Avenir Wellness Solutions, Inc. - Quarter Report: 2019 September (Form 10-Q)

curr_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2019

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

For the transition period from __________ to __________

Commission file number 333-204857

CURE PHARMACEUTICAL HOLDING CORP.

(Exact name of registrant as specified in its charter)

Nevada

2834

37-1765151

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Number)

(IRS Employer

Identification Number)

1620 Beacon Place, Oxnard, California 93033

(Address of principal executive offices)

(805) 824-0410

(Issuer’s telephone number)

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

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

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

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
		Emerging growth company	x

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

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

On November 12, 2019, we had 37,959,877 shares of common stock, par value $0.001 per share (the “Common Stock”) issued and outstanding.

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PART I. FINANCIAL INFORMATION:

Item 1.	Unaudited Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018	3

	Unaudited Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2019 and 2018	4

	Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three month periods ended March 31, June 30, and September 30, 2019 and 2018	5-6

	Unaudited Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2019 and 2018	7-8

	Notes to the Unaudited Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43

Item 4.	Controls and Procedures	43

PART II. OTHER INFORMATION:

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	48

Item 4.	Mine Safety Disclosure	48

Item 5.	Other Information	48

Item 6.	Exhibits	49

	Signatures	50

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

CURE PHARMACEUTICAL HOLDING CORP.

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

	September 30, 2019			December 31, 2018
ASSETS	(Unaudited)
Current assets:
Cash	$	6,258		$	501
Accounts receivable, net		9			103
Inventory		78			38
Prepaid expenses and other assets		1,608			946
Total current assets		7,953			1,588

Property and equipment, net		659			300
Goodwill		9,178			-
Intellectual property and patents, net		1,913			1,206
In-process research and development		14,288			-
Prepaid expenses and other assets		-			232
Other assets		38			70

Total assets	$	34,029		$	3,396

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	655		$	774
Accrued expenses		185			509
Loan payable		-			105
Notes payable, net		50			920
Convertible promissory notes, net		550			5,242
Derivative liability		147			618
Contract liabilities		495			383
Contingent share considerations		9,938			-
Total current liabilities		12,020			8,551

License Fees		93			-
Contingent share considerations		8,560			-

Total liabilities		20,673			8,551

Commitments and Contingencies (see Note 15)

Stockholders' equity (deficit):
Common stock: $0.001 par value; authorized 150,000,000 shares;
37,949,460 shares and 26,784,019 issued and outstanding as of
September 30, 2019 and December 31, 2018, respectively		38			27
Additional paid-in capital		62,239			23,425
Stock payable		820			646
Accumulated deficit		(49,741	)		(29,269	)
Total CURE Pharmaceutical Holding Corp stockholders’ equity (deficit)		13,356			(5,171	)

Noncontrolling interest		-			16

Total stockholders' equity (deficit)		13,356			(5,155	)

Total liabilities and stockholders' equity (deficit)	$	34,029		$	3,396

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

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CURE PHARMACEUTICAL HOLDING CORP.

Condensed Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended September 30, 2019 and 2018

(in thousands, except share amounts)

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Revenue:
Net product sales	$	29		$	68		$	29		$	287
Consulting research & development income		70			20			247			63
Shipping and other sales		3			-			8			-
Total revenues		102			88			284			350

Cost of goods sold:
Cost of goods sold		15			42			18			171

Gross profit		87			46			266			179

Operating expenses:
Research and development expenses		453			292			1,547			1,095
Selling, general and administrative expenses		2,217			2,444			7,593			5,496
Change in fair value contingent stock consideration		(4,654	)		-			3,866			-
Total operating expenses		(1,984	)		2,736			13,006			6,591

Net operating income (loss) before other income (expense)		2,071			(2,690	)		(12,740	)		(6,412	)

Other income (expense):
Interest income		37			-			40			-
Other income		-			-			15			6
Gain on deconsolidation		-			-			81			-
Change in fair value of derivative liability		198			(624	)		471			(418	)
Other expense		-			(62	)		(590	)		(171	)
Interest expense		(102	)		(1,433	)		(4,099	)		(2,133	)
Loss on conversion of convertible promissory notes		-			-			(3,660	)		-

Other income (expense)		133			(2,119	)		(7,742	)		(2,714	)

Net income (loss) before income taxes		2,204			(4,809	)		(20,482	)		(9,128	)

Provision for income taxes		-			-			-			-

Net income (loss)		2,204			(4,809	)		(20,482	)		(9,128	)

Net income (loss) attributable to non-controlling interest		-			(10	)		(10	)		(25	)

Net income (loss) attributable to Cure Pharmaceutical Holding Corp.		2,204			(4,799	)		(20,472	)		(9,103	)

Net income (loss ) per share, basic
Basic	$	0.06		$	(0.20	)	$	(0.62	)	$	(0.37	)
Diluted	$	0.05		$	(0.20	)	$	(0.62	)	$	(0.37	)

Weighted average common shares outstanding
Basic		34,613,642			24,403,901			33,247,660			24,635,143
Diluted		43,368,323			24,403,901			33,247,660			24,635,143

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

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CURE PHARMACEUTICAL HOLDING CORP.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited)

For the Three Month Periods Ended March 31, June 30 and September 30, 2019 and 2018

(in thousands, except share amounts)

					Additional
	Common Stock				Paid-in			Stock			Accumulated			Noncontrolling
	Shares		Par		Capital			Payable			Deficit			Interest			Total
Balance, December 31, 2018		26,784,019	$	27	$	23,425		$	646		$	(29,269	)	$	16		$	(5,155	)
Issuance of common stock for professional services		86,744		-		165			356									522
Issuance of common stock for extension of maturity dates relating to convertible promissory notes		105,000		1		321												322
Issuance of common stock for conversion of convertible promissory notes		2,844,156		2		8,621			938									9,561
Issuance of common stock from the equity incentive plan		130,208		-		-												-
Issuance of common stock for cash		416,667		-		500												500
Issuance of common stock for cancellation of accounts payable									64									64
Warrants granted						3,035												3,035
Beneficial conversion features						801												801
Fair value of stock options and restricted stock granted						230												230
Noncontrolling interest of Oak Therapeutics, Inc.															(6	)		(7	)
Net loss												(10,028	)					(10,028	)
Balance, March 31, 2019		30,366,794	$	30	$	37,098		$	2,004		$	(39,297	)	$	10		$	(155	)
Issuance of common stock for professional services		186,249		-		502			(166	)								336
Issuance of common stock for cash		208,333		1		250			1,745									1,996
Issuance of common stock from exercise of warrants		25,675		-		-			60									60
Issuance of common stock for acquistion of Chemistry Holdings, Inc		5,700,000		6		19,032												19,038
Warrants granted						817												817
Fair value of stock options and restricted stock granted						659												659
Noncontrolling interest of Oak Therapeutics, Inc.															(10	)		(10	)
Net loss												(12,648	)					(12,648	)
Balance, June 30, 2019		36,487,051	$	37	$	58,358		$	3,643		$	(51,945	)	$	-		$	10,093
Issuance of common stock for professional services		191,476		-		586			(221	)								365
Issuance of common stock for cash		528,790		1		1,744			(1,745	)								-
Issuance of common stock for conversion of convertible promissory notes		285,723		-		938			(938	)								-
Issuance of common stock from exercise of warrants		66,753		-		60			(60	)								-
Issuance of common stock for purchase of patents		30,000		-		43			(43	)								-
Issuance of common stock for cancellation of accounts payable		34,876		-		64			(64	)								-
Issuance of common stock from the equity incentive plan		324,791		-		-												-
Common stock shares to be issued for purchase of intellectual property									157									157
Common stock shares to be issued for issuance of note payable									91									91
Warrants granted						(91	)											(91	)
Fair value of stock options and restricted stock granted						537												537
Net loss												2,204						2,204
Balance, September 30, 2019		37,949,460	$	38	$	62,239		$	820		$	(49,741	)	$	-		$	13,356

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Balance, December 31, 2017	23,901,252	$	24	$	16,484		$	325		$	(18,868	)	$	47		$	(1,988	)
Issuance of common stock for professional services	50,000		-		74			1,228									1,302
Warrants granted					37												37
Beneficial conversion features					646												646
Noncontrolling interest of Oak Therapeutics, Inc.														(7	)		(7	)
Net loss											(1,902	)					(1,902	)
Balance, March 31, 2018	23,951,252	$	24	$	17,241		$	1,553		$	(20,770	)	$	40		$	(1,912	)
Issuance of common stock for professional services	1,070,175		1		1,015			(776	)								240
Issuance of common stock for purchase of patents								97									97
Issuance of common stock for cancellation of accounts payable								50									50
Warrants granted					(22	)											(22	)
Fair value of stock options and restricted stock granted					461												461
Noncontrolling interest of Oak Therapeutics, Inc.														(8	)		(8	)
Net loss											(2,403	)					(2,403	)
Balance, June 30, 2018	25,021,427	$	25	$	18,695		$	924		$	(23,173	)	$	32		$	(3,497	)
Issuance of common stock for professional services	590,000		1		849			(412	)								438
Issuance of common stock for extension of maturity dates relating to convertible promissory notes	115,000		-		190			407									597
Issuance of common stock for cancellation of accounts payable	69,444		-		50			(50	)								-
Warrants granted					1,684												1,684
Beneficial conversion features					355												355
Fair value of stock options and restricted stock granted					100												100
Noncontrolling interest of Oak Therapeutics, Inc.														(10	)		(10	)
Net loss											(4,799	)					(4,799	)
Balance, September 30, 2018	25,795,871	$	26	$	21,923		$	869		$	(27,972	)	$	22		$	(5,132	)

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

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CURE PHARMACEUTICAL HOLDING CORP

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	For the Nine Months Ended
	September 30, 2019			September 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(20,482	)	$	(9,128	)

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

Stock based compensation - services		572			46
Stock based compensation - prepaid		1,083			1,162
Stock issued for amending convertible promissory notes		320			190
Gain from settlement on accounts payable		(15	)		-
Gain from deconsolidation of Oak Therapeutics, Inc		(81	)		-
Change in fair value of contingent share consideration		3,866			-
Loss on conversion of convertible promissory notes		3,660			-
Warrant expense from convertible notes		2,173			-
Depreciation and amortization		420			110
Amortization of loan discounts		1,255			1,651
Recovery of bad debt expense		(8	)		-
Inventory reserve for obsolesce		7			-
Deposits made for purchase of property, plant and equipment		(883	)		-
Change of fair value in derivative liabilities		(471	)		418
Fair value of vested stock options and restricted stock		1,426			561
Warrants granted for commission expense		1,178			1,155
Warrants granted for broker fee expense		411			-
Cashless exercise of warrants		-			-

Change in other assets and liabilities:
Accounts receivable		101			(2	)
Inventory		(47	)		(48	)
Prepaid expenses and other assets		20			165
Other assets		33			25
Accounts payable		(379	)		250
Accrued expenses		(670	)		269
Contract Liabilities		112			43
License fees		93			-

Cash used in operating activities		(6,306	)		(3,133	)

Cash flows from investing activities
Purchase in intangible assets		(47	)		(72	)
Proceeds from common stock issuance for acquisition of Chemistry Holdings		8,487			-
Acquisition of property and equipment, net		(377	)		(51	)

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Cash provided by (used in) investing activities		8,063			(123	)

Cash flows from financing activities
Proceeds from convertible notes payable		3,425			3,600
Proceeds from promissory notes		-			250
Proceeds from common stock issuance		2,495			-
Proceeds from stock payable		-			-
Proceeds from exercise of warrants		60			-
Repayment of convertible notes payable		(1,225	)		-
Repayment of notes payable		(650	)		-
Repayment of loans payable		(105	)		(400	)

Cash provided by financing activities		4,000			3,450

Net increase in cash and cash equivalents		5,757			194

Cash and cash equivalents, beginning of period		501			109

Cash and cash equivalents, end of period	$	6,258		$	303

Supplemental cash flow information

Cash paid for interest and income taxes:
Interest	$	90		$	67
Income taxes	$	-		$	-

Non-cash financing activities:
Common stock related to prepaid expense	$	-		$	1,018
Warrants granted for discount on convertible promissory notes	$	-		$	1,546
Common stock issued for conversion of promissory notes and accrued interest	$	5,902		$	-
Common stock payable for conversion of convertible note	$	-		$	263
Common stock payable for issuance of a promissory note	$	-		$	144
Common stock payable for patents	$	-		$	97
Common stock payable for purchase of intellectual property	$	157		$	-
Common stock issued for settlement of accounts payable	$	65		$	50
Accrued interest converted to convertible promissory note	$	-		$	10
Fixed assets received from the acquisition of Chemistry Holdings, Inc	$	83		$	-
Patents received from the acquistion of Chemistry Holdings, Inc	$	650		$	-
In-process research and development received from the acquistion of Chemistry Holdings, Inc	$	14,460		$	-
Goodwill resulting from the acquisiton of Chemistry Holdings, Inc	$	9,178		$	-
Contingent share considerations for acquistion of Chemistry Holdings	$	14,632		$	-
Liabilities assumed from the acquisiton of Chemistry Holdings, Inc	$	1,189		$	-
Convertible promissory note payable eliminated from the acquisiton of Chemistry Holdings, Inc	$	2,000
Cashless exercise of warrants	$	-		$	-
Liabilities released as a result of deconsolidation of Oak Therapeutics, Inc	$	76		$	-
Non-controlling interest released as a result of deconsolidation of Oak Therapeutics, Inc	$	16		$	-

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

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CURE PHARMACEUTICAL HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Business Operations

CURE Pharmaceutical Holding Corp., and its wholly-owned subsidiaries, CURE Pharmaceutical Corporation (“CURE Pharmaceutical”) and CURE Chemistry, Inc. (collectively (the “Company,” “we,” “our,” “us,” or “CURE”) is an emerging growth company focusing on the development and manufacturing of drug formulation and 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 business strategy is to develop products using our proprietary technology, which may include clinical development and regulatory approval, and license the product rights to partners responsible for marketing, sales and distribution, while retaining exclusive manufacturing rights. We operate a 25,000 square foot cGMP manufacturing plant in Oxnard, CA.

Our CUREform^TM technology platform focuses on improving oral drug delivery by combining drug encapsulation techniques with alternative dosage forms including CUREfilm^®,oral dissolving films (ODF) and CUREpods^TM , chewable products. We apply our technology to pharmaceutical drugs and dietary supplements. ODF 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 tract (GI) 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 currently have two commercial products and several development programs underway.

Background

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

On November 7, 2016, the Company, in a reverse take-over transaction, acquired CURE Pharmaceutical Corporation (“CURE Pharmaceutical”), a specialty pharmaceutical and bioscience company based in California that specializes in drug delivery technologies, by executing a Share Exchange Agreement and Conversion Agreement (“Exchange Agreement”) by and among the Company and a holder of a majority of the issued and outstanding capital stock of the registrant prior to the closing (the “Majority Stockholder”), on the one hand, and CURE Pharmaceutical, a California corporation, all of the shareholders of CURE Pharmaceutical’s issued and outstanding share capital (the “CURE Pharm Shareholders”) and the holders of certain convertible promissory notes of CURE Pharmaceutical (“CURE Pharm Noteholders”), on the other hand. Hereinafter, this share exchange transaction is described as the “Share Exchange.” As a result of the Share Exchange, CURE Pharmaceutical became a wholly owned subsidiary of the Company, and the CURE Pharm Shareholders and CURE Pharm Noteholders became the controlling shareholders of the Company. For accounting purposes, CURE Pharmaceutical was the surviving entity. The transaction was accounted for using the reverse acquisition method of accounting. As a result of the recapitalization and change in control, CURE Pharmaceutical was the acquiring entity in accordance with ASC 805, Business Combinations.

We licensed our technology available to a private company, Oak Therapeutics (“Oak”), to develop products for sale in the developing world (“Territory”). On November 10, 2017, we received 269,000 shares of Oak as consideration for an exclusive license to our patent rights in the Territory, along with a royalty-free non-exclusive license to any improvements made by Oak. As a result of this transaction, we owned approximately 63% of Oak’s outstanding shares and consolidated Oak’s financial statements as of the fourth quarter 2017. Due to the lack of performance by Oak under the license agreement, on April 15, 2019, we terminated all contractual relationships with Oak, including the license and surrendered our Oak shares to Oak. The parties terminated all contractual relationships between them, whether written or verbal, express or implied. All license or other rights previously granted by Oak to the Company or the Company to Oak were terminated, including all licenses or rights of any kind granted by the Company. (See Note 13 for deconsolidation of Oak)

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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 Chemistry Holdings, Inc., a Delaware corporation (“Chemistry Holdings”). As agreed in the Merger Agreement, the Company acquired Chemistry Holdings pursuant to a merger of the Merger Sub with and into Chemistry Holdings (the “Merger”). Pursuant to the Merger, Chemistry Holdings became a wholly-owned subsidiary of the Company and the stockholders of Chemistry Holdings 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 Chemistry Holdings. (See Note 13)

The Company was the acquiring entity in accordance with ASC 805, Business Combinations.

Liquidity and Capital Resources

In connection with preparing unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2019, management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s ability to continue as a going concern within one year from the date that the financial statements are issued. As part of the Company’s evaluation, the Company considered the following:

	·	Its accumulated deficit of approximately $50 million,
	·	Its cash balance of $6.3 million, which includes the addition of approximately $7.3 million of net cash from the acquisition of CHI,
	·	Only $0.5 million of debt and no other obligations due in the next 12 months,
	·	Its continued progress towards increasing revenues from commercialization and the impact of increased manufacturing and related plant upgrades,
	·	Its research and development strategic plans, including the filing and maintenance of patents, and
	·	The forecasted hiring of personnel and other S,G&A costs.

Based on these considerations, the Company believes that its current cash reserves and its revenues shall be adequate to sustain operations over the next 12 months.

If the Company does require additional funds, it may do so through the sale of common stock, combined with or without warrants, the sale of notes, and, to a lesser extent, equipment financing facilities and secured loans.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

Principle of Consolidation and Basis of Presentation

The condensed consolidated financial statements include the accounts of CURE Pharmaceutical Holding Corp (“CPHC”) and its wholly-owned subsidiaries , CURE Pharmaceutical Corporation (“CURE”) Chemistry Holdings Inc. and related subsidiaries recently acquired (collectively referred to as “CHI”) and its 63% majority owned subsidiary Oak Therapeutics, Inc. (“Oak”) through April 15, 2019 as the Company entered into a Termination and Release Agreement with Oak to surrender all of the Company’s shares of Oak and terminate any rights the Company may have to acquire additional shares or interest in OAK, collectively referred to as (“CURE”, “we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s film strip product represents the principal operations of the Company.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2019, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2019 and 2018, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal period ended December 31, 2018 filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2019.

Use of Estimates

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

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Cash and Cash Equivalents

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. As of September 30, 2019 and December 31, 2018, the Company had no cash equivalents. At September 30, 2019 and December 31, 2018, 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 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions.

Investment in Associates

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

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

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

Property and Equipment

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

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

Accounts Receivable

Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. At September 30, 2019 and December 31, 2018, management determined that an allowance was necessary which amounted to approximately $9 and $8, respectively.

Inventory

Inventory is stated at the lower of cost or net realizable value. 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 and writes down any excess and obsolete inventories to their realizable value in the period in which the impairment is first identified.

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Impairment of Long-Lived Assets

We review all of our long-lived assets for impairment indicators throughout the year and perform detailed testing whenever impairment indicators are present. In addition, we perform detailed impairment testing for indefinite-lived intangible assets, at least annually, at December 31. When necessary, we record charges for impairments.

Specifically:

	·	For finite-lived intangible assets, such as acquired developed technology rights, and for other long-lived assets, we compare the undiscounted amount of the projected cash flows associated with the asset, or asset group, to the carrying amount. If the carrying amount is found to be greater, we record an impairment loss for the excess of book value over fair value. In addition, in all cases of an impairment review, we re-evaluate the remaining useful lives of the assets and modify them, as appropriate; and

	·	For indefinite-lived intangible assets, such as goodwill, each year and whenever impairment indicators are present, we determine the fair value of the asset and record an impairment loss for the excess of book value over fair value, if any.

Management determined that no impairment indicators were present and that no impairment charges were necessary as of September 30, 2019 or December 31, 2018.

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue Recognition”. The Company adopted Topic 606 using a modified retrospective approach for the years ended December 31, 2017 and prior and has been applied prospectively in the Company’s financial statements beginning January 1, 2018. 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 will be evaluated using a five-step model. The adoption of Topic 606 did not have a material impact on the Company’s financial statements, at initial implementation nor will it have a material impact on an ongoing basis.

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

1.	Identify the contract(s) with customer;
2.	Identify the performance obligations in the contract;
3.	Determine the transactions price;
4.	Allocate the transactions price to the performance obligations in the contract; and
5.	Recognize revenue when (or as) we satisfy a performance obligation.

We derive revenues from two primary sources: products and services. Product revenue includes the shipment of product according to the agreement with our customers. Services include research and development contracts for the development of products utilizing our CUREForm™ technology. Rarely, contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices are typically estimated based on observable transactions when these services are sold on a standalone basis.

The Company’s product development income includes services for the development of products utilizing our CUREForm™ 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. The Company 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 the Company incurs 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.

Contract liabilities is shown separately in the condensed consolidated balance sheets. At September 30, 2019 and December 31, 2018 we had contract liabilities of $0.5 million and $0.4 million, respectively.

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Advertising Expense

The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying statements of operations. The Company recorded advertising costs of $0.1 million and $0.3 million, for the three and nine month periods ended September 30, 2019, respectively. The Company recorded advertising costs of $0.05 million and $0.1 million for the three and nine month periods ended September 30, 2018, 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 $0.5 million and $1.5 million for the three and nine month periods ended September 30, 2019, respectively. The Company recorded research and development expenses of $0.3 million and $1.1 million for the three and nine month periods ended September 30, 2018, respectively.

Income Taxes

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

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

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

The Company accounts for restricted stock awards and stock options issued at fair value, based on an exercise price per share equal to the volume-weighted average of the high and low selling prices of the Company’s common stock reported on the OTC Bulletin Board for the five (5) trading days in the Company’s common stock beginning with the third (3rd) such trading following the Filing Date and ending with the seventh (7th) such trading day following the Filing Date. Compensation expense is recognized for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to the Company generally using the straight-line single option method.

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

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

Convertible Debentures

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.

Derivative Liabilities

ASC 815-40 (formerly SFAS No. 133 “Accounting for derivative instruments and hedging activities”), 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 (formerly EITF 00-19 “Accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock”) to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula and present value pricing. At September 30, 2019 and December 31, 2018, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement of operations and comprehensive loss.

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 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1:		Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:		Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3:		Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

The carrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable, accrued expenses and notes and loans payable approximate their estimated fair market value based on the short-term maturity of these instruments. The carrying amount of the notes and convertible promissory notes approximates the estimated fair value for these instruments as management believes that such notes constitute substantially all of the Company’s debt and the interest payable on the notes approximates the Company’s incremental borrowing rate. We measured the liability for price adjustable warrants and embedded derivative features in the convertible notes, using the probability adjusted Black-Scholes option pricing model (“Black-Scholes”), which management has determined approximates values using more than complex methods, using Level 3 inputs. (See Note 10)

We measured the contingent stock consideration based on the following: i) Company’s closing price at the end of each quarter; ii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over a 61 month performance period applied to the total number of contingent shares, as determined based on the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished; and iii) the fair value of the acquisition warrant shares based on using the Black-Scholes valuation

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The following table summarizes fair value measurements by level at September 30, 2019 for assets and liabilities measured at fair value on a recurring basis:

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Fair value of contingent stock consideration	$	18,498	$	-	$	-	$	18,498
Fair value of Derivative Liability	$	147	$	-	$	-	$	147

The following table summarizes fair value measurements by level at December 31, 2018 for assets and liabilities measured at fair value on a recurring basis:

(Dollars in thousands)		Total				Level 1				Level 2				Level 3
Fair value of Derivative Liability		$	618			$	-			$	-			$	618

The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earnouts may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from the date of acquisition to September 30, 2019, 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 all decreased resulting in a significant decrease of the fair value of the contingent stock consideration.

Net Earnings (Loss) per Common Share

Basic net earnings (loss) per common share is computed by dividing the net earnings (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.

The following table sets forth the computation of basic and diluted net income per share for the period indicated:

	For the Three Months Ended					For the Nine Months Ended
(Dollars in thousands)	September 30, 2019		September 30, 2018			September 30, 2019			September 30, 2018

Net income	$	2,204	$	(4,799	)	$	(20,472	)	$	(9,101	)
Weighted average outstanding shares of common stock		34,613,642		24,403,901			33,247,660			24,635,143
Dilutive potential common stock shares from:
Vested Stock options from the Company’s 2017 Equity Incentive Plan		228,759		-			-			-
Conversion of convertible notes		115,047		-			-			-
Issuance of contingent shares relating to CHI acquisition		8,410,875		-			-			-
Common stock and common stock equivalents		43,368,323		24,403,901			33,247,660			24,635,143
Income per share:
Basic net income per share		0.06		(0.20	)		(0.62	)		(0.37	)
Diluted net income per share		0.05		(0.20	)		(0.62	)		(0.37	)

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 number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive:

	For the Three Months Ended				For the Nine Months Ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018

Vested stock options from the Company’s 2017 Equity Incentive Plan		-		132,153		1,481,391		527,231
Warrants		-		258,644		6,648,446		3,656,107
Shares to be issued upon conversion of convertible notes		-		3,546,908		115,047		3,546,908
Total		-		3,937,705		8,244,884		7,730,246

In connection with CHI acquisition, the Company estimated as of the Closing Date that approximately 8,410,875 common stock shares, of which 7,128,913 common stock shares are held in escrow, may be issued and released over a period of 5 months to 5 years. These potential post-closing claims relate to, among other things, breaches of representations, warranties and covenants contained in the Merger Agreement and the future earn-out and achievement of a variety of milestones as defined in the Merger Agreement. Additionally, a warrant was issued to purchase up to 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. Due to the uncertainty of the number of shares to be issued and vested under the warrant, these shares were not included in the table above.

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Recently Issued Standards

In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”). This guidance, as amended by subsequent ASU’s on the topic, improves transparency and comparability among companies by recognizing right of use (ROU) assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. ASU No. 2016-02 is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We adopted ASU No. 2016-02 in our fiscal year beginning January 1, 2019 and used the alternative transition method provided by the FASB in ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements”, with no restatement of comparative periods.

The new standard provides optional practical expedients in transition. We expect to only elect the package of practical expedients where, under the new standard, prior conclusions about lease identification, lease classification and initial direct costs do not need to be reassessed. The new standard also provides practical expedients for ongoing accounting and we do not expect to elect any of these practical expedients on adoption. We continue to assess the impact of the new standard and believe it will not have a material effect on the condensed consolidated balance sheet.

In June 2018, the FASB issued ASU No. 2018-7, Compensation – Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting. This guidance supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The guidance permits early adoption and was adopted by the Company in the first quarter of fiscal year 2019. The adoption of this ASU did not have any impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force)” (“ASU 2018-15”). The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As permitted by ASU 2018-15, the Company early-adopted this standard on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements.

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.

NOTE 3 - INVENTORY

Inventory consists of raw materials, packaging components, work-in-process and finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or market. The carrying value of inventory consisted of the following at September 30, 2019 and December 31, 2018:

(Dollars in thousands)	September 30, 2019			December 31, 2018
Raw materials	$	61		$	25
Packaging components		8			8
Work-in-process		14			8
		83			41
Reserve for obsolescence		(5	)		(3	)
Total inventory	$	78		$	38

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NOTE 4 - PREPAID EXPENSES AND OTHER ASSETS

As of September 30, 2019 and December 31, 2018, prepaid expenses and other assets consisted of the following:

(Dollars in thousands)	September 30, 2019			December 31, 2018

Prepaid consulting services– stock-based compensation	$	407		$	936
Prepaid consulting services		60			82
Prepaid insurance		22			120
Prepaid inventory		30			-
Other receivables					3
Prepaid property, plant and equipment		883			-
Prepaid expenses		206			37
Prepaid expenses and other assets		1,608			1,178
Current portion of prepaid expenses and other assets		(1,608	)		(946	)
Prepaid expenses and other assets less current portion	$	-		$	232

NOTE 5 - PROPERTY AND EQUIPMENT

As of September 30, 2019, and December 31, 2018, property and equipment consisted of the following:

(Dollars in thousands)	September 30, 2019			December 31, 2018
Manufacturing equipment	$	896		$	842
Computer and other equipment		562			183
Leasehold improvements		75			48
Less accumulated depreciation		(874	)		(773	)
Property and Equipment, net	$	659		$	300

Depreciation expense for the three and nine month periods ended September 30, 2019 was $0.04 million and $0.1 million, respectively. Depreciation expense for the three and nine month periods ended September 30, 2018 was $0.03 million and $0.08 million, respectively, which includes depreciation of $0.002 million and $0.006 million for capitalized leased assets for the three and nine months ended September 30, 2018, respectively. Accumulated depreciation for property held under capital leases was $0.04 million as of September 30, 2019 and December 31, 2018.

NOTE 6 - INTANGIBLE ASSETS

The Company incurred $0.05 million and $0.2 million of legal patent costs that were capitalized during the nine months periods ended September 30, 2019 and 2018, respectively. In addition, the Company acquired a patent and developed technology with a fair value of $0.7 million and in-process research and development with a fair value of $14.5 million as part of the CHI acquisition (See Note 13). The Company purchased $0.2 million of intellectual property from Continuum Brand’s through the issuance of 40,000 common stock shares of the Company during the nine months period ended September 30, 2019. No intellectual properties were acquired through the issuance of common stock shares of the Company for the nine months ended September 30, 2018. No patents were acquired through issuance of common stock shares of the Company for the nine months period ended September 30, 2019. The Company purchased $0.3 million of patents through the issuance of 200,000 common stock shares of the Company during the year ended December 31, 2018.

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Intangible Asset Summary

The following table summarizes the estimated fair values as of September 30, 2019 of the identifiable intangible assets acquired, their useful life, and method of amortization:

(Dollars in thousands)	Estimated Fair Value			Remaining Estimated Useful Life (Years)		Nine Months Amortization Expense
Intellectual Property	$	972			11.48	$	31
Patents		1,276			12.76		38
In-process research and development technology		14,460			13.83		172
Total	$	16,708				$	241
Less: accumulated amortization		(507	)
Intellectual property and patents, net		16,201
Less: pending patents and in-process research and development technology not subject to amortization		(14,586	)
Net intangible assets subject to amortization	$	1,615

The net intangible asset was $16.2 million, net of accumulated amortization of $0.5 million, as of September 30, 2019. Amortization expense was $0.1 million and $0.3 million for the three and nine months periods ended September 30, 2019, respectively. Amortization expense was $0.01 million and $0.03 million for the three and nine months periods ended September 30, 2018, respectively.

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

(Dollars in thousands)
2019	$	108
2020		118
2021		118
2022		118
2023		118
Thereafter		1,035
Total Amortization	$	1,615

NOTE 7 – LOAN PAYABLE

Loan payable consists of the following at September 30, 2019 and December 31, 2018:

(Dollars in thousands)	September 30, 2019		December 31, 2018
Notes to a company due September 29, 2019, including interest at 6.00% per annum; unsecured; interest due monthly	$	-	$	105
Current portion of loan payable		-		(105	)
Loan payable, less current portion	$	-	$	-

Interest expense for the three and nine months periods ended September 30, 2019 was $0 and $0.003 million, respectively. Interest expense for the three and nine months periods ended September 30, 2018 was $0 and $0.002 million, respectively.

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NOTE 8 – NOTES PAYABLE

Notes payable consist of the following at September 30, 2019 and December 31, 2018:

(Dollars in thousands)	September 30, 2019			December 31, 2018

Note to a company amended on August 27, 2017 and February 27, 2019, due on or before one month from the amended date and the maturity date shall be extended for one month periods as long as the Company is not in default, interest shall accrue at 10% per annum, secured by the Company’s intellectual property. This note was repaid on May 21, 2019.	$	-		$	650
Note to an individual, non-interest bearing, unsecured and has no fixed terms of repayment.		50			50
Note to an individual due April 1, 2019, interest payable at 6% per annum, unsecured, principal and accrued interest due at maturity. The Company issued 50,000 shares of its common stock on October 18, 2018 at a price per share of $2.88 as an equity kicker. This note and accrued interest was repaid on April 2, 2019.		-			150
Note to a company due December 15, 2018, interest payable at 5% per annum, unsecured, principal and accrued interest due at maturity. If this note is still outstanding as of the date of any bona fide sale of the Company’s preferred stock or common stock in excess of $4,000,000 in gross proceeds, in one transaction or a serious of related transactions, which offering definitively sets a price per share of common stock and results in a listing of the Company’s common stock on a national securities exchange. On January 1, 2019, we entered into an Amendment to extend the maturity date to June 30, 2019. This note was repaid on May 29, 2019.		-			100
		50			950
Unamortized discount					(30	)
Current portion of loan payable		(50	)		(920	)
Loan payable, less current portion	$	-		$	-

Interest expense for the three and nine month periods ended September 30, 2019 was $0 and $0.03 million, respectively. Interest expense for the three and nine month periods ended September 30, 2018 was $0.02 million and $0.05 million, respectively.

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NOTE 9 – CONVERTIBLE PROMISSORY NOTES

Convertible promissory notes consist of the following at September 30, 2019 and December 31, 2018:

(Dollars in thousands)	September 30, 2019		December 31, 2018

Convertible promissory notes totaling $1,400,000 due between December 31, 2018 and February 28, 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 between December 31, 2018 and February 28, 2019. A total of $250,000 convertible promissory notes was repaid in 2018 and $450,000 convertible promissory notes were repaid in 2019. A total $400,000 of convertible promissory notes plus accrued interest of $71,342 have been converted in to 254,779 common stock shares of the Company in 2019. Remaining $550,000 of convertible promissory notes are currently in default.	$	550	$	1,400
Convertible promissory notes totaling $1,275,000 due November 30, 2018 and $750,000 due February 28, 2019, interest payable at 9% per annum; unsecured; principal and accrued interest convertible into common stock at either the price per share equal to the average closing price of the Company’s Common Stock on the OTC Markets for the five consecutive trading days prior to the delivery of a Notice of Conversion (“Optional Conversion”) or price per share equal to 75% of the price of the Company’s next bona fide sale of its preferred stock or Common Stock in excess of $4,000,000 in gross proceeds, in one transaction or a series of related transactions, which offering definitively sets a price per share of the Company’s Common Stock or preferred stock and enables the Company to list its common stock on a national securities exchange; accrued interest to be paid quarterly beginning September 30, 2018, which has not yet been paid. During the first quarter of 2019, the Company repaid $275,000. On February 13, 2019, $750,000 of convertible promissory notes plus accrued interest and penalties of $135,825 were converted into 479,144 common stock shares of the Company. On February 15, 2019, $1,000,000 of convertible promissory notes plus accrued interest and penalties of $94,750 were converted into 591,757 common stock shares of the Company.		-		2,025
Convertible promissory note totaling $500,000 due April 30, 2019, interest payable at 9% per annum; unsecured; principal and accrued interest convertible into common stock at a price per share (the “ Voluntary Conversion PPS “) equal to 75% of the average of the closing prices of the Company’s Common Stock on the OTC Market (or any other market on which the common stock of the Company is then listed for trading) over the thirty (30) consecutive trading days prior to the delivery of the notice of conversion by the Investor to the Company, or, if at the time of such conversion the shares of the Company’s Common Stock are not listed for trading, then the entire then outstanding Investment Amount shall be converted into that number of shares of the most senior class of shares of the Company existing at the time of such conversion, at a price per share equal to 75% of the fair market value of such Common Stock as shall be determined by the Board of Directors based on, among others, a valuation prepared by an independent third party and which shall have been submitted to the Company not more than 90 days prior to the date of such determination by the Board of Directors. In the event of the consummation by the Company, on or before the Maturity Date, of a transaction or series of related transactions in which the Company issues equity securities of the Company in consideration of at least US$4,000,000 (a “ Financing “), the then outstanding Investment Amount not previously converted hereunder shall be automatically converted, immediately prior to (but conditioned upon) the consummation of such Financing, into such number of shares (or a sub-class thereof) issued by the Company in the Financing, equal to the outstanding Investment Amount divided by a price per share equal to 75% of the lowest price per share paid to the Company in the Financing. In the event the Financing is not consummated by the Maturity Date, then the outstanding Investment Amount as of the Maturity Date not previously converted hereunder shall be automatically converted, on the Maturity Date, into such number of shares (or a sub-class thereof) issued by the Company in the Financing, equal to the outstanding Investment Amount divided by the Voluntary Conversion PPS. This convertible promissory note and accrued interest was repaid on April 29, 2019.		-		500
Convertible promissory note totaling $500,000 due December 31, 2018, interest payable at 9% per annum; secured by all assets of the company; principal and accrued interest convertible into common stock at either the price per share equal to the average closing price of the Company’s Common Stock on the OTC Markets for the five consecutive trading days prior to the delivery of a Notice of Conversion (“Optional Conversion”) or price per share equal to 75% of the price of the Company’s next bona fide sale of its preferred stock or Common Stock in excess of $4,000,000 in gross proceeds, in one transaction or a series of related transactions, which offering definitively sets a price per share of the Company’s Common Stock or preferred stock and enables the Company to list its common stock on a national securities exchange; accrued interest to be paid quarterly beginning September 30, 2018. In 2019, the noteholder of this convertible promissory note entered into a debt conversion agreement to convert this convertible promissory note plus accrued interest into common stock shares of the Company at a $1.85 conversion price.		-		500

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Convertible promissory notes totaling $575,000 due June 27, 2019, interest payable at 9% per annum; unsecured; principal and accrued interest convertible into common stock at either the price per share equal to the average closing price of the Company’s Common Stock on the OTC Markets for the five consecutive trading days prior to the delivery of a Notice of Conversion (“Optional Conversion”) or price per share equal to 75% of the price of the Company’s next bona fide sale of its preferred stock or Common Stock in excess of $4,000,000 in gross proceeds, in one transaction or a series of related transactions, which offering definitively sets a price per share of the Company’s Common Stock or preferred stock and enables the Company to list its common stock on a national securities exchange; accrued interest to be paid quarterly beginning December 31, 2018. $575,000 convertible promissory notes due June 27, 2019 plus accrued interest and penalties of $78,034 have been converted into 353,221 common stock shares of the Company in 2019.		-		575
Convertible promissory notes totaling $2,000,000 due October 31, 2019, interest payable at 9% per annum; unsecured; principal and accrued interest convertible into common stock at either the price per share equal to the average closing price of the Company’s Common Stock on the OTC Markets for the five consecutive trading days prior to the delivery of a Notice of Conversion (“Optional Conversion”) or price per share equal to 75% of the price of the Company’s next bona fide sale of its preferred stock or Common Stock in excess of $4,000,000 in gross proceeds, in one transaction or a series of related transactions, which offering definitively sets a price per share of the Company’s Common Stock or preferred stock and enables the Company to list its common stock on a national securities exchange; accrued interest to be paid quarterly beginning December 31, 2018, which has not yet been paid. In 2019, the noteholder of this convertible promissory note entered into a debt conversion agreement to convert this convertible promissory note plus accrued interest into common stock shares of the Company at a $1.85 conversion price.		-		575
		550		5,575
Unamortized discount		-		(333	)
Current portion of convertible promissory notes		550		5,242
Convertible promissory notes, less current portion	$	-	$	-

During the three and nine month periods ended September 30, 2019, the Company incurred $0 and $1.1 million, respectively, amortization of discount. Interest expense for the three and nine month periods ended September 30, 2019 was $0.01 million and $0.1 million, respectively. During the three and nine month period ended September 30, 2018, the Company incurred $0.4 million and $1.3 million, respectively, amortization of discount. Interest expense for the three and nine month periods ended September 30, 2018 was $0.09 million and $0.2 million, respectively.

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NOTE 10 – DERIVATIVE LIABILITY

The Company evaluates its convertible instruments, options, warrants or other contracts, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instruments, the instrument is marked to fair value at the conversion date then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.

The following table summarizes fair value measurements by level at September 30, 2019 for assets and liabilities measured at fair value on a recurring basis:

(Dollars in thousands)		Total				Level 1				Level 2				Level 3
Fair value of Derivative Liability		$	147			$	-			$	-			$	147

The following table summarizes fair value measurements by level at December 31, 2018 for assets and liabilities measured at fair value on a recurring basis:

(Dollars in thousands)		Total				Level 1				Level 2				Level 3
Fair value of Derivative Liability		$	618			$	-			$	-			$	618

The Company has issued convertible promissory notes during 2018 and 2017. The convertible notes require us to record the value of the conversion feature as a liability, at fair value, pursuant to ASC 815, including provisions in the notes that protect the holders from declines in the Company’s stock price, which is considered outside the control of the Company. The derivative liabilities are marked-to-market each reporting period and changes in fair value are recorded as a non-operating gain or loss in our statement of operations, until they are completely settled. The fair value of the conversion feature is determined each reporting period using the Black-Scholes option pricing model and is affected by changes in inputs to that model including our stock price, expected stock price volatility, dividends, interest rates and expected term. The assumptions used in valuing the derivative liability during 2019 were as follows:

Significant assumptions:
Risk-free interest rate at grant date	1.55	%
Expected stock price volatility	77.52	%
Expected dividend payout	-
Expected option life (in years)	1
Expected forfeiture rate	0

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The following table presents a reconciliation of the derivative liability and contingent stock consideration measured at fair value on a recurring basis from December 31, 2018 to September 30, 2019:

(Dollars in thousands)	Fair value of derivative liabilities
Balance at December 31, 2018	$	618
Gain on change in fair value included in earnings		(471	)
Balance at September 30, 2019	$	147

NOTE 11 – STOCK BASED AWARDS

On December 29, 2017 (“Effective Date”), the Company adopted the CURE Pharmaceutical Holding Corp. 2017 Equity Incentive Plan (the “Plan”), pursuant to which an aggregate of 5,000,000 shares of the common stock of the Company are available for grant. The Board of Directors have determined that it is in the best interests of the Company and its stockholders to provide an additional incentive for certain employees, including executive officers, and non-employee members of the Board of Directors of the Company by granting to them awards with respect to the common stock of the Company pursuant to the Plan. The Plan seeks to achieve this purpose by providing for awards in the form of Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards (“Awards”). The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date.

The Company issued 1,170,000 Nonstatutory Stock Options (“NSO”) to employees, including executive officers, and non-employee members of the Board of Directors of the Company during the nine months period ended September 30, 2019. The Company did not issue any Restricted Common Stock (“RCS”), or Incentive Stock Options (“ISO”) to any employees, including executive officers, non-employee members of the Board of Directors of the Company, members of the Advisory Board Committee and consultants during the ninr months period ended September 30, 2019. Vesting periods for awarded RCS, NSO and ISO’s range from immediate to quarterly over a 4 year period. For NSO’s and ISO awarded, the term to exercise their NSO or ISO is 10 years.

Stock Options

The Company’s stock option activity was as follows:

	Options			Weighted Average Exercise Price		Weighted Average Contractual Remaining Life
Outstanding, December 31, 2018		2,313,050		$	0.79		9.27
Granted		1,170,000		$	3.62		9.59
Exercised		-			-		-
Forfeited/Expired		(89,544	)	$	0.74		-
Outstanding, September 30, 2019		3,393,506		$	1.77		8.91
Exercisable at September 30, 2019		1,481,391		$	1.22		8.72

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

3,393,506

8.91

1.77

1,481,391

1.22

3,393,506

8.91

1.77

1,481,391

1.22

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The aggregate intrinsic value of options outstanding and exercisable at September 30, 2019 was $0.01 million.

The aggregate grant date fair value of options granted during the nine months ended September 30, 2019 and year ended December 31, 2018 amounted to $4 million and $1.5 million, respectively. Compensation expense related to stock options for the three and nine months periods ended September 30, 2019 was $0.4 million and $1 million, respectively. Compensation expense related to stock options for the three and nine months periods ended September 30, 2018 was $0.08 million and $0.4 million, respectively.

As of September 30, 2019, the total unrecognized fair value compensation cost related to unvested stock options was $3.9 million, which is to be recognized over a remaining weighted average period of approximately 9.07 years.

The weighted-average fair value of options granted during the nine months ended September 30, 2019 and year ended December 31, 2018, 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:

	September 30, 2019			December 31, 2018
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		1.55	%		2.51	%
Expected stock price volatility		77.52	%		156.15	%
Expected dividend payout		-			-
Expected option life (in years)		10			10
Expected forfeiture rate		0	%		0	%

Restricted Stock

The Company’s restricted stock activity was as follows:

Compensation expense related to restricted shares for the three and nine months periods ended September 30, 2019 was $0.1 million and $0.4 million, respectively. Compensation expense related to restricted shares for the three and nine months periods ended September 30, 2018 was $0.02 million and $0.2 million, respectively. Information relating to non-vested restricted award shares is as follows:

	Restricted Stock Shares			Weighted Average Grant Date Fair Value
Non-vested, December 31, 2018		317,708			1.44
Granted		-			-
Vested		(265,625	)		1.50
Forfeited/Expired		-			-
Non-vested, September 30, 2019		52,083			1.17

NOTE 12 – WARRANT AGREEMENTS

On February 13, 2019, the Company issued 657,655 warrants at a fair market value of $1.8 million and with an exercise price of $2.31 per share in connection with the conversion of $1.3 million convertible promissory notes. The Company also issued 99,476 warrants at a fair market value of $0.3 million and with an exercise price of $2.31 per share in connection with the broker fees earned from the conversion of those convertible promissory notes.

On February 15, 2019, the Company issued 312,500 warrants at a fair market value of $0.9 million and with an exercise price of $2.00 per share in connection with the conversion of $500,000 convertible promissory notes.

On February 15, 2019, the Company issued 295,879 warrants at a fair market value of $0.8 million and with an exercise price of $2.31 per share in connection with the conversion of $1,000,000 convertible promissory notes.

On May 10, 2019, the Company issued 52,879 warrants at a fair market value of $0.1 million and with an exercise price of $5.01 per share in connection with an engagement agreement with a licensed brokerage company for $1,745,000 of funds raised.

On May 10, 2019, the Company issued 52,879 warrants at a fair market value of $0.1 million and with an exercise price of $6.00 per share in connection with eight stock purchase agreements with accredited investors totaling $1,745,000.

On May 14, 2019, in connection with the acquisition of CHI, the Company issued warrants to purchase up to 8,018,071 shares of the Company’s common stock at an exercise price of $5.01. The total number of shares to vest is subject to certain revenue milestones earned during the 3^rd and 4^th years post acquisition period and the warrant expires on May 14, 2024. The fair value of the warrants, assuming full vesting of all shares, was $0.005 million and is used in the calculation of the acquisition price of CHI.

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

The Company’s warrant activity was as follows:

	Warrants			Weighted Average Exercise Price		Weighted Average Contractual Remaining Life
Outstanding, December 31, 2018		5,340,751		$	2.20		3.80
Granted		9,489,340		$	4.62		4.35
Exercised		(163,573	)	$	1.62		-
Forfeited/Expired		-		$	-		-
Outstanding, September 30, 2019		14,666,518		$	3.70		3.84
Exercisable at September 30, 2019		6,648,446		$	2.27		2.90

Range of

Exercise Price

Number of Warrants

Weighted Average Remaining Contractual Life (years)

Weighted Average Exercise Price

Number of Warrants Exercisable

Weighted Average Exercise Price

1.00–$7.00

14,666,518

3.84

3.70

6,648,446

2.27

14,666,518

3.84

3.70

6,648,446

2.27

The weighted-average fair value of warrants granted to during the nine months ended September 30, 2019 and year ended December 31, 2018, 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:

	September 30, 2019			December 31, 2018
Significant assumptions (weighted-average):
Risk-free interest rate at grant date		1.55	%		2.51	%
Expected stock price volatility		77.52	%		156.15	%
Expected dividend payout		-			-
Expected option life (in years)		3			3
Expected forfeiture rate		0	%		0	%

NOTE 13 – BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY

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 $2,000,000 (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.

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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 $14,632,000 will be recorded as a liability as contingent share consideration.

The Company estimated the fair value of the preliminary purchase price for the acquisition of CHI is approximately $34,070,000. The Company acquired CHI through the issuance of shares of Common Stock of the Company with no cash consideration provided. The preliminary total purchase price was determined based on the following: i) Company’s closing price ($3.34) on May 14, 2019 for the Upfront Consideration Share; ii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over a 66 month performance period applied to the total number of contingent shares, which consists of the Clawback Shares, Achievement Shares and Earnout Shares, as determined based on the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished (“Adjusted Contingent Shares”); iii) the fair value of the Acquisition Warrant Shares based on using the Black-Scholes valuation using the a risk free rate of 2.4%, stock price volatility of 134.7%, no dividend payout, 1 year expected life, exercise price of $5.01 and an estimated stock price of $0.39 based on the end of the earn-out period, year 4 (as determine by using a Monte-Carlo simulation model); and iv) the Company estimated acquisition costs of $400,000, of which $290,000 were included in general and administrative expenses for the period ended September 30, 2019.

(Dollars in thousands)	Shares		Amount
Upfront Consideration Shares		5,700,000	$	19,038
Adjusted Contingent Shares		8,410,875		14,627
Acquisition Warrant Shares		8,018,071		5
Acquisition costs		-		400
Total purchase price		22,128,946	$	34,070

The Company estimated the fair value of acquired in-process research and development technology using the relief from royalty method. The fair values of acquired patents and developed technology were estimated using the multi-period excess earnings method. Under both the relief from royalty and multi-period excess earnings methods, the fair value models incorporate estimates of future cash flows, estimates of allocations of certain assets and cash flows, estimates of future growth rates, and management’s judgment regarding the applicable discount rates to use to discount such estimates of cash flows.

The Company allocated the acquisition consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value of the acquired tangible and identifiable intangible assets were determined based on inputs that are unobservable and significant to the overall fair value measurement. It is also based on estimates and assumptions made by management at the time of the acquisition. As such, this was classified as Level 3 fair value hierarchy measurements and disclosures.

The excess of the purchase price over the estimated fair values is assigned to goodwill.

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The following table summarizes the preliminary estimated fair values of the assets and liabilities assumed in the CHI acquisition, which is subject to change during measurement period:

(Dollars in thousands)
Net assets acquired:
Cash	$	8,487
Note receivable from CURE		2,000
Property, plant and equipment		83
Patents and development technology		650
In-process research and development		14,460
Goodwill		9,178
Accounts payable		(354	)
Payroll tax liabilities		(834	)
Net assets acquired		33,670
Acquisition costs		400
Net assets acquired and acquisition costs incurred	$	34,070

Information regarding identifiable intangible assets acquired in the CHI acquisition is presented below:

(Dollars in thousands)	Weighted-average Estimated useful life	Preliminary Estimated Asset Fair Value
Finite-lived intangible assets:
Patent and developed technology	11.0 years	$	650
Total finite-lived intangible assets acquired	11.0 years	$	650

Supplemental Pro Forma Information

The following unaudited supplemental pro forma financial information is based on our historical condensed consolidated financial statements and CHI’s historical condensed consolidated financial statements as adjusted to give effect to the May 14, 2019 acquisition of CHI’s. The unaudited supplemental pro forma financial information for the periods presented gives effect to the acquisition as if it had occurred on January 1, 2018.

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 income attributable to Cure Pharmaceuticals Holding, Inc., and net income attributable to CURE per common share data assuming CHI was acquired at the beginning of the 2018 fiscal year:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net revenues	$	31		$	88		$	214		$	350
Net loss		(14,590,578	)		(2,344,350	)		(24,739,485	)		(4,200,631	)

Net loss attributable to Cure per common share, basic	$	(0.36	)	$	(0.08	)	$	(0.67	)		(0.14	)
Net loss attributable to Cure per common share, diluted		(0.36	)		(0.08	)		(0.67	)		(0.14	)

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Deconsolidation of Oak Therapeutics, Inc.

On April 15, 2019, the Company entered into a Termination and Release Agreement (“Agreement”) with Oak Therapeutics (“Oak”) to surrender all of its Oak shares to Oak and terminating any rights the Company might have to acquire additional shares or interest in Oak. The parties terminated all contractual relationships between them, whether written or verbal, express or implied. All license or other rights previously granted by Oak to the Company or the Company to Oak were terminated, including all licenses or rights of any kind granted by the Company. As of the date of deconsolidation, Oak has a negative net assets, which resulted in a gain of $0.08 million.

In the Company’s condensed consolidated financial statements for the nine months period ended September 30, 2019, the Company’s investment in Oak has been written off and was reflected at a value of zero.

The following information summarizes the results of operations of Oak for the period January 1, 2019 through April 15, 2019, the date of deconsolidation:

(Dollars in thousands)	January 1, 2019 through April 15, 2019
Revenue	$	-
Net loss	$	29

NOTE 14 – STOCKHOLDERS’ EQUITY

Authorized Stock

The Company has authorized to issue is 150,000,000 common shares with a par value of $0.001 per share.

As of September 30, 2019 and December 31, 2018, there were 37,949,460 and 26,784,019 shares of the Company’s common stock issued and outstanding, respectively.

Common Share Issuances

On December 14, 2018, the Company entered into an Advisory Consulting Agreement (“Agreement”). Per the terms of the Agreement, the Company is to issue 50,000 common stock shares of the Company that vest 30 days from December 14, 2018 and an additional 250,000 common stock shares of the Company that vest monthly over 24 months. On January 14, 2019, the Company issued 50,000 common stock shares of the Company at $1.84 per share per the terms of this Agreement. From February 14, 2019 through May 14, 2019, the Company issued a total of 41,666 common stock shares of the Company at prices per share ranging from $1.52 to $3.85 per the terms of this Agreement.

On December 14, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with an accredited investor for the purchase of 833,333 shares of common stock of the Company (the “Shares” or “Securities”) at $1.20 per share (the “Share Price”) for a total purchase price of One Million Dollars ($1,000,000) (the “Purchase Price”). Per the terms of the SPA, the Company and the investor agreed to multiple Closings and Closing Dates (as hereinafter defined): (1) a Closing of $250,000 five (5) business days after the Closing Date; (2) a Closing of $250,000 ten (10) business days after the Closing Date; (3) a Closing of $250,000 thirty (30) business days after the Closing Date; and (4) a Closing $250,000 ninety (60) business days after the Closing Date. Each of the aforementioned being a Closing and the dates of each Closing being a Closing Date. The investor funded $250,000 on December 26, 2018 and the Company issued 208,333 common stock shares. The investor funded another $250,000 on December 31, 2018 and the Company issued another 208,333 common stock shares. The investor funded $250,000 on January 22, 2019 and another $250,000 on February 25, 2019 and the Company issued 208,333 common stock shares and 208,334 common stock shares, respectively. In addition, per the SPA, the investor had an option to purchase an additional 833,333 common stock shares of the Company at the Share Price of $1.20 for a period of 90 days subsequent to the last funds received from the multiple closings (“Option”). On May 21, 2019, the investor funded $250,000 and the Company issued 208,333 common stock shares at the Share Price relating to the investor’s Option.

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On January 1, 2019, the Company issued 13,827 common stock shares at $2.26 per share for investor relations consulting services to be performed over a nine-month period. The total value of this issuance was $31,249

On February 1, 2019, the Company amended two convertible promissory notes totaling $600,000 to extend the maturity dates to February 28, 2019. For extending the maturity date, the Company will issue a total of 30,000 common stock shares of the Company at $2.32 price per share. The total value of this issuance was $69,600. The Company considered if the amendment of the convertible promissory note was a debt modification or extinguishment based on the guidelines of ASC 470-50, and concluded that the amendments of the convertible promissory notes were debt modifications. The Company recorded the fair market value of the 30,000 common stock shares issued as a debt discount that has been fully amortized as of March 31, 2019.

On February 13, 2019, the Company entered into Debt Conversion Agreements (“Agreements”) with thirty convertible promissory note holders totaling $1,325,000 plus accrued interest and penalties of $213,859 that were converted into 832,365 common stock shares of the Company with a conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock on the OTC Markets for five consecutive trading days. As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $812,241. In connection with the conversion of the convertible promissory notes, the Company will issue 657,655 warrants that were priced at $2.31 price per share.

On February 14, 2019, the Company entered into a Debt Conversion Agreement (“Agreement”), where $250,000 (Two Hundred Fifty Thousand Dollars) of $650,000 (Nine Hundred Fifty Thousand Dollars) of the Outstanding Balance under the Senior Secured Promissory Note effective April 27, 2017 which was replaced with an Amended and Restated Senior Secured Promissory Note dated August 27, 2017 (the “Note”) shall be converted into 135,135 (One Hundred Thirty-Five Thousand, One Hundred Thirty-Five) shares of Common Stock of the Company (the “Conversion Shares”) at a conversion price of $1.85 per share (a discounted rate calculated as an approximation based on 20% discount on 5 days volume weighted average price of the market rate). As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $201,351.

On February 14, 2019, the Company entered into a First Amendment to Amended and Restated Senior Secured Promissory Note, that amends the Senior Secured Promissory Note effective April 27, 2017 which was replaced with an Amended and Restated Senior Secured Promissory Note effective August 27, 2017 (“Amended Agreement”) with the Note Holder (“Holder”). The Company and the Holder have agreed that the Maturity Date shall be extended to February 27, 2019 in exchange for 75,000 common stock shares of the Company at a price per share of $3.35. The total value of this issuance was $251,250. The Company considered if the amendment of the convertible promissory note was a debt modification or extinguishment based on the guidelines of ASC 470-50, and concluded that the amendments of the convertible promissory notes were debt modifications. The Company recorded the fair market value of the 75,000 common stock shares issued as a debt discount that has been fully amortized as of March 31, 2019.

On February 15, 2019, the Company entered into a Debt Conversion Agreement (“Agreement”) to convert $400,000 of convertible promissory notes plus accrued interest of $71,342 into 254,779 common stock shares of the Company with a conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock on the OTC Markets for five consecutive trading days. As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $630,238.

On February 15, 2019, the Company entered into a Debt Conversion Agreement (“Agreement”) with a convertible promissory note holder totaling $1,000,000 plus accrued interest of $94,750 that were converted into 591,757 common stock shares of the Company with a conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock on the OTC Markets for five consecutive trading days. As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $860,087. In connection with the conversion of the convertible promissory notes, the Company will issue 295,879 warrants that were priced at $2.31 price per share.

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On February 15, 2019, the Company entered into a Debt Conversion Agreement (“Agreement”) with a convertible promissory note holder totaling $1,575,000 plus accrued interest of $18,406 that were converted into 861,301 common stock shares of the Company with a conversion price per share $1.85 which was based on a 20% discount to the average closing price of the Company’s common stock on the OTC Markets for five consecutive trading days. As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $745,929.

On February 19, 2019, the Company entered into a Debt Conversion Agreement (“Agreement”) with a convertible promissory note holder totaling $425,000 plus accrued interest of $425 that were converted into 168,819 common stock shares of the Company with a conversion price per share $2.52 which was based on a 20% discount to the average closing price of the Company’s common stock on the OTC Markets for five consecutive trading days.

On February 19, 2019, the Company entered into a Consulting Agreement (“Agreement”) with a Company. Per the terms of the Agreement, the Company is to issue 25,000 common stock shares of the Company for providing investor relations services, where 12,500 common stock shares of the Company are due immediately and the remaining 12,500 common stock shares of the Company is due June 19, 2019. On February 19, 2019, the Company issued 250,000 common stock shares of the Company at $3.39 per share. As of our filing of our Form 10-Q for the quarterly period ended September 30, 2019, the Company has not yet issued the 12,500 common stock shares due as of June 19, 2019 and has recorded a stock payable of $52,375.

On February 25, 2019, the Company issued 46,875 and 83,333 common stock shares of the Company at $0.74 and $1.81 per share, respectively, relating to restricted stock issued from the Company’s 2017 Equity Incentive Plan.

On April 16, 2019, the Company issued a total of 25,675 common stock shares at $2.31 per share from the cashless exercise of 88,769 warrants held by 5 warrant holders. The share price on the date of exercise was $3.25 per share.

On April 29, 2019, the Company issued 45,000 common stock shares at $1.52 per share in regard to a Consulting Agreement (“Agreement”), dated January 4, 2019, with an individual for providing financial and investor relations services.

On April 29, 2019 the Company issued 50,000 common stock shares at $1.84 per share in regard to an Advisory Consulting Agreement (“Agreement”), dated January 15, 2019, with an individual for providing financial advisory and business development services.

On April 29, 2019 the Company issued 60,000 common stock shares at $3.78 per share in regard to a Media Advertising Agreement (“Agreement”), dated February 26, 2019, with a company for providing investor relations and media coverage services.

On May 14, 2019, in connection with the Company’s acquisition of CHI (See Note 13), the Company issued 5,700,000 common stock shares as upfront consideration and estimated as of the Closing Date that approximately 8,410,875 common stock shares, of which 7,128,913 common stock shares are held in escrow, may be issued and released over a period of 5 months to 5 years related potential post-closing claims relating to, among other things, breaches of representations, warranties and covenants contained in the Merger Agreement and the future earn-out and achievement of a variety of milestones as defined in the Merger Agreement.

During the three months period ending September 30, 2019, the Company issued 191,476 common stock shares at price per shares ranging from $2.25 to $5.05 in regard to various consulting and advisory services.

During the three months period ending September 30, 2019, the Company issued 285,723 common stock shares of the Company at a conversion prices per share of $1.85 in regard to a Debt Conversion Agreement (“Agreement”) with a convertible promissory note holder totaling $500,000 plus accrued interest of $28,588. As a result of the lower conversion price compared to the fair market value of the common stock on the date of issuance, the Company recorded a loss on conversion of $409,672. In connection with the conversion of the convertible promissory notes, the Company issued 312,500 warrants that were priced at $2.00 price per share.

During the three months period ending September 30, 2019, the Company issued 34,876 common stock shares at a price per share of $1.85 in regard to a Stock Purchase Agreement (“SPA”) with an individual (“Landlord”) for the cancellation of two months rent and overages for property tax and general liability insurance.

During the three months period ending September 30, 2019, the Company issued 528,780 common stock shares at a price per share of $3.30 in regard to a Securities Purchase Agreement (the “SPA”) with several accredited investors for a total purchase price of $1,745,000.

During the three months period ending September 30, 2019, the Company issued 324,791 common stock shares of the Company at prices per share ranging from $0.74 and $1.81 in regard to restricted stock issued from the Company’s 2017 Equity Incentive Plan.

During the three months period ending September 30, 2019, the Company issued a total of 66,753 common stock shares at $1.00 per share from the cashless exercise of 14,324 warrants and cash exercise of 60,480 warrants. The share price on the date of exercise was $4.11 per share.

During the three months period ending September 30, 2019, the Company issued 30,000 common stock shares at a price per share of $1.42 in regard to a Patent Purchase Agreement (“Patent Agreement”) with an individual (“Assignor”) who is the owner of all rights, title and interest in and to certain Assigned Patents to purchase the rights to the Assigned Patents.

Stock Payable

During 2018, convertible promissory notes and accrued interests totaling $0.6 million was converted into 447,288 shares of common stock of the Company at prices ranging from $0.886 to $2.26 per share. As of our filing of our Form 10-Q for the quarterly period ended September 30, 2019, the Company has not yet issued these common stock shares and has recorded a stock payable.

During the three months period ending September 30, 2019, the Company entered into a Consulting Agreement (“Agreement”) with an individual. Per the terms of the Agreement, the Company is to issue 40,000 common stock shares of the Company at $3.93 per share for completing phase I and II of the Agreement. As of our filing of our Form 10-Q for the quarterly period ended September 30, 2019, the Company has not yet issued these common stock shares and has recorded a stock payable of $157,200.

During the three months period ending September 30, 2019, the Company issued 25,000 common stock shares at a price per share of $3.65 in regard to a Promissory Note (“Note”) with a company (“Lender”). Per the terms of the Note, the Company’s next bona fide sale or issuance of its preferred or common stock shares equal to or in excess of $2,000,000 in gross proceeds, in one transaction or a series of related transactions shall issue to the Lender 25,000 common stock shares of the Company. As of our filing of our Form 10-Q for the quarterly period ended September 30, 2019, the Company has not yet issued these common stock shares and has recorded a stock payable of $91,250.

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NOTE 15 - 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.

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.

Total rent expense for the three and nine months periods ended September 30, 2019 was $0.06 million and $0.2 million respectively. Total rent expense for the three and nine months periods ended September 30, 2018 was $0.06 million and $0.2 million, respectively.

NOTE 16 – SUBSEQUENT EVENTS

On October 14, 2019, the Company issued 10,417 common stock shares at a price per share of $3.73 to an individual in regard to an Advisory Consulting Agreement ("Agreement") originally dated December 14, 2018. Per the terms of the Agreement, the Company is to issue 50,000 common stock shares of the Company that vest 30 days from December 14, 2018 and an additional 250,000 common stock shares of the Company that vest monthly over 24 months.

On November 1, 2019, the Company purchased a Convertible Loan (“Loan”) with a company (“Borrower”) in the amount of $0.2 million. The Borrower shall accrue interest on the Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Loan is repaid or at the maturity date of October 31, 2021 (“Maturity Date”). In the event of a request for conversion by the Company (“Request for Conversion”) or at the end of the Maturity Date, the outstanding amount of the Loan and any unpaid accrued interest shall be converted into shares of the Borrower (“Shares”) based on a price per share on a post money valuation of $10.9 million. In the event the Borrower 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 Borrower 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.

On November 12, 2019, the Company purchased a $0.2 million convertible promissory note (the “Convertible Promissory Note”) issued by Coeptis Pharnaceuticals, Inc., a Delaware corporation a privately held biopharmaceutical company engaged in the acquisition, development and commercialization of pharmaceutical products (“Coeptis”). The Convertible Promissory Note is due June 15, 2020, pays interest at the rate of 9% per annum and gives the holder the right, at any time from the date thereof, to convert the Convertible Promissory Note into shares of Common Stock of Coeptis at a price per share equal to $2.60 (the “Optional Conversion Price”) or the share price set by the latest qualified financing, whichever is less.

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

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

BUSINESS

Overview

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 business strategy is to develop products using our proprietary technology, which may include clinical development and regulatory approval, and license the product rights to partners responsible for marketing, sales and distribution, while retaining exclusive manufacturing rights. We operate in a 25,000 square foot cGMP manufacturing plant in Oxnard, CA.

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 registrant’s common stock executed a written consent to change registrant’s name from Makkanotti Group Corp. to CURE Pharmaceutical Holding Corp. The Certificate of Amendment to Articles of Incorporation was filed with the State of Nevada on November 30, 2016.

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

As a result of the Share Exchange, CURE Pharmaceutical became a wholly owned subsidiary of the Company, and the CURE 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.

Acquisitions

On May 14, 2019 (the “Closing Date”), we, 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 Chemistry Holdings, Inc., a Delaware corporation (“Chemistry Holdings” or “CHI”). As agreed in the Merger Agreement, we acquired Chemistry Holdings pursuant to a merger of the Merger Sub with and into Chemistry Holdings (the “Merger”). Pursuant to the Merger, Chemistry Holdings became a wholly-owned subsidiary of ours and the stockholders of Chemistry Holdings received shares of our common stock. 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.

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The purchase price for CHI was estimated at $34,069,942 and was paid for through the issuance of 5,700,000 shares of common stock as upfront consideration of $19,038,000. We also estimated as of the Closing Date that 8,410,875 common stock shares, of which 7,128,913 common stock shares are held in escrow, may be issued and released over a period of 5 months to 5 years related potential post-closing claims relating to, among other things, breaches of representations, warranties and covenants contained in the Merger Agreement and the future earn-out and achievement of a variety of milestones as defined in the Merger Agreement. Additionally, we issued a warrant 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. Due to the nature of the contingent shares being issued or released from escrow in the future, and the uncertain vesting of the warrant shares, we determined the fair value of those shares to be $14,632,000 and we recorded the fair value as contingent stock consideration. No cash was provided as consideration.

In exchange for the purchase, we received $8,487,489 in cash, a $2,000,000 note due from us that was forgiven, $82,700 in equipment, and assumed $1,188,666 in payroll tax and acquisition liabilities. Additionally, we received a patent, developed technology and in-process research and development which we estimated the fair value to be $15,110,000.

Nature of Business

We currently have two commercial products and several development programs underway:

CUREfilm Sleep –Launched with ID Life LLC

This is a melatonin-containing sleep aid CUREfilm ODF that is manufactured and sold as a dietary supplement under the brand name “ID Life Sleep Strips”. Our non-exclusive distributor is ID Life, a health and wellness company focused on customized nutrition and selling within the United States. We are seeking additional distributors.

CUREfilm Sleep – Launched with Incubrands

This novel sleep aid containing a dietary cannabinoid CUREfilm ODF was launched Q3 2018 by Incubrands under the brand name “Sleep Stripzzz”. We are seeking additional distributors.

CUREfilm Blue

We are developing a 25mg and 50 mg sildenafil CUREfilm ODF for the treatment of erectile dysfunction. We have completed our pre-IND meeting with the FDA, confirming a 505(b)(2) regulatory path.

CUREfilm D

We are developing a 50,000IU, once per week, Vitamin D3 CUREfilm ODF for oral administration. On April 30, 2019, we entered into an exclusive 5-year supply agreement with Meroven Pharmaceuticals covering the United States and the MENA region: Iraq, Saudi Arabia, Yemen, Syria, UAE, Jordan, Palestine, Lebanon, Oman, Kuwait, Qatar, Bahrain, Sudan, Egypt, Tunisia, Morocco, Algeria and Africa.

CUREfilm and CUREpod Canna

We are developing several cannabinoid products using both our CUREfilm and CUREpod dosage forms as dietary supplements and pharmaceutical products. We entered into a development agreement with Canopy Growth Corporation on June 17, 2019 to develop a low dose hemp CUREfilm. Our pharmaceutical cannabinoid program is at the preclinical stage.

CUREfilm BCP

We are developing a dietary cannabinoid ODF using the cannabinoid beta-caryophyllene targeting the CB2 receptor. We are in early feasibility stages of development of this product and have not yet signed with a distribution partner.

CURE 5200

We are developing a novel CUREfilm ODF substrate with an undisclosed partner. On June 4, 2018, we entered into a development agreement with an undisclosed partner for product development feasibility of CURE 5200. In order to protect CURE’s and our partner’s competitive advantage, no details of the product have been disclosed at this stage.

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CUREfilm and CUREpod Canna

CUREfilm BCP

CURE 5200

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 55 NMEs approved 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.

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 FDA. The number of 2017 NDA approvals that used the 505(b)(2) regulatory pathway rose dramatically from 45 approvals in each of the last two years to an all-time high of 63 in 2017. 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.

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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 ODF – 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

We are specifically investing in the development of pharmaceutical-grade cannabinoid products consistent with FDA and DEA regulations, using active ingredients that are manufactured under appropriate chemistry, manufacturing and controls. 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 have a licensing rights agreement with Canopy Growth Corporation (“Canopy”) for the global commercialization of ODFs containing cannabinoids, under which Canopy is granted non-exclusive in the United States and exclusive rights in the rest of the world excluding Asia. 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 Agency (DEA) to manufacture schedule 1 controlled substances at the Oxnard facility.

Nutraceuticals

Increasingly, patients are 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 nutraceutical 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. We therefore focus on evidence-based nutraceuticals that are differentiated by using proprietary and/or proven active ingredients that we formulate for greater stability, overall quality and increased bioavailability. Nutraceutical products do not require FDA approval but do require following all GMPs. Thus, they are less costly and faster to launch in the marketplace. While manufacturing fees for nutraceuticals have lower margins than prescription drugs, they provide us with short term revenue opportunities.

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 Chemistry Holdings, Inc., a formulation technology company that is developing innovative oral delivery systems for nutraceutical and pharmaceutical products. This acquisition allows us to address the increased demand for solid, chewable or dissolvable products for immediate and controlled-release, oral delivery of active ingredients and particularly poorly soluble active pharmaceutical ingredients such as cannabinoids.

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Our expanded oral formulation and delivery platform, CUREform^TM combines the right formulation with the right dosage form. In addition to novel chewable dosage forms, the acquisition gives us advanced encapsulation capabilities 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 ODF, having launched the first therapeutic ODF product, Chloraseptic® relief strips in 2003. ODF 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 oral ODF, 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 ODF 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.

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

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

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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 foot print, 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 ODF 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 ODF
	·	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 (ODF) 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.

	·	Loading of multiple active ingredients on one dose unit
	·	Can 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)
	·	Can achieve desired performance characteristics while maintaining pleasant feeling in the mouth (e.g. soft, plush feeling with pliable film)
	·	Can achieve desired performance characteristics while formulating active ingredients susceptible to degradation from low pH environments, light, heat, moisture, and oxygen
	·	Multiple and unique ways to mask the bitter, metallic or salty taste of an active ingredient

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 it proprietary 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 thirteen (13) issued U.S. patents, ten (10) pending applications in the United States, one (1) pending application in China and one (1) international Patent Cooperation Treaty (“PCT”) patent application. These patents and applications relate, among others, to (1) a method and apparatus for minimizing heat, moisture, and shear damage to medicant incorporated into an edible film, (2) edible films for administration of medicaments to animals, (3) methods for modulating dissolution, bioavailability, bioequivalence, (4) pharmaceutical composition and method of manufacturing, (5) pharmaceutical composition with ionically crosslinked polymer encapsulation of active ingredient, (6) multi-layered high dosage dissolvable film for oral administration, (7) thin films with high load of active ingredient, (8) high dosage dissolvable films for oral administration, (9) methods and composition for improving sleep, (10) oral dissolvable film that includes plant extracts and controlled substances, (11) rapidly disintegrating film matrix for moisture sensitive compounds, and (12) protein-polysaccharide macromolecular complexes encapsulating ethyl alcohol.

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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 2038, 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 applied for nine (6) trademark and logomark registrations, of which five (5) have been granted.

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 Acquestive 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.

Environmental Compliance

Our research and development activities involve the controlled use of hazardous materials and chemicals. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specific waste products. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of bio-hazardous materials. The cost of compliance with these laws and regulations could be significant and may adversely affect capital expenditures to the extent we are required to procure expensive capital equipment to meet regulatory requirements. At this time, we believe that we are in compliance with environmental regulations applicable to our research and development and manufacturing facility located in Oxnard, California.

Employees

As of the date of this filing, we have 16 full-time employees. None of our employees are covered by collective bargaining agreements. We consider our relations with our employees to be good.

RESULTS OF OPERATIONS

Revenues for the Three Months and Nine Ended September 30, 2019 and 2018

Revenues for the three and nine months ended September 30, 2019 were $0.1 million and $0.3 million, respectively as compared to $0.09 million and $0.4 million, revenues for the three and nine months ended September 30, 2018, respectively. The increase in the three months ended September 30, 2019 compared with the same period in 2018 is mainly due to combination of an increase in research and development income relating to a development agreement between the Company and Therapix Biosciences for work completed, offset by a decrease in product sales relating to ID Life Sleep Strips. The decrease in the nine months ended September 30, 2019 compared to the same period in 2018 is primarily due to the decrease in product sales relating to ID Life Sleep Strips. However, the Company experienced an increase in research and development income from (i) successfully completing phase I of our research and development agreement with Canopy Growth Corporation (“Canopy”) for the development of a CBD OTF, (ii) completion of Isagenix for the development of CURE 5209 during the first half of 2019 and (iii) completion of phase I and II for the development of a Palmitoylethanolamine (PEA) & Dronabinol CUREfilm ODF for buccal administration. . In addition, the Company received a non-refundable and non-creditable development fee to develop a low dose hemp CUREfilm for Canopy.

Cost of Goods Sold

Cost of goods sold was $0.02 million in the three and nine months ended September 30, 2019, compared to $0.04 million and $0.2 million in the three and nine months ended September 30, 2018, respectively. Cost of goods sold decreased during the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018. The decrease was primarily due to the Company generating product sales from ID Life during the three months ended September 30, 2019 as where the Company did incur revenues during the three and nine months ended September 30, 2018.

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Research and Development Expenses

For the three and nine months ended September 30, 2019, research and development expenses increased to $0.5 million and $1.5 million compared to $0.3 million and $1.1 million for the three and nine months ended September 30, 2018, respectively. The increase in research and development expenses is mainly due to the Company’s continuation of the development of CUREfilm Blue, CUREfilm D, CUREfilm Beta-Caryophyllene and CUREfilm and CUREpod Canna products during the three and nine months ended September 30, 2019. In addition, we hired three new scientists during the three and nine months ended September 30, 2019 that resulted in an increase our research and development expenses during these periods.

Selling, General and Administrative Expenses

Our expenses for the three and nine months ended September 30, 2019 are summarized as follows in comparison to our expenses for the three and nine months ended September 30, 2018.

	Three Months Ended				Nine Months Ended
(Dollars in thousands)	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018

Consulting	$	578	$	1,598	$	3,055	$	2,559
Salaries and wages		264		220		758		816
Selling, general and administrative		504		238		1,198		795
Professional and investor relations		334		288		1,156		766
Noncash compensation		537		100		1,426		561
Total operating expenses	$	2,217	$	2,444	$	7,593	$	5,497

Consulting

Consulting expense decreased and increased to $0.6 million and $3 million, respectively, for the three and nine months ended September 30, 2019, respectively, as compared to $1.6 million and $2.6 million for the three and nine months ended September 30, 2018, respectively. The decrease during the three months ended September 30, 2019 compared to the same period in 2018 is mainly due to the decrease in fair value of warrants relating to advisory consulting services. The increase during the nine months ended September 30, 2019 was due to the Company increasing the number of consultants used during the nine months ended September 30, 2019 compared to the same period in 2018. 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 as well as the recording of the fair market value of warrants vested during the nine months ended September 30, 2019 for services performed.

Salaries and wages

Salaries and wages expense increased and decreased by approximately $0.04 million and $0.06 million, respectively, during the three and nine months ended September 30, 2019, respectively, as compared to the three and nine months ended September 30, 2018, respectively. The increase in salaries and wages during the three months ended September 30, 2019 was due to the Company hiring a new Chief Financial Officer in May 2019 where his salary was not present in the same period in 2018. The decrease in salaries and wages during the nine months ended September 30, 2019 compared to the same period in 2018 was due to the Company issuing restricted common stock to three employees of the Company in the 2018 period and as a result of the issuance, the Company recorded the fair market value of the restricted common stock as compensation to these employees. There was no such transaction in the same period in 2019.

Selling, General and Administrative

Selling, general and administrative expense increased by approximately $0.3 million and $0.4 million during the three and nine months ended September 30, 2019 as compared to the three and nine months ended September 30, 2018, respectively. The increase during the nine months ended September 30, 2019 was due to the following factors: (i) increase in our D&O insurance as the Company increased coverage by getting an excess D&O policy, (ii) increase in our sales and marketing efforts to promote the technology and Company and (iii) increase in the amortization expense relating to the fair value of patents acquired in the CHI acquisition during the nine months ended September 30, 2019 compared to the same period in 2018.

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Professional and Investor Relations

Professional and investor relations expenses increased by approximately $0.05 million and $0.4 million during the three and nine months ended September 30, 2019 as compared to the three and nine months ended September 30, 2018, respectively. This was due to the Company increasing our investor relation efforts to help increase awareness of our Company with potential new investors as well as to update our existing shareholder base. In addition, the Company increased our legal and accounting professional services during the three and nine months ended September 30, 2019 compared to the same period in 2018 as to assist the Company in strategic planning and advisory for potential business acquisitions, patent and technology acquisitions and general and corporate compliance services.

Non-cash Compensation

Non-cash compensation expense increased by approximately $0.4 million and $0.9 million during the three and nine months ended September 30, 2019 as compared the three and nine months ended September 30, 2018, respectively. This was primarily due to the Company recording the fair value of vested stock options and vested restricted stock issued from our 2017 Equity Incentive Plan during the three and nine months ended September 30, 2019. The fair values of the vested stock options and restricted stock during the three and nine months ended September 30, 2018 were less compared to fair values of the vested stock options and restricted stock in the same period in 2019 due to the increase in the strike prices offered in 2019 compared to 2018.

Change in Fair Value Contingent Stock Consideration

Change in fair value stock consideration decreased and increased by approximately $4.7 million and $3.9 million, respectively, during the three and nine months ended September 30, 2019 as compared to the same time period in 2018, respectively. This was primarily due to the classification of the contingent shares offered in the CHI acquisition as a liability on May 14, 2019. The contingent shares fair value as of September 30, 2019 was based on the decrease in probabilities for completing each milestone, lower volatility of the Company’s stock price, a lower closing stock price at September 30, 2019 compared to June 30, 2019 and less time to meet each milestone. As a result of these factors, the fair value of the contingent shares decreased from $23.2 million as of June 30, 2019 to $18.5 million as of September 30, 2019.

Other Expense

Other expense decreased and increased by approximately $2.3 million and $5 million, respectively, during the three and nine months ended September 30, 2019 as compared to the three and nine months ended September 30, 2018, respectively. This was mainly due to (i) recording of fair value of warrants issued relating to convertible promissory notes (ii) change in the warrant values relating to convertible promissory notes, (iii) a loss on conversion relating to convertible promissory notes of $3.7 million due to additional shares to be issued as a result of a lower conversion price compared to the fair market value at the date of issuance and (iv) an decrease in the change in fair value of derivative liabilities.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2019

Working Capital (Deficit)

(Dollars in thousands)	September 30, 2019			December 31, 2018
Current assets	$	7,953		$	1,588
Current liabilities		(12,020	)		(8,551	)
Working capital (deficit)	$	(4,067	)	$	(6,963	)

Working capital deficit as of September 30, 2019 was approximately $4.1 million, as compared to a working capital deficit of approximately $7 million as of December 31, 2018. The decrease in working capital deficit was primarily attributable to (i) an increase in cash of approximately $7.3 million due to the CHI acquisition and (ii) repayment of convertible promissory notes, loan and note payables of approximately of $1.9 million and (iii) contingent share considerations of approximately $9.9 million as well as approximately $9.6 million of convertible promissory notes converting to common stock shares of the Company.

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	For the Nine Months Ended
(Dollars in thousands)	September 30, 2019			September 30, 2018

Net cash used in operating activities	$	(6,306	)	$	(3,133	)
Net cash provided by (used in) investing activities		8,063			(123	)
Net cash provided by financing activities		4,000			3,450
Increase in cash	$	5,757		$	194

Net cash used in Operating Activities

Net cash used in operating activities was approximately $6.3 million during the nine months ended September 30, 2019. This was primarily due to the net loss of approximately $20.5 million, partially offset by (i) the amortization of the debt discount of approximately $ 1.3 million, (ii) stock based compensation of approximately $1.7 million, (iii) the fair value of stock issued for amending convertible notes of approximately $0.3 million, (iv) the fair value of vested stock options and restricted stock of approximately $1.4 million (v) fair value of warrant granted for commission expense of approximately $1.2 million, (vi) loss on conversion of convertible promissory notes of approximately $3.7 million, (vii) warrant expense from convertible promissory notes of approximately $2.2 million, (viii) the fair value of warrant granted for broker fee expense of approximately $0.4 million, (ix) depreciation and amortization of approximately $0.4 million, (x) change in derivative liability of approximately $0.5 million, (xi) deposits made for purchase of property plant and equipment of approximately $0.9 million and (xi) change in fair value of contingent share considerations of approximately $3.9 million.

Comparatively, net cash used in operating activities was approximately $3.1 million during the nine months ended September 30, 2018. This was primarily due to the net loss of approximately $9.1 million offset by (i) the amortization of the debt discount of approximately $1.6 million, (ii) the fair value of stock and warrants issued for services of approximately $1.2 million, (iii) change in derivative liability of approximately $0.4 million and (iv) stock based compensation of approximately $1.2 million.

Net cash used in Investing Activities

Net cash provided by investing activities during the nine months ended September 30, 2019 was due to (i) the purchase of an intangible asset for approximately $0.04 million, (ii) approximately $8.5 million from the acquisition of CHI and (iii) the purchase of property and equipment for approximately $0.4 million. Comparatively, net cash used in investing activities during the nine months ended September 30, 2018 was due to (i) the purchase of an intangible asset for approximately $0.07 million, and (ii) the purchase of property and equipment for approximately $0.05 million.

Net cash provided by Financing Activities

Net cash provided by financing activities of approximately $4 million during the nine months ended September 30, 2019 was primarily due to the approximately (i) $3.4 million received from the issuances of new convertible notes payable, (ii) approximately $2.5 million in proceeds from issuances of common stock and (iii) approximately $0.06 million in proceeds from exercise of warrants and was offset by approximately $2 million in repayments of convertible promissory notes, notes payable and loans payable. Correspondingly, during the nine months ended September 30, 2018, net cash provided by financing activities was approximately $3.4 million. This was primarily attributable to proceeds of approximately $3.6 million from the issuances of new convertible notes payable and $0.3 million in promissory notes which was offset by approximately $0.4 million in repayments of loans payable.

Liquidity and Capital Resources

	·	Its accumulated deficit of approximately $50 million,
	·	Its cash balance of $6.3 million, which includes the addition of approximately $7.3 million of net cash from the acquisition of CHI,
	·	Only $0.5 million of debt and no other obligations due in the next 12 months,
	·	Its continued progress towards increasing revenues from commercialization and the impact of increased manufacturing and related plant upgrades,
	·	Its research and development strategic plans, including the filing and maintenance of patents, and
	·	The forecasted hiring of personnel and other S,G&A costs.

Based on these considerations, the Company believes that its current cash reserves and its revenues shall be adequate to sustain operations over the next 12 months. If the Company does require additional funds, it may do so through the sale of common stock, combined with or without warrants, the sale of notes, and, to a lesser extent, equipment financing facilities and secured loans. However, we cannot be certain that we will be able to obtain such funds required for our operations at terms acceptable to us or at all.

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CRITICAL ACCOUNTING POLICIES

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

Impairment of Long-Lived Assets

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

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There was no impairment on our long-lived assets during the nine months ended September 30, 2019 and 2018.

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OFF-BALANCE SHEET ARRANGEMENTS

As of the date of this Quarterly Report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES

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

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

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

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

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

Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2019. Based on this assessment, management concluded that the Company did not maintain effective internal controls over financial reporting as a result of the identified material weakness in our internal control over financial reporting described below. In making this assessment, management used the framework set forth in the report entitled Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication and (v) monitoring.

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Identified Material Weakness

A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement or the financial statements will not be prevented or detected. Management identified the segregation of duties as a material weakness during its assessment of internal controls over financial reporting as of June 30, 2019. As of September 30, 2019, we still had a lack of segregation of duties necessary to ensure that all transactions are accounted for accurately and in a timely manner. However, the Company continues to take the necessary steps to eliminate this material weakness through the addition of a full-time Chief Financial Officer and Controller, engaging an outside accounting services company and a senior financial executive that all have the requisite expertise in the key functional areas of finance and accounting. We believe these additions to the accounting functional areas will eliminate the segregation of duties material weakness for the future.

Management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a15(e) and 15d15(e)) as of September 30, 2019, the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based upon that evaluation, the Company’s Principal Executive Officer and Principal Financial Officer have concluded that as of the Evaluation Date, the Company’s disclosure controls are not effective as a result of the identified material weakness described herein.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the fiscal quarter ended September 30, 2019 that materially affected, or is reasonably likely to have a material effect, on our internal control over financial reporting.

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ITEM 1. LEGAL PROCEEDINGS

Not Applicable.

ITEM 1A. RISK FACTORS

Not Applicable.

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

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On April 29, 2019, the Company issued 45,000 common stock shares at $1.52 per share in regards to a Consulting Agreement (“Agreement”), dated January 4, 2019, with an individual for providing financial and investor relations services.

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ITEM 3. DEFAULTS UPON SENIOR SECURITES

As of September 30, 2019, there were two convertible promissory notes (“Notes”) totaling $550,000 that were in default. The Company has offered to either repay the Notes or request to have them converted into common stock shares of the Company. As of our filing of our Form 10-Q for the quarterly period ended September 30, 2019, the note holders of the Notes have not yet communicated their intent to either receive payment or convert.

ITEM 4. MINE SAFETY DISCLOSURE

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

31.1		Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

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

	CURE PHARMACEUTICAL HOLDING CORP.

Dated: November 14, 2019	By:	/s/ Robert Davidson
		Robert Davidson
		Chief Executive Officer

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

/s/ Robert Davidson
Robert Davidson
Chief Executive Officer
November 14, 2019

/s/ Michael Redard
Michael Redard
Chief Financial Officer
November 14, 2019

/s/ Mark Udell
Mark Udell
Chief Accounting Officer
November 14, 2019