focusing on the development and manufacturing of drug formulation and drug delivery technologies in novel dosage forms to improve drug safety, efficacy and patient adherence. Our mission is to improve lives by redefining how medications are delivered and experienced. Our primary business model is to develop wellness and drug products using our proprietary technology, which development may include preclinical and clinical studies and regulatory approval, grant product rights to partners responsible for marketing, sales and distribution, while retaining exclusive manufacturing rights and market sell and distribute branded health, wellness, and beauty products through Sera Labs. We operate in a 25,000 square foot cGMP manufacturing plant in Oxnard, CA.

Our technology platform includes oral thin film (“OTF”), and encapsulation systems (“microCURE”) compatible with OTF, chews, oral solutions, topical and transdermal dose forms. We apply our technology to pharmaceutical drugs and dietary supplements and topical products for the wellness market. OTF products are about the size of a postage stamp and composed of excipients such as polymers, stabilizers, lipids and surfactants, which are all generally recognized as safe. They can be designed to deliver active ingredients to the gastrointestinal, or GI, tract when placed on the tongue and swallowed, or directly to the blood stream when placed under the tongue (sublingual) or on the inner lining of the cheek and lip (buccal).

We sell multiple commercial wellness products under our distribution partners’ brands as well as through Sera Labs under the Nutri-Strip, Sera Topical, and Sera Topical Revolution brands. We also develop 50,000IU and Vitamin D3 OTF for oral administration to be distributed by Meroven Pharmaceuticals in the United States and the MENA region. Our pharmaceutical drug program includes:

CUREfilm Blue

A 25mg and 50mg sildenafil OTF for the treatment of erectile dysfunction. We have completed our pre-IND meeting with the U.S. Food and Drug Administration (the “FDA”), confirming a 505(b)(2) regulatory path.  

 CUREfilm Canna  

We are developing several cannabinoid products with optimized pharmacokinetic profiles using microCURE and CUREfilm technology.  

CUREfilm Anti-Viral  

We are developing an orally bio-available anti-viral of an existing therapeutic leveraging existing pre-clinical/clinical safety and toxicity data.  

 CUREfilm Central Nervous System (CNS)  

 In the area of CNS indications, we are developing a novel dosage form of a difficult to treat disease states utilizing our proprietary CUREfilm dosage form. These could include but are not limited to mental health disorders such as depression, post-traumatic stress disorder (PTSD), addiction disorders, obsessive compulsive disorder, and anxiety. 

Background

We were incorporated in the State of Nevada on May 15, 2014. On November 7, 2016, we changed our name from Makkanotti Group Corp. to CURE Pharmaceutical Holding Corp. On September 27, 2019, the Company reincorporated from the State of Nevada to the State of Delaware.

3

On October 2, 2020, the Company completed its acquisition of Sera Labs, a Delaware corporation pursuant to an Agreement and Plan of Merger and Reorganization, dated as of September 23, 2020 (the “Merger Agreement”), by and among the Company, Cure Labs, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), Sera Labs and Nancy Duitch, in her capacity as the security holders representative. The Merger Agreement provides for the acquisition of Sera Labs by the Company through the merger of Merger Sub with and into Sera Labs, with Sera Labs surviving as a wholly owned subsidiary of the Company (the “Merger”).

Impact of COVID-19

Our financial results and operations for the fiscal year ended December 31, 2021 were not significantly impacted by the COVID-19 pandemic. The measures we have taken to ensure the availability and functioning of our critical infrastructure, and to promote the safety and security of our employees remain in place. In accordance with public and private sector policies and initiatives to reduce the transmission of COVID-19, we have imposed travel restrictions, adopted policies aimed at promoting social distancing, and implemented work-from-home arrangements for employees where practicable. These measures and our compliance with local and national guidelines aimed at containing the virus could impact our operations and disrupt our business. Currently, our single operating facility is operational, and no reduction in our work force has taken place due to COVID-19.

CURE Pharmaceutical Corporation

Our wholly owned subsidiary and operating business, CURE Pharmaceutical Corporation, located in Oxnard, California was originally incorporated in July 2011 to develop novel drug formulation and delivery technologies.

The pharmaceutical industry is facing ever-growing R&D expenditures and fewer new drug approvals as a result of increasing regulation, a failure to predict safety problems or a lack of efficacy early in a drug’s development, and high investment in new technologies to improve the speed and accuracy of drug development. Researching and developing new molecular entities (NMEs) is risky as measured by an ever-increasing R&D spend (13.4% average increase per year), low clinical trial success rate (10%) and sluggish NME drug approvals – with 48 NMEs approved in 2019, down from 55 in 2018. Faced with these challenges, drug developers are looking toward alternative dosage forms, for which R&D investments dwarves those of NMEs. Alternative dosage forms can address safety and efficacy limitations observed during clinical development of an NME using conventional formulations, by improving its pharmacokinetic profile.

In addition to these challenges, many marketed drugs are coming off-patent, creating a need to fill revenue gaps. Novel dosage forms can offer strategies for surviving patent cliffs by extending market exclusivity when they address a bona fide unmet need.

4

The pharmaceutical industry is also challenged by the many patients who do not adhere to a regime of prescription drugs because of side effects, difficulty in administration or the taste of a drug. According to HealthPrize and Capgemini, the loss of global revenues by drug makers due to non-adherence to medicines is $630 billion every year and according to a recent paper published in The Annals of Pharmacotherapy titled “Cost of Prescription Drug-Related Morbidity and Mortality” the estimated annual cost of prescription drug-related morbidity and mortality resulting from nonoptimized medication therapy was $528.4 billion in 2016 US dollars and about 275,689 deaths per year. Medication adherence and the patient experience can be improved with strategies such as replacing an injectable drug with a sublingual drug, simplifying the dosing schedule with a sustained release dosage form and reducing toxicities by avoiding the GI tract (e.g. through transdermal or transmucosal delivery).

Improved formulations can address these many challenges by cutting down development costs, reducing the time to market, extending product patent protection, improving patient compliance and increasing drug efficacy. For example, reformulation can enable drug repositioning, the process of finding new uses for failed drugs, such as those abandoned for lack of efficacy or excessive toxicity after Phase II trials, or marketed drugs for which new uses will extend patent life and, therefore, profitability.

The FDA approves more reformulations than new chemical entities (NCEs) each year under Section 505(b)(2) of the Food, Drug, and Cosmetic Act (“505(b)(2)”). The number of 2018 NDA approvals that used the 505(b)(2) regulatory pathway rose dramatically from 45 approvals in 2016 to an all-time high of 75 in 2018, 64 in 2019 and 68 in 2020. Under Section (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 indication for use. Taken together, the exclusivity period of a drug and the lower R&D cost for reformulating a drug, have led to some pharmaceutical companies investigating reformulating their drugs as part of their lifecycle management protocols.

Furthermore, patients are increasingly encouraged to take part in their own treatments, and a consumer market has been developing midway between the supermarket-based world of consumer goods companies and the scientific, pharmacy-based world of pharmaceutical firms. The front lines of this battle are wellness products that have been proven to help prevent or cure disease. Breakthroughs in functional medicine suggest a number of opportunities for pharmaceutical companies like CURE. Functional medicines focus on the imbalances underlying disease processes (rather than only symptomatic relief) and they rely on molecular nutrition for patient-specific solutions. These types of nutraceuticals can be synergistic with pharmaceutical treatments, particularly in the emerging endocannabinoid medical market.

Our Strategy

Our commercial strategy is designed to mitigate risk by pursuing a diversified model in the following categories:

Pharmaceuticals

We partner with companies that are responsible for marketing and distribution of the products we develop and manufacture. On a case-by-case basis, we may be responsible for clinical development and regulatory approval with the FDA and/or other regulatory bodies. Deal terms may include upfront licensing fees, development costs, milestone payments, royalties and exclusive manufacturing rights. Within this category, we are pursuing products with 505(b)(2) approval pathways such as our Sildenafil OTF – CUREfilm Blue. While we currently manufacture nutraceutical products in our state-of-the-art cGMP oral dissolving film manufacturing facility, we are undertaking steps to manufacture pharmaceutical products for commercial use.

Cannabinoids and Other Schedule 1 Drugs

We are specifically investing in pharmaceutical-grade cannabinoid products, such as tetrahydrocannabinol (THC) and cannabidiol (CBD). The oral bioavailability of cannabinoids is very low due to extensive “first-pass” metabolism. Consequently, potency and release times are unpredictable and inconsistent. Moreover, cannabinoids do not readily dissolve in water, which adds to dosing difficulties and discrepancies. In addition to improving bioavailability, CUREfilm enables the loading of combinations of cannabinoids and botanical extracts, which may provide maximum therapeutic benefit.

We are sponsoring preclinical cannabinoid research at the Technion – Israel Institute of Technology, where the laboratory of Dr. Dedi Meiri is identifying specific combinations of cannabinoids with anti-tumor effects. We are registered with the Drug Enforcement Administration (“DEA”) to manufacture Schedule 1 controlled substances at the Oxnard facility.

5

Wellness

We focus on evidence-based wellness products that are differentiated by using proprietary and/or proven active ingredients that we formulate for greater stability, overall quality and increased bioavailability. Wellness products can be cosmetics, OTC or dietary supplements which do not require FDA approval but do require following all GMPs. Thus, they are less costly and faster to launch in the marketplace. We sell white labeled and private labeled wellness products, which we produce in our state-of-the-art cGMP manufacturing facility. While manufacturing fees for such products have lower margins than prescription drugs, they provide us with short term revenue opportunities.

Our recently acquired wholly-owned subsidiary, Sera Labs, is a trusted leader in the health, wellness, and beauty sectors of innovative products with cutting edge technology and superior ingredients such as CBD. Sera Labs creates high quality products that use science-backed, proprietary formulations. More than 25 products are sold under the brand names Seratopical™, Seratopical Revolution™ SeraLabs™, and Nutri-Strips™. Sera Labs sells its products at affordable prices, making them easily accessible on a global scale. Strategically positioned in the growth market categories of beauty, health & wellness, and pet care, Sera Labs products are sold in major national drug, grocery chains, convenience stores and mass retailers. The company also sells products under private label to major retailers and multi-level marketers, as well as direct-to-consumer (DTC), via online website orders, including opt-in subscriptions.

In December 2020, Nicole Kidman became the Global Brand Ambassador and Strategic Partner for Seratopical Skincare. In addition to being the face of the brand, Nicole Kidman plays an integral role in the strategic direction of product development and messaging. This partnership allows for women of all skin tones and types to look and feel their best by using Sera Labs’ industry best ingredients.

Our Technology

As a drug delivery company, we seek to grow our technological capabilities through internal innovation and acquisitions. On May 13, 2019, we acquired CHI, a formulation technology company that developoed innovative delivery systems for wellness and pharmaceutical products. This acquisition allowed us to address the increased demand for solid, chewable, liquid and dermal products for immediate and controlled-release, particularly for poorly soluble molecules such as cannabinoids.

Our expanded formulation and delivery platform, CUREform^TM combines the right formulation with the right dosage form. In addition to novel chewable dosage forms, the acquisition gave us advanced encapsulation capabilities (microCURE) that serve to:

· Protect molecules from degradation during the manufacturing process and throughout shelf life

· Protect molecules from degradation in the body (e.g. stomach acids); and

· Increase a drug’s bioavailability and optimize its release kinetics through:

· Increased solubility in water and therefore bodily fluids

· Enhanced permeability and retention in target tissue

CUREfilm^TM Technology

The founders of CURE Pharmaceutical are pioneers in drug delivery and OTF, having launched the first therapeutic OTF product, Chloraseptic® relief strips in 2003. OTF products are about the size of a postage stamp and can deliver medicines through the mucosal tissue in the mouth, sublingually or buccally – on the cheek or more traditionally via the GI tract. Oral transmucosal drug delivery is a non-invasive route for drug delivery that allows for absorption directly into the vascularized tissue in the mouth, bypassing the hepatic first pass effect. This leads to reduced drug exposure and can offer a rapid onset of action. As an OTF, active ingredients can be either pre-solubilized within the matrix or encapsulated, or both for more effective GI absorption and/or sustained release. The quick dissolution nature of OTF means that no water is required for administration, improving patient compliance - especially among the elderly, children, and in conditions where patients have difficulty in swallowing.

OTFs have significant advantages compared to other dosage forms (e.g., tablets and capsules), including:

6

Safety and Efficacy

· Potential for rapid onset of action, which can be especially useful for indications such as motion sickness, erectile dysfunction, seizures, allergic attack or coughing, bronchitis or asthma.

· Potential to extend a drug’s half-life and consequently extending dosage intervals.

· Transmucosal delivery can improve a drug’s safety profile of therapy such as reduced gastric irritation.

· Transmucosal delivery can improve a drug’s efficacy in patients with GI absorption issues.

· Accuracy in the administered dose can be better assured for each film.

Patient Experience and Medication Adherence

· Difficulty swallowing tablets and capsules can be a problem for many individuals and can lead to a variety of adverse events and patient noncompliance with treatment regimens. It is estimated that over 16 million people in the United States have some difficulty swallowing, also known as dysphagia. Studies in adults evaluating the effect of tablet and capsule size on ease of swallowing suggest that increases in size are associated with increases in patient complaints related to swallowing difficulties at tablet sizes greater than approximately 8 mm in diameter. OTFs can readily be taken without the need to swallow or use of water or other beverages.

· Upon administration, there is a relatively low risk of the patient choking which can be most beneficial for patients suffering from motion sickness, dysphagia and repeated emesis.

· Easily administered to bedridden and non-cooperative patients (e.g., geriatric, pediatric, and psychiatric). They are hard to spit out.

· Configured with physical dimensions such that it is relatively easy and convenient to store and carry. Patients can conveniently carry multiple dissolvable films in his or her pocket or wallet. A single dose of strip can be carried individually without requiring the secondary container.

· OTFs are flexible with a pleasant mouth feel unlike oral dissolvable tablets which are brittle.

Manufacturing and logistics

· The pouches or sachets offer larger printable 2D areas which traditional drug product formats do not. This allows the manufacturer to adapt to rapidly evolving labeling and regulatory requirements for information and anti-counterfeiting, such as product serialization.

· The manufacturing process has a low carbon footprint, with lower use of water for component preparation and sterilization as compared with other dosage forms.

· Even though not necessarily sterile, each dose unit is packed individually avoiding contact with other units.

· Tensile strength and plasticity of OTF allow for handling single, individual dose units without damage to the dosage form.

· Multiple SKUs can be produced by simply modifying the length of the OTF.

· Enables anti-counterfeit management and dose management.

· Adaptable for use with dispensing devices for pharmacy preparation or self-administration.

· Can be easily and conveniently handled, stored, and transported at room temperature.

The CUREfilm platform is a scalable and versatile formulation and drug delivery system for both oral (OTF) and transdermal (skin) delivery. We believe that CUREfilm formulations can improve or match the pharmacokinetics of drugs in accordance with the desired outcome. The platform is compatible with a broad spectrum of molecules, for the formulation of both investigational and marketed prescription drugs and nutraceutical products.

The specific advantages below are present with multiple CUREfilm products and platform technologies. The advantages listed below are expressly described in CURE’s patent documents. Other advantages are present in specific products and platform technologies, but not outlined in the patent documents and kept as trade secrets and proprietary equipment designs. Additional advantages are described in pending and unpublished patent documents, including, but not limited to the following:

· loading of multiple active ingredients on one dose unit;

· ability to accommodate high drug load per dose unit (e.g. > 200 mg);

· quickly dissolving/disintegrating (e.g. < 2 minutes);

· potential for low moisture level (e.g. < 10 wt.% water);

· ability to achieve desired performance characteristics while maintaining pleasant feeling in the mouth (e.g. soft, plush feeling with pliable film);

· ability to achieve desired performance characteristics while formulating active ingredients susceptible to degradation from low pH environments, light, heat, moisture, and oxygen; and

· multiple and unique ways to mask the bitter, metallic or salty taste of an active ingredient.

7

Intellectual Property

The competitive advantages of the CUREform^TM platform and products are protected by issued and ending patents, as well as trade secrets such as proprietary equipment design and manufacturing processes, which allow us to produce CUREform products at commercial scale in a cGMP environment. We will be able to protect our technology and products from unauthorized use by third parties only to the extent it is covered by valid and enforceable claims of our patents or is effectively maintained as trade secrets. Patents and other proprietary rights are thus an essential element of our business.

Our success will depend in part on our ability to obtain and maintain proprietary protection for our product candidates, technology, and know-how, to operate without infringing on the proprietary rights of others, and to prevent others from infringing on ourproprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions, and improvements that are important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation, and in-licensing opportunities to develop and maintain our proprietary position.

We own or have exclusive rights to fourteen (14) issued U.S. patents, two (2) allowed U.S. patents, twenty three (23) pending applications in the United States, one (1) issued patent in China and one (1) international Patent Cooperation Treaty (“PCT”) patent application. These patents and applications relate, among others, to:

· a method and apparatus for minimizing heat, moisture, and shear damage to medicant incorporated into an edible film;

· edible films for administration of medicaments to animals;

· methods for modulating dissolution, bioavailability, bioequivalence;

· pharmaceutical composition and method of manufacturing;

· pharmaceutical composition with ionically crosslinked polymer encapsulation of active ingredient;

· multi-layered high dosage dissolvable film for oral administration;

· thin films with high load of active ingredient;

· high dosage dissolvable films for oral administration;

· methods and composition for improving sleep;

· oral dissolvable film that includes plant extracts and controlled substances;

· rapidly disintegrating film matrix for moisture sensitive compounds;

· protein-polysaccharide macromolecular complexes encapsulating ethyl alcohol;

· self-emulsifying oral thin film compositions; and

· topical preparation.

Granted U.S. patents will expire between 2023 and 2035, excluding any patent term extensions that might be available following the grant of marketing authorizations. If issued, pending applications would expire in 2040, excluding any patent term adjustment that might be available following the grant of the patent and any patent term extensions that might be available following the grant of marketing authorizations.

We have five (5) registered trade and logomarks, and one pending trademark registration for which the opposition periods have expired without any opposition being filed.

8

Competition

We face competition from pharmaceutical companies, generic drug companies, wellness and nutraceutical companies, as well as organizations developing advanced drug delivery platforms such as Lonza, Aquestive Therapeutics, BioDelivery Sciences International, IntelGenx, ARx Pharma and LTS Lohmann, which have substantially greater financial, technical and human resources than we have. Furthermore, we face competition from these entities as well as universities, 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. Our success will be based in part on our ability to develop and manufacture products that address unmet medical needs and create value to patients at competitive price points. In addition, continuing to build our intellectual property portfolio and designing innovative approaches that surpass our competitors’ patents will be critical to success.

Recent Developments

On January 5, 2021, the Company announced that the U.S. Food and Drug Administration (“FDA”) had approved an Investigational New Drug (“IND”) application for its product CUREfilm Blue™, an oral soluble film of sildenafil citrate (the active ingredient present in Viagra®) for the treatment of erectile dysfunction (“ED”). The Company is seeking approval of this product via the 505(b)(2) regulatory pathway to expedite the U.S. approval process. Viagra® is a registered trademark of Pfizer, Inc.

On February 23, 2021, the Company announced the start of its initial Pharmacokinetics (PK)/bioequivalence studies in support of a previously approved IND application with the FDA. This application has been initiated via the 505(b)(2) drug approval pathway, and is in continuation of FDA-provided feedback in support of the Company’s clinical development plans for its CUREfilm Blue™, an oral soluble film of sildenafil citrate (the active ingredient present in Viagra®) for the treatment of ED.

During the fourth quarter of 2021, Sera Labs began selling its facial products of the Seratopical Revolution™ line in CVS. CVS is one of the leading national drug store chains in America. Seratopical Revolution™ marries nature and science into one clean and nourishing line of beauty products. The line’s P3P complex, developed by CURE Pharmaceutical, drives natural, clean, plant-based ingredients into the deeper layers of the skin by utilizing a proprietary tri-peptide delivery system. Unlike other companies that use alcohol as a delivery system, which is incredibly drying to the skin, Seratopical Revolution’s natural oil and surfactant delivery systems are highly efficacious and offer near immediate results.

Licensing Agreements

On February 3, 2020, the Company entered into an exclusive license agreement with Releaf Europe b.v., a medical cannabis company based in the Netherlands, under which it will license its microCURE technology for use in topicals and oral solutions. The royalty-bearing license is exclusive to the Netherlands.

On February 11, 2020, the Company entered into a non-exclusive license agreement with Vanguard Scientific Systems, a botanical extraction equipment manufacturer, under which rights were granted to the Company’s super-critical fluid cannabis extraction patents which cover methods enabled by the licensee’s extraction equipment.

Acquisitions

On October 2, 2020, the Company completed its acquisition of Sera Labs, a Delaware corporation pursuant to the Sera Labs Merger Agreement, by and among the Company, Sera Labs Merger Sub, a Delaware corporation and a wholly owned subsidiary of the Company, Sera Labs and Mrs. Duitch, in her capacity as the security holder’s representative regarding the Sera Labs Merger.

All issued and outstanding shares of the capital stock of Sera Labs were converted into the right to receive, subject to customary adjustments, an aggregate of approximately (i) $1.0 million in cash (the “Upfront Payment”) and (ii) up to 6,909,091 shares of the Company’s common stock. On October 1, 2020, the Parties entered into a Waiver of Closing Condition, pursuant to which the Company’s obligation to pay the Upfront Payment at the Effective Time was extended to October 13, 2020. The Company has paid $0.3 million of the Upfront Payment with the remaining balance of $0.7 million, plus $0.1 million of shareholder loans made to Sera Labs prior to closing of the Merger, were converted into a promissory note due to the Duitch Living Trust (“Duitch Promissory Note”). The Duitch Promissory Note bears interest at 8% per annum with a maturity date of June 30, 2021, which was amended with a new maturity date of April 15, 2022.

Pursuant to the Sera Labs Merger Agreement, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as set forth in the Sera Labs Merger Agreement. Subsequent to the Effective Time and for a period of two years, the Company agreed to make available to Sera Labs $4.0 million for working capital, less the outstanding amount of the Secured Promissory Note.

9

Government Regulation Applicable to Us

In the United States, the Federal Food, Drug, and Cosmetic Act, as amended (the “FFDCA”) and the regulations promulgated thereunder, and other federal and state statutes and regulations govern, among other things, the testing, manufacturing, labeling, storing, recordkeeping, distribution, advertising and promotion of our product candidates. Regulation by governmental authorities in the United States and foreign countries will be a significant factor in the manufacturing and potential marketing of our product candidates and in our ongoing research and product development activities. Any product candidate we develop will require regulatory approval by governmental agencies prior to commercialization. In particular, pharmaceutical drug products are subject to rigorous preclinical studies, clinical trials and other approval procedures by the FDA and similar health authorities in foreign countries. The process of obtaining these approvals and subsequent compliance with appropriate federal and state statutes and regulations requires the expenditure of substantial resources.

Preclinical studies must ordinarily be conducted to evaluate an investigational new drug’s potential safety by toxicology studies and potential efficacy by pharmacology studies. The results of these studies, among other things, are submitted to the FDA as part of an Investigational New Drug Application (“IND”), which must be reviewed by the FDA before clinical trials can begin. Typically, clinical evaluation involves a three-stage process. Phase I clinical trials are conducted with a small number of healthy volunteers to determine the safety profile and the pattern of drug absorption, distribution, metabolism and excretion, and to assess the drug’s effect on the patient. Phase II, or therapeutic exploratory, trials are conducted with somewhat larger groups of patients, who are selected by relatively narrow criteria yielding a more homogenous population that is afflicted with the target disease, in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. Phase II trials should allow for the determination of the dose to be used in Phase III clinical trials. Phase III, or therapeutic confirmatory, large scale, multi-center, comparative trials are conducted with patients afflicted with a target disease in order to provide enough data for the statistical proof of safety and efficacy required by the FDA and other regulatory authorities. The primary objective of Phase III clinical trials is to show that the drug confers therapeutic benefit that outweighs any safety risks. All clinical trials must be registered with a central public database, such as www.clinicaltrials.gov, and once completed, results of the clinical trials must be entered in the database.

The results of these preclinical studies and clinical trials, along with detailed information on manufacturing, are submitted to the FDA in the form of a New Drug Application (“NDA”) for approval to commence commercial sales. In responding to an NDA, the FDA may refuse to file the application if the FDA determines that the application does not satisfy its regulatory approval criteria, request additional information or grant marketing approval. Therefore, even if we complete Phase III clinical trials for our product candidates and submit an NDA to the FDA, there can be no assurance that the FDA will grant marketing approval, or if granted, that it will be granted on a timely basis. If the FDA does approve a product candidate, it may require, among other things, post-marketing testing, including potentially expensive Phase IV trials, which monitor the safety of the drug. In addition, the FDA may in some circumstances impose risk evaluation and mitigation strategies that may be difficult and expensive to administer. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems occur after the product reaches the market.

Among the conditions for NDA approval is the requirement that the applicable clinical, pharmacovigilance, quality control and manufacturing procedures conform on an ongoing basis with current Good Clinical Practices, Good Laboratory Practices, current Good Manufacturing Practices, and computer information system validation standards. During the review of an NDA, the FDA will perform a pre-licensing inspection of select clinical sites, manufacturing facilities and the related quality control records to determine the applicant’s compliance with these requirements. To assure compliance, applicants must continue to expend time, money and effort in the area of training, production and quality control. After approval of any product, manufacturers are subject to periodic inspections by the FDA. If a company fails to comply with FDA regulatory requirements, FDA may pursue a wide range of remedial actions, including seizure of products, corrective actions, warning letters and fines.

Other Government Regulations

In addition to laws and regulations enforced by the FDA, we are also subject to regulation under NIH guidelines as well as under the Controlled Substances Act and implementing regulations from the DEA, the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential future federal, state or local laws and regulations, as our research and development may involve the controlled use of hazardous materials, chemicals, viruses and various radioactive compounds.

10

Fraud and Abuse and Privacy and Data Security Laws and Regulations

The healthcare industry, and thus our business, is subject to extensive federal, state, local and foreign regulation. Some of the pertinent laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. In addition, these laws and their interpretations are subject to change. Both federal and state governmental agencies continue to subject the healthcare industry to intense regulatory scrutiny, including heightened civil and criminal enforcement efforts.

The restrictions under applicable federal and state healthcare fraud and abuse and privacy and data security laws and regulations that may affect our ability to operate include, but are not limited to:

· the federal healthcare Anti‑Kickback Statute, which prohibits, among other things, knowingly or willingly offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward the purchasing, leasing, ordering or arranging for or recommending the purchase, lease or order of any healthcare items or service for which payment may be made, in whole or in part, by federal healthcare programs such as Medicare and Medicaid. This statute has been interpreted to apply to arrangements between pharmaceutical companies on one hand and prescribers, purchasers and formulary managers on the other. Liability under the Anti-Kickback Statute may be established without proving actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti‑Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. Although there are a number of statutory exemptions and regulatory safe harbors to the federal Anti‑Kickback Statute protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exemption or safe harbor may be subject to scrutiny. Moreover, the anti-kickback statute is subject to evolving interpretation and there are no safe harbors for many common practices, including patient or product support programs, educational and research grants, or charitable donations. In October 2019, the federal government published a proposed regulation creating new safe harbors for, among other things, certain value-based arrangements and patient engagement tools, and that modifies and clarifies the scope of existing safe harbors for warranties and personal service agreements. The impact of the proposed regulation on our current or contemplated operations is not clear even if the proposed regulation is finalized. We seek to comply with the exemptions and safe harbors whenever possible, but our practices may not in all cases meet all of the criteria for safe harbor protection from anti‑kickback liability;

· the federal civil False Claims Act, which imposes civil penalties against individuals and entities for, among other things, knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay money to the federal government. Actions under the False Claims Act may be brought by the U.S. Attorney General or as a qui tam action by a private individual in the name of the government. Many pharmaceutical and other healthcare companies have been investigated and have reached substantial financial settlements with the federal government under the civil False Claims Act for a variety of alleged improper marketing activities, including providing free product to customers with the expectation that the customers would bill federal programs for the product; providing consulting fees, grants, free travel, and other benefits to physicians to induce them to prescribe the company’s products; and inflating prices reported to private price publication services, which are used to set drug payment rates under government healthcare programs. In addition, in recent years the government has pursued civil False Claims Act cases against a number of pharmaceutical companies for causing false claims to be submitted as a result of the marketing of their products for unapproved, and thus non‑reimbursable, uses. More recently, federal enforcement agencies are and have been investigating certain pharmaceutical companies’ product and patient assistance programs, including manufacturer reimbursement support services, relationships with specialty pharmacies, and grants to independent charitable foundations. False Claims Act liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties per false or fraudulent claim or statement. Because of the potential for large monetary exposure, healthcare and pharmaceutical companies often resolve allegations without admissions of liability for significant and material amounts. Pharmaceutical and other healthcare companies also are subject to other federal false claim laws, including, among others, federal criminal healthcare fraud and false statement statutes that extend to non‑government health benefit programs;

· the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HIPAA”) imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

· numerous U.S. federal and state laws and regulations, including state data breach notification laws, state health information privacy laws and federal and state consumer protection laws, govern the collection, use, disclosure, and protection of personal information. In addition, most healthcare providers who prescribe our products and from whom we obtain patient health information are subject to privacy and security requirements under HIPAA. We are not a HIPAA‑covered entity and we do not operate as a business associate to any covered entities. Therefore, the HIPAA privacy and security requirements do not apply to us (other than potentially with respect to providing certain employee benefits). However, we could be subject to criminal penalties if we knowingly obtain individually identifiable health information from a covered entity in a manner that is not authorized or permitted by HIPAA or for aiding and abetting and/or conspiring to commit a violation of HIPAA. We are unable to predict whether our actions could be subject to prosecution in the event of an impermissible disclosure of health information to us. In addition, the California Consumer Privacy Act (“CCPA”) was signed into law on June 28, 2018 and largely took effect January 1, 2020. The law contains new disclosure obligations for businesses that collect personal information about California residents and affords those individuals new rights relating to their personal information that may affect our ability to use personal information. The CCPA has substantial penalties for non-compliance, and we continue to assess its impact on our business. Similarly, there are a number of legislative proposals at both the federal and state level that could impose new privacy and security-related obligations or limitations in areas affecting our business. Other countries also have, or are developing, laws governing the collection, use, disclosure and protection of personal information. The collection and use of personal health data and other personal data in the European Union (“EU”) is governed by the provisions of the General Data Protection Regulation (“GDPR”), an EU-wide regulation that became fully enforceable on May 25, 2018, replacing the EU Data Protection Directive, imposes strict obligations and restrictions on the ability to collect, analyze or otherwise use, and transfer personal data, including health data from clinical trials and adverse event reporting. The GDPR imposes restrictions on the processing (e.g., collection, use, disclosure) of personal data. These obligations and restrictions concern, in particular, the consent of the individuals to whom the personal data relate, the information provided to the individuals prior to processing their personal data, the transfer of personal data out of the EEA or Switzerland, including to the United States, notification of data processing obligations to the competent national data protection authorities, security breach notifications, security and confidentiality of the personal data, as well as substantial potential fines for breaches of the data protection obligations. Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU Member States may result in substantial fines and administrative penalties. Compliance with GDPR may be onerous and increase our cost of doing business. The legislative and regulatory landscape for privacy and data security continues to evolve, and there has been an increasing amount of focus on privacy and data security issues with the potential to affect our business. These privacy and data security laws and regulations could increase our cost of doing business, and failure to comply with these laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business. Moreover, patients about whom we or our partners obtain information, as well as the providers who share this information with us, may have contractual rights that limit our ability to use and disclose the information. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business;

11

· analogous state laws and regulations, such as state anti‑kickback and false claims laws, may apply to items or services reimbursed under Medicaid and other state programs or, in several states, apply regardless of the payor. Some state laws also require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and to report gifts and payments to certain healthcare providers in the states. Other states prohibit providing meals to prescribers or other marketing‑related activities and restrict the ability of manufacturers to offer co-pay support to patients for certain prescription drugs. Some states require the posting of information relating to clinical studies and their outcomes. Some states and cities require identification or licensing of sales representatives. In addition, some states require pharmaceutical companies to implement compliance programs or marketing codes of conduct. Foreign governments often have similar regulations, which we also will be subject to in those countries where we market and sell products;

· the federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, requires certain pharmaceutical manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the Centers for Medicare and Medicaid Services within the U.S. Department of Health and Human Services (“CMS”) information related payments and other transfers of value, directly or indirectly, to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives; and

· the federal Foreign Corrupt Practices Act of 1977 and other similar anti‑bribery laws in other jurisdictions prohibit companies and their intermediaries from providing money or anything of value to officials of foreign governments, candidates for foreign political office, or public international organizations with the intent to obtain or retain business or seek a business advantage. Recently, there has been a substantial increase in anti‑bribery law enforcement activity by U.S. and foreign regulators, with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the U.S. Securities and Exchange Commission. A determination that our operations or activities are not, or were not, in compliance with United States or foreign laws or regulations could result in the imposition of substantial fines, interruptions of business, loss of supplier, vendor or other third‑party relationships, termination of necessary licenses and permits, and other legal or equitable sanctions. Other internal or government investigations or legal or regulatory proceedings, including lawsuits brought by private litigants, may also follow as a consequence.

If our operations are found to be in violation of any of the laws or regulations described above or any other governmental regulations that apply to us, we may be subject to significant civil, criminal and administrative mandatory penalties, imprisonment, damages, fines, exclusion from government‑funded healthcare programs, like Medicare and Medicaid, and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws and regulations, the risks cannot be entirely eliminated. Any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, data security and fraud laws and regulations may prove costly.

Healthcare Reform

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our future product candidates profitably. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding access. Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit coverage of or lower reimbursement for the procedures associated with the use of our future product candidates. The cost containment measures that payors and providers are instituting and the effect of any healthcare reform initiative implemented in the future could impact our revenue from the sale of our future product candidates.

12

The implementation of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”) in the United States, for example, has changed healthcare financing and delivery by both governmental and private insurers substantially. The Affordable Care Act provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models. Additionally, the Affordable Care Act has expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. We do not yet know the full impact that the Affordable Care Act will have on our business. There have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect additional challenges and amendments in the future. Most recently, the Tax Cuts and Jobs Acts was enacted, which, among other things, removes penalties for not complying with the individual mandate to carry health insurance.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, the Budget Control Act of 2011, among other things, included reductions to Medicare payments to providers of two percent per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2025 unless additional Congressional action is taken. Additionally, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

We expect additional state and federal healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our future product candidates.

Human Capital Resources

As of December 31, 2021, we had 28 total employees of which all are full-time employees. None of our employees are subject to a collective bargaining agreement or represented by a trade or labor union. We consider our relationship with our employees to be good.

We believe that our future success largely depends upon our continued ability to attract and retain highly qualified management and personnel. Talent management is critical to our ability to execute on our long-term growth strategy. To facilitate talent attraction and retention, we strive to make our company a safe and rewarding workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation and benefits, and by programs that build connections among our employees. We continue to be committed to an inclusive culture, which values equity, opportunity, and respect. In support of our inclusive culture, we offer competitive compensation and benefits, including stock awards, and strive to recruit a diverse talent pool across all levels of the organization. In response to the COVID-19 pandemic, we implemented changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. This included implementing a work-from-home policy for all employees who are able to perform their duties remotely and restricting all nonessential travel.

Company Information

We were incorporated in the State of Nevada on May 15, 2014. On November 7, 2016, we changed our name from Makkanotti Group Corp. to CURE Pharmaceutical Holding Corp. On September 27, 2019, the Company reincorporated from the State of Nevada to the State of Delaware. Our principal executive offices are located at 1620 Beacon Place, Oxnard, California 93033 and our telephone number is (805) 824-0410. Our website is www.curepharmaceutical.com. The information contained on or that can be accessed through our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider any information contained on, or that can be accessed through, our website as part of this Annual Report on Form 10-K or in deciding whether to purchase our common stock.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are accessible free of charge on our website at www.curepharmaceutical.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC also maintains an internet site that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov.

13

ITEM 1A. RISK FACTORS

Investing in our securities involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Annual Report on Form 10-K, including our consolidated financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of these risks could have a material and adverse effect on our business, reputation, financial condition, results of operations and future growth prospects, as well as our ability to accomplish our strategic objectives. Certain statements contained in this section constitute forward-looking statements. See the information included in “Special Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Summary of Risk Factors

Risks Related to Our Business and Industry

· The success of our pharmaceutical product candidates is dependent on our business partners’ ability to conduct clinical trials, obtain regulatory approval, market and sell our products. We cannot give any assurance that any of our pharmaceutical product candidates will receive regulatory approval, which is necessary before they can be commercialized.

· Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future study results.

· The life sciences industry is highly competitive and subject to rapid technological change. If our competitors and potential competitors develop superior products and technologies, our competitive position and results of operations would suffer.

· The report of our independent registered public accounting firm contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. This going concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise.

· We have not generated any revenue from the sale of our current pharmaceutical product candidates and may never be profitable. Our ability to generate revenue and achieve profitability depends on our ability to successfully complete the development of, and to commercialize, our product candidates and on the demand for our product candidates.

· We or our suppliers may experience development or manufacturing problems or delays that could limit the growth of our revenue or increase our losses.

· Our business could be adversely affected by widespread public health epidemics or other catastrophic events beyond our control. An outbreak of contagious diseases, and other adverse public health developments, such as the recent novel strain of coronavirus (COVID-19) could impact our operations depending on future developments, which are highly uncertain, largely beyond our control and cannot be predicted with certainty.

· Our ability to compete depends on our ability to attract and retain highly qualified technical, development, sales and marketing, managerial and administrative personnel.

· If we do not achieve, sustain or successfully manage our anticipated growth, our business and prospects will be harmed. Furthermore, significant growth will place strains on our management and our operational and financial systems and processes, and our operating costs may escalate even faster than planned.

· If we do not achieve, sustain or successfully manage our anticipated growth, our business and prospects will be harmed.

· New technologies could emerge that might offer better combinations of price and performance than our current or product.

· If the market opportunities for our product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.

· We face intense competition and rapid technological change and the possibility that our competitors may discover, develop or commercialize drugs that are similar, more advanced or more effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.

· We currently have no marketing and sales organization. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenue.

14

· The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

· Regulatory and legal uncertainties could result in significant costs or otherwise harm our business. Satisfaction of regulatory requirements, including FDA requirements, typically takes many years, and if approval is obtained at all, it is dependent upon the type, complexity and novelty of the product, and requires the expenditure of substantial resources.

· Our product candidates are based on new medical technology and, consequently, are inherently risky. Concerns about the safety and efficacy of our products could limit our future success.

· Failure to obtain timely regulatory approvals required to exploit the commercial potential of our products could increase our future development costs or impair our future sales.

· State pharmaceutical marketing compliance and reporting requirements may expose us to regulatory and legal action by state governments or other government authorities.

· Changes in healthcare law and implementing regulations, as well as changes in healthcare policy, may impact our business in ways that we cannot currently predict, and may have a significant adverse effect on our business and results of operations.

· We may not be successful in establishing collaborations for product candidates we seek to commercialize, which could adversely affect our ability to discover, develop, and commercialize products.

· We have limited sales and marketing experience.

· Our products under development may not gain market acceptance.

· We may be required to defend lawsuits or pay damages for product liability claims.

· Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance. If there is not sufficient reimbursement for our products, it is less likely that they will be widely used.

Risks Relating to Our Financial Position and Need for Additional Capital

· We may not be able to continue to operate as a going concern.

· Even if future financing is successful, we expect that we will need to raise substantial additional funding before we can expect to become profitable from sales of our product candidates. This additional financing may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product candidate development efforts or other operations.

· We are a drug delivery and development company and have a limited operating history on which to assess the prospects for our business, have incurred significant losses since the date of our inception, and anticipate that we will continue to incur significant losses until we are able to successfully commercialize our product candidates.

· Raising additional capital may cause dilution to our existing stockholders and restrict our operations or require us to relinquish certain intellectual property rights.

· Our inability to raise capital on acceptable terms in the future may cause us to delay, diminish, or curtail certain operational activities, including research and development activities, clinical trials, sales and marketing, and other operations, in order to reduce costs and sustain the business, and such inability would have a material adverse effect on our business and financial condition.

· We have broad discretion in the use of the net proceeds from financing and may not use them effectively.

· Market and economic conditions may negatively impact our business, financial condition and share price.

· U.S. federal income tax reform could adversely affect us or our stockholders.

15

Risks Related to Intellectual Property

· The extent to which we can protect our technologies through intellectual property rights that we own, acquire or license is uncertain.

· Our currently pending or future patent applications may not result in issued patents, and we cannot predict how long it may take for a patent to issue on any of our pending patent applications, assuming a patent does issue.

· The extent to which the patent rights of life sciences companies effectively protect their technologies is often highly uncertain and involves complex legal and factual questions for which important legal principles remain unresolved.

· The patent prosecution process is expensive and time-consuming, is highly uncertain and involves complex legal and factual questions. Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

· Obtaining and maintaining our patent protection depends upon compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

· We may not be able to identify infringements of our patents and accordingly the enforcement of our intellectual property rights may be difficult.

· Our intellectual property rights may not be sufficient to protect our competitive position and to prevent others from manufacturing, using or selling competing products.

· We may become involved in disputes relating to our intellectual property rights and may need to resort to litigation in order to defend and enforce our intellectual property rights.

· We may be subject to claims challenging the inventorship of our intellectual property.

· If we are unable to maintain effective proprietary rights for our products, we may not be able to compete effectively in our markets.

· We could face claims that our activities or the manufacture, use or sale of our products infringe the intellectual property rights of others, which could cause us to pay damages or licensing fees and limit our ability to sell some or all of our products and services.

· Our failure to secure trademark registrations could adversely affect our business and our ability to market our products.

· We may be unable to adequately prevent disclosure of trade secrets and other proprietary information, or the misappropriation of the intellectual property we regard as our own.

· Global economic conditions, including those resulting from the widespread outbreak of COVID-19, may negatively impact the Company’s financial condition and results of operations.

Risks Related to Common Stock

· We are a “smaller reporting company” and have elected to comply with certain reduced reporting and disclosure requirements which could make our common stock less attractive to investors.

· We do not intend to pay cash dividends to our stockholders for the foreseeable future, so you may not receive any return on your investment in us prior to selling your interest.

· Our business, financial condition and operations has been and may be in the future, materially adversely affected by the COVID-19 pandemic or other public health crises.

· Our stock price may be volatile, and you may not be able to resell your shares at or above the purchase price.

· Future sales and issuances of our common stock or rights to purchase common stock could result in additional dilution of the percentage ownership of our stockholders and could cause our share price to fall.

· Our common stock is quoted on the over-the-counter market, which subjects us to the SEC’s penny stock rules and may decrease the liquidity of our common stock.

· Our management is required to devote substantial time to compliance initiatives.

16

Risks Related to Our Business and Industry

The success of our pharmaceutical product candidates is dependent on our business partners’ ability to conduct clinical trials, obtain regulatory approval, market and sell our products. We cannot give any assurance that any of our pharmaceutical product candidates will receive regulatory approval, which is necessary before they can be commercialized.

In addition to developing and launching dietary supplements, we have invested substantial efforts and financial resources to design and develop our pharmaceutical products, including conducting product characterization, validation and scale up and providing general and administrative support for these operations. Our future success is dependent on our ability with our partners, to successfully develop, obtain regulatory approval for, and then successfully commercialize one or more pharmaceutical product candidates. We currently generate no revenue from sales of any pharmaceutical product, and we may never be able to develop or commercialize a marketable pharmaceutical product.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future study results.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical study process. In vitro testing and characterization of our product candidates may not be predictive of the clinical results. Product candidates that have shown promising results in early-stage clinical studies may still suffer significant setbacks in subsequent advanced clinical studies. There is a high failure rate for drugs proceeding through clinical studies, and product candidates in later stages of clinical studies may fail to show the desired safety and efficacy traits despite having progressed satisfactorily through preclinical studies and initial clinical studies. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses. We do not know whether any Phase I, Phase II, Phase III or other clinical studies such as bio equivalency studies conducted with our partners, will demonstrate consistent or adequate efficacy and safety sufficient to obtain regulatory approval to market our product candidates.

The life sciences industry is highly competitive and subject to rapid technological change. If our competitors and potential competitors develop superior products and technologies, our competitive position and results of operations would suffer.

We face intense competition from a number of companies that offer products in our target markets, many of which have substantially greater financial resources and larger, more established marketing, sales and service organizations than we do. The life sciences industry is characterized by rapid and continuous technological innovation. We may need to develop new technologies for our products to remain competitive. One or more of our current or future competitors could render our present or future products obsolete or uneconomical by technological advances. We may also encounter other problems in the process of delivering new products to the marketplace, such as problems related to design, development or manufacturing of such products, and as a result we may be unsuccessful in selling such products. Our future success depends on our ability to compete effectively against current technologies, as well as to respond effectively to technological advances by developing and marketing products that are competitive in the continually changing technological landscape.

17

The report of our independent registered public accounting firm contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern.

The report of our independent registered public accounting firm on our audited financial statements as of and for the year ended December 31, 2021 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of the uncertainty regarding our ability to continue as a going concern. This going concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise. Further reports on our financial statements may include an explanatory paragraph with respect to our ability to continue as a going concern.

We have not generated any revenue from the sale of our current pharmaceutical product candidates and may never be profitable.

We have not yet commercialized any of our pharmaceutical product candidates. We have generated minimal revenues from the sale of our nutraceutical products, and we expect modest growth in sales of these products over the next 2-3 years. We do not know whether or when we will become profitable. Our ability to generate revenue and achieve profitability depends on our ability to successfully complete the development of, and to commercialize, our product candidates and on the demand for our product candidates. Our ability to generate revenue and achieve profitability depends on our ability, alone or with commercialization partners, to successfully complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize, one or more of our product candidates. Our ability to generate future revenue from product candidate sales depends heavily on our success in many areas, including but not limited to:

· obtaining and maintaining financial support from pharmaceutical and other commercialization partners to advance product development, testing and scale up;

· our partners ability and commitment to obtain regulatory and marketing approvals for pharmaceutical product candidates;

· our partners ability and commitment to obtain market acceptance of our products;

· establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality) products to support market demand for our product candidates, if approved;

· addressing any competing pharmaceutical or biotechnological and market developments;

· identifying, assessing, acquiring and/or developing new product candidates;

· negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;

· ourselves or our partners becoming a target of litigation for possible patent infringement;

· maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and

· attracting, hiring and retaining qualified personnel.

We or our suppliers may experience development or manufacturing problems or delays that could limit the growth of our revenue or increase our losses.

We may encounter unforeseen situations in the manufacturing of our products that could result in delays or shortfalls in our production. Our suppliers may also face similar delays or shortfalls. In addition, we or our suppliers’ production processes may have to change to accommodate any significant future expansion of our manufacturing capacity, which may increase our or our suppliers’ manufacturing costs, delay production of our products, reduce our product gross margin and adversely impact our business. If we are unable to keep up with demand for our products by successfully manufacturing and shipping our products in a timely manner, our revenue could be impaired, market acceptance for our products could be adversely affected and our customers might instead purchase our competitors’ products. In addition, developing manufacturing procedures for new products may require developing specific production processes for those products. Developing such processes could be time consuming and any unexpected difficulty in doing so can delay the introduction of a product.

There has been an increased public focus, including from the United States federal and state governments, on environmental sustainability matters, including with respect to climate change, greenhouse gases, water resources, packaging and waste, animal health and welfare, deforestation, and land use. We endeavor to conduct our business in a manner which reflects our priority of sustainable stewardship, including with respect to environmental sustainability matters, and we are working to manage the risks and costs to us and our supply chain associated with these types of environmental sustainability matters. In addition, as the result of such heightened public focus on environmental sustainability matters, we may face increased pressure to provide expanded disclosure, make or expand commitments, set targets, or establish additional goals and take actions to meet such goals, in connection with such environmental sustainability matters. These matters and our efforts to address them could expose us to market, operational, reputational, and execution costs or risks.

18

Our business could be adversely affected by widespread public health epidemics or other catastrophic events beyond our control.

In addition to our reliance on our own employees and facilities, we depend on our collaborators, laboratories and other facilities for the continued operation of our business. Despite any precautions we take for natural disasters or other catastrophic events, events such as pandemic disease, terrorist attacks, hurricanes, fires, floods, ice and snowstorms, may result in interruptions in our business.

An outbreak of contagious diseases, and other adverse public health developments, such as the continued impact of the coronavirus (COVID-19) pandemic could impact our operations depending on future developments, which are highly uncertain, largely beyond our control and cannot be predicted with certainty. These uncertain factors, including the duration of the outbreak, new information which may emerge concerning the severity of the disease and the actions to contain or treat its impact, could adversely impact our operations, including among others, conduct of our clinical trials, employee mobility and productiveness, temporary closure of facilities, including clinical trial sites, our manufacturing capabilities, and third party service providers, any of which could have an adverse impact on our business and our financial results. In addition, a significant health epidemic could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products which could have a material adverse effect on our business, operating results and financial condition.

Our ability to compete depends on our ability to attract and retain talented employees.

Our future success depends on our ability to identify, attract, train, integrate and retain highly qualified technical, development, sales and marketing, managerial and administrative personnel. Competition for highly skilled individuals is extremely intense and we face difficulty identifying and hiring qualified personnel in many areas of our business. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for hiring experienced employees have greater resources than we have. If we fail to identify, attract, train, integrate and retain highly qualified and motivated personnel, our reputation could suffer and our business, financial condition and results of operations could be adversely affected.

Our future success also depends on the continued service and performance of our senior management team. The replacement of members of our senior management team likely would involve significant time and costs, and the loss of any these individuals may delay or prevent the achievement of our business objectives.

If we do not achieve, sustain or successfully manage our anticipated growth, our business and prospects will be harmed.

If we are unable to obtain or sustain adequate revenue growth, our financial results could suffer. Furthermore, significant growth will place strains on our management and our operational and financial systems and processes, and our operating costs may escalate even faster than planned. If we cannot effectively manage our expanding operations and our costs, we may not be able to grow effectively, or we may grow at a slower pace. Additionally, if we do not successfully forecast the timing of regulatory authorization for our products, marketing and subsequent demand for our products or manage our anticipated expenses accordingly, our operating results will be harmed.

New technologies could emerge that might offer better combinations of price and performance than our current product.

It is critical to our success that we anticipate changes in technology and customer requirements and to successfully introduce, on a timely and cost-effective basis, new, enhanced and competitive technologies that meet the needs of current and prospective customers. If we do not successfully innovate and introduce new technology into our product lines or manage the transitions to new product offerings, our revenues, results of operations and business will be adversely impacted. Competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. We anticipate that we will face increased competition in the future as existing companies and competitors develop new or improved products and as new companies enter the market with new technologies.

19

If the market opportunities for our product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.

Our projections of both the number of people who have our target diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including the scientific literature, surveys of clinics, or market research and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out to be lower than expected. The effort to identify patients with diseases we seek to treat is in early stages, and we cannot accurately predict the number of patients for whom treatment might be possible.

We face intense competition and rapid technological change and the possibility that our competitors may discover, develop or commercialize drugs that are similar, more advanced or more effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.

The biotechnology and pharmaceutical industries are highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities and research organizations actively engaged in the research and development of products that may be similar to our product candidates.

We compete with other companies within the drug delivery industry, which may have a competitive advantage over us due to their greater size, cash flows and institutional experience. Some of these drug delivery competitors include Aquestive Therapeutics Inc. (formerly Monosol Rx), Tesa-Labtec GmbH, BioDelivery Sciences International, Inc., LTS Lohmann Therapy Systems Corp and IntelGenx. New entrants such as Zim Laboratories in India and CMG Pharmaceuticals in Korea are also pursuing OTF products. Some of these competitors, such as IntelGenx are also pursuing cannabinoid formulations. Biotechnology companies such as Lonza have entered the cannabinoid formulation market.

Compared to us, many of our competitors may have significantly greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations. As a result of these factors, our competitors may have an advantage in marketing their approved products and may obtain regulatory approval of their product candidates before we are able to, which may limit our ability to develop or commercialize our product candidates. Our competitors may also develop drugs that are safer, more effective, more widely used and less expensive than ours, and may also be more successful than us in manufacturing and marketing their products. These advantages could materially impact our ability to develop and commercialize our product candidates.

Even if we successfully develop our product candidates, and obtain marketing approval for them, other treatments or therapeutics may be preferred, and we may not be successful in commercializing our product candidates or in bringing them to market.

Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than we are able to and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization and market penetration than we do. Additionally, technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.

20

We currently have no marketing and sales organization. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any revenue.

We as a company have no experience selling and marketing our products and we currently have no marketing or sales organization. To successfully commercialize any products that may result from our development programs, we rely on partners to market and distribute our products. Any failure or delay in securing an appropriate partner would adversely impact the commercialization of our products.

If our partners do not commit sufficient resources to market and distribute our future products, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We may be competing with companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

Even with the requisite approvals from the FDA, the commercial success of our product candidates will depend in part on the medical community, patients and third-party payors accepting our product candidates as medically useful, cost-effective and safe. Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and others in the medical community. The degree of market acceptance of any of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

· the safety and efficacy of the product as demonstrated in clinical studies and potential advantages over competing treatments;

· the prevalence and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling;

· the clinical indications for which approval is granted;

· relative convenience and ease of administration;

· the cost of treatment, particularly in relation to competing treatments;

· the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

· the strength of marketing and distribution support and timing of market introduction of competitive products;

· publicity concerning our products or competing products and treatments; and

· sufficient third-party insurance coverage and reimbursement.

Even if a potential product displays a favorable efficacy and safety profile in preclinical and clinical studies, market acceptance of the product will not be fully known until after it is launched. Our partners’ efforts to educate the medical community and third-party payors on the benefits of the product candidates may require significant resources and may never be successful. If our product candidates are approved, but fail to achieve an adequate level of acceptance by physicians, patients, third-party payors and others in the medical community, we will not be able to generate sufficient revenue to become or remain profitable.

21

Regulatory and legal uncertainties could result in significant costs or otherwise harm our business.

To manufacture and sell our products, we must comply with extensive domestic and international regulation. In order to sell our products in the United States, approval from the FDA is required. Satisfaction of regulatory requirements, including FDA requirements, typically takes many years, and if approval is obtained at all, it is dependent upon the type, complexity and novelty of the product, and requires the expenditure of substantial resources. We cannot predict whether our products will be approved by the FDA. Even if they are approved, we cannot predict the time frame for approval. Foreign regulatory requirements differ from jurisdiction to jurisdiction and may, in some cases, be more stringent or difficult to meet than FDA requirements. As with the FDA, we cannot predict if or when we may obtain these regulatory approvals. If we cannot demonstrate that our products can be used safely and successfully in a broad segment of the patient population on a long-term basis, our products would likely be denied approval by the FDA and the regulatory agencies of foreign governments.

Our product candidates are based on new medical technology and, consequently, are inherently risky. Concerns about the safety and efficacy of our products could limit our future success.

We are subject to the risks of failure inherent in the development of product candidates based on new medical technologies. These risks include the possibility that the products we create will not be effective, that our product candidates will be unsafe or otherwise fail to receive the necessary regulatory approvals, and that our product candidates will be hard to manufacture on a large scale or will be uneconomical to market.

Many pharmaceutical products cause multiple potential complications and side effects, not all of which can be predicted with accuracy and many of which may vary from patient to patient. Long term follow-up data may reveal previously unidentified complications associated with our products. The responses of potential physicians and others to information about complications could materially affect the market acceptance of our products, which in turn would materially harm our business.

Failure to obtain timely regulatory approvals required to exploit the commercial potential of our products could increase our future development costs or impair our future sales.

None of our products are approved by the FDA for sale in the United States or by other regulatory authorities for sale in foreign countries. To exploit the commercial potential of our technologies, we are conducting and planning to conduct additional pre-clinical studies and clinical trials. This process is expensive and can require a significant amount of time. Failure can occur at any stage of testing, even if the results are favorable. Failure to adequately demonstrate safety and efficacy in clinical trials could delay or preclude regulatory approval and restrict our ability to commercialize our technology or products. Any such failure may severely harm our business. In addition, any approvals we obtain may not cover all of the clinical indications for which approval is sought or may contain significant limitations in the form of narrow indications, warnings, precautions or contraindications with respect to conditions of use, or in the form of onerous risk management plans, restrictions on distribution, or post-approval study requirements.

State pharmaceutical marketing compliance and reporting requirements may expose us to regulatory and legal action by state governments or other government authorities.

Several states have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs and file periodic reports on sales, marketing, pricing and other activities. Similar legislation is being considered in other states. Many of these requirements are new and uncertain, and available guidance is limited. Unless we are in full compliance with these laws, we could face enforcement action, fines, and other penalties and could receive adverse publicity, all of which could harm our business.

22

Changes in healthcare law and implementing regulations, as well as changes in healthcare policy, may impact our business in ways that we cannot currently predict, and may have a significant adverse effect on our business and results of operations.

In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect our ability to profitably sell any product candidates for which we obtain marketing approval. Among policy makers and payors in the United States and elsewhere, including in the EU, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

The Affordable Care Act substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry. The Affordable Care Act, includes a number of provisions that are intended to lower healthcare costs, including provisions relating to prescription drug prices and government spending on medical products.

Since its enactment, there have also been judicial and Congressional challenges to certain aspects of the Affordable Care Act, as well as efforts by the Trump administration to repeal or replace certain aspects of the statute. We continue to evaluate the effect that the Affordable Care Act and subsequent changes to the statute has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition. There have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect additional challenges and amendments in the future. Most recently, the Tax Cuts and Jobs Acts was enacted, which, among other things, removes penalties for not complying with the individual mandate to carry health insurance.

There has also been heightened governmental scrutiny recently over the manner in which drug manufacturers set prices for their marketed products. There have been several Congressional inquiries and proposed bills, as well as state efforts, designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. In June 2017, the FDA issued a Drug Competition Action plan intended to lower prescription drug prices by encouraging competition from generic versions of existing products. The Agency announced that it will issue a similar plan intended to promote competition to prescription biologics from biosimilars later this year.

Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures. For example, in September 2017, the California State Assembly approved SB17, which requires pharmaceutical companies to notify health insurers and government health plans at least 60 days before any scheduled increases in the prices of their products if they exceed 16% over a two-year period, and further requiring pharmaceutical companies to explain the reasons for such increase.

We expect that these, and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs, once marketing approval is obtained.

We may not be successful in establishing collaborations for product candidates we seek to commercialize, which could adversely affect our ability to discover, develop, and commercialize products.

We expect to seek additional collaborations for the development and commercialization of product candidates in the future. The timing and terms of any collaboration will depend on the evaluation by prospective collaborators of the clinical trial results and other aspects of a product’s safety and efficacy profile. If we are unable to reach agreements with suitable collaborators for any product candidate, we will be forced to fund the entire development and commercialization of such product candidates, ourselves, and we may not have the resources to do so. If resource constraints require us to enter into a collaboration agreement early in the development of a product candidate, we may be forced to accept a more limited share of any revenues the product may eventually generate. We face significant competition in seeking appropriate collaborators. Moreover, these collaboration arrangements are complex and time-consuming to negotiate and document. We may not be successful in our efforts to establish collaborations or other alternative arrangements for any product candidate. Even if we are successful in establishing collaborations, we may not be able to ensure fulfillment by collaborators of their obligations or our expectations.

23

We have limited sales and marketing experience.

We have limited experience in sales and marketing. To obtain the expertise necessary to successfully market and sell our products, we will require the development of our own commercial infrastructure and/or collaborative commercial arrangements and partnerships. Our ability to execute our current operating plan is dependent on numerous factors, including, the performance of third-party collaborators with whom we may contract.

Our products under development may not gain market acceptance.

Our products may not gain market acceptance among physicians, patients, healthcare payers and the medical community. Significant factors in determining whether we will be able to compete successfully include:

· the efficacy and safety of our products;

· the time and scope of regulatory approval;

· reimbursement coverage from insurance companies and others;

· the price and cost-effectiveness of our products, especially as compared to any competitive products; and

· the ability to maintain patent protection.

We may be required to defend lawsuits or pay damages for product liability claims.

Product liability is a major risk in testing and marketing biotechnology and pharmaceutical products. We may face substantial product liability exposure in human clinical trials and for products that we sell after regulatory approval. We carry product liability insurance and we expect to continue such policies. However, product liability claims, regardless of their merits, could exceed policy limits, divert management’s attention, and adversely affect our reputation and demand for our products.

Reimbursement decisions by third-party payors may have an adverse effect on pricing and market acceptance. If there is not sufficient reimbursement for our products, it is less likely that they will be widely used.

Market acceptance of products we develop, if approved, will depend on reimbursement policies and may be affected by, among other things, future healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs they will cover and establish payment levels. We cannot be certain that reimbursement will be available for any products that we may develop. Also, we cannot be certain that reimbursement policies will not reduce the demand for, or the price paid for our products. If reimbursement is not available or is available on a limited basis, we may not be able to successfully commercialize products that we develop.

Risks Relating to Our Financial Position and Need for Additional Capital

We may not be able to continue to operate as a going concern.

Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements. We may be unable to continue to operate without the threat of liquidation for the foreseeable future.

24

Even if future financing is successful, we expect that we will need to raise substantial additional funding before we can expect to become profitable from sales of our product candidates. This additional financing may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product candidate development efforts or other operations.

As of December 31, 2021, our cash and cash equivalents were approximately $0.02 million, a working capital deficit of approximately $22.5 million and an accumulated deficit of approximately $94.4 million. Upon the completion of future financing, we expect that our existing cash and cash equivalents will be sufficient to fund operations. Even if future financing is completed, we expect that we may require substantial additional capital to commercialize our product candidates. In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future funding requirements will depend on many factors, including but not limited to:

· the scope, rate of progress, results and cost of product development, clinical studies, preclinical testing, and other related activities;

· the cost, timing and outcomes of regulatory approvals;

· the cost and timing of establishing sales, marketing, and distribution capabilities; and

· the terms and timing of any collaborative, licensing, and other arrangements that we may establish.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of holders of our securities and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidates or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

We are a drug delivery and development company and have a limited operating history on which to assess the prospects for our business, have incurred significant losses since the date of our inception, and anticipate that we will continue to incur significant losses until we are able to successfully commercialize our product candidates.

Since our inception, we have been operating as a specialty pharmaceutical company and have a limited operating history on which to assess the prospects for our business, have incurred significant losses, and anticipate that we will continue to incur significant losses for the foreseeable future. We have historically incurred substantial net losses, including net losses of approximately $10.6 million in 2018, approximately $21.4 million in 2019, approximately $30.6 million in 2020 and approximately $13.2 million in 2021. As of December 31, 2021 and 2020, we had an accumulated deficit of approximately $94.4 million and approximately $81.3 million, respectively.

25

We have devoted substantially all of our financial resources to develop our product candidates. We have financed our operations primarily through the issuance of equity securities and convertible notes. The amount of our future net losses will depend, in part, on completing the development of our product candidates, the demand for our product candidates, the rate of our future expenditures and our ability to obtain funding through the issuance of our securities, strategic collaborations or grants. Pharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We are in the late stages of preclinical and at the early stages of clinical development for our product candidates, we have not yet commenced pivotal clinical studies for any product candidate, and it may be several years, if ever, before we complete pivotal clinical studies and have a product candidate approved for commercialization. Even if we obtain regulatory approval to market a product candidate, our future revenue will depend upon the size of the markets for which our product candidates may receive approval and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party payors and adequate market share for our product candidates in those markets. We expect to continue to incur significant losses until we are able to commercialize our first pharmaceutical product candidates, which we may not be successful in achieving. We anticipate that our expenses will increase substantially if and as we:

· continue the research and development of our product candidates;

· expand our manufacturing capabilities;

· seek regulatory and marketing approvals for our product candidates that successfully complete clinical studies;

· establish a sales, marketing, and distribution infrastructure to commercialize our product candidates;

· seek to identify, assess, acquire, license, and/or develop other product candidates and subsequent generations of our current product candidates;

· seek to maintain, protect, and expand our intellectual property portfolio;

· seek to attract and retain skilled personnel; and

· create additional infrastructure to support our operations as a public company and our product candidate development and planned future commercialization efforts.

Raising additional capital may cause dilution to our existing stockholders and restrict our operations or require us to relinquish certain intellectual property rights.

We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances, licensing arrangements and grants. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders may be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt and receivables financings may be coupled with an equity component, such as warrants to purchase shares, which could also result in dilution of our existing stockholders’ ownership. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our products or grant licenses on terms that are not favorable to us. A failure to obtain adequate funds may cause us to curtail certain operational activities, including research and development, regulatory trials, sales and marketing, and manufacturing operations, in order to reduce costs and sustain the business, and would have a material adverse effect on our business and financial condition.

Our inability to raise capital on acceptable terms in the future may cause us to delay, diminish, or curtail certain operational activities, including research and development activities, clinical trials, sales and marketing, and other operations, in order to reduce costs and sustain the business, and such inability would have a material adverse effect on our business and financial condition.

We expect capital outlays and operating expenditures to increase over the next several years as we work to expand our commercial activities, expand our development activities, conduct clinical trials, expand manufacturing operations and expand our infrastructure. We may need to raise additional capital to, among other things:

· fund clinical trials and preclinical trials for our products as requested or required by regulatory agencies;

· sustain commercialization of our new products;

· expand and automate our manufacturing capabilities;

· increase our sales and marketing efforts to drive market adoption and address competitive developments;

· finance capital expenditures and our general and administrative expenses;

· develop new products;

· maintain, expand and protect our intellectual property portfolio;

· add operational, financial and management information systems; and

· hire additional research and development, quality control, scientific, and general and administrative personnel.

26

Our present and future funding requirements will depend on many factors, including but not limited to:

· the progress and timing of clinical trials;

· the level of research and development investment required to maintain and improve our technology position;

· cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights, if any;

· our efforts to acquire or license complementary technologies or acquire complementary businesses;

· changes in product development plans needed to address any difficulties in commercialization or changing market conditions;

· competing technological and market developments;

· changes in regulatory policies or laws that may affect our operations; and

· changes in physician acceptance or medical society recommendations that may affect commercial efforts.

We have broad discretion in the use of the net proceeds from financing and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from financing. Because of the number and variability of factors that will determine our use of the net proceeds from the financing, their ultimate use may vary substantially from their currently intended use. Our management may not apply our cash from financing in ways that ultimately increase the value of any investment in our securities or enhance stockholder value. The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from future financing in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply our cash in ways that enhance stockholder value, we may fail to achieve expected financial results, which may result in a decline in the price of our shares of common stock, and, therefore, may negatively impact our ability to raise capital, invest in or expand our business, acquire additional products or licenses, commercialize our products, or continue our operations.

Market and economic conditions may negatively impact our business, financial condition and share price.

Concerns over inflation, energy costs, geopolitical issues, the U.S. mortgage market and a declining real estate market, unstable global credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, increased unemployment rates, and increased credit defaults in recent years. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance, and share price and could require us to delay or abandon development or commercialization plans. In addition, there is a risk that one or more of our current and future service providers, manufacturers, suppliers, hospitals and other medical facilities, our third-party payers, and other partners could be negatively affected by these difficult economic times, which could adversely affect our ability to attain our operating goals on schedule and on budget or meet our business and financial objectives.

27

U.S. federal income tax reform could adversely affect us or our stockholders.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “TCJA”) was signed into law, significantly reforming the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of interest, allows for the expensing of capital expenditures, puts into effect the migration from a “worldwide” system of taxation to a territorial system and modifies or repeals many business deductions and credits. We continue to examine the impact the TCJA may have on our business. We are in the process of evaluating the effect of the TCJA on our projection of minimal cash taxes or to our net operating losses. The estimated impact of the TCJA is based on our management’s current knowledge and assumptions and recognized impacts could be materially different from current estimates based on our actual results and our further analysis of the new law. The impact of the TCJA on holders of our common stock remains uncertain and could be adverse. There remains significant uncertainty as to the impact of the TCJA on us and on any investment in our common stock.

Risks Related to Intellectual Property

The extent to which we can protect our technologies through intellectual property rights that we own, acquire or license is uncertain.

We employ a variety of proprietary and patented technologies and methods in connection with our products we sell or are developing. We cannot provide any assurance that the intellectual property rights that we own, or license provide effective protection from competitive threats or that we would prevail in any litigation in which our intellectual property rights are challenged. In addition, we may not be successful in obtaining new proprietary or patented technologies or methods in the future, whether through acquiring ownership or through licenses from third parties.

Our currently pending or future patent applications may not result in issued patents, and we cannot predict how long it may take for a patent to issue on any of our pending patent applications, assuming a patent does issue.

Other parties may challenge patents issued or exclusively licensed to us, or courts or administrative agencies will hold our patents or the patents we license on an exclusive basis to be valid and enforceable. We may not be successful in defending challenges made against our patents and other intellectual property rights. Any third-party challenge to any of our patents could result in the unenforceability or invalidity of some or all of the claims of such patents and could be time consuming and expensive.

The extent to which the patent rights of life sciences companies effectively protect their technologies is often highly uncertain and involves complex legal and factual questions for which important legal principles remain unresolved.

No consistent policy regarding the proper scope of allowable claims of patents held by life sciences companies has emerged to date in the United States. Various courts, including the U.S. Supreme Court, have rendered decisions that impact the scope of patentability of certain inventions or discoveries relating to products. These decisions generally stand for the proposition that inventions that recite laws of nature are not themselves patentable unless they have sufficient additional features that provide practical assurance that the processes are genuine inventive applications of those laws rather than patent drafting efforts designed to monopolize a law of nature itself. What constitutes a “sufficient” additional feature for this purpose is uncertain. While we do not generally rely on gene sequence patents, this evolving case law in the United States may adversely impact our ability to obtain new patents and may facilitate third-party challenges to our existing owned and exclusively licensed patents.

We cannot predict the breadth of claims that may be allowed or enforced in patents we own. For example:

· the inventor(s) named in one or more of our patents or patent applications might not have been the first to have made the relevant invention;

· the inventor (or his assignee) might not have been the first to file a patent application for the claimed invention;

· others may independently develop similar or alternative technologies or may successfully replicate our product and technologies;

· it is possible that the patents we own, or in which have exclusive license rights may not provide us with any competitive advantages or may be challenged by third parties and found to be invalid or unenforceable;

· any patents we obtain or exclusively license may expire before, or within a limited time period after, the products and services relating to such patents are commercialized;

· we may not develop or acquire additional proprietary technologies that are patentable; and

· others may acquire patents that could be asserted against us in a manner that could have an adverse effect on our business.

28

The patent prosecution process is expensive and time-consuming, is highly uncertain and involves complex legal and factual questions. Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and product candidates. We seek to protect our proprietary position by filing in the United States patent applications related to our novel technologies and product candidates that are important to our business.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. In addition, we may not pursue or obtain patent protection in all major markets. Moreover, in some circumstances, we may not have the right to control the preparation, filing or prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. In some circumstances, our licensors may have the right to enforce the licensed patents without our involvement or consent, or to decide not to enforce or to allow us to enforce the licensed patents. Therefore, these patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If any of our licensors fail to maintain such patents, or lose rights to those patents, the rights that we have licensed may be reduced or eliminated and our right to develop and commercialize any of our product candidates that are the subject of such licensed rights could be adversely affected.

Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. In particular, during prosecution of any patent application, the issuance of any patents based on the application may depend upon our ability to generate additional nonclinical or clinical data that support the patentability of our proposed claims. We may not be able to generate sufficient additional data on a timely basis, or at all. Moreover, changes in either the patent laws or interpretation of the patent laws in the United States or other countries may diminish the value of our patents or narrow the scope of our patent protection.

Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings or other patent office proceedings or litigation, in the United States or elsewhere, challenging our patent rights or the patent rights of others. An adverse determination in any such submission or proceeding could reduce the scope of, or invalidate, our patent rights; allow third parties to commercialize our technology or products and compete directly with us, without payment to us; or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our owned and licensed patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Obtaining and maintaining our patent protection depends upon compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO require compliance with a number of procedural, documentary, fee payment and other provisions during the patent prosecution process and following the issuance of a patent. There are situations in which noncompliance with these requirements can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case if our patent were in force.

29

We may not be able to identify infringements of our patents and accordingly the enforcement of our intellectual property rights may be difficult.

The drug substance in some of our product candidates is repurposed, which means that it is available in other pharmaceutical products for the purpose of treating indications that are different from the indications for our product candidates. It is possible that if we receive regulatory approval to market and sell our drug candidates, some patients that receive a prescription could be sold the same drug substance, but not our product candidate. It would be difficult, if not impossible for us to identify such instances that may constitute an infringement of our patents. In addition, because the drug substance of some of our product candidates is repurposed, such substance may not be eligible for patent protection or data exclusivity.

Our intellectual property rights may not be sufficient to protect our competitive position and to prevent others from manufacturing, using or selling competing products.

The scope of our owned and exclusively licensed intellectual property rights will not be sufficient to prevent others from manufacturing, using or selling competing products. Competitors could purchase our product and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies and thereby avoid infringing our intellectual property rights. If our intellectual property is not sufficient to effectively prevent our competitors from developing and selling similar products, our competitive position and our business could be adversely affected.

We may become involved in disputes relating to our intellectual property rights and may need to resort to litigation in order to defend and enforce our intellectual property rights.

Extensive litigation regarding patents and other intellectual property rights has been common in the medical industry. Litigation may be necessary to assert infringement claims, protect trade secrets or know-how and determine the enforceability, scope and validity of certain proprietary rights. Litigation may even be necessary to resolve disputes of inventorship or ownership of proprietary rights. The defense and prosecution of intellectual property lawsuits, USPTO interference or derivation proceedings and related legal and administrative proceedings (e.g., a re-examination) in the United States and internationally involve complex legal and factual questions. As a result, such proceedings are costly and time consuming to pursue, and their outcome is uncertain.

Even if we prevail in such a proceeding in which we assert our intellectual property rights against third parties, the remedy we obtain may not be commercially meaningful or adequately compensate us for any damages we may have suffered. If we do not prevail in such a proceeding, our patents could potentially be declared to be invalid, unenforceable or narrowed in scope, or we could otherwise lose valuable intellectual property rights. Similar proceedings involving the intellectual property we exclusively license could also have an impact on our business. Further, if any of our other owned or exclusively licensed patents are declared invalid, unenforceable or narrowed in scope, our competitive position could be adversely affected.

We may be subject to claims challenging the inventorship of our intellectual property.

We may be subject to claims that former employees, collaborators or other third parties have an interest in, or right to compensation, with respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

30

If we are unable to maintain effective proprietary rights for our products, we may not be able to compete effectively in our markets.

In addition to the protection afforded by any patents currently owned and that may be granted, historically, we have relied on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes that are not easily known, knowable or easily ascertainable, and for which patent infringement is difficult to monitor and enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining physical security of our premises and physical and electronic security of our information technology systems. Agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known or be independently discovered by competitors.

We cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed in violation of our confidentiality agreements or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Also, misappropriation or unauthorized and unavoidable disclosure of our trade secrets and intellectual property could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties for misappropriating any trade secret.

We could face claims that our activities or the manufacture, use or sale of our products infringe the intellectual property rights of others, which could cause us to pay damages or licensing fees and limit our ability to sell some or all of our products and services.

Our research, development and commercialization activities may infringe or be claimed to infringe patents or other intellectual property rights owned by other parties of which we may be unaware because the relevant patent applications may have been filed, but not yet published. Certain of our competitors and other companies have substantial patent portfolios and may attempt to use patent litigation as a means to obtain a competitive advantage or to extract licensing revenue. In addition to patent infringement claims, we may also be subject to other claims relating to the violation of intellectual property rights, such as claims that we have misappropriated trade secrets or infringed third party trademarks. The risks of being involved in such litigation may also increase as we gain greater visibility as a public company and as we gain commercial acceptance of our products and move into new markets and applications for our products.

Regardless of merit or outcome, our involvement in any litigation, interference or other administrative proceedings could cause us to incur substantial expense and could significantly divert the efforts of our technical and management personnel. Any public announcements related to litigation or interference proceedings initiated or threatened against us could cause our share price to decline. An adverse determination, or any actions we take or agreements we enter into in order to resolve or avoid disputes, may subject us to the loss of our proprietary position or to significant liabilities, or require us to seek licenses that may include substantial cost and ongoing royalties. Licenses may not be available from third parties or may not be obtainable on satisfactory terms. An adverse determination or a failure to obtain necessary licenses may restrict or prevent us from manufacturing and selling our products and offering our services. These outcomes could materially harm our business, financial condition and results of operations.

Our failure to secure trademark registrations could adversely affect our business and our ability to market our products.

Our trademark applications in the United States and any other jurisdictions where we may file may not be allowed for registration, and our registered trademarks may not be maintained or enforced. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our applications and/or registrations, and our applications and/or registrations may not survive such proceedings. Failure to secure such trademark registrations in the United States could adversely affect our business and our ability to market our products.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information, or the misappropriation of the intellectual property we regard as our own.

We rely on trade secrets to protect our proprietary know how and technological advances, particularly where we do not believe patent protection is appropriate or obtainable. Nevertheless, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, third party contractors, third party collaborators and other advisors to protect our trade secrets and other proprietary information. These agreements generally require that the other party to the agreement keep confidential and not disclose to third parties all confidential information developed by us or made known to the other party by us during the course of the other party’s relationship with us. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Monitoring unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate. If we were to seek to pursue a claim that a third party had illegally obtained and was using our trade secrets, it would be expensive and time consuming, and the outcome would be unpredictable. Further, courts outside the United States may be less willing to protect trade secrets. In addition, others may independently discover our trade secrets and proprietary information and therefore be free to use such trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. In addition, our trade secrets and proprietary information may be misappropriated as a result of breaches of our electronic or physical security systems in which case we may have no legal recourse. Failure to obtain, or maintain, trade secret protection could enable competitors to use our proprietary information to develop products that compete with our products or cause additional, material adverse effects upon our competitive business position.

31

Global economic conditions, including those resulting from the widespread outbreak of COVID-19, may negatively impact the Company’s financial condition and results of operations.

A general weakening or decline in the global economy or a reduction in industrial outputs, business or consumer spending or confidence could delay or significantly decrease purchases of the Company’s products by its customers and end users. Consumer purchases of discretionary items, which could include the Company’s maintenance products and homecare and cleaning products, may decline during periods where disposable income is reduced or there is economic uncertainty, and this may negatively impact the Company’s financial condition and results of operations.

In addition, the Company’s sales and operating results may be affected by uncertain or changing economic and market conditions, including inflation, deflation, prolonged weak consumer demand, political instability, public health crises or other changes that may affect the principal markets, trade channels, and industrial segments in which the Company conducts its business. Public health crises, including epidemics or pandemics, may affect the principal markets, trade channels, and industrial segments in which the Company conducts its business. For example, in December 2019, a novel strain of coronavirus, SARS-CoAV-2, was identified in Wuhan, China. Since then, SARS-CoV-2, and the resulting disease, COVID-19, has spread to most countries and all 50 states within the United States. The COVID-19 pandemic has caused a significant disruption to global financial markets and supply chains. Pandemics or disease outbreaks such as the COVID-19 pandemic have impacted and are likely to continue to impact our ability to obtain supplies and increase commodity costs. We may be adversely affected if government authorities: impose restrictions on public gatherings, human interactions, operations or manufacturing, or mandatory closures; seek voluntary closures; restrict hours of operations or impose curfews; restrict the import or export of products; or if suppliers issue mass recalls of products. Additional regulation or requirements with respect to the compensation of our employees could also have an adverse effect on our business. Even if such measures are not implemented and a virus or other disease does not spread significantly within a specific area, the perceived risk of infection or health risk in such area may adversely affect our business, liquidity, financial condition, and results of operations.

Even though we have been deemed an “essential business” during this COVID-19 pandemic and have been allowed to remain in operation, there is no guarantee that in the event of a future pandemic or resurgence of the COVID-19 pandemic that we will receive the same designation. Regardless of our status as an essential business during the COVID-19 pandemic, we expect our operations will be disrupted if employees are suspected of having COVID-19 or other illnesses, since this requires us to quarantine some or all such employees and potentially close and disinfect our facility. If a significant percentage of our workforce is unable to work, including because of illness or travel or government restrictions, like quarantine requirements, in connection with pandemics or disease outbreaks, our operations may be negatively impacted, potentially materially adversely affecting our business, liquidity, financial condition, or results of operations.

The COVID-19 pandemic and mitigation measures have also had an adverse impact on global economic conditions, which have had certain adverse effects on our business and financial condition, including specific sales channels, construction costs, supply chain, and difficulties experienced by our partners and employees. Our sales and operating results may be affected by uncertain or changing economic and market conditions arising in connection with and in response to the COVID-19 pandemic, including prolonged periods of high unemployment, inflation, deflation, prolonged weak consumer demand, a decrease in consumer discretionary spending, political instability, or other changes. The significance of the operational and financial impact to us will depend on how long and widespread the disruptions caused by the COVID-19 pandemic, and the corresponding response to contain the virus and treat those affected by it, prove to be.

We do not yet know the full extent of potential delays or impacts on our business, operations, or the global economy as a whole. While there have recently been vaccines developed and administered, and the spread of COVID-19 may eventually be contained or mitigated, we cannot predict the timing of the vaccine roll-out globally or the efficacy of such vaccines, and we do not yet know how customers will operate in a post COVID-19 environment. In addition, new strains and variants of the virus have caused a resurgence and an increase in reported infection rates, particularly in areas with lower vaccination rates, which may impact the general economic recovery. There is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the global economy will recover, either of which could seriously harm our business fully recover. The ultimate impact of the COVID-19 pandemic or a similar health epidemic on our business, operations, or the global economy as a whole remains highly uncertain.

While we have developed and continue to develop plans to help mitigate the potential negative impact of the COVID-19 pandemic, these efforts may not be effective, and any protracted economic downturn will likely limit the effectiveness of our efforts. Accordingly, it is not possible for us to predict the duration and extent to which this will affect our business at this time.

Risks Related to Common Stock

We are a “smaller reporting company” and have elected to comply with certain reduced reporting and disclosure requirements which could make our common stock less attractive to investors.

We are a “smaller reporting company,” as defined in the Regulation S-K of the Securities Act of 1933, as amended, which allows us to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, and (2) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Our independent registered public accounting firm is not be required to formally attest to the effectiveness of our internal control over financial reporting until we are no longer a “smaller reporting company”. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal controls in the future.

Investors may find our common stock less attractive as a result of our election to utilize these exemptions, which could result in a less active trading market for our common stock and/or the market price of our common stock may be more volatile.

32

We do not intend to pay cash dividends to our stockholders for the foreseeable future, so you may not receive any return on your investment in us prior to selling your interest.

We have never paid any dividends to our common stockholders and do not foresee doing so as a public company. We currently intend to retain any future earnings for funding growth and, therefore, do not expect to pay any cash dividends in the foreseeable future. If we determine that we will pay cash dividends to the holders of our common stock, we cannot assure that such cash dividends will be paid on a regular basis. The success of an investment in the Company will likely depend entirely upon any future appreciation. As a result, an investor will not receive any return on their investment prior to selling their shares in the Company and, for the other reasons discussed in this “Risk Factors” section, an investor may not receive any return on their investment even when they sell their shares in the Company.

The continued outbreak of the novel coronavirus (COVID-19) could negatively impact our business operations, including the conduct and cost of our ongoing clinical trials, and our future capital-raising efforts.

In light of the uncertain and rapidly evolving situation relating to the spread of the novel coronavirus (COVID-19), this pandemic could pose a risk to our business. The extent to which the coronavirus may impact our business operations will depend on future developments, which are highly uncertain and cannot be predicted at this time. We intend to continue to monitor the situation and may adjust our current business plans as more information and guidance become available. The impact of the coronavirus on capital markets may affect the availability, amount and type of financing.

Our business, financial condition and operations has been and may be in the future, materially adversely affected by the COVID-19 pandemic or other public health crises.

The COVID-19 pandemic, and the resulting restrictions intended to slow the spread of COVID-19, including stay-at-home orders, business shutdowns and other restrictions, has and may continue to adversely affect our business in a number of ways. To respond to the demands of managing COVID-19 and the resulting economic uncertainties, healthcare organizations may be forced to adjust spending priorities by increased spending related to COVID-19, which may have a significant effect on the demand and available budget for our products and related services. The financial strains on healthcare systems may also lead to an increased risk of delays in customer payments. In addition, a recession resulting from the spread of COVID-19 could materially affect our business, especially if a recession results in higher unemployment causing potential loss of access to health insurance. Our ability to generate sales may be further disrupted by the inability to obtain commercial supplies of raw materials and other manufacturing supplies due to the continued spread of COVID -19. A decline in operating results has limited and could further limit our generation of capital resources and cause financial stress if we are unable to increase revenues or adjust our costs appropriately to changes in revenue. We believe that COVID-19’s adverse impact on our operating results, cash flows and financial condition will be primarily driven by the severity and duration of the pandemic and its impact on the U.S. and global economy.

In addition to adversely impacting demand for our products, COVID-19 or other public health crises could have an adverse impact on our manufacturing capacity, supply chains, and distribution systems as we and other businesses and governments take preventative and precautionary measures designed to slow the spread of COVID-19. We could experience other negative impacts of COVID-19 relating to lack of availability of our key personnel or temporary closures of our office or the facilities of our suppliers or third-party service providers.

The future progression of the COVID-19 pandemic and its resulting impacts on our customers, sales activity, supply chain and distribution networks are uncertain at this time. However, the foregoing and other disruptions as a result of COVID-19 could have a material adverse effect on our business, operating results and financial condition, especially to the extent these impacts persist or exacerbate over an extended period of time.

Our stock price may be volatile, and you may not be able to resell your shares at or above the purchase price.

Although our common stock is registered under the Exchange Act, and our stock is traded on the over-the-counter on the OTC Bulletin Board, an active trading market for the securities does not yet exist and may not exist or be sustained in the future. The OTC Bulletin Board is an over-the-counter market that provides significantly less liquidity than the Nasdaq Stock Market. Quotes for stocks included on the OTC Bulletin Board are not listed in the financial sections of newspapers as are those for the Nasdaq Stock Market. Therefore, prices for securities traded solely on the OTC Bulletin Board may be difficult to obtain and holders of common stock may be unable to resell their securities at or near their original offering price or at any price.

There is no assurance that an established public trading market for our common stock will ultimately develop, and if it does develop, that it will be sustainable, which would adversely affect the ability of our investors to sell their shares of common stock in the public market.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

The market price of our common stock is volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

· our ability to execute our business plan;

· changes in our industry;

· competitive pricing pressures and other competitive developments;

· our ability to obtain working capital financing;

33

· additions or departures of key personnel and management;

· sales of our common stock in financing transactions;

· operating results that fall below expectations;

· regulatory developments;

· economic and other external factors;

· period-to-period fluctuations in our financial results;

· the public’s response to press releases or other public announcements by us or third parties, including filings with the SEC;

· changes in financial estimates or ratings by any securities analysts who follow our common stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our common stock;

· the development and sustainability of an active trading market for our common stock; and

· any future sales of our common stock by our officers, directors and significant stockholders.

Future sales and issuances of our common stock or rights to purchase common stock could result in additional dilution of the percentage ownership of our stockholders and could cause our share price to fall.

We expect that significant additional capital will be needed in the future to continue our planned operations, including expanding research and development, funding clinical trials, purchasing of capital equipment, hiring new personnel, commercializing, and continuing activities as an operating public company. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.

Our common stock is quoted on the over-the-counter market, which subjects us to the SEC’s penny stock rules and may decrease the liquidity of our common stock.

Our common stock is traded over-the-counter on the OTC Bulletin Board. Over-the-counter markets are generally considered to be less efficient than, and not as broad as, a stock exchange. There may be a limited market for our stock since it is quoted on the OTC Bulletin Board, and trading in our stock may become more difficult and our share price could decrease. Specifically, you may not be able to resell your shares of common stock at or above the price you paid for such shares or at all.

In addition, our ability to raise additional capital may be impaired because of the less liquid nature of the over-the-counter markets. While we cannot guarantee that we would be able to complete an equity financing on acceptable terms, or at all, we believe that dilution from any equity financing while our shares are quoted on an over-the-counter market would likely be substantially greater than if we were to complete a financing while our common stock is traded on a national securities exchange.

Our common stock is also subject to penny stock rules, which impose additional sales practice requirements on broker-dealers who sell our common stock. The SEC generally defines “penny stock” as an equity security that has a market price of less than $5.00 per share, subject to certain exceptions. The ability of broker-dealers to sell our common stock and the ability of our stockholders to sell their shares in the secondary market will be limited and, as a result, the market liquidity for our common stock will likely be adversely affected. We cannot assure you that trading in our securities will not be subject to these or other regulations in the future.

Further, recently some discount and major brokerage firms have implemented new rules regarding the deposit of penny stock shares into new or existing accounts where such stocks do not meet minimum price and volume requirements. Such rules may make it difficult or even prevent stockholders from timely selling their shares through such brokerage firms unless the shares meet such minimum requirements.

34

Our management is required to devote substantial time to compliance initiatives.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a newly formed entity. The Sarbanes-Oxley Act and rules implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, these rules and regulations increase our compliance costs and make certain activities more time consuming and costly. As a public company, these rules and regulations may make it more difficult and expensive for us to maintain our directors and officer’s liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers, and to maintain insurance at reasonable rates, or at all.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2. PROPERTIES

We do not own any real property. Our principal executive offices and manufacturing facility are located at 1620 Beacon Place, Oxnard, California 93033. The offices and manufacturing facility consist of approximately 25,000 square feet and we are currently on a month-to-month lease. Rent expense was approximately $0.3 and $0.3 million for the years ended December 31, 2021 and 2020, respectively. The office of Sera Labs is located at 5805 Sepulveda Blvd #801, Sherman Oaks, CA 91411. The office consists of 3,822 square feet and has 25 months remaining on a 60-month lease. Rent expense for Sera Lab’s office was approximately $0.1 million for the year ended December 31, 2021 and $0.03 million for the year ended December 31, 2020.

We believe that our facilities are generally in good condition and suitable to carry on our business. We also believe that, if required, suitable alternative or additional space will be available to us on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Other than as disclosed below, we currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our results of operations, financial position or cash flows. Regardless of the outcome, any litigation could have an adverse impact on us due to defense and settlement costs, diversion of management resources and other factors.

On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million was paid to the Company’s attorneys.

On March 26, 2021, a vendor that the Company utilized for consulting services relating to various quality, compliance and regulatory filed a complaint against the Company for breach of contract. On May 18, 2021, the Company responded to the compliant denying their claims and also filed a cross complaint against this vendor for breach of contract by failing to provide deliverables as required by the contract. On February 3, 2022, the Company and the vendor entered into a Settlement and Mutual Release Agreement where the Company has agreed to pay $0.03 million as final settlement of amounts due to the vendor and have mutual agreed to release all claims relating to, arising out of, or connected with or related to the complaints filed. 

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

35

PART II

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

Market Information

Our common stock is quoted on the OTCQB under the symbol “CURR”. Only a limited market exists for our securities. There is no assurance that a regular trading market will develop, or if developed, that it will be sustained.

Holders of Record

At March 28 2022, there were approximately 135 stockholders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

Dividend Policy

To date, we have paid no dividends on our common stock and do not expect to pay cash dividends in the foreseeable future. We plan to retain all earnings to provide funds for the operations of our company. In the future, our Board of Directors will decide whether to declare and pay dividends based upon our earnings, financial condition, capital requirements, and other factors that our Board of Directors may consider relevant. We are not under any contractual restriction as to present or future ability to pay dividends, however, the terms of any financing arrangements that we may enter into may restrict our ability to pay any dividends.

Unregistered Sales of Equity Securities

Except as previously disclosed in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, we had no additional sales of unregistered equity securities during fiscal year 2021.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Purchases of Equity Securities by Affiliated Purchasers(1)
Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs(2)		Maximum number of shares that may yet be purchased under the plans or programs
5/21/2021		12,400	$	0.72		N/A		N/A
5/25/2021		1,000		0.70		N/A		N/A
5/27/2021		10,000		0.69		N/A		N/A
Total		23,400	$	0.71		N/A		N/A

(1)	The table reflects open market purchases of our common stock by Robert Davidson, our Chief Executive Officer, Nancy Duitch, Chief Strategic Officer and Jonathan Berlent, former Chief Business Officer. We did not repurchase any shares of our common stock during the period reflected in the table.
(2)	No purchases reflected in the table were made pursuant to a publicly announced plan or program.

Performance Graph

As a smaller reporting company, we are not required to provide the performance graph required by Item 201(e) of Regulation S-K.

ITEM 6. [RESERVED]

36

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for the two-year period ended December 31, 2021 and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations. In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the year ended December 31, 2021, as compared to the year ended December 31, 2020. This discussion should be read in conjunction with our consolidated financial statements for the two-year period ended December 31, 2021 and related notes included in Part II, Item 8 of this annual report on Form 10-K.

Cautionary Notice Regarding Forward Looking Statements

The information contained in this Item 7 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. This filing contains a number of forward-looking statements that reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, clinical developments, which management expects or anticipates will or may occur in the future, including statements relating to our technology, market expectations, future revenues, financing alternatives, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words, “believe,” “expect,” intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but are not exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligations to revise these forward-looking statements to reflect any future events or circumstances.

Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (particularly in “Item 1A – Risk Factors”) and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences could include, but are not limited to, the risks to be discussed in this Annual Report on Form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors, which may affect our business. We undertake no obligations to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For additional information regarding forward-looking statements, see Item 1 – Our Business – “Forward-Looking Statements.”

Corporate Overview

Overview

We are a biopharmaceutical company focusing the development and manufacturing of drug formulation and drug delivery technologies in novel dosage forms to improve drug safety, efficacy and patient adherence. Our mission to improve lives by redefining how medications are delivered and experienced. Our business strategy is to develop products using our proprietary technology, license the product rights to partners responsible for clinical development, regulatory approval, marketing and sales and retain exclusive manufacturing rights and market, sell and distribute branded health, wellness, and beauty products through Sera Labs. We operate in a 25,000 square foot cGMP manufacturing plant in Oxnard, CA.

We were incorporated in the State of Nevada on May 15, 2014. The Company was formerly named Makkanotti Group Corp., which was formed to engage in the business of manufacturing food paper bags in Nicosia, Cyprus. On November 7, 2016, the Board of Directors and the majority stockholder of the then outstanding shares of our common stock executed a written consent to change our name from Makkanotti Group Corp. to CURE Pharmaceutical Holding Corp. The Certificate of Amendment to the Articles of Incorporation was filed with the State of Nevada on November 30, 2016. On September 27, 2019, we reincorporated from the State of Nevada to the State of Delaware.

37

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

As a result of the Share Exchange, CURE Pharmaceutical became a wholly owned subsidiary of the Company, and the CURE Pharm Shareholders and CURE Pharm Noteholders became our controlling shareholders owning, at such time, approximately 65% of our issued and outstanding common stock. For accounting purposes, CURE Pharmaceutical was the surviving entity. As a result of the recapitalization and change in control, CURE Pharmaceutical was deemed to be the accounting acquirer in accordance with ASC 805, Business Combinations.

On May 14, 2019, the Company, and Merger Sub, a Delaware corporation and wholly owned subsidiary of the Company, completed the transactions contemplated in the Merger Agreement with CHI, a Delaware corporation. As agreed in the Merger Agreement and pursuant to the Merger, CHI became a wholly-owned subsidiary of the Company and the stockholders of CHI received shares of the Company’s common stock, par value $0.001 per share in exchange for all of the issued and outstanding shares of CHI.

On October 2, 2020, the Company completed its acquisition of Sera Labs, a Delaware corporation pursuant to the Sera Labs Merger Agreement, by and among the Company, Sera Labs Merger Sub, a Delaware corporation and a wholly owned subsidiary of the Company, Sera Labs and Mrs. Nancy Duitch, in her capacity as the security holder’s representative regarding the Sera Labs Merger.

Nature of Business

We are a biopharmaceutical company focusing on the development and manufacturing of drug formulation and drug delivery technologies in novel dosage forms to improve drug safety, efficacy and patient adherence. Our mission is to improve lives by redefining how medications are delivered and experienced. Our primary business model is to develop wellness and drug products using our proprietary technology, which development may include preclinical and clinical studies and regulatory approval, and grant product rights to partners responsible for marketing, sales and distribution, while retaining exclusive manufacturing rights and to market, sell and distribute branded health, wellness, and beauty products through Sera Labs.

Our technology platform includes oral dissolving film (“OTF”), and encapsulation systems (“microCURE”) compatible with OTF, chews, oral solutions, topical and transdermal dose forms. We apply our technology to pharmaceutical drugs and dietary supplements for the wellness market. OTF products are about the size of a postage stamp and composed of excipients such as polymers, stabilizers, lipids and surfactants, which are all generally recognized as safe. They can be designed to deliver active ingredients to the gastrointestinal, or GI, tract when placed on the tongue and swallowed, or directly to the blood stream when placed under the tongue (sublingual) or on the inner lining of the cheek and lip (buccal).

We sell multiple commercial wellness products under our distribution partners’ brands. We are developing a 50,000IU, once per week, Vitamin D3 OTF for oral administration to be distributed by Meroven Pharmaceuticals in the United States and the MENA region. Our pharmaceutical drug program includes:

CUREfilm Blue  

A 25mg and 50 mg sildenafil OTF for the treatment of erectile dysfunction. We have completed our pre-IND meeting with the U.S. Food and Drug Administration (“FDA”), confirming a 505(b)(2) regulatory path.  

 CUREfilm Canna

We are developing several cannabinoid products with optimized pharmacokinetic profiles using microCURE and CUREfilm technology.

CUREfilm Anti-Viral   We are developing an orally bio-available anti-viral of an existing therapeutic leveraging existing pre-clinical/clinical safety and toxicity data.

CUREfilm Central Nervous System (CNS)

In the area of CNS indications, we are developing a novel dosage form of a difficult to treat disease states utilizing our proprietary CUREfilm dosage form. These could include but are not limited to mental health disorders such as depression, PTSD, addiction disorders, obsessive compulsive disorder, and anxiety. 

38

Impact of COVID-19

Our financial results and operations for the fiscal year ended December 31, 2021 were not significantly impacted by the COVID-19 pandemic. The measures we have taken to ensure the availability and functioning of our critical infrastructure, and to promote the safety and security of our employees remain in place. In accordance with public and private sector policies and initiatives to reduce the transmission of COVID-19, we have imposed travel restrictions, adopted policies aimed at promoting social distancing, and implemented work-from-home arrangements for employees where practicable. These measures and our compliance with local and national guidelines aimed at containing the virus could impact our operations and disrupt our business. Currently, our single operating facility is operational, and no reduction in our work force has taken place.

Results of Operations

Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020

Revenue

Revenues for the year ended December 31, 2021 were $6.6 million as compared to $2.1 million for the year ended December 31, 2020. The increase in revenue included approximately $5.0 million of revenue attributed to the Sera Labs acquisition on October 2, 2020 as we were able to recognize a full year’s worth of revenue in fiscal year ending 2021 compared to the fiscal year ending 2020. However, this increase was offset by a decrease in CURE Pharmaceutical product sales mainly due to the decrease in one of our larger customers of approximately $0.3 million.

Cost of Goods Sold

Cost of goods sold was $2.2 million for the year ended December 31, 2021 compared to $1.1 million, for the year ended December 31, 2020. Cost of goods sold increased by $1.1 million for the year ended December 31, 2021 compared to the same period in 2020, which was due to (i) the acquisition of Sera Labs on October 2, 2020, which added additional $1.7 million of cost of goods sold and (ii) decrease in revenues from CURE Pharmaceutical which was mainly due to the decrease in one of our larger customers.

Research and Development Expenses

Research and development expenses were $2.4 million for the year ended December 31, 2021, as compared to $2.8 million for the year ended December 31, 2020. Research and development expenses decreased by $0.4 million, compared to the year ended December 31, 2020. The decrease in research and development expenses is mainly due to the Company not incurring the same third-party contractor expenses for our CUREfilm Blue product during the year ended December 31, 2021 compared to the December 31, 2020. During the year ended December 31, 2020, we engaged a third-party contractor to assist in the development in our CUREfilm Blue that will take us into our pre-clinical trials, which all services ended in 2020. However, the decrease in spend with this third-party contractor was offset with continuing the development various other OTF and other delivery forms during the year ended December 31, 2021 compared to the year ended December 31, 2020.

Selling, General and Administrative Expenses

Our expenses for the year ended December 31, 2021 are summarized as follows in comparison to our expenses for the year ended December 31, 2020.

	Year Ended
	December 31, 2021		December 31, 2020
(in thousands)
Consulting	$	587	$	948
Salaries and wages		2,702		1,420
Selling, general and administrative		10,396		3,805
Professional and investor relations		1,462		2,352
Noncash compensation		3,733		2,840
Total operating expenses	$	18,880	$	11,365

39

Consulting

Consulting expenses decreased by approximately $0.4 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The decrease was due to the Company decreasing the number of consultants used during the year ended December 31, 2021 compared to the same period in 2020. In addition, a majority of the expenses related to noncash consulting services where the Company issued common stock shares in exchange for services performed over a period of time. The Company did not issue as many common stock shares in exchange for services during the year ended December 31, 2021.

Salaries and wages

Salaries and wages expense increased by approximately $1.3 million during the year ended December 31, 2021 as compared to the year ended December 31, 2020. The increase was primarily due to the Company adding approximately $1.5 million of salaries and wages from the acquisition of Sera Labs on October 2, 2020, which was a full year’s worth of salaries and wages during the year ended December 31, 2021 compared to only approximately 3 months of salaries and wages during the year ended December 31, 2020.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expense increased by approximately $6.6 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. This was mainly due to the Company recognizing a full year’s worth of SG&A expenses from Sera Labs during the year ended December 31, 2021 compared to only 3 months of SG&A expenses from Sera Labs during the year ended December 31, 2020. The main factors for the increase in SG&A expenses incurred by Sera Labs during the year ended December 31, 2021 compared to the same period in 2020 are (i) marketing and advertising expenses increased by approximately $3.1 million, (ii) increase in amortization expenses of $2.3 million and (iii) increase in brand ambassador expenses of approximately $1.0 million.

Professional and Investor Relations

Professional and investor relations expenses decreased by approximately $0.9 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The decrease was a result of the Company incurring less legal expenses during the year ended December 31, 2021 compared to the same period in 2020. The decrease in legal expenses was due the following factors occurring during the year ended December 31, 2020 and not during the year ended December 31, 2021: (i) incurring legal costs for the Sera Labs acquisition and (ii) the CHI settlement for their earnout shares.

Non-cash Compensation

Non-cash compensation expense increased by approximately $0.9 million for the year ended December 31, 2021, as compared to the year ended December 31, 2020. The increase is mainly due to the Company recording the fair value of vested stock options, restricted stock and restricted stock units issued from our 2017 Equity Incentive Plan during the year ended December 31, 2021. The fair values of the vested stock options, restricted stock and restricted stock units during the year ended 2022 were more compared to the fair values of the vested stock options, restricted stock and restricted stock units in the same period in 2020.

40

Change in Fair Value Contingent Stock Consideration

Change in fair value stock consideration decreased by approximately $7.5 million for the year ended December 31, 2021 as compared to the same time period in 2020. The decrease was primarily due to the settlement with CHI on June 5, 2020, which resulted in a significant decrease in the change in fair value of contingent stock consideration during the year ended December 31, 2021 compared to the same period in 2020. In addition, during the year ended December 31, 2021, the fair value of the contingent shares to be issued to Sera Labs also decreased mainly due to the decrease in the stock price during the year ended December 31, 2021.

Other Expense

	Year Ended
(in thousands)	December 31, 2021			December 31, 2020
Interest income	$	62		$	37
Settlement income		2,434			-
Gain on extinguishment of debt		741			-
Gain from settlement of payables		-			61
Loss on sale of property, plant and equipment		(41	)		-
Change in fair value of derivative liability		-			91
Change in fair value of convertible promissory notes		(393	)		(9,380	)
Reserve on investment		(350	)		-
Interest expense		(554	)		(2,472	)
Total other income (expense)	$	1,899		$	(11,663	)

Other income/(expense) for the year ended December 31, 2021 increased approximately $13.6 million, as compared to the year ended December 31, 2020. The increase is due to (i) recording the change in fair value of the Series A and Series B Notes at issuance during the year ended December 31, 2021, on the date of the partial conversion of the Series A Note and on December 31, 2020, and (ii) recording the debt discounts, transaction costs and fair value of placement agent warrants issued in connection to the Series A and Series B Notes as interest expense during the year ended December 31, 2020, (iii) a gain on extinguishment of the PPP loan that was forgiven during the year ended December 31, 2021, (iv) reserve on investment relating to Releaf Europe b.v. of approximately $0.4 million during the year ended December 31, 2021 and (v) a gain on settlement of approximately $2.4 million relating to the settlement reached between the Company and Canopy during the year ended December 31, 2021.

Liquidity & Capital Resources

Working Capital Deficit

(in thousands)	December 31, 2021			December 31, 2020
Current assets	$	1,781		$	3,850
Current liabilities		(24,261	)		(14,467	)
Working capital (deficiency)	$	(22,480	)	$	(10,617	)

Working capital deficit as of December 31, 2021 was approximately $22.5 million, as compared to a working capital deficit of approximately $10.6 million as of December 31, 2020. As of December 31, 2021, current assets were approximately $1.8 million, comprised primarily of (i) cash of approximately $0.02 million, (ii) accounts receivable, net of approximately $0.4 million, (iii) inventory, net of approximately $0.9 million and (iv) prepaid expenses and other assets of approximately $0.5 million. As of December 31, 2020, current assets were approximately $3.9 million, comprised primarily of (i) cash of approximately $1.7 million, (ii) accounts receivable, net of approximately $0.2 million, (iii) inventory, net of approximately $0.5 million and (iv) prepaid expenses and other assets of approximately $1.5 million.

As of December 31, 2021, current liabilities were approximately $24.3 million, comprised primarily of (i) approximately $13.6 million in loans, notes, related party payables, convertible notes payable and fair value of convertible promissory notes, (ii) approximately $2.8 million in accounts payable; (iii) approximately $0.5 million in contract liabilities, (iv) approximately $3.8 million in accrued expenses, (v) approximately $0.1 million of finance and operating lease payables and (vi) contingent share considerations of approximately $1.4 million. Comparatively, as of December 31, 2020, current liabilities were approximately $14.5 million, comprised primarily of (i) approximately $9.9 million in loans, notes and convertible notes payable, (ii) approximately $2.1 million in accounts payable; (iii) approximately $1.0 million in contract liabilities, (iv) approximately $1.3 million in accrued expenses, payroll liabilities and sales tax payable and (v) approximately $0.1 million of finance and operating lease payables.

41

Cash Flows and liquidity

	Year Ended
	December 31, 2021			December 31, 2020
(in thousands)
Net cash used in operating activities	$	(4,315	)	$	(9,722	)
Net cash used in investing activities		(175	)		(131	)
Net cash provided by financing activities		2,781			7,482
Decrease in cash	$	(1,709	)	$	(2,371	)

Net cash used in Operating Activities

Net cash used in operating activities was approximately $4.3 million during the year ended December 31, 2021. This was primarily due to the net loss of approximately $12.8 million, including changes from (i) gain from extinguishment of debt of approximately $0.7, (ii) stock based compensation of approximately $0.8 million, (iii) change in fair value of convertible promissory notes of approximately $0.4 million, (iv) the fair value of vested stock options, restricted stocks and restricted stock units of approximately $3.1 million, (v) change in fair value of contingent share consideration of approximately $1.8 million, (vi) reserve on investment of approximately $0.4 million, (vii) depreciation and amortization of approximately $3.6 million, (viii) a decrease in prepaid expenses of approximately $0.9 million, (ix) an increase in accounts payable of approximately $0.7 million, (x) an increase in accrued expenses of approximately $2.8 million and (xi) an decrease in contract liabilities of approximately $0.5 million.

Net cash used in operating activities was approximately $9.7 million during the year ended December 31, 2020. This was primarily due to the net loss of approximately $30.6 million, partially offset by (i) the amortization of the debt discount of approximately $1.5 million, (ii) stock based compensation of approximately $0.6 million, (iii) change in fair value of convertible promissory notes of approximately $9.4 million, (iv) the fair value of vested stock options, restricted stocks and restricted stock units of approximately $2.8 million, (v) change in fair value of contingent share consideration of approximately $5.8 million, (vi) an increase in prepaid expenses of approximately $0.3 million, (vii) an increase in accounts payable of approximately $0.5 million, (viii) an increase in accrued expenses of approximately $0.5 million and (ix) an decrease in contract liabilities of approximately $1.4 million.

Net cash used in Investing Activities

Net cash used from investing activities of approximately of $0.2 million during the year ended December 31, 2021 was due to (i) collection of note receivable of approximately $0.2 million, which was offset by (i) the purchase of property and equipment for approximately $0.04 million; (ii) purchase of note receivable of approximately $0.2 million, (iii) purchase of intangible assets of $0.1 million and (iv) investment of $0.1 million.

Net cash used from investing activities of approximately of $0.1 million during the year ended December 31, 2020 was due to (i) cash acquired from the acquisition of Sera Labs of approximately of $1.4 million and (ii) collection of note receivable of approximately $1.0 million, which was offset by (i) the purchase of property and equipment for approximately $0.7 million; (ii) purchase of note receivable of approximately $1.5 million and (iii) investment of $0.3 million.

Net cash provided by Financing Activities

Net cash provided by financing activities of approximately $2.8 million during the year ended December 31, 2021 was primarily due to (i) approximately $3.1 million in proceeds from issuance of notes, related party payable and loans payable and (ii) approximately $0.3 million for repayment of loans payables.

Net cash provided by financing activities of approximately $7.5 million during the year ended December 31, 2020 was primarily due to (i) approximately $5.0 million received from the issuances of new convertible notes payable, (ii) approximately $2.6 million in proceeds from issuance of notes and loans payable, (iii) approximately $1.4 million from exercise of warrants, and (iv) approximately $1.5 million for repayment of loan and note payables.

42

We may need to raise additional operating capital in calendar year 2022 in order to maintain our operations and to realize our business plan. Without additional sources of cash and/or the deferral, reduction, or elimination of significant planned expenditures, we may not have the cash resources to continue as a going concern thereafter.

Going Concern

The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2021, we had an accumulated deficit of approximately $94.4 million and a working capital deficit of approximately $22.5 million. Our operating activities consume the majority of our cash resources. We anticipate that we will continue to incur operating losses and negative cash flows from operations, at least into the near future, as we execute our commercialization and development plans and strategic and business development initiatives.

For the year ended December 31, 2021, the auditors’ opinion contained a going concern paragraph, which stated that the Company had an accumulated deficit, working deficit and net loss. 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.

We have an accumulated deficit balance as of December 31, 2021. Our ability to continue as a going concern is dependent on our obtaining adequate capital to fund operating losses until we establish a sufficient revenue stream to consistently generate operating profits. We are continually analyzing our current costs and are attempting to make additional cost reductions where possible. We expect that we will continue to generate losses from operations throughout 2022.

Historically, we have had operating losses and negative cash flows from operations which cast significant doubt upon our ability to continue as a going concern. As such, we have needed to raise capital in order to fund its operations. This need may be adversely impacted by uncertain market conditions and changes in the regulatory environment. We have previously funded, and intend to continue funding, our losses primarily through the issuance of common stock and/or promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations. We believe the funds available through these potential financings will be sufficient to meet the Company’s working capital requirements during the coming year. If we are unable to raise sufficient additional funds. We will have to develop and implement a plan to extend payables, reduce expenditures, or scale back our business plan until sufficient additional capital is raised to support further operations.

Our ability to continue as a going concern is dependent upon our ability to successfully accomplish the plans described in the preceding paragraph and eventually 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 we are unable to continue as a going concern.

Future Financing

We will require additional funds to implement the growth strategy for our business. As mentioned above, we intend to continue funding our losses primarily through the issuance of common stock and/or promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations.

Off-Balance Sheet Arrangements

As of December 31, 2021, we did 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.

Contractual Obligations and Commitments

As a “smaller reporting company” as defined in Rule 12(b) of the Exchange Act, we are not required to provide the information required by this item.

Impact of Inflation

                The impact of inflation upon our revenue and loss from operations during the years ended December 31, 2021 and 2020 has not been material to our financial position or results of operations for those years.

43

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”), requires management to make estimates and assumptions that affect the reported amounts in our consolidated financial statements and related notes. Our significant accounting policies are described in Note 2 to our consolidated financial statements included elsewhere in this Report. We have identified below our critical accounting policies and estimates that we believe require the greatest amount of judgment. On an ongoing basis, we evaluate estimates which are subject to significant judgment, including those related to the going concern assessments of our consolidated financial statements, allocation of direct and indirect expenses, useful lives associated with long-lived intangible assets, machinery and equipment, loss contingencies, valuation allowances related to deferred income taxes, and assumptions used to value stock-based awards, debt or other equity instruments. Actual results could differ materially from those estimates. On an ongoing basis, we evaluate our estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. To the extent that there are material differences between our estimates and our actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe the assumptions and estimates associated with the following have the greatest potential impact on our consolidated financial statements.

Going concern assessment

With the implementation of FASB’s standard on going concern, ASU No. 2014-15, we assess going concern uncertainty in our consolidated financial statements to determine if we have sufficient cash and cash equivalents on hand and working capital, including available loans or lines of credit, if any, to operate for a period of at least one year from the date our consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to us, we consider various scenarios, forecasts, projections, and estimates, and we make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and our ability to delay or curtail those expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, we make certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent we deem probable those implementations can be achieved and we have the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15.

Business combinations

We account for business combinations, such as the CHI Merger and the Sera Labs Merger, in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, which requires the purchase price to be measured at fair value. When the purchase consideration consists, in part or entirely of our common shares, we calculate the purchase price by determining the fair value, as of the acquisition date, of shares issued in connection with the closing of the acquisition. We recognize estimated fair values of the tangible assets and intangible assets acquired, including in-process research and development (“IPR&D”), and liabilities assumed as of the acquisition date, and we record as goodwill any amount of the fair value of the tangible and intangible assets acquired and liabilities assumed in excess of the purchase price.

Contingent consideration liabilities

ASC 805 requires that contingent consideration be estimated and recorded at fair value as of the acquisition date as part of the total consideration transferred. Contingent consideration is an obligation of the acquirer to transfer additional assets or equity interests to the selling shareholders in the future if certain future events occur or conditions are met, such as the attainment of product development milestones. Contingent consideration also includes additional future payments to selling shareholders based on achievement of components of earnings, such as “earn-out” provisions or percentage of future revenues, including royalties paid to the selling shareholders based on a percentage of revenues generated from CHI and Sera Labs over the contractual period.

The fair value of milestone-based contingent consideration was determined using a scenario analysis valuation method which incorporates our assumptions with respect to the likelihood of achievement of revenue and gross margin percentage milestones, as defined in the Sera Labs Merger Agreement, credit risk, timing of the contingent consideration payments and a risk-adjusted discount rate to estimate the present value of the expected payments, all of which require significant management judgment and assumptions. Since the contingent consideration payments are based on nonfinancial, binary events, management believes the use of the scenario analysis method is appropriate.

The fair value of all contingent consideration after the Sera Labs Merger Date is reassessed by us as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in our consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that we record in our consolidated financial statements. See Note 20 to our consolidated financial statements included elsewhere in this Report.

44

Goodwill and intangible assets

In accordance with ASC 350, Intangibles – Goodwill and Other, in-process research and development projects acquired in a business combination that are not complete as of the acquisition date are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related research and development efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. We consider various factors and risks for potential impairment of IPR&D assets, including the current legal and regulatory environment, uncertainties posed by the ongoing COVID-19 pandemic and the competitive landscape. Adverse clinical trial results, significant delays or inability to scale up, the inability to bring a product or service to market and the introduction or advancement of competitors’ product or services could result in partial or full impairment of the related intangible assets. Consequently, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods. During the period between completion or abandonment, the IPR&D assets will not be amortized but will be tested for impairment on an annual basis and between annual tests if we become aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts.

Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill, similar to IPR&D, is not amortized but is tested for impairment at least annually, or if circumstances indicate its value may no longer be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting our business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. Since October 2020, we operate in two segments, (Cure Pharma Products/Services and The Sera Labs) and considered to be the two reporting units and, therefore, goodwill is tested for impairment at the segment/reporting unit level.

Accounting for warrants

We determine the accounting classification of warrants we issue, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate us to settle the warrants or the underlying shares by paying cash or other assets, and warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet the liability classification under ASC 480-10, we assess the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, we also assess whether the warrants are indexed to our common stock and whether the warrants are classified as equity under ASC 815-40 or other GAAP. After all such assessments, we conclude whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. We do not have any liability classified warrants as of any period presented. See Note 16 to our consolidated financial statements included elsewhere in this Report.

Fair Value Option for Convertible Notes

We have elected the fair value option to account for the Series A and B Notes that were issued on October 30, 2020 and record these at fair value with changes in fair value recorded in the Consolidated Statements of Operations. As a result of applying the fair value option, direct costs and fees related to the Series A and B Notes are recognized in earnings as incurred and not deferred. Values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s and, if applicable, an independent third-party valuation firm’s own assumptions about the assumptions a market participant would use in pricing the asset or liability. We believe accounting for the Series A and B Notes at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility.

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3).

45

Stock-based compensation

We recognize compensation expense related to share-based payments in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for share-based payment awards made to directors and employees based on estimated fair values. We estimate the fair value of employee stock-based payment awards on the grant-date and recognize the resulting fair value over the requisite service period on a straight-line basis. For stock-based awards that vest only upon the attainment of one or more performance goals, compensation cost is recognized if and when we determine that it is probable that the performance condition or conditions will be, or have been, achieved. We utilize the Black-Scholes option pricing model for determining the fair value of stock options. Our determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. For the years ended December 31, 2021 and 2020, we estimated the expected volatility using our own stock price volatility to the extent applicable or a combination of our stock price volatility and the stock price volatility of stock of peer companies, for a period equal to the expected term of the options. The expected term of options granted is based on our own experience and, in part, based upon the “simplified method” provided under Staff Accounting Bulletin, Topic 14, or SAB Topic 14, as necessary. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. Although the fair value of employee stock options is determined in accordance with FASB guidance, the key inputs and assumptions may change as we develop our own company estimates, experience and key inputs including our expected term, and stock price volatility based on the trading history of our stock in the public market. Changes in these subjective assumptions can materially affect the estimated value of equity grants and the stock-based compensation that we record in our consolidated financial statements.

Leases

We account for leases in accordance with ASC 842, Leases. We determine if an arrangement is a lease at inception. Leases are classified as either financing or operating, with classification affecting the pattern of expense recognition in the consolidated statements of operations. Under the available practical expedients for the adoption of ASC 842, we account for the lease and non-lease components as a single lease component. We recognize right-of-use (“ROU”) assets and lease liabilities for leases with terms greater than twelve months in the consolidated balance sheet. ROU assets represent the right to use an underlying asset during the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when it is readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Operating leases are included as operating right-of-use assets and operating lease liabilities, current and long-term, in the consolidated balance sheets. Financing leases are included as finance right-of-use assets and in financing lease liabilities, current and long-term, in the consolidated balance sheets. We disclose the amortization of our ROU assets and operating lease payments as a net amount, “Amortization of right-of-use assets”, on the consolidated statements of cash flows.

On January 1, 2019, the adoption date of ASC 842, and based on the available practical expedients under the standard, we did not reassess any expired or existing contracts, reassess the lease classification for any expired or existing leases and reassess initial direct costs for exiting leases. We also elected not to capitalize leases that have terms of twelve months or less.

The adoption of ASC 842 did not have a material impact to our consolidated financial statements because we did not have any significant operating leases at the time of adoption. During the years ended December 31, 2021 and 2020, we entered into various operating leases and an embedded operating lease in accordance with ASC 842 discussed in Note 23 to the consolidated financial statements included elsewhere in this Report. Our accounting for financing leases (previously referred to as “capital leases”) remained substantially unchanged.

Impairment of long-lived assets

We assess the impairment of long-lived assets, which consists primarily of long-lived intangible assets, machinery and equipment, whenever events or changes in circumstances indicate that such assets might be impaired and the carrying value may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the expected undiscounted future cash flows attributable to the asset are less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded.

Income taxes

We account for income taxes in accordance with ASC 740, Income Taxes, which prescribes the use of the asset and liability method, whereby deferred tax asset or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect. Valuation allowances are established when necessary to reduce deferred tax assets when it is more likely than not that a portion or all of the deferred tax assets will not be realized. Our judgments regarding future taxable income may change over time due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If our assumptions and consequently our estimates change in the future, the valuation allowance may be increased or decreased, which may have a material impact on our statements of operations.

The guidance also prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not sustainable upon examination by taxing authorities. We will recognize accrued interest and penalties, if any, related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties as of the financial statement periods presented herein. We account for uncertain tax positions by assessing all material positions taken in any assessment or challenge by relevant taxing authorities. We are currently unaware of any tax issues under review. See Note 21 to our consolidated financial statements included elsewhere in this Report.

46

Revenue recognition

We followed the revenue recognition standard ASC Topic 606, Revenue from Contracts with Customers (ASC) 606. Pursuant to ASC 606, revenues are recognized when control of services performed is transferred to customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services. ASC 606 provides for a five-step model that includes, (i) identifying the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations, and (v) recognizing revenue when, or as, an entity satisfies a performance obligation.

Product revenue

In the fourth quarter of 2020, we acquired The Sera Labs products. In determining whether all of the revenue recognition criteria (i) through (v) above are met with respect to CBD and Personal Protection Equipment product order is considered a single performance obligation and is generally considered complete when the product result is delivered or made available to the customer and, as such, there are shipping and/or handling fees incurred by us or billed to customers. Although we bill a list price for all products ordered and completed for all payer types, we recognize realized revenue when all the revenue recognition criteria have been met. These contracts do not have variable price considerations. For all payers, we must take into account the uncertainty of receiving payment, or being subject to claims for refund, from payers with whom we do not have a sufficient payment collection history or contractual reimbursement agreements. Historically, we have de minims claims for returns.

Pharma Products and Services revenue

Cure Pharmaceutical’s formulation and product development income includes services for the development of OTF products utilizing our CureFilm Technology. Our development contracts have up to four phases. Revenue is recognized based on progress toward completion of the performance obligation in each phase. The method to measure progress toward completion requires judgment and is based on the nature of the products or services to be provided. We generally use the input method to measure progress for our contracts because it best depicts the transfer of assets to the customer, which occurs as we incur costs for the contracts. Under the cost-to-cost measure of progress, the progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenue is recorded proportionally as costs are incurred. Costs to fulfill these obligations mainly include materials, labor, supplies and consultants. We generally identify each sale of our pharma service offering as a single performance obligation.

We establish an allowance for doubtful accounts based on the evaluation of the collectability of accounts receivables after considering a variety of factors, including the length of time receivables are past due, significant events that may impair the customer’s ability to pay, such as a bankruptcy filing or deterioration in the customer’s operating results or financial position, and historical experience. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. We continuously monitor collections and payments from customers and maintain a provision for estimated credit losses and uncollectible accounts, if any, based upon historical experience and any specific customer collection issues that have been identified. Amounts determined to be uncollectible are written off against the allowance for doubtful accounts. As of December 31, 2021, we have $0.08 million recorded allowance for doubtful accounts on accounts receivables.

New and Recently Adopted Accounting Pronouncements

Information on Recently Issued Accounting Standards that could potentially impact the Company’s consolidated financial statements and related disclosures is incorporated by reference to Part II, Item 8, Note 2, “Summary of Significant Accounting Policies”, included in this report.

47

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information for this Item is not required as we are a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by Item 8 is included following the “Index to Financial Statements” on page F-1 contained in this Annual Report on Form 10-K.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

48

Our management, with the participation of our chief executive officer and chief financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our chief executive officer and chief financial officer concluded that, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below.

Management’s Annual Report on Internal Control Over Financial Reporting

Management of our Company and its consolidated subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of its chief executive and chief financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) 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 GAAP. 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 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. In addition, 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.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting because the attestation report requirement has been removed for “smaller reporting companies” under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Material Weakness in Internal Control over Financial Reporting

Management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, carried out an evaluation of the effectiveness of our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) as of December 31, 2021, the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, the Company’s Principal Executive Officer and Principal Financial Officer have concluded that as of December 31, 2021, the Company’s internal control over financial report is not effective as a result of the identified material weakness described herein.

Management’s report on internal control over financial reporting was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit a smaller reporting company to provide only Management’s report in this annual report, which may increase the risk that weaknesses or deficiencies in our internal control over financial reporting go undetected.

A material weakness, as defined in the standards established by the Sarbanes-Oxley Act, is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The ineffectiveness of our internal control over financial reporting was due to the following material weakness which is indicative of many small companies with small number of staff:

(i) inadequate segregation of duties consistent with control objectives.

49

Management’s Plan to Remediate the 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 separation of duties as a material weakness during its assessment of internal controls over financial reporting as of December 31, 2021. Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned include:

· re-design of our accounting processes and control procedures; and

· identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company.

During the fiscal year ended December 31, 2021, we continued to execute upon our planned remediation actions which are all intended to strengthen our overall control environment. During the second quarter of fiscal year 2019 management hired a Chief Financial Officer. Our Chief Financial Officer is an experienced C-Level executive. During the third quarter of fiscal year 2019 we hired a new Controller with expertise in functional areas of finance and accounting. During the first quarter of fiscal year 2021, we hired a senior accountant with over 15 years in various accounting positions. We believe the above additions have improved the segregation of duties as well as added to the overall oversight of internal controls.

Additionally, Management has engaged a professional services firm with expertise in internal controls. In order to remediate the material weaknesses described above, management has initiated compensating controls in the near term and are enhancing and revising the design of existing controls and procedures to properly account for significant and unusual transactions.

The following are the primary remediation efforts made by the Company:

· Prepare accounting memos over the debt issuances made by the Company in fiscal 2021 and 2020 which include derivative and warrants

· Review fair value of convertible promissory notes in relation to the Series A and B Notes

· Review of impairment of long-lived assets including goodwill and intangibles

· 10-Q and 10-K review to ensure the appropriate disclosures are made within the SEC filed documents

· In addition, the Company engaged external SOX consultants to further enhance the Company’s internal control environment. After several meetings with the key accounting personnel the following were put in place:

· Adoption of COSO 2013

· SOX Risk assessment memo

· Entity Level COSO Mapping

· SOX control narratives for financial reporting as well as other processes

While we believe these additions have addressed our lack of segregation of duties, due to the timing of the events, they were not able to mitigate the material weakness for the year ended December 31, 2021. We are committed to maintaining a strong internal control environment and believe that these remediation efforts will represent significant improvements in our control environment. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

50

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table lists the names, ages as of December 31, 2021, and positions of the individuals who serve as our executive officers and directors:

Name	Age	Position
Robert Davidson	54	Chief Executive Officer, Director
Michael Redard	63	Chief Financial Officer and Secretary
Mark Udell	44	Chief Accounting Officer and Treasurer
Nancy Duitch	67	Chief Strategic Officer, Chief Executive Officer of Sera Labs, Director
Ruben King-Shaw Jr.	60	Chairman of the Board of Directors
Gene Salkind, M.D	67	Director
Joshua Held	36	Director
John Bell	74	Director
Dov Szapiro	46	Director

Our Executive Officers

Robert Davidson –Chief Executive Officer and Director

Robert Davidson has served as a director and as our Chief Executive Officer since July 2011 and served as Chairman of our Board until January 2019. Prior to joining the Company, Mr. Davidson served as President, Chief Executive Officer, and director of InnoZen Inc. from 2003 to 2011, Chief Executive Officer and director of Gel Tech LLC from 1998 to 2001, and Chief Executive Officer and director of Bio Delivery Technologies Inc. from 1999 to 2003. In addition to his service as a director at Innozen, Inc., Gel Tech LLC, and Bio Delivery Technologies Inc., Mr. Davidson served as a director of HealthSport Inc. from 2007 to 2011. Mr. Davidson was responsible for the development of several drug delivery technologies and commercial brand extensions. He has worked with brands such as Chloraseptic™, Suppress™, as well as Pediastrip™, a private label electrolyte OTF sold in major drug store chains. Mr. Davidson is also considered an industry expert leader in OTF technology. Mr. Davidson holds a B.S. in Biological Life Sciences from the University of the State of New York, Excelsior College, a Masters Certificate in Applied Project Management from Villanova University, Masters of Public Health from American Military University, Virginia, and a Masters in Health and Wellness from Liberty University, Virginia. Mr. Davidson also holds a Certificate of Sustainable Value Chains and a Masters in Sustainability Leadership from the University of Cambridge and is a Certified Performance Enhancement Specialist and Fitness Nutrition Specialist through the National Academy of Sports Medicine. We believe that Mr. Davidson’s executive and board experience as well as his extensive knowledge of OTF and drug delivery technologies qualifies him to serve on our Board.

51

Michael Redard – Chief Financial Officer and Secretary

Michael Redard has served as our Chief Financial Officer since May 2019 and Secretary since May 2020. Since 2018, Mr. Redard has served as a Council Member at GLG. Mr. Redard has over 30 years of experience in financial operations, strategic planning, and capital markets across a broad range of industries including medical devices, healthcare, consumer and industrial products, and manufacturing. From 2018 until 2019, Mr. Redard served as Principal of Redard Consulting and from 2011 until 2018, Mr. Redard served as Chief Financial Officer of Casa Pacifica, a California-based behavioral health services provider. Prior to joining Casa Pacifica, Mr. Redard held Chief Financial Officer, Vice President and General Manager positions with several venture and private equity backed companies including Inogen, Medical Analysis Systems (which was later acquired by Thermo Fisher Scientific), CDTi Advanced Materials, and Abrisa Technologies. Mr. Redard’s earlier experience includes serving in various management roles at Pepsi and serving as a public accountant. Mr. Redard is a Certified Public Accountant (inactive) and holds a B.S. in Business Administration from California Polytechnic State University, San Luis Obispo.

Mark Udell – Chief Accounting Officer and Treasurer

Mark Udell has served as our Chief Accounting Officer since November 2018 and Treasurer since July 2011. Mr. Udell previously served as our Chief Financial Officer from July 2011 until November 2018 and as our Secretary from July 2011 until May 2020. Mr. Udell is a Certified Public Accountant with over 21 years of experience in finance and accounting. From 2007 to 2011, Mr. Udell served as Chief Accounting Officer and Controller of InnoZen, Inc., a drug delivery company with manufacturing capabilities, where he was responsible for establishing, monitoring, and enforcing internal policies and procedures, as well as conducting audits and working with external auditors. Mr. Udell gained valuable knowledge in the drug delivery industry during his time at InnoZen, Inc. and is a key contributor to our development and commercialization of various drug delivery technologies. Prior to Mr. Udell’s time at InnoZen, Inc., he served as Auditing Manager at Green Hasson & Janks, LLP in Los Angeles. Mr. Udell holds a B.S. in Business Economics with a concentration in accounting from the University of California, Santa Barbara.

52

Our Directors

Ruben King-Shaw, Jr.

Ruben King-Shaw, Jr. has served as a director of the Company since January 2019 and was appointed Chairman of the Board of Directors on February 8, 2021. Mr. King-Shaw served as the President of Steward Health Care Network, a risked based provider organization and at ACO from June 2018 to January 2020, where he led the business unit focused on managing integrated, coordinated, and community-based health care services delivery in 9 states. Principally, Mr. King-Shaw led the turnaround and sale of Steward Health Care Network’s 220,00 member Medicaid and DSNP managed care plan, Steward Health Choice Arizona, to Blue Cross and Blue Shield of Arizona for a record high valuation. Mr. King-Shaw has since returned to his position of Chief Strategy Officer at Steward Health Care Investors, the physician-driven private equity vehicle that led a management buyout of Steward Health Care System in May of 2020. Since 2005, he has served as the CEO of Mansa Equity Partners, Inc., the King-Shaw family’s personal holding company and investment vehicle. From 2017 to 2018, Mr. King-Shaw served as the interim CEO of Verify ID. Mr. King-Shaw has three decades of executive leadership experience in the healthcare technology and private equity sectors and has held c-suite positions with leading private companies including Neighborhood Health Partnership, Inc. from 1993 to 1998 and JMH Health Plan from 1989 to 1993. He currently serves on the board of directors of privately-held US Retina. He previously served as director of Intelligent Retinal Imaging Systems, Cotiviti Holdings, Inc., Independent Living Systems, WellCare Health Plans, Inc., and Athenahealth, Inc. During the Obama Administration, Mr. King-Shaw served on the Medicare Program Advisory and Oversight Committee and during the W. Bush Administration, he served as Chief Operating Officer and Deputy Administrator of the Centers for Medicare and Medicaid Services (“CMS”), administering a federal budget of $600 billion. Mr. King-Shaw has recently provided advice on healthcare policy to the Trump Administration, including CMS and the National Economic Council. Mr. King-Shaw holds a B.S. in Economics from Cornell University and a Masters in Health Services Administration and Masters in International Business from Florida International University. Mr. King-Shaw also completed advanced studies in Corporate Governance at Harvard Business School. Mr. King-Shaw is a Trustee Emeritus and Presidential Counselor at Cornell University and a member of the Weil Cornell Medicine Board of Overseers. He is also a former Trustee for Meharry Medical College. We believe that Mr. King-Shaw’s executive experience and administrative expertise in the healthcare field qualifies him to serve on our Board.

Gene Salkind M.D.

Dr. Gene Salkind has served as a director of the Company since January 2019. Dr. Salkind is board certified in neurological surgery by the American Board of Neurological Surgery and has worked as a practicing neurosurgeon at Bruno & Salkind, MD PC since 1985, where he is currently president and shareholder. Dr. Salkind completed various residencies, fellowships, and postgraduate trainings at Abington Memorial hospital, The Graduate Hospital, Veteran’s Administration Hospital, Pennsylvania Hospital, Children’s Hospital of Philadelphia, and the Hospital of the University of Pennsylvania and has had numerous faculty, hospital, and administrative appointments at nearly every major hospital in northeastern Philadelphia and surrounding areas. As a prolific pharmaceutical investor, some of Dr. Salkind’s previous successful investments include Intuitive Surgical, Pharmacyclics, which grew from less than $1 per share to subsequently being acquired by Abbvie for $250/share and Centocor, one of the nation’s largest biotechnology companies, which was acquired by Johnson & Johnson for $4.9 billion in stock. Dr. Salkind has served on the board of DermTech, a private company based in San Diego that has become the global leader in non-invasive dermatological molecular diagnostics, since 2004 and Mobiquity Technologies since 2019. Dr. Salkind holds a B.A. in Biology from the University of Pennsylvania and M.D. from Temple University School of Medicine. We believe that Dr. Salkind’s medical background and experience, as well as his extensive investing experience, qualifies him to serve on our Board.

Joshua Held

Joshua Held has served as a director of the Company since May 2019. From 2009 to 2019, Mr. Held was the founder and Chief Executive Officer of Chemistry Holdings, Inc., a formulation technology company that creates innovative, sustainable delivery systems for a variety of industries, which was acquired by CURE in May 2019. In 2015, Mr. Held founded and served as Chief Executive Officer of Form Factory Inc. f/k/a Made By Science, Inc. until acquired by Acreage Holdings, the largest multi-state cannabis operator, in 2018, at which time he served as President until March 2020. From 2011 to 2015, Mr. Held served as Vice President of Investments for JP Morgan, where he managed more than $100 million in investment dollars for high-net-worth individuals and families. Mr. Held holds a B.A. in Political Science from the California State University, Long Beach. We believe that Mr. Held’s experience as the founder of multiple medical technology companies qualifies him to serve on our Board.

53

John Bell

John Bell has served as a director of the Company since November 2019. Mr. Bell has served as Chair of the board of directors of Onbelay Capital Inc., a private equity and investment company based in Cambridge, Canada since 1997, Chair of the board of directors of Canopy Rivers, an investment holding company since 2018, Chair of Stack Capital since April 2021 and Chair of Hexo Corp from December 2021 to February 2022. From 2014 to 2020, Mr. Bell served as Chair of the board of directors, audit committee, and compensation committee of Canopy Growth Corp and from 2013 to 2020 he served as member of the board of directors and Chair of the audit committee of DelMar Pharmaceuticals, Inc. From 1977 to 1995, Mr. Bell was the founder, owner, and Chief Executive Officer of Shred-Tech Inc., a global manufacturer of shredding and recycling equipment and the creator of the mobile shredding industry. From 1995 to 2007, Mr. Bell was owner and Chief Executive Officer of Polymer Technologies Inc., a global manufacturer of auto-parts. From 2006 to 2014, Mr. Bell was the principal shareholder and served as Chairman of the board of directors of BSM Technologies Inc., a fleet management company and from 2007 to 2010, he served as Chief Executive Officer and member of the board of directors of ATS Automation, a factory automation company with 23 global plants. In the past, Mr. Bell has served on the boards of a number of public, private, non-profit, and government institutions, including: Chair of Cambridge Memorial Hospital, Chair of Waterloo Regional Police, Chair of Waterloo Prosperity Counsel, Chair of Waterloo Accelerator Network, and Governor of Stratford Festival. Mr. Bell holds a B.B.A. from Western University Ivey School of Business, is a Fellow of the Chartered Professional Accountants of Ontario, and a graduate of the Institute of Directors Program of Canada. We believe that Mr. Bell’s extensive executive and business experience qualifies him to serve on the Board.

Nancy Duitch – Chief Strategic Officer and Director

Nancy Duitch has over 30 years’ experience as an entrepreneur and leader in the consumer products industry. Ms. Duitch currently serves as Chief Executive Officer of Sera Labs and as Chief Strategy Officer-Wellness of the Company. From 2014 to 2018, Ms. Duitch served as Chief Executive Officer of a marketing agency, Vision Works, and from 2015 to 2017, she served as Managing Member at Advanced Legacy Technology, a company specializing in anti-aging skincare. Ms. Duitch has founded and developed several diverse businesses from start-up to public company level, and she has executed state-of-the-art campaigns generating over $3 billion in revenue for some of the most well-loved consumer brands. Her creativity, ability to develop talent, and effective utilization of multi-channel strategy for optimal ROI has consistently positioned Ms. Duitch as an industry leader. Sera Labs was created to expand products in the health, wellness, and beauty sectors, and has redefined these sectors with innovation and technology that incorporates exceptional ingredients, including CBD. Sera Labs develops high-quality products that use science-backed, proprietary formulations and its more than 20 products are sold under the brand names Sera Labs™, SeraRelief™ and SeraTopical™. Ms. Duitch is also passionate about, and heavily involved in, several philanthropic activities supporting children in need. After losing two siblings to sudden cardiac death when they were in their twenties, Ms. Duitch and her mother embarked on a mission to educate and raise awareness and resources to help fight sudden death in children and young adults. In 1995 they founded the Cardiac & Arrhythmia Research & Education Foundation (C.A.R.E.) which continues to play a critical role in supporting thousands of patients and their families. Ms. Duitch received her undergraduate degree from Temple University. We believe that Ms. Duitch is qualified to serve on our board based on her extensive professional background and business development in the consumer products industry.

Dov Szapiro

Mr. Szapiro has over 20 years’ experience as an entrepreneur, investor, advisor, and board member in companies across multiple industries and different growth phases. Mr. Szapiro currently serves as Co-Founder, Managing Partner and Principal of Entourage Effect Capital, one of the cannabis industry’s most highly regarded investment firms. In 2016, Mr. Szapiro founded e54 Capital, LLC, where he is currently the Managing Director. Mr. Szapiro also co-founded AFS Acceptance LLC (“AFS”), where he served as President and Chief Executive Officer from 2001 to 2017. Prior to co-founding AFS, Mr. Szapiro was the Director of Business Development for GovWorks, Inc, an internet start-up in the e-government sector. Mr. Szapiro holds a B.B.A. from the University of Pennsylvania. Earlier in his career, Mr. Szapiro was an analyst for Bassini, Playfair + Associates, a $1.2 billion emerging markets private equity firm. We believe that Mr. Szapiro’s extensive executive and business experience qualifies him to serve on the Board.

54

Board of Directors

Our Board of Directors currently consists of seven members. All directors hold office until the next annual meeting of stockholders. At each annual meeting of stockholders, the successors to directors whose terms then expire are elected to serve from the time of election and qualification until the next annual meeting following election.

Management has been delegated the responsibility for meeting defined corporate objectives, implementing approved strategic and operating plans, carrying on our business in the ordinary course, managing cash flow, evaluating new business opportunities, recruiting staff and complying with applicable regulatory requirements. The Board of Directors exercises its supervision over management by reviewing and approving long-term strategic, business and capital plans, material contracts and business transactions, and all debt and equity financing transactions and stock issuances.

Director Independence

The Board of Directors utilizes Nasdaq’s standards for determining the independence of its members. In applying these standards, the Board considers commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others, in assessing the independence of directors, and must disclose any basis for determining that a relationship is not material.

The Board has concluded that each of Messrs., King-Shaw, Held, Szapiro and Bell are “independent” based on the listing standards of the Nasdaq Stock Market, having concluded that any relationship between such director and our Company, in its opinion, does not interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Board Committees

The Board of Directors held ten (10) meetings during 2021. During 2021, all directors attended approximately 75% of the aggregate number of meetings of the Board of Directors that were held during the time that they served as members of the Board of Directors. We do not have a formal policy regarding attendance by members of the Board of Directors at the annual meeting of stockholders, but we strongly encourage all members of the Board of Directors to attend our annual meetings and expect such attendance except in the event of extraordinary circumstances.

We did not hold annual meeting of stockholders in 2021.

Committees of the Board of Directors

The Board of Directors has established and currently maintains the following three standing committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee (the “N&GC”). The Board of Directors has adopted written charters for each of these committees, which we make available free of charge on or through our website, along with other items related to corporate governance matters, including our Code of Business Conduct and Ethics applicable to all employees, officers and directors. We maintain our website at http://www.curepharmaceutical.com. You can access our committee charters and code of conduct on our website by first clicking “Investors” and then “Governance.”

55

We disclose on our website any amendments to or waivers from our Code of Business Conduct and Ethics, as well as any amendments to the charters of any of our standing committees. Any stockholder may also obtain copies of these documents, free of charge, by sending a request in writing to: Cure Pharmaceutical Holding Corp., 1620 Beacon Place, Oxnard, California 93033.

Each committee has the composition and responsibilities described below. Our Board of Directors may from time to time establish other committees.

Name	Audit Committee	Compensation Committee	Nominating and Corporate Governance Committee
Ruben King-Shaw Jr.	M		M
Joshua Held		M
John Bell	C	M

During the 2021 fiscal year, the Audit Committee held six (6) meetings and the Compensation and N&CG Committees each held one meeting.

Audit Committee

Among other functions, the Audit Committee reviews and approves the engagement of our independent auditors to perform audit and any permissible non-audit services, evaluates the performance, independence and qualifications of our independent auditors and determines whether to retain our existing independent auditors or to engage new independent auditors, reviews our annual and quarterly financial statements and reports, including the disclosures contained in the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” recommends that the audited financial statements be included in the Company’s annual report on Form 10-K and discusses the statements and reports with our independent auditors and management, reviews with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning scope, adequacy and effectiveness of our financial controls, reviews our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented, and reviews and evaluates on an annual basis the performance of the audit committee, including compliance of the audit committee with its charter.

The Board of Directors has determined that each of the current members of the Audit Committee is an independent director within the meaning of the Nasdaq independence standards and Rule 10A-3 promulgated by the SEC under the Exchange Act. In addition, the Board of Directors has determined that Mr. Bell qualifies as an Audit Committee Financial Expert pursuant to Item 407(d)(5) of Regulation S-K SEC Rules and satisfies the Nasdaq standards of financial literacy and financial or accounting expertise or experience.

Compensation Committee

The Compensation Committee’s functions include reviewing, modifying and approving (or if it deems appropriate, making recommendations to the full Board of Directors regarding) our overall compensation strategy and policies, reviewing and approving compensation, the performance goals and objectives relevant to the compensation, and other terms of employment of our Chief Executive Officers and our other executive officers, reviewing and approving (or if it deems appropriate, making recommendations to the full Board of Directors regarding) the equity incentive plans, compensation plans and similar programs advisable for us, as well as modifying, amending or terminating existing plans and programs, reviewing and approving the terms of employment agreements, severance arrangements, change in control protections and any other compensatory arrangements for our executive officers, reviewing with management and approving our disclosures under the caption “Compensation Discussion and Analysis” in our periodic reports or proxy statements to be filed with the SEC, and preparing the report that the SEC requires in our annual proxy statement.

The Compensation Committee may select or receive advice from, a compensation consultant, legal counsel or other adviser to the Committee, other than in-house legal counsel, only after taking into consideration the following factors:

· the provision of other services to the Company by the person that employs the compensation consultant, legal counsel or other adviser;

· the amount of fees received from the Company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser;

· the policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest;

· any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the Compensation Committee;

· any stock of the Company owned by the compensation consultant, legal counsel or other adviser; and

· any business or personal relationship of the compensation consultant, legal counsel or other adviser, or the person employing the adviser with an executive officer of the Company

Neither the Compensation Committee nor the Board of Directors retained any consultants to assist in the review and approval of the compensation and benefits for the executive officers of our company during 2021. The Board of Directors has determined that each current member of the Compensation Committee is an independent director within the meaning of the Nasdaq independence standards.

56

Nominating and Corporate Governance Committee

The N&GC functions include identifying, reviewing and evaluating candidates to serve on our Board of Directors consistent with criteria approved by our Board of Directors, evaluating director performance on our Board of Directors and applicable committees of our Board of Directors and determining whether continued service on our Board of Directors is appropriate, evaluating, nominating and recommending individuals for membership on our Board of Directors, and evaluating nominations by stockholders for election to our Board of Directors.

In selecting candidates for the Board of Directors, the Board (or, as used throughout this section, the N&GC, as applicable) begins by determining whether the incumbent directors whose terms expire at the annual meeting of stockholders desire and are qualified to continue their service on the Board of Directors. If there are positions on the Board of Directors for which the Board will not be renominating an incumbent director, or if there is a vacancy on the Board of Directors, the Board will solicit recommendations for nominees from persons whom the Board believes are likely to be familiar with qualified candidates, including members of our Board of Directors and our senior management. The Board may also engage a search firm to assist in the identification of qualified candidates. The Board will review and evaluate those candidates whom it believes merit serious consideration, taking into account all available information concerning the candidate, the existing composition and mix of talent and expertise on the Board of Directors and other factors that it deems relevant. In conducting its review and evaluation, the committees may solicit the views of management and other members of the Board of Directors and may conduct interviews of proposed candidates.

The Board generally requires that all candidates for the Board of Directors be of the highest personal and professional integrity and have demonstrated exceptional ability and judgement. The Board will consider whether such candidate will be effective, in conjunction with the other members of the Board of Directors, in collectively serving the long-term interests of our stockholders. In addition, the Board requires that all candidates have no interests that materially conflict with our interest and those of our stockholders, have meaningful management, advisory or policymaking experience, have general appreciation of the major business issues facing us and have adequate time to devote to service on the Board of Directors.

The Board will consider stockholder recommendations for nominees to fill director positions, provided that the Board will not entertain stockholder nominations from stockholders who do not meet the eligibility criteria for submission of stockholder proposals under Rule 14a-8 of Regulation 14A under the Exchange Act. Stockholders may submit written recommendations for nominees to the Board of Directors, together with appropriate biographical information and qualification of such nominees as required by our Bylaws, to our Corporate Secretary following the same procedures as described in “Stockholder Communications” in our Proxy Statement. In order for a nominee for directorship submitted by a stockholder to be considered, such recommendation must be received by the Corporate Secretary by the time period set forth in our most recent proxy statement for the submission of stockholder proposals under Rule 14a-8 of Regulation 14A under the Exchange Act. The Corporate Secretary shall then deliver any such communications to the Chairman of the Board or the N&GC, as applicable. The Board will evaluate stockholder recommendations for candidates for the Board of Directors using the same criteria as for other candidates, except that the Board may consider, as one of the factors in its evaluation of stockholder recommended candidates, the size and duration of the interest of the recommending stockholder or stockholder group in our equity.

The Board of Directors has determined that each current member of the N&GC is an independent director within the meaning of the NASDAQ independence standards.

See “Directors, Executive Officers and Corporate Governance – Directors” above for descriptions of the relevant education and experience of each member of the above stated committees.

DELINQUENT SECTION 16(A) REPORTS

Our records reflect that all reports which were required to be filed pursuant to Section 16(a) of the Exchange Act, were filed on a timely basis, except that Mr. King-Shaw, Mr. Salkind, Mr. Held, Mr. Bell and Mr. Szapiro has not filed pending Form 4 filings. We are working on developing and implementing processes, procedures and training to ensure improved compliance on an on-going basis with the requirements of Section 16 of the Exchange Act.

Corporate Code of Conduct and Ethics

Our Board of Directors has adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Copies of our corporate code of conduct and ethics are available, without charge, upon request in writing to Cure Pharmaceutical Holding Corp., 1620 Beacon Place, Oxnard, California 93033, and are posted on the investor relations section of our website, which is located at www.curepharmaceutical.com. The inclusion of our website address in this Annual Report on Form 10-K does not include or incorporate by reference the information on our website into this Annual Report on Form 10-K. We also intend to disclose any amendments to the Corporate Code of Conduct and Ethics, or any waivers of its requirements, on our website.

57

Board Leadership Structure and Role in Risk Oversight

Our Board of Directors is currently chaired by Mr. Ruben King-Shaw Jr., who was appointed to serve in such capacity since February 8, 2021. Our amended and restated bylaws provide our Board of Directors with flexibility to combine or separate the positions of Chairman of the Board and Chief Executive Officer in accordance with its determination that utilizing one or the other structure is in the best interests of our company. As Chairman of the Board, Mr. King-Shaw facilitates communications between members of our Board of Directors and works with management in the preparation of the agenda for each board meeting. All of our directors are encouraged to make suggestions for board agenda items or pre-meeting materials. Mr. King-Shaw presides over the executive sessions of the Board of Directors and serves as a liaison to our Chief Executive Officer, Mr. Davidson, and management on behalf of the independent members of the Board of Directors.

Our Board of Directors has concluded that our current leadership structure is appropriate at this time based on their specific characteristics as described in the “Directors, Executive Officers and Corporate Governance – Directors” above for descriptions of the relevant education and experience of each member of Board of Directors. However, the Board of Directors periodically reviews our leadership structure and may make such changes in the future as it deems appropriate.

Our Board of Directors and the Audit Committee thereof is responsible for overseeing the risk management processes on behalf of our company. The Board and, to the extent applicable, the Audit Committee, receive and review periodic reports from management, auditors, legal counsel and others, as considered appropriate regarding our company’s assessment of risks. Where applicable, the Audit Committee reports regularly to the full Board of Directors with respect to risk management processes. The Audit Committee and the full Board of Directors focus on the most significant risks facing our Company and our Company’s general risk management strategy, and also ensure that risks undertaken by our Company are consistent with the Board’s appetite for risk. While the Board oversees the risk management of our Company, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our Company and that our Board leadership structure supports this approach.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information regarding compensation earned during 2021 and 2020 by our principal executive officer and our two most highly compensated executive officers as of the end of the 2021 fiscal year (“Named Executive Officers”).

Summary Compensation Table

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)(1)		All Other Compensation ($)(2)		Total ($)
Robert Davidson, Chief Executive Officer and Director	2021		189,235		-				343,000		68,417		600,652
	2020		191,667		-				-		-		191,667
Michael Redard, Chief Financial Officer	2021		176,421		-		-		269,500		54,154		500,075
	2020		162,917		-		-		-		-		162,917
Mark Udell, Chief Accounting Officer, Treasurer and Secretary	2021		137,171		-		-		19,600		29,846		186,617
	2020		148,902		-		-		-		-		148,902

__________

(1)

Amounts listed in this column represent the aggregate fair value on the date of vesting of the Company’s equity awards granted to the named executive officers determined in accordance with Financial Accounting Standards Board (FASB) ASC Topic 718, Compensation-Stock Compensation (FASB ASC Topic 718). See Note 17 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for the years ended December 31, 2021 and 2020 for details as to the assumptions used to determine the fair value of these awards.

(2)

Rob Davidson, Mike Redard and Mark Udell all agreed to defer part of their salary during the fiscal year 2021. These deferral amounts are included in the Company’s financial statements under accrued expenses.

58

Outstanding Equity Awards at December 31, 2021

The following sets forth information regarding the outstanding equity awards held by our Named Executive Officers as of the end of our 2021 fiscal year:

	Option Awards
	Number of Securities Underlying Unexercised Options (#)		Number of Securities Underlying Unexercised Options (#)		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options			Option Exercise Price	Option Expiration
Name	Exercisable		Unexercisable		(#)			(#)	Date
Robert Davidson		686,031		311,719		311,719	$	0.61-$3.40	April 6, 2028 to March 4, 2031
Michael Redard		278,125		246,875		246,875	$	0.98- 4.01	May 30, 2029 to March 4, 2031
Mark Udell		148,125		21,875		21,875	$	0.74-0.98	April 6, 2028 to March 4, 2031

Option Exercises in 2021

There were no option exercises by our named executive officers during our fiscal year ended December 31, 2021.

Narrative Disclosure to Summary Compensation Table

Michael Redard

On May 15, 2019, the Company entered into an employment agreement with Michael Redard to serve as the Company’s Chief Financial Officer with such customary responsibilities, duties and authority normally associated with such position and as may, from time to time, be assigned to Mr. Redard by the Board of Directors of the Company, consistent with such position. In the performance of such duties, Mr. Redard shall report to the Chief Executive Officer and shall receive a base salary at a rate of $170,000.00 per annum (such annual base salary, as it may be adjusted from time to time, the “Annual Base Salary”). The Annual Base Salary shall be paid in equal installments in accordance with the customary payroll practices of the Company, but no less frequently than monthly. The Company’s Board shall review Executive’s salary at least once a year and shall increase Executive’s salary if, in the sole discretion of the Board, an increase is warranted. The term of employment under this Agreement (the “Term”) shall commence on May 15, 2019 and continue for a period of one year, unless terminated in accordance with Section 3. Following the expiration of the initial Term, the Term shall be extended by one year unless terminated by either Mr. Redard or the Company.

59

Director Compensation

The following Director Compensation Table sets forth information concerning compensation for services rendered to our independent directors for fiscal year 2021:

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)(1)		Option Awards ($)		Total ($)
Gene Salkind M.D.(2)		15,667		82,000		-		97,667
Ruben King-Shaw Jr.(3)		38,254		82,000		-		120,254
Joshua Held(4)		19,496		82,000		-		101,496
John Bell(5)		25,087		82,000		-		107,087
Dov Szapiro(6)		9,169		136,667		-		145,836

_________ 

⁽¹⁾ Represents the grant date fair value of restricted stock units calculated in accordance with FASB ASC Topic 718 calculated based on closing price of our common stock on the day of the grant date of the restricted stock units multiplied by the number of shares granted. Restricted stock units are subject to time-based vesting as described above. These amounts do not represent cash payments or proceeds actually received by the directors and the actual values they realize may be materially different from these reported amounts upon their sale of the underlying shares. For fair value assumptions refer to Note 17 to our Consolidated Financial Statements included in this Annual Report on Form 10-K for the years ended December 31, 2021 and 2020 for details as to the assumptions used to determine the fair value of these awards.

(2)	Consists of 117,647 shares of common stock underlying a restricted stock unit, granted on September 23, 2021, which shall vest on the earlier of (i) the day prior to the next Annual Meeting of Shareholders following the date of grant, and (ii) one year from the date of grant.
(3)	Consists of 117,647 shares of common stock underlying a restricted stock unit, granted on September 23, 2021, which shall vest on the earlier of (i) the day prior to the next Annual Meeting of Shareholders following the date of grant, and (ii) one year from the date of grant.
(4)	Consists of 117,647 shares of common stock underlying a restricted stock unit, granted on September 23, 2021, which shall vest on the earlier of (i) the day prior to the next Annual Meeting of Shareholders following the date of grant, and (ii) one year from the date of grant.
(5)	Consists of 117,647 shares of common stock underlying a restricted stock unit, granted on September 23, 2021, which shall vest on the earlier of (i) the day prior to the next Annual Meeting of Shareholders following the date of grant, and (ii) one year from the date of grant.
(6)	Consists of 41,103 shares of common stock underlying a restricted stock unit, granted on February 1, 2021, which vested on September 23, 2021. Mr. Szapiro received an additional 117,647 shares of common stock underlying a restricted stock unit, granted on September 23, 2021, which shall vest on the earlier of (i) the day prior to the next Annual Meeting of Shareholders following the date of grant, and (ii) one year from the date of grant.

60

Compensation Policy for Non-Employee Directors.

The Company does have a formal policy regarding compensation for non-employee directors. Notwithstanding any other provision of the Equity Incentive Plan to the contrary, the aggregate grant date fair value (computed as of the date of grant in accordance with generally accepted accounting principles in the United States) of all Awards granted to any nonemployee director during any fiscal year of the Company, taken together with any cash compensation paid to such nonemployee director during such fiscal year, shall not exceed $300,000.

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

The following table sets forth the number of outstanding shares of common stock beneficially owned and the percentage of common stock beneficially owned, as of March 28, 2022, by:

· each person known to us to be the beneficial owner of more than five percent of our then-outstanding common stock;

· each director and named executive officer; and

· all of our directors and executive officers as a group.

The number of shares of common stock beneficially owned by each person is determined under the rules of the SEC. Under these rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares that the individual has the right to acquire by May 28, 2022 (sixty days after March 28, 2022) through the exercise or conversion of a security or other right. Unless otherwise indicated or pursuant to applicable community property laws, each person has sole investment and voting power, or shares such power with a family member, with respect to the shares set forth in the following table. The inclusion in this table of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares for any other purpose.

The percentage of beneficial ownership in the table below is based on 69,866,902 shares of common stock deemed to be outstanding as of March 28, 2022.

Unless otherwise indicated, the address of all individuals listed in the table below is c/o Cure Pharmaceutical Holding Corp., 1620 Beacon Place, Oxnard, California 93033.

61

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership		Percent
Named Executive Officers and Directors
Robert Davidson (1)		1,303,922		1.9	%
Michael Redard (2)		325,000	*
Mark Udell (3)		602,632	*
Nancy Duitch (4)		5,014,868		7.2	%
Gene Salkind M.D. (5)		2,164,781		3.1	%
Ruben King-Shaw Jr.(6)		161,654	*
Joshua Held (7)		4,354,564		6.2	%
John Bell (8)		79,255	*
Dov Szapiro (9)		9,719,260		13.9	%
All executive officers and directors as a group (9 persons) (10)		23,725,936		34.0	%
Other Greater than 5% Holders
Maci Molecule SPV LLC(9)		7,285,375		10.4	%

_________ 

*Less than 1%.

(1)	Consists of (i) 541,719 shares of common stock held by Mr. Davidson and (ii) 762,203 shares of common stock underlying stock options exercisable within 60 days of March 28, 2022.
(2)	Consists of 325,000 shares of common stock underlying stock options exercisable by Mr. Redard within 60 days of March 28, 2022.
(3)	Consists of (i) 442,632 shares of common stock held by Mr. Udell and (ii) 160,000 shares of common stock underlying stock options exercisable within 60 days of March 28, 2022.
(4)	Consists of 5,014,868 shares of common stock held by Mrs. Duitch.
(5)	Consists of (i) 2,083,531 shares of common stock held by Dr. Salkind and (ii) 81,250 shares of common stock underlying stock options exercisable within 60 days of March 28, 2022.
(6)	Consists of (i) 61,654 shares of common stock held by Mr. King-Shaw and (ii) 100,000 shares of common stock underlying stock options exercisable within 60 days of March 28, 2022.
(7)	Consists of 4,254,564 shares of common stock held by Mr. Held and (ii) 100,000 shares of common stock underlying stock options exercisable within 60 days of March 28, 2022.
(8)	Consists of 79,255 shares of common stock underlying fully vested restricted stock units held by Mr. Bell.
(9)	Consists of 7,326,478 shares of common stock held by Maci Molecule SPV, LLC (“Maci Molecule”) and 2,392,782 shares of common stock held by MacArthur Investment, LLC (“MacArthur”). Mr. Szapiro is a control person of both Maci Molecule and MacArthur and may be deemed to have voting and dispositive power over the shares. Mr. Szapiro disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. The address for both Maci Molecule and MacArthur is 2890 NE 187th Street, Aventura, FL 90049.
(10)	Does not include 588,238 shares of common stock underlying restricted stock units held by certain of our directors not exercisable within 60 days of March 28, 2022.

62

Securities Authorized for Issuance Under Existing Equity Compensation Plans

There are 10,000,000 shares of common stock authorized for issuance under the Company’s Amended and Restated 2017 Equity Incentive Plan. A summary of our Amended and Restated 2017 Equity Incentive Plan may be found in our definitive proxy statement for our annual meeting of stockholders filed with the SEC on July 12, 2019 as well as our Form S-3 filed with the SEC on November 30, 2020.

The Company does not have any individual compensation arrangements with respect to its common or preferred stock. The issuance of any of our common or preferred stock is within the discretion of our Board of Directors, which has the power to issue any or all of our authorized but unissued shares without stockholder approval.

The following table summarizes certain information regarding our equity compensation plans as of December 31, 2021:

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options		Weighted- Average Exercise Price of Outstanding Options		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders (1)		7,230,068	$	1.45		645,695
Equity compensation plans not approved by security holders		-	$	-		-
Total		7,230,068	$	1.45		645,695

_________ 

(1) Consists of the 2017 Equity Incentive Plan. For a short description of those plans, see Note 17 to our 2021 Consolidated Financial Statements included in this Annual Report on Form 10-K for the year ended December 31, 2021.

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

Approval for Related Party Transactions

It is our practice and policy to comply with all applicable laws, rules and regulations regarding related-person transactions. The Company requires that all employees, including officers and directors, disclose to the Chief Executive Officer the nature of any company business that is conducted with any related party of such employee, officer or director (including any immediate family member of such employee, officer or director, and any entity owned or controlled by such persons). If the transaction involves an officer or director of our company, the Chief Executive Officer must bring the transaction to the attention of the Audit Committee or, in the absence of an Audit Committee the full Board, which must review and approve the transaction in writing in advance. In considering such transactions, the Audit Committee (or the full Board, as applicable) takes into account the relevant available facts and circumstances.

63

Transactions with Related Parties

On January 2, 2019, Sera Labs entered into an administrative service agreement (“Service Agreement”) with Visionworx, an affiliate of Sear Labs. Visionworx will process payments related to Sera Lab’s operations using Visionworx’s contractual relationship with JPMorgan Chase Bank, N.A. via its Chase Paymentech Select Merchant Payment Instrument Processing Agreement. In consideration for the services, Sera Labs will pay to Visionworx a management fee equal to all associated fees and expenses in connection with the Service Agreement. The Service Agreement is effective on January 2, 2019 and will continue for a period of two years. The term of the Service Agreement will be renewed automatically for additional one-year periods until terminated. The Service Agreement may be terminated by (a) either party for any reason at least thirty days’ prior written notice to the other party; or (b) immediately upon the mutual consent of the parties.

On August 6, 2020, the Company entered into an unsecured promissory note (the “August Note”) with one of the Company’s board members, John Bell, (“Board Investor”), for a principal amount of $0.2 million. The August Note was due on August 6, 2021 and has an interest rate of 8% per annum, payable in quarterly payments. The principal and accrued interest under the August Note can convert into a convertible promissory note if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the August Note. Upon notice by the Company of such debt financing, the holder of the August Note shall have the right, but not the obligation, to convert the August Note into a convertible promissory note, with the same principal amount and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. The Board Investor did not elect to convert their August Note into a convertible promissory note, with the same principal and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. On August 6, 2021, both the Company and the Board Investor agreed to roll the amount of principal and accrued interest as of August 6, 2021 into a new secured promissory note (“New August Note”) with a new principal amount of $0.2 million. The New August Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The New August Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On October 2, 2020, the Company completed its acquisition of Sera Labs and pursuant to the Sera Labs Merger Agreement, the Company issued a promissory note in the principal amount of $1.1 million owed to the Chief Executive Officer of Sera Labs (“Duitch Note”), of which $1.0 million is the upfront payment in connection with the closing of the Sera Labs Merger, and $0.1 million is for certain liabilities of Sera Labs due to Mrs. Duitch. The Duitch Note is due September 30, 2021 and has an interest rate of 8% per annum. On November 9, 2020, a payment of $0.3 million was made and applied to principal only. On June 30, 2021, both the Company and the Chief Executive Officer of Sera Labs agreed to roll the amount of principal and accrued interest as of June 30, 2021 as well as other amounts due to the Chief Executive Officer of Sera Labs into a new secured promissory note (“New Duitch Note”) with a new principal amount of $1.05 million. The New Duitch Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The New Duitch Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On November 16, 2021, the Company entered into a secured promissory note (the “November Note”) with the Board Investor for a principal amount of $0.2 million. The November Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The November Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

From May 3, 2021 through December 28, 2021, the Company entered into several secured promissory notes (the “Secured Notes”) with one of the Company’s board members (“Second Board Investor”) for a total principal amount of $0.7 million. The Secured Notes are due on April 15, 2022 and have an interest rate of 10% per annum, payable at maturity. The Secured Notes are secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

Named Executive Officers and Current Directors

For information regarding compensation for our named executive officers and current directors, see “Executive Compensation.”

Director Independence

See “Directors, Executive Officers and Corporate Governance – Director Independence” and “Directors, Executive Officers and Corporate Governance – Board Committees” in Item 10 above.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Board of Directors of the Company appointed RBSM LLP (“RBSM”) as our independent registered public accounting firm (the “Independent Auditor”) for the fiscal year ended December 31, 2021. The following table sets forth the fees billed to the Company for professional services rendered by RBSM for the years ended December 31, 2021 and 2020:

Services	2021		2020
Audit Fees (1)	$	145,500	$	110,950
Audit-Related fees (2)		-		30,000
Tax fees (3)		-		10,000
Other fees		-		-
Total fees	$	145,500	$	150,950

___________

(1)	Audit Fees – These consisted of the aggregate fees for professional services rendered in connection with (i) the audit of our annual financial statements and (ii) the review of the financial statements included in our Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30.
(2)	Audit related Fees – These consisted of professional services rendered in connection with the Chemistry Holdings, Inc., audit and our Form 8-K/A as well as our Form S-3 and S-8.
(3)	Tax Fees – These consisted of services performed in preparation of the Company’s corporate Federal and State tax returns.

64

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Public Accountant

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm.

Prior to engagement of an independent registered public accounting firm for next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.

1. Audit services include audit work performed in the preparation of financial statements, as well as work that generally only an independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, attest services and consultation regarding financial accounting and/or reporting standards.

2. Audit-Related services are for assurance and related services that are traditionally performed by an independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

3. Tax services include all services performed by an independent registered public accounting firm’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.

4. Other Fees are those associated with services not captured in the other categories. The Company generally does not request such services from our independent registered public accounting firm.

Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted, and the Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging our independent registered public accounting firm.

The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

65

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)	The following documents are filed as part of this Annual Report on Form 10-K:
1.	Consolidated Financial Statements:

Reference is made to the Index to consolidated financial statements of Cure Pharmaceutical Holding Corp. under Item 8 of Part II hereof.

2. Financial Statement Schedule:

All schedules are omitted because they are not applicable or the amounts are immaterial or the required information is presented in the consolidated financial statements and notes thereto in Part II, Item 8 above.

3. Exhibits:

66

EXHIBIT INDEX

			Incorporated by Reference
Exhibit Number	Description of Exhibit	Form	File No.	Filing Date	Filed Herewith
2.1	Share Exchange and Conversion Agreement, among the Registrant and the parties listed therein, dated November 8, 2016	8-K	333-204857	11/15/2016
2.2	Agreement and Plan of Merger and Reorganization, among the Registrant and the parties listed therein, dated March 31, 2019	8-K/A	000-55908	12/31/2019
2.3	Plan of Conversion, dated September 27, 2019	8-K	000-55908	10/4/2019
2.4*	Agreement and Plan of Merger, dated September 23, 2020, by and between CURE Pharmaceutical Holding Corp. (the “Company”), The Sera Labs, Inc. and the other parties thereto.	8-K	000-55908	10/5/2020
2.5	Consent and Waiver Agreement, dated February 25, 2021, by and between the Registrant and Ionic Ventures, LLC	8-K	000-55908	2/25/2021
3.1	Amended and Restated Certificate of Incorporation	8-K	000-55908	10/4/2019
3.2	Bylaws	8-K	000-55908	10/4/2019
4.1	Specimen common stock certificate	10-K	000-55908	3/30/2020
4.2	Description of Registrant’s Securities	10-K	000-55908	3/30/2020
4.3	Form of Warrant to Purchase Common Stock	8-K	333-204857	11/15/2016
4.4	Form of Warrant to Purchase Common Stock	8-K	333-204857	12/14/2016
4.5	Amendment to Warrants to Purchase Common Stock.	8-K	333-204857	06/9/2020
4.6	Form of Common Stock Purchase Warrant	10-K	000-55908	3/26/2018
10.1	Agreement for Sale of Assets, dated June 28, 2016	8-K	333-204857	8/26/2016
10.2	Form of Share Cancellation Agreement	8-K	333-204857	11/15/2016
10.3	Form of Securities Purchase Agreement	10-K	000-55908	3/26/2018
10.4	Form of 9% Convertible Note	10-K	000-55908	3/26/2018
10.5	Form of Securities Purchase Agreement	8-K	000-55908	10/18/2018
10.6	Secured Promissory Note	8-K	000-55908	07/28/2020
10.7	Secured Promissory Note, dated September 25, 2020, by and between CURE Pharmaceutical Holding Corp. and Ionic Ventures, LLC.	8-K	000-55908	09/30/2020
10.8+	Employment Agreement, between the Registrant and Alex Katz, dated November 15, 2018	8-K	000-55908	11/20/2018
10.9	Securities Purchase Agreement, between the Registrant and Michael J. Willner, dated December 14, 2018	8-K	000-55908	1/7/2019
10.10	Advisory Consulting Agreement, between the Registrant and Michael J. Willner, dated December 14, 2018	8-K	000-55908	1/7/2019
10.11+	Employment Agreement between the Registrant and Michael Redard, dated May 15, 2019	8-K	000-55908	5/20/2019
10.12	Convertible Promissory Note, between the Registrant and Coeptis Pharmaceuticals, Inc., dated November 12, 2019	8-K	000-55908	11/14/2019
10.13	Convertible Demand Note, between the Registrant and Chemistry Holdings, Inc., dated March 29, 2019	8-K	000-55908	4/1/2019
10.14+	Amended and Restated Cure Pharmaceutical Holding Corp. 2017 Equity Incentive Plan	10-K	000-55908	3/30/2020
10.15+	Form of Stock Option Agreement for the Amended and Restated 2017 Equity Incentive Plan	10-K	000-55908	3/30/2020
10.16+	Form of Restricted Stock Award Agreement for the Amended and Restated 2017 Equity Incentive Plan	10-K	000-55908	3/30/2020
10.17+	Form of Restricted Stock Unit Agreement for the Amended and Restated 2017 Equity Incentive Plan	10-K	000-55908	3/30/2020
10.18	Form of Lock-Up Agreement.	8-K	000-55908	10/5/2020
10.19+	Employment Agreement, dated October 2, 2020, by and between the Company and Nancy Duitch.	8-K	000-55908	10/5/2020
10.20*	Security Purchase Agreement.	8-K	000-55908	11/2/2020
10.21*	Series A Convertible Note.	8-K	000-55908	11/2/2020
10.22*	Series B Convertible Note.	8-K	000-55908	11/2/2020
10.23*	Note Purchase Agreement.	8-K	000-55908	11/2/2020
10.24*	Secured Promissory Note.	8-K	000-55908	11/2/2020

67

10.25	Master Netting Agreement.	8-K	000-55908	11/2/2020
10.26	Registration Rights Agreement.	8-K	000-55908	11/2/2020
10.27	Leak-Out Agreement.	8-K	000-55908	11/2/2020
21.1	List of Subsidiaries of the Registrant				☒
23.1	Consent of Independent Registered Public Accounting Firm				☒
24.1	Power of Attorney (included on signature page)				☒
31.1	Certification of Principal Executive Officer pursuant to Exchange Act Rule, 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				☒
31.2	Certification of Principal Financial Officer pursuant to Exchange Act Rule, 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002				☒
32.1**	Certifications of Principal 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**	Certifications of Principal 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	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

+ Indicates a management contract or compensatory plan or arrangement.

*	All schedules (or similar attachments) have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished to the SEC upon request.
**	The certification attached as Exhibit 32.1 that accompanies this Form 10-K is not deemed filed with the SEC and is not to be incorporated by reference into any filing of Cure Pharmaceutical Holding Corp. under the Securities Act or the Exchange Act, whether made before or after the date of this Form 10-K, irrespective of any general incorporation language contained in such filing.

ITEM 16. FORM 10-K SUMMARY

Not applicable.

68

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Oxnard, California, on April 1, 2022

	CURE PHARMACEUTICAL HOLDING CORP.
Dated: April 1, 2022	By:	/s/ Robert Davidson
		Robert Davidson
		Chief Executive Officer
		(Principal Executive Officer)

Each person whose signature appears below constitutes and appoints Robert Davidson and Michael Redard, and each of them, as their true and lawful attorneys and agents with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorneys and agents may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments hereto; and we do hereby ratify and confirm all that said attorneys and agents shall do or cause to be done by virtue hereof.

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 Company in the capacities and on the dates indicated.

By:	/s/ Robert Davidson
	Robert Davidson
	Chief Executive Officer and Director
	Date: April 1, 2022
By:	/s/ Gene Salkind M.D.
	Gene Salkind M.D.
	Director
	Date: April 1, 2022
By:	/s/ Ruben King-Shaw Jr.
	Ruben King-Shaw Jr.
	Director
	Date: April 1, 2022
By:	/s/ Joshua Held
	Joshua Held
	Director
	Date: April 1, 2022
By:	/s/ John Bell
	John Bell
	Director
	Date: April 1, 2022
By:	/s/ Dov Szapiro
	Dov Szapiro
	Director
	Date: April 1, 2022

69

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CURE PHARMACEUTICAL HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets	F-4
Consolidated Statements of Operations	F-5
Consolidated Statements of Changes Stockholders’ Equity	F-6
Consolidated Statements of Cash Flows	F-7
Notes to Consolidated Financial Statements	F-8 to F-42

70

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Cure Pharmaceutical Holding Corp and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cure Pharmaceutical Holding Corp and subsidiaries (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two year period ended December 31, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for each of the years in the two year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses and expects future losses that raise substantial doubt about the Company's ability to continue as a going concern. Management's evaluation of the events and conditions and management's plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-1

Fair Value of Convertible Promissory Notes

Critical Audit Matter Description

As described in Note 2 and 15 to the consolidated financial statements, as of December 31, 2021, the fair value of the Company’s Convertible Promissory Notes was measured at approximately $9.9 million. The Company elected the fair value option to record its convertible promissory notes within Level 3 fair value hierarchy by utilizing Monte Carlo Simulation model, taking into consideration terms of the note, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. The Company utilized a third-party valuation specialist to assist in the determination of fair value of the convertible promissory notes.

We identified the estimated fair value of convertible promissory notes payable as a critical audit matter because of the significant estimates and assumptions management used in the analysis performed by management to determine fair value. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

How the Critical Audit Matter was Addressed in the Audit

Our audit procedures related to the following:

☐	Testing management’s process for developing the fair value of the convertible promissory notes payable.
☐	Testing the completeness and accuracy of underlying data used in the fair value estimate.
☐	Evaluating the significant assumptions provided by management or developed by the third-party valuation specialist and to discern whether they are reasonable considering (i) the current and past performance of the entity;  (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

In addition, professionals with specialized skill and knowledge were utilized to assist in the evaluation of the Monte Carlo Simulation model inputs.

Goodwill and Indefinite Life Intangibles Impairment Assessments – Cure Pharma and Sera Labs Reporting Units

Critical Audit Matter Description

As described in Note 2, 8 and 20 to the consolidated financial statements, the Company’s consolidated goodwill and in-process research and development balance was $14.2 million as of December 31, 2021, including $9.2 million related to the Cure Pharma Division (“CPD”) reporting unit and $4.7 million related to the Sera Labs reporting unit. Management tests goodwill and indefinite live intangible annually for impairment of value or more frequently when potential impairment triggering events are present. Goodwill is tested for impairment by comparing the estimated fair value of a reporting unit to its carrying value. Management uses a weighted market and income approach to estimate the fair value of its reporting units. Management’s market approach is based on the EBITDA (earnings before interest, income taxes, depreciation and amortization) multiple technique. Management’s income approach is based on a discounted cash flow model. The key assumptions and estimates utilized in the market and income approaches primarily include market multiples, discount rates, and future levels of revenue growth and operating margins.

The principal considerations for our determination that performing procedures relating to the goodwill and capitalized in-process research and development impairment assessments of the CPD and Sera Labs reporting units is a critical audit matter because (i) the significant judgment used by management when determining the fair value estimates of the reporting units; (ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating the significant assumptions used in management’s fair value estimates related to market multiples, discount rates, and future levels of revenue growth and operating margins; and (iii) the audit effort involved in the use of professionals with specialized skill and knowledge.

F-2

How the Critical Audit Matter Was Addressed in the Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing management’s process for determining the fair value estimates of the CPD and Sera Labs reporting units; (ii) evaluating the appropriateness of the weighted market and income approaches; (iii) testing the completeness and accuracy of the underlying data used in the market and income approaches; and (iv) evaluating the reasonableness of the significant assumptions used by management related to market multiples, discount rates, and future levels of revenue growth and operating margins.

Evaluating management’s assumptions related to the future levels of revenue growth and operating margins involved evaluating whether the assumptions were reasonable considering (i) current and past performance of the reporting units; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the weighted market and income approaches and (ii) the reasonableness of significant assumptions related to the market multiples and the discount rates.

In addition, we tested the reconciliation of the fair value of the asset group developed by management to the market capitalization of the Company as of the valuation date.

/s/ RBSM LLP

We have served as the Company’s auditor since 2015.

Las Vegas, NV

April 1, 2022

PCAOB ID: 587 

F-3

  CURE PHARMACEUTICAL HOLDING CORP AND SUBSIDIARIES       

  Consolidated Balance Sheets       

  (in thousand, except share amounts) 

	December 31,  2021			December 31, 2020
ASSETS
Current assets:
Cash	$	16		$	1,725
Accounts receivable, net		357			224
Note receivable, net		-			-
Inventory, net		864			449
Prepaid expenses and other assets		544			1,452
Total current assets		1,781			3,850
Property and equipment, net		1,841			2,074
Finance lease right-of-use assets, net		40			52
Operating lease right-of-use assets, net		257			343
Note receivable		200			-
Investment, net		216			509
Goodwill		13,868			13,868
Intellectual property and patents, net		14,662			1,711
In-process research and development, net		329			14,288
Customer relationships, Tradename, and Non-compete, net		7,297			9,606
Other assets		83			58
Total assets	$	40,574		$	46,359
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	2,848		$	2,135
Accrued expenses		3,753			1,299
Finance lease payable		13			12
Operating lease payable		104			93
Loan payable		235			265
Paycheck protection program loan		-			605
Related party payable		2,011			1,040
Notes payable		2,877			800
Convertible promissory notes		550			550
Fair value convertible promissory notes, net		9,932			6,674
Contract liabilities		508			994
Contingent share considerations		1,430			-
Total current liabilities		24,261			14,467
License fees		-			80
Finance lease payable		27			40
Operating lease payable		174			278
Fair value convertible promissory notes, net		-			7,010
Contingent share considerations		-			3,205
Total liabilities		24,462			25,080
Commitments and contingencies (see Note 23)
Stockholders' equity:
Common stock: $0.001 par value; authorized 150,000,000 shares; 68,201,900 and 59,476,268 shares issued and outstanding as of December 31, 2021 and 2020, respectively		69			60
Additional paid-in capital		110,146			101,807
Common stock issuable		343			665
Accumulated deficit		(94,446	)		(81,253	)
Total stockholders' equity		16,112			21,279
Total liabilities and stockholders' equity	$	40,574		$	46,359

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

F-4

  CURE PHARMACEUTICAL HOLDING CORP AND SUBSIDIARIES       

  Consolidated Statements of Operations       

  For the Year Ended December 31, 2021 and 2020       

  (in thousands, except share amounts)      

	December 31, 2021			December 31, 2020
Revenue:
Product sales, net of discounts and refunds	$	6,050		$	1,744
Consulting research & development income		52			232
PPE sales		363			9
Shipping and other sales		90			66
Total revenues		6,555			2,051
Cost of goods sold:
Cost of goods sold		2,173			1,076
Gross profit		4,382			975
Operating expenses:
Research and development expenses		2,369			2,789
Selling, general and administrative expenses		18,880			11,365
Change in fair value of contingent stock consideration		(1,775	)		5,779
Total operating expenses		19,474			19,933
Net operating loss before other income (expense)		(15,092	)		(18,958	)
Other income (expense):
Interest income		62			37
Settlement income		2,434			-
Gain on extinguishment of debt		741			-
Gain from settlement of payables		-			61
Loss on sale of property, plant and equipment		(41	)		-
Change in fair value of derivative liability		-			91
Change in fair value of convertible promissory notes		(393	)		(9,380	)
Reserve on investment		(350	)		-
Interest expense		(554	)		(2,472	)
Total other income (expense)		1,899			(11,663	)
Net loss before income taxes		(13,193	)		(30,621	)
Provision for income taxes		-			-
Net loss	$	(13,193	)	$	(30,621	)
Net loss per share
Basic	$	(0.26	)	$	(0.65	)
Diluted	$	(0.26	)	$	(0.65	)
Weighted average common shares outstanding
Basic		50,182,229			47,308,158
Diluted		50,182,229			47,308,158

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

F-5

CURE PHARMACEUTICAL HOLDING CORP AND SUBSIDIARIES            

Consolidated Statements of Stockholders' Equity            

(in thousands, except share amounts)     

					Additional
	Common Stock				Paid-in		Common Stock			Accumulated
	Shares		Par		Capital		Issuable			Deficit			Total
Balance, Decembee 31, 2019		38,001,543	$	38	$	63,035	$	1,066		$	(50,632	)	$	13,507
Issuance of common stock for professional services		281,250		1		717		(155	)					563
Issuance of common stock from the equity incentive plan		194,016		-		22								22
Issuance of common stock from exercise of warrants		708,467		1		1,417								1,418
Issuance of common stock from settlement with Chemistry Holdings, Inc.		12,058,623		12		21,935		(246	)					21,701
Issuance of common stock from conversion of convertible promissory notes		1,323,278		1		2,195								2,196
Issuance of common stock from acquisition of Sera Labs, Inc.		6,909,091		7		9,528								9,535
Warrants granted for services						119								119
Fair value of stock options and restricted stock granted						2,507								2,507
Fair value of restricted stock units granted						332								332
Net loss											(30,621	)		(30,621	)
Balance, December 31, 2020		59,476,268	$	60	$	101,807	$	665		$	(81,253	)	$	21,279
Issuance of common stock for professional services		646,512		1		607		179						787
Issuance of common stock from the equity incentive plan		904,929		1		187		(238	)					(50	)
Issuance of common stock for cashless exercise of warrants		26,936		-		-		-						-
Issuance of common stock from conversion of convertible promissory notes		7,147,255		7		4,402		(263	)					4,146
Fair value of stock options and restricted stock granted						2,571								2,571
Fair value of restricted stock units granted						572								572
Net loss											(13,193	)		(13,193	)
Balance, December 31, 2021		68,201,900	$	69	$	110,146	$	343		$	(94,446	)	$	16,112

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

F-6

CURE PHARMACEUTICAL HOLDING CORP AND SUBSIDIARIES    

Consolidated Statements of Cash Flows    

(in thousands)

	For the Years Ended
	December 31, 2021			December 31, 2020
Net loss	$	(13,193	)	$	(30,621	)
Adjustment to reconcile net loss to net cash used in operating activities:
Stock based compensation - services		787			563
Stock based compensation - prepaid		-			-
Stock issued from equity incentive plan		(50	)		22
Gain from settlement of accounts payable		-			(62	)
Gain from extinguishment of debt		(741	)		-
Change in fair value of contingent share consideration		(1,775	)		5,779
Change in fair value of convertible promissory notes		393			9,380
Reserve on investment		350			-
Depreciation and amortization		3,607			918
Amortization of loan discounts		-			1,500
Bad debt expenses		41			46
Recovery of bad debt expense		(221	)		-
Loss on disposal of property, plant and equipment		41			-
Inventory reserve for obsolescence		(176	)		292
Change of fair value in derivative liabilities		-			(91	)
Fair value of vested stock options and restricted stock		3,143			2,839
Warrant granted for broker fee expense		-			119
Change in operating assets and liabilities:
Accounts receivable		(174	)		(59	)
Inventory		(239	)		(147	)
Prepaid expenses and other assets		929			300
Other assets		(25	)		(2	)
Accounts payable		744			493
Accrued expenses		2,822			455
Finance lease payable		(12	)		(11	)
Contract liabilities		(486	)		(1,425	)
License fees		(80	)		(10	)
Cash used in operating activities		(4,315	)		(9,722	)
Cash flows from investing activities
Investment in company		(57	)		(250	)
Purchase of intangible assets		(83	)		(15	)
Net cash acquired from acquisition of Sera Labs, Inc.		-			1,357
Acquisition of property and equipment, net		(35	)		(673	)
Purchase of note receivable		(200	)		(1,550	)
Collection of note receivable		200			1,000
Cash used in investing activities		(175	)		(131	)
Cash flows from financing activities
Proceeds from convertible notes payable		-			5,000
Proceeds from loans payable		279			204
Proceeds from exercise of warrants		-			1,418
Proceeds from notes payable		2,015			1,850
Proceeds from related party payable		796			150
Proceeds from paryoll protection program loan		-			399
Repayment of notes payable		-			(1,100	)
Repayment of related party payable		-			(250	)
Repayment of loans payable		(309	)		(189	)
Cash provided by financing activities		2,781			7,482
Net decrease in cash and cash equivalents		(1,709	)		(2,371	)
Cash and cash equivalents, beginning of year		1,725			4,096
Cash and cash equivalents, end of year	$	16		$	1,725
Supplemental cash flow information
Cash paid for interest and income taxes:
Interest	$	226		$	3
Income taxes	$	-		$	-
Non-cash investing and financing activities:
Common stock issued for conversion of promissory notes and accrued interest	$	4,146		$	2,196
Common stock issued for settlement of earnout liabilities from the acquisiton of Chemistry Holdings, Inc	$	-		$	21,701
Assets received from acquisition of The Sera Labs, Inc.	$	-		$	1,830
Goodwill received from acquisition of The Sera Labs, Inc.	$	-		$	4,687
Customer relationship, non-compete, and trademark resulting from acquisition of The Sera Labs, Inc.	$	-		$	10,182
Liabilities assumed from acquisition of The Sera Labs, Inc.	$	-		$	4,091
Contingent shares consideration for acquisition of The Sera Labs, Inc.	$	-		$	3,083
Related party note payable resulting from acquisition of The Sera Labs, Inc.	$	-		$	1,141
PPP loan assumed from acquisition of The Sera Labs, Inc.	$	-		$	206

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

F-7

CURE PHARMACEUTICALS HOLDING CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED DECEMBER 31, 2021 AND 2020

NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

Business Operations

CURE Pharmaceutical Holding Corp. (“CPCH”), its wholly-owned subsidiary, CURE Pharmaceutical Corporation (“CURE Pharmaceutical”), Cure Chemistry Inc. and its recently acquired related subsidiaries (collectively referred to as “CHI”) and The Sera Labs, Inc. (“Sera Labs”) collectively (the “Company,” “we,” “our,” “us,” or “CURE”) is a biopharmaceutical company focusing on the development and manufacturing of drug formulation and drug delivery technologies in novel dosage forms to improve drug safety, efficacy and patient adherence. Our mission is to improve lives by redefining how medications are delivered and experienced. Our primary business model is to develop wellness and drug products using our proprietary technology, which development may include preclinical and clinical studies and regulatory approval, grant product rights to partners responsible for marketing, sales and distribution, while retaining exclusive manufacturing rights and market, sell and distribute branded health, wellness, and beauty products through Sera Labs.. We operate in a 25,000 square foot cGMP manufacturing plant in Oxnard, CA.

Our technology platform includes oral dissolving film (“OTF”), and encapsulation systems (“microCURE”) compatible with OTF, chews, oral solutions, topical and transdermal dose forms. We apply our technology to pharmaceutical drugs and dietary supplements and topical products for the wellness market. OTF products are about the size of a postage stamp and composed of excipients such as polymers, stabilizers, lipids and surfactants which are all generally recognized as safe. They can be designed to deliver active ingredients to the gastrointestinal, or GI, tract when placed on the tongue and swallowed, or directly to the blood stream when placed under the tongue (sublingual) or on the inner lining of the cheek and lip (buccal).

Background

We were incorporated in the State of Nevada on May 15, 2014. The Company was formerly named Makkanotti Group Corp. which was formed to engage in the business of manufacturing food paper bags in Nicosia, Cyprus.

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

As a result of the Share Exchange, CURE Pharmaceutical became a wholly owned subsidiary of the Company, and the CURE Pharmaceutical Shareholders and CURE Pharmaceutical Noteholders became our controlling shareholders owning, at such time, approximately 65% of our issued and outstanding common stock.

Further, on November 7, 2016, the board of directors and the majority stockholder of the then outstanding shares of registrant’s common stock executed a written consent to change registrant’s name from Makkanotti Group Corp. to CURE Pharmaceutical Holding Corp. The Certificate of Amendment to Articles of Incorporation was filed with the State of Nevada on November 30, 2016. On September 27, 2019, the Company reincorporated from the State of Nevada to the State of Delaware.

On May 14, 2019 (the “Closing Date”), the Company, and CURE Chemistry Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), completed the transactions contemplated by the Agreement and Plan of Merger and Reorganization, dated March 31, 2019 (the “Merger Agreement”), with CHI., a Delaware corporation. As agreed in the Merger Agreement, the Company acquired CHI pursuant to a merger of the Merger Sub with and into CHI (the “Merger”). Pursuant to the Merger, CHI became a wholly-owned subsidiary of the Company and the stockholders of CHI received shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) in exchange for all of the issued and outstanding shares of CHI.

On October 2, 2020, the Company completed its acquisition of Sera Labs, a Delaware corporation, pursuant to an Agreement and Plan of Merger and Reorganization, dated as of September 23, 2020 (the “Sera Labs Merger Agreement”), by and among the Company, Cure Labs, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Sera Labs Merger Sub”), Sera Labs and Nancy Duitch, in her capacity as the security holders representative (“Ms. Duitch”; collectively with the Company, Sera Labs and Sera Labs Merger Sub, the “Parties”). The Sera Labs Merger Agreement provides for the acquisition of Sera Labs by the Company through the merger of Sera Labs Merger Sub with and into Sera Labs, with Sera Labs surviving as a wholly owned subsidiary of the Company (the “Sera Labs Merger”).

The Coronavirus Disease 2019 (COVID-19) Pandemic

The COVID-19 pandemic was declared a global pandemic by the World Health Organization in March 2020, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19, or other public health epidemic poses the risk that the Company or its employees, suppliers, and other partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the future impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by the governments of countries affected and in which the Company operates could continue to disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures have had an adverse impact on global economic conditions, and may continue to have such adverse impact, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company undertook temporary precautionary measures intended to help minimize the risk of the virus to its employees (with such measures still currently in effect), including temporarily requiring a majority of our employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Due to the speed with which the COVID-19 situation is developing, the Company is not able at this time to estimate the impact of COVID-19 on its consolidated financial statements and related disclosures, but the impact could be material for the fiscal year 2022 in all business aspects and could be material during any future period affected either directly or indirectly by this pandemic.

F-8

While the extent and duration of the economic downturn from the COVID-19 pandemic remains unclear, the Company has considered, among other things, whether the global operational disruptions indicate a change in circumstances that may trigger asset impairments and whether it needs to revisit accounting estimates and projections or its expectations about collectability of receivables. Additionally, the Company has considered the potential impacts on its fair value disclosures and on its internal control over financial reporting. During the year ended December 31, 2021 there was no significant direct impact on the Company’s operations as a result of the economic downturn. While significant uncertainty still exists concerning the magnitude of the impact and duration of the COVID-19 pandemic on the global economy, the Company has determined that there was no triggering event for an impairment with respect to any of its assets nor has there been an adverse change in the probability related to the collectability of its receivables. The Company continues to assess the potential impact of the global economic situation on its consolidated financial statements. Please see Item 1A. Risk Factors of this Annual Report on Form 10-K.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Principles of Consolidation

The consolidated financial statements include the accounts of CPHC and its wholly-owned subsidiaries, CURE Pharmaceutical, CHI, and Sera Labs, collectively referred to as (“CURE”, “we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s film strip product represents the principal operations of the Company. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition.

Going Concern and Management’s Liquidity Plans

In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, The Company assesses going concern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to The Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, The Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent The Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15.

The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2021, we had an accumulated deficit of approximately $94.4 million and a working capital deficit of approximately $22.5 million. Our operating activities consume the majority of our cash resources. We anticipate that we will continue to incur operating losses and negative cash flows from operations, at least into the near future, as we execute our commercialization and development plans and strategic and business development initiatives.

As of December 31, 2021, the Company had approximately $0.02 million of cash on hand. We have previously funded, and intend to continue funding, our losses primarily through the issuance of common stock and/or promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations. We believe the funds available through these potential financings will be sufficient to meet the Company’s working capital requirements during the coming year. If we are unable to raise sufficient additional funds, we will have to develop and implement a plan to extend payables, reduce expenditures, or scale back our business plan until sufficient additional capital is raised to support further operations. 

F-9

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

Reclassifications

Certain reclassifications have been made to prior year’s consolidated financial statements to enhance comparability with the current year’s consolidated financial statements. These reclassifications had no effect on the previously reported net loss.

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts, valuation of intangible assets and goodwill, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock based compensation, beneficial conversion features, warrant values, valuation allowance on deferred taxes, incremental borrowing rate (“IBR”) relating to leases, assumption used for discounts and returns in relation to revenue and the assumptions used to calculate derivative liabilities and fair values of the purchase price allocations and convertible promissory notes. Actual results could differ materially from such estimates under different assumptions or circumstances.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of December 31, 2021, and 2020, the Company had no cash equivalents. The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At December 31, 2021 the Company did not have in excess of the federal insurance limit and at December 31, 2020, the Company had $1.5 million in excess of the federal insurance limit.

Investment in Associates

The Company follows Accounting Standards Codification (“ASC”) 325-20, Cost Method Investments (“ASC 325-20”), to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

From November 1, 2019 to February 13, 2020, the Company purchased Convertible Loans (“Loans”) from Releaf Europe BV (“Releaf”) in the amount of $0.5 million. Releaf shall accrue interest on the Loans at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Loans are repaid or at the maturity date of October 31, 2021 (“Maturity Date”). In the event of a request for conversion by the Company (“Request for Conversion”) or at the end of the Maturity Date, the outstanding amount of the Loans and any unpaid accrued interest shall be converted into shares of Releaf (“Shares”) based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2 million of debt and/or equity (“Qualified Financing”), the outstanding amount of the Loan Agreement and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Qualified Financing less a discount of 20% on the subscription price. In addition, both the Company and Releaf agree in the event the pre-money valuation of the Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of December 31, 2021, the Company recorded an investment using the cost method of accounting in Releaf and recorded accrued interest relating to these Loans as well as a reserve on investment . As of the filing date of this report, the Company has not extended or received Shares as per the term of the agreement, but are in discussions with Releaf regarding the terms of conversion of the Loans.    

F-10

Accounts Receivable

Accounts receivable are generally unsecured. The Company closely monitors accounts receivable balances and estimates the allowance for credit losses. These estimates are based on historical collection experience and other factors, including those related to current market conditions and events. The Company’s allowances for accounts receivable have not historically been material. At December 31, 2021 and 2020 management determined that an allowance of $0.08 million and $0.04 million were necessary.

Property and Equipment

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

Manufacturing equipment	5-7 years
Computer and other equipment	3-7 years
Leasehold improvements	3-7 years

In accordance with ASC 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

Leases

Effective January 2019, the Company accounts for its leases under ASC 842. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. The adoption of ASC 842 did not have a material impact to the Company’s consolidated financial statements because the Company did not have any significant operating leases at the time of adoption. During the years ended December 31, 2021 and 2020, the Company as a result of its acquisition has various operating leases in accordance with ASC 842 discussed in Note 21. The Company’s accounting for financing leases (previously referred to as “capital leases”) remained substantially unchanged.

In calculating the right of use and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial term of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

Inventory

Inventory is stated at the lower of cost or net realizable value (“NRV”). NRV is the amount by which the estimated selling price of the product exceeds the sum of any additional costs expected to be incurred on the sale of such product in the ordinary course of business. The Company determines the cost of its inventory, which includes amounts related to materials, direct labor, and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period. In order to state the inventory at the lower of cost or NRV, we maintain reserves against individual stocking units. Inventory reserves, once established, are not reversed until the related inventories have been sold or scrapped. If future demand or market conditions are less favorable than our projections, a write-down of inventory may be required, and would be reflected in cost of product revenues sold in the period the revision is made.

Goodwill and intangible assets

In accordance with ASC 350, Intangibles – Goodwill and Other, in-process research and development (“IPR&D”) projects acquired in a business combination that are not complete as of the acquisition date are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related research and development efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. The Company considers various factors and risks for potential impairment of IPR&D assets, including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, or significant delays, or the inability to bring a product to market and the introduction or advancement of competitors’ products could result in partial or full impairment of the related intangible assets. Consequently, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods. During the period between completion or abandonment, the IPR&D assets will not be amortized but will be tested for impairment on an annual basis and between annual tests if the Company becomes aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts (see Note 8).

Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill, similar to IPR&D, is not amortized but is tested for impairment at least annually, or if circumstances indicate its value may no longer be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company’s business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. The Company operates in two segments as result of the Sera Labs, Inc., acquisition in October 2020 and considered to be the two reporting units and, therefore, goodwill is tested for impairment at the segment level.

The Company does not have intangible assets with indefinite useful lives other than goodwill, Trademark, and the acquired IPR&D discussed in Note 20. As of December 31, 2021, there has been no impairment of goodwill and intangible assets.

F-11

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 year ended December 31, 2021 and 2020.

Contingent consideration liabilities

Certain of the Company’s asset and business acquisitions involve the potential for future payment of consideration to third-parties and former selling shareholders in amounts determined upon attainment of revenue milestones, from product sales, as applicable. The fair value of such liabilities is determined using unobservable inputs. These inputs include the estimated amount and timing of projected cash flows and the risk-adjusted discount rate used to present value the cash flows. These obligations are referred to as contingent consideration.

ASC 805 requires that contingent consideration be estimated and recorded at fair value as of the acquisition date as part of the total consideration transferred. Contingent consideration is an obligation of the acquirer to transfer additional assets or equity interests to the selling shareholders in the future if certain future events occur or conditions are met, such as the attainment of product development milestones. Contingent consideration also includes additional future payments to selling shareholders based on achievement of components of earnings, such as “earn-out” provisions or percentage of future revenues, including royalties paid to the selling shareholders based on a percentage of revenues generated from the Sera Labs’ products.

The fair value of contingent consideration after the acquisition date is reassessed by the Company as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in the consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that the Company records in its consolidated financial statements. See Note 20 for a full discussion of these liabilities.

Related Party

                Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, “Revenue Recognition”. Revenues under Topic 606 are required to be recognized either at a “point in time” or “over time”, depending on the facts and circumstances of the arrangement, and are evaluated using a five-step model.

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

· Identify the contract(s) with customer;

· Identify the performance obligations in the contract;

· Determine the transactions price;

· Allocate the transactions price to the performance obligations in the contract; and

· Recognize revenue when (or as) we satisfy a performance obligation.

Under Topic 606, the Company recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer.

Cure Pharmaceutical Revenue

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

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

F-12

Cure Pharmaceutical has entered into a Collaboration and Joint Development Agreement (“Agreement”) with Medolife Rx (“Medolife”) on February 1, 2021 (“Effective Date”) for Medolife to produce Medolife Products (“Products”) in Cure Pharmaceutical’s cGMP facility. The term of this agreement is for five (5) years from the Effective Date (“Term”). Medolife is to pay $0.3 million to assist in completing the jointly developed production line at Cure Pharmaceutical’s cGMP facility. In addition, Cure Pharmaceutical will produce Products on behalf of Medolife and will grant access to Medolife for a joint production area within Cure Pharmaceutical’s production facility for the Term of this Agreement. The Company has determined that there are no distinct obligations for the $0.3 million and Cure Pharmaceutical does have further obligations as stated in the Agreement, thus the Company will recognize the revenue monthly over the Term, beginning February 1, 2021.

Sera Labs Revenue

Sera Labs recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer.

Revenue from eCommerce sales, including direct-to-consumer sales, are recognized upon shipment of merchandise. We also elected to adopt the practical expedient related to shipping and handling fees which allows us to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Therefore, shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred. Shipping revenue are recorded upon delivery to the customer.

Practical Expedients and Exemptions

The Company has elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows:

· The Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception;

· The Company made the accounting policy election to exclude any sales and similar taxes from the transaction price; and

· The Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Sales Tax

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to a customer, excluding sales taxes. The net amount of sales tax payable to the taxation authority is included accrued expenses in the balance sheet.

Sales Returns, Discounts and Warranties

Sales returns, discount and warranties are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns, discounts and warranties which may occur with distributors and retailers. When evaluating the adequacy of sales returns, discounts and warranties, the Company analyzes the following: historical credit allowances, current sell-through of inventory of the Company’s products, current trends in retail industry, changes in customer demand, acceptance of products, and other related factors.

Cost to Obtain a Contract

The Company pays sales commission to its employees and outside sales representatives for contracts that they obtain relating to wholesale and personal protective equipment. The Company applies the optional practical expedient to immediately expense costs to obtain a contract if the amortization period of the asset that would have been recognized is one year or less. As such, sales commissions are immediately recognized as an expense and included as part of sales and marketing expenses.

Contract Liabilities

Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded as deferred revenues when customers remit contractual cash payments in advance before satisfying performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied. Advance payments and billings in excess of revenue recognized are included in deferred revenue, which is classified as current or noncurrent based on the timing of when the Company expects to recognize revenue. At December 31, 2021 and 2020, we had contract liabilities of $0.5 million and $1.0 million, respectively.

Contract liabilities is made up of the following as of December 31, 2021 and 2020 (in thousands):

	2021		2020
Customer deposits for commercial products	$	508	$	281
Customer deposits for personal protective equipment		-		713
Total contract liabilities	$	508	$	994

The following table summarizes the changes in contract liabilities during the years ended December 31, 2020 and 2019 (in thousands):

Balance at December 31,2019	$	456
Additions		1,033
Transfers to Revenue		(495	)
Balance at December 31,2020		994
Additions		435
Customer deposits returned		(713	)
Transfers to Revenue		(208	)
Balance at December 31, 2021	$	508

F-13

Cost of Revenues

Cost of revenues primarily consists of labor and manufacturing costs for our products.

Advertising Expense

The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying consolidated statements of operations. The Company recorded advertising costs of $2.8 million and $1.1 million for the years ended December 31, 2021 and 2020, respectively.

Research and Development

Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred. The Company recorded research and development expenses of $2.4 million and $2.8 million for the years ended December 31, 2021 and 2020, respectively.

Income Taxes

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

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

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the outbreak of a novel strain of the coronavirus, COVID-19. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Under the CARES Act, net operating losses (“NOLs”) arising in tax years beginning after December 31, 2017, and before January 1, 2021 may be carried back to each of the five tax years preceding the tax year of such loss. Moreover, under the 2017 Tax Act as modified by the CARES Act, federal NOLs of our corporate subsidiaries generated in tax years ending after December 31, 2017, may be carried forward indefinitely, but the deductibility of federal NOLs, particularly for tax years beginning on or after January 1, 2021, may be limited. The accounting for the material income tax impacts has been reflected in the year ended December 31, 2021 financial statements. It is uncertain if and to what extent various states will conform to the 2017 Tax Act or the CARES Act. The Company is currently assessing the impact the CARES Act will have on the Company’s consolidated financial statements.

Stock-Based Compensation

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

Pursuant to ASC 2018-07 (“Topic 718”) for share-based payments to employees, consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the grant date. The Company uses the Black-Scholes option valuation model for estimating fair value at the date of grant.

The Company accounts for restricted stock awards and stock options issued at fair value, based the closing stock price of the Company’s common stock reported on the OTC Bulletin Board. Compensation expense is recognized for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to the Company generally using the straight-line single option method.

In the case of award modifications, the Company accounts for the modification in accordance with Accounting Standards Update (“ASU”) No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, whereby the Company recognizes the effect of the modification in the period the award is modified.

As of January 1, 2019, the Company adopted ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting of share-based payment awards issued to employees and nonemployees. The adoption did not materially impact our consolidated financial statements.

Business combinations

                The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the value of the assets acquired and liabilities assumed is recognized as goodwill.

Fair value measurements

The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements and establishes a framework for measuring fair value and expands disclosure about such fair value measurements. ASC 820 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

· Level 1 – Quoted prices in active markets for identical assets and liabilities.

F-14

· Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

When a part of the purchase consideration consists of shares of the Company common stock, the Company calculates the purchase price attributable to those shares, a Level 1 security, by determining the fair value of those shares quoted on the OTC as of the acquisition date. The Company recognizes estimated fair values of the tangible assets and identifiable intangible assets acquired, including in-process research and development, and liabilities assumed, including any contingent consideration, as of the acquisition date. Goodwill is recognized as any amount of the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in excess of the consideration transferred. ASC 805 precludes the recognition of an assembled workforce as an asset, effectively subsuming any assembled workforce value into goodwill.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. At December, 31, 2021 and 2020, the Company had no financial assets or liabilities recorded at fair value on a recurring basis, except for cash and cash equivalents consisting of money market funds and the Series A and Series B Notes, which we elected the fair value option. These assets and liabilities are measured at fair value using either Black-Scholes model or Monte Carlo simulation model as a Level 3 input. The Company also has certain derivative liabilities and contingent consideration liabilities which are carried at fair value based on Level 3 inputs.

The carrying amounts of cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair values because of the short-term nature of these items.

The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earn outs may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from the date of acquisition to December 31, 2020, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in an increase of the fair value of the contingent stock consideration From January 1, 2021 to December 31, 2021, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in a decrease of the fair value of the contingent stock consideration. In June 2020, the Company settled all of its outstanding contingent consideration liabilities outstanding with CHI. In October 2020, the Company acquired Sera Labs and had an outstanding contingent consideration liability of $3.2 million in relation to the Sera Labs Merger.

The Company has elected the fair value option to account for the Series A and B Notes that were issued on October 30, 2020 and records this at fair value with changes in fair value recorded in the Consolidated Statements of Operations. As a result of applying the fair value option, direct costs and fees related to the Series A and B Notes were recognized in earnings as incurred and not deferred.

The following table summarizes fair value measurements by level at December 31, 2021 for assets and liabilities measured at fair value on a recurring basis (in thousands):

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Fair value of contingent stock consideration	$	1,430	$	-	$	-	$	1,430
Fair value of Series A Note	$	3,075	$	-	$	-	$	3,075
Fair value of Series B Note	$	6,857	$	-	$	-	$	6,857
Fair value of derivative liability	$	-	$	-	$	-	$	-

The following table summarizes fair value measurements by level at December 31, 2020 for assets and liabilities measured at fair value on a recurring basis (in thousands):

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Fair value of contingent stock consideration	$	3,205	$	-	$	-	$	3,205
Fair value of Series A Note	$	7,010	$	-	$	-	$	7,010
Fair value of Series B Note	$	6,674	$	-	$	-	$	6,674
Fair value of derivative liability	$	-	$	-	$	-	$	-

The following table summarizes the changes in Level 3 financial instruments during the years ended December 31, 2021 and 2020 (in thousands):

Fair value of Series A and B Notes at December 31, 2019	$	—
Initial fair value of Series A Note		9,042
Initial fair value of Series B Note		6,990
Change in fair value of Series A Note		165
Change in fair value of Series B Notes		(316	)
Conversion of Series A Notes		(2,197	)
Fair value of Series A and B Notes at December 31, 2020		13,684
Change in fair value of Series A Note		(1,054	)
Change in fair value of Series B Notes		1,448
Conversion of Series A Notes		(2,881	)
Conversion of Series B Notes		(1,265	)
Fair value of Series A and B Notes at December 31, 2021	$	9,932

F-15

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Series A and Series B Notes are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy is as follows:

Date of valuation	December 31, 2021			December 31,  2020
Stock price	$	0.36		$	1.30
Conversion price	$	1.32		$	1.32
Term (in years) – Series A Note		0.83			1.83
Term (in years) – Series B Note		0.13			0.83
Volatility – Series A Note		85	%		86	%
Volatility – Series B Note		65	%		80	%
Risk-free interest rate – Series A Note		0.32	%		0.12	%
Risk-free interest rate – Series B Note		0.06	%		0.09	%
Interest rate		18	%		18	%

The Company recorded a loss of $0.4 million and $9.3 million due to the change in fair value of Series A and B convertible notes for the years ended December 31, 2021 and 2020.

Beneficial Conversion Feature

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

Series A and Series B convertible notes:

As described further in Note 15 - the Company has elected the fair value option to record its Series A and Series B convertible debentures, which were issued in October 2020. The fair value of the Notes is classified within Level 3 of the fair value hierarchy because the fair values were estimated utilizing a Monte Carlo simulation model. Accordingly, the notes are marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the Consolidated Statement of Operations. All issuance costs related to the debentures were expensed as incurred in the Consolidated Statement of Operations.

Accounting for warrants

The Company determines the accounting classification of warrants it issues, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. The Company does not have any liability classified warrants as of any period presented.

Derivative Liabilities

ASC 815-40, requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula and present value pricing. At December 31, 2020, the Company didn’t have a derivative liability, but the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement of operations for the year ended December 31, 2020.

Contingencies

We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. Gain contingencies are recorded when the ultimate resolution of the contingency is resolved.  As disclosed in note 22, the Company recognized settlement income of $2.4 million during 2021.

Net Loss per Common Share

Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, excluding any unvested restricted stock awards. Diluted net earnings per share is computed by dividing net earnings by the weighted average common shares outstanding during the period plus dilutive securities or other contracts to issue common stock as if these securities were exercised or converted to common stock.

F-16

Diluted net loss per share includes the effect of common stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive. Net loss is adjusted for the dilutive effect of the change in fair value liability for price adjustable warrants, if applicable.

The following table sets forth the computation of basic and diluted net income per share for the year ended (in thousands, except per share data):

(Dollars in thousands)	December 31, 2021			December 31, 2020
Net loss	$	(13,193	)	$	(30,621	)
Weighted average outstanding shares of common stock		50,182,229			47,308,158
Dilutive potential common stock shares from:
Vested Stock options from the Company’s 2017 Equity Incentive Plan		-			-
Warrants
Conversion of convertible notes		-			-
Issuance of contingent shares relating to CHI acquisition		-			-
Common stock and common stock equivalents		50,182,229			47,308,158
Income per share:
Basic net loss per share	$	(0.26	)	$	(0.65	)
Diluted net loss per share	$	(0.26	)	$	(0.65	)

The following number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive (in thousands, except per share data):

	December 31, 2021		December 31, 2020
Vested stock options from the Company’s 2017 Equity Incentive Plan		4,067,452		2,757,687
Warrants		1,565,447		2,479,849
Shares to be issued upon conversion of convertible notes		115,047		115,047
Total		5,747,946		5,352,583

In connection with Sera Labs Merger, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones. Due to the uncertainty of the number of Clawback Shares to be issued, these Clawback Shares were not included in the table above.

The Series A and B Notes (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. Due to the uncertainty of the number of shares to be issued, the shares to be issued from the conversion of the Series A and B Notes were also not included in the table above.

Segment Reporting

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it does have segment reporting relating to Cure Pharmaceutical and Sera Labs.

F-17

Risks and Uncertainties

The COVID-19 pandemic has had, and may continue to have, an unfavorable impact on certain areas of the Company’s business. The broader implications of the COVID-19 pandemic on the Company’s financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, and the availability, distribution, and effectiveness of vaccines to address the COVID-19 virus. The impact on the Company’s customers and suppliers and the range of governmental and community reactions to the pandemic are uncertain. The Company may experience reduced customer demand or constrained supply that could materially adversely impact business, financial condition, results of operations, liquidity and cash flows in future periods.

Recent Accounting Pronouncements Adopted

ASU 2020-01

In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815. ASU 2020-01 addresses the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. Observable transactions that require a company to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with ASC 321, Investments – Equity Securities, should be considered immediately before applying or upon discontinuing the equity method. Certain non-derivative forward contracts or purchased call options to acquire equity securities generally will be measured using the fair value principles of ASC 321 before settlement or exercise and consideration shall not be given to how entities will account for the resulting investments on eventual settlement or exercise. ASU 2020-01 is effective for the Company beginning in the first quarter of 2021 and early adoption is permitted. ASU 2020-01 should be applied prospectively. The adoption of this ASU did not have any impact on the Company’s consolidated financial statements.

F-18

Recent Accounting Pronouncements Not Yet Adopted

ASU 2019-12

In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within that fiscal year. Early adoption is permitted. The Company is in the process of evaluating the impacts of this guidance on its consolidated financial statements and related disclosures.

ASU 2020-06

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivative and Hedging - Contracts in Entity’s Own Equity, which simplifies the accounting for convertible instruments. This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is required to be adopted by us in the first quarter of 2023 and must be applied using either a modified or full retrospective approach. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2020 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

There are various other updates recently issued, however, they are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

F-19

NOTE 3 – ACCOUNTS RECEIVABLE

As of December 31, 2021, and 2020, accounts receivable consisted of the following (in thousands):

	December 31, 2021			December 31, 2020
Customer billed	$	437		$	263
Allowance for doubtful accounts		(80	)		(39	)
Accounts receivable, net	$	357		$	224

                Customer billed accounts receivable represents amounts billed to clients that have yet to be collected.

                Allowances for doubtful accounts have been determined through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable based on current and past experience.

NOTE 4 – PREPAID EXPENSES AND OTHER ASSETS

As of December 31, 2021, and 2020, prepaid expenses and other assets consisted of the following (in thousands):

	December 31, 2021			December 31, 2020
Prepaid consulting services	$	-		$	14
Prepaid clinical study		-			32
Prepaid insurance		302			347
PPE deposits		-			700
Prepaid equipment		67			61
Prepaid inventory		95			211
Prepaid expenses		31			66
Other assets		132			79
Prepaid expenses and other assets		627			1,510
Current portion of prepaid expenses and other assets		(544	)		(1,452	)
Prepaid expenses and other assets less current portion	$	83		$	58

NOTE 5 – INVENTORY

Inventory consists of raw materials, packaging components, work-in-process and finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or Net Realized Value.

The carrying value of inventory consisted of the following (in thousands):

	December 31, 2021			December 31, 2020
Raw Materials	$	66		$	64
Packaging Components		117			54
Work-In-Process		40			22
Finished Goods		753			603
	$	976		$	743
Reserve for Obsolescence		(112	)		(294	)
Total inventory	$	864		$	449

NOTE 6 – PROPERTY AND EQUIPMENT

As of December 31, 2021, and 2020, property and equipment consisted of the following (in thousands):

	December 31, 2021			December 31, 2020
Equipment not yet placed in service	$	1,413		$	1,465
Manufacturing equipment		1,095			1,074
Computer and other equipment		626			626
Less accumulated depreciation		(1,293	)		(1,091	)
Property and Equipment, net	$	1,841		$	2,074

For the years ended December 31, 2021 and 2020, depreciation expense amounted to $0.2 million and $0.2 million, respectively.

F-20

NOTE 7 – NOTES RECEIVABLE

On November 12, 2019, the Company purchased a $0.2 million convertible promissory note (the “Coeptis Note”) issued by Coeptis Pharmaceuticals, Inc.(“Coeptis”), a privately held biopharmaceutical company engaged in the acquisition, development and commercialization of pharmaceutical products. The Coeptis Note was due June 15, 2020, pays interest at the rate of 9% per annum and gives us the right, at any time, to convert the Coeptis Note into shares of common stock of Coeptis, at a price per share equal to $2.60 or the share price set by the latest qualified financing, whichever is less.

On July 31, 2020, the Company purchased a $0.5 million secured promissory note (the “Sera Labs Note”) issued by Sera Labs, in connection with the execution of the Memorandum of Understanding summarizing the terms and conditions of a proposed acquisition, pursuant to which Sera Labs will become a wholly-owned subsidiary of the Company. The Sera Labs Note bears an interest at the rate of 9% per annum and has a maturity date of December 31, 2020. On September 16, 2020, a Note Modification Agreement was signed, modifying the principal amount to $0.55 million with interest on $0.5 million of the principal amount accruing from and after July 31, 2020 and on $0.05 million of the principal amount from and after September 16, 2020. The note was settled as part of the Sera Labs acquisition, see Note 20.

On May 26, 2021, the Company purchased a convertible loan (the “May 2021 Loan”) with Biopharmaceutical Research Company (“BRC”) for a total amount of $0.2 million, which is one of a series of notes “(Notes”) pursuant to the terms of the Note Purchase Agreement (“NPA”) offered by BRC. BRC shall accrue interest on the May 2021 Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date or the maturity date of May 26, 2023. In the event of a request for conversion by the Company, the outstanding amount of the May 2021 Loan and any unpaid accrued interest shall be converted into shares of BRC, rounded down to the nearest whole share, by dividing the May 2021 Loan by the price per share obtained by dividing $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (i) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes and (ii) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC. In the event the Company has not requested for conversion, the May 2021 Loan can automatically convert if BRC sells shares of preferred stock (the “Qualified Financing Securities”) to one or more investors in a single transaction or series of related transactions for aggregate proceeds to BRC (including cancellation of indebtedness under the Notes or any other convertible debt) of at least $4 million (a “Qualified Financing”). The May 2021 Loan shall automatically convert at the initial closing of and on the same terms and conditions of the Qualified Financing into a total number of Qualified Financing Securities, rounded down to the nearest whole share, obtained by dividing the May 2021 Loan by the lesser of (i) 80% of the price per share paid for the Qualified Financing Securities by investors in the Qualified Financing and (ii) $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (a) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes, (b) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC and (c) any equity incentive or similar plan to be created or increased in connection with the Qualified Financing).

Note receivable consists of the following (in thousands):

	December 31, 2021		December 31, 2020
Coeptis Pharmaceuticals, Inc.	$	-	$	200
Biopharmaceutical Research Company		200		-
Less: allowance for doubtful accounts		-		(200	)
Less: Current portion of note receivable, net		-		-
Note receivable, non-current portion	$	200	$	-

On January 20, 2021 and February 10, 2021, the Company collected a total of $0.2 million from Coeptis relating to a convertible promissory note issued from Coeptis on November 12, 2019. The total payment of $0.2 million was full satisfaction of the principal amount and accrued interest until February 10, 2021. The Coeptis Note had a maturity date of June 15, 2020, which was not paid by the maturity date and was considered in default as of December 31, 2020 and fully reserved for. The Company recorded the collection of the Coeptis Note as a recovery of bad debt during the year ended December 31, 2021.

NOTE 8 - GOODWILL AND INTANGIBLE ASSETS

The Company incurred $0.08 million and $0.02 million of legal patent costs that were capitalized during the year ended December 31, 2021 and 2020, respectively. During the year ended December 31, 2021, the Company did not acquire any intangibles through an acquisition. During the year ended December 31, 2020, the Company acquired from Sera Labs customer relationships at a fair value of $7.1 million, $2.6 million in Tradename intangibles, $0.5 million in non-compete and $4.7 million in Goodwill from the acquisition of Sera Labs.

Intangible Asset Summary

As of December 31, 2021 and 2020, goodwill and intangible assets, net, consisted of the following (in thousands):

	2021			2020
Goodwill (1)	$	13,868		$	13,868
Intangible assets:
Acquired IPR&D – Chemistry (2)	$	502		$	14,460
Pending patents – Cure Pharmaceutical		341			259
Intangible assets subject to amortization:
Acquired IPR&D – Chemistry (2)		13,958			-
Customer relationships (2)		7,110			7,110
Tradename (2)		2,610			2,610
Noncompete (2)		462			462
Intellectual property		972			972
Issued patents		1,034			1,044
Total intangible assets		26,989			26,917
Accumulated amortization		(4,701	)		(1,312	)
Intangible assets, net	$	22,288		$	25,605

________ 

(1)	Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired from CHI and Sera Labs (see Note 20).
(2)	See Note 20 for information on the Mergers which were consummated in May 2019 and October 2020. During the year ended December 31, 2021, the Company completed two research and development projects that resulted in the company reclass approximately $13.9 million of IPR&D from intangibles not subject to amortization to intangibles subject to amortization.

F-21

Amortization expense was $3.4 million and $0.7 million for the years ended December 31, 2021 and 2020, respectively.

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

2022	$	3,765
2023		3,592
2024		3,429
2025		2,583
2026		1,517
Thereafter		6,559
Total Amortization	$	21,445

NOTE 9 – INVESTMENT

In accordance with ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost.

As of December 31, 2021 and 2020, our investment, at cost, consisted of the following (in thousands):

	December 31, 2021			December 31, 2020
Investment in Releaf Europe BV	$	566		$	509
Valuation reserve		(350	)		-
Investment, net	$	216		$	509

As of December 31, 2021 and 2020, the net investment is based on management’s best estimate of net realizable value, which resulted a valuation reserve amount of $0.4 million and $0, respectively.

NOTE 10 – ACCRUED EXPENSES

As of December 31, 2021 and 2020, accrued expenses consisted of the following (in thousands):

	December 31, 2021		December 31, 2020
Accounts payable factoring	$	1,722	$	-
Refunds and returns liability		445		-
Accrued interest (see Note 11 for amount of related party interest included)		390		194
Accrued payroll		330		308
Accrued vacation leave		173		180
Accrued expenses		359		306
Sales tax payable		334		311
Accrued Expenses	$	3,753	$	1,299

NOTE 11 - RELATED PARTY TRANSACTIONS

Due to Related Party

The Company and other related entities have had a commonality of ownership and/or management control, and as a result, the reported operating results and /or financial position of the Company could significantly differ from what would have been obtained if such entities were autonomous.

On January 2, 2019, Sera Labs entered into an administrative service agreement (“Service Agreement”) with Visionworx, an affiliate of Sear Labs. Visionworx will process payments related to Sera Lab’s operations using Visionworx’s contractual relationship with JPMorgan Chase Bank, N.A. via its Chase Paymentech Select Merchant Payment Instrument Processing Agreement. In consideration for the services, Sera Labs will pay to Visionworx a management fee equal to all associated fees and expenses in connection with the Service Agreement. The Service Agreement is effective on January 2, 2019 and will continue for a period of two years. The term of the Service Agreement will be renewed automatically for additional one-year periods until terminated. The Service Agreement may be terminated by (a) either party for any reason at least thirty days’ prior written notice to the other party; or (b) immediately upon the mutual consent of the parties.

On August 6, 2020, the Company entered into an unsecured promissory note (the “August Note”) with one of the Company’s board members (“Board Investor”), for a principal amount of $0.2 million. The August Note was due on August 6, 2021 and has an interest rate of 8% per annum, payable in quarterly payments. The principal and accrued interest under the August Note can convert into a convertible promissory note if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the August Note. Upon notice by the Company of such debt financing, the holder of the August Note shall have the right, but not the obligation, to convert the August Note into a convertible promissory note, with the same principal amount and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. The Board Investor did not elect to convert their August Note into a convertible promissory note, with the same principal and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. On August 6, 2021, both the Company and the Board Investor agreed to roll the amount of principal and accrued interest as of August 6, 2021 into a new secured promissory note (“Secured August Note”) with a new principal amount of $0.2 million. The Secured August Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The Secured August Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

F-22

On October 2, 2020, the Company completed its acquisition of Sera Labs and pursuant to the Sera Labs Merger Agreement, the Company issued a promissory note in the principal amount of $1.1 million owed to the CEO of Sera Labs (“Duitch Note”), of which $1.0 million is the upfront payment in connection with the closing of the Sera Labs Merger, and $0.1 million is for certain liabilities of Sera Labs due to Mrs. Duitch. The Duitch Note is due September 30, 2021 and has an interest rate of 8% per annum. On November 9, 2020, a payment of $0.3 million was made and applied to principal only. On June 30, 2021, both the Company and the CEO of Sera Labs agreed to roll the amount of principal and accrued interest as of June 30, 2021 as well as other amounts due to the CEO of Sera Labs into a new secured promissory note (“Secured Duitch Note”) with a new principal amount of $1.05 million. The Secured Duitch Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The Secured Duitch Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing

On November 16, 2021, the Company entered into a secured promissory note (the “Secured November Note”) with the Board Investor for a principal amount of $0.05 million. The Secured November Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The Secured November Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

From May 3, 2021 through December 28, 2021, the Company entered into several secured promissory notes (the “Secured Notes”) with one of the Company’s board members (“Second Board Investor”) for a total principal amount of $0.7 million. The Secured Notes are due on April 15, 2022 and have an interest rate of 10% per annum, payable at maturity. The Secured Notes are secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

As of December 31, 2021 and 2020, the Company recorded $0.08 million and $0.02 million, respectively of accrued related party interest and is recorded in accrued expenses. Interest expense in regard to related party payables for the years ended December 31, 2021 and 2020 was $0.08 million and $0.02 million, respectively.

NOTE 12 – LOAN PAYABLE

Loan payable consists of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021			December 31, 2020
Note to a company due September 29, 2022, including interest at 4.32% per annum; unsecured; interest due monthly	$	195		$	-
Note to a company due June 6, 2022, including interest at 4.42% per annum; unsecured; interest due monthly		40			-
Note to a company due September 29, 2021, including interest at 4.32% per annum; unsecured; interest due monthly		-			182
Note to a company due June 6, 2021, including interest at 6.55% per annum; unsecured; interest due monthly		-			83
Current portion of loan payable		(235	)		(265	)
Loan payable, less current portion	$	-		$	-

Interest expense for the years ended December 31, 2021 and 2020 was $0.01 million and $0.003 million, respectively.

F-23

NOTE 13 - NOTES PAYABLE AND PAYCHECK PROTECTION PROGRAM LOAN

Notes payable consist of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021		December 31, 2020
Note to an individual, non-interest bearing, unsecured and due on demand	$	50	$	50
Promissory note to a company originally due May 18, 2021 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity		270		250
Promissory note to a company originally due May 18, 2021 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity		540		500
Promissory note to a company originally due January 13, 2022 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity		500		-
Secured promissory notes to a company originally due April 8, 2022 and October 30, 2021 was rolled into a new secured promissory notes now due June 15, 2022; interest at 10% per annum payable at maturity		502		-
Secured promissory note to a company due April 15, 2022; interest at 10% per annum payable at maturity		300		-
Secured promissory note to a company due April 15, 2022; interest at 10% per annum payable at maturity		100		-
Promissory notes to a company, as of the filing date of this report, terms of the promissory notes are still being negotiated		415		-
Secured promissory notes to a company due June 15, 2022; as of the filing date of this report, terms of the promissory notes are still being negotiated		200
Current portion of note payable	$	2,877	$	800

On May 18, 2020 and August 12, 2020, the Company entered into unsecured promissory notes (“Notes”) with an investor for $0.3 million and $0.5 million, respectively. The Notes were due on May 18, 2021 and August 12, 2021, respectively, and have an interest rate of 8%per annum, payable in quarterly payments. The principal and accrued interest under the Notes can convert into convertible promissory notes if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the Notes. Upon notice by the Company of such debt financing, the holder of the Notes shall have the right, but not the obligation, to convert the Notes into convertible promissory notes, with the same principal amount and interest accruing from the date of issuance of the Notes, on the same terms as the convertible promissory notes issued to such new investors. On October 30, 2021, both the Company and the investor agreed to roll the amount of principal and accrued interest as of October 30, 2021 into new secured promissory notes (“New August & May Notes”) with a new principal amount of $0.3 million and $0.5 million. The New August & May Notes are due on June 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The New August & May Notes are secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On September 25, 2020 the Company issued a demand secured promissory note to Ionic Ventures, LLC (“Ionic”), (the “Promissory Note”), in the principal amount of $1.1 million with the Company receiving gross proceeds of $1.0 million and $0.1 million being an original issue discount. The Promissory Note is secured by certain assets of the Company as further set forth therein, bears no interest rate and is subject to payment on demand of Ionic after the earlier of either (a) the initial date after September 25, 2020 of any offering of securities by the Company with gross proceeds of at least $1.0 million or (b) October 31, 2020. The outstanding principal amount and any unpaid accrued Late Charges (as defined below) may be prepaid at any time, without notice, premium or penalty. Payments will be credited first to the accrued Late Charges then due and payable and the remainder applied to the outstanding principal. On October 30, 2020, the Company repaid in full the outstanding principal balance and all accrued but unpaid interest expense of $1.1 million from the proceeds of the Series A Note further described in Note 15.

On January 13, 2021 and February 25, 2021, the Company received a total of $0.5 million from an investment company (“Investor”) in exchange for a promissory note. At the time the Company received the $0.5 million, terms of promissory note were not yet finalized. On October 30, 2021, both the Company and the investor agreed to roll the amount of principal and accrued interest as of October 30, 2021 into a new secured promissory note (“New January 2021 Note”) with a principal amount of $0.5 million. The New January 2021 Note is due on June 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The New January 2021 Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On April 8, 2021 and September 24, 2021, the Company received $0.3 million and $0.3 million, respectively, from an investment company (“Second Investor”) in exchange for two promissory notes. At the time the Company received the total amount of $0.5 million, terms of promissory notes were not yet finalized. On October 30, 2021, both the Company and the Second Investor agreed to roll the amount of principal and accrued interest as of October 30, 2021 into new secured promissory notes (“New April & September 2021 Notes”) with principal amounts of $0.3 million and $0.3 million. The New April & September 2021 Notes are due on June 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The New April & September 2021 Notes are secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On October 27, 2021, the Company received $0.3 million from an investment company in exchange for a secured promissory note (“October 2021 Note”). The October 2021 Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The October 2021 Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

F-24

On November 18, 2021, the Company received $0.1 million from an investment company in exchange for a secured promissory note (“November 2021 Note”). The November 2021 Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The November 2021 Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

From October 15, 2021 to December 15, 2021, the Company received at total of $0.4 million from an investment company (“Third Investor”) in exchange for promissory notes. Both the Company and Third Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Third Investor are still negotiating the terms of the promissory notes.

On December 16, 2021, the Company received at total of $0.2 million from an investment company in exchange for secured promissory note (“December 2021 Note”). The December 2021 Note is due on June 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The December 2021 Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

Paycheck protection program consist of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021		December 31, 2020
Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act.	$	-	$	399
Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act.		-		206
Payment protection program loan	$	-	$	605

In April 2020, the CURE Pharmaceutical and Sera Labs received loan proceeds in the amount of approximately $0.4 million and $0.2 million under the Paycheck Protection Program (“PPP”). The PPP, established as part of the CARES Act, provides for loans to qualifying businesses. A portion of the loans and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries. No collateral or guarantees were provided in connection with the PPP loans. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act and the Company recorded a gain on extinguishment of debt during the three months ended March 31, 2021. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act and the Company recorded a gain on extinguishment of debt during the three months ended September 30, 2021.

Interest expense for the year ended December 31, 2021 and 2020 was $0.03 million and $0.3 million, respectively.  

NOTE 14 – CONVERTIBLE PROMISSORY NOTES

Convertible promissory notes consist of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021		December 31, 2020
Convertible promissory notes totaling $550,000 due January 31, 2019, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due January 31, 2019 and currently in default. The Company has offered to either repay the convertible promissory notes or request to have them converted into common stock shares of the Company. The beneficial owners of the convertible promissory notes have not yet communicated their intent to either receive payment or convert.	$	550	$	550
Current portion of convertible promissory notes	$	550	$	550

F-25

NOTE 15 – FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES

Fair value of convertible promissory notes consists of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021			December 31, 2020
Series A subordinated convertible note at fair value	$	3,074		$	7,010
Series B subordinated convertible note at fair value		11,858			11,674
Total convertible promissory notes		14,932			18,684
Less: Investor Note offset – Series B Note		(5,000	)		(5,000	)
Carrying value of convertible promissory notes at fair value		9,932			13,684
Less: current portion of convertible promissory notes at fair value		(9,932	)		(6,674	)
Convertible promissory notes, less current portion	$	-		$	7,010

On October 30, 2020, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Investor”) for the purchase of two new series of convertible notes with an aggregate principal amount of $11,500,000. Concurrently the Company consummated the sale to the Investor of a Series A subordinated convertible note (the “Series A Note”) with an initial principal amount of $4,600,000 and a Series B senior secured convertible note (the “Series B Note,” and together with the Series A Note, the “Convertible Notes” and, each a “Convertible Note”) with an initial principal amount of $6,900,000 in a private placement (the “Private Placement”).

The Series A Note was sold with an original issue discount of $600,000 and the Series B Note was sold with an original issue discount of $900,000. The Investor paid for the Series A Note to be issued to the Investor by delivering $4,000,000 in cash consideration and paid for the Series B Note to be issued to the Investor by delivering a secured promissory note (the “Investor Note”) with an initial principal amount of $6,000,000. The Company will receive cash in respect of a Series B Note only upon cash repayment of the corresponding Investor Note. In certain circumstances, the Investor Note may be automatically satisfied through netting against the Series B Note, as described more fully below, rather than through the payment of cash. Until an Investor Note is repaid, the original issue discount and the rest of the principal under the corresponding Series B Note is considered to be “restricted.” Upon any repayment of the Investor Note, the principal of the corresponding Series B Note becomes “unrestricted” on dollar-for-dollar basis, along with a proportional amount of the original issue discount. During the year ended December 31, 2020, the Company received $1.0 million from the Investor Note, leaving a remaining balance of $5.0 million of the Investor Note as of December 31, 2020, which is netted against the Series B Note and included in convertible promissory notes in the balance sheet.

The placement agent received a placement agent fee of $306,000 at the closing of the Private Placement, representing 8% of the gross cash proceeds at the closing. After deducting the placement agent fee, the Company’s estimated expenses associated with the Private Placement and the repayment of the September Note, the Company’s net cash proceeds at the closing were approximately $2,340,000. If the Investor Note is subsequently satisfied in full by payment in cash, the additional financial advisory fee on the cash proceeds received from the Investor Note will be another $480,000, and the aggregate net cash proceeds from the Private Placement as a whole will be approximately $8,850,000. In addition, the placement agent received a warrant (the “Warrant”) exercisable for two years for the purchase of an aggregate of up to 242,424 shares of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock (collectively with the shares underlying the Warrant, the “Warrant Shares”). The Warrant Shares, when issued, will have the same rights, preferences and privileges (including the registration rights described under “Registration Rights Agreement” below) as the shares underlying the Convertible Notes.

The Convertible Notes mature on October 30, 2022 with respect to the Series A Note and October 30, 2021 with respect to the Series B Note (the “Maturity Date”), subject to extension in certain circumstances, including bankruptcy and outstanding events of default. On the Maturity Date, the Company shall pay to the Investor an amount in cash (other than restricted amounts under a Series B Note) presenting all outstanding principal, Make-Whole Amount (as defined in the Convertible Notes), if any, accrued and unpaid interest and accrued and unpaid Late Charges (as defined in the Convertible Notes) on such principal, except that any restricted amount under the Series B Note will be automatically satisfied on the Maturity Date (in lieu of a cash payment) by Maturity Netting (as defined in the Investor Note described below). The Company may not prepay any amounts due under the Convertible Notes. The Convertible Notes shall bear no interest unless there is an occurrence, and during the continuance, of an Event of Default at which point interest shall be 18%.

Each Convertible Note (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet anti-dilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein.

Promptly after the consummation of the sale of the Convertible Notes, the Company repaid in full the outstanding principal balance and all accrued but unpaid interest expense on the Senior Promissory Note issued on September 25, 2020 to the Investor (the “September Note”). The cash payment to the Investor to satisfy the September Note was in the amount $1,100,000.

On January 5, 2022, the Company entered into a Forbearance Agreement (the “Forbearance Agreement”) with the Investor pursuant to which the Investor has agreed not to exercise, with certain exclusions, any of its judicial or administrative enforcement actions to obtain cash or other assets (excluding Common Stock or other assets issuable upon conversion or exchange of the Series B Note in accordance with the terms thereof) from the Company on account of any payment obligations of the Company under the Series B Note or the Event of Default Redemption Notice that exist as of the date of the Forbearance Agreement or that may arise from the date of this Agreement through February 15, 2022. As of the filing date this report, the Company is currently in discussions with the Investor regarding an extension of the Forbearance period.

F-26

Payment of Amounts Due under the Convertible Notes

On the Maturity Date, the Company shall pay to the Investor an amount in cash (other than restricted amounts under a Series B Note) presenting all outstanding principal, Make-Whole Amount (as defined in the Convertible Notes), if any, accrued and unpaid interest and accrued and unpaid Late Charges (as defined in the Convertible Notes) on such principal, except that any restricted amount under the Series B Note will be automatically satisfied on the Maturity Date (in lieu of a cash payment) by Maturity Netting (as defined in the Investor Note described below). The Company may not prepay any amounts due under the Convertible Notes.

Interest

The Convertible Notes shall bear no interest unless there is an occurrence, and during the continuance, of an Event of Default (as defined in the Convertible Notes). During any such Event of Default, the Convertible Notes will accrue interest at the rate of 18% per annum. See “Events of Default” below.

Conversion; Alternate Conversion upon Event of Default

Each Convertible Note (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet anti-dilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price.

If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein.

Conversion Limitation

The Investor will not have the right to convert any portion of a Convertible Notes, to the extent that, after giving effect to such conversion, the Investor (and other certain related parties) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such conversion. This limit may, from time to time, be increased, up to 9.99%, or decreased; provided that any such increase will not be effective until the 61st day after delivery of a notice to the Company of such increase.

Events of Default

The Convertible Notes include certain customary and other Events of Default. In connection with an Event of Default, the Investor may require the Company to redeem in cash any or all of the Convertible Notes. The redemption price will be at a premium to the amount due under the Convertible Notes as described therein.

Change of Control

In connection with a Change of Control (as defined in the Convertible Notes), the Investor may require the Company to redeem all or any portion of the Convertible Notes. The redemption price per share will be at a premium to the amount due under the Convertible Notes as described therein.

Covenants

The Company will be subject to certain customary affirmative and negative covenants including those regarding the payment of dividends, maintenance of its property, transactions with affiliates, and issue notes and certain securities.

Placement Agent Warrants

On October 2, 2020 and December 31, 2020, in connection with the Series A Note and Series B Note, respectively, a placement agent received a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock.

The Company used the Black-Scholes model to determine the fair value of the Warrants issued to the Placement Agent. The Company has elected the Fair Value Option for the Series A Note and Series B Note, accordingly the fair value of the Warrants issued to the placement agent were expensed.

The following table sets forth the assumptions used and calculated aggregated fair values of the warrants:

Significant assumptions (weighted-average):
Risk-free interest rate at grant date	0.36	%
Expected stock price volatility	81.14	%
Expected dividend payout	-
Expected warrant life (in years)	2
Expected forfeiture rate	0	%

F-27

Fair Value Option for the Series A and Series B Notes

The Company elected the fair value option under ASC 825, Financial Instruments, for both the Series A and Series B Notes and accounted for the Notes as follows (1) the portion of the change in the liability’s fair value that is attributable to a change in instrument-specific credit risk in other comprehensive income (2) the remaining change in the liability’s fair value in net income (3) the excess of the fair value over the proceeds is recognized as an expense and (4) upfront costs and fees are recognized in earnings as incurred Gains and losses attributable to changes in credit risk are determined using observable credit default spreads for the issuer or comparable companies; these gains and losses were insignificant during all periods presented. The Company recognized a loss of $4.4 million and $5.1 million at the time of issuance of the Series A and Series B Notes, respectively, as a result of the make whole provision noted within the debt arrangements as the debt holders would be awarded a variable number of shares at the time of conversion which would always equate to an amount greater than the principal amount of the debt.

The Company recorded a gain of $1.0 million and a loss of $1.4 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the year ended December 31, 2021 and were recorded in the consolidated statement of operations. The Company recorded a loss of $4.6 million and $4.7 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the year ended December 31, 2020 and were recorded in the consolidated statement of operations. During the year ended December 31, 2020, the Company incurred debt issuance cost of $0.7 million and $0.1 million attributed to the Series A and Series B Notes, respectively, which were expensed as incurred.

NOTE 16 – WARRANT AGREEMENTS

In June 2020, as part of the Company’s settlement with CHI we amended the warrants to purchase up 8,018,071 common stock shares which vest based on various revenue achievement during year 3 and year 4 post the CHI acquisition Closing Date. As part of the settlement the Company reduced the number of warrants to 708,467 common stock shares at an exercise price of $2.00 per share which was reduced from the original exercise price of $5.01 per share. In addition, the expiration date of the warrants was amended to expire on June 5, 2020. The warrants were exercisable on the date of issuance and were exercised by the warrant holders and the Company received $1.4 million. The Company determined based on Black-Scholes value calculated for pre and post modification, there was no incremental value to the warrant modification as the exercise price was more than the fair value of the stock.

On October 2, 2020 and December 31, 2020, in connection with the Series A Note and Series B Note, respectively, a placement agent is to receive a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock.

On December 8, 2020, an individual exercised 62,851 warrants by means of a cashless exercise with an exercise price of $1.00 per share. As a result of the exercise, the Company is to issue 26,936 common stock shares of the Company. As of the filing of this report, the Company has not yet issued these shares and is included in common stock issuable as of December 31, 2020.

During the year ended December 31, 2021, the Company did not issue any warrants.

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

The Company’s warrant activity was as follows:

	Warrants			Weighted Average Exercise Price		Weighted Average Contractual Remaining Life
Outstanding, December 31, 2019		14,666,518		$	3.70		2.99
Granted		303,030			1.32		1.86
Exercised		(771,318	)		1.92		-
Forfeited/Expired		(11,718,381	)		5.01		-
Outstanding, December 31, 2020		2,479,849		$	1.86		1.23
Granted		-			-		-
Exercised		(96,250	)		1.00		-
Forfeited/Expired		(818,152	)		1.58		-
Outstanding, December 31, 2021		1,565,447		$	2.18		0.66
Exercisable at December 31, 2021		1,565,447		$	2.18		0.66

F-28

Warrant summary for the year ended December 31, 2021:

Range of Exercise Price	Number of Warrants		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Warrants Exercisable		Weighted Average Exercise Price
$ 1.98–$2.31		1,565,447		0.66	$	2.18		1,565,447	$	2.18
		1,565,447		0.66	$	2.18		1,565,447	$	2.18

Warrant summary for the year ended December 31, 2020:

Range of Exercise Price	Number of Warrants		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Warrants Exercisable		Weighted Average Exercise Price
$ 1.00–$6.00		2,479,849		1.23	$	1.86		2,479,849	$	1.86
		2,479,849		1.23	$	1.86		2,479,849	$	1.86

The weighted-average fair value of warrants granted during the years ended December 31, 2021 and 2020, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows:

	December 31, 2021			December 31, 2020
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		0	%		0.36	%
Expected stock price volatility		0	%		81.14	%
Expected dividend payout		-			-
Expected warrant life (in years)		-			3
Expected forfeiture rate		0	%		0	%

The aggregate intrinsic value of warrants outstanding and exercisable at December 31, 2021 and 2020 was $0 and $0.2 million, respectively.

F-29

NOTE 17 – STOCK INCENTIVE PLANS

On December 29, 2017 (“Effective Date”), the Company adopted the CURE Pharmaceutical Holding Corp. 2017 Equity Incentive Plan (the “2017 Equity Plan”), pursuant to which an aggregate of 5,000,000 shares of the common stock of the Company are available for grant. On November 25, 2020, the Company registered an additional 5,000,000 shares of common stock of the Company that are available to be granted by filing a Form S-8 Registration Statement under the Securities Act of 1933.

The Board of Directors have determined that it is in the best interests of the Company and its stockholders to provide an additional incentive for certain employees, including executive officers, and non-employee members of the Board of Directors of the Company by granting to them awards with respect to the common stock of the Company pursuant to the Plan. The Plan seeks to achieve this purpose by providing for awards in the form of Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards (“Awards”). The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date.

The Company did not issue any Incentive Stock Options (“ISO”) during the year ended December 31, 2021 and issued 90,000 ISO’s to an officer of the Company during the year ended December 31, 2020. The Company issued 1,555,526 Nonstatutory Stock Options (“NSO”) to employees of the Company and 338,443 Restricted Common Stock (“Restricted Common Stock”) to various consultants of the Company and 629,338 RSU’s to the members of the Board of Directors during the year ended December 31, 2021. The Company issued 3,510,364 Nonstatutory Stock Options (“NSO”), 150,000 Restricted Common Stock (“RCS”), and 431,578 Restricted Stock Units (“RSU”) to employees, including executive officers, and non-employee members of the Board of Directors of the Company during the year ended December 31, 2020. During the year ended December 31, 2020, 30,000 NSO’s were exercised at $0.74 per share in exchange for $22,200.

Vesting periods for awarded RCS, ISO’s and NSO’s range from immediate to quarterly over a 4 year period. Vesting period for RSU’s is the earlier of (i) the day prior to the next Annual Meeting of Shareholders following the date of grant, and (ii) one (1) year from the Date of Grant. For ISO’s and NSO’s awarded, the term to exercise their ISO or NSO is 10 years.

The Company issued 1,518,194 stock options during the year ended December 31, 2020 to a consultant that contains performance-based vesting conditions where revenue milestones are to be met over a certain period. Such stock option awards would be valued using a Monte Carlo simulation based on the probability of the performance condition being met and the underlying expense would be recognized as the associated vesting conditions are met. No stock options that contain performance-based vesting conditions vested during the year ended December 31, 2021 and the likelihood of meeting the performance-based condition is currently nil.

Stock Options

The Company’s stock option activity was as follows:

	Options			Weighted Average Exercise Price		Weighted Average Contractual Remaining Life
Outstanding, December 31, 2019		3,467,650		$	1.84		8.74
Granted		3,600,364			1.26		9.19
Exercised		(30,000	)		0.74		-
Forfeited/Expired		(752,222	)		1.76		-
Outstanding, December 31, 2020		6,285,792		$	1.52		8.86
Granted		1,555,526			0.95		9.25
Exercised		-			-		-
Forfeited/Expired		(611,250	)		0.97		-
Outstanding, December 31, 2021		7,230,068		$	1.45		8.27
Exercisable at December 31, 2021		4,067,452		$	1.51		7.81

Range of Exercise Price	Number of Awards		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Awards Exercisable		Weighted Average Exercise Price
$ 0.61-$4.01		7,230,068		8.27	$	1.45		4,067,452	$	1.51
		7,230,068		8.27	$	1.45		4,067,452	$	1.51

F-30

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2021 was $0.

The aggregate grant date fair value of options granted during the year ended December 31, 2021 and 2020 amounted to $1.5 million and $2.2 million, respectively. Compensation expense related to stock options for the year ended December 31, 2021 and 2020 was $2.0 million and $2.0 million, respectively.

As of December 31, 2021, the total unrecognized fair value compensation cost related to unvested stock options was $2.1 million, which is to be recognized over a remaining weighted average period of approximately 1.4 years.

The weighted-average fair value of options granted during the years ended December 31, 2021 and 2020, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows:

	December 31, 2021			December 31, 2020
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		1.18	%		0.59	%
Expected stock price volatility		76.95	%		81.14	%
Expected dividend payout		-			-
Expected option life (in years)		10			10
Expected forfeiture rate		0	%		0	%

Restricted Stock

Subject to the restrictions set with respect to the particular Award, a recipient of Restricted Stock generally shall have the rights and privileges of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld for the recipient’s account, and interest may be credited on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the recipient in cash or, at the discretion of the Board or Committee, in shares of common stock having a fair market value equal to the amount of such dividends, if applicable, upon the release of restrictions on the Restricted Stock and, if the Restricted Stock is forfeited, the recipient shall have no right to the dividends.

The Company’s restricted stock activity was as follows:

Compensation expense related to restricted shares for the years ended December 31, 2021 and 2020 was $0.5 million and $0.5 million, respectively. Information relating to non-vested restricted award shares is as follows:

	Restricted Stock Shares			Weighted Average Grant Date Fair Value
Non-vested, December 31, 2019		82,086		$	2.69
Granted		150,000			1.60
Vested		(181,849	)		2.08
Forfeited/Expired		(237	)		-
Non-vested, December 31, 2020		50,000			1.60
Granted		338,443			1.20
Vested		(388,443	)		1.26
Forfeited/Expired		-			-
Non-vested, December 31, 2021		-		$	-

At December 31, 2021 and 2020, the Company had approximately $0 and $0.1 million, respectively, of total unrecognized compensation expense related to restricted stock awards. Compensation will be recognized over a weighted-average period of approximately 0 years and 0.14 years, respectively.

Restricted Stock Units

The terms and conditions of a grant of Restricted Stock Units shall be determined by the Board or Committee. No shares of common stock shall be issued at the time a Restricted Stock Unit is granted. A recipient of Restricted Stock Units shall have no voting rights with respect to the Restricted Stock Units. Upon the expiration of the restrictions applicable to a Restricted Stock Unit, The Company will either issue to the recipient, without charge, one share of common stock per Restricted Stock Unit or cash in an amount equal to the fair market value of one share of common stock.

F-31

The Company’s restricted stock unit activity was as follows:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding, December 31, 2019		60,759		$	3.66
Granted		431,578			1.33
Vested		(60,759	)		3.66
Forfeited/Expired		-			-
Outstanding, December 31, 2020		431,578			1.33
Granted		629,338			0.74
Vested		(411,027	)		1.33
Forfeited/Expired		(61,654	)		1.33
Outstanding, December 31, 2021		588,235		$	0.70

At December 31, 2021 and 2020, the Company had approximately $0.4 million and $0.6 million, respectively, of total unrecognized compensation expense related to restricted stock units. Compensation will be recognized over a weighted-average period of approximately 0.85 years and 0.64 years, respectively.

Compensation expense related to restricted stock units for the years ended December 31, 2021 and 2020 was $0.6 million and $0.3 million, respectively. All compensation expense related to restricted stock units were included in selling, general and administrative expenses for the years ended December 31, 2021 and 2020.

NOTE 18 - STOCKHOLDERS’ EQUITY

Authorized Stock

The Company has authorized to issue is 150,000,000 common shares with a par value of $0.001 per share.

As of December 31, 2021 and 2020, there were 68,201,900 and 59,476,268 shares of the Company’s common stock issued and outstanding, respectively.

Common Share Issuances

F-32

From January 1, 2020 to December 31, 2020, the Company issued 281,250 common stock shares, at prices per share ranging from $1.40 to $3.93 in consideration for certain consulting services. The total value of these issuances was $0.5 million.

From January 1, 2020 to December 31, 2020, the Company issued 194,016 common stock shares, at prices per share ranging from $1.60 to $3.15 in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.02 million.

On June 5, 2020, the Company issued 12,058,623 shares of its common stock, at a price per share equal to$1.82, in connection with the Release, Waiver, and Amendment Agreement entered into with CHI. The total value of these issuances was $21.9 million. $0.2 million related to common stock issuable as of December 31, 2019 that was issued in during 2020.

On June 5, 2020, the Company issued 708,467 common stock shares, at a price of $2.00 per share, from the exercise of certain warrants. Total value of these issuances was $1.4 million.

On October 2, 2020, the Company issued 6,909,091 common stock shares at a price per share of $1.38, in connection with the Sera Labs Merger. The total value of this issuance was $9,534,546.

On December 9, 2020, the Company issued 757,576 common stock shares, at a price per share of 1.32 in connection to conversion of $1,000,000 of the Series A Note plus 565,702 common stock shares at a price per share of $0.89 in connection to the make-whole-amount of $500,000 per the terms of the Series A Note.

From January 1, 2021 to December 31, 2021, the Company issued 904,929 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.2 million.

From January 1, 2021 to December 31, 2021, the Company issued 646,512 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to several consulting agreements. The total value of these issuances was $0.7 million.

From January 1, 2021 to December 31, 2021, the Company issued 26,936 common stock shares, at a price of $1.30 per share, from a cash-less exercise of 96,250 warrants. Total value of these issuances was $0 as this was a cash-less exercise.

From January 1, 2021 to December 31, 2021, the Company issued 297,288 common stock shares, at a price of $0.89 per share, from conversion of a convertible note and accrued interest totaling $0.3 million.

From January 1, 2021 to December 31, 2021, the Company issued 1,439,394 common stock shares, at a price per share of $1.32 in connection to conversion of $1.9 million of the Series A Note plus 2,598,573 common stock shares at a price per share ranging from $0.43 to $0.64 in connection to the make-whole-amounts totaling $1.3 million per the terms of the Series A Note.

From January 1, 2021 to December 31, 2021, the Company issued 1,580,042 common stock shares, at a price per share of $0.24, the Alternative Conversion Price, in connection to conversion of $0.4 million of the Series B Note plus 1,231,958 common stock shares at a price per share of $0.24, in connection to the make-whole-amounts totaling $0.3 million per the terms of the Series B Note.

Common Stock Issuable

In 2018, the Company entered into an amendment to extend the maturity date of a convertible promissory note. As compensation for extending the note, the Company is to issue 150,000 common stock shares of the Company at a price of $2.05 per share. As of the filing of this Current Report on Form 10-K, the Company has not yet issued these common stock shares and has recorded a stock issuable of $0.3 million.

On October 1, 2021, the Company entered into a Consulting Agreement (“Agreement”) with individuals. Per the terms of the Agreement, the Company is to issue 60,000 common stock shares of the Company at prices ranging from $0.43 to $0.68 per share. As of our filing of our Form 10-K for the year ended December 31, 2021, the Company has not yet issued these common stock shares and has recorded a stock payable of $0.03 million.

F-33

NOTE 19 – SEGMENT REPORTING

Business Segments

ASC 280 establishes the standards for reporting information about segments in financial statements. In applying the criteria set forth in ASC 280, we have determined that we have two reportable segments: Cure, which develops and manufactures pharmaceutical and wellness products, and Sera Labs, which sells wellness products through direct to consumer and wholesale channels.

The Company evaluates performance based on net operating profit. Administrative functions such as finance, treasury, and information systems are centralized. However, where applicable, portions of the administrative function expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. In the event any materials and/or services are provided to one operating segment by the other, the transaction is valued according to the company’s transfer policy, which approximates market price. The costs of operating the manufacturing plant is captured discretely in the Cure segment. The Company’s property, plant and equipment, inventory, and accounts receivable are captured and reported discretely within each operating segment.

Summary financial information for the two reportable segments for the year ended December 31, 2021 is as follows (in thousands):

	Cure			Sera Labs			Eliminations			Consolidated
Net sales	$	651		$	6,078		$	(174	)	$	6,555
Net operating loss	$	(8,232	)	$	(6,860	)	$	-		$	(15,092	)
Assets	$	46,491		$	8,608		$	(14,175	)	$	40,574
Accounts receivable, net	$	18		$	339		$	-		$	357
Inventory, net	$	243		$	621		$	-		$	864
Interest expense	$	468		$	86		$	-		$	544
Depreciation and amortization	$	1,295		$	2,312		$	-		$	3,607

Summary financial information for the two reportable segments for the year ended December 31, 2020 is as follows (in thousands):

	Cure			Sera  Labs			Eliminations			Consolidated
Net sales	$	1,007		$	1,044		$	-		$	2,051
Net operating loss	$	(17,377	)	$	(1,581	)	$	-		$	(18,958	)
Assets	$	45,376		$	15,158		$	(14,175	)	$	46,359
Accounts receivable, net	$	131		$	93		$	-		$	224
Inventory, net	$	209		$	240		$	-		$	449
Interest expense	$	2,472		$	-		$	-		$	2,472
Depreciation and amortization	$	341		$	577		$	-		$	918

Total expenditures for additions to long-lived assets were minimal during the years ended December 31, 2021 and 2020.

Disaggregation of Revenues and Concentration Risk

The following table presents the percentage of consolidated revenues attributable to products or services classes that represent greater than ten percent of consolidated revenues for the years ended December 31, 2021 and 2020:

	Year Ended December 31,
	2021			2020
CureFilm™ sales		20	%		37	%
Research & Development services		0	%		11	%
Product sales - CBD		71	%		49	%
Total		91	%		97	%

The Company did not have revenue from any customers that individually represents 10% or more of consolidated revenues for the year ended December 31, 2021. The Company received revenue from one customer that individually represents greater than ten percent of consolidated revenues. Revenue for this customer represents 16% of consolidated revenues for the year ended December 31, 2020. Accounts receivable from this customer at December 31, 2020 was $0.03 million.

F-34

NOTE 20 – BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY

Sera Labs Acquisition

On October 2, 2020, the Company acquired all of the issued and outstanding stock of Sera Labs. All issued and outstanding shares of the capital stock of Sera Labs were converted into the right to receive, subject to customary adjustments, an aggregate of approximately (i) $1.0 million in cash (the “Upfront Payment”) and (ii) up to 6,909,091 shares of the Company’s common stock. On October 1, 2020, the Parties entered into a Waiver of Closing Condition, pursuant to which the Company’s obligation to pay the Upfront Payment at the Effective Time was extended to October 13, 2020. Pursuant to the Sera Labs Merger Agreement, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as set forth in the Sera Labs Merger Agreement. Subsequent to the Effective Time and for a period of two years, the Company agreed to make available to Sera Labs $4.0 million for working capital, less the outstanding amount of the Secured Promissory Note previously issued by the Company to Sera Labs.

Sera Labs is a trusted leader in the health, wellness, and beauty sectors of innovative products with cutting edge technology and superior ingredients such as CBD. Sera Labs creates high quality products that use science-backed, proprietary formulations. Its more than 20 products are sold under the brand names Seratopical™, SeraLabs™, and Gordon’s Herbals™. Sera Labs sells its products at affordable prices, making them easily accessible on a global scale. Strategically positioned in the growth market categories of beauty, health & wellness, and pet care, Sera Labs products are sold in major national drug, grocery chains and mass retailers. The company also sells products under private label to major retailers and multi-level marketers, as well as direct-to-consumer (DTC), via online website orders, including opt-in subscriptions.

The acquisition was accounted for in accordance with ASC 805, Business Combinations. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 12,897,115 total potential shares to be issued, 5,988,024 shares are considered contingent shares based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as described in the Sera Labs Merger Agreement. (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent Shares of $3.1 million will be recorded as a liability as contingent share consideration as of October 2, 2020.

(Dollars in thousands)	Fair Value of the Contingent Share Consideration
Fair value at December 31, 2020	$	3,205
Fair value at December 31, 2021		1,430
Net change in fair value during the year ended December 31, 2021	$	(1,775	)

The Company estimated the fair value of the preliminary purchase price for the acquisition of Sera Labs is approximately $14.2 million. The Company acquired Sera Labs through the issuance of shares of Common Stock of the Company with $1 million of cash consideration to be provided. The preliminary total purchase price was determined based on the following: i) $1 million of the Upfront Payment ii) Company’s closing price ($1.38) on October 2, 2020 for the closing merger consideration shares; and iii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over a 24 month performance period applied to the Clawback Shares.

(Dollars in thousands)	Shares		Amount
Upfront Payment		-	$	1,000
Closing Merger Consideration Shares		6,909,091		9,535
Contingent Consideration Shares (Clawback Shares)		5,988,024		3,083
Liabilities assumed		-		550
Total purchase price		12,897,115	$	14,168

The Company allocated the acquisition consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value of the acquired tangible and identifiable intangible assets were determined based on inputs that are unobservable and significant to the overall fair value measurement. It is also based on estimates and assumptions made by management at the time of the acquisition. As such, this was classified as Level 3 fair value hierarchy measurements and disclosures.

The excess of the purchase price over the estimated fair values was assigned to goodwill.

F-35

The following table summarizes the preliminary estimated fair values of the assets and liabilities assumed in the Sera Labs acquisition, which is subject to change during measurement period:

(Dollars in thousands)
Net assets acquired:
Cash	$	1,357
Other assets		1,440
Property, plant and equipment		6
Other long term assets		384
Intangibles assets		10,182
Goodwill		4,687
Accounts payable and accrued expenses		(1,063	)
Contract liabilities		(1,963	)
Other current liabilities		(462	)
Other long-term liabilities		(400	)
Net assets acquired	$	14,168

Information regarding identifiable intangible assets acquired in the Sera Labs acquisition is presented below:

(Dollars in thousands)	Weighted- average Estimated useful life	Preliminary Estimated Asset Fair Value
Finite-lived intangible assets:
Customer relationships	5.0 years	$	7,110
Tradename	4.0 years	$	2,610
Non-compete	2.0 years	$	462
Total finite-lived intangible assets acquired	4.6 years	$	10,182

CHI Acquisition

On May 14, 2019, the Company acquired all of the issued and outstanding stock of CHI for shares of the Company’s Common Stock. The maximum number of shares of Common Stock to be issued, including escrowed shares and shares issuable pursuant to a variety of earn-out provisions and warrants, is 32,072,283 shares. The shares are allocated as follows: (i) 5,700,000 shares of Common Stock as upfront consideration issued at the Closing (the “Upfront Consideration Shares”); (ii) 7,128,913 shares to be held in escrow, subject to indemnification and clawback rights that lapse upon the achievement of certain milestones (the “Clawback Shares”); (iii) up to 3,207,228 shares that may be issued pursuant to an earn-out over five years upon the achievement of certain technological implementations (“Achievement Shares”); (iv) up to 8,018,071 shares that may be issued pursuant to an earn-out over two years upon the achievement of certain revenue goals (“Earnout Shares”); and (v) up to 8,018,071 shares issuable upon exercise of warrants (“Acquisition Warrants”) that become exercisable upon achieving certain revenue goals between the second and fourth anniversary of the Closing Date at an exercise price of 5.01 per share, exercisable, to the extent vested, for five years from the Closing Date. In exchange for the assets and liabilities acquired, the Company received an investment of $2 million (the “Principal Amount”) from Chemistry Holdings pursuant to a convertible note (the “Note”). Such Note, on the Closing Date, became an intercompany payable and was cancelled.

On June 5, 2020 (the “Release Effective Date”), the Company and CHI, entered into a Release, Waiver, and Amendment (the “Agreement”) and a related Warrant Amendment Agreement (“Warrant Amendment”), in order to make a full resolution of the shares issuable pursuant to the CHI Merger. The Agreement provided as follows: (a) all7,128,913r shares held in escrow were released to the Holders as of the Release Effective Date, of which 140,828shares were returned to the Company for cancellation in consideration for the Company committing to pay certain outstanding liabilities, (b) of the 11,225,299 total shares issuable pursuant to the earn-out provisions in the CHI Merger Agreement, 5,612,654 shares were issued to the Holders as of the Release Effective Date (310,821 of which were assigned back to the Company as of the Release Effective Date) and the obligation of the Company to issue any further earn-out shares was terminated, and (c) certain Holders exercised warrants issued in the CHI Merger to purchase708,467 shares of Common Stock on the Release Effective Date at a price of $2.00 per share (which reflects a reduced exercise price as a result of the Warrant Amendment) for gross proceeds to the Company of approximately $1.4million and the remaining warrants to purchase 7,309,605 shares of Common Stock issued in the CHI Merger expired on the Release Effective Date as a result of an amendment of such warrants effected pursuant to the Warrant Amendment.

F-36

As previously disclosed, the Company undertook to issue warrants to purchase an additional 4,143,706 shares of common stock to certain affiliates of CHI in consideration for consulting and advisory services to be provided following the closing of the CHI Merger (the “Service Warrants”). Pursuant to the Agreement, the undertaking by the Company to issue the Service Warrants was terminated as of the Release Effective Date.

CHI has developed a novel chewable delivery system, nanoemulsions, microemulsions, microcapsules and taste masking solutions. These technologies complement and expand the CUREfilm™ platform to enable the delivery of a wider range of active ingredients at higher doses. The combined technologies create a versatile platform for both immediate and controlled-release drug delivery.

The acquisition was accounted for in accordance with ASC 805, Business Combinations. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 32,072,283 total potential shares to be issued, 26,372,283 shares are considered contingent shares to be released or issued over a period from 5 months to 5 years based on the various contingency as described in the Merger Agreement. (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent and Acquisition Warrant Shares of $14.6 million will be recorded as a liability as contingent share consideration as of May 14, 2019. Below is the change of contingent share consideration during the year ended December 31, 2020:

(Dollars in thousands)	Fair Value of the Contingent Share Consideration
Fair value at December 31, 2018	$	-
Fair value at May 14, 2019		14,632
Net change in fair value during the year ended December 31, 2019		1,657
Fair value of common stock shares to be released from escrow and to be issued		(246	)
Fair Value at December 31, 2019		16,043
Settlement of contingent consideration liability		(21,701	)
Net change in fair value during the year ended December 31, 2020		5,658
Fair Value at December 31, 2020	$	-

Supplemental Pro Forma Information

The following unaudited supplemental pro forma financial information is based on our historical consolidated financial statements, CHI’s historical consolidated financial statements and Sera Lab’s historical consolidated financial statements as adjusted to give effect to the May 14, 2019 acquisition of CHI’s and the October 2, 2020 acquisition of Sera Labs. The unaudited supplemental pro forma financial information for the periods presented gives effect to the acquisition for CHI as if it had occurred on January 1, 2018 and January 1, 2019 for Sera Labs.

F-37

This unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the periods presented. In addition, the unaudited pro forma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable.

The following table presents pro forma sales, net loss attributable to Cure Pharmaceutical Holding, Inc., and net loss attributable to the Company per common share data assuming Sera Labs and CHI were acquired at the beginning of 2019 fiscal year.

For the year ended December 31, 2020 (in thousands, except per share data):

	Cure Pharmaceutical			Sera Labs			Pro forma Adjustments			Consolidated Pro Forma
Net product sales	$	1,049		$	6,728		$	(34	)	$	7,743
Net loss	$	(29,059	)	$	(3,051	)	$	162		$	(31,948	)
Net loss attributable to Cure per common share, basic and diluted	$	(0.65	)	$	(0.26	)				$	(0.68	)

NOTE 21 – INCOME TAXES

The Company accounts for income taxes under ASC Topic 740: Income Taxes which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

The Company generated a deferred tax asset through net operating loss carry-forwards. Management of the Company’s analysis indicates the net operating losses would be subject to significant limitations pursuant to Internal Revenue Code Section 382/383. The Company has not completed its IRC Section 382 Valuation, as required and the NOL’s because of potential Change of Ownerships might limit the usage or render the NOL’s completely worthless. Therefore, Management of the Company based upon Management’s evaluation has recorded a Full Valuation Reserve (100%), since it is more likely than not that no benefit will be realized for the Deferred Tax Assets.

F-38

Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. The Company does not have any uncertain tax positions.

The total deferred tax asset is calculated by multiplying a domestic (US) 21 percent marginal tax rate by the cumulative Net Operating Loss Carryforwards (“NOL”). The Company currently has NOL’s of approximately $13.8 million, which expire through 2038, in general, and NOL’s of approximately $26.9 million, which has an infinite life. The deferred tax asset related to the NOL carryforwards Management has determined based on all the available information that a 100% Valuation reserve is required. The change in the valuation allowance was $7.8 million and $7.3 million for the years ended December 31, 2021 and 2020, respectively.

The provision for incomes taxes for the years ending December 31 is as follows (in thousands):

	2021		2020
Current expense
Federal	$	-	$	-
State		-		-
Deferred expense
Federal	$	-	$	-
State		-		-
Total income tax expense	$	-	$	-

Deferred income tax (liabilities) assets at December 31 are as follows (in thousands):

	2021			2020
Deferred income tax assets
Net operating loss carryforward	$	6,862		$	14,359
Change in fair value of convertible promissory notes		2,517			2,627
Noncash compensation		899			1,018
Deferred revenue		142			180
Reserves and accruals		74			-
Lease liability		89			118
Other intangibles		195			195
Inventory reserve		31			82
Stock based compensation		79			79
Allowance for doubtful accounts		22			96
Accrued expenses		135			131
Total deferred tax assets		11,045			18,885
Deferred income tax liabilities
State income taxes		-			-
ROU assets		(83	)		(110	)
Prepaid expenses and other assets		(43	)		(84	)
Depreciation and amortization		(48	)		(48	)
Valuation allowance		(10,871	)		(18,643	)
Total deferred tax liabilities		(11,045	)		(18,885	)
Deferred income tax, net	$	-		$	-

Open income tax years for audit purposes (Federal and State) are from 2018 through 2021. The Company has not been serviced with any audit notices, as of the year ended December 31, 2021. In addition, the Company is current in filing our sales and income tax returns.

Internal Revenue Code Section 382 places a limitation (“Section 382 Limitation”) on the amount of taxable income that can be offset by NOL carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. California has similar rules. Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the NOL and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods.

In general, the Company is no longer subject to tax examination by the Internal Revenue Service or state taxing authorities for years before 2016. Although the federal and state statutes are closed for purposes of assessing additional income tax in those prior years, the taxing authorities may still make adjustments to the NOL and credit carryforwards used in open years. Therefore, the tax statutes should be considered open as it relates to the NOL and credit carryforwards used in open years. For tax years that remain open to examination, potential examinations may include questioning of the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with the Internal Revenue Code or state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

The Company’s practice is to recognize interest and penalties related to income tax matters in tax expense. As of December 31, 2021 and 2020, The Company has no accrued interest and penalties.

F-39

NOTE 22 - INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS

On September 4, 2018, Cure Pharmaceutical Holding Corp., through its subsidiary, Cure Pharmaceutical Corp. (together, the “Company”) entered into its first multi-year licensing agreement (the “Licensing Agreement”) with Canopy Growth Corporation, a company that engages in the production and sale of medical cannabis (“Canopy”). Under the terms of the Licensing Agreement, Canopy will have an exclusive license to certain of the Company’s intellectual property rights, including the Company’s patented, multi-layer OTF, CUREfilm™ technology for use with cannabis extracts and biosynthetic cannabinoids (“Products”) and the Company’s trademarks in markets around the world where it is legal for Canopy to sell the Products, excluding Asia. The Company will retain the right to manufacture synthetic cannabinoids for pharmaceutical applications.

On November 7, 2019 (the “Effective Date”), the Company and Canopy entered into an Amendment Agreement (“Amendment”) to allow the Company to sell cannabinoid CUREfilm products (“Product”) to third parties internationally, excluding Canada, from the Effective Date until December 31, 2020. However, the Company shall not be allowed to sell any Product that are being specifically developed for Canopy, as identified per the Development Agreement between the Company and Canopy, which is dated on June 17, 2019.

On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million was paid to the Company’s attorneys. The Company recognized a settlement income of $2.4 million during 2021 as a result of this agreement.

During the year ended December 31, 2021 and 2020, the Company recognized $0 and $0.01 million, respectively, of revenue relating to work completed regarding the transfer of technology fee as discussed in the License Agreement with Canopy.

NOTE 23 - COMMITMENTS AND CONTINGENCIES

Litigation

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

On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million was paid to the Company’s attorneys.

On March 26, 2021, a vendor that the Company utilized for consulting services relating to various quality, compliance and regulatory filed a complaint against the Company for breach of contract. On May 18, 2021, the Company responded to the compliant denying their claims and also filed a cross complaint against this vendor for breach of contract by failing to provide deliverables as required by the contract. On February 2, 2022, the Company and the vendor entered into a Settlement Agreement and Mutual Release (“Settlement Agreement”) where both the Company and the vendor desire to come together and to settle fully and finally all difference as filed in each parties complaints. As part of the Settlement Agreement, the Company will pay to the vendor a settlement amount of $0.03 million (“Settlement Amount”) and upon receipt of the Settlement Amount by the vendor, the vendor will execute a Request for Dismissal dismissing the entire actions of all parties.

Tax Filings

The Company tax filings are subject to audit by taxing authorities in jurisdictions where it conducts business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. As of December 31, 2021, the Company is not subject to any such these audits.

Employment Contracts

The Company has entered into employment and severance benefit contracts with certain executive officers. Under the provisions of the contracts, The Company may be required to incur severance obligations for matters relating to changes in control, as defined, and certain terminations of executives. As of December 31, 2021, the Company had such severance obligations for certain executive officers, in accordance with the severance benefit provisions of their respective employment and severance benefit agreements.

On May 8, 2020 the Company entered into a separation agreement (the “Rousset Separation Agreement”) with Jessica Rousset whereby the parties have agreed to a mutual separation of Mrs. Rousset’s employment as the Company’s Chief Operating Officer, effective May 8, 2020.

Pursuant to the terms of the Rousset Separation Agreement, Mrs. Rousset will be entitled to the following severance benefits: (i) a gross sum of $93,461.54, paid in equal installments over a six-month period; (ii) for a period of six months, an amount equal to the cost of her COBRA health benefits if she enrolls for COBRA coverage; (iii) acceleration of vesting of each equity award held by her to the extent the award would have vested had she remained employed for six months following her resignation; and (iv) an extended exercise period for certain equity awards held by her such that she may exercise vested shares under such outstanding equity awards until May 8, 2021. The Separation Agreement contains a release and certain restrictive covenants that are binding upon Mrs. Rousset.

On November 3, 2021 the Company entered into a separation agreement (the “Berlent Separation Agreement”) with Jonathan Berlent whereby the parties have agreed to a mutual separation of Mr. Berlent’s employment as the Company’s Chief Business Officer, effective November 3, 2021.

Pursuant to the terms of the Berlent Separation Agreement, Mr. Berlent will be entitled to the following severance benefits: (i) a gross sum of $0.01 million relating to deferred payroll; (ii) separation pay of three weeks of Mr. Berlent’s gross pay, less standard payroll deductions and withholdings; and (iii) for a period of five months, an amount equal to the cost of his COBRA health benefits if he enrolls for COBRA coverage. The Berlent Separation Agreement contains a release and certain restrictive covenants that are binding upon Mr. Berlent.

F-40

Indemnification

In the normal course of business, the Company may provide indemnification of varying scope under the Company’s agreements with other companies or consultants, typically the Company’s clinical research organizations, suppliers and others. Pursuant to these agreements, the Company will generally agree to indemnify, hold harmless, and reimburse the indemnified parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of the Company’s products. Indemnification provisions could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to the Company’s products. The Company’s office and laboratory facility leases also will generally contain indemnification obligations, including obligations for indemnification of the lessor for environmental law matters and injuries to persons or property of others, arising from the Company’s use or occupancy of the leased property. The term of these indemnification agreements will generally continue in effect after the termination or expiration of the particular research, development, services, lease, or license agreement to which they relate. Historically, the Company has not been subject to any claims or demands for indemnification. The Company also maintains various liability insurance policies that limit the Company’s financial exposure. As a result, the Company management believes that the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of December 31, 2021 and 2020.

Operating leases

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

Sera Labs will pay base monthly rent in the amount of $0.01 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%. If the Lease is terminated based on the occurrence of an “event of default,” The Company will be obligated to pay the abated rent to the lessor.

On May 1, 2019, Sera Labs entered into a lease agreement to lease a 3,822 square feet office space and was absorbed by the Company upon acquisition of Sera Labs on October 2, 2020. The agreement contains an option to extend the lease for an additional 36 months and the Company will reassess the lease term of the contract when it has determined it is reasonably certain to exercise the option. Sera Labs will pay base monthly rent in the amount of $0.01 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%. If the Lease is terminated based on the occurrence of an “event of default,” The Company will be obligated to pay the abated rent to the lessor.

Total rent expense was $0.4 million and $0.3 million for the years ended December 31, 2021 and 2020, respectively.

The Company classified the Sera Labs lease as an operating lease in accordance with ASC 842 and has recognized a right-of-use asset and a lease liability based on the present values of its lease payments over its respective lease term. The Company used the services of a valuation company to compute the IBR, which is necessary to determine the present value of its lease payments since a borrowing rate is not explicitly available on the lease agreement. The concluded IBR is 11.30%. Operating lease payments and lease expense are recognized on a straight-line basis over the lease term.

As of December 31, 2021, the current portion and long-term portion of operating lease liability is $0.1 million and $0.3 million, respectively.

The future payments due under the operating lease for the years ended December 31 are as follows:

Years
2022	$	134
2023		138
2024		46
2025		-
2026		-
Undiscounted cash flow		318
Effects of discounting		(40	)
Lease liabilities recognized	$	278

Finance leases

During 2019, the Company entered into a 5-year equipment lease rental, which requires the company to pay monthly payments of $0.02 million. The Company determined the payments represented substantially all of the fair value of the asset and recorded a right of use asset for $0.06 million and a finance lease liability for $0.06 million as of December 31, 2019 within other assets and liabilities. The company will make payments of $0.02 annually until October 2024. Interest associated with the lease is $0.01 million or less annually based on a discount rate of 9.0%. For the year ended December 31, 2021, the current portion and long-term portion of finance capital lease liability is $0.01 million and $0.03 million, respectively. For the year ended December 31, 2020 the current portion and long-term portion of finance capital lease liability was $0.01 million and $0.04 million, respectively.

Future minimum lease payments under non-cancellable finance leases as of December 31, 2021 are as follows (in thousands):

2022	$	14
2023		14
2024		12
2025		-
2026		-
Thereafter		-
Finance lease liabilities recognized	$	40

F-41

Operating and Financing leases

The following table presents supplemental balance sheet information related to operating and financing leases as of December 31, 2021 and 2020 (in thousands, except lease term and discount rate):

	2021			2020
Operating leases
Right-of-use assets, net	$	257		$	343
Right-of-use lease liabilities, current	$	104		$	93
Right-of-use lease liabilities, noncurrent		174			278
Total operating lease liabilities	$	278		$	371
Financing Leases
Finance lease right-to-use assets, net	$	40		$	52
Current liabilities	$	13		$	12
Noncurrent liabilities		27			40
Total financing lease liabilities	$	40		$	52
Weighted average remaining lease term
Operating leases	2.29 years			3.31 years
Financing leases	2.80 years			3.82 years
Weighted average discount rate
Operating leases		11.3	%		11.3	%
Financing leases		9.0	%		9.0	%

NOTE 24 - SUBSEQUENT EVENTS

Except for the event(s) discussed below, there were no subsequent events that required recognition or disclosure. The Company evaluated subsequent events through the date the consolidated financial statements were issued and filed with the Securities and Exchange Commission.

On January 5, 2022, the Company entered into a Forbearance Agreement (the “Forbearance Agreement”) with the Investor pursuant to which the Investor has agreed not to exercise, with certain exclusions, any of its judicial or administrative enforcement actions to obtain cash or other assets (excluding Common Stock or other assets issuable upon conversion or exchange of the Series B Note in accordance with the terms thereof) from the Company on account of any payment obligations of the Company under the Series B Note or the Event of Default Redemption Notice that exist as of the date of the Forbearance Agreement or that may arise from the date of this Agreement through February 15, 2022. As of the filing date this report, the Company is currently in discussions with the Investor regarding an extension of the Forbearance period.

On January 10, 2022, the Company entered into a senior secured promissory note (the “Senior Secured January Note”) with a Board Investor for a principal amount of $0.2 million. The Senior Secured January Note is due on April 11, 2022 and has an interest rate of 10% per annum, payable at maturity. The Senior Secured January Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On January 12, 2022, the Company entered into a senior secured promissory note (the “Second Senior Secured January Note”) with the CEO of Sera Labs for a principal amount of $0.04 million. The Senior Secured January Note is due on April 11, 2022 and has an interest rate of 10% per annum, payable at maturity. The Secured November Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On January 18, 2022, the Company entered into a senior secured promissory note (the “Third Senior Secured January Note”) with an investor for a principal amount of $0.2 million. The Third Senior Secured January Note is due on April 11, 2022 and has an interest rate of 10% per annum, payable at maturity. The Third Secured January Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On February 2, 2022, the Company and a vendor that the Company utilized for consulting services relating to various quality, compliance and regulatory the vendor entered into a Settlement Agreement and Mutual Release (“Settlement Agreement”) where both the Company and the vendor desire to come together and to settle fully and finally all difference as filed in each parties complaints. As part of the Settlement Agreement, the Company will pay to the vendor a settlement amount of $0.03 million (“Settlement Amount”) and upon receipt of the Settlement Amount by the vendor, the vendor will execute a Request for Dismissal dismissing the entire actions of all parties.

From January 31, 2022 to March 9, 2022, the Company received at total of $2.1 million from an investment company (“Investor”) in exchange for promissory notes. Both the Company and Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory notes.

F-42

EX-21.1

EXHIBIT 21.1

List of Subsidiaries

CURE Pharmaceutical Corporation, a California corporation

Cure Chemistry Inc., a Delaware corporation

The Sera Labs, Inc., a Delaware corporation

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Forms S-8 (No. 333-222565, 333-227791 and 333-250978) and Form S-3 (No. 333-251039) of Cure Pharmaceutical Holding Corp., (the “Company”) of our report dated April 1, 2022, with respect to the Company’s consolidated financial statements as of December 31, 2021 and 2020, which appears in this annual report on Form 10-K for the year ended December 31, 2021.

RBSM, LLP

Las Vegas, NV

April 1, 2022

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Robert Davidson, certify that:

1. I have reviewed this Annual Report on Form 10-K 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 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 an 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 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: April 1, 2022	By:	/s/ Robert Davidson
		Robert Davidson
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Michael Redard, certify that:

1. I have reviewed this Annual Report on Form 10-K 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 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 an 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 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: April 1, 2022	By:	/s/ Michael Redard
		Michael Redard
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION 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 Annual Report of Cure Pharmaceutical Holding Corp. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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: April 1, 2022	By:	/s/ Robert Davidson
		Robert Davidson
		Chief Executive Officer and Director
		(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to Cure Pharmaceutical Holding Corp. and will be retained by Cure Pharmaceutical Holding Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION 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 Annual Report of Cure Pharmaceutical Holding Corp. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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: April 1, 2022	By:	/s/ Michael Redard
		Michael Redard
		Chief Financial Officer
		(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to Cure Pharmaceutical Holding Corp. and will be retained by Cure Pharmaceutical Holding Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Mar. 28, 2022	Jun. 30, 2021
Cover [Abstract]
Entity Registrant Name	CURE PHARMACEUTICAL HOLDING CORP.
Entity Central Index Key	0001643301
Document Type	10-K
Amendment Flag	false
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Well Known Seasoned Issuer	No
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Dec. 31, 2021
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2021
Entity Common Stock Shares Outstanding		69,866,902
Entity Public Float			$ 23.4
Document Annual Report	true
Document Transition Report	false
Entity File Number	333-204857
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	37-1765151
Entity Address Address Line 1	1620 Beacon Place
Entity Address City Or Town	Oxnard
Entity Address State Or Province	CA
Entity Address Postal Zip Code	93033
City Area Code	805
Icfr Auditor Attestation Flag	false
Auditor Name	RBSM LLP
Auditor Location	Las Vegas, NV
Auditor Firm Id	587
Local Phone Number	824-0410
Security 12g Title	Common stock, par value $0.001
Trading Symbol	CURR
Entity Interactive Data Current	Yes

XML

Consolidated Balance Sheets - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Current assets:
Cash	$ 16,000	$ 1,725,000
Accounts receivable, net	357,000	224,000
Note receivable, net	0	0
Inventory, net	864,000	449,000
Prepaid expenses and other assets	544,000	1,452,000
Total current assets	1,781,000	3,850,000
Property and equipment, net	1,841,000	2,074,000
Finance lease right-of-use assets, net	40,000	52,000
Operating lease right-of-use assets, net	257,000	343,000
Note receivable	200,000	0
Investment, net	216,000	509,000
Goodwill	13,868,000	13,868,000
Intellectual property and patents, net	14,662,000	1,711,000
In-process research and development, net	329,000	14,288,000
Customer relationships, Tradename, and Non-compete, net	7,297,000	9,606,000
Other assets	83,000	58,000
Total assets	40,574,000	46,359,000
Current liabilities:
Accounts payable	2,848,000	2,135,000
Accrued expenses	3,753,000	1,299,000
Finance lease payable	13,000	12,000
Operating lease payable	104,000	93,000
Loan payable	235,000	265,000
Paycheck protection program loan	0	605,000
Related party payable	2,011,000	1,040,000
Notes payable	2,877,000	800,000
Convertible promissory notes	550,000	550,000
Fair value convertible promissory notes, net	9,932,000	6,674,000
Contract liabilities	508,000	994,000
Contingent share considerations	1,430,000	0
Total current liabilities	24,261,000	14,467,000
License fees	0	80,000
Finance lease payable	27,000	40,000
Operating lease payable	174,000	278,000
Contingent share considerations	0	3,205,000
Total liabilities	24,462,000	25,080,000
Stockholders' equity:
Common stock: $0.001 par value; authorized 150,000,000 shares; 68,201,900 and 59,476,268 shares issued and outstanding as of December 31, 2021 and 2020, respectively	69,000	60,000
Additional paid-in capital	110,146,000	101,807,000
Common stock issuable	343,000	665,000
Accumulated deficit	(94,446,000)	(81,253,000)
Total stockholders' equity	16,112,000	21,279,000
Total liabilities and stockholders' equity	$ 40,574,000	$ 46,359,000

XML

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2021	Jun. 30, 2021	Dec. 31, 2020
Stockholders' equity
Common stock, shares par value	$ 0.001		$ 0.001
Common stock, shares authorized	150,000,000		150,000,000
Common stock, shares issued	68,201,900	30,000	59,476,268
Common stock, shares outstanding	68,201,900		59,476,268

XML

Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Revenue:
Product sales, net of discounts and refunds	$ 6,050	$ 1,744
Consulting research & development income	52	232
PPE sales	363	9
Shipping and other sales	90	66
Total revenues	6,555	2,051
Cost of goods sold:
Cost of goods sold	2,173	1,076
Gross profit	4,382	975
Operating expenses:
Research and development expenses	2,369	2,789
Selling, general and administrative expenses	18,880	11,365
Change in fair value of contingent stock consideration	(1,775)	5,779
Total operating expenses	19,474	19,933
Net operating loss before other income (expense)	(15,092)	(18,958)
Other income (expense):
Interest income	62	37
Settlement income	2,434	0
Gain on extinguishment of debt	741	0
Gain from settlement of payables	0	61
Loss on sale of property, plant and equipment	(41)	0
Change in fair value of derivative liability	0	91
Change in fair value of convertible promissory notes	(393)	(9,380)
Reserve on investment	(350)	0
Interest expense	(554)	(2,472)
Total other income (expense)	1,899	(11,663)
Net loss before income taxes	(13,193)	(30,621)
Provision for income taxes	0	0
Net loss	$ (13,193)	$ (30,621)
Net loss per share
Basic	$ (0.26)	$ (0.65)
Diluted	$ (0.26)	$ (0.65)
Weighted average common shares outstanding
Basic	50,182,229	47,308,158
Diluted	50,182,229	47,308,158

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Common Stock Issuable	Accumulated Deficit
Balance, shares at Dec. 31, 2019		38,001,543,000
Balance, amount at Dec. 31, 2019	$ 13,507	$ 38	$ 63,035	$ 1,066	$ (50,632)
Issuance of common stock for professional services, shares		281,250,000
Issuance of common stock for professional services, amount	563	$ 1	717	(155)
Issuance of common stock from the equity incentive plan, shares		194,016,000
Issuance of common stock from the equity incentive plan, amount	22	$ 0	22
Issuance of common stock from exercise of warrants, shares		708,467,000
Issuance of common stock from exercise of warrants, amount	1,418	$ 1	1,417
Issuance of common stock from settlement with Chemistry Holdings, Inc., shares		12,058,623,000
Issuance of common stock from settlement with Chemistry Holdings, Inc., amount	21,701	$ 12	21,935	(246)
Issuance of common stock from conversion of convertible promissory notes, shares		1,323,278,000
Issuance of common stock from conversion of convertible promissory notes, amount	2,196	$ 1	2,195
Issuance of common stock from acquisition of Sera Labs, Inc., shares		6,909,091,000
Issuance of common stock from acquisition of Sera Labs, Inc., amount	9,535	$ 7	9,528
Warrants granted for services	119		119
Fair value of stock options and restricted stock granted	2,507		2,507
Fair value of restricted stock units granted	332		332
Net loss	(30,621)				(30,621)
Balance, shares at Dec. 31, 2020		59,476,268,000
Balance, amount at Dec. 31, 2020	21,279	$ 60	101,807	665	(81,253)
Issuance of common stock for professional services, shares		646,512,000
Issuance of common stock for professional services, amount	787	$ 1	607	179
Issuance of common stock from the equity incentive plan, shares		904,929,000
Issuance of common stock from the equity incentive plan, amount	(50)	$ 1	187	(238)
Issuance of common stock from conversion of convertible promissory notes, shares		7,147,255,000
Issuance of common stock from conversion of convertible promissory notes, amount	4,146	$ 7	4,402	(263)
Fair value of stock options and restricted stock granted	2,571		2,571
Fair value of restricted stock units granted	572		572
Net loss	(13,193)				(13,193)
Issuance of common stock for cashless exercise of warrants, shares		26,936,000
Issuance of common stock for cashless exercise of warrants, amount	0	$ 0	0	0
Balance, shares at Dec. 31, 2021		68,201,900,000
Balance, amount at Dec. 31, 2021	$ 16,112	$ 69	$ 110,146	$ 343	$ (94,446)

XML

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Consolidated Statements of Cash Flows
Net loss	$ (13,193,000)	$ (30,621,000)
Adjustment to reconcile net loss to net cash used in operating activities:
Stock based compensation - services	787,000	563,000
Stock based compensation - prepaid	0	0
Stock issued from equity incentive plan	(50,000)	22,000
Gain from settlement of accounts payable	0	(62,000)
Gain from extinguishment of debt	(741,000)	0
Change in fair value of contingent share consideration	(1,775,000)	5,779,000
Change in fair value of convertible promissory notes	393,000	9,380,000
Reserve on investment	350,000	0
Depreciation and amortization	3,607,000	918,000
Amortization of loan discounts	0	1,500,000
Bad debt expenses	41,000	46,000
Recovery of bad debt expense	(221,000)	0
Loss on disposal of property, plant and equipment	41,000	0
Inventory reserve for obsolescence	(176,000)	292,000
Change of fair value in derivative liabilities	0	(91,000)
Fair value of vested stock options and restricted stock	3,143,000	2,839,000
Warrant granted for broker fee expense	0	119,000
Change in operating assets and liabilities:
Accounts receivable	(174,000)	(59,000)
Inventory	(239,000)	(147,000)
Prepaid expenses and other assets	929,000	300,000
Other assets	(25,000)	(2,000)
Accounts payable	744,000	493,000
Accrued expenses	2,822,000	455,000
Finance lease payable	(12,000)	(11,000)
Contract liabilities	(486,000)	(1,425,000)
License fees	(80,000)	(10,000)
Cash used in operating activities	(4,315,000)	(9,722,000)
Cash flows from investing activities
Investment in company	(57,000)	(250,000)
Purchase of intangible assets	83,000	15,000
Net cash acquired from acquisition of Sera Labs, Inc.	0	1,357,000
Acquisition of property and equipment, net	(35,000)	(673,000)
Purchase of note receivable	(200,000)	(1,550,000)
Collection of note receivable	200,000	1,000,000
Cash used in investing activities	(175,000)	(131,000)
Cash flows from financing activities
Proceeds from convertible notes payable	0	5,000,000
Proceeds from loans payable	279,000	204,000
Proceeds from exercise of warrants	0	1,418,000
Proceeds from related party payable	796,000	150,000
Proceeds from notes payable	2,015,000	1,850,000
Proceeds from paryoll protection program loan	0	399,000
Repayment of notes payable	0	(1,100,000)
Repayment of related party payable	0	(250,000)
Repayment of loans payable	(309,000)	(189,000)
Cash provided by financing activities	2,781,000	7,482,000
Net decrease in cash and cash equivalents	(1,709,000)	(2,371,000)
Cash and cash equivalents, beginning of year	1,725,000	4,096,000
Cash and cash equivalents, end of year	16,000	1,725,000
Supplemental cash flow information
Interest	226,000	3,000
Income Tax	0	0
Non-cash investing and financing activities:
Common stock issued for conversion of promissory notes and accrued interest	4,146,000	2,196,000
Common stock issued for settlement of earnout liabilities from the acquisiton of Chemistry Holdings, Inc	0	21,701,000
Assets received from acquisition of The Sera Labs, Inc.	0	1,830,000
Goodwill received from acquisition of The Sera Labs, Inc.	0	4,687,000
Customer relationship, non-compete, and trademark resulting from acquisition of The Sera Labs, Inc.	0	10,182,000
Liabilities assumed from acquisition of The Sera Labs, Inc.	0	4,091
Contingent shares consideration for acquisition of The Sera Labs, Inc.	0	3,083,000
Related party note payable resulting from acquisition of The Sera Labs, Inc.	0	1,141
PPP loan assumed from acquisition of The Sera Labs, Inc.	$ 0	$ 206,000

XML

ORGANIZATION AND DESCRIPTION OF BUSINESS

12 Months Ended

Dec. 31, 2021

ORGANIZATION AND DESCRIPTION OF BUSINESS

ORGANIZATION AND DESCRIPTION OF BUSINESS

NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS

Business Operations

CURE Pharmaceutical Holding Corp. (“CPCH”), its wholly-owned subsidiary, CURE Pharmaceutical Corporation (“CURE Pharmaceutical”), Cure Chemistry Inc. and its recently acquired related subsidiaries (collectively referred to as “CHI”) and The Sera Labs, Inc. (“Sera Labs”) collectively (the “Company,” “we,” “our,” “us,” or “CURE”) is a biopharmaceutical company focusing on the development and manufacturing of drug formulation and drug delivery technologies in novel dosage forms to improve drug safety, efficacy and patient adherence. Our mission is to improve lives by redefining how medications are delivered and experienced. Our primary business model is to develop wellness and drug products using our proprietary technology, which development may include preclinical and clinical studies and regulatory approval, grant product rights to partners responsible for marketing, sales and distribution, while retaining exclusive manufacturing rights and market, sell and distribute branded health, wellness, and beauty products through Sera Labs.. We operate in a 25,000 square foot cGMP manufacturing plant in Oxnard, CA.

Our technology platform includes oral dissolving film (“OTF”), and encapsulation systems (“microCURE”) compatible with OTF, chews, oral solutions, topical and transdermal dose forms. We apply our technology to pharmaceutical drugs and dietary supplements and topical products for the wellness market. OTF products are about the size of a postage stamp and composed of excipients such as polymers, stabilizers, lipids and surfactants which are all generally recognized as safe. They can be designed to deliver active ingredients to the gastrointestinal, or GI, tract when placed on the tongue and swallowed, or directly to the blood stream when placed under the tongue (sublingual) or on the inner lining of the cheek and lip (buccal).

Background

We were incorporated in the State of Nevada on May 15, 2014. The Company was formerly named Makkanotti Group Corp. which was formed to engage in the business of manufacturing food paper bags in Nicosia, Cyprus.

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

As a result of the Share Exchange, CURE Pharmaceutical became a wholly owned subsidiary of the Company, and the CURE Pharmaceutical Shareholders and CURE Pharmaceutical Noteholders became our controlling shareholders owning, at such time, approximately 65% of our issued and outstanding common stock.

Further, on November 7, 2016, the board of directors and the majority stockholder of the then outstanding shares of registrant’s common stock executed a written consent to change registrant’s name from Makkanotti Group Corp. to CURE Pharmaceutical Holding Corp. The Certificate of Amendment to Articles of Incorporation was filed with the State of Nevada on November 30, 2016. On September 27, 2019, the Company reincorporated from the State of Nevada to the State of Delaware.

On May 14, 2019 (the “Closing Date”), the Company, and CURE Chemistry Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), completed the transactions contemplated by the Agreement and Plan of Merger and Reorganization, dated March 31, 2019 (the “Merger Agreement”), with CHI., a Delaware corporation. As agreed in the Merger Agreement, the Company acquired CHI pursuant to a merger of the Merger Sub with and into CHI (the “Merger”). Pursuant to the Merger, CHI became a wholly-owned subsidiary of the Company and the stockholders of CHI received shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) in exchange for all of the issued and outstanding shares of CHI.

On October 2, 2020, the Company completed its acquisition of Sera Labs, a Delaware corporation, pursuant to an Agreement and Plan of Merger and Reorganization, dated as of September 23, 2020 (the “Sera Labs Merger Agreement”), by and among the Company, Cure Labs, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Sera Labs Merger Sub”), Sera Labs and Nancy Duitch, in her capacity as the security holders representative (“Ms. Duitch”; collectively with the Company, Sera Labs and Sera Labs Merger Sub, the “Parties”). The Sera Labs Merger Agreement provides for the acquisition of Sera Labs by the Company through the merger of Sera Labs Merger Sub with and into Sera Labs, with Sera Labs surviving as a wholly owned subsidiary of the Company (the “Sera Labs Merger”).

The Coronavirus Disease 2019 (COVID-19) Pandemic

The COVID-19 pandemic was declared a global pandemic by the World Health Organization in March 2020, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19, or other public health epidemic poses the risk that the Company or its employees, suppliers, and other partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the future impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by the governments of countries affected and in which the Company operates could continue to disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures have had an adverse impact on global economic conditions, and may continue to have such adverse impact, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company undertook temporary precautionary measures intended to help minimize the risk of the virus to its employees (with such measures still currently in effect), including temporarily requiring a majority of our employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Due to the speed with which the COVID-19 situation is developing, the Company is not able at this time to estimate the impact of COVID-19 on its consolidated financial statements and related disclosures, but the impact could be material for the fiscal year 2022 in all business aspects and could be material during any future period affected either directly or indirectly by this pandemic.

While the extent and duration of the economic downturn from the COVID-19 pandemic remains unclear, the Company has considered, among other things, whether the global operational disruptions indicate a change in circumstances that may trigger asset impairments and whether it needs to revisit accounting estimates and projections or its expectations about collectability of receivables. Additionally, the Company has considered the potential impacts on its fair value disclosures and on its internal control over financial reporting. During the year ended December 31, 2021 there was no significant direct impact on the Company’s operations as a result of the economic downturn. While significant uncertainty still exists concerning the magnitude of the impact and duration of the COVID-19 pandemic on the global economy, the Company has determined that there was no triggering event for an impairment with respect to any of its assets nor has there been an adverse change in the probability related to the collectability of its receivables. The Company continues to assess the potential impact of the global economic situation on its consolidated financial statements. Please see Item 1A. Risk Factors of this Annual Report on Form 10-K.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Principles of Consolidation

The consolidated financial statements include the accounts of CPHC and its wholly-owned subsidiaries, CURE Pharmaceutical, CHI, and Sera Labs, collectively referred to as (“CURE”, “we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s film strip product represents the principal operations of the Company. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition.

Going Concern and Management’s Liquidity Plans

In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, The Company assesses going concern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to The Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, The Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent The Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15.

The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2021, we had an accumulated deficit of approximately $94.4 million and a working capital deficit of approximately $22.5 million. Our operating activities consume the majority of our cash resources. We anticipate that we will continue to incur operating losses and negative cash flows from operations, at least into the near future, as we execute our commercialization and development plans and strategic and business development initiatives.

As of December 31, 2021, the Company had approximately $0.02 million of cash on hand. We have previously funded, and intend to continue funding, our losses primarily through the issuance of common stock and/or promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations. We believe the funds available through these potential financings will be sufficient to meet the Company’s working capital requirements during the coming year. If we are unable to raise sufficient additional funds, we will have to develop and implement a plan to extend payables, reduce expenditures, or scale back our business plan until sufficient additional capital is raised to support further operations. 

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

Reclassifications

Certain reclassifications have been made to prior year’s consolidated financial statements to enhance comparability with the current year’s consolidated financial statements. These reclassifications had no effect on the previously reported net loss.

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts, valuation of intangible assets and goodwill, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock based compensation, beneficial conversion features, warrant values, valuation allowance on deferred taxes, incremental borrowing rate (“IBR”) relating to leases, assumption used for discounts and returns in relation to revenue and the assumptions used to calculate derivative liabilities and fair values of the purchase price allocations and convertible promissory notes. Actual results could differ materially from such estimates under different assumptions or circumstances.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of December 31, 2021, and 2020, the Company had no cash equivalents. The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At December 31, 2021 the Company did not have in excess of the federal insurance limit and at December 31, 2020, the Company had $1.5 million in excess of the federal insurance limit.

Investment in Associates

The Company follows Accounting Standards Codification (“ASC”) 325-20, Cost Method Investments (“ASC 325-20”), to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

From November 1, 2019 to February 13, 2020, the Company purchased Convertible Loans (“Loans”) from Releaf Europe BV (“Releaf”) in the amount of $0.5 million. Releaf shall accrue interest on the Loans at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Loans are repaid or at the maturity date of October 31, 2021 (“Maturity Date”). In the event of a request for conversion by the Company (“Request for Conversion”) or at the end of the Maturity Date, the outstanding amount of the Loans and any unpaid accrued interest shall be converted into shares of Releaf (“Shares”) based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2 million of debt and/or equity (“Qualified Financing”), the outstanding amount of the Loan Agreement and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Qualified Financing less a discount of 20% on the subscription price. In addition, both the Company and Releaf agree in the event the pre-money valuation of the Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of December 31, 2021, the Company recorded an investment using the cost method of accounting in Releaf and recorded accrued interest relating to these Loans as well as a reserve on investment . As of the filing date of this report, the Company has not extended or received Shares as per the term of the agreement, but are in discussions with Releaf regarding the terms of conversion of the Loans.    

Accounts Receivable

Accounts receivable are generally unsecured. The Company closely monitors accounts receivable balances and estimates the allowance for credit losses. These estimates are based on historical collection experience and other factors, including those related to current market conditions and events. The Company’s allowances for accounts receivable have not historically been material. At December 31, 2021 and 2020 management determined that an allowance of $0.08 million and $0.04 million were necessary.

Property and Equipment

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

Manufacturing equipment	5-7 years
Computer and other equipment	3-7 years
Leasehold improvements	3-7 years

In accordance with ASC 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

Leases

Effective January 2019, the Company accounts for its leases under ASC 842. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. The adoption of ASC 842 did not have a material impact to the Company’s consolidated financial statements because the Company did not have any significant operating leases at the time of adoption. During the years ended December 31, 2021 and 2020, the Company as a result of its acquisition has various operating leases in accordance with ASC 842 discussed in Note 21. The Company’s accounting for financing leases (previously referred to as “capital leases”) remained substantially unchanged.

In calculating the right of use and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial term of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

Inventory

Inventory is stated at the lower of cost or net realizable value (“NRV”). NRV is the amount by which the estimated selling price of the product exceeds the sum of any additional costs expected to be incurred on the sale of such product in the ordinary course of business. The Company determines the cost of its inventory, which includes amounts related to materials, direct labor, and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period. In order to state the inventory at the lower of cost or NRV, we maintain reserves against individual stocking units. Inventory reserves, once established, are not reversed until the related inventories have been sold or scrapped. If future demand or market conditions are less favorable than our projections, a write-down of inventory may be required, and would be reflected in cost of product revenues sold in the period the revision is made.

Goodwill and intangible assets

In accordance with ASC 350, Intangibles – Goodwill and Other, in-process research and development (“IPR&D”) projects acquired in a business combination that are not complete as of the acquisition date are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related research and development efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. The Company considers various factors and risks for potential impairment of IPR&D assets, including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, or significant delays, or the inability to bring a product to market and the introduction or advancement of competitors’ products could result in partial or full impairment of the related intangible assets. Consequently, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods. During the period between completion or abandonment, the IPR&D assets will not be amortized but will be tested for impairment on an annual basis and between annual tests if the Company becomes aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts (see Note 8).

Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill, similar to IPR&D, is not amortized but is tested for impairment at least annually, or if circumstances indicate its value may no longer be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company’s business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. The Company operates in two segments as result of the Sera Labs, Inc., acquisition in October 2020 and considered to be the two reporting units and, therefore, goodwill is tested for impairment at the segment level.

The Company does not have intangible assets with indefinite useful lives other than goodwill, Trademark, and the acquired IPR&D discussed in Note 20. As of December 31, 2021, there has been no impairment of goodwill and intangible assets.

Impairment of Long-Lived Assets

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

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted 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 year ended December 31, 2021 and 2020.

Contingent consideration liabilities

Certain of the Company’s asset and business acquisitions involve the potential for future payment of consideration to third-parties and former selling shareholders in amounts determined upon attainment of revenue milestones, from product sales, as applicable. The fair value of such liabilities is determined using unobservable inputs. These inputs include the estimated amount and timing of projected cash flows and the risk-adjusted discount rate used to present value the cash flows. These obligations are referred to as contingent consideration.

ASC 805 requires that contingent consideration be estimated and recorded at fair value as of the acquisition date as part of the total consideration transferred. Contingent consideration is an obligation of the acquirer to transfer additional assets or equity interests to the selling shareholders in the future if certain future events occur or conditions are met, such as the attainment of product development milestones. Contingent consideration also includes additional future payments to selling shareholders based on achievement of components of earnings, such as “earn-out” provisions or percentage of future revenues, including royalties paid to the selling shareholders based on a percentage of revenues generated from the Sera Labs’ products.

The fair value of contingent consideration after the acquisition date is reassessed by the Company as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in the consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that the Company records in its consolidated financial statements. See Note 20 for a full discussion of these liabilities.

Related Party

                Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, “Revenue Recognition”. Revenues under Topic 606 are required to be recognized either at a “point in time” or “over time”, depending on the facts and circumstances of the arrangement, and are evaluated using a five-step model.

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

· Identify the contract(s) with customer;

· Identify the performance obligations in the contract;

· Determine the transactions price;

· Allocate the transactions price to the performance obligations in the contract; and

· Recognize revenue when (or as) we satisfy a performance obligation.

Under Topic 606, the Company recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer.

Cure Pharmaceutical Revenue

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

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

Cure Pharmaceutical has entered into a Collaboration and Joint Development Agreement (“Agreement”) with Medolife Rx (“Medolife”) on February 1, 2021 (“Effective Date”) for Medolife to produce Medolife Products (“Products”) in Cure Pharmaceutical’s cGMP facility. The term of this agreement is for five (5) years from the Effective Date (“Term”). Medolife is to pay $0.3 million to assist in completing the jointly developed production line at Cure Pharmaceutical’s cGMP facility. In addition, Cure Pharmaceutical will produce Products on behalf of Medolife and will grant access to Medolife for a joint production area within Cure Pharmaceutical’s production facility for the Term of this Agreement. The Company has determined that there are no distinct obligations for the $0.3 million and Cure Pharmaceutical does have further obligations as stated in the Agreement, thus the Company will recognize the revenue monthly over the Term, beginning February 1, 2021.

Sera Labs Revenue

Sera Labs recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer.

Revenue from eCommerce sales, including direct-to-consumer sales, are recognized upon shipment of merchandise. We also elected to adopt the practical expedient related to shipping and handling fees which allows us to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Therefore, shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred. Shipping revenue are recorded upon delivery to the customer.

Practical Expedients and Exemptions

The Company has elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows:

· The Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception;

· The Company made the accounting policy election to exclude any sales and similar taxes from the transaction price; and

· The Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Sales Tax

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to a customer, excluding sales taxes. The net amount of sales tax payable to the taxation authority is included accrued expenses in the balance sheet.

Sales Returns, Discounts and Warranties

Sales returns, discount and warranties are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns, discounts and warranties which may occur with distributors and retailers. When evaluating the adequacy of sales returns, discounts and warranties, the Company analyzes the following: historical credit allowances, current sell-through of inventory of the Company’s products, current trends in retail industry, changes in customer demand, acceptance of products, and other related factors.

Cost to Obtain a Contract

The Company pays sales commission to its employees and outside sales representatives for contracts that they obtain relating to wholesale and personal protective equipment. The Company applies the optional practical expedient to immediately expense costs to obtain a contract if the amortization period of the asset that would have been recognized is one year or less. As such, sales commissions are immediately recognized as an expense and included as part of sales and marketing expenses.

Contract Liabilities

Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded as deferred revenues when customers remit contractual cash payments in advance before satisfying performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied. Advance payments and billings in excess of revenue recognized are included in deferred revenue, which is classified as current or noncurrent based on the timing of when the Company expects to recognize revenue. At December 31, 2021 and 2020, we had contract liabilities of $0.5 million and $1.0 million, respectively.

Contract liabilities is made up of the following as of December 31, 2021 and 2020 (in thousands):

	2021		2020
Customer deposits for commercial products	$	508	$	281
Customer deposits for personal protective equipment		-		713
Total contract liabilities	$	508	$	994

The following table summarizes the changes in contract liabilities during the years ended December 31, 2020 and 2019 (in thousands):

Balance at December 31,2019	$	456
Additions		1,033
Transfers to Revenue		(495	)
Balance at December 31,2020		994
Additions		435
Customer deposits returned		(713	)
Transfers to Revenue		(208	)
Balance at December 31, 2021	$	508

Cost of Revenues

Cost of revenues primarily consists of labor and manufacturing costs for our products.

Advertising Expense

The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying consolidated statements of operations. The Company recorded advertising costs of $2.8 million and $1.1 million for the years ended December 31, 2021 and 2020, respectively.

Research and Development

Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred. The Company recorded research and development expenses of $2.4 million and $2.8 million for the years ended December 31, 2021 and 2020, respectively.

Income Taxes

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

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

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the outbreak of a novel strain of the coronavirus, COVID-19. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Under the CARES Act, net operating losses (“NOLs”) arising in tax years beginning after December 31, 2017, and before January 1, 2021 may be carried back to each of the five tax years preceding the tax year of such loss. Moreover, under the 2017 Tax Act as modified by the CARES Act, federal NOLs of our corporate subsidiaries generated in tax years ending after December 31, 2017, may be carried forward indefinitely, but the deductibility of federal NOLs, particularly for tax years beginning on or after January 1, 2021, may be limited. The accounting for the material income tax impacts has been reflected in the year ended December 31, 2021 financial statements. It is uncertain if and to what extent various states will conform to the 2017 Tax Act or the CARES Act. The Company is currently assessing the impact the CARES Act will have on the Company’s consolidated financial statements.

Stock-Based Compensation

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

Pursuant to ASC 2018-07 (“Topic 718”) for share-based payments to employees, consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the grant date. The Company uses the Black-Scholes option valuation model for estimating fair value at the date of grant.

The Company accounts for restricted stock awards and stock options issued at fair value, based the closing stock price of the Company’s common stock reported on the OTC Bulletin Board. Compensation expense is recognized for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to the Company generally using the straight-line single option method.

In the case of award modifications, the Company accounts for the modification in accordance with Accounting Standards Update (“ASU”) No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, whereby the Company recognizes the effect of the modification in the period the award is modified.

As of January 1, 2019, the Company adopted ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting of share-based payment awards issued to employees and nonemployees. The adoption did not materially impact our consolidated financial statements.

Business combinations

                The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the value of the assets acquired and liabilities assumed is recognized as goodwill.

Fair value measurements

The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements and establishes a framework for measuring fair value and expands disclosure about such fair value measurements. ASC 820 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

· Level 1 – Quoted prices in active markets for identical assets and liabilities.

· Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

When a part of the purchase consideration consists of shares of the Company common stock, the Company calculates the purchase price attributable to those shares, a Level 1 security, by determining the fair value of those shares quoted on the OTC as of the acquisition date. The Company recognizes estimated fair values of the tangible assets and identifiable intangible assets acquired, including in-process research and development, and liabilities assumed, including any contingent consideration, as of the acquisition date. Goodwill is recognized as any amount of the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in excess of the consideration transferred. ASC 805 precludes the recognition of an assembled workforce as an asset, effectively subsuming any assembled workforce value into goodwill.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. At December, 31, 2021 and 2020, the Company had no financial assets or liabilities recorded at fair value on a recurring basis, except for cash and cash equivalents consisting of money market funds and the Series A and Series B Notes, which we elected the fair value option. These assets and liabilities are measured at fair value using either Black-Scholes model or Monte Carlo simulation model as a Level 3 input. The Company also has certain derivative liabilities and contingent consideration liabilities which are carried at fair value based on Level 3 inputs.

The carrying amounts of cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair values because of the short-term nature of these items.

The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earn outs may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from the date of acquisition to December 31, 2020, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in an increase of the fair value of the contingent stock consideration From January 1, 2021 to December 31, 2021, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in a decrease of the fair value of the contingent stock consideration. In June 2020, the Company settled all of its outstanding contingent consideration liabilities outstanding with CHI. In October 2020, the Company acquired Sera Labs and had an outstanding contingent consideration liability of $3.2 million in relation to the Sera Labs Merger.

The Company has elected the fair value option to account for the Series A and B Notes that were issued on October 30, 2020 and records this at fair value with changes in fair value recorded in the Consolidated Statements of Operations. As a result of applying the fair value option, direct costs and fees related to the Series A and B Notes were recognized in earnings as incurred and not deferred.

The following table summarizes fair value measurements by level at December 31, 2021 for assets and liabilities measured at fair value on a recurring basis (in thousands):

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Fair value of contingent stock consideration	$	1,430	$	-	$	-	$	1,430
Fair value of Series A Note	$	3,075	$	-	$	-	$	3,075
Fair value of Series B Note	$	6,857	$	-	$	-	$	6,857
Fair value of derivative liability	$	-	$	-	$	-	$	-

The following table summarizes fair value measurements by level at December 31, 2020 for assets and liabilities measured at fair value on a recurring basis (in thousands):

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Fair value of contingent stock consideration	$	3,205	$	-	$	-	$	3,205
Fair value of Series A Note	$	7,010	$	-	$	-	$	7,010
Fair value of Series B Note	$	6,674	$	-	$	-	$	6,674
Fair value of derivative liability	$	-	$	-	$	-	$	-

The following table summarizes the changes in Level 3 financial instruments during the years ended December 31, 2021 and 2020 (in thousands):

Fair value of Series A and B Notes at December 31, 2019	$	—
Initial fair value of Series A Note		9,042
Initial fair value of Series B Note		6,990
Change in fair value of Series A Note		165
Change in fair value of Series B Notes		(316	)
Conversion of Series A Notes		(2,197	)
Fair value of Series A and B Notes at December 31, 2020		13,684
Change in fair value of Series A Note		(1,054	)
Change in fair value of Series B Notes		1,448
Conversion of Series A Notes		(2,881	)
Conversion of Series B Notes		(1,265	)
Fair value of Series A and B Notes at December 31, 2021	$	9,932

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Series A and Series B Notes are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy is as follows:

Date of valuation	December 31, 2021			December 31,  2020
Stock price	$	0.36		$	1.30
Conversion price	$	1.32		$	1.32
Term (in years) – Series A Note		0.83			1.83
Term (in years) – Series B Note		0.13			0.83
Volatility – Series A Note		85	%		86	%
Volatility – Series B Note		65	%		80	%
Risk-free interest rate – Series A Note		0.32	%		0.12	%
Risk-free interest rate – Series B Note		0.06	%		0.09	%
Interest rate		18	%		18	%

The Company recorded a loss of $0.4 million and $9.3 million due to the change in fair value of Series A and B convertible notes for the years ended December 31, 2021 and 2020.

Beneficial Conversion Feature

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

Series A and Series B convertible notes:

As described further in Note 15 - the Company has elected the fair value option to record its Series A and Series B convertible debentures, which were issued in October 2020. The fair value of the Notes is classified within Level 3 of the fair value hierarchy because the fair values were estimated utilizing a Monte Carlo simulation model. Accordingly, the notes are marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the Consolidated Statement of Operations. All issuance costs related to the debentures were expensed as incurred in the Consolidated Statement of Operations.

Accounting for warrants

The Company determines the accounting classification of warrants it issues, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. The Company does not have any liability classified warrants as of any period presented.

Derivative Liabilities

ASC 815-40, requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula and present value pricing. At December 31, 2020, the Company didn’t have a derivative liability, but the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement of operations for the year ended December 31, 2020.

Contingencies

We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. Gain contingencies are recorded when the ultimate resolution of the contingency is resolved.  As disclosed in note 22, the Company recognized settlement income of $2.4 million during 2021.

Net Loss per Common Share

Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, excluding any unvested restricted stock awards. Diluted net earnings per share is computed by dividing net earnings by the weighted average common shares outstanding during the period plus dilutive securities or other contracts to issue common stock as if these securities were exercised or converted to common stock.

Diluted net loss per share includes the effect of common stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive. Net loss is adjusted for the dilutive effect of the change in fair value liability for price adjustable warrants, if applicable.

The following table sets forth the computation of basic and diluted net income per share for the year ended (in thousands, except per share data):

(Dollars in thousands)	December 31, 2021			December 31, 2020
Net loss	$	(13,193	)	$	(30,621	)
Weighted average outstanding shares of common stock		50,182,229			47,308,158
Dilutive potential common stock shares from:
Vested Stock options from the Company’s 2017 Equity Incentive Plan		-			-
Warrants
Conversion of convertible notes		-			-
Issuance of contingent shares relating to CHI acquisition		-			-
Common stock and common stock equivalents		50,182,229			47,308,158
Income per share:
Basic net loss per share	$	(0.26	)	$	(0.65	)
Diluted net loss per share	$	(0.26	)	$	(0.65	)

The following number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive (in thousands, except per share data):

	December 31, 2021		December 31, 2020
Vested stock options from the Company’s 2017 Equity Incentive Plan		4,067,452		2,757,687
Warrants		1,565,447		2,479,849
Shares to be issued upon conversion of convertible notes		115,047		115,047
Total		5,747,946		5,352,583

In connection with Sera Labs Merger, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones. Due to the uncertainty of the number of Clawback Shares to be issued, these Clawback Shares were not included in the table above.

The Series A and B Notes (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. Due to the uncertainty of the number of shares to be issued, the shares to be issued from the conversion of the Series A and B Notes were also not included in the table above.

Segment Reporting

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it does have segment reporting relating to Cure Pharmaceutical and Sera Labs.

Risks and Uncertainties

The COVID-19 pandemic has had, and may continue to have, an unfavorable impact on certain areas of the Company’s business. The broader implications of the COVID-19 pandemic on the Company’s financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, and the availability, distribution, and effectiveness of vaccines to address the COVID-19 virus. The impact on the Company’s customers and suppliers and the range of governmental and community reactions to the pandemic are uncertain. The Company may experience reduced customer demand or constrained supply that could materially adversely impact business, financial condition, results of operations, liquidity and cash flows in future periods.

Recent Accounting Pronouncements Adopted

ASU 2020-01

In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815. ASU 2020-01 addresses the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. Observable transactions that require a company to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with ASC 321, Investments – Equity Securities, should be considered immediately before applying or upon discontinuing the equity method. Certain non-derivative forward contracts or purchased call options to acquire equity securities generally will be measured using the fair value principles of ASC 321 before settlement or exercise and consideration shall not be given to how entities will account for the resulting investments on eventual settlement or exercise. ASU 2020-01 is effective for the Company beginning in the first quarter of 2021 and early adoption is permitted. ASU 2020-01 should be applied prospectively. The adoption of this ASU did not have any impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

ASU 2019-12

In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within that fiscal year. Early adoption is permitted. The Company is in the process of evaluating the impacts of this guidance on its consolidated financial statements and related disclosures.

ASU 2020-06

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivative and Hedging - Contracts in Entity’s Own Equity, which simplifies the accounting for convertible instruments. This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is required to be adopted by us in the first quarter of 2023 and must be applied using either a modified or full retrospective approach. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2020 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

There are various other updates recently issued, however, they are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

XML

Accounts Receivables

12 Months Ended

Dec. 31, 2021

Accounts Receivables

Accounts Receivable

NOTE 3 – ACCOUNTS RECEIVABLE

As of December 31, 2021, and 2020, accounts receivable consisted of the following (in thousands):

	December 31, 2021			December 31, 2020
Customer billed	$	437		$	263
Allowance for doubtful accounts		(80	)		(39	)
Accounts receivable, net	$	357		$	224

                Customer billed accounts receivable represents amounts billed to clients that have yet to be collected.

                Allowances for doubtful accounts have been determined through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable based on current and past experience.

XML

PREPAID EXPENSES AND OTHER ASSETS

12 Months Ended

Dec. 31, 2021

PREPAID EXPENSES AND OTHER ASSETS

PREPAID EXPENSES AND OTHER ASSETS

NOTE 4 – PREPAID EXPENSES AND OTHER ASSETS

As of December 31, 2021, and 2020, prepaid expenses and other assets consisted of the following (in thousands):

	December 31, 2021			December 31, 2020
Prepaid consulting services	$	-		$	14
Prepaid clinical study		-			32
Prepaid insurance		302			347
PPE deposits		-			700
Prepaid equipment		67			61
Prepaid inventory		95			211
Prepaid expenses		31			66
Other assets		132			79
Prepaid expenses and other assets		627			1,510
Current portion of prepaid expenses and other assets		(544	)		(1,452	)
Prepaid expenses and other assets less current portion	$	83		$	58

XML

INVENTORY

12 Months Ended

Dec. 31, 2021

INVENTORY

INVENTORY

NOTE 5 – INVENTORY

Inventory consists of raw materials, packaging components, work-in-process and finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or Net Realized Value.

The carrying value of inventory consisted of the following (in thousands):

	December 31, 2021			December 31, 2020
Raw Materials	$	66		$	64
Packaging Components		117			54
Work-In-Process		40			22
Finished Goods		753			603
	$	976		$	743
Reserve for Obsolescence		(112	)		(294	)
Total inventory	$	864		$	449

XML

PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2021

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

NOTE 6 – PROPERTY AND EQUIPMENT

As of December 31, 2021, and 2020, property and equipment consisted of the following (in thousands):

	December 31, 2021			December 31, 2020
Equipment not yet placed in service	$	1,413		$	1,465
Manufacturing equipment		1,095			1,074
Computer and other equipment		626			626
Less accumulated depreciation		(1,293	)		(1,091	)
Property and Equipment, net	$	1,841		$	2,074

For the years ended December 31, 2021 and 2020, depreciation expense amounted to $0.2 million and $0.2 million, respectively.

XML

NOTES RECEIVABLE

12 Months Ended

Dec. 31, 2021

PROPERTY AND EQUIPMENT

NOTES RECEIVABLE

NOTE 7 – NOTES RECEIVABLE

On November 12, 2019, the Company purchased a $0.2 million convertible promissory note (the “Coeptis Note”) issued by Coeptis Pharmaceuticals, Inc.(“Coeptis”), a privately held biopharmaceutical company engaged in the acquisition, development and commercialization of pharmaceutical products. The Coeptis Note was due June 15, 2020, pays interest at the rate of 9% per annum and gives us the right, at any time, to convert the Coeptis Note into shares of common stock of Coeptis, at a price per share equal to $2.60 or the share price set by the latest qualified financing, whichever is less.

On July 31, 2020, the Company purchased a $0.5 million secured promissory note (the “Sera Labs Note”) issued by Sera Labs, in connection with the execution of the Memorandum of Understanding summarizing the terms and conditions of a proposed acquisition, pursuant to which Sera Labs will become a wholly-owned subsidiary of the Company. The Sera Labs Note bears an interest at the rate of 9% per annum and has a maturity date of December 31, 2020. On September 16, 2020, a Note Modification Agreement was signed, modifying the principal amount to $0.55 million with interest on $0.5 million of the principal amount accruing from and after July 31, 2020 and on $0.05 million of the principal amount from and after September 16, 2020. The note was settled as part of the Sera Labs acquisition, see Note 20.

On May 26, 2021, the Company purchased a convertible loan (the “May 2021 Loan”) with Biopharmaceutical Research Company (“BRC”) for a total amount of $0.2 million, which is one of a series of notes “(Notes”) pursuant to the terms of the Note Purchase Agreement (“NPA”) offered by BRC. BRC shall accrue interest on the May 2021 Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date or the maturity date of May 26, 2023. In the event of a request for conversion by the Company, the outstanding amount of the May 2021 Loan and any unpaid accrued interest shall be converted into shares of BRC, rounded down to the nearest whole share, by dividing the May 2021 Loan by the price per share obtained by dividing $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (i) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes and (ii) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC. In the event the Company has not requested for conversion, the May 2021 Loan can automatically convert if BRC sells shares of preferred stock (the “Qualified Financing Securities”) to one or more investors in a single transaction or series of related transactions for aggregate proceeds to BRC (including cancellation of indebtedness under the Notes or any other convertible debt) of at least $4 million (a “Qualified Financing”). The May 2021 Loan shall automatically convert at the initial closing of and on the same terms and conditions of the Qualified Financing into a total number of Qualified Financing Securities, rounded down to the nearest whole share, obtained by dividing the May 2021 Loan by the lesser of (i) 80% of the price per share paid for the Qualified Financing Securities by investors in the Qualified Financing and (ii) $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (a) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes, (b) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC and (c) any equity incentive or similar plan to be created or increased in connection with the Qualified Financing).

Note receivable consists of the following (in thousands):

	December 31, 2021		December 31, 2020
Coeptis Pharmaceuticals, Inc.	$	-	$	200
Biopharmaceutical Research Company		200		-
Less: allowance for doubtful accounts		-		(200	)
Less: Current portion of note receivable, net		-		-
Note receivable, non-current portion	$	200	$	-

On January 20, 2021 and February 10, 2021, the Company collected a total of $0.2 million from Coeptis relating to a convertible promissory note issued from Coeptis on November 12, 2019. The total payment of $0.2 million was full satisfaction of the principal amount and accrued interest until February 10, 2021. The Coeptis Note had a maturity date of June 15, 2020, which was not paid by the maturity date and was considered in default as of December 31, 2020 and fully reserved for. The Company recorded the collection of the Coeptis Note as a recovery of bad debt during the year ended December 31, 2021.

XML

GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2021

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

NOTE 8 - GOODWILL AND INTANGIBLE ASSETS

The Company incurred $0.08 million and $0.02 million of legal patent costs that were capitalized during the year ended December 31, 2021 and 2020, respectively. During the year ended December 31, 2021, the Company did not acquire any intangibles through an acquisition. During the year ended December 31, 2020, the Company acquired from Sera Labs customer relationships at a fair value of $7.1 million, $2.6 million in Tradename intangibles, $0.5 million in non-compete and $4.7 million in Goodwill from the acquisition of Sera Labs.

Intangible Asset Summary

As of December 31, 2021 and 2020, goodwill and intangible assets, net, consisted of the following (in thousands):

	2021			2020
Goodwill (1)	$	13,868		$	13,868
Intangible assets:
Acquired IPR&D – Chemistry (2)	$	502		$	14,460
Pending patents – Cure Pharmaceutical		341			259
Intangible assets subject to amortization:
Acquired IPR&D – Chemistry (2)		13,958			-
Customer relationships (2)		7,110			7,110
Tradename (2)		2,610			2,610
Noncompete (2)		462			462
Intellectual property		972			972
Issued patents		1,034			1,044
Total intangible assets		26,989			26,917
Accumulated amortization		(4,701	)		(1,312	)
Intangible assets, net	$	22,288		$	25,605

________ 

(1)	Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired from CHI and Sera Labs (see Note 20).
(2)	See Note 20 for information on the Mergers which were consummated in May 2019 and October 2020. During the year ended December 31, 2021, the Company completed two research and development projects that resulted in the company reclass approximately $13.9 million of IPR&D from intangibles not subject to amortization to intangibles subject to amortization.

Amortization expense was $3.4 million and $0.7 million for the years ended December 31, 2021 and 2020, respectively.

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

2022	$	3,765
2023		3,592
2024		3,429
2025		2,583
2026		1,517
Thereafter		6,559
Total Amortization	$	21,445

XML

INVESTMENT

12 Months Ended

Dec. 31, 2021

GOODWILL AND INTANGIBLE ASSETS

INVESTMENT

NOTE 9 – INVESTMENT

In accordance with ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost.

As of December 31, 2021 and 2020, our investment, at cost, consisted of the following (in thousands):

	December 31, 2021			December 31, 2020
Investment in Releaf Europe BV	$	566		$	509
Valuation reserve		(350	)		-
Investment, net	$	216		$	509

As of December 31, 2021 and 2020, the net investment is based on management’s best estimate of net realizable value, which resulted a valuation reserve amount of $0.4 million and $0, respectively.

XML

ACCRUED EXPENSES

12 Months Ended

Dec. 31, 2021

PREPAID EXPENSES AND OTHER ASSETS

ACCRUED EXPENSES

NOTE 10 – ACCRUED EXPENSES

As of December 31, 2021 and 2020, accrued expenses consisted of the following (in thousands):

	December 31, 2021		December 31, 2020
Accounts payable factoring	$	1,722	$	-
Refunds and returns liability		445		-
Accrued interest (see Note 11 for amount of related party interest included)		390		194
Accrued payroll		330		308
Accrued vacation leave		173		180
Accrued expenses		359		306
Sales tax payable		334		311
Accrued Expenses	$	3,753	$	1,299

XML

RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2021

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

NOTE 11 - RELATED PARTY TRANSACTIONS

Due to Related Party

The Company and other related entities have had a commonality of ownership and/or management control, and as a result, the reported operating results and /or financial position of the Company could significantly differ from what would have been obtained if such entities were autonomous.

On January 2, 2019, Sera Labs entered into an administrative service agreement (“Service Agreement”) with Visionworx, an affiliate of Sear Labs. Visionworx will process payments related to Sera Lab’s operations using Visionworx’s contractual relationship with JPMorgan Chase Bank, N.A. via its Chase Paymentech Select Merchant Payment Instrument Processing Agreement. In consideration for the services, Sera Labs will pay to Visionworx a management fee equal to all associated fees and expenses in connection with the Service Agreement. The Service Agreement is effective on January 2, 2019 and will continue for a period of two years. The term of the Service Agreement will be renewed automatically for additional one-year periods until terminated. The Service Agreement may be terminated by (a) either party for any reason at least thirty days’ prior written notice to the other party; or (b) immediately upon the mutual consent of the parties.

On August 6, 2020, the Company entered into an unsecured promissory note (the “August Note”) with one of the Company’s board members (“Board Investor”), for a principal amount of $0.2 million. The August Note was due on August 6, 2021 and has an interest rate of 8% per annum, payable in quarterly payments. The principal and accrued interest under the August Note can convert into a convertible promissory note if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the August Note. Upon notice by the Company of such debt financing, the holder of the August Note shall have the right, but not the obligation, to convert the August Note into a convertible promissory note, with the same principal amount and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. The Board Investor did not elect to convert their August Note into a convertible promissory note, with the same principal and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. On August 6, 2021, both the Company and the Board Investor agreed to roll the amount of principal and accrued interest as of August 6, 2021 into a new secured promissory note (“Secured August Note”) with a new principal amount of $0.2 million. The Secured August Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The Secured August Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On October 2, 2020, the Company completed its acquisition of Sera Labs and pursuant to the Sera Labs Merger Agreement, the Company issued a promissory note in the principal amount of $1.1 million owed to the CEO of Sera Labs (“Duitch Note”), of which $1.0 million is the upfront payment in connection with the closing of the Sera Labs Merger, and $0.1 million is for certain liabilities of Sera Labs due to Mrs. Duitch. The Duitch Note is due September 30, 2021 and has an interest rate of 8% per annum. On November 9, 2020, a payment of $0.3 million was made and applied to principal only. On June 30, 2021, both the Company and the CEO of Sera Labs agreed to roll the amount of principal and accrued interest as of June 30, 2021 as well as other amounts due to the CEO of Sera Labs into a new secured promissory note (“Secured Duitch Note”) with a new principal amount of $1.05 million. The Secured Duitch Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The Secured Duitch Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing

On November 16, 2021, the Company entered into a secured promissory note (the “Secured November Note”) with the Board Investor for a principal amount of $0.05 million. The Secured November Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The Secured November Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

From May 3, 2021 through December 28, 2021, the Company entered into several secured promissory notes (the “Secured Notes”) with one of the Company’s board members (“Second Board Investor”) for a total principal amount of $0.7 million. The Secured Notes are due on April 15, 2022 and have an interest rate of 10% per annum, payable at maturity. The Secured Notes are secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

As of December 31, 2021 and 2020, the Company recorded $0.08 million and $0.02 million, respectively of accrued related party interest and is recorded in accrued expenses. Interest expense in regard to related party payables for the years ended December 31, 2021 and 2020 was $0.08 million and $0.02 million, respectively.

XML

LOAN PAYABLE

12 Months Ended

Dec. 31, 2021

LOAN PAYABLE

LOAN PAYABLE

NOTE 12 – LOAN PAYABLE

Loan payable consists of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021			December 31, 2020
Note to a company due September 29, 2022, including interest at 4.32% per annum; unsecured; interest due monthly	$	195		$	-
Note to a company due June 6, 2022, including interest at 4.42% per annum; unsecured; interest due monthly		40			-
Note to a company due September 29, 2021, including interest at 4.32% per annum; unsecured; interest due monthly		-			182
Note to a company due June 6, 2021, including interest at 6.55% per annum; unsecured; interest due monthly		-			83
Current portion of loan payable		(235	)		(265	)
Loan payable, less current portion	$	-		$	-

Interest expense for the years ended December 31, 2021 and 2020 was $0.01 million and $0.003 million, respectively.

XML

NOTES PAYABLE AND PAYCHECK PROTECTION PROGRAM LOAN

12 Months Ended

Dec. 31, 2021

NOTES PAYABLE AND PAYCHECK PROTECTION PROGRAM LOAN

NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN

NOTE 13 - NOTES PAYABLE AND PAYCHECK PROTECTION PROGRAM LOAN

Notes payable consist of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021		December 31, 2020
Note to an individual, non-interest bearing, unsecured and due on demand	$	50	$	50
Promissory note to a company originally due May 18, 2021 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity		270		250
Promissory note to a company originally due May 18, 2021 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity		540		500
Promissory note to a company originally due January 13, 2022 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity		500		-
Secured promissory notes to a company originally due April 8, 2022 and October 30, 2021 was rolled into a new secured promissory notes now due June 15, 2022; interest at 10% per annum payable at maturity		502		-
Secured promissory note to a company due April 15, 2022; interest at 10% per annum payable at maturity		300		-
Secured promissory note to a company due April 15, 2022; interest at 10% per annum payable at maturity		100		-
Promissory notes to a company, as of the filing date of this report, terms of the promissory notes are still being negotiated		415		-
Secured promissory notes to a company due June 15, 2022; as of the filing date of this report, terms of the promissory notes are still being negotiated		200
Current portion of note payable	$	2,877	$	800

On May 18, 2020 and August 12, 2020, the Company entered into unsecured promissory notes (“Notes”) with an investor for $0.3 million and $0.5 million, respectively. The Notes were due on May 18, 2021 and August 12, 2021, respectively, and have an interest rate of 8%per annum, payable in quarterly payments. The principal and accrued interest under the Notes can convert into convertible promissory notes if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the Notes. Upon notice by the Company of such debt financing, the holder of the Notes shall have the right, but not the obligation, to convert the Notes into convertible promissory notes, with the same principal amount and interest accruing from the date of issuance of the Notes, on the same terms as the convertible promissory notes issued to such new investors. On October 30, 2021, both the Company and the investor agreed to roll the amount of principal and accrued interest as of October 30, 2021 into new secured promissory notes (“New August & May Notes”) with a new principal amount of $0.3 million and $0.5 million. The New August & May Notes are due on June 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The New August & May Notes are secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On September 25, 2020 the Company issued a demand secured promissory note to Ionic Ventures, LLC (“Ionic”), (the “Promissory Note”), in the principal amount of $1.1 million with the Company receiving gross proceeds of $1.0 million and $0.1 million being an original issue discount. The Promissory Note is secured by certain assets of the Company as further set forth therein, bears no interest rate and is subject to payment on demand of Ionic after the earlier of either (a) the initial date after September 25, 2020 of any offering of securities by the Company with gross proceeds of at least $1.0 million or (b) October 31, 2020. The outstanding principal amount and any unpaid accrued Late Charges (as defined below) may be prepaid at any time, without notice, premium or penalty. Payments will be credited first to the accrued Late Charges then due and payable and the remainder applied to the outstanding principal. On October 30, 2020, the Company repaid in full the outstanding principal balance and all accrued but unpaid interest expense of $1.1 million from the proceeds of the Series A Note further described in Note 15.

On January 13, 2021 and February 25, 2021, the Company received a total of $0.5 million from an investment company (“Investor”) in exchange for a promissory note. At the time the Company received the $0.5 million, terms of promissory note were not yet finalized. On October 30, 2021, both the Company and the investor agreed to roll the amount of principal and accrued interest as of October 30, 2021 into a new secured promissory note (“New January 2021 Note”) with a principal amount of $0.5 million. The New January 2021 Note is due on June 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The New January 2021 Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On April 8, 2021 and September 24, 2021, the Company received $0.3 million and $0.3 million, respectively, from an investment company (“Second Investor”) in exchange for two promissory notes. At the time the Company received the total amount of $0.5 million, terms of promissory notes were not yet finalized. On October 30, 2021, both the Company and the Second Investor agreed to roll the amount of principal and accrued interest as of October 30, 2021 into new secured promissory notes (“New April & September 2021 Notes”) with principal amounts of $0.3 million and $0.3 million. The New April & September 2021 Notes are due on June 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The New April & September 2021 Notes are secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On October 27, 2021, the Company received $0.3 million from an investment company in exchange for a secured promissory note (“October 2021 Note”). The October 2021 Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The October 2021 Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On November 18, 2021, the Company received $0.1 million from an investment company in exchange for a secured promissory note (“November 2021 Note”). The November 2021 Note is due on April 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The November 2021 Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

From October 15, 2021 to December 15, 2021, the Company received at total of $0.4 million from an investment company (“Third Investor”) in exchange for promissory notes. Both the Company and Third Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Third Investor are still negotiating the terms of the promissory notes.

On December 16, 2021, the Company received at total of $0.2 million from an investment company in exchange for secured promissory note (“December 2021 Note”). The December 2021 Note is due on June 15, 2022 and has an interest rate of 10% per annum, payable at maturity. The December 2021 Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

Paycheck protection program consist of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021		December 31, 2020
Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act.	$	-	$	399
Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act.		-		206
Payment protection program loan	$	-	$	605

In April 2020, the CURE Pharmaceutical and Sera Labs received loan proceeds in the amount of approximately $0.4 million and $0.2 million under the Paycheck Protection Program (“PPP”). The PPP, established as part of the CARES Act, provides for loans to qualifying businesses. A portion of the loans and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries. No collateral or guarantees were provided in connection with the PPP loans. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act and the Company recorded a gain on extinguishment of debt during the three months ended March 31, 2021. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act and the Company recorded a gain on extinguishment of debt during the three months ended September 30, 2021.

Interest expense for the year ended December 31, 2021 and 2020 was $0.03 million and $0.3 million, respectively.  

XML

CONVERTIBLE PROMISSORY NOTES

12 Months Ended

Dec. 31, 2021

RELATED PARTY TRANSACTIONS

CONVERTIBLE PROMISSORY NOTES

NOTE 14 – CONVERTIBLE PROMISSORY NOTES

Convertible promissory notes consist of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021		December 31, 2020
Convertible promissory notes totaling $550,000 due January 31, 2019, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due January 31, 2019 and currently in default. The Company has offered to either repay the convertible promissory notes or request to have them converted into common stock shares of the Company. The beneficial owners of the convertible promissory notes have not yet communicated their intent to either receive payment or convert.	$	550	$	550
Current portion of convertible promissory notes	$	550	$	550

XML

FAIR VALUE CONVERTIBLE PROMISSORY NOTES

12 Months Ended

Dec. 31, 2021

FAIR VALUE CONVERTIBLE PROMISSORY NOTES

FAIR VALUE CONVERTIBLE PROMISSORY NOTES

NOTE 15 – FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES

Fair value of convertible promissory notes consists of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021			December 31, 2020
Series A subordinated convertible note at fair value	$	3,074		$	7,010
Series B subordinated convertible note at fair value		11,858			11,674
Total convertible promissory notes		14,932			18,684
Less: Investor Note offset – Series B Note		(5,000	)		(5,000	)
Carrying value of convertible promissory notes at fair value		9,932			13,684
Less: current portion of convertible promissory notes at fair value		(9,932	)		(6,674	)
Convertible promissory notes, less current portion	$	-		$	7,010

On October 30, 2020, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Investor”) for the purchase of two new series of convertible notes with an aggregate principal amount of $11,500,000. Concurrently the Company consummated the sale to the Investor of a Series A subordinated convertible note (the “Series A Note”) with an initial principal amount of $4,600,000 and a Series B senior secured convertible note (the “Series B Note,” and together with the Series A Note, the “Convertible Notes” and, each a “Convertible Note”) with an initial principal amount of $6,900,000 in a private placement (the “Private Placement”).

The Series A Note was sold with an original issue discount of $600,000 and the Series B Note was sold with an original issue discount of $900,000. The Investor paid for the Series A Note to be issued to the Investor by delivering $4,000,000 in cash consideration and paid for the Series B Note to be issued to the Investor by delivering a secured promissory note (the “Investor Note”) with an initial principal amount of $6,000,000. The Company will receive cash in respect of a Series B Note only upon cash repayment of the corresponding Investor Note. In certain circumstances, the Investor Note may be automatically satisfied through netting against the Series B Note, as described more fully below, rather than through the payment of cash. Until an Investor Note is repaid, the original issue discount and the rest of the principal under the corresponding Series B Note is considered to be “restricted.” Upon any repayment of the Investor Note, the principal of the corresponding Series B Note becomes “unrestricted” on dollar-for-dollar basis, along with a proportional amount of the original issue discount. During the year ended December 31, 2020, the Company received $1.0 million from the Investor Note, leaving a remaining balance of $5.0 million of the Investor Note as of December 31, 2020, which is netted against the Series B Note and included in convertible promissory notes in the balance sheet.

The placement agent received a placement agent fee of $306,000 at the closing of the Private Placement, representing 8% of the gross cash proceeds at the closing. After deducting the placement agent fee, the Company’s estimated expenses associated with the Private Placement and the repayment of the September Note, the Company’s net cash proceeds at the closing were approximately $2,340,000. If the Investor Note is subsequently satisfied in full by payment in cash, the additional financial advisory fee on the cash proceeds received from the Investor Note will be another $480,000, and the aggregate net cash proceeds from the Private Placement as a whole will be approximately $8,850,000. In addition, the placement agent received a warrant (the “Warrant”) exercisable for two years for the purchase of an aggregate of up to 242,424 shares of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock (collectively with the shares underlying the Warrant, the “Warrant Shares”). The Warrant Shares, when issued, will have the same rights, preferences and privileges (including the registration rights described under “Registration Rights Agreement” below) as the shares underlying the Convertible Notes.

The Convertible Notes mature on October 30, 2022 with respect to the Series A Note and October 30, 2021 with respect to the Series B Note (the “Maturity Date”), subject to extension in certain circumstances, including bankruptcy and outstanding events of default. On the Maturity Date, the Company shall pay to the Investor an amount in cash (other than restricted amounts under a Series B Note) presenting all outstanding principal, Make-Whole Amount (as defined in the Convertible Notes), if any, accrued and unpaid interest and accrued and unpaid Late Charges (as defined in the Convertible Notes) on such principal, except that any restricted amount under the Series B Note will be automatically satisfied on the Maturity Date (in lieu of a cash payment) by Maturity Netting (as defined in the Investor Note described below). The Company may not prepay any amounts due under the Convertible Notes. The Convertible Notes shall bear no interest unless there is an occurrence, and during the continuance, of an Event of Default at which point interest shall be 18%.

Each Convertible Note (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet anti-dilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein.

Promptly after the consummation of the sale of the Convertible Notes, the Company repaid in full the outstanding principal balance and all accrued but unpaid interest expense on the Senior Promissory Note issued on September 25, 2020 to the Investor (the “September Note”). The cash payment to the Investor to satisfy the September Note was in the amount $1,100,000.

On January 5, 2022, the Company entered into a Forbearance Agreement (the “Forbearance Agreement”) with the Investor pursuant to which the Investor has agreed not to exercise, with certain exclusions, any of its judicial or administrative enforcement actions to obtain cash or other assets (excluding Common Stock or other assets issuable upon conversion or exchange of the Series B Note in accordance with the terms thereof) from the Company on account of any payment obligations of the Company under the Series B Note or the Event of Default Redemption Notice that exist as of the date of the Forbearance Agreement or that may arise from the date of this Agreement through February 15, 2022. As of the filing date this report, the Company is currently in discussions with the Investor regarding an extension of the Forbearance period.

On the Maturity Date, the Company shall pay to the Investor an amount in cash (other than restricted amounts under a Series B Note) presenting all outstanding principal, Make-Whole Amount (as defined in the Convertible Notes), if any, accrued and unpaid interest and accrued and unpaid Late Charges (as defined in the Convertible Notes) on such principal, except that any restricted amount under the Series B Note will be automatically satisfied on the Maturity Date (in lieu of a cash payment) by Maturity Netting (as defined in the Investor Note described below). The Company may not prepay any amounts due under the Convertible Notes.

Interest

The Convertible Notes shall bear no interest unless there is an occurrence, and during the continuance, of an Event of Default (as defined in the Convertible Notes). During any such Event of Default, the Convertible Notes will accrue interest at the rate of 18% per annum. See “Events of Default” below.

Conversion; Alternate Conversion upon Event of Default

Each Convertible Note (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet anti-dilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price.

If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein.

Conversion Limitation

The Investor will not have the right to convert any portion of a Convertible Notes, to the extent that, after giving effect to such conversion, the Investor (and other certain related parties) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such conversion. This limit may, from time to time, be increased, up to 9.99%, or decreased; provided that any such increase will not be effective until the 61st day after delivery of a notice to the Company of such increase.

Events of Default

The Convertible Notes include certain customary and other Events of Default. In connection with an Event of Default, the Investor may require the Company to redeem in cash any or all of the Convertible Notes. The redemption price will be at a premium to the amount due under the Convertible Notes as described therein.

Change of Control

In connection with a Change of Control (as defined in the Convertible Notes), the Investor may require the Company to redeem all or any portion of the Convertible Notes. The redemption price per share will be at a premium to the amount due under the Convertible Notes as described therein.

Covenants

The Company will be subject to certain customary affirmative and negative covenants including those regarding the payment of dividends, maintenance of its property, transactions with affiliates, and issue notes and certain securities.

Placement Agent Warrants

On October 2, 2020 and December 31, 2020, in connection with the Series A Note and Series B Note, respectively, a placement agent received a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock.

The Company used the Black-Scholes model to determine the fair value of the Warrants issued to the Placement Agent. The Company has elected the Fair Value Option for the Series A Note and Series B Note, accordingly the fair value of the Warrants issued to the placement agent were expensed.

The following table sets forth the assumptions used and calculated aggregated fair values of the warrants:

Significant assumptions (weighted-average):
Risk-free interest rate at grant date	0.36	%
Expected stock price volatility	81.14	%
Expected dividend payout	-
Expected warrant life (in years)	2
Expected forfeiture rate	0	%

Fair Value Option for the Series A and Series B Notes

The Company elected the fair value option under ASC 825, Financial Instruments, for both the Series A and Series B Notes and accounted for the Notes as follows (1) the portion of the change in the liability’s fair value that is attributable to a change in instrument-specific credit risk in other comprehensive income (2) the remaining change in the liability’s fair value in net income (3) the excess of the fair value over the proceeds is recognized as an expense and (4) upfront costs and fees are recognized in earnings as incurred Gains and losses attributable to changes in credit risk are determined using observable credit default spreads for the issuer or comparable companies; these gains and losses were insignificant during all periods presented. The Company recognized a loss of $4.4 million and $5.1 million at the time of issuance of the Series A and Series B Notes, respectively, as a result of the make whole provision noted within the debt arrangements as the debt holders would be awarded a variable number of shares at the time of conversion which would always equate to an amount greater than the principal amount of the debt.

The Company recorded a gain of $1.0 million and a loss of $1.4 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the year ended December 31, 2021 and were recorded in the consolidated statement of operations. The Company recorded a loss of $4.6 million and $4.7 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the year ended December 31, 2020 and were recorded in the consolidated statement of operations. During the year ended December 31, 2020, the Company incurred debt issuance cost of $0.7 million and $0.1 million attributed to the Series A and Series B Notes, respectively, which were expensed as incurred.

XML

WARRANT AGREEMENTS

12 Months Ended

Dec. 31, 2021

WARRANT AGREEMENTS

WARRANT AGREEMENTS

NOTE 16 – WARRANT AGREEMENTS

In June 2020, as part of the Company’s settlement with CHI we amended the warrants to purchase up 8,018,071 common stock shares which vest based on various revenue achievement during year 3 and year 4 post the CHI acquisition Closing Date. As part of the settlement the Company reduced the number of warrants to 708,467 common stock shares at an exercise price of $2.00 per share which was reduced from the original exercise price of $5.01 per share. In addition, the expiration date of the warrants was amended to expire on June 5, 2020. The warrants were exercisable on the date of issuance and were exercised by the warrant holders and the Company received $1.4 million. The Company determined based on Black-Scholes value calculated for pre and post modification, there was no incremental value to the warrant modification as the exercise price was more than the fair value of the stock.

On October 2, 2020 and December 31, 2020, in connection with the Series A Note and Series B Note, respectively, a placement agent is to receive a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock.

On December 8, 2020, an individual exercised 62,851 warrants by means of a cashless exercise with an exercise price of $1.00 per share. As a result of the exercise, the Company is to issue 26,936 common stock shares of the Company. As of the filing of this report, the Company has not yet issued these shares and is included in common stock issuable as of December 31, 2020.

During the year ended December 31, 2021, the Company did not issue any warrants.

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

The Company’s warrant activity was as follows:

	Warrants			Weighted Average Exercise Price		Weighted Average Contractual Remaining Life
Outstanding, December 31, 2019		14,666,518		$	3.70		2.99
Granted		303,030			1.32		1.86
Exercised		(771,318	)		1.92		-
Forfeited/Expired		(11,718,381	)		5.01		-
Outstanding, December 31, 2020		2,479,849		$	1.86		1.23
Granted		-			-		-
Exercised		(96,250	)		1.00		-
Forfeited/Expired		(818,152	)		1.58		-
Outstanding, December 31, 2021		1,565,447		$	2.18		0.66
Exercisable at December 31, 2021		1,565,447		$	2.18		0.66

Warrant summary for the year ended December 31, 2021:

Range of Exercise Price	Number of Warrants		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Warrants Exercisable		Weighted Average Exercise Price
$ 1.98–$2.31		1,565,447		0.66	$	2.18		1,565,447	$	2.18
		1,565,447		0.66	$	2.18		1,565,447	$	2.18

Warrant summary for the year ended December 31, 2020:

Range of Exercise Price	Number of Warrants		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Warrants Exercisable		Weighted Average Exercise Price
$ 1.00–$6.00		2,479,849		1.23	$	1.86		2,479,849	$	1.86
		2,479,849		1.23	$	1.86		2,479,849	$	1.86

The weighted-average fair value of warrants granted during the years ended December 31, 2021 and 2020, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows:

	December 31, 2021			December 31, 2020
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		0	%		0.36	%
Expected stock price volatility		0	%		81.14	%
Expected dividend payout		-			-
Expected warrant life (in years)		-			3
Expected forfeiture rate		0	%		0	%

The aggregate intrinsic value of warrants outstanding and exercisable at December 31, 2021 and 2020 was $0 and $0.2 million, respectively.

XML

STOCK INCENTIVE PLANS

12 Months Ended

Dec. 31, 2021

STOCK INCENTIVE PLANS

STOCK INCENTIVE PLANS

NOTE 17 – STOCK INCENTIVE PLANS

On December 29, 2017 (“Effective Date”), the Company adopted the CURE Pharmaceutical Holding Corp. 2017 Equity Incentive Plan (the “2017 Equity Plan”), pursuant to which an aggregate of 5,000,000 shares of the common stock of the Company are available for grant. On November 25, 2020, the Company registered an additional 5,000,000 shares of common stock of the Company that are available to be granted by filing a Form S-8 Registration Statement under the Securities Act of 1933.

The Board of Directors have determined that it is in the best interests of the Company and its stockholders to provide an additional incentive for certain employees, including executive officers, and non-employee members of the Board of Directors of the Company by granting to them awards with respect to the common stock of the Company pursuant to the Plan. The Plan seeks to achieve this purpose by providing for awards in the form of Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards (“Awards”). The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date.

The Company did not issue any Incentive Stock Options (“ISO”) during the year ended December 31, 2021 and issued 90,000 ISO’s to an officer of the Company during the year ended December 31, 2020. The Company issued 1,555,526 Nonstatutory Stock Options (“NSO”) to employees of the Company and 338,443 Restricted Common Stock (“Restricted Common Stock”) to various consultants of the Company and 629,338 RSU’s to the members of the Board of Directors during the year ended December 31, 2021. The Company issued 3,510,364 Nonstatutory Stock Options (“NSO”), 150,000 Restricted Common Stock (“RCS”), and 431,578 Restricted Stock Units (“RSU”) to employees, including executive officers, and non-employee members of the Board of Directors of the Company during the year ended December 31, 2020. During the year ended December 31, 2020, 30,000 NSO’s were exercised at $0.74 per share in exchange for $22,200.

Vesting periods for awarded RCS, ISO’s and NSO’s range from immediate to quarterly over a 4 year period. Vesting period for RSU’s is the earlier of (i) the day prior to the next Annual Meeting of Shareholders following the date of grant, and (ii) one (1) year from the Date of Grant. For ISO’s and NSO’s awarded, the term to exercise their ISO or NSO is 10 years.

The Company issued 1,518,194 stock options during the year ended December 31, 2020 to a consultant that contains performance-based vesting conditions where revenue milestones are to be met over a certain period. Such stock option awards would be valued using a Monte Carlo simulation based on the probability of the performance condition being met and the underlying expense would be recognized as the associated vesting conditions are met. No stock options that contain performance-based vesting conditions vested during the year ended December 31, 2021 and the likelihood of meeting the performance-based condition is currently nil.

Stock Options

The Company’s stock option activity was as follows:

	Options			Weighted Average Exercise Price		Weighted Average Contractual Remaining Life
Outstanding, December 31, 2019		3,467,650		$	1.84		8.74
Granted		3,600,364			1.26		9.19
Exercised		(30,000	)		0.74		-
Forfeited/Expired		(752,222	)		1.76		-
Outstanding, December 31, 2020		6,285,792		$	1.52		8.86
Granted		1,555,526			0.95		9.25
Exercised		-			-		-
Forfeited/Expired		(611,250	)		0.97		-
Outstanding, December 31, 2021		7,230,068		$	1.45		8.27
Exercisable at December 31, 2021		4,067,452		$	1.51		7.81

Range of Exercise Price	Number of Awards		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Awards Exercisable		Weighted Average Exercise Price
$ 0.61-$4.01		7,230,068		8.27	$	1.45		4,067,452	$	1.51
		7,230,068		8.27	$	1.45		4,067,452	$	1.51

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2021 was $0.

The aggregate grant date fair value of options granted during the year ended December 31, 2021 and 2020 amounted to $1.5 million and $2.2 million, respectively. Compensation expense related to stock options for the year ended December 31, 2021 and 2020 was $2.0 million and $2.0 million, respectively.

As of December 31, 2021, the total unrecognized fair value compensation cost related to unvested stock options was $2.1 million, which is to be recognized over a remaining weighted average period of approximately 1.4 years.

The weighted-average fair value of options granted during the years ended December 31, 2021 and 2020, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows:

	December 31, 2021			December 31, 2020
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		1.18	%		0.59	%
Expected stock price volatility		76.95	%		81.14	%
Expected dividend payout		-			-
Expected option life (in years)		10			10
Expected forfeiture rate		0	%		0	%

Restricted Stock

Subject to the restrictions set with respect to the particular Award, a recipient of Restricted Stock generally shall have the rights and privileges of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld for the recipient’s account, and interest may be credited on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the recipient in cash or, at the discretion of the Board or Committee, in shares of common stock having a fair market value equal to the amount of such dividends, if applicable, upon the release of restrictions on the Restricted Stock and, if the Restricted Stock is forfeited, the recipient shall have no right to the dividends.

The Company’s restricted stock activity was as follows:

Compensation expense related to restricted shares for the years ended December 31, 2021 and 2020 was $0.5 million and $0.5 million, respectively. Information relating to non-vested restricted award shares is as follows:

	Restricted Stock Shares			Weighted Average Grant Date Fair Value
Non-vested, December 31, 2019		82,086		$	2.69
Granted		150,000			1.60
Vested		(181,849	)		2.08
Forfeited/Expired		(237	)		-
Non-vested, December 31, 2020		50,000			1.60
Granted		338,443			1.20
Vested		(388,443	)		1.26
Forfeited/Expired		-			-
Non-vested, December 31, 2021		-		$	-

At December 31, 2021 and 2020, the Company had approximately $0 and $0.1 million, respectively, of total unrecognized compensation expense related to restricted stock awards. Compensation will be recognized over a weighted-average period of approximately 0 years and 0.14 years, respectively.

Restricted Stock Units

The terms and conditions of a grant of Restricted Stock Units shall be determined by the Board or Committee. No shares of common stock shall be issued at the time a Restricted Stock Unit is granted. A recipient of Restricted Stock Units shall have no voting rights with respect to the Restricted Stock Units. Upon the expiration of the restrictions applicable to a Restricted Stock Unit, The Company will either issue to the recipient, without charge, one share of common stock per Restricted Stock Unit or cash in an amount equal to the fair market value of one share of common stock.

The Company’s restricted stock unit activity was as follows:

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding, December 31, 2019		60,759		$	3.66
Granted		431,578			1.33
Vested		(60,759	)		3.66
Forfeited/Expired		-			-
Outstanding, December 31, 2020		431,578			1.33
Granted		629,338			0.74
Vested		(411,027	)		1.33
Forfeited/Expired		(61,654	)		1.33
Outstanding, December 31, 2021		588,235		$	0.70

At December 31, 2021 and 2020, the Company had approximately $0.4 million and $0.6 million, respectively, of total unrecognized compensation expense related to restricted stock units. Compensation will be recognized over a weighted-average period of approximately 0.85 years and 0.64 years, respectively.

Compensation expense related to restricted stock units for the years ended December 31, 2021 and 2020 was $0.6 million and $0.3 million, respectively. All compensation expense related to restricted stock units were included in selling, general and administrative expenses for the years ended December 31, 2021 and 2020.

XML

STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2021

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

NOTE 18 - STOCKHOLDERS’ EQUITY

Authorized Stock

The Company has authorized to issue is 150,000,000 common shares with a par value of $0.001 per share.

As of December 31, 2021 and 2020, there were 68,201,900 and 59,476,268 shares of the Company’s common stock issued and outstanding, respectively.

Common Share Issuances

From January 1, 2020 to December 31, 2020, the Company issued 281,250 common stock shares, at prices per share ranging from $1.40 to $3.93 in consideration for certain consulting services. The total value of these issuances was $0.5 million.

From January 1, 2020 to December 31, 2020, the Company issued 194,016 common stock shares, at prices per share ranging from $1.60 to $3.15 in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.02 million.

On June 5, 2020, the Company issued 12,058,623 shares of its common stock, at a price per share equal to$1.82, in connection with the Release, Waiver, and Amendment Agreement entered into with CHI. The total value of these issuances was $21.9 million. $0.2 million related to common stock issuable as of December 31, 2019 that was issued in during 2020.

On June 5, 2020, the Company issued 708,467 common stock shares, at a price of $2.00 per share, from the exercise of certain warrants. Total value of these issuances was $1.4 million.

On October 2, 2020, the Company issued 6,909,091 common stock shares at a price per share of $1.38, in connection with the Sera Labs Merger. The total value of this issuance was $9,534,546.

On December 9, 2020, the Company issued 757,576 common stock shares, at a price per share of 1.32 in connection to conversion of $1,000,000 of the Series A Note plus 565,702 common stock shares at a price per share of $0.89 in connection to the make-whole-amount of $500,000 per the terms of the Series A Note.

From January 1, 2021 to December 31, 2021, the Company issued 904,929 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.2 million.

From January 1, 2021 to December 31, 2021, the Company issued 646,512 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to several consulting agreements. The total value of these issuances was $0.7 million.

From January 1, 2021 to December 31, 2021, the Company issued 26,936 common stock shares, at a price of $1.30 per share, from a cash-less exercise of 96,250 warrants. Total value of these issuances was $0 as this was a cash-less exercise.

From January 1, 2021 to December 31, 2021, the Company issued 297,288 common stock shares, at a price of $0.89 per share, from conversion of a convertible note and accrued interest totaling $0.3 million.

From January 1, 2021 to December 31, 2021, the Company issued 1,439,394 common stock shares, at a price per share of $1.32 in connection to conversion of $1.9 million of the Series A Note plus 2,598,573 common stock shares at a price per share ranging from $0.43 to $0.64 in connection to the make-whole-amounts totaling $1.3 million per the terms of the Series A Note.

From January 1, 2021 to December 31, 2021, the Company issued 1,580,042 common stock shares, at a price per share of $0.24, the Alternative Conversion Price, in connection to conversion of $0.4 million of the Series B Note plus 1,231,958 common stock shares at a price per share of $0.24, in connection to the make-whole-amounts totaling $0.3 million per the terms of the Series B Note.

Common Stock Issuable

In 2018, the Company entered into an amendment to extend the maturity date of a convertible promissory note. As compensation for extending the note, the Company is to issue 150,000 common stock shares of the Company at a price of $2.05 per share. As of the filing of this Current Report on Form 10-K, the Company has not yet issued these common stock shares and has recorded a stock issuable of $0.3 million.

On October 1, 2021, the Company entered into a Consulting Agreement (“Agreement”) with individuals. Per the terms of the Agreement, the Company is to issue 60,000 common stock shares of the Company at prices ranging from $0.43 to $0.68 per share. As of our filing of our Form 10-K for the year ended December 31, 2021, the Company has not yet issued these common stock shares and has recorded a stock payable of $0.03 million.

XML

SEGMENT REPORTING

12 Months Ended

Dec. 31, 2021

SEGMENT REPORTING

SEGMENT REPORTING

NOTE 19 – SEGMENT REPORTING

Business Segments

ASC 280 establishes the standards for reporting information about segments in financial statements. In applying the criteria set forth in ASC 280, we have determined that we have two reportable segments: Cure, which develops and manufactures pharmaceutical and wellness products, and Sera Labs, which sells wellness products through direct to consumer and wholesale channels.

The Company evaluates performance based on net operating profit. Administrative functions such as finance, treasury, and information systems are centralized. However, where applicable, portions of the administrative function expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. In the event any materials and/or services are provided to one operating segment by the other, the transaction is valued according to the company’s transfer policy, which approximates market price. The costs of operating the manufacturing plant is captured discretely in the Cure segment. The Company’s property, plant and equipment, inventory, and accounts receivable are captured and reported discretely within each operating segment.

Summary financial information for the two reportable segments for the year ended December 31, 2021 is as follows (in thousands):

	Cure			Sera Labs			Eliminations			Consolidated
Net sales	$	651		$	6,078		$	(174	)	$	6,555
Net operating loss	$	(8,232	)	$	(6,860	)	$	-		$	(15,092	)
Assets	$	46,491		$	8,608		$	(14,175	)	$	40,574
Accounts receivable, net	$	18		$	339		$	-		$	357
Inventory, net	$	243		$	621		$	-		$	864
Interest expense	$	468		$	86		$	-		$	544
Depreciation and amortization	$	1,295		$	2,312		$	-		$	3,607

Summary financial information for the two reportable segments for the year ended December 31, 2020 is as follows (in thousands):

	Cure			Sera  Labs			Eliminations			Consolidated
Net sales	$	1,007		$	1,044		$	-		$	2,051
Net operating loss	$	(17,377	)	$	(1,581	)	$	-		$	(18,958	)
Assets	$	45,376		$	15,158		$	(14,175	)	$	46,359
Accounts receivable, net	$	131		$	93		$	-		$	224
Inventory, net	$	209		$	240		$	-		$	449
Interest expense	$	2,472		$	-		$	-		$	2,472
Depreciation and amortization	$	341		$	577		$	-		$	918

Total expenditures for additions to long-lived assets were minimal during the years ended December 31, 2021 and 2020.

Disaggregation of Revenues and Concentration Risk

The following table presents the percentage of consolidated revenues attributable to products or services classes that represent greater than ten percent of consolidated revenues for the years ended December 31, 2021 and 2020:

	Year Ended December 31,
	2021			2020
CureFilm™ sales		20	%		37	%
Research & Development services		0	%		11	%
Product sales - CBD		71	%		49	%
Total		91	%		97	%

The Company did not have revenue from any customers that individually represents 10% or more of consolidated revenues for the year ended December 31, 2021. The Company received revenue from one customer that individually represents greater than ten percent of consolidated revenues. Revenue for this customer represents 16% of consolidated revenues for the year ended December 31, 2020. Accounts receivable from this customer at December 31, 2020 was $0.03 million.

XML

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY

12 Months Ended

Dec. 31, 2021

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY

NOTE 20 – BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY

Sera Labs Acquisition

On October 2, 2020, the Company acquired all of the issued and outstanding stock of Sera Labs. All issued and outstanding shares of the capital stock of Sera Labs were converted into the right to receive, subject to customary adjustments, an aggregate of approximately (i) $1.0 million in cash (the “Upfront Payment”) and (ii) up to 6,909,091 shares of the Company’s common stock. On October 1, 2020, the Parties entered into a Waiver of Closing Condition, pursuant to which the Company’s obligation to pay the Upfront Payment at the Effective Time was extended to October 13, 2020. Pursuant to the Sera Labs Merger Agreement, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as set forth in the Sera Labs Merger Agreement. Subsequent to the Effective Time and for a period of two years, the Company agreed to make available to Sera Labs $4.0 million for working capital, less the outstanding amount of the Secured Promissory Note previously issued by the Company to Sera Labs.

Sera Labs is a trusted leader in the health, wellness, and beauty sectors of innovative products with cutting edge technology and superior ingredients such as CBD. Sera Labs creates high quality products that use science-backed, proprietary formulations. Its more than 20 products are sold under the brand names Seratopical™, SeraLabs™, and Gordon’s Herbals™. Sera Labs sells its products at affordable prices, making them easily accessible on a global scale. Strategically positioned in the growth market categories of beauty, health & wellness, and pet care, Sera Labs products are sold in major national drug, grocery chains and mass retailers. The company also sells products under private label to major retailers and multi-level marketers, as well as direct-to-consumer (DTC), via online website orders, including opt-in subscriptions.

The acquisition was accounted for in accordance with ASC 805, Business Combinations. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 12,897,115 total potential shares to be issued, 5,988,024 shares are considered contingent shares based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as described in the Sera Labs Merger Agreement. (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent Shares of $3.1 million will be recorded as a liability as contingent share consideration as of October 2, 2020.

(Dollars in thousands)	Fair Value of the Contingent Share Consideration
Fair value at December 31, 2020	$	3,205
Fair value at December 31, 2021		1,430
Net change in fair value during the year ended December 31, 2021	$	(1,775	)

The Company estimated the fair value of the preliminary purchase price for the acquisition of Sera Labs is approximately $14.2 million. The Company acquired Sera Labs through the issuance of shares of Common Stock of the Company with $1 million of cash consideration to be provided. The preliminary total purchase price was determined based on the following: i) $1 million of the Upfront Payment ii) Company’s closing price ($1.38) on October 2, 2020 for the closing merger consideration shares; and iii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over a 24 month performance period applied to the Clawback Shares.

(Dollars in thousands)	Shares		Amount
Upfront Payment		-	$	1,000
Closing Merger Consideration Shares		6,909,091		9,535
Contingent Consideration Shares (Clawback Shares)		5,988,024		3,083
Liabilities assumed		-		550
Total purchase price		12,897,115	$	14,168

The Company allocated the acquisition consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value of the acquired tangible and identifiable intangible assets were determined based on inputs that are unobservable and significant to the overall fair value measurement. It is also based on estimates and assumptions made by management at the time of the acquisition. As such, this was classified as Level 3 fair value hierarchy measurements and disclosures.

The excess of the purchase price over the estimated fair values was assigned to goodwill.

The following table summarizes the preliminary estimated fair values of the assets and liabilities assumed in the Sera Labs acquisition, which is subject to change during measurement period:

(Dollars in thousands)
Net assets acquired:
Cash	$	1,357
Other assets		1,440
Property, plant and equipment		6
Other long term assets		384
Intangibles assets		10,182
Goodwill		4,687
Accounts payable and accrued expenses		(1,063	)
Contract liabilities		(1,963	)
Other current liabilities		(462	)
Other long-term liabilities		(400	)
Net assets acquired	$	14,168

Information regarding identifiable intangible assets acquired in the Sera Labs acquisition is presented below:

(Dollars in thousands)	Weighted- average Estimated useful life	Preliminary Estimated Asset Fair Value
Finite-lived intangible assets:
Customer relationships	5.0 years	$	7,110
Tradename	4.0 years	$	2,610
Non-compete	2.0 years	$	462
Total finite-lived intangible assets acquired	4.6 years	$	10,182

CHI Acquisition

On May 14, 2019, the Company acquired all of the issued and outstanding stock of CHI for shares of the Company’s Common Stock. The maximum number of shares of Common Stock to be issued, including escrowed shares and shares issuable pursuant to a variety of earn-out provisions and warrants, is 32,072,283 shares. The shares are allocated as follows: (i) 5,700,000 shares of Common Stock as upfront consideration issued at the Closing (the “Upfront Consideration Shares”); (ii) 7,128,913 shares to be held in escrow, subject to indemnification and clawback rights that lapse upon the achievement of certain milestones (the “Clawback Shares”); (iii) up to 3,207,228 shares that may be issued pursuant to an earn-out over five years upon the achievement of certain technological implementations (“Achievement Shares”); (iv) up to 8,018,071 shares that may be issued pursuant to an earn-out over two years upon the achievement of certain revenue goals (“Earnout Shares”); and (v) up to 8,018,071 shares issuable upon exercise of warrants (“Acquisition Warrants”) that become exercisable upon achieving certain revenue goals between the second and fourth anniversary of the Closing Date at an exercise price of 5.01 per share, exercisable, to the extent vested, for five years from the Closing Date. In exchange for the assets and liabilities acquired, the Company received an investment of $2 million (the “Principal Amount”) from Chemistry Holdings pursuant to a convertible note (the “Note”). Such Note, on the Closing Date, became an intercompany payable and was cancelled.

On June 5, 2020 (the “Release Effective Date”), the Company and CHI, entered into a Release, Waiver, and Amendment (the “Agreement”) and a related Warrant Amendment Agreement (“Warrant Amendment”), in order to make a full resolution of the shares issuable pursuant to the CHI Merger. The Agreement provided as follows: (a) all7,128,913r shares held in escrow were released to the Holders as of the Release Effective Date, of which 140,828shares were returned to the Company for cancellation in consideration for the Company committing to pay certain outstanding liabilities, (b) of the 11,225,299 total shares issuable pursuant to the earn-out provisions in the CHI Merger Agreement, 5,612,654 shares were issued to the Holders as of the Release Effective Date (310,821 of which were assigned back to the Company as of the Release Effective Date) and the obligation of the Company to issue any further earn-out shares was terminated, and (c) certain Holders exercised warrants issued in the CHI Merger to purchase708,467 shares of Common Stock on the Release Effective Date at a price of $2.00 per share (which reflects a reduced exercise price as a result of the Warrant Amendment) for gross proceeds to the Company of approximately $1.4million and the remaining warrants to purchase 7,309,605 shares of Common Stock issued in the CHI Merger expired on the Release Effective Date as a result of an amendment of such warrants effected pursuant to the Warrant Amendment.

As previously disclosed, the Company undertook to issue warrants to purchase an additional 4,143,706 shares of common stock to certain affiliates of CHI in consideration for consulting and advisory services to be provided following the closing of the CHI Merger (the “Service Warrants”). Pursuant to the Agreement, the undertaking by the Company to issue the Service Warrants was terminated as of the Release Effective Date.

CHI has developed a novel chewable delivery system, nanoemulsions, microemulsions, microcapsules and taste masking solutions. These technologies complement and expand the CUREfilm™ platform to enable the delivery of a wider range of active ingredients at higher doses. The combined technologies create a versatile platform for both immediate and controlled-release drug delivery.

The acquisition was accounted for in accordance with ASC 805, Business Combinations. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 32,072,283 total potential shares to be issued, 26,372,283 shares are considered contingent shares to be released or issued over a period from 5 months to 5 years based on the various contingency as described in the Merger Agreement. (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent and Acquisition Warrant Shares of $14.6 million will be recorded as a liability as contingent share consideration as of May 14, 2019. Below is the change of contingent share consideration during the year ended December 31, 2020:

(Dollars in thousands)	Fair Value of the Contingent Share Consideration
Fair value at December 31, 2018	$	-
Fair value at May 14, 2019		14,632
Net change in fair value during the year ended December 31, 2019		1,657
Fair value of common stock shares to be released from escrow and to be issued		(246	)
Fair Value at December 31, 2019		16,043
Settlement of contingent consideration liability		(21,701	)
Net change in fair value during the year ended December 31, 2020		5,658
Fair Value at December 31, 2020	$	-

Supplemental Pro Forma Information

The following unaudited supplemental pro forma financial information is based on our historical consolidated financial statements, CHI’s historical consolidated financial statements and Sera Lab’s historical consolidated financial statements as adjusted to give effect to the May 14, 2019 acquisition of CHI’s and the October 2, 2020 acquisition of Sera Labs. The unaudited supplemental pro forma financial information for the periods presented gives effect to the acquisition for CHI as if it had occurred on January 1, 2018 and January 1, 2019 for Sera Labs.

This unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the periods presented. In addition, the unaudited pro forma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable.

The following table presents pro forma sales, net loss attributable to Cure Pharmaceutical Holding, Inc., and net loss attributable to the Company per common share data assuming Sera Labs and CHI were acquired at the beginning of 2019 fiscal year.

For the year ended December 31, 2020 (in thousands, except per share data):

	Cure Pharmaceutical			Sera Labs			Pro forma Adjustments			Consolidated Pro Forma
Net product sales	$	1,049		$	6,728		$	(34	)	$	7,743
Net loss	$	(29,059	)	$	(3,051	)	$	162		$	(31,948	)
Net loss attributable to Cure per common share, basic and diluted	$	(0.65	)	$	(0.26	)				$	(0.68	)

XML

INCOME TAXES

12 Months Ended

Dec. 31, 2021

INCOME TAXES

INCOME TAXES

NOTE 21 – INCOME TAXES

The Company accounts for income taxes under ASC Topic 740: Income Taxes which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

The Company generated a deferred tax asset through net operating loss carry-forwards. Management of the Company’s analysis indicates the net operating losses would be subject to significant limitations pursuant to Internal Revenue Code Section 382/383. The Company has not completed its IRC Section 382 Valuation, as required and the NOL’s because of potential Change of Ownerships might limit the usage or render the NOL’s completely worthless. Therefore, Management of the Company based upon Management’s evaluation has recorded a Full Valuation Reserve (100%), since it is more likely than not that no benefit will be realized for the Deferred Tax Assets.

Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. The Company does not have any uncertain tax positions.

The total deferred tax asset is calculated by multiplying a domestic (US) 21 percent marginal tax rate by the cumulative Net Operating Loss Carryforwards (“NOL”). The Company currently has NOL’s of approximately $13.8 million, which expire through 2038, in general, and NOL’s of approximately $26.9 million, which has an infinite life. The deferred tax asset related to the NOL carryforwards Management has determined based on all the available information that a 100% Valuation reserve is required. The change in the valuation allowance was $7.8 million and $7.3 million for the years ended December 31, 2021 and 2020, respectively.

The provision for incomes taxes for the years ending December 31 is as follows (in thousands):

	2021		2020
Current expense
Federal	$	-	$	-
State		-		-
Deferred expense
Federal	$	-	$	-
State		-		-
Total income tax expense	$	-	$	-

Deferred income tax (liabilities) assets at December 31 are as follows (in thousands):

	2021			2020
Deferred income tax assets
Net operating loss carryforward	$	6,862		$	14,359
Change in fair value of convertible promissory notes		2,517			2,627
Noncash compensation		899			1,018
Deferred revenue		142			180
Reserves and accruals		74			-
Lease liability		89			118
Other intangibles		195			195
Inventory reserve		31			82
Stock based compensation		79			79
Allowance for doubtful accounts		22			96
Accrued expenses		135			131
Total deferred tax assets		11,045			18,885
Deferred income tax liabilities
State income taxes		-			-
ROU assets		(83	)		(110	)
Prepaid expenses and other assets		(43	)		(84	)
Depreciation and amortization		(48	)		(48	)
Valuation allowance		(10,871	)		(18,643	)
Total deferred tax liabilities		(11,045	)		(18,885	)
Deferred income tax, net	$	-		$	-

Open income tax years for audit purposes (Federal and State) are from 2018 through 2021. The Company has not been serviced with any audit notices, as of the year ended December 31, 2021. In addition, the Company is current in filing our sales and income tax returns.

Internal Revenue Code Section 382 places a limitation (“Section 382 Limitation”) on the amount of taxable income that can be offset by NOL carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. California has similar rules. Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the NOL and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods.

In general, the Company is no longer subject to tax examination by the Internal Revenue Service or state taxing authorities for years before 2016. Although the federal and state statutes are closed for purposes of assessing additional income tax in those prior years, the taxing authorities may still make adjustments to the NOL and credit carryforwards used in open years. Therefore, the tax statutes should be considered open as it relates to the NOL and credit carryforwards used in open years. For tax years that remain open to examination, potential examinations may include questioning of the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with the Internal Revenue Code or state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

The Company’s practice is to recognize interest and penalties related to income tax matters in tax expense. As of December 31, 2021 and 2020, The Company has no accrued interest and penalties.

XML

INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS

12 Months Ended

Dec. 31, 2021

INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS

INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS

NOTE 22 - INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS

On September 4, 2018, Cure Pharmaceutical Holding Corp., through its subsidiary, Cure Pharmaceutical Corp. (together, the “Company”) entered into its first multi-year licensing agreement (the “Licensing Agreement”) with Canopy Growth Corporation, a company that engages in the production and sale of medical cannabis (“Canopy”). Under the terms of the Licensing Agreement, Canopy will have an exclusive license to certain of the Company’s intellectual property rights, including the Company’s patented, multi-layer OTF, CUREfilm™ technology for use with cannabis extracts and biosynthetic cannabinoids (“Products”) and the Company’s trademarks in markets around the world where it is legal for Canopy to sell the Products, excluding Asia. The Company will retain the right to manufacture synthetic cannabinoids for pharmaceutical applications.

On November 7, 2019 (the “Effective Date”), the Company and Canopy entered into an Amendment Agreement (“Amendment”) to allow the Company to sell cannabinoid CUREfilm products (“Product”) to third parties internationally, excluding Canada, from the Effective Date until December 31, 2020. However, the Company shall not be allowed to sell any Product that are being specifically developed for Canopy, as identified per the Development Agreement between the Company and Canopy, which is dated on June 17, 2019.

On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million was paid to the Company’s attorneys. The Company recognized a settlement income of $2.4 million during 2021 as a result of this agreement.

During the year ended December 31, 2021 and 2020, the Company recognized $0 and $0.01 million, respectively, of revenue relating to work completed regarding the transfer of technology fee as discussed in the License Agreement with Canopy.

XML

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2021

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 23 - COMMITMENTS AND CONTINGENCIES

Litigation

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

On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million was paid to the Company’s attorneys.

On March 26, 2021, a vendor that the Company utilized for consulting services relating to various quality, compliance and regulatory filed a complaint against the Company for breach of contract. On May 18, 2021, the Company responded to the compliant denying their claims and also filed a cross complaint against this vendor for breach of contract by failing to provide deliverables as required by the contract. On February 2, 2022, the Company and the vendor entered into a Settlement Agreement and Mutual Release (“Settlement Agreement”) where both the Company and the vendor desire to come together and to settle fully and finally all difference as filed in each parties complaints. As part of the Settlement Agreement, the Company will pay to the vendor a settlement amount of $0.03 million (“Settlement Amount”) and upon receipt of the Settlement Amount by the vendor, the vendor will execute a Request for Dismissal dismissing the entire actions of all parties.

Tax Filings

The Company tax filings are subject to audit by taxing authorities in jurisdictions where it conducts business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. As of December 31, 2021, the Company is not subject to any such these audits.

Employment Contracts

The Company has entered into employment and severance benefit contracts with certain executive officers. Under the provisions of the contracts, The Company may be required to incur severance obligations for matters relating to changes in control, as defined, and certain terminations of executives. As of December 31, 2021, the Company had such severance obligations for certain executive officers, in accordance with the severance benefit provisions of their respective employment and severance benefit agreements.

On May 8, 2020 the Company entered into a separation agreement (the “Rousset Separation Agreement”) with Jessica Rousset whereby the parties have agreed to a mutual separation of Mrs. Rousset’s employment as the Company’s Chief Operating Officer, effective May 8, 2020.

Pursuant to the terms of the Rousset Separation Agreement, Mrs. Rousset will be entitled to the following severance benefits: (i) a gross sum of $93,461.54, paid in equal installments over a six-month period; (ii) for a period of six months, an amount equal to the cost of her COBRA health benefits if she enrolls for COBRA coverage; (iii) acceleration of vesting of each equity award held by her to the extent the award would have vested had she remained employed for six months following her resignation; and (iv) an extended exercise period for certain equity awards held by her such that she may exercise vested shares under such outstanding equity awards until May 8, 2021. The Separation Agreement contains a release and certain restrictive covenants that are binding upon Mrs. Rousset.

On November 3, 2021 the Company entered into a separation agreement (the “Berlent Separation Agreement”) with Jonathan Berlent whereby the parties have agreed to a mutual separation of Mr. Berlent’s employment as the Company’s Chief Business Officer, effective November 3, 2021.

Pursuant to the terms of the Berlent Separation Agreement, Mr. Berlent will be entitled to the following severance benefits: (i) a gross sum of $0.01 million relating to deferred payroll; (ii) separation pay of three weeks of Mr. Berlent’s gross pay, less standard payroll deductions and withholdings; and (iii) for a period of five months, an amount equal to the cost of his COBRA health benefits if he enrolls for COBRA coverage. The Berlent Separation Agreement contains a release and certain restrictive covenants that are binding upon Mr. Berlent.

Indemnification

In the normal course of business, the Company may provide indemnification of varying scope under the Company’s agreements with other companies or consultants, typically the Company’s clinical research organizations, suppliers and others. Pursuant to these agreements, the Company will generally agree to indemnify, hold harmless, and reimburse the indemnified parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of the Company’s products. Indemnification provisions could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to the Company’s products. The Company’s office and laboratory facility leases also will generally contain indemnification obligations, including obligations for indemnification of the lessor for environmental law matters and injuries to persons or property of others, arising from the Company’s use or occupancy of the leased property. The term of these indemnification agreements will generally continue in effect after the termination or expiration of the particular research, development, services, lease, or license agreement to which they relate. Historically, the Company has not been subject to any claims or demands for indemnification. The Company also maintains various liability insurance policies that limit the Company’s financial exposure. As a result, the Company management believes that the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of December 31, 2021 and 2020.

Operating leases

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

Sera Labs will pay base monthly rent in the amount of $0.01 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%. If the Lease is terminated based on the occurrence of an “event of default,” The Company will be obligated to pay the abated rent to the lessor.

On May 1, 2019, Sera Labs entered into a lease agreement to lease a 3,822 square feet office space and was absorbed by the Company upon acquisition of Sera Labs on October 2, 2020. The agreement contains an option to extend the lease for an additional 36 months and the Company will reassess the lease term of the contract when it has determined it is reasonably certain to exercise the option. Sera Labs will pay base monthly rent in the amount of $0.01 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%. If the Lease is terminated based on the occurrence of an “event of default,” The Company will be obligated to pay the abated rent to the lessor.

Total rent expense was $0.4 million and $0.3 million for the years ended December 31, 2021 and 2020, respectively.

The Company classified the Sera Labs lease as an operating lease in accordance with ASC 842 and has recognized a right-of-use asset and a lease liability based on the present values of its lease payments over its respective lease term. The Company used the services of a valuation company to compute the IBR, which is necessary to determine the present value of its lease payments since a borrowing rate is not explicitly available on the lease agreement. The concluded IBR is 11.30%. Operating lease payments and lease expense are recognized on a straight-line basis over the lease term.

As of December 31, 2021, the current portion and long-term portion of operating lease liability is $0.1 million and $0.3 million, respectively.

The future payments due under the operating lease for the years ended December 31 are as follows:

Years
2022	$	134
2023		138
2024		46
2025		-
2026		-
Undiscounted cash flow		318
Effects of discounting		(40	)
Lease liabilities recognized	$	278

Finance leases

During 2019, the Company entered into a 5-year equipment lease rental, which requires the company to pay monthly payments of $0.02 million. The Company determined the payments represented substantially all of the fair value of the asset and recorded a right of use asset for $0.06 million and a finance lease liability for $0.06 million as of December 31, 2019 within other assets and liabilities. The company will make payments of $0.02 annually until October 2024. Interest associated with the lease is $0.01 million or less annually based on a discount rate of 9.0%. For the year ended December 31, 2021, the current portion and long-term portion of finance capital lease liability is $0.01 million and $0.03 million, respectively. For the year ended December 31, 2020 the current portion and long-term portion of finance capital lease liability was $0.01 million and $0.04 million, respectively.

Future minimum lease payments under non-cancellable finance leases as of December 31, 2021 are as follows (in thousands):

2022	$	14
2023		14
2024		12
2025		-
2026		-
Thereafter		-
Finance lease liabilities recognized	$	40

Operating and Financing leases

The following table presents supplemental balance sheet information related to operating and financing leases as of December 31, 2021 and 2020 (in thousands, except lease term and discount rate):

	2021			2020
Operating leases
Right-of-use assets, net	$	257		$	343
Right-of-use lease liabilities, current	$	104		$	93
Right-of-use lease liabilities, noncurrent		174			278
Total operating lease liabilities	$	278		$	371
Financing Leases
Finance lease right-to-use assets, net	$	40		$	52
Current liabilities	$	13		$	12
Noncurrent liabilities		27			40
Total financing lease liabilities	$	40		$	52
Weighted average remaining lease term
Operating leases	2.29 years			3.31 years
Financing leases	2.80 years			3.82 years
Weighted average discount rate
Operating leases		11.3	%		11.3	%
Financing leases		9.0	%		9.0	%

XML

SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2021

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 24 - SUBSEQUENT EVENTS

Except for the event(s) discussed below, there were no subsequent events that required recognition or disclosure. The Company evaluated subsequent events through the date the consolidated financial statements were issued and filed with the Securities and Exchange Commission.

On January 5, 2022, the Company entered into a Forbearance Agreement (the “Forbearance Agreement”) with the Investor pursuant to which the Investor has agreed not to exercise, with certain exclusions, any of its judicial or administrative enforcement actions to obtain cash or other assets (excluding Common Stock or other assets issuable upon conversion or exchange of the Series B Note in accordance with the terms thereof) from the Company on account of any payment obligations of the Company under the Series B Note or the Event of Default Redemption Notice that exist as of the date of the Forbearance Agreement or that may arise from the date of this Agreement through February 15, 2022. As of the filing date this report, the Company is currently in discussions with the Investor regarding an extension of the Forbearance period.

On January 10, 2022, the Company entered into a senior secured promissory note (the “Senior Secured January Note”) with a Board Investor for a principal amount of $0.2 million. The Senior Secured January Note is due on April 11, 2022 and has an interest rate of 10% per annum, payable at maturity. The Senior Secured January Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On January 12, 2022, the Company entered into a senior secured promissory note (the “Second Senior Secured January Note”) with the CEO of Sera Labs for a principal amount of $0.04 million. The Senior Secured January Note is due on April 11, 2022 and has an interest rate of 10% per annum, payable at maturity. The Secured November Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On January 18, 2022, the Company entered into a senior secured promissory note (the “Third Senior Secured January Note”) with an investor for a principal amount of $0.2 million. The Third Senior Secured January Note is due on April 11, 2022 and has an interest rate of 10% per annum, payable at maturity. The Third Secured January Note is secured by all the Company’s personal property, now existing or later arising, including accounts, chattel paper, commercial tort claims, fixtures, intellectual property, investment property, letter-of-credit rights, inventory, equipment, general intangibles, deposit accounts, financial assets, documents, instruments, goods and money and all proceeds of all of the foregoing.

On February 2, 2022, the Company and a vendor that the Company utilized for consulting services relating to various quality, compliance and regulatory the vendor entered into a Settlement Agreement and Mutual Release (“Settlement Agreement”) where both the Company and the vendor desire to come together and to settle fully and finally all difference as filed in each parties complaints. As part of the Settlement Agreement, the Company will pay to the vendor a settlement amount of $0.03 million (“Settlement Amount”) and upon receipt of the Settlement Amount by the vendor, the vendor will execute a Request for Dismissal dismissing the entire actions of all parties.

From January 31, 2022 to March 9, 2022, the Company received at total of $2.1 million from an investment company (“Investor”) in exchange for promissory notes. Both the Company and Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory notes.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Principles of Consolidation

The consolidated financial statements include the accounts of CPHC and its wholly-owned subsidiaries, CURE Pharmaceutical, CHI, and Sera Labs, collectively referred to as (“CURE”, “we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s film strip product represents the principal operations of the Company. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition.

Going Concern and Management's Liquidity Plans

In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, The Company assesses going concern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to The Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, The Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent The Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15.

The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2021, we had an accumulated deficit of approximately $94.4 million and a working capital deficit of approximately $22.5 million. Our operating activities consume the majority of our cash resources. We anticipate that we will continue to incur operating losses and negative cash flows from operations, at least into the near future, as we execute our commercialization and development plans and strategic and business development initiatives.

As of December 31, 2021, the Company had approximately $0.02 million of cash on hand. We have previously funded, and intend to continue funding, our losses primarily through the issuance of common stock and/or promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations. We believe the funds available through these potential financings will be sufficient to meet the Company’s working capital requirements during the coming year. If we are unable to raise sufficient additional funds, we will have to develop and implement a plan to extend payables, reduce expenditures, or scale back our business plan until sufficient additional capital is raised to support further operations. 

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

ASU 2020-01

In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815. ASU 2020-01 addresses the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. Observable transactions that require a company to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with ASC 321, Investments – Equity Securities, should be considered immediately before applying or upon discontinuing the equity method. Certain non-derivative forward contracts or purchased call options to acquire equity securities generally will be measured using the fair value principles of ASC 321 before settlement or exercise and consideration shall not be given to how entities will account for the resulting investments on eventual settlement or exercise. ASU 2020-01 is effective for the Company beginning in the first quarter of 2021 and early adoption is permitted. ASU 2020-01 should be applied prospectively. The adoption of this ASU did not have any impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

ASU 2019-12

In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within that fiscal year. Early adoption is permitted. The Company is in the process of evaluating the impacts of this guidance on its consolidated financial statements and related disclosures.

ASU 2020-06

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivative and Hedging - Contracts in Entity’s Own Equity, which simplifies the accounting for convertible instruments. This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is required to be adopted by us in the first quarter of 2023 and must be applied using either a modified or full retrospective approach. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2020 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

There are various other updates recently issued, however, they are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

Fair value measurements

The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements and establishes a framework for measuring fair value and expands disclosure about such fair value measurements. ASC 820 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

· Level 1 – Quoted prices in active markets for identical assets and liabilities.

· Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

When a part of the purchase consideration consists of shares of the Company common stock, the Company calculates the purchase price attributable to those shares, a Level 1 security, by determining the fair value of those shares quoted on the OTC as of the acquisition date. The Company recognizes estimated fair values of the tangible assets and identifiable intangible assets acquired, including in-process research and development, and liabilities assumed, including any contingent consideration, as of the acquisition date. Goodwill is recognized as any amount of the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in excess of the consideration transferred. ASC 805 precludes the recognition of an assembled workforce as an asset, effectively subsuming any assembled workforce value into goodwill.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. At December, 31, 2021 and 2020, the Company had no financial assets or liabilities recorded at fair value on a recurring basis, except for cash and cash equivalents consisting of money market funds and the Series A and Series B Notes, which we elected the fair value option. These assets and liabilities are measured at fair value using either Black-Scholes model or Monte Carlo simulation model as a Level 3 input. The Company also has certain derivative liabilities and contingent consideration liabilities which are carried at fair value based on Level 3 inputs.

The carrying amounts of cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair values because of the short-term nature of these items.

The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earn outs may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from the date of acquisition to December 31, 2020, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in an increase of the fair value of the contingent stock consideration From January 1, 2021 to December 31, 2021, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in a decrease of the fair value of the contingent stock consideration. In June 2020, the Company settled all of its outstanding contingent consideration liabilities outstanding with CHI. In October 2020, the Company acquired Sera Labs and had an outstanding contingent consideration liability of $3.2 million in relation to the Sera Labs Merger.

The Company has elected the fair value option to account for the Series A and B Notes that were issued on October 30, 2020 and records this at fair value with changes in fair value recorded in the Consolidated Statements of Operations. As a result of applying the fair value option, direct costs and fees related to the Series A and B Notes were recognized in earnings as incurred and not deferred.

The following table summarizes fair value measurements by level at December 31, 2021 for assets and liabilities measured at fair value on a recurring basis (in thousands):

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Fair value of contingent stock consideration	$	1,430	$	-	$	-	$	1,430
Fair value of Series A Note	$	3,075	$	-	$	-	$	3,075
Fair value of Series B Note	$	6,857	$	-	$	-	$	6,857
Fair value of derivative liability	$	-	$	-	$	-	$	-

The following table summarizes fair value measurements by level at December 31, 2020 for assets and liabilities measured at fair value on a recurring basis (in thousands):

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Fair value of contingent stock consideration	$	3,205	$	-	$	-	$	3,205
Fair value of Series A Note	$	7,010	$	-	$	-	$	7,010
Fair value of Series B Note	$	6,674	$	-	$	-	$	6,674
Fair value of derivative liability	$	-	$	-	$	-	$	-

The following table summarizes the changes in Level 3 financial instruments during the years ended December 31, 2021 and 2020 (in thousands):

Fair value of Series A and B Notes at December 31, 2019	$	—
Initial fair value of Series A Note		9,042
Initial fair value of Series B Note		6,990
Change in fair value of Series A Note		165
Change in fair value of Series B Notes		(316	)
Conversion of Series A Notes		(2,197	)
Fair value of Series A and B Notes at December 31, 2020		13,684
Change in fair value of Series A Note		(1,054	)
Change in fair value of Series B Notes		1,448
Conversion of Series A Notes		(2,881	)
Conversion of Series B Notes		(1,265	)
Fair value of Series A and B Notes at December 31, 2021	$	9,932

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Series A and Series B Notes are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy is as follows:

Date of valuation	December 31, 2021			December 31,  2020
Stock price	$	0.36		$	1.30
Conversion price	$	1.32		$	1.32
Term (in years) – Series A Note		0.83			1.83
Term (in years) – Series B Note		0.13			0.83
Volatility – Series A Note		85	%		86	%
Volatility – Series B Note		65	%		80	%
Risk-free interest rate – Series A Note		0.32	%		0.12	%
Risk-free interest rate – Series B Note		0.06	%		0.09	%
Interest rate		18	%		18	%

The Company recorded a loss of $0.4 million and $9.3 million due to the change in fair value of Series A and B convertible notes for the years ended December 31, 2021 and 2020.

Reclassifications

Certain reclassifications have been made to prior year’s consolidated financial statements to enhance comparability with the current year’s consolidated financial statements. These reclassifications had no effect on the previously reported net loss.

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts, valuation of intangible assets and goodwill, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock based compensation, beneficial conversion features, warrant values, valuation allowance on deferred taxes, incremental borrowing rate (“IBR”) relating to leases, assumption used for discounts and returns in relation to revenue and the assumptions used to calculate derivative liabilities and fair values of the purchase price allocations and convertible promissory notes. Actual results could differ materially from such estimates under different assumptions or circumstances.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of December 31, 2021, and 2020, the Company had no cash equivalents. The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At December 31, 2021 the Company did not have in excess of the federal insurance limit and at December 31, 2020, the Company had $1.5 million in excess of the federal insurance limit.

Investment in Associates

The Company follows Accounting Standards Codification (“ASC”) 325-20, Cost Method Investments (“ASC 325-20”), to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

From November 1, 2019 to February 13, 2020, the Company purchased Convertible Loans (“Loans”) from Releaf Europe BV (“Releaf”) in the amount of $0.5 million. Releaf shall accrue interest on the Loans at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Loans are repaid or at the maturity date of October 31, 2021 (“Maturity Date”). In the event of a request for conversion by the Company (“Request for Conversion”) or at the end of the Maturity Date, the outstanding amount of the Loans and any unpaid accrued interest shall be converted into shares of Releaf (“Shares”) based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2 million of debt and/or equity (“Qualified Financing”), the outstanding amount of the Loan Agreement and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Qualified Financing less a discount of 20% on the subscription price. In addition, both the Company and Releaf agree in the event the pre-money valuation of the Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of December 31, 2021, the Company recorded an investment using the cost method of accounting in Releaf and recorded accrued interest relating to these Loans as well as a reserve on investment . As of the filing date of this report, the Company has not extended or received Shares as per the term of the agreement, but are in discussions with Releaf regarding the terms of conversion of the Loans.    

Account Receivable

Accounts receivable are generally unsecured. The Company closely monitors accounts receivable balances and estimates the allowance for credit losses. These estimates are based on historical collection experience and other factors, including those related to current market conditions and events. The Company’s allowances for accounts receivable have not historically been material. At December 31, 2021 and 2020 management determined that an allowance of $0.08 million and $0.04 million were necessary.

Property Plant And Equipment

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

Manufacturing equipment	5-7 years
Computer and other equipment	3-7 years
Leasehold improvements	3-7 years

In accordance with ASC 360, Property Plant and Equipment, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

Leases

Effective January 2019, the Company accounts for its leases under ASC 842. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. The adoption of ASC 842 did not have a material impact to the Company’s consolidated financial statements because the Company did not have any significant operating leases at the time of adoption. During the years ended December 31, 2021 and 2020, the Company as a result of its acquisition has various operating leases in accordance with ASC 842 discussed in Note 21. The Company’s accounting for financing leases (previously referred to as “capital leases”) remained substantially unchanged.

In calculating the right of use and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial term of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

Inventory

Inventory is stated at the lower of cost or net realizable value (“NRV”). NRV is the amount by which the estimated selling price of the product exceeds the sum of any additional costs expected to be incurred on the sale of such product in the ordinary course of business. The Company determines the cost of its inventory, which includes amounts related to materials, direct labor, and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period. In order to state the inventory at the lower of cost or NRV, we maintain reserves against individual stocking units. Inventory reserves, once established, are not reversed until the related inventories have been sold or scrapped. If future demand or market conditions are less favorable than our projections, a write-down of inventory may be required, and would be reflected in cost of product revenues sold in the period the revision is made.

Goodwill and intangible assets

In accordance with ASC 350, Intangibles – Goodwill and Other, in-process research and development (“IPR&D”) projects acquired in a business combination that are not complete as of the acquisition date are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related research and development efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. The Company considers various factors and risks for potential impairment of IPR&D assets, including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, or significant delays, or the inability to bring a product to market and the introduction or advancement of competitors’ products could result in partial or full impairment of the related intangible assets. Consequently, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods. During the period between completion or abandonment, the IPR&D assets will not be amortized but will be tested for impairment on an annual basis and between annual tests if the Company becomes aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts (see Note 8).

Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill, similar to IPR&D, is not amortized but is tested for impairment at least annually, or if circumstances indicate its value may no longer be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company’s business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. The Company operates in two segments as result of the Sera Labs, Inc., acquisition in October 2020 and considered to be the two reporting units and, therefore, goodwill is tested for impairment at the segment level.

The Company does not have intangible assets with indefinite useful lives other than goodwill, Trademark, and the acquired IPR&D discussed in Note 20. As of December 31, 2021, there has been no impairment of goodwill and intangible assets.

Impairment of Long Lived Assets

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

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted 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 year ended December 31, 2021 and 2020.

Contingent Consideration Liabilities

Certain of the Company’s asset and business acquisitions involve the potential for future payment of consideration to third-parties and former selling shareholders in amounts determined upon attainment of revenue milestones, from product sales, as applicable. The fair value of such liabilities is determined using unobservable inputs. These inputs include the estimated amount and timing of projected cash flows and the risk-adjusted discount rate used to present value the cash flows. These obligations are referred to as contingent consideration.

ASC 805 requires that contingent consideration be estimated and recorded at fair value as of the acquisition date as part of the total consideration transferred. Contingent consideration is an obligation of the acquirer to transfer additional assets or equity interests to the selling shareholders in the future if certain future events occur or conditions are met, such as the attainment of product development milestones. Contingent consideration also includes additional future payments to selling shareholders based on achievement of components of earnings, such as “earn-out” provisions or percentage of future revenues, including royalties paid to the selling shareholders based on a percentage of revenues generated from the Sera Labs’ products.

The fair value of contingent consideration after the acquisition date is reassessed by the Company as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in the consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that the Company records in its consolidated financial statements. See Note 20 for a full discussion of these liabilities.

Related Party

                Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, “Revenue Recognition”. Revenues under Topic 606 are required to be recognized either at a “point in time” or “over time”, depending on the facts and circumstances of the arrangement, and are evaluated using a five-step model.

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

· Identify the contract(s) with customer;

· Identify the performance obligations in the contract;

· Determine the transactions price;

· Allocate the transactions price to the performance obligations in the contract; and

· Recognize revenue when (or as) we satisfy a performance obligation.

Under Topic 606, the Company recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer.

Cure Pharmaceutical Revenue

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

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

Cure Pharmaceutical has entered into a Collaboration and Joint Development Agreement (“Agreement”) with Medolife Rx (“Medolife”) on February 1, 2021 (“Effective Date”) for Medolife to produce Medolife Products (“Products”) in Cure Pharmaceutical’s cGMP facility. The term of this agreement is for five (5) years from the Effective Date (“Term”). Medolife is to pay $0.3 million to assist in completing the jointly developed production line at Cure Pharmaceutical’s cGMP facility. In addition, Cure Pharmaceutical will produce Products on behalf of Medolife and will grant access to Medolife for a joint production area within Cure Pharmaceutical’s production facility for the Term of this Agreement. The Company has determined that there are no distinct obligations for the $0.3 million and Cure Pharmaceutical does have further obligations as stated in the Agreement, thus the Company will recognize the revenue monthly over the Term, beginning February 1, 2021.

Sera Labs Revenue

Sera Labs recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer.

Revenue from eCommerce sales, including direct-to-consumer sales, are recognized upon shipment of merchandise. We also elected to adopt the practical expedient related to shipping and handling fees which allows us to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Therefore, shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred. Shipping revenue are recorded upon delivery to the customer.

Practical Expedients and Exemptions

The Company has elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows:

· The Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception;

· The Company made the accounting policy election to exclude any sales and similar taxes from the transaction price; and

· The Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Sales Tax

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to a customer, excluding sales taxes. The net amount of sales tax payable to the taxation authority is included accrued expenses in the balance sheet.

Sales Returns, Discounts and Warranties

Sales returns, discount and warranties are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns, discounts and warranties which may occur with distributors and retailers. When evaluating the adequacy of sales returns, discounts and warranties, the Company analyzes the following: historical credit allowances, current sell-through of inventory of the Company’s products, current trends in retail industry, changes in customer demand, acceptance of products, and other related factors.

Cost to Obtain a Contract

The Company pays sales commission to its employees and outside sales representatives for contracts that they obtain relating to wholesale and personal protective equipment. The Company applies the optional practical expedient to immediately expense costs to obtain a contract if the amortization period of the asset that would have been recognized is one year or less. As such, sales commissions are immediately recognized as an expense and included as part of sales and marketing expenses.

Contract Liabilities

Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded as deferred revenues when customers remit contractual cash payments in advance before satisfying performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied. Advance payments and billings in excess of revenue recognized are included in deferred revenue, which is classified as current or noncurrent based on the timing of when the Company expects to recognize revenue. At December 31, 2021 and 2020, we had contract liabilities of $0.5 million and $1.0 million, respectively.

Contract liabilities is made up of the following as of December 31, 2021 and 2020 (in thousands):

	2021		2020
Customer deposits for commercial products	$	508	$	281
Customer deposits for personal protective equipment		-		713
Total contract liabilities	$	508	$	994

The following table summarizes the changes in contract liabilities during the years ended December 31, 2020 and 2019 (in thousands):

Balance at December 31,2019	$	456
Additions		1,033
Transfers to Revenue		(495	)
Balance at December 31,2020		994
Additions		435
Customer deposits returned		(713	)
Transfers to Revenue		(208	)
Balance at December 31, 2021	$	508

Cost of Revenues

Cost of revenues primarily consists of labor and manufacturing costs for our products.

Advertising Expense

The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying consolidated statements of operations. The Company recorded advertising costs of $2.8 million and $1.1 million for the years ended December 31, 2021 and 2020, respectively.

Research and Development

Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred. The Company recorded research and development expenses of $2.4 million and $2.8 million for the years ended December 31, 2021 and 2020, respectively.

Income Taxes

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

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

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the outbreak of a novel strain of the coronavirus, COVID-19. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Under the CARES Act, net operating losses (“NOLs”) arising in tax years beginning after December 31, 2017, and before January 1, 2021 may be carried back to each of the five tax years preceding the tax year of such loss. Moreover, under the 2017 Tax Act as modified by the CARES Act, federal NOLs of our corporate subsidiaries generated in tax years ending after December 31, 2017, may be carried forward indefinitely, but the deductibility of federal NOLs, particularly for tax years beginning on or after January 1, 2021, may be limited. The accounting for the material income tax impacts has been reflected in the year ended December 31, 2021 financial statements. It is uncertain if and to what extent various states will conform to the 2017 Tax Act or the CARES Act. The Company is currently assessing the impact the CARES Act will have on the Company’s consolidated financial statements.

Stock Based Compensation

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

Pursuant to ASC 2018-07 (“Topic 718”) for share-based payments to employees, consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the grant date. The Company uses the Black-Scholes option valuation model for estimating fair value at the date of grant.

The Company accounts for restricted stock awards and stock options issued at fair value, based the closing stock price of the Company’s common stock reported on the OTC Bulletin Board. Compensation expense is recognized for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to the Company generally using the straight-line single option method.

In the case of award modifications, the Company accounts for the modification in accordance with Accounting Standards Update (“ASU”) No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, whereby the Company recognizes the effect of the modification in the period the award is modified.

As of January 1, 2019, the Company adopted ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting of share-based payment awards issued to employees and nonemployees. The adoption did not materially impact our consolidated financial statements.

Business combinations

                The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the value of the assets acquired and liabilities assumed is recognized as goodwill.

Beneficial Conversion Feature

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

Accounting for warrants

The Company determines the accounting classification of warrants it issues, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. The Company does not have any liability classified warrants as of any period presented.

Derivative Liabilities

ASC 815-40, requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula and present value pricing. At December 31, 2020, the Company didn’t have a derivative liability, but the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement of operations for the year ended December 31, 2020.

Contingencies

We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. Gain contingencies are recorded when the ultimate resolution of the contingency is resolved.  As disclosed in note 22, the Company recognized settlement income of $2.4 million during 2021.

Net Loss per Common Share

Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, excluding any unvested restricted stock awards. Diluted net earnings per share is computed by dividing net earnings by the weighted average common shares outstanding during the period plus dilutive securities or other contracts to issue common stock as if these securities were exercised or converted to common stock.

Diluted net loss per share includes the effect of common stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive. Net loss is adjusted for the dilutive effect of the change in fair value liability for price adjustable warrants, if applicable.

The following table sets forth the computation of basic and diluted net income per share for the year ended (in thousands, except per share data):

(Dollars in thousands)	December 31, 2021			December 31, 2020
Net loss	$	(13,193	)	$	(30,621	)
Weighted average outstanding shares of common stock		50,182,229			47,308,158
Dilutive potential common stock shares from:
Vested Stock options from the Company’s 2017 Equity Incentive Plan		-			-
Warrants
Conversion of convertible notes		-			-
Issuance of contingent shares relating to CHI acquisition		-			-
Common stock and common stock equivalents		50,182,229			47,308,158
Income per share:
Basic net loss per share	$	(0.26	)	$	(0.65	)
Diluted net loss per share	$	(0.26	)	$	(0.65	)

The following number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive (in thousands, except per share data):

	December 31, 2021		December 31, 2020
Vested stock options from the Company’s 2017 Equity Incentive Plan		4,067,452		2,757,687
Warrants		1,565,447		2,479,849
Shares to be issued upon conversion of convertible notes		115,047		115,047
Total		5,747,946		5,352,583

In connection with Sera Labs Merger, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones. Due to the uncertainty of the number of Clawback Shares to be issued, these Clawback Shares were not included in the table above.

The Series A and B Notes (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. Due to the uncertainty of the number of shares to be issued, the shares to be issued from the conversion of the Series A and B Notes were also not included in the table above.

Segment Reporting

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it does have segment reporting relating to Cure Pharmaceutical and Sera Labs.

Risks and Uncertainties

The COVID-19 pandemic has had, and may continue to have, an unfavorable impact on certain areas of the Company’s business. The broader implications of the COVID-19 pandemic on the Company’s financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, and the availability, distribution, and effectiveness of vaccines to address the COVID-19 virus. The impact on the Company’s customers and suppliers and the range of governmental and community reactions to the pandemic are uncertain. The Company may experience reduced customer demand or constrained supply that could materially adversely impact business, financial condition, results of operations, liquidity and cash flows in future periods.

Series A and Series B convertible notes

As described further in Note 15 - the Company has elected the fair value option to record its Series A and Series B convertible debentures, which were issued in October 2020. The fair value of the Notes is classified within Level 3 of the fair value hierarchy because the fair values were estimated utilizing a Monte Carlo simulation model. Accordingly, the notes are marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the Consolidated Statement of Operations. All issuance costs related to the debentures were expensed as incurred in the Consolidated Statement of Operations.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Schedule of property plant and equipment

Manufacturing equipment	5-7 years
Computer and other equipment	3-7 years
Leasehold improvements	3-7 years

Schedule of contract liabilities

	2021		2020
Customer deposits for commercial products	$	508	$	281
Customer deposits for personal protective equipment		-		713
Total contract liabilities	$	508	$	994

Summary of changes in contract liabilities

Balance at December 31,2019	$	456
Additions		1,033
Transfers to Revenue		(495	)
Balance at December 31,2020		994
Additions		435
Customer deposits returned		(713	)
Transfers to Revenue		(208	)
Balance at December 31, 2021	$	508

Schedule of assets and liabilities measured at fair value

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Fair value of contingent stock consideration	$	1,430	$	-	$	-	$	1,430
Fair value of Series A Note	$	3,075	$	-	$	-	$	3,075
Fair value of Series B Note	$	6,857	$	-	$	-	$	6,857
Fair value of derivative liability	$	-	$	-	$	-	$	-

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Fair value of contingent stock consideration	$	3,205	$	-	$	-	$	3,205
Fair value of Series A Note	$	7,010	$	-	$	-	$	7,010
Fair value of Series B Note	$	6,674	$	-	$	-	$	6,674
Fair value of derivative liability	$	-	$	-	$	-	$	-

Schedule of financial instruments

Fair value of Series A and B Notes at December 31, 2019	$	—
Initial fair value of Series A Note		9,042
Initial fair value of Series B Note		6,990
Change in fair value of Series A Note		165
Change in fair value of Series B Notes		(316	)
Conversion of Series A Notes		(2,197	)
Fair value of Series A and B Notes at December 31, 2020		13,684
Change in fair value of Series A Note		(1,054	)
Change in fair value of Series B Notes		1,448
Conversion of Series A Notes		(2,881	)
Conversion of Series B Notes		(1,265	)
Fair value of Series A and B Notes at December 31, 2021	$	9,932

Derivative Liabilities At Fair Value

Date of valuation	December 31, 2021			December 31,  2020
Stock price	$	0.36		$	1.30
Conversion price	$	1.32		$	1.32
Term (in years) – Series A Note		0.83			1.83
Term (in years) – Series B Note		0.13			0.83
Volatility – Series A Note		85	%		86	%
Volatility – Series B Note		65	%		80	%
Risk-free interest rate – Series A Note		0.32	%		0.12	%
Risk-free interest rate – Series B Note		0.06	%		0.09	%
Interest rate		18	%		18	%

Schedule of basic and diluted loss per share

(Dollars in thousands)	December 31, 2021			December 31, 2020
Net loss	$	(13,193	)	$	(30,621	)
Weighted average outstanding shares of common stock		50,182,229			47,308,158
Dilutive potential common stock shares from:
Vested Stock options from the Company’s 2017 Equity Incentive Plan		-			-
Warrants
Conversion of convertible notes		-			-
Issuance of contingent shares relating to CHI acquisition		-			-
Common stock and common stock equivalents		50,182,229			47,308,158
Income per share:
Basic net loss per share	$	(0.26	)	$	(0.65	)
Diluted net loss per share	$	(0.26	)	$	(0.65	)

Schedule of diluted net income (loss)

	December 31, 2021		December 31, 2020
Vested stock options from the Company’s 2017 Equity Incentive Plan		4,067,452		2,757,687
Warrants		1,565,447		2,479,849
Shares to be issued upon conversion of convertible notes		115,047		115,047
Total		5,747,946		5,352,583

XML

ACCOUNTS RECEIVABLE (Tables)

12 Months Ended

Dec. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounts Receivable Table

	December 31, 2021			December 31, 2020
Customer billed	$	437		$	263
Allowance for doubtful accounts		(80	)		(39	)
Accounts receivable, net	$	357		$	224

XML

INVENTORY (Tables)

12 Months Ended

Dec. 31, 2021

INVENTORY (Tables)

Schedule of inventory

	December 31, 2021			December 31, 2020
Raw Materials	$	66		$	64
Packaging Components		117			54
Work-In-Process		40			22
Finished Goods		753			603
	$	976		$	743
Reserve for Obsolescence		(112	)		(294	)
Total inventory	$	864		$	449

XML

PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2021

PROPERTY AND EQUIPMENT

Schedule of property and equipment, net

	December 31, 2021			December 31, 2020
Equipment not yet placed in service	$	1,413		$	1,465
Manufacturing equipment		1,095			1,074
Computer and other equipment		626			626
Less accumulated depreciation		(1,293	)		(1,091	)
Property and Equipment, net	$	1,841		$	2,074

XML

NOTES RECEIVABLE (Tables)

12 Months Ended

Dec. 31, 2021

Accounts Receivables

Schedule of note receivable

	December 31, 2021		December 31, 2020
Coeptis Pharmaceuticals, Inc.	$	-	$	200
Biopharmaceutical Research Company		200		-
Less: allowance for doubtful accounts		-		(200	)
Less: Current portion of note receivable, net		-		-
Note receivable, non-current portion	$	200	$	-

XML

PREPAID EXPENSES AND OTHER ASSETS (Tables)

12 Months Ended

Dec. 31, 2021

Accounts Receivables

Schedule of prepaid expenses and other assets

	December 31, 2021			December 31, 2020
Prepaid consulting services	$	-		$	14
Prepaid clinical study		-			32
Prepaid insurance		302			347
PPE deposits		-			700
Prepaid equipment		67			61
Prepaid inventory		95			211
Prepaid expenses		31			66
Other assets		132			79
Prepaid expenses and other assets		627			1,510
Current portion of prepaid expenses and other assets		(544	)		(1,452	)
Prepaid expenses and other assets less current portion	$	83		$	58

XML

GOODWILL AND INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2021

GOODWILL AND INTANGIBLE ASSETS

Schedule of intangible assets, net

	2021			2020
Goodwill (1)	$	13,868		$	13,868
Intangible assets:
Acquired IPR&D – Chemistry (2)	$	502		$	14,460
Pending patents – Cure Pharmaceutical		341			259
Intangible assets subject to amortization:
Acquired IPR&D – Chemistry (2)		13,958			-
Customer relationships (2)		7,110			7,110
Tradename (2)		2,610			2,610
Noncompete (2)		462			462
Intellectual property		972			972
Issued patents		1,034			1,044
Total intangible assets		26,989			26,917
Accumulated amortization		(4,701	)		(1,312	)
Intangible assets, net	$	22,288		$	25,605

2022	$	3,765
2023		3,592
2024		3,429
2025		2,583
2026		1,517
Thereafter		6,559
Total Amortization	$	21,445

XML

Investemen (Tables)

12 Months Ended

Dec. 31, 2021

GOODWILL AND INTANGIBLE ASSETS

Schedule of Investment

	December 31, 2021			December 31, 2020
Investment in Releaf Europe BV	$	566		$	509
Valuation reserve		(350	)		-
Investment, net	$	216		$	509

XML

ACCRUED EXPENSES (Tables)

12 Months Ended

Dec. 31, 2021

NOTES PAYABLE AND PAYCHECK PROTECTION PROGRAM LOAN

Schedule of accrued expenses

As of December 31, 2021 and 2020, accrued expenses consisted of the following (in thousands):

	December 31, 2021		December 31, 2020
Accounts payable factoring	$	1,722	$	-
Refunds and returns liability		445		-
Accrued interest (see Note 11 for amount of related party interest included)		390		194
Accrued payroll		330		308
Accrued vacation leave		173		180
Accrued expenses		359		306
Sales tax payable		334		311
Accrued Expenses	$	3,753	$	1,299

XML

LOAN PAYABLE (Tables)

12 Months Ended

Dec. 31, 2021

LOAN PAYABLE

Schedule of loan Payable

	December 31, 2021			December 31, 2020
Note to a company due September 29, 2022, including interest at 4.32% per annum; unsecured; interest due monthly	$	195		$	-
Note to a company due June 6, 2022, including interest at 4.42% per annum; unsecured; interest due monthly		40			-
Note to a company due September 29, 2021, including interest at 4.32% per annum; unsecured; interest due monthly		-			182
Note to a company due June 6, 2021, including interest at 6.55% per annum; unsecured; interest due monthly		-			83
Current portion of loan payable		(235	)		(265	)
Loan payable, less current portion	$	-		$	-

XML

NOTES PAYABLE AND PPP LOAN (Tables)

12 Months Ended

Dec. 31, 2021

NOTES PAYABLE AND PPP LOAN (Tables)

Schedule of notes payable

	December 31, 2021		December 31, 2020
Note to an individual, non-interest bearing, unsecured and due on demand	$	50	$	50
Promissory note to a company originally due May 18, 2021 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity		270		250
Promissory note to a company originally due May 18, 2021 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity		540		500
Promissory note to a company originally due January 13, 2022 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity		500		-
Secured promissory notes to a company originally due April 8, 2022 and October 30, 2021 was rolled into a new secured promissory notes now due June 15, 2022; interest at 10% per annum payable at maturity		502		-
Secured promissory note to a company due April 15, 2022; interest at 10% per annum payable at maturity		300		-
Secured promissory note to a company due April 15, 2022; interest at 10% per annum payable at maturity		100		-
Promissory notes to a company, as of the filing date of this report, terms of the promissory notes are still being negotiated		415		-
Secured promissory notes to a company due June 15, 2022; as of the filing date of this report, terms of the promissory notes are still being negotiated		200
Current portion of note payable	$	2,877	$	800

Schedule of paycheck protection program

Paycheck protection program consist of the following at December 31, 2021 and 2020 (in thousands):

	December 31, 2021		December 31, 2020
Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act.	$	-	$	399
Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act.		-		206
Payment protection program loan	$	-	$	605

XML

CONVERTIBLE PROMISSORY NOTES (Tables)

12 Months Ended

Dec. 31, 2021

RELATED PARTY TRANSACTIONS

Schedule of convertible promissory notes

	December 31, 2021		December 31, 2020
Convertible promissory notes totaling $550,000 due January 31, 2019, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due January 31, 2019 and currently in default. The Company has offered to either repay the convertible promissory notes or request to have them converted into common stock shares of the Company. The beneficial owners of the convertible promissory notes have not yet communicated their intent to either receive payment or convert.	$	550	$	550
Current portion of convertible promissory notes	$	550	$	550

XML

FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES (Tables)

12 Months Ended

Dec. 31, 2021

FAIR VALUE CONVERTIBLE PROMISSORY NOTES

Schedule of assumptions

	December 31, 2021			December 31, 2020
Series A subordinated convertible note at fair value	$	3,074		$	7,010
Series B subordinated convertible note at fair value		11,858			11,674
Total convertible promissory notes		14,932			18,684
Less: Investor Note offset – Series B Note		(5,000	)		(5,000	)
Carrying value of convertible promissory notes at fair value		9,932			13,684
Less: current portion of convertible promissory notes at fair value		(9,932	)		(6,674	)
Convertible promissory notes, less current portion	$	-		$	7,010

Schedule of promissory notes

Significant assumptions (weighted-average):
Risk-free interest rate at grant date	0.36	%
Expected stock price volatility	81.14	%
Expected dividend payout	-
Expected warrant life (in years)	2
Expected forfeiture rate	0	%

XML

WARRANT AGREEMENTS (Tables)

12 Months Ended

Dec. 31, 2021

WARRANT AGREEMENTS

Schedule of change in warrant

	Warrants			Weighted Average Exercise Price		Weighted Average Contractual Remaining Life
Outstanding, December 31, 2019		14,666,518		$	3.70		2.99
Granted		303,030			1.32		1.86
Exercised		(771,318	)		1.92		-
Forfeited/Expired		(11,718,381	)		5.01		-
Outstanding, December 31, 2020		2,479,849		$	1.86		1.23
Granted		-			-		-
Exercised		(96,250	)		1.00		-
Forfeited/Expired		(818,152	)		1.58		-
Outstanding, December 31, 2021		1,565,447		$	2.18		0.66
Exercisable at December 31, 2021		1,565,447		$	2.18		0.66

Schedule of warrant summary

Range of Exercise Price	Number of Warrants		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Warrants Exercisable		Weighted Average Exercise Price
$ 1.98–$2.31		1,565,447		0.66	$	2.18		1,565,447	$	2.18
		1,565,447		0.66	$	2.18		1,565,447	$	2.18

Range of Exercise Price	Number of Warrants		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Warrants Exercisable		Weighted Average Exercise Price
$ 1.00–$6.00		2,479,849		1.23	$	1.86		2,479,849	$	1.86
		2,479,849		1.23	$	1.86		2,479,849	$	1.86

Schedule of fair value of warrant valuation assumptions

	December 31, 2021			December 31, 2020
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		0	%		0.36	%
Expected stock price volatility		0	%		81.14	%
Expected dividend payout		-			-
Expected warrant life (in years)		-			3
Expected forfeiture rate		0	%		0	%

XML

STOCK INCENTIVE PLANS (Tables)

12 Months Ended

Dec. 31, 2021

STOCK INCENTIVE PLANS

Schedule of stock option activity

	Options			Weighted Average Exercise Price		Weighted Average Contractual Remaining Life
Outstanding, December 31, 2019		3,467,650		$	1.84		8.74
Granted		3,600,364			1.26		9.19
Exercised		(30,000	)		0.74		-
Forfeited/Expired		(752,222	)		1.76		-
Outstanding, December 31, 2020		6,285,792		$	1.52		8.86
Granted		1,555,526			0.95		9.25
Exercised		-			-		-
Forfeited/Expired		(611,250	)		0.97		-
Outstanding, December 31, 2021		7,230,068		$	1.45		8.27
Exercisable at December 31, 2021		4,067,452		$	1.51		7.81

Weighted-average fair value of options granted

Range of Exercise Price	Number of Awards		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Awards Exercisable		Weighted Average Exercise Price
$ 0.61-$4.01		7,230,068		8.27	$	1.45		4,067,452	$	1.51
		7,230,068		8.27	$	1.45		4,067,452	$	1.51

Schedule of non-vested restricted award shares

	December 31, 2021			December 31, 2020
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		1.18	%		0.59	%
Expected stock price volatility		76.95	%		81.14	%
Expected dividend payout		-			-
Expected option life (in years)		10			10
Expected forfeiture rate		0	%		0	%

Schedule of restricted stock unit

	Restricted Stock Shares			Weighted Average Grant Date Fair Value
Non-vested, December 31, 2019		82,086		$	2.69
Granted		150,000			1.60
Vested		(181,849	)		2.08
Forfeited/Expired		(237	)		-
Non-vested, December 31, 2020		50,000			1.60
Granted		338,443			1.20
Vested		(388,443	)		1.26
Forfeited/Expired		-			-
Non-vested, December 31, 2021		-		$	-

	Restricted Stock Units			Weighted Average Grant Date Fair Value
Outstanding, December 31, 2019		60,759		$	3.66
Granted		431,578			1.33
Vested		(60,759	)		3.66
Forfeited/Expired		-			-
Outstanding, December 31, 2020		431,578			1.33
Granted		629,338			0.74
Vested		(411,027	)		1.33
Forfeited/Expired		(61,654	)		1.33
Outstanding, December 31, 2021		588,235		$	0.70

XML

SEGMENT REPORTING (Tables)

12 Months Ended

Dec. 31, 2021

SEGMENT REPORTING

Schedule of business segments

	Cure			Sera Labs			Eliminations			Consolidated
Net sales	$	651		$	6,078		$	(174	)	$	6,555
Net operating loss	$	(8,232	)	$	(6,860	)	$	-		$	(15,092	)
Assets	$	46,491		$	8,608		$	(14,175	)	$	40,574
Accounts receivable, net	$	18		$	339		$	-		$	357
Inventory, net	$	243		$	621		$	-		$	864
Interest expense	$	468		$	86		$	-		$	544
Depreciation and amortization	$	1,295		$	2,312		$	-		$	3,607

	Cure			Sera  Labs			Eliminations			Consolidated
Net sales	$	1,007		$	1,044		$	-		$	2,051
Net operating loss	$	(17,377	)	$	(1,581	)	$	-		$	(18,958	)
Assets	$	45,376		$	15,158		$	(14,175	)	$	46,359
Accounts receivable, net	$	131		$	93		$	-		$	224
Inventory, net	$	209		$	240		$	-		$	449
Interest expense	$	2,472		$	-		$	-		$	2,472
Depreciation and amortization	$	341		$	577		$	-		$	918

Schedule of disaggregation of revenue

	Year Ended December 31,
	2021			2020
CureFilm™ sales		20	%		37	%
Research & Development services		0	%		11	%
Product sales - CBD		71	%		49	%
Total		91	%		97	%

XML

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Tables)

12 Months Ended

Dec. 31, 2021

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY

Schedule of Sera labs net contingent share consideration

(Dollars in thousands)	Fair Value of the Contingent Share Consideration
Fair value at December 31, 2020	$	3,205
Fair value at December 31, 2021		1,430
Net change in fair value during the year ended December 31, 2021	$	(1,775	)

Schedule of estimated fair value of preliminary price

(Dollars in thousands)	Shares		Amount
Upfront Payment		-	$	1,000
Closing Merger Consideration Shares		6,909,091		9,535
Contingent Consideration Shares (Clawback Shares)		5,988,024		3,083
Liabilities assumed		-		550
Total purchase price		12,897,115	$	14,168

Schedule of preliminary estimated fair value of assets

(Dollars in thousands)
Net assets acquired:
Cash	$	1,357
Other assets		1,440
Property, plant and equipment		6
Other long term assets		384
Intangibles assets		10,182
Goodwill		4,687
Accounts payable and accrued expenses		(1,063	)
Contract liabilities		(1,963	)
Other current liabilities		(462	)
Other long-term liabilities		(400	)
Net assets acquired	$	14,168

Schedule of sera labs acquisitions

(Dollars in thousands)	Weighted- average Estimated useful life	Preliminary Estimated Asset Fair Value
Finite-lived intangible assets:
Customer relationships	5.0 years	$	7,110
Tradename	4.0 years	$	2,610
Non-compete	2.0 years	$	462
Total finite-lived intangible assets acquired	4.6 years	$	10,182

Schedule of estimated acquisition costs

(Dollars in thousands)	Fair Value of the Contingent Share Consideration
Fair value at December 31, 2018	$	-
Fair value at May 14, 2019		14,632
Net change in fair value during the year ended December 31, 2019		1,657
Fair value of common stock shares to be released from escrow and to be issued		(246	)
Fair Value at December 31, 2019		16,043
Settlement of contingent consideration liability		(21,701	)
Net change in fair value during the year ended December 31, 2020		5,658
Fair Value at December 31, 2020	$	-

Net loss attributable

	Cure Pharmaceutical			Sera Labs			Pro forma Adjustments			Consolidated Pro Forma
Net product sales	$	1,049		$	6,728		$	(34	)	$	7,743
Net loss	$	(29,059	)	$	(3,051	)	$	162		$	(31,948	)
Net loss attributable to Cure per common share, basic and diluted	$	(0.65	)	$	(0.26	)				$	(0.68	)

XML

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2021

INCOME TAXES

Schedule of income tax expense benefit

	2021		2020
Current expense
Federal	$	-	$	-
State		-		-
Deferred expense
Federal	$	-	$	-
State		-		-
Total income tax expense	$	-	$	-

Schedule of deferred income tax, net

	2021			2020
Deferred income tax assets
Net operating loss carryforward	$	6,862		$	14,359
Change in fair value of convertible promissory notes		2,517			2,627
Noncash compensation		899			1,018
Deferred revenue		142			180
Reserves and accruals		74			-
Lease liability		89			118
Other intangibles		195			195
Inventory reserve		31			82
Stock based compensation		79			79
Allowance for doubtful accounts		22			96
Accrued expenses		135			131
Total deferred tax assets		11,045			18,885
Deferred income tax liabilities
State income taxes		-			-
ROU assets		(83	)		(110	)
Prepaid expenses and other assets		(43	)		(84	)
Depreciation and amortization		(48	)		(48	)
Valuation allowance		(10,871	)		(18,643	)
Total deferred tax liabilities		(11,045	)		(18,885	)
Deferred income tax, net	$	-		$	-

XML

COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2021

COMMITMENTS AND CONTINGENCIES

Schedule of future lease payments

Years
2022	$	134
2023		138
2024		46
2025		-
2026		-
Undiscounted cash flow		318
Effects of discounting		(40	)
Lease liabilities recognized	$	278

Schedule of future minimum lease payments

2022	$	14
2023		14
2024		12
2025		-
2026		-
Thereafter		-
Finance lease liabilities recognized	$	40

Schedule of operating and financing leases

	2021			2020
Operating leases
Right-of-use assets, net	$	257		$	343
Right-of-use lease liabilities, current	$	104		$	93
Right-of-use lease liabilities, noncurrent		174			278
Total operating lease liabilities	$	278		$	371
Financing Leases
Finance lease right-to-use assets, net	$	40		$	52
Current liabilities	$	13		$	12
Noncurrent liabilities		27			40
Total financing lease liabilities	$	40		$	52
Weighted average remaining lease term
Operating leases	2.29 years			3.31 years
Financing leases	2.80 years			3.82 years
Weighted average discount rate
Operating leases		11.3	%		11.3	%
Financing leases		9.0	%		9.0	%

XML

ORGANIZATION AND BUSINESS OPERATIONS (Details Narrative)	Dec. 31, 2021 $ / shares
Merger Agreement [Member]
Common stock par value	$ 0.001
CPHC [Member]
Ownership percentage	65.00%

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
	Dec. 31, 2021
Minimum [Member] | Manufacturing Facility [Member]
Property plant and equipment and useful life	5 years
Minimum [Member] | Computer and other equipment [Member]
Property plant and equipment and useful life	3 years
Minimum [Member] | Leaseholds and Leasehold Improvements [Member]
Property plant and equipment and useful life	3 years
Maximum [Member] | Manufacturing Facility [Member]
Property plant and equipment and useful life	7 years
Maximum [Member] | Computer and other equipment [Member]
Property plant and equipment and useful life	7 years
Maximum [Member] | Leaseholds and Leasehold Improvements [Member]
Property plant and equipment and useful life	7 years

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Customer deposits for commercial products	$ 508	$ 281
Customer deposits for personal protective equipment	0	713
Total contract liabilities	$ 508	$ 994

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Contract liabilities beginning balance	$ 994,000	$ 456,000
Additions	435,000	1,033,000
Customer deposits returned	(713,000)
Transfers to Revenue	(208,000)	(495,000)
Contract liabilities ending balance	$ 508,000	$ 994,000

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Fair value of contingent stock consideration	$ 1,430	$ 3,205
Fair value of Series A Note	3,075	7,010
Fair value of Series B Note	6,857	6,674
Fair value of derivative liability	0	0
Fair Value, Inputs, Level 1 [Member]
Fair value of contingent stock consideration	0	0
Fair value of Series A Note	0	0
Fair value of Series B Note	0	0
Fair value of derivative liability	0	0
Fair Value, Inputs, Level 2 [Member]
Fair value of contingent stock consideration	0	0
Fair value of Series A Note	0	0
Fair value of Series B Note	0	0
Fair value of derivative liability	0	0
Fair Value, Inputs, Level 3 [Member]
Fair value of contingent stock consideration	1,430	3,205
Fair value of Series A Note	3,075	7,010
Fair value of Series B Note	6,857	6,674
Fair value of derivative liability	$ 0	$ 0

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fair value at December 31, 2019	$ 13,684,000	$ 0
Initial fair value of Series A Note		9,042,000
Initial fair value of Series B Note		6,990,000
Change in fair value of Series A Note	(1,054,000)	165,000
Change in fair value of Series B Notes	1,448,000	(316,000)
Conversion of Series A Notes	(2,881,000)	(2,197,000)
Conversion of Series B Notes	(1,265)
Fair value at December 2021	$ 9,932,000	$ 13,684,000

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) - $ / shares	1 Months Ended					2 Months Ended		12 Months Ended
	Dec. 16, 2021	Nov. 18, 2021	Oct. 30, 2021	Oct. 27, 2021	Sep. 24, 2021	Dec. 15, 2021	Feb. 25, 2021	Dec. 31, 2021	Dec. 31, 2020
Stock price								$ 0.36	$ 1.30
Conversion price								$ 1.32	$ 1.32
Interest Rate	10.00%	10.00%	10.00%	10.00%	10.00%	10.00%	10.00%	18.00%	18.00%
Series A Note [Member]
Interest Rate								0.32%	0.12%
Volatility								85.00%	86.00%
Term								9 months 29 days	1 year 9 months 29 days
Series B Note [Member]
Interest Rate								0.06%	0.09%
Volatility								65.00%	80.00%
Term								9 months 29 days	1 month 17 days

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 6) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net income (loss) attributable to the Company	$ (13,193)	$ (30,621)
Weighted average outstanding shares of common stock	50,182,229,000	47,308,158,000
Common stock and common stock equivalents	50,182,229,000	47,308,158
Income (loss) per share:
Basic net income per share	$ (0.26)	$ (0.65)
Diluted net income per share	$ (0.26)	$ (0.65)

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 7) - shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Vested stock options from the company's 2017 Equity Incentive plan	4,067,452	2,757,687
Warrants	1,565,447	2,479,849
Shares to be issued upon conversion of convertible notes	115,047	115,047
Total	5,747,946	5,352,583

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	1 Months Ended	12 Months Ended
	May 26, 2021	Dec. 31, 2021	Dec. 31, 2020
Accumulated deficit		$ (94,446,000)	$ (81,253,000)
Allowance for doubtful accounts		80,000.00	40,000.00
Cure Pharmaceutical Revenue		$ 300,000
AgreementTerm		5 years
Payment fordeveloped production line		$ 300,000
Contract liabilities		500,000	1,000,000.0
Advertising costs		2,800,000	1,100,000
Research and development expenses		$ 2,400,000	2,800,000
Valuation allowance percentage		100.00%
Amount in excess of FDIC limit			1,500,000
RequestForConversionDescription		the Company purchased Convertible Loans (“Loans”) from Releaf Europe BV (“Releaf”) in the amount of $0.5 million. Releaf shall accrue interest on the Loans at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Loans are repaid or at the maturity date of October 31, 2021 (“Maturity Date”). In the event of a request for conversion by the Company (“Request for Conversion”) or at the end of the Maturity Date, the outstanding amount of the Loans and any unpaid accrued interest shall be converted into shares of Releaf (“Shares”) based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2 million of debt and/or equity (“Qualified Financing”), the outstanding amount of the Loan Agreement and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Qualified Financing less a discount of 20% on the subscription price.
Qualified Financing conversion	$ 4,000,000	$ 15,000,000
Valuation Financing conversion		14,500,000
Working capital deficit		22,500,000
FDIC insured amount		250,000
Cash in hand		16,000	$ 1,725,000
Cash [Member]
Cash in hand		$ 20,000.00

XML

ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
ACCOUNTS RECEIVABLE (Details)
Customer billed	$ 437	$ 263
Allowance for doubtful accounts	80	39
Accounts receivable	$ 357	$ 224

XML

PREPAID EXPENSES AND OTHER ASSETS (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
ACCOUNTS RECEIVABLE (Details)
Prepaid consulting services	$ 0	$ 14,000
Prepaid clinical study	0	32,000
Prepaid insurance	302,000	347,000
PPE deposits	0	700,000
Prepaid equipment	67,000	61,000
Prepaid inventory	95,000	211,000
Prepaid expenses	31,000	66,000
Other assets	132,000	79,000
Prepaid expenses and other assets	627,000	1,510,000
Current portion of prepaid expenses and other assets	(544,000)	(1,452,000)
Prepaid expenses and other assets less current portion	$ 83,000	$ 58,000

XML

INVENTORY (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
INVENTORY (Tables)
Raw Materials	$ 66	$ 64
Packaging Components	117	54
Work-In-Process	40	22
Finished Goods	753	603
Inventory, Gross	976	743
Reserve for Obsolescence	(112)	(294)
Total inventory	$ 864	$ 449

XML

PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Less accumulated depreciation	$ (1,293)	$ (1,091)
Property and Equipment, net	1,841	2,074
Manufacturing equipmentt [Member]
Property and Equipment	1,095	1,074
Computer and other equipment [Member]
Property and Equipment	626	626
Equipment not yet placed in service [Member]
Property and Equipment	$ 1,413	$ 1,465

XML

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
PROPERTY AND EQUIPMENT
Depreciation expense	$ 0.2	$ 0.2

XML

NOTES RECEIVABLE (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Less: allowance for doubtful accounts	$ 80	$ 39
Less: Current portion of note receivable, Net	0	0
Note receivable, non-current portion	200	0
Coeptis Pharmaceuticals, Inc. [Member]
Note receivable, non-current portion	0	200
Biopharmaceutical Research Company [Member]
Note receivable, non-current portion	$ 200	$ 0

XML

NOTES RECEIVABLE (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended
	Feb. 10, 2021	Sep. 16, 2020	May 26, 2021	Dec. 31, 2020	Oct. 30, 2020	Jul. 31, 2020	Nov. 12, 2019
Conversion price				$ 1.32	$ 1.32
Coeptis Pharmaceuticals, Inc. [Member]
Convertible promissory note	$ 200						$ 200
Interest rate							9.00%
Conversion price							$ 2.60
Principal amount	$ 200
The Sera Labs, Inc. [Member]
Convertible promissory note						$ 500
Interest rate						9.00%
Principal amount		$ 550
Interest upon principal amount		$ 500
BRC [Member]
Interest rate			6.00%
Convertible loan			$ 200
Loan by the price per share			20,000
Aggregate Proceeds			4,000
Outstanding shares of common stock of BRC			$ 20,000
Price per share paid			80.00%

XML

GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Goodwill (1)	$ 13,868,000	$ 13,868,000
Less accumulated amortization	(4,701,000)	(1,312,000)
Customer relationships	7,110,000	7,110,000
Acquired IPR&D - Chemistry	13,958,000	0
Intangible assets net	22,288,000	25,605,000
Intangible assets Gross	26,989,000	26,917,000
Acquired IPR&D - Chemistry [Member]
Intangible assets Gross	502,000	14,460,000
Non-compete [Member]
Intangible assets net	462,000	462,000
Tradename [Member]
Intangible assets net	2,610,000	2,610,000
Pending patents - Cure Pharmaceutical [Member]
Intangible assets Gross	341,000	259,000
Intellectual Property [Member]
Intangible assets net	972,000	972,000
Issued Patents [Member]
Intangible assets net	$ 1,034,000	$ 1,044,000

XML

GOODWILL AND INTANGIBLE ASSETS (Details 1) $ in Thousands	Dec. 31, 2021 USD ($)
GOODWILL AND INTANGIBLE ASSETS
2023	$ 3,592
2024	3,429
2025	2,583
2022	3,765
2026	1,517
Thereafter	6,559
Total Amortization	$ 21,445

XML

GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Completed two research and development projects of IPR&D	$ 13,900
Amortization expense	3,400	$ 700
Goodwill		4,700
Patents [Member]
Patent costs capitalized	$ 80	20
Non-compete [Member]
Acquired intangible assets		500
Tradename [Member]
Acquired intangible assets		2,600
Sera Labs Customer Relationships [Member]
Acquired intangible assets		$ 7,100

XML

INVESTMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
GOODWILL AND INTANGIBLE ASSETS
Valuation reserve	$ 350	$ 0
Investment in Releaf Europe BV	566	509
Investment, net	$ 216	$ 509

XML

INVESTMENT (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
GOODWILL AND INTANGIBLE ASSETS
Valuation reserve	$ 400	$ 0

XML

ACCRUED EXPENSES (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
GOODWILL AND INTANGIBLE ASSETS
Accounts payable factoring	$ 1,722	$ 0
Refunds and returns liability	445	0
Accrued interest	390	194
Accrued payroll	330	308
Accrued vacation leave	173	180
Accrued expenses	359	306
Sales tax payable	334	311
Accrued Expenses net	$ 3,753	$ 1,299

XML

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	1 Months Ended						2 Months Ended		12 Months Ended
	Dec. 16, 2021	Nov. 18, 2021	Oct. 30, 2021	Oct. 27, 2021	Sep. 24, 2021	Aug. 06, 2020	Dec. 15, 2021	Feb. 25, 2021	Dec. 31, 2021	Dec. 31, 2020	Jan. 18, 2022	Jun. 30, 2021
Interest expense - related party									$ 80,000.00	$ 20.00
Interest rate	10.00%	10.00%	10.00%	10.00%	10.00%		10.00%	10.00%	18.00%	18.00%
Accrued expenses									$ 80,000.00	$ 20.00
Outstanding amount									$ 9,932,000	$ 13,684,000	$ 200,000
Mrs. Duitch [Member]
Outstanding amount												$ 900,000
October 2, 2020 [Member] | Sera labs [Member]
Principal amount												$ 1,100,000
Due date									September 30, 2021
Upfront payment connection									$ 100,000,000
Certain liabilities									$ 100,000
Unsecured Promissory Note [Member]
Interest rate						8.00%
Principal amount						$ 200,000.0
Due date						Aug. 06, 2021

XML

LOAN PAYABLE (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Current portion of loan payable	$ (235,000)	$ (265,000)
Loan payable, less current portion	0	0
Loans Payable Four [Member]
Current portion of loan payable	0	(83,000)
Loans Payable One [Member]
Current portion of loan payable	(40)	0
Loans Payable Two [Member]
Current portion of loan payable	(40,000)	(182,000)
Loan Payable Three [Member]
Current portion of loan payable	$ 0	$ (83)

XML

LOAN PAYABLE (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
LOAN PAYABLE
Interest expense	$ 10	$ 3

XML

NOTES PAYABLE AND PPP LOAN (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Current portion of note payable	$ 2,877,000	$ 800,000
Promissory Note [Member]
Notes payable	270,000	250,000
Promissory note 1 [Member]
Notes payable	540,000	500,000
Promissory note 2 [Member]
Notes payable	500,000	0
Promissory note 3 [Member]
Notes payable	502,000	0
Promissory Note 4[Member]
Notes payable	300,000
Promissory Note 5[Member]
Notes payable	100,000
Promissory Note 6 [Member]
Notes payable	415,000
Promissory Note 7 [Member]
Notes payable	200,000
Individual [Member]
Notes payable	$ 50,000	$ 50,000

XML

NOTES PAYABLE AND PPP LOAN (Details 1) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Payment protection program loan	$ 0	$ 605,000
Paycheck Protection Program One [Member]
Payment protection program loan	0	206,000
Paycheck Protection Program [Member]
Payment protection program loan	$ 0	$ 399,000

XML

NOTES PAYABLE AND PPP LOAN (Details Narrative) - USD ($)		1 Months Ended									2 Months Ended		12 Months Ended
	Aug. 12, 2020	Dec. 16, 2021	Nov. 18, 2021	Oct. 30, 2021	Oct. 27, 2021	Sep. 24, 2021	Feb. 05, 2021	Sep. 25, 2020	May 18, 2020	Apr. 30, 2020	Dec. 15, 2021	Feb. 25, 2021	Dec. 31, 2021	Dec. 31, 2020
Total balance repaid of outstanding								$ 1,100,000
Interest Rate		10.00%	10.00%	10.00%	10.00%	10.00%					10.00%	10.00%	18.00%	18.00%
Interest expense													$ 544,000	$ 2,472,000
Proceeds from loan													0	399,000
Board Members [Member]
Interest Rate	8.00%								8.00%
Unsecured promissory note	$ 500,000								$ 300,000				300,000
Maturity date	Aug. 12, 2021								May 18, 2021
Investor [Member]
Proceeds from loan		$ 20,000	$ 10,000.0	$ 300,000	$ 30,000.0	$ 3,000,000					$ 40,000.0	$ 500,000.0	500,000
Paycheck Protection Program [Member]
Proceeds from loan						500,000.0				$ 200,000		500,000.0
Loan forgiveness							$ 400,000
Notes Payable And Paycheck Protection Program [Member]
Interest expense													$ 30,000.00	$ 300,000.0
LLC [Member] | Promissory Note [Member]
Gross proceeds, net							$ 100,000,000	100,000
Principal, amount						$ 30,000.0		$ 1,100,000				$ 500,000.0
Sera Lab [Member]
Proceeds from loan										$ 400,000

XML

CONVERTIBLE PROMISSORY NOTES (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
PREPAID EXPENSES AND OTHER ASSETS
Convertible promissory notes	$ 550	$ 550
Current portion of convertible promissory notes	$ 550	$ 550

XML

FAIR VALUE CONVERTIBLE PROMISSORY NOTES (Details) - USD ($)	Jan. 18, 2022	Dec. 31, 2021	Dec. 31, 2020
PREPAID EXPENSES AND OTHER ASSETS
Series A subordinated convertible note at fair value		$ 3,074,000	$ 7,010,000
Series B subordinated convertible note at fair value		11,583,000	11,674,000
Total convertible promissory notes		14,932,000	18,684,000
Less: Investor Note offset - Series B Note		(5,000,000)	(5,000,000)
Carrying value of convertible promissory notes at fair value	$ 200,000	9,932,000	13,684,000
Less: current portion of convertible promissory notes at fair value		(9,932,000)	(6,674,000)
Convertible promissory notes, less current portion		$ 0	$ 7,010,000

XML

FAIR VALUE CONVERTIBLE PROMISSORY NOTES (Details 1)	12 Months Ended
	Dec. 31, 2021 USD ($)
Significant assumptions (weighted-average):
Risk-free interest rate at grant date	0.36%
Expected stock price volatility	81.14%
Expected dividend payout	$ 0
Expected warrant life (in years)	2 years
Expected forfeiture rate	0%

XML

FAIR VALUE CONVERTIBLE PROMISSORY NOTES (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended		12 Months Ended
	Oct. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2021	Dec. 31, 2020
Proceeds from investor note					$ 100,000,000
Remaining balance of investor note					$ 500,000,000
Purchase of warrant description					In addition, the placement agent received a warrant (the “Warrant”) exercisable for two years for the purchase of an aggregate of up to 242,424 shares of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock (collectively with the shares underlying the Warrant, the “Warrant Shares”). The Warrant Shares, when issued, will have the same rights
Conversion price	$ 1.32				$ 1.32
Convertible promissory notes				$ 550,000	$ 550,000
Interest rate				18.00%	18.00%
Conversion price description					The Investor will not have the right to convert any portion of a Convertible Notes, to the extent that, after giving effect to such conversion, the Investor (and other certain related parties) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such conversion. This limit may, from time to time, be increased, up to 9.99%, or decreased
Warranty exercise price per share					$ 1.32
Warrant, exercisable shares				363,636
Cash consideration				$ 14,200,000
Debt issuance cost				0	$ 1,500,000
Private Placement [Member]
Net cash proceeds					2,340,000
Financial advisory fee					480,000
Proceeds from Private Placement					8,850,000
Placement agent fee					306,000
Convertible Promissory Note [Member]
Debt issuance cost				700,000	100,000
Series A Subordinated Convertible Note [Member]
Cash consideration	$ 4,000,000
Initial principal amount	4,600,000,000
Original issue discount	600,000
Series B Senior Secured Convertible Note [Member]
Initial principal amount	6,900,000
Original issue discount	900,000
Secured Convertible Note [Member]
Initial principal amount	6,000,000
Securities Purchase Agreement [Member] | Institutional Investor [Member]
Aggregate principal amount	$ 11,500,000
Series A Note [Member]
Loss on fair value option					4,400,000
Gain (Loss) on change in fair value		$ 100,000,000			(4,600,000)
Series B Note [Member]
Loss on fair value option					5,100,000
Gain (Loss) on change in fair value			$ 600,000	$ 500,000	$ 4,700,000
Placement Agent Warrants [Member] | Series A and Series B Note [Member]
Purchase of warrant description					Series B Note, respectively, a placement agent received a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.”

XML

WARRANT AGREEMENTS (Details) - $ / shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Warrants, beginning balance	6,285,792	3,467,650
Forfeited/Expired	(611,250)	(752,222)
Warrants, ending balance	7,230,068	6,285,792
Weighted Average Contractual Remaining Life, Granted	9 years 3 months	9 years 2 months 8 days
Warrants [Member]
Warrants, beginning balance	2,479,849	14,666,518
Granted		303,030
Exercised	(96,250)	(771,318)
Forfeited/Expired	(818,152)	(11,718,381)
Warrants, ending balance	1,565,447	2,479,849
Exercisable at December 31, 2021	1,565,447
Weighted average exercise price beginning balance	$ 1.86	$ 3.70
Weighted Average Exercise Price, Granted		1.32
Weighted Average Exercise Price, Exercised	1.00	1.92
Weighted Average Exercise Price, Forfeited/Expired	1.58	5.01
Weighted Average Exercise Price, ending balance	2.18	$ 1.86
Weighted Average Exercise Price, Exercisable	$ 2.18
Weighted Average Contractual Remaining Life, beginning balance	1 year 2 months 23 days	2 years 11 months 26 days
Weighted Average Contractual Remaining Life, Granted		1 year 10 months 10 days
Weighted Average Contractual Remaining Life, ending balance	7 months 28 days	1 year 2 months 23 days
Weighted Average Contractual Remaining Life, Exercisable	7 months 28 days

XML

WARRANT AGREEMENTS (Details 1) - $ / shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Number of Warrants	1,565,447	2,479,849
Weighted Average Remaining Contractual Life (years)	7 months 28 days	1 year 2 months 23 days
Weighted Average Exercise Price	$ 1.51	$ 1.86
Number of Warrants Exercisable, Weighted Average Exercise Price	$ 2.18	$ 1.86
Number of Warrants Exercisable	1,565,447	2,479,849
Warrants [Member]
Weighted Average Exercise Price	$ 2.18
$ 1.98-$2.31 [Member]
Number of Warrants	1,565,447
Weighted Average Remaining Contractual Life (years)	7 months 28 days
Weighted Average Exercise Price	$ 2.18
Number of Warrants Exercisable, Weighted Average Exercise Price	$ 2.18
Number of Warrants Exercisable	1,565,447
1.00 - $6.00 [Member]
Number of Warrants		2,479,849
Weighted Average Remaining Contractual Life (years)		1 year 2 months 23 days
Weighted Average Exercise Price		$ 1.86
Number of Warrants Exercisable, Weighted Average Exercise Price		$ 1.86
Number of Warrants Exercisable		2,479,849

XML

WARRANT AGREEMENTS (Details 2)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Significant assumptions (weighted-average):
Risk-free interest rate at grant date	0.36%
Expected stock price volatility	81.14%
Expected option life (in years)s	2 years
Warrants [Member]
Significant assumptions (weighted-average):
Risk-free interest rate at grant date	0.00%	0.36%
Expected stock price volatility	0.00%	81.14%
Expected dividend payout	0.00%	0.00%
Expected option life (in years)s		3 years
Expected forfeiture rate	0.00%	0.00%

XML

WARRANT AGREEMENTS (Details Narrative) - USD ($) $ / shares in Units, $ in Millions			1 Months Ended	9 Months Ended	12 Months Ended
	Dec. 08, 2020	Oct. 02, 2020	Jun. 30, 2020	Sep. 30, 2020	Dec. 31, 2021	Dec. 31, 2020
Change in warrant value					$ 0.0	$ 0.2
Warrant, exercisable shares					363,636
Warrants [Member]
Warrants issued			8,018,071
Fair market value			$ 1.4
Warrant exercise price				$ 2.00	$ 5.01
Warrants [Member] | October 2, 2020 [Member]
Warrant, exercisable shares						363,636
Warrants issued	62,851	242,424	708,467			60,606
Warrant exercise price	$ 1.00	$ 1.32			$ 1.32
Stock issued during period shares	26,936

XML

STOCK INCENTIVE PLANS (Details) - $ / shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Option
Warrants, beginning balance	6,285,792	3,467,650
Granted	1,555,526	3,600,364
Exercised		(30,000)
Forfeited/Expired	(611,250)	(752,222)
Warrants, ending balance	7,230,068	6,285,792
Exercisable Ending Balance	4,067,452
Weighted Average Exercise Price
Outstanding Beginning Balance	$ 1.52	$ 1.84
Granted	0.95	1.26
Exercised	0	0.74
Forfeited/Expired	0.97	1.76
Outstanding Ending Balance	1.45	$ 1.52
Exercisable Ending Balance	$ 1.51
Weighted Average Contractual Remaining Life
Outstanding Beginning Balance	8 years 10 months 9 days	8 years 8 months 26 days
Granted	9 years 3 months	9 years 2 months 8 days
Outstanding Ending Balance	8 years 3 months 7 days	8 years 10 months 10 days
Exercisable Ending Balance	7 years 9 months 21 days

XML

STOCK INCENTIVE PLANS (Details 1) - $ / shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Weighted Average Exercise Price	$ 1.51	$ 1.86
Weighted Average Remaining Contractual Life (years)	7 months 28 days	1 year 2 months 23 days
Stock Options [Member]
Weighted Average Exercise Price	$ 1.45
Number of Awards	7,230,068
Weighted Average Remaining Contractual Life (years)	8 years 3 months 7 days
Number of Awards Exercisable	4,067,452
0.61-$4.01 [Member]
Weighted Average Exercise Price	$ 1.45
Number of Awards	7,230,068
Weighted Average Remaining Contractual Life (years)	8 years 3 months 7 days
Number of Awards Exercisable	4,067,452
Range of Exercise Price Upper Limited	$ 1.51

XML

STOCK INCENTIVE PLANS (Details 2) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Significant assumptions (weighted-average):
Expected dividend payout	$ 0
Expected forfeiture rate	0%
Stock Options [Member]
Significant assumptions (weighted-average):
Risk-free interest rate at grant date	1.18	0.59
Expected stock price volatility	76.95	81.14
Expected dividend payout	$ 0	$ 0
Expected option life (in years)	10 years	10 years
Expected forfeiture rate	0	0

XML

STOCK INCENTIVE PLANS (Details 3) - $ / shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Forfeited/Expired	(611,250)	(752,222)
Stock Options [Member]
Forfeited/Expired	(61,654)	(237)
Non-vested, beginning balance	50,000	82,086
Granted	338,443	150,000
Vested	(388,443)	(181,849)
Non-vested, ending balance	0	50,000
Weighted Average Exercise Price, Non-vested, beginning balance	$ 1.60	$ 2.69
Weighted Average Exercise Price, Granted	1.20	1.60
Weighted Average Exercise Price, Vested	1.26	2.08
Weighted Average Exercise Price, Forfeited/Expired	0	0
Weighted Average Exercise Price, Non-vested, ending balance	$ 0	$ 1.60

XML

STOCK INCENTIVE PLANS (Details 4) - $ / shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Forfeited/Expired	(611,250)	(752,222)
Stock Options [Member]
Outstanding beginning balance	431,578	60,759
Granted	629,338	431,578
Vested	(411,027)	(60,759)
Forfeited/Expired	(61,654)	(237)
Outstanding, ending balance	588,235	431,578
Weighted Average Grant Date Fair Value Outstanding, ending balance	$ 1.33	$ 3.66
Weighted Average Grant Date Fair Value Granted	0.74	1.33
Weighted Average Grant Date Fair Value Vested	1.33	3.66
Weighted Average Grant Date Fair Value Outstanding	$ 1.33	$ 1.33

XML

STOCK INCENTIVE PLANS (Details Narrative) - USD ($)	1 Months Ended		3 Months Ended		12 Months Ended
	Nov. 28, 2020	Dec. 29, 2017	Jun. 30, 2021	Sep. 30, 2020	Dec. 31, 2021	Dec. 31, 2020
Compensation expense to restricted shares	$ 22,200		$ 100,000	$ 100,000	$ 400,000	$ 300,000
Fair value of options granted					150,000.0	220,000.0
Compensation expense				$ 100,000	$ 2,000,000.0	2,000,000.0
Unrecognized compensation expense			$ 0			$ 100,000
Common stock issued			30,000		68,201,900	59,476,268
Exercise price					$ 0.74
Unrecognized fair value of compensation cost					$ 79,000	$ 79,000
Weighted Average Remaining Contractual Life (years)					10 months 6 days	7 months 20 days
Term of exercise period					10 years
Equity Incentive Plan [Member]
Common stock available for grant	5,000,000	5,000,000
Equity incentive plan, description		The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date.
Stock Options [Member]
Unrecognized fair value of compensation cost			$ 3,000,000
Aggregate Intrinsic Value, Outstanding			$ 2,100,000		$ 0
Consultant [Member]
Restricted common stock issued					150,000
Stock options issued, shares					1,518,194	90,000
Restricted Stock Units [Member]
Compensation expense					$ 500,000	$ 500,000
Restricted common stock issued			431,578		629,338
Unrecognized fair value of compensation cost			$ 400,000			600,000
Restricted Common Stock [Member]
Restricted common stock issued					338,443
Unrecognized fair value of compensation cost					$ 600,000	$ 300,000
Weighted Average Remaining Contractual Life (years)					0 years
Nonstatutory Stock Options [Member]
Restricted common stock issued					150,000
Common stock, shares issued during the period, shares					3,510,364	1,555,526
Awarded vesting period					4 years

XML

STOCKHOLDERS EQUITY (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Jun. 05, 2020
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares par value	$ 0.001	$ 0.001
Common stock, shares outstanding	68,201,900	59,476,268
CHI [Member]
Price per share			$ 1.82
Common stock, shares issued			12,058,623
Proceed from issuance of common stock	$ 21,900,000
Proceeds from common stock issuable	$ 200,000
Series A Note plus [Member]
Conversion price description	ranging from $0.43 to $0.64
Debt instrument converted into common stock	2,598,573
Debt instrument converted amount, principal	$ 1,300,000
Series B Note [Member]
Debt instrument converted into common stock	1,231,958
Debt instrument converted amount, principal	$ 300,000
Price per share	$ 0.24
Several Consulting Agreement [Member]
Conversion price description	ranging from $0.43 to $0.68
Debt instrument converted into common stock	60,000
Convertible debt	$ 300,000
October 2, 2020 [Member] | Sera labs [Member]
Price per share	$ 1.38
Common stock, shares issued	6,909,091
Proceed from issuance of common stock	$ 9,534,546
From January 1, 2020 to December 31, 2020 [Member]
Conversion price description	ranging from $1.40 to $3.93
Debt instrument converted into common stock	281,250
Debt instrument converted amount, principal	$ 500,000
From January 1, 2020 to December 31, 2020 [Member] | 2017 Equity Plan [Member]
Conversion price description	ranging from $1.60 to $3.15
Debt instrument converted into common stock	194,016
Debt instrument converted amount, principal	$ 20,000,000
January 1, 2021 to September 30, 2021[Member] | 1[Member]
Conversion price description	ranging from $0.98 to $1.85
Debt instrument converted into common stock	904,929
Debt instrument converted amount, principal	$ 200,000
January 1, 2021 to September 30, 2021[Member] | 2 [Member]
Conversion price description	ranging from $0.98 to $1.85
Debt instrument converted into common stock	646,512
Debt instrument converted amount, principal	$ 700,000
January 1, 2021 to September 30, 2021[Member] | 4 [Member]
Price per share	$ 1.32
Common stock, shares issued	1,439,394
Proceed from issuance of common stock	$ 1,900,000
January 1, 2021 to September 30, 2021[Member] | 5 [Member]
Price per share	$ 0.89
Common stock, shares issued	297,288
Proceed from issuance of common stock	$ 300,000
January 1, 2021 to September 30, 2021[Member] | 6 [Member]
Price per share	$ 0.24
Common stock, shares issued	1,580,042
Proceed from issuance of common stock	$ 400,000
December 9, 2020 [Member]
Debt instrument converted into common stock	757,576
Debt instrument converted amount, principal	$ 1,000,000
Price per share	$ 1.32
June 5, 2020 [Member]
Price per share	$ 2.00
Common stock, shares issued	708,467
Proceed from issuance of common stock	$ 1,400,000
January 1, 2021 to December 31, 2021[Member] | 3 [Member]
Price per share	$ 1.30
Common stock, shares issued	26,936
Proceed from issuance of common stock	$ 0
Cash-less exercise warrants	962,500,000
On February 1, 2019 [Member]
Price per share	$ 2.32

XML

SEGMENT REPORTING (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Net sales	$ 6,555	$ 2,051
Operating loss	(15,092,000)	(18,958,000)
Assets	40,574,000	46,359,000
Accounts receivable, net	357,000	224,000
Inventory	864,000	449,000
Interest expense	544,000	2,472,000
Depreciation and amortization	3,607,000	918,000
Cure Operations [Member]
Net sales	651,000	1,007,000
Operating loss	(8,232,000)	(17,377,000)
Assets	46,491,000	45,376,000
Accounts receivable, net	18,000	131,000
Inventory	243,000	209,000
Interest expense	468,000	2,472,000
Depreciation and amortization	1,295,000	341,000
Sera Labs Operations [Member]
Net sales	6,078,000	1,044,000
Operating loss	(6,860,000)	(1,581,000)
Assets	8,608,000	15,158,000
Accounts receivable, net	339,000	93,000
Inventory	621,000	240,000
Interest expense	86,000	0
Depreciation and amortization	2,312,000	577,000
Eliminations [Member]
Net sales	(174,000)	0
Operating loss	0	0
Assets	14,175,000	14,175,000
Accounts receivable, net	0
Inventory	0
Interest expense	0	0
Depreciation and amortization	$ 0	$ 0

XML

SEGMENT REPORTING (Details 1 )	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Revenues and Concentration Risk	91.00%	97.00%
CureFilm? sales [Member]
Revenues and Concentration Risk	20.00%	37.00%
Product sales - CBD [Member]
Revenues and Concentration Risk	71.00%	49.00%
Research & Development services [Member]
Revenues and Concentration Risk	0.00%	11.00%

XML

SEGMENT REPORTING (Details Narrative ) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Accounts receivable	$ 30
Revenues	10.00%	16.00%

XML

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Fair Value of the Contingent Share Consideration
Fair value of contingent liability	$ 1,430	$ 3,205
Net change in fair value	$ (1,775)

XML

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 1) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($) shares
Closing Merger Consideration Shares, shares | shares	6,909,091
Contingent Consideration Shares (Clawback Shares), shares | shares	5,988,024
Total purchase price, value	$ 14,200
October 2, 2020 [Member]
Upfront Consideration Shares, value	$ 1,000
Closing Merger Consideration Shares, shares | shares	6,909,091
Closing Merger Consideration Shares, value	$ 9,535
Contingent Consideration Shares (Clawback Shares), shares | shares	5,988,024
Contingent Consideration Shares (Clawback Shares), value	$ 3,083
Liabilities assumed, value	$ 550
Total purchase price, shares | shares	12,897,115
Total purchase price, value	$ 14,168

XML

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 2) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Net assets acquired:
Other assests	$ 83,000	$ 58,000
Total contract liabilities	508,000	$ 994,000
October 2, 2020 [Member]
Net assets acquired:
Cash	1,357,000
Other assests	1,440,000
Property, plant and equipment	6,000
Other long term assets	384,000
Intangibles assets	10,182,000
Goodwill	4,687,000
Accounts payable and accrued expenses	1,063,000
Total contract liabilities	1,963,000
Other current liabilities	462,000
Other long-term liabilities	400,000
Net assets acquired	$ 14,168,000

XML

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 3) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)
Finite-lived intangible assets:
Weighted-average Estimated useful life	4 years 7 months 6 days
Preliminary Estimated Asset Fair Value	$ 10,182
Non-compete [Member]
Finite-lived intangible assets:
Weighted-average Estimated useful life	2 years
Preliminary Estimated Asset Fair Value	$ 462
Tradename [Member]
Finite-lived intangible assets:
Weighted-average Estimated useful life	4 years
Preliminary Estimated Asset Fair Value	$ 2,610
Customer relationships [Member]
Finite-lived intangible assets:
Weighted-average Estimated useful life	5 years
Preliminary Estimated Asset Fair Value	$ 7,110

XML

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 4) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Fair Value of the Contingent Share Consideration
Fair value Beginning Balance	$ 16,043,000	$ 0
Fair value at May 14, 2019		14,632,000
Settlement of contingent consideration liability	(21,701,000)
Net change in fair value	$ (5,658,000)	1,657,000
Fair value of common stock shares to be released from escrow and to be issued		(246,000)
Fair Value Ending Balance		$ 16,043,000

XML

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 5) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Net revenues	$ 6,555	$ 2,051
Net loss	(13,193)	$ (30,621)
Cure Pharmaceutical [Member]
Net revenues	1,049
Net loss	$ (29,059)
Net loss attributable to Cure per common share, basic and dilued	$ (0.65)
Pro forma Adjustment [Member]
Net revenues	$ (34)
Net loss	162
Consolidated Pro Forma [Member]
Net revenues	7,743
Net loss	$ (31,948)
Net loss attributable to Cure per common share, basic and dilued	$ (0.68)
Sera Labs [Member]
Net revenues	$ 6,728
Net loss	$ (3,051)
Net loss attributable to Cure per common share, basic and dilued	$ (0.26)

XML

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details Narrative) - USD ($)			1 Months Ended	12 Months Ended
	Jun. 05, 2020	May 14, 2019	Oct. 21, 2020	Dec. 31, 2021	Dec. 31, 2020
Purchase price for the acquisition				$ 14,200,000
Closing Merger Consideration Shares, shares				6,909,091
Contingent Consideration Shares (Clawback Shares), shares				5,988,024
Aggregate amount				$ 20,000,000
Acquisition descriptions				The Company acquired Sera Labs through the issuance of shares of Common Stock of the Company with $1 million of cash consideration to be provided. The preliminary total purchase price was determined based on the following: i) $1 million of the Upfront Payment ii) Company’s closing price ($1.38) on October 2, 2020 for the closing merger consideration shares
Claw back shares		7,128,913
Upfront payment consideration		5,700,000		1
Acheivment shares		3,207,228
Earnout shares		8,018,071
Warrants issue purchase additional shares					4,143,706
Total potential shares to be issued				32,072,283
Upfront payment in cash			$ 1,000,000.0
Working capital			4,000,000.0
Aggregate maximum milestones amount			$ 20,000,000
Potential shares to be issued			5,988,024
Fair value of contingent shares			$ 3,100,000
Cash consideration				$ 1,000,000
Earn out provisions and warrants				32,072,283
Note payable, principal amount				$ 2,000,000
Shares held in escrow				7,128,913
Issuable shares	11,225,299
Returnback shares	140,828
Gross proceed from warrant	$ 1,400,000
Warrant to purchase common stock	7,309,605
Purchase of common stock	708,467
Assigned back shares	310,821
Shares issue to holders	5,612,654
Shares held in escrow	7,128,913
Convertible Note [Member]
Debt instrument converted amount, principal				$ 14,600,000
CHI [Member]
Total purchase price, shares		12,897,115

XML

INCOME TAXES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Current expense
Federal	$ 0	$ 0
State	0	0
Deferred expense
Federal	0	0
State	0	0
Total income tax expense	$ 0	$ 0

XML

INCOME TAXES (Details 1) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Deferred income tax assets
Net operating loss carryforward	$ 6,862,000	$ 14,359,000
Change in fair value of convertible promissory notes	2,517,000	2,627,000
Non cash compensation	899,000	1,018,000
Deferred revenue	142,000	180,000
Reserves and accruals	74	0
Lease liability	89,000	118,000
Other intangibles	195,000	195,000
Inventory reserve	31,000	82,000
Stock based compensation	79,000	79,000
Allowance for doubtful accounts	22,000	96,000
Accrued expenses	135,000	131,000
Total deferred tax assets	11,045,000	18,885,000
Deferred income tax liabilities
State income taxes	0	0
ROU Assets	(83,000)	(110,000)
Prepaid expenses and other assets	43,000	84,000
Depreciation and amortization	(48,000)	(48,000)
Valuation allowance	10,871,000	8,643,000
Total deferred tax liabilities	11,045,000	18,885,000
Deferred income tax, net	$ 0	$ 0

XML

INCOME TAXES (Details Narrative) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
INCOME TAXES
Net operating loss carryforwards	$ 13.8	$ 26.9
Net operating loss carryforwards expiration date	2038
Valuation reserve allowance percentage	100.00%
Ownership interest	50.00%
Change in valuation allowance	$ 7.8	$ 7.3

XML

INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS (Details Narrative) - USD ($) $ in Thousands		12 Months Ended
	May 06, 2021	Dec. 31, 2021	Dec. 31, 2020
Revenue		$ 0	$ 10
License Agreement [Member]
Settlement payment	$ 3,900	$ 2,400
Amount payable	1,600
Paid amount	$ 2,300

XML

COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Dec. 31, 2021 USD ($)
COMMITMENTS AND CONTINGENCIES
2022	$ 134
2023	138
2024	46
2025	0
2026	0
Undiscounted cash flow	(318)
Effect of discounting	40
Lease liabilities recognized	$ 278

XML

COMMITMENTS AND CONTINGENCIES (Details 1) $ in Thousands	Dec. 31, 2021 USD ($)
COMMITMENTS AND CONTINGENCIES
2022	$ 14
2023	14
2024	12
2025	0
2026	0
Thereafter	0
Finance lease liabilities recognized	$ 40

XML

COMMITMENTS AND CONTINGENCIES (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Operating leases
Right-of-use assets, net	$ 257	$ 343
Right-of-use lease liabilities, current	104	93
Right-of-use lease liabilities, noncurrent	174	278
Total operating lease liabilities	278	371
Finance lease right-to-use assets, net	40	52
Current liabilities	13	12
Noncurrent liabilities	27	40
Total financing lease liabilities	$ 40	$ 52
Weighted average remaining lease term, operating lease	2 years 3 months 14 days	3 years 3 months 21 days
Weighted average remaining lease term, finance lease	2 years 9 months 18 days	3 years 9 months 25 days
Weighted average discount rate	11.30%	11.30%
Weighted average discount rate	9.00%	9.00%

XML

COMMITMENTS AND CONTINGENCIES (Details Narrative)			1 Months Ended		12 Months Ended
	May 06, 2021 USD ($)	May 08, 2020	Mar. 26, 2021 USD ($)	Oct. 21, 2020 USD ($)	Dec. 31, 2021 USD ($) ft²	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Monthly payment					$ 20,000.00
RIght of use assets					$ 40,000	$ 52,000	$ 60,000.00
Finance lease liability							60,000.00
Interest associates with lease							$ 10,000.00
Discount rate							9.00%
Percent of base monthly rent					3.00%
Base monthly rent					$ 10,000.00
Vendor a settlement amount			$ 30,000.00
Operating lease rent expense					$ 400,000	30,000
Weighted average discount rate					11.30
Finance lease payable, current					$ 1.00	40,000.00
Gross sum					10,000.00
Operating capital lease liability, current portion					10,000.00	30,000.00
Operating capital lease liability, long term portion					$ 100,000	$ 300,000
Lease term					5 years
Sum of installment payment, description		a gross sum of $93,461.54, paid in equal installments over a six-month period
Offices And Manufacturing Facility [Member]
Offices and manufacturing facility area | ft²					25,000
License Agreement [Member]
Agreed to pay	$ 2,300,000			$ 3,900,000
Amount payable	$ 1,600,000
Lease Agreement [Member] | May 1, 2019 [Member]
Offices and manufacturing facility area | ft²					3,822

XML

SUBSEQUENT EVENTS (Details Narrative) - USD ($)	1 Months Ended
	Mar. 09, 2022	Feb. 02, 2022	Jan. 18, 2022	Jan. 12, 2022	Jan. 10, 2022	Dec. 31, 2021	Dec. 31, 2020
Carrying value of convertible promissory notes at fair value			$ 200,000			$ 9,932,000	$ 13,684,000
Proceeds from exchange of promissory notes	$ 2,100,000
Interest trate			10.00%
Subsequent Event [Member] | Vendor [Member]
Settlement amount		30.00
Subsequent Event [Member] | Senior Secured January Note [Member]
Carrying value of convertible promissory notes at fair value					$ 200
Interest trate					10.00%
Subsequent Event [Member] | Second Senior Secured January Note [Member]
Carrying value of convertible promissory notes at fair value				$ 40,000.00
Interest trate				10.00%