AVRW Avenir Wellness Solutions Inc (QB)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

(Amendment No. 1)

 

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

 

For the quarterly period ended September 30, 2021

 

☐	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 000-59908 

 

AVENIR WELLNESS SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		2844		90-1504639
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Number)		(IRS Employer Identification Number)

 

5805 Sepulveda Boulevard, Suite 500, Sherman Oaks, CA 91411

(Address of principal executive offices)

 

(424) 273-8675

(Issuer’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

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

 

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

 

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

 

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

 

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

 

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

 

On November 12, 2021, we had 65,060,044 shares of common stock, par value $0.001 per share (the “Common Stock”) issued and outstanding.

 

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EXPLANATORY NOTE

 

This Amendment No. 1 on Form 10-Q/A amends Part 1 of the Quarterly Report on Form 10-Q previously filed for the quarter ended September 30, 2021 by Avenir Wellness Solutions, Inc. (formerly known as CURE Pharmaceutical Holding Corp.) (the “Company”). This Form 10-Q/A is filed in connection with the restatement of our earnings per share presented in our Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021 and 2020 and the related disclosure of our earnings per share in Note 2 – Summary of Significant Accounting Policies – Net Loss per Common Share. Specifically, during the year ended December 31, 2022, the Company identified an error in the calculation of our weighted average shares outstanding that affects our presentation of earnings per share for the nine months ended September 30, 2021 as described in “Note 2 – Summary of Significant Accounting Policies – Restatement.”

 

Other than as described above, all other information contained in this Form 10-Q/A is as of the date of the original filing and does not reflect subsequent information or events other than (i) the name change of the Company effective on October 14, 2022; (ii) the correction of the Company’s IRS Employer Identification Number and (iii) the address and telephone number changes of the Company effective on July 22, 2022. In addition, Exhibits 31.1, 31.2, 32.1 and 32.2 of the original filing have been amended to contain currently dated certifications from the current Chief Executive Officer and Chief Financial Officer.

 

 

TABLE OF CONTENTS

 

			Page
PART I. FINANCIAL INFORMATION:			3
Item 1.	Unaudited Condensed Consolidated Financial Statements		3
	Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020		3
	Unaudited Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2021 and 2021		4
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine month periods ended September 30, 2021 and 2020		5
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2021 and 2020		6
	Notes to the Unaudited Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		50
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		63
Item 4.	Controls and Procedures		63
PART II. OTHER INFORMATION:			65
Item 1.	Legal Proceedings		65
Item 1A.	Risk Factors		65
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		66
Item 3.	Defaults Upon Senior Securities		66
Item 4.	Mine Safety Disclosure		66
Item 5.	Other Information		66
Item 6.	Exhibits		67
	Signatures		68

 

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PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

AVENIR WELLNESS SOLUTIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

 

		September 30, 2021				December 31, 2020
ASSETS		(unaudited)
Current assets:
Cash		$	164			$	1,725
Accounts receivable, net			208				224
Note receivable, net			-				-
Inventory, net			960				449
Prepaid expenses and other assets			431				1,452
Total current assets			1,763				3,850
Property and equipment, net			1,902				2,074
Finance lease right-of-use assets, net			43				52
Operating lease right-of-use assets, net			280				343
Note receivable			200				-
Investment			509				509
Goodwill			13,868				13,868
Intellectual property and patents, net			15,027				1,711
In-process research and development, net			329				14,288
Customer relationships, Tradename, and Non-compete, net			7,875				9,606
Other assets			83				58
Total assets		$	41,879			$	46,359
Liabilities and stockholders' equity
Current liabilities:
Accounts payable		$	2,242			$	2,135
Accrued expenses			4,295				1,299
Finance lease payable			13				12
Operating lease payable			104				93
Loan payable			60				265
Paycheck protection program loan			-				605
Related party payable			1,440				1,040
Notes payable			1,800				800
Convertible promissory notes			550				550
Fair value convertible promissory notes, net			6,583				6,674
Contract liabilities			611				994
Total current liabilities			17,698				14,467
License fees			-				80
Finance lease payable			30				40
Operating lease payable			199				278
Fair value convertible promissory notes, net			3,109				7,010
Contingent share considerations			2,258				3,205
Total liabilities			23,294				25,080
Commitments and contingencies (see Note 21)
Stockholders' equity:
Common stock: $0.001 par value; authorized 150,000,000 shares; 65,060,044 and 59,476,268 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively			66				60
Additional paid-in capital			108,004				101,807
Common stock issuable			603				665
Accumulated deficit			(90,088	)			(81,253	)
Total stockholders' equity			18,585				21,279
Total liabilities and stockholders' equity		$	41,879			$	46,359

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

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AVENIR WELLNESS SOLUTIONS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except share amounts)

 

		For the Three Months Ended								For the Nine Months Ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Revenue:
Product sales, net of discounts and refunds		$	1,345			$	167			$	4,817			$	533
Consulting research & development income			-				-				52				169
Shipping and other sales			14				25				70				39
Total revenues			1,359				192				4,939				741
Cost of goods sold:
Cost of goods sold, current			512				145				1,725				346
Gross profit			847				47				3,214				395
Operating expenses:
Research and development expenses			601				744				1,944				2,284
Selling, general and administrative expenses			4,584				2,075				14,925				6,711
Change in fair value of contingent stock consideration			608				-				(947	)			5,658
Total operating expenses			5,793				2,819				15,922				14,653
Net operating loss before other income (expense)			(4,946	)			(2,772	)			(12,708	)			(14,258	)
Other income (expense):
Interest income			2				12				4				32
Gain from settlement			-				35				2,434				61
Gain on extinguishment of debt			7				-				741				-
Loss on sale of property, plant and equipment			-				-				(41	)			-
Change in fair value of derivative liability			-				13				-				88
Change in fair value of convertible promissory notes			772				-				1,112				-
Interest expense			(178	)			(39	)			(377	)			(67	)
Total other income (expense)			603				21				3,873				114
Net loss before income taxes			(4,343	)			(2,751	)			(8,835	)			(14,144	)
Provision for income taxes			-				-				-				-
Net loss		$	(4,343	)		$	(2,751	)		$	(8,835	)		$	(14,144	)
Net loss per share
Basic		$	(0.07	)		$	(0.07	)		$	(0.14	)		$	(0.32	)
Diluted		$	(0.07	)		$	(0.07	)		$	(0.14	)		$	(0.32	)
Weighted average common shares outstanding
Basic, Weighted			62,174,822				41,344,256				61,462,300				43,647,388
Diluted Weighted			62,174,822				41,344,256				61,462,300				43,647,388

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

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AVENIR WELLNESS SOLUTIONS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Stockholders' Equity

For the Three and Nine Months Ended September 30, 2021 and 2020

(in thousands, except share amounts)

 

										Additional				Common
		Common Stock								Paid-in				Stock				Accumulated
		Shares				Amount				Capital				Issuable				Deficit				Total
Balance, December 31, 2020			59,476,268			$	60			$	101,807			$	665			$	(81,253	)		$	21,279
Issuance of common stock for professional services			265,512				-				363				145								508
Issuance of common stock from the equity incentive plan			157,693				-				190				(52	)							138
Issuance of common stock for exercise of warrants			26,936				-				-				-								-
Fair value of stock options and restricted stock granted											961												961
Fair value of restricted stock units granted											144												144
Net loss																			(3,171	)			(3,171	)
Balance, March 31, 2021			59,926,409			$	60			$	103,465			$	758			$	(84,424	)		$	19,859
Issuance of common stock for professional services			381,000				-				243												243
Issuance of common stock from the equity incentive plan			141,693				-				(2	)			(155	)							(157	)
Issuance of common stock from conversion of convertible promissory notes			2,428,857				3				1,832												1,835
Fair value of stock options and restricted stock granted											591												591
Fair value of restricted stock units granted											143												143
Net loss																			(1,321	)			(1,321	)
Balance, June 30, 2021			62,877,959			$	63			$	106,272			$	603			$	(85,745	)		$	21,193
Issuance of common stock for professional services																							-
Issuance of common stock from the equity incentive plan			572,975				1				(1	)											-
Issuance of common stock from conversion of convertible promissory notes			1,609,110				2				1,045												1,047
Fair value of stock options and restricted stock granted											532												532
Fair value of restricted stock units granted											156												156
Net loss																			(4,343	)			(4,343	)
Balance, September 30, 2021			65,060,044			$	66			$	108,004			$	603			$	(90,088	)		$	18,585
Balance, December 31, 2019			38,001,543			$	38			$	63,035			$	1,066			$	(50,632	)		$	13,507
Issuance of common stock for professional services			31,250				-				68				163								231
Fair value of stock options and restricted stock granted											469												469
Fair value of restricted stock units granted											60												60
Net loss																			2,046				2,046
Balance, March 31, 2020			38,032,793			$	38			$	63,632			$	1,229			$	(48,586	)		$	16,313
Issuance of common stock for professional services			218,750				-				600				(411	)							189
Issuance of common stock from the equity incentive plan			8,003				-				-												-
Issuance of common stock from exercise of warrants			708,467				1				1,417												1,418
Issuance of common stock from settlement with Chemistry Holdings, Inc.			12,058,623				12				21,935				(246	)							21,701
Fair value of stock options and restricted stock granted											479												479
Fair value of restricted stock units granted											60												60
Net loss																			(13,439	)			(13,439	)
Balance, June 30, 2020			51,026,636			$	51			$	88,123			$	572			$	(62,025	)		$	26,721
Issuance of common stock for professional services			31,250				-				49				-								49
Issuance of common stock from the equity incentive plan			161,633				-				22												22
Fair value of stock options and restricted stock granted											515												515
Fair value of restricted stock units granted											68												68
Net loss																			(2,751	)			(2,751	)
Balance, September 30, 2020			51,219,519			$	51			$	88,777			$	572			$	(64,776	)		$	24,624

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

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AVENIR WELLNESS SOLUTIONS, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

		For the Nine Months Ended
		September 30, 2021				September 30, 2020
Net loss		$	(8,835	)		$	(14,144	)
Adjustment to reconcile net loss to net cash used in operating activities:
Stock based compensation - services			752				469
Stock based compensation - prepaid			-				342
Stock issued from equity incentive plan			(19	)			22
Gain from settlement of accounts payable			-				(26	)
Gain from extinguishment of debt			(741	)			-
Change in fair value of contingent share consideration			(947	)			5,658
Change in fair value of convertible promissory notes			(1,112	)			-
Depreciation and amortization			2,584				277
Bad debt expenses			41				31
Recovery of bad debt expense			(221	)			-
Loss on disposal of property, plant and equipment			41				-
Inventory reserve for obsolescence			(113	)			5
Change of fair value in derivative liabilities			-				(88	)
Fair value of vested stock options and restricted stock			2,527				1,652
Change in operating assets and liabilities:
Accounts receivable			(25	)			65
Inventory			(398	)			(77	)
Prepaid expenses and other assets			1,042				227
Other assets			(25	)			-
Accounts payable			139				550
Accrued expenses			3,126				63
Finance lease payable			(9	)			(8	)
Contract liabilities			(383	)			(140	)
License fees			(80	)			(8	)
Cash used in operating activities			(2,656	)			(5,130	)
Cash flows from investing activities
Investment in company			-				(250	)
Purchase of intangible assets			(68	)			(11	)
Acquisition of property and equipment, net			(32	)			(642	)
Purchase of note receivable			(200	)			(550	)
Collection of note receivable			200				-
Cash used in investing activities			(100	)			(1,453	)
Cash flows from financing activities
Proceeds from exercise of warrants			-				1,417
Proceeds from notes payable			1,000				2,299
Proceeds from related party payable			400				-
Repayment of loans payable			(205	)			(127	)
Cash provided by financing activities			1,195				3,589
Net decrease in cash and cash equivalents			(1,561	)			(2,994	)
Cash and cash equivalents, beginning of year			1,725				4,096
Cash and cash equivalents, end of period		$	164			$	1,102
Supplemental cash flow information
Cash paid for interest and income taxes:
Interest		$	102			$	3
Income taxes		$	-			$	-
Non-cash investing and financing activities:
Common stock issued for conversion of promissory notes and accrued interest		$	2,881			$	-
Common stock issued for settlement of earnout liabilities from the acquisition of Chemistry Holdings, Inc		$	-			$	21,701

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

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AVENIR WELLNESS SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Business Operations

 

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

 

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

 

Background

 

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

 

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

 

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

 

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

 

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

 

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

 

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The Coronavirus Disease 2019 (COVID-19) Pandemic

 

The COVID-19 pandemic was declared a global pandemic by the World Health Organization on March 11, 2020, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19, or other public health epidemic poses the risk that the Company or its employees, suppliers, and other partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the future impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by the governments of countries affected and in which the Company operates could continue to disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures have had an adverse impact on global economic conditions, and may continue to have such adverse impact, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company undertook temporary precautionary measures intended to help minimize the risk of the virus to its employees (with such measures still currently in effect), including temporarily requiring a majority of our employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Due to the speed with which the COVID-19 situation is developing, the Company is not able at this time to estimate the impact of COVID-19 on its consolidated financial statements and related disclosures, but the impact could be material for the remainder of fiscal year 2021 in all business aspects and could be material during any future period affected either directly or indirectly by this pandemic.

 

While the extent and duration of the economic downturn from the COVID-19 pandemic remains unclear, the Company has considered, among other things, whether the global operational disruptions indicate a change in circumstances that may trigger asset impairments and whether it needs to revisit accounting estimates and projections or its expectations about collectability of receivables. Additionally, the Company has considered the potential impacts on its fair value disclosures and on its internal control over financial reporting. During the nine months ended September 30, 2021 there was no significant direct impact on the Company’s operations as a result of the economic downturn. While significant uncertainty still exists concerning the magnitude of the impact and duration of the COVID-19 pandemic on the global economy, the Company has determined that there was no triggering event for an impairment with respect to any of its assets nor has there been an adverse change in the probability related to the collectability of its receivables. The Company continues to assess the potential impact of the global economic situation on its consolidated financial statements. Please see Item 1A. Risk Factors of this Quarterly Report on Form 10-Q.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

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

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2021, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2021 and 2020, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal period ended December 31, 2020 filed with the SEC on March 31, 2021.

 

Principle of Consolidation

 

The unaudited condensed financial statements include the accounts of CPHC and its wholly-owned subsidiaries, CURE Pharmaceutical, CHI and Sera Labs, collectively referred to as (“CURE”, “we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s film strip product represents the principal operations of the Company. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition. The Company’s purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates.

 

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Going Concern and Management’s Liquidity Plans

 

In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, The Company assesses going concern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to the Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, the Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent the Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15. The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At September 30, 2021, we had an accumulated deficit of approximately $90.1 million and a working capital deficit of approximately $15.9 million. Our operating activities consume the majority of our cash resources. We anticipate that we will continue to incur operating losses and negative cash flows from operations, at least into the near future, as we execute our commercialization and development plans and strategic and business development initiatives. As of the date of this report, the Company had approximately $0.1 million of cash on hand.   

 

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

 

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

 

Reclassifications

 

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

 

Restatement

 

During the year ended December 31, 2022, the Company became aware of an error in the calculation of its weighted average common shares outstanding and resultant reported loss per share for the nine months ended September 30, 2021. The reported weighted average common shares outstanding and loss per share was 49,294,190 and ($0.18), respectively. The corrected weighted average shares outstanding and loss per share was 61,462,300 and ($0.14), respectively.  Based on an initial analysis of ASC 250 “Accounting Changes and Error Corrections” and Staff Accounting Bulletin 99 “Materiality,” the Company determined that the error was immaterial to the previously issued consolidated financial statements for the nine months ended September 30, 2021 and that the correction and disclosure of the error in its Annual Report on Form 10-K for the year ended December 31, 2022, which included the 2021 financial statements, was adequate. The Company has since determined that the errors in its previously reported earnings per share are material and is thus restating the impacted financial statements.

 

Use of Estimates

 

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

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of September 30, 2021 and December 31, 2020, the Company had no cash equivalents.

  

Investment in Associates

 

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

 

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

 

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

 

On November 1, 2019, the Company purchased a convertible loan (the “Releaf Loan”) with Releaf Europe BV (“Releaf”) in the amount of $0.2 million. Releaf shall accrue interest on the Releaf Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Releaf Loan is repaid or at the maturity date of October 31, 2021. In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amount of the Releaf Loan and any unpaid accrued interest shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2.0 million of debt and/or equity (“Releaf Qualified Financing”), the outstanding amount of the Releaf Loan and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf Qualified Financing less a discount of 20% on the subscription price. In addition, both the Company and Releaf agree in the event that the pre-money valuation of the Releaf Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of September 30, 2021, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to the Releaf Loan.

 

On February 5, 2020 and February 13, 2020, the Company purchased two convertible loans (the “February 2020 Loans”) with Releaf for a total amount of $0.3 million. Releaf shall accrue interest on the February 2020 Loans at 6% per annum and they shall become due and payable to the Company at the earlier of the conversion date or the maturity date of October 31, 2021. In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amounts of the February 2020 Loans and any unpaid accrued interests shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2.0 million of debt and/or equity (“Releaf February 2020 Qualified Financing”), the outstanding amount of the February 2020 Loans and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf February 2020 Qualified Financing, less a discount of 20% on the subscription price. In addition, in the event that the pre-money valuation of the Releaf February 2020 Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of September 30, 2021, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to the foregoing Releaf loans.

 

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

 

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The Company follows Accounting Standards Codification (“ASC”) 325-20, Cost Method Investments (“ASC 325-20”), to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. The Company has determined that there was no impairment of our investment in Releaf during the nine months ended September 30, 2021.

 

Accounts Receivable

 

Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. At September 30, 2021 management determined that an allowance of $0.08 million was necessary. At December 31, 2020 management determined that an allowance of $0.04 million was necessary.

 

Inventory

 

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

 

Goodwill and intangible assets

 

In accordance with ASC 350, Intangibles – Goodwill and Other, in-process research and development (“IPR&D”) projects acquired in a business combination that are not complete as of the acquisition date are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related research and development efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. The Company considers various factors and risks for potential impairment of IPR&D assets, including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, or significant delays, or the inability to bring a product to market and the introduction or advancement of competitors’ products could result in partial or full impairment of the related intangible assets. Consequently, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods. During the period between completion or abandonment, the IPR&D assets will not be amortized but will be tested for impairment on an annual basis and between annual tests if the Company becomes aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts (see Note 7).

 

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

 

The Company does not have intangible assets with indefinite useful lives other than goodwill and trademark discussed in Note 19. As of September 30, 2021 and December 31, 2020, there has been no impairment of goodwill and intangible assets.

 

Business Combinations

 

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

 

Impairment of Long-Lived Assets

 

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

 

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cashflow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There was no impairment on our long-lived assets during the nine months ended September 30, 2021 and 2020.

 

Contingent consideration liabilities

 

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

 

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

 

The fair value of contingent consideration after the acquisition date is reassessed by the Company as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in the consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that the Company records in its consolidated financial statements. See Note 19 for a full discussion of these liabilities.

 

Revenue Recognition

 

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

 

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

 

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

 

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

 

Cure Pharmaceutical Revenue

 

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

 

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

 

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

 

Sera Labs Revenue

 

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

 

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

 

Practical Expedients and Exemptions

 

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

 

	·	The Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception;
	·	The Company made the accounting policy election to exclude any sales and similar taxes from the transaction price;
	·	The Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less

 

Sales Tax

 

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

 

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Sales Returns, Discounts and Warranties

 

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

 

Cost to Obtain a Contract

 

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

 

Contract Liabilities

 

Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded as deferred revenues when customers remit contractual cash payments in advance before satisfying performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied. Advance payments and billings in excess of revenue recognized are included in deferred revenue, which is classified as current or noncurrent based on the timing of when the Company expects to recognize revenue. At September 30, 2021 and December 31, 2020, we had contract liabilities of $0.6 million and $1.0 million, respectively.

 

Contract liabilities is made up of the following as of September 30, 2021 and December 31, 2020 (in thousands):

 

		2021				2020
Customer deposits for commercial products		$	611			$	281
Customer deposits for personal protective equipment			-				713
Total contract liabilities		$	611			$	994

 

The following table summarizes the changes in contract liabilities during the nine months ended September 30, 2021 and year ended December 31, 2020 (in thousands):

 

Balance at December 31, 2019		$	456
Additions			1,033
Transfers to Revenue			(495	)
Balance at December 31, 2020			994
Additions			435
Customer deposits returned			(713	)
Transfers to Revenue			(105	)
Balance at September 30, 2021		$	611

 

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Cost of Revenues

 

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

   

Advertising Expense

 

The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying statements of operations. The Company recorded advertising costs of $0.7 million and $2.4 million for the three and nine month periods ended September 30, 2021, respectively. The Company did not record advertising costs for the three and nine month periods ended September 30, 2020.

 

Research and Development

 

Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred. The Company recorded research and development expenses of $0.6 million and $1.9 million for the three and nine month periods ended September 30, 2021, respectively. The Company recorded research and development expenses of $0.7 million and $2.3 million for the three and nine month periods ended September 30, 2020, respectively.

 

Income Taxes

 

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

 

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

 

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

 

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Stock-Based Compensation

 

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

 

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

   

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

 

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

 

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

 

Fair value measurements

 

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

 

	·	Level 1 – Quoted prices in active markets for identical assets and liabilities.
	·	Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
	·	Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

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

 

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. At September 30, 2021 and December, 31, 2020, the Company had no financial assets or liabilities recorded at fair value on a recurring basis, except for cash and cash equivalents consisting of money market funds and the Series A and Series B Notes, which we elected the fair value option. These assets are measured at fair value using the period-end quoted market prices as a Level 3 input. The Company also has certain derivative liabilities and contingent consideration liabilities which are carried at fair value based on Level 3 inputs (see Note 14).

  

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

 

The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earnouts may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from the date of acquisition to September 30, 2021, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in a decrease of the fair value of the contingent stock consideration. In June 2020, the Company settled all of its outstanding contingent consideration liabilities outstanding with CHI. In October 2020, the Company acquired Sera Labs and had an outstanding contingent consideration liability of $

3.2 million in relation to the Sera Labs Merger.

 

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

 

The following table summarizes the changes in Level 3 financial instruments during the nine months ended September 30, 2021 (in thousands):

 

Fair value at December 31, 2020		$	18,684
Change in fair value of Series A Note			(1,020	)
Change in fair value of Series B Notes			(91	)
Conversion of Series A Notes			(2,881	)
Fair value of Series A and B Notes at September 30, 2021		$	14,692

   

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

 

Date of valuation		September 30, 2021				December 31, 2020
Stock price		$	0.73			$	1.30
Conversion price		$	1.32			$	1.32
Term (in years) – Series A Note			1.08				1.83
Term (in years) – Series B Note			0.08				0.83
Volatility – Series A Note			85	%			86	%
Volatility – Series B Note			80	%			80	%
Risk-free interest rate – Series A Note			0.11	%			0.12	%
Risk-free interest rate – Series B Note			0.07	%			0.09	%
Interest rate			18	%			1	%

 

The Company recorded a loss of $0.7 million and $1.1 million due to the change in fair value of Series A and B convertible notes for the three and nine months ended September 30, 2021 and $0 for the three and nine months ended September 30, 2020.

 

Beneficial Conversion Feature

 

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

 

Series A and Series B convertible notes:

 

As described further in Note 13 - the Company has elected the fair value option to record its Series A and Series B convertible debentures, which were issued in October 2020. The fair value of the Notes is classified within Level 3 of the fair value hierarchy because the fair values were estimated utilizing a Monte Carlo simulation model. Accordingly, the notes are marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the Consolidated Statement of Operations. All issuance costs related to the debentures were expensed as incurred in the Consolidated Statement of Operations.

 

Accounting for warrants

 

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

 

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Derivative Liabilities

 

ASC 815-40, requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula and present value pricing. At September 30, 2021 and December 2020, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement of operations.

 

Contingencies

 

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

 

Net Loss per Common Share

 

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

 

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

 

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

 

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		For the Three Months Ended								For the Nine months Ended
(Dollars in thousands)		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Net income (loss)		$	(4,343	)		$	(2,751	)		$	(8,835	)		$	(14,144	)
Weighted average outstanding shares of common stock			62,174,822				41,344,256				61,462,300				43,647,388
Dilutive potential common stock shares from:			-				-				-
Vested Stock options from the Company’s 2017 Equity Incentive Plan			-				-				-
Conversion of convertible notes			-				-				-
Common stock and common stock equivalents			62,174,822				41,344,256				61,462,300				43,647,388
Income per share:
Basic net income per share			(0.07	)			(0.07	)			(0.14	)			(0.32	)
Diluted net income per share			(0.07	)			(0.07	)			(0.14	)			(0.32	)

 

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

 

		Three and nine months ended September 30,
		2021				2020
Vested stock options from the Company’s 2017 Equity Incentive Plan			3,845,124				3,517,577
Warrants			1,565,447				6,648,446
Shares to be issued upon conversion of convertible payable			115,047				115,047
Total			5,525,618				10,281,070

 

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

 

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

 

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Segment Reporting

 

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

 

Emerging Growth Company

 

We are an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 (“JOBS Act”). For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i), and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.

 

Risks and Uncertainties

 

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

 

Recent Accounting Pronouncements Adopted

ASU 2020-01

 

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

 

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Recent Accounting Pronouncements Not Yet Adopted

 

ASU 2019-12

 

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

 

ASU 2020-06

 

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

 

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2021 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

 

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

 

NOTE 3 - PREPAID EXPENSES AND OTHER ASSETS

 

As of September 30, 2021 and December 31, 2020, prepaid expenses and other assets consisted of the following (in thousands):

 

		September 30, 2021				December 31, 2020
Prepaid consulting services		$	-			$	14
Prepaid clinical study			-				32
Prepaid insurance			113				347
PPE deposits			-				700
Prepaid equipment			67				61
Prepaid deposit for inventory			165				211
Prepaid expenses			40				66
Other assets			129				79
Prepaid expenses and other assets			514				1,510
Current portion of prepaid expenses and other assets			(431	)			(1,452	)
Prepaid expenses and other assets less current portion		$	83			$	58

 

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NOTE 4 - INVENTORY

 

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

 

The carrying value of inventory consisted of the following at September 30, 2021 and December 31, 2020 (in thousands):

 

		September 30, 2021				December 31, 2020
Raw materials		$	98			$	64
Packaging components			133				54
Work-in-process			40				22
Finished goods			877				603
			1,148				743
Reserve for obsolescence			(188	)			(294	)
Total inventory		$	960			$	449

 

For the three months ended September 30, 2021 and 2020, inventory reserves amounted to $0.003 million and $0.001 million, respectively. For the nine months ended September 30, 2021 and 2020, inventory reserves amounted to $0.2 million and $0.004 million, respectively.

 

NOTE 5 - PROPERTY AND EQUIPMENT

 

As of September 30, 2021 and December 31, 2020, property and equipment consisted of the following (in thousands):

 

		September 30, 2021				December 31, 2020
Equipment not yet placed in service		$	1,413			$	1,465
Manufacturing equipment			1,093				1,047
Computer and other equipment			626				626
Less accumulated depreciation			(1,230	)			(1,091	)
Property and Equipment, net		$	1,902			$	2,074

 

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For the three and nine month periods ended September 30, 2021, depreciation expense amounted to $0.05 million and $0.14 million, respectively. Depreciation expense for the three and nine month periods ended September 30, 2020 was $0.06 million and $0.16 million, respectively.

 

NOTE 6 – NOTES RECEIVABLE

 

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

 

On July 31, 2020, the Company purchased a $0.5 million secured promissory note (the “Sera Labs Note”) issued by Sera Labs, in connection with the execution of the Memorandum of Understanding summarizing the terms and conditions of a proposed acquisition, pursuant to which Sera Labs will become a wholly-owned subsidiary of the Company. The Sera Labs Note bears an interest at the rate of 9% per annum and has a maturity date of December 31, 2020. On September 16, 2020, a Note Modification Agreement was signed, modifying the principal amount to $0.55 million with interest on $0.5 million of the principal amount accruing from and after July 31, 2020 and on $0.05 million of the principal amount from and after September 16, 2020. The note was settled as part of the Sera Labs acquisition, see Note 19.

 

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

 

Note receivable consists of the following (in thousands):

 

		September 30, 2021				December 31, 2020
Coeptis Pharmaceuticals, Inc.		$	-			$	200
Biopharmaceutical Research Company			200				-
Less: allowance for doubtful accounts			-				(200	)
Current portion of note receivable, net			-				-
Note receivable, net less current portion		$	200			$	-

 

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On January 20, 2021 and February 10, 2021, the Company collected a total of $0.2 million from Coeptis relating to a convertible promissory note issued from Coeptis on November 7, 2019. The total payment of $0.2 million was full satisfaction of the principal amount and accrued interest until February 10, 2021. The Coeptis Note had a maturity date of June 15, 2020, which was not paid by the maturity date and was considered in default as of December 31, 2020 and fully reserved for. The Company recorded the collection of the Coeptis Note as a recovery of bad debt during the three months ended March 31, 2021.

 

NOTE 7 – GOODWILL AND INTANGIBLE ASSETS

 

The Company incurred $0.07 and $0.01 million of legal patent costs that were capitalized during the nine months ended June, 2021 and 2020, respectively. During the year ended December 31, 2020, the Company acquired from Sera Labs customer relationships at a fair value of $7.1 million, $2.6 million in Tradename intangibles, $0.5 million in non-compete and $4.7 million in Goodwill from the acquisition of Sera Labs. During the year ended December 31, 2019, the Company acquired from the CHI acquisition patents at a fair value of $0.7 million, $14.5 million in Intellectual Property Research & Development and $9.2 million in Goodwill from the acquisition of CHI.

 

Intangible Asset Summary

 

As of September 30, 2021 and December 31, 2020, goodwill and intangible assets, net, consisted of the following (in thousands):

 

		September 30, 2021				December 31, 2020
Goodwill (1)		$	13,868			$	13,868
Intangible assets:
Acquired IPR&D – Chemistry (2)		$	502			$	14,460
Pending patents – Cure Pharmaceutical			327				259
Intangible assets subject to amortization:
Customer relationships (2)			7,110				7,110
Acquired IPR&D – Chemistry (2)			13,958				-
Tradename (2)			2,610				2,610
Noncompete (2)			462				462
Intellectual property			972				972
Issued patents			1,034				1,044
Total intangible assets			26,975				26,917
Accumulated amortization			(3,744	)			(1,312	)
Intangible assets, net		$	23,231			$	25,605

 

(1)	Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in the Merger (see Note 19). In 2020, the Company recorded additional goodwill of $4.7 million as a result of the Sera Labs acquisition.
(2)	See Note 19 for information on the Mergers which were consummated in May 2019 and October 2020.

 

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During the three and nine months ended September 30, 2021 the Company completed a portion of their IPR&D project and begin amortizing $3.5 million and $13.9 million over its estimated useful life of 10 years on a straight-line basis.

 

Amortization expense was $1.0 million and $0.03 million for the three months ended September 30, 2021 and 2020, respectively. Amortization expense was $2.4 million and $0.09 million for the nine months ended September 30, 2021 and 2020, respectively.

 

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

 

2021 (remaining)		$	953
2022			3,765
2023			3,592
2024			3,429
2025			2,583
Thereafter			8,080
Total Amortization		$	22,402

 

NOTE 8 – ACCRUED EXPENSES

 

As of September 30, 2021 and December 31, 2020, accrued expenses consisted of the following (in thousands):

 

		September 30, 2021				December 31, 2020
Accounts payable factoring		$	2,325			$	-
Refunds and returns liability			434				-
Accrued interest			417				194
Accrued payroll			270				308
Accrued vacation leave			221				180
Accrued expenses			301				306
Sales tax payable			327				311
Accrued Expenses		$	4,295			$	1,299

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

Due to Related Party

 

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

 

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

  

On August 6, 2020, the Company entered into an unsecured promissory note (the “August Note”) with one of the Company’s board members (“Board Investor”), for a principal amount of $150,000. The August Note is due on August 6, 2021 and has an interest rate of 8% per annum, payable in quarterly payments. The principal and accrued interest under the August Note can convert into a convertible promissory note if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the August Note. Upon notice by the Company of such debt financing, the holder of the August Note shall have the right, but not the obligation, to convert the August Note into a convertible promissory note, with the same principal amount and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. The Board Investor did not elect to convert their August Note into a convertible promissory note, with the same principal and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. As of the date of this report, both the Company and the Board Investor agreed to extend the August Note and are currently negotiating the terms of the amendment.

 

On October 2, 2020, the Company completed its acquisition of Sera Labs and pursuant to the Sera Labs Merger Agreement, the Company issued a promissory note in the principal amount of $1.1 million owed to the CEO of Sera Labs (“Duitch Note”), of which $1.0 million is the upfront payment in connection with the closing of the Sera Labs Merger, and $0.1 million is for certain liabilities of Sera Labs due to Mrs. Duitch. The Duitch Note is due September 30, 2021 and has an interest rate of 8% per annum. On November 9, 2020, a payment of $0.3 million was made and applied to principal only. As of September 30, 2021, total outstanding due to Mrs. Duitch was $0.9 million. As of the date of this report, both the Company and Mrs. Duitch agreed to extend the Duitch Note and are currently negotiating the terms of the amendment.

 

On May 3, 2021 and September 16, 2021, the Company received $0.2 million and $0.2 million, respectively, from one of the Company’s board members (“Second Board Investor”) in exchange for two promissory notes. Both the Company and Second Board Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Second Board Investor are still negotiating the terms of the promissory notes.

 

Interest expense in regard to related party payables for the three months ended September 30, 2021 and 2020 was $0.029 million and $0.002 million, respectively. Interest expense in regard to related party payables for the nine months ended September 30, 2021 and 2020 was $0.075 million and $0.002 million, respectively.

 

NOTE 10 – LOAN PAYABLE

 

Loan payable consists of the following at September 30, 2021 and December 31, 2020 (in thousands):

 

		September 30, 2021				December 31, 2020
Note to a company due September 29, 2021, including interest at 4.32% per annum; unsecured; interest due monthly		$	-			$	182
Note to a company due September 6, 2021, including interest at 6.55% per annum; unsecured; interest due monthly			-				83
Note to a company due June 6, 2022, including interest at 4.42% per annum; unsecured; interest due monthly			60				-
Current portion of loan payable			(60	)			(265	)
Loan payable, less current portion		$	-			$	-

 

Interest expense for the three and nine month periods ended September 30, 2021 was $0.001 million and $0.003 million, respectively. Interest expense for the three and nine month periods ended September 30, 2020 was $0.001 million and $0.002 million, respectively.

 

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NOTE 11 – NOTES PAYABLE AND PPP LOAN

 

Notes payable consist of the following at September 30, 2021 and December 31, 2020 (in thousands):

 

		September 30, 2021				December 31, 2020
Note to an individual, non-interest bearing, unsecured and due on demand		$	50			$	50
Promissory note to a company due May 18, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note			250				250
Promissory note to a company due August 12, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note			500				500
Promissory note to a company due January 13, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note			500				-
Promissory note to a company due April 8, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note			250				-
Promissory note to a company due October 30, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note			250
Current portion of note payable		$	1,800			$	800

 

On May 18, 2020 and August 12, 2020, the Company entered into unsecured promissory notes (“Notes”) with an investor for $0.3 million and $0.5 million, respectively. The Notes are due on May 18, 2021 and August 12, 2021, respectively, and have an interest rate of 8% per annum, payable in quarterly payments. The principal and accrued interest under the Notes can convert into convertible promissory notes if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the Notes. Upon notice by the Company of such debt financing, the holder of the Notes shall have the right, but not the obligation, to convert the Notes into convertible promissory notes, with the same principal amount and interest accruing from the date of issuance of the Notes, on the same terms as the convertible promissory notes issued to such new investors. The investor did not elect to convert their Notes into a convertible promissory note, with the same principal and interest accruing from the date of issuance of the Notes, on the same terms as the convertible promissory notes issued to such new investors. As of the date of this report, both the Company and the investor agreed to extend the $0.3 million and $0.5 million unsecured promissory notes and are currently negotiating the terms of the amendment.

 

On September 25, 2020 the Company issued a demand secured promissory note to Ionic Ventures, LLC (“Ionic”), dated September 25, 2020 (the “Promissory Note”), in the principal amount of $1.1 million with the Company receiving gross proceeds of $1.0 million and $0.1 million being an original issue discount. The Promissory Note is secured by certain assets of the Company as further set forth therein, bears no interest rate and is subject to payment on demand of Ionic after the earlier of either (a) the initial date after September 25, 2020 of any offering of securities by the Company with gross proceeds of at least $1.0 million or (b) October 31, 2020. The outstanding principal amount and any unpaid accrued Late Charges (as defined below) may be prepaid at any time, without notice, premium or penalty. Payments will be credited first to the accrued Late Charges then due and payable and the remainder applied to the outstanding principal. On October 30, 2020, the Company repaid in full the outstanding principal balance and all accrued but unpaid interest expense of $1.1 million from the proceeds of the Series A Note further described in Note 13.

 

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On January 13, 2021 and February 25, 2021, the Company received a total of $0.5 million from an investment company (“Investor”) in exchange for a promissory note. Both the Company and Investor agreed to negotiate the terms of the promissory note and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory note.

 

On April 8, 2021 and September 24, 2021, the Company received $0.3 million and $0.3 million, respectively, from an investment company (“Investor”) in exchange for two promissory notes. Both the Company and Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory notes.

 

Paycheck protection program consist of the following at September 30, 2021 and December 31, 2020 (in thousands):

 

		September 30, 2021				December 31, 2020
Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act.		$	-			$	399
Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act.			-				206
Payment protection program loan		$	-			$	605

 

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

 

Interest expense for the three months ended September 30, 2021 and 2020 was $0.05 million and $0.01 million, respectively. Interest expense for the nine months ended September 30, 2021 and 2020 was $0.11 million and $0.01 million, respectively.

 

NOTE 12 – CONVERTIBLE PROMISSORY NOTES

 

Convertible promissory notes consist of the following at September 30, 2021 and December 31, 2020 (in thousands):

 

		September 30, 2021				December 31, 2020
Convertible promissory notes totaling $550,000 due January 31, 2019, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due January 31, 2019 and currently in default. The Company has offered to either repay the convertible promissory notes or request to have them converted into common stock shares of the Company. The beneficial owners of the convertible promissory notes have not yet communicated their intent to either receive payment or convert.		$	550			$	550
Current portion of convertible promissory notes		$	550			$	550

 

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NOTE 13 – FAIR VALUE CONVERTIBLE PROMISSORY NOTES

 

Fair value of convertible promissory notes consists of the following at September 30, 2021 and December 31, 2020 (in thousands):

 

		September 30, 2021				December 31, 2020
Series A subordinated convertible note at fair value		$	3,109			$	7,010
Series B subordinated convertible note at fair value			11,583				11,674
Total convertible promissory notes			14,692				18,684
Less: Investor Note offset – Series B Note			(5,000	)			(5,000	)
Carrying value of convertible promissory notes at fair value			9,692				13,684
Less: current portion of convertible promissory notes at fair value			(6,583	)			(6,674	)
Convertible promissory notes, less current portion		$	3,109			$	7,010

 

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

 

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

 

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

 

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The Convertible Notes mature on October 30, 2022 with respect to the Series A Note and October 30, 2021 with respect to the Series B Note (the “Maturity Date”), subject to extension in certain circumstances, including bankruptcy and outstanding events of default. On the Maturity Date, the Company shall pay to the Investor an amount in cash (other than restricted amounts under a Series B Note) presenting all outstanding principal, Make-Whole Amount (as defined in the Convertible Notes), if any, accrued and unpaid interest and accrued and unpaid Late Charges (as defined in the Convertible Notes) on such principal, except that any restricted amount under the Series B Note will be automatically satisfied on the Maturity Date (in lieu of a cash payment) by Maturity Netting (as defined in the Investor Note described below). The Company may not prepay any amounts due under the Convertible Notes. The Convertible Notes shall bear no interest unless there is an occurrence, and during the continuance, of an Event of Default at which point interest shall be 18%. As of the filing date of this report, the Series B Note has matured and is due according to its terms (see Note 22). The Company and Investor are currently negotiating to extend the maturity date of the Series B Note on terms satisfactory to the Company.

 

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

 

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

 

Payment of Amounts Due under the Convertible Notes

 

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

 

Interest

 

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

 

Conversion; Alternate Conversion upon Event of Default

 

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

 

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

 

Conversion Limitation

 

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

 

Events of Default

 

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

 

Change of Control

 

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

 

Covenants

 

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

 

Placement Agent Warrants

 

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

 

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

 

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

 

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

 

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Fair Value Option for the Series A and Series B Notes

 

The Company elected the fair value option under ASC 825, Financial Instruments , for both the Series A and Series B Notes and accounted for the Notes as follows (1) the portion of the change in the liability’s fair value that is attributable to a change in instrument-specific credit risk in other comprehensive income (2) the remaining change in the liability’s fair value in net income (3) the excess of the fair value over the proceeds is recognized as an expense and (4) upfront costs and fees are recognized in earnings as incurred Gains and losses attributable to changes in credit risk are determined using observable credit default spreads for the issuer or comparable companies; these gains and losses were insignificant during all periods presented. The Company recognized a loss of $4.4 million and $5.1 million at the time of issuance of the Series A and Series B Notes, respectively, as a result of the make whole provision noted within the debt arrangements as the debt holders would be awarded a variable number of shares at the time of conversion which would always equate to an amount greater than the principal amount of the debt.

 

The Company recorded a gain of $0.1 million and $0.6 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the three months period ended September 30, 2021 and were recorded in the consolidated statement of operations. The Company recorded a gain of $1.0 million and $0.1 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the nine months period ended September 30, 2021 and were recorded in the consolidated statement of operations. Based on discussions with our valuation expert and knowledge of the Company, there was no change in valuation caused by a change in the Company’s credit risk during the period from October 30, 2020 to December 31, 2020 and from January 1, 2021 to September 30, 2021.

 

The Company recorded a loss of $4.6 million and $4.7 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the year ended December 31, 2020 and were recorded in the consolidated statement of operations. The Company incurred debt issuance cost of $0.7 million and $0.1 million attributed to the Series A and Series B Notes, respectively, which were expensed as incurred.

 

NOTE 14 – DERIVATIVE LIABILITY

 

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

 

The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis from December 31, 2019 to September 30, 2021 (in thousands):

 

		Fair value of derivative liabilities
Balance at December 31, 2019		$	91
Loss on change in fair value included in earnings			(91	)
Balance at December 31, 2020			-
Gain on change in fair value included in earnings			-
Balance at September 30, 2021		$	-

 

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NOTE 15 – WARRANT AGREEMENTS

 

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

 

In June 2020, as part of the Company’s settlement with CHI we amended the warrants to purchase up 8,018,071 common stock shares which vest based on various revenue achievement during year 3 and year 4 post the CHI acquisition Closing Date. As part of the settlement the Company reduced the number of warrants to 708,467 common stock shares at an exercise price of $2.00 per share which was reduced from the original exercise price of $5.01 per share. In addition, the expiration date of the warrants was amended to expire on June 5, 2020. The warrants were exercisable on the date of issuance and were exercised by the warrant holders and the Company received $1.4 million. The Company determined based on Black-Scholes value calculated for pre and post modification, there was no incremental value to the warrant modification as the exercise price was more than the fair value of the stock.

 

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

 

On December 8, 2020, an individual exercised 62,851 warrants by means of a cashless exercise with an exercise price of $1.00 per share. As a result of the exercise, the Company is to issue 26,936 common stock shares of the Company.

 

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

 

The Company’s warrant activity was as follows:

 

		Warrants				Weighted Average Exercise Price				Weighted Average Contractual Remaining Life
Outstanding, December 31, 2019			14,666,518			$	3.70				2.99
Granted			303,030				1.32				1.86
Exercised			(771,318	)			1.92				-
Forfeited/Expired			(11,718,381	)			5.01				-
Outstanding, December 31, 2020			2,479,849			$	1.86				1.23
Granted			-				-				-
Exercised			(96,250	)			1.00				-
Forfeited/Expired			(818,152	)			5.01				-
Outstanding, September 30, 2021			1,565,447				2.18				0.92
Exercisable at September 30, 2021			1,565,447			$	2.18				0.92

 

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Warrant summary as of September 30, 2021:

 

Range of Exercise Price		Number of Warrants				Weighted Average Remaining Contractual Life (years)				Weighted Average Exercise Price				Number of Warrants Exercisable				Weighted Average Exercise Price
$ 1.00–$2.31			1,565,447				0.92			$	2.18				1,565,447			$	2.18
			1,565,447				0.92			$	2.18				1,565,447			$	2.18

 

Warrant summary as of December 31, 2020:

 

Range of Exercise Price		Number of Warrants				Weighted Average Remaining Contractual Life (years)				Weighted Average Exercise Price				Number of Warrants Exercisable				Weighted Average Exercise Price
$ 1.00–$6.00			2,479,849				1.23			$	1.86				2,479,849			$	1.86
			2,479,849				1.23			$	1.86				2,479,849			$	1.86

 

The change in warrant value for the three months ended September 30, 2021 and 2020 was $0 and $0.1 million, respectively. The change in warrant value for the nine months ended September 30, 2021 and 2020 was $0 and $0 million, respectively.

 

There were no warrants granted during the three and nine months ended September 30, 2021. The weighted-average fair value of warrants granted to during the three and nine months ended September 30, 2020, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes option pricing model are as follows:

 

		September 30, 2021				September 30, 2020
Significant assumptions (weighted-average):
Risk-free interest rate at grant date			-	%			0.29	%
Expected stock price volatility			-	%			74.46	%
Expected dividend payout			-				-
Expected option life (in years)			-				3
Expected forfeiture rate			-	%			0	%

 

The aggregate intrinsic value of warrants outstanding and exercisable at September 30, 2021 was $0.

 

NOTE 16 – STOCK INCENTIVE PLANS

 

On December 29, 2017 (“Effective Date”), the Company adopted the CURE Pharmaceutical Holding Corp. 2017 Equity Incentive Plan (the “2017 Equity Plan”), pursuant to which an aggregate of 5,000,000 shares of the common stock of the Company are available for grant. On November 28, 2020, the Company registered an additional 5,000,000 shares of common stock of the Company that are available to be granted by filing a Form S-3 Registration Statement under the Securities Act of 1933.

 

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

 

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The Company issued 1,395,801 Nonstatutory Stock Options (“NSO”) to employees of the Company and 338,443 Restricted Common Stock (“Restricted Common Stock”) to various consultants of the Company. The Company did not issue any Incentive Stock Options (“ISO”) or Restricted Stock Units (“RSU”) during the nine months ended September 30, 2021. The Company issued 90,000 ISO’s to an officer of the Company, 150,000 RCS to a consultant and 431,578 RSU’s to the members of the Board of Directors during the nine months period ended September 30, 2020. The Company did not issue any NSO’s during the nine months ended September 30, 2020. Vesting periods for awarded RCS, ISO’s and NSO’s range from immediate to quarterly over a 4 year period. Vesting period for RSU’s is the earlier of (i) the day prior to the next Annual Meeting of Shareholders following the date of grant, and (ii) one (1) year from the Date of Grant. For ISO’s and NSO’s awarded, the term to exercise their ISO or NSO is 10 years.

 

The Company issued 1,518,194 stock options to a consultant that contains performance-based vesting conditions where revenue milestones are to be met over a certain period. Such stock option awards would be valued using a Monte Carlo simulation based on the probability of the performance condition being met and the underlying expense would be recognized as the associated vesting conditions are met. No stock options that contain performance-based vesting conditions vested during the nine months ended September 30, 2021 and the likelihood of meeting the performance-based condition is currently nil.

 

Stock Options

 

The Company’s stock option activity was as follows:

 

		Options				Weighted Average Exercise Price				Weighted Average Contractual Remaining Life
Outstanding, December 31, 2019			3,467,650			$	1.84				8.74
Granted			3,600,364				1.26				9.19
Exercised			(30,000	)			0.74				-
Forfeited/Expired			(752,222	)			1.76				-
Outstanding, December 31, 2020			6,285,792			$	1.52				8.86
Granted			1,395,801				0.98				9.43
Exercised			-				-				-
Forfeited/Expired			(371,250	)			0.73				-
Outstanding, September 30, 2021			7,310,343				1.46				8.45
Exercisable at September 30, 2021			3,845,124				1.52				7.91

 

Range of Exercise Price		Number of Awards				Weighted Average Remaining Contractual Life (years)				Weighted Average Exercise Price				Number of Awards Exercisable				Weighted Average Exercise Price
$ 0.61 - $4.01			7,310,343				8.45			$	1.46				3,845,124			$	1.52
			7,310,343				8.45			$	1.46				3,845,124			$	1.52

 

The aggregate intrinsic value of options outstanding and exercisable at September 30, 2021 was $0.2 million.

 

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The aggregate grant date fair value of options granted during the nine months ended September 30, 2021 and year ended December 31, 2020 amounted to $1.1 and $4.3 million, respectively. Compensation expense related to stock options for the three and nine month periods ended September 30, 2021 was $0.4 million and $1.7 million, respectively. Compensation expense related to stock options was $0.1 million and $0.4 million for the three and nine month periods ended September 30, 2020, respectively.

 

As of September 30, 2021, the total unrecognized fair value compensation cost related to unvested stock options was $2.5 million, which is to be recognized over a remaining weighted average period of approximately 9.03 years.

 

The weighted-average fair value of options granted during the three months ended September 30, 2021 and 2020, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes option pricing model are as follows:

 

		September 30, 2021				September 30, 2020
Significant assumptions (weighted-average):
Risk-free interest rate at grant date			-	%			0.29	%
Expected stock price volatility			-	%			74.46	%
Expected dividend payout			-				-
Expected option life (in years)			-				10
Expected forfeiture rate			0	%			0	%

 

Restricted Stock

 

Subject to the restrictions set with respect to the particular Award, a recipient of Restricted Stock generally shall have the rights and privileges of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld for the recipient’s account, and interest may be credited on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the recipient in cash or, at the discretion of the Board or Committee, in shares of common stock having a fair market value equal to the amount of such dividends, if applicable, upon the release of restrictions on the Restricted Stock and, if the Restricted Stock is forfeited, the recipient shall have no right to the dividends.

 

The Company’s restricted stock activity was as follows:

 

		Restricted Stock Shares				Weighted Average Grant Date Fair Value
Non-vested, December 31, 2019			82,086			$	2.69
Granted			150,000				1.60
Vested			(181,849	)			2.08
Forfeited/Expired			(237	)			-
Non-vested, December 31, 2020			50,000			$	1.60
Granted			338,443				1.86
Vested			(330,751	)			2.07
Forfeited/Expired			-				-
Non-vested, September 30, 2021			57,692			$	1.30

 

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Compensation expense related to restricted shares for the three and nine months ended September 30, 2021 was $0.1 million and $0.4 million, respectively. Compensation expense related to restricted shares for the three and nine months ended September 30, 2020 was $0.1 million and $0.3 million, respectively. At September 30, 2021 and December 31, 2020, the Company had approximately $0.1 million and $0.1 million, respectively, of total unrecognized compensation expense related to restricted stock awards. Compensation will be recognized over a weighted-average period of approximately 0.17 years and 0.14 years, respectively.

 

Restricted Stock Units

 

The terms and conditions of a grant of Restricted Stock Units shall be determined by the Board or Committee. No shares of common stock shall be issued at the time a Restricted Stock Unit is granted. A recipient of Restricted Stock Units shall have no voting rights with respect to the Restricted Stock Units. Upon the expiration of the restrictions applicable to a Restricted Stock Unit, The Company will either issue to the recipient, without charge, one share of common stock per Restricted Stock Unit or cash in an amount equal to the fair market value of one share of common stock.

 

The Company’s restricted stock unit activity was as follows:

 

		Restricted Stock Units				Weighted Average Grant Date Fair Value
Outstanding, December 31, 2019			60,759				3.66
Granted			431,578				1.33
Vested			(60,759	)			3.66
Forfeited/Expired			-				-
Outstanding, December 31, 2020			431,578			$	1.33
Granted			65,600				1.00
Vested			(497,178	)			1.29
Forfeited/Expired			-				-
Outstanding, September 30, 2021			-				-

 

At September 30, 2021 and December 31, 2020, the Company had approximately $0 and $0.6 million, respectively, of total unrecognized compensation expense related to restricted stock units. As of September 30, 2021 and December 31, 2020, compensation will be recognized over a weighted-average period of approximately 0 years 0.64 years, respectively.

 

Compensation expense related to restricted stock units for the three and nine month periods ended September 30, 2021 was $0.2 million and $0.4 million, respectively. Compensation expense related to restricted stock units was $0.1 million and $0.2 million for the three and nine month periods ended September 30, 2020, respectively. All compensation expense related to restricted stock units were included in selling, general and administrative expenses.

 

NOTE 17 – STOCKHOLDERS’ EQUITY

 

Authorized Stock

 

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

 

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As of September 30, 2021 and December 31, 2020, there were 65,060,044 shares of the Company’s common stock issued and outstanding, respectively.

 

Common Share Issuances

 

From January 1, 2020 to December 31, 2020, the Company issued 281,250 common stock shares, at prices per share ranging from $1.40 to $3.93 in consideration for certain consulting services. The total value of these issuances was $0.5 million.

 

From January 1, 2020 to December 31, 2020, the Company issued 194,016 common stock shares, at prices per share ranging from $1.60 to $3.15 in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.02 million.

 

On June 5, 2020, the Company issued 12,058,623 shares of its common stock, at a price per share equal to$1.82, in connection with the Release, Waiver, and Amendment Agreement entered into with CHI. The total value of these issuances was $21.9 million. $0.2 million related to common stock issuable as of December 31, 2019 that was issued in during 2020.

 

On June 5, 2020, the Company issued 708,467 common stock shares, at a price of $2.00 per share, from the exercise of certain warrants. Total value of these issuances was $1.4 million.

 

On October 2, 2020, the Company issued 6,909,091 common stock shares at a price per share of $1.38, in connection with the Sera Labs Merger. The total value of this issuance was $9,534,546.

 

On December 9, 2020, the Company issued 757,576 common stock shares, at a price per share of $1.32 in connection to conversion of $1,000,000 of the Series A Note plus 565,702 common stock shares at a price per share of $0.89 in connection to the make-whole-amount of $500,000 per the terms of the Series A Note.

 

From January 1, 2021 to September 30, 2021, the Company issued 872,361 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.2 million.

 

From January 1, 2021 to September 30, 2021, the Company issued 646,512 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to several consulting agreements. The total value of these issuances was $0.7 million.

 

From January 1, 2021 to September 30, 2021, the Company issued 26,936 common stock shares, at a price of $1.30 per share, from a cash-less exercise of certain warrants. Total value of these issuances was $0.03 million.

 

From January 1, 2021 to September 30, 2021, the Company issued 1,439,394 common stock shares, at a price per share of $1.32 in connection to conversion of $1.9 million of the Series A Note plus 2,597,951 common stock shares at a price per share ranging from $0.43 to $0.64 in connection to the make-whole-amounts totaling $1.3 million per the terms of the Series A Note.

 

Common Stock Issuable

 

In 2018, the Company entered into an amendment to extend the maturity date of a convertible promissory note. As compensation for extending the note, the Company is to issue 150,000 common stock shares of the Company at a price of $2.05 per share. As of the filing of this Current Report on Form 10-Q, the Company has not yet issued these common stock shares and has recorded a stock issuable of $0.3 million.

 

In 2018, convertible promissory notes and accrued interests totaling $0.3 million was converted into 297,288 shares of common stock of the Company at a price of $0.89 per share. As of the filing of this Current Report on Form 10-Q, the Company has not yet issued these common stock shares and has recorded a stock issuable of $0.3 million.

 

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From January 1, 2021 to September 30, 2021, the Company entered into Consulting Agreements (“Agreements”) with individuals. Per the terms of the Agreements, the Company is to issue 18,104 common stock shares of the Company at a price per share of $1.72. As of our filing of this Current Report on Form 10-Q, the Company has not yet issued these common stock shares and has recorded a stock payable of $0.03 million.

 

NOTE 18 – SEGMENT REPORTING

 

Business Segments

 

The Company manages its operations through two business segments: Cure, which develops and manufactures pharmaceutical and wellness products, and Sera Labs, which sells wellness products through direct to consumer and wholesale channels.

 

The Company evaluates performance based on net operating profit. Administrative functions such as finance, treasury, and information systems are centralized. However, where applicable, portions of the administrative function expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. In the event any materials and/or services are provided to one operating segment by the other, the transaction is valued according to the company’s transfer policy, which approximates market price. The costs of operating the manufacturing plant is captured discretely in the Cure segment. The Company’s property, plant and equipment, inventory, and accounts receivable are captured and reported discretely within each operating segment.

 

Summary financial information for the two reportable segments for the nine months ending September 30, 2021 is as follows (in thousands):

 

		Cure				Sera Labs				Eliminations				Consolidated
Net Sales		$	386			$	4,654			$	(126	)		$	4,914
Operating Loss		$	(7,019	)		$	(5,689	)		$	-			$	(12,708	)
Assets		$	46,604			$	9,450			$	(14,175	)		$	41,879
Accounts receivable, net		$	22			$	186			$	-			$	208
Inventory, net		$	368			$	592			$	-			$	960

 

Summary financial information for the two reportable segments for the nine months ending September 30, 2020 is as follows (in thousands):

 

		Cure				Sera Labs				Eliminations				Consolidated
Net Sales		$	741			$	-			$	-			$	741
Operating Loss		$	(14,258	)		$	-			$	-			$	(14,258	)
Assets		$	30,066			$	-			$	-			$	30,066
Accounts receivable, net		$	46			$	-			$	-			$	46
Inventory, net		$	228			$	-			$	-			$	228

 

Disaggregation of Revenues and Concentration Risk

 

The following table presents the percentage of consolidated revenues attributable to products or services classes that represent greater than ten percent of consolidated revenues for the three and nine months September 30, 2021 and 2020:

 

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		Three Months Ended								Nine months Ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
CureFilm™ sales			21	%			98	%			14	%			75	%
Research & Development services			-				-				1				23
Product sales - CBD			78				-				77				-
Product sales – PPE			-				-				7				-
Other sales less than 10%			1				2				1				2
Total			100	%			100	%			100	%			100	%

 

The Company did not receive revenue from one customer that individually represents 10% or more of consolidated revenues for the three and nine months ended September 30, 2021. The Company received revenue from two customers that individually represent greater than 10% of consolidated revenues, representing 81% of consolidated revenues for the three months ended September 30, 2020, and three customers that individually represent greater than 10% of consolidated revenues, representing 74% of consolidated revenues for the nine months ended September 30, 2020. Accounts receivable from these customers was $0.04 million and $0.13 million at September 30, 2021 and December 31, 2020, respectively.

 

NOTE 19 – BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY

 

Sera Labs Acquisition

 

On October 2, 2020, the Company acquired all of the issued and outstanding stock of Sera Labs. All issued and outstanding shares of the capital stock of Sera Labs were converted into the right to receive, subject to customary adjustments, an aggregate of approximately (i) $1.0 million in cash (the “Upfront Payment”) and (ii) up to 6,909,091 shares of the Company’s common stock. On October 1, 2020, the Parties entered into a Waiver of Closing Condition, pursuant to which the Company’s obligation to pay the Upfront Payment at the Effective Time was extended to October 13, 2020. Pursuant to the Sera Labs Merger Agreement, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as set forth in the Sera Labs Merger Agreement. Subsequent to the Effective Time and for a period of two years, the Company agreed to make available to Sera Labs $4.0 million for working capital, less the outstanding amount of the Secured Promissory Note previously issued by the Company to Sera Labs.

 

Sera Labs is a trusted leader in the health, wellness, and beauty sectors of innovative products with cutting edge technology and superior ingredients such as CBD. Sera Labs creates high quality products that use science-backed, proprietary formulations. Its more than 20 products are sold under the brand names Seratopical™, SeraLabs™, and Gordon’s Herbals™. Sera Labs sells its products at affordable prices, making them easily accessible on a global scale. Strategically positioned in the growth market categories of beauty, health & wellness, and pet care, Sera Labs products are sold in major national drug, grocery chains and mass retailers. The company also sells products under private label to major retailers and multi-level marketers, as well as direct-to-consumer (DTC), via online website orders, including opt-in subscriptions.

 

The acquisition was accounted for in accordance with ASC 805, Business Combinations. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 12,897,115 total potential shares to be issued, 5,988,024 shares are considered contingent shares based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as described in the Sera Labs Merger Agreement. (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent Shares of $3.1 million will be recorded as a liability as contingent share consideration as of October 2, 2020.

 

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The following table presents the change in fair value of contingent consideration (in thousands):

 

(Dollars in thousands)		Fair Value of the Contingent Share Consideration
Fair value at December 31, 2020		$	3,205
Fair value at September 30, 2021			2,258
Net change in fair value for the nine months ended September 30, 2021		$	(947	)

 

The Company estimated the fair value of the preliminary purchase price for the acquisition of Sera Labs is approximately $14.2 million. The Company acquired Sera Labs through the issuance of shares of Common Stock of the Company with $1 million of cash consideration to be provided. The preliminary total purchase price was determined based on the following: i) $1 million of the Upfront Payment ii) Company’s closing price ($1.38) on October 2, 2020 for the closing merger consideration shares; and iii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over a 24 month performance period applied to the Clawback Shares.

 

(Dollars in thousands)		Shares				Amount
Upfront Payment			-			$	1,000
Closing Merger Consideration Shares			6,909,091				9,535
Contingent Consideration Shares (Clawback Shares)			5,988,024				3,083
Liabilities assumed			-				550
Total purchase price			12,897,115			$	14,168

 

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

 

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

 

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

 

(Dollars in thousands)
Net assets acquired:
Cash		$	1,357
Other assets			1,440
Property, plant and equipment			6
Other long term assets			384
Intangibles assets			10,182
Goodwill			4,687
Accounts payable and accrued expenses			(1,063	)
Contract liabilities			(1,963	)
Other current liabilities			(462	)
Other long-term liabilities			(400	)
Net assets acquired		$	14,168

 

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

 

(Dollars in thousands)		Weighted-average Estimated useful life		Preliminary Estimated Asset Fair Value
Finite-lived intangible assets:
Customer relationships		5.0 years		$	7,110
Tradename		4.0 years		$	2,610
Non-compete		2.0 years		$	462
Total finite-lived intangible assets acquired		4.6 years		$	10,182

 

CHI Acquisition

 

On May 14, 2019, the Company acquired all of the issued and outstanding stock of CHI for shares of the Company’s Common Stock. The maximum number of shares of Common Stock to be issued, including escrowed shares and shares issuable pursuant to a variety of earn-out provisions and warrants, is 32,072,283 shares. The shares are allocated as follows: (i) 5,700,000 shares of Common Stock as upfront consideration issued at the closing of the transaction (the “Closing Date”); (ii) 7,128,913 shares to be held in escrow, subject to indemnification and clawback rights that lapse upon the achievement of certain milestones; (iii) up to 3,207,228 shares that may be issued pursuant to an earn-out over five years upon the achievement of certain technological implementations; (iv) up to 8,018,071 shares that may be issued pursuant to an earn-out over two years upon the achievement of certain revenue goals; and (v) up to 8,018,071 shares issuable upon exercise of warrants (“Acquisition Warrant Shares”) that become exercisable upon achieving certain revenue goals between the second and fourth anniversary of the Closing Date at an exercise price of $5.01 per share, exercisable, to the extent vested, for five years from the Closing Date. In exchange for the assets and liabilities acquired, the Company received an investment of $2 million from Chemistry Holdings pursuant to a convertible note. Such convertible note, on the Closing Date, became an intercompany payable and was cancelled.

 

On June 5, 2020 (the “Release Effective Date”), the Company and CHI, entered into a Release, Waiver, and Amendment (the “Agreement”) and a related Warrant Amendment Agreement (“Warrant Amendment”), in order to make a full resolution of the shares issuable pursuant to the CHI Merger. The Agreement provided as follows: (a) all 7,128,913 shares held in escrow were released to the Holders as of the Release Effective Date, of which 140,828shares were returned to the Company for cancellation in consideration for the Company committing to pay certain outstanding liabilities, (b) of the 11,225,299 total shares issuable pursuant to the earn-out provisions in the CHI Merger Agreement, 5,612,654 shares were issued to the Holders as of the Release Effective Date (310,821 of which were assigned back to the Company as of the Release Effective Date) and the obligation of the Company to issue any further earn-out shares was terminated, and (c) certain Holders exercised warrants issued in the CHI Merger to purchase 708,467 shares of Common Stock on the Release Effective Date at a price of $2.00 per share (which reflects a reduced exercise price as a result of the Warrant Amendment) for gross proceeds to the Company of approximately $1.4million and the remaining warrants to purchase 7,309,605 shares of Common Stock issued in the CHI Merger expired on the Release Effective Date as a result of an amendment of such warrants effected pursuant to the Warrant Amendment. 

 

As previously disclosed, the Company undertook to issue warrants to purchase an additional 4,143,706 shares of common stock to certain affiliates of CHI in consideration for consulting and advisory services to be provided following the closing of the CHI Merger (the “Service Warrants”). Pursuant to the Agreement, the undertaking by the Company to issue the Service Warrants was terminated as of the Release Effective Date.

 

CHI has developed a novel chewable delivery system, nanoemulsions, microemulsions, microcapsules and taste masking solutions. These technologies complement and expand the CUREfilm™ platform to enable the delivery of a wider range of active ingredients at higher doses. The combined technologies create a versatile platform for both immediate and controlled-release drug delivery.

 

The acquisition was accounted for in accordance with ASC 805, Business Combinations. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 32,072,283 total potential shares to be issued, 26,372,283 shares are considered contingent shares to be released or issued over a period from 5 months to 5 years based on the various contingency as described in the Merger Agreement. (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent Shares and Acquisition Warrant Shares of $14.6 million will be recorded as a liability as contingent share consideration as of May 14, 2019. Below is the change of Contingent Share consideration for the year ended December 31, 2020:

 

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(Dollars in thousands)		Fair Value of the Contingent Share Consideration
Fair Value at December 31, 2019		$	16,043
Settlement of contingent consideration liability			(21,701	)
Net change in fair value during the year ended December 31, 2020			5,658
Fair Value at December 31, 2020		$	-

 

Supplemental Pro Forma Information

 

The following unaudited supplemental pro forma financial information is based on our historical consolidated financial statements and Sera Lab’s historical consolidated financial statements as adjusted to give effect to the October 2, 2020 acquisition of Sera Labs. The unaudited supplemental pro forma financial information for the periods presented gives effect to the acquisition for CHI as if it had occurred on January 1, 2020 for Sera Labs.

 

This unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the periods presented. In addition, the unaudited pro forma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable.

 

The following table presents pro forma sales, net loss attributable to Avenir Wellness Solutions, Inc. formerly known as CPHC, and net loss attributable to the Company per common share data assuming Sera Labs and CHI were acquired at the beginning of 2020 fiscal year.

 

For the three months ended September 30, 2020 (in thousands, except per share data):

 

		Cure Pharmaceutical				Sera Labs				Pro forma Adjustments				Consolidated Pro Forma
Net product sales		$	192			$	1,744			$	-			$	1,936
Net income (loss)		$	(2,751	)		$	(970	)		$	-			$	(3,721	)
Net income (loss) attributable to Cure per common share:
Basic		$	(0.07	)		$	(0.08	)						$	(0.07	)
Diluted		$	(0.07	)		$	(0.08	)						$	(0.07	)

 

For the nine months ended September 30, 2020 (in thousands, except per share data):

 

		Cure Pharmaceutical				Sera Labs				Pro forma Adjustments				Consolidated Pro Forma
Net product sales		$	741			$	5,685			$	-			$	6,426
Net loss		$	(14,144	)		$	(1,327	)		$	-			$	(15,471	)
Net loss attributable to Cure per common share:
Basic		$	(0.32	)		$	(0.11	)						$	0.30	)
Diluted		$	(0.32	)		$	(0.11	)						$	(0.30	)

 

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NOTE 20 - INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS

 

On September 4, 2018, Cure Pharmaceutical entered into its first multi-year licensing agreement (the “Licensing Agreement”) with Canopy Growth Corporation (“Canopy”), a company that engages in the production and sale of medical cannabis. Under the terms of the Licensing Agreement, Canopy will have an exclusive license to certain of Cure Pharmaceutical’s intellectual property rights, including Cure Pharmaceutical’s patented, multi-layer oral thin film (OTF), CUREfilm™ technology for use with cannabis extracts and biosynthetic cannabinoids and the Cure Pharmaceutical’s trademarks in markets around the world where it is legal for Canopy to sell such products, excluding Asia. Cure Pharmaceutical will retain the right to manufacture synthetic cannabinoids for pharmaceutical applications.

 

On November 7, 2019, the Company and Canopy entered into an Amendment Agreement (“Amendment”) to allow the Company to sell cannabinoid CUREfilm products to third parties internationally, excluding Canada, from the November 7, 2019 until December 31, 2020. However, Cure Pharmaceutical may not sell any cannabinoid CUREfilm products that are specifically developed for Canopy, as identified in the Development Agreement between the Company and Canopy, dated June 17, 2019.

 

Canopy will manufacture CUREfilms that deliver cannabis extracts, expanding the commercialization and monetization of the CUREfilm technology. The parties will collaborate on new products and uses for the products.

 

Canopy shall pay the Company approximately $0.3 million for costs associated with a feasibility study and technology transfer as well as certain milestone payments and royalties on product sales by Canopy with minimum royalties starting in 2020.

 

On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million will be paid to the Company’s attorneys within 45 calendar days.

 

During the three months ended September 30, 2021 and 2020, the Company recognized $0 and $0.05 million of revenue relating to work completed in regard to the transfer of technology fee as discussed in the License Agreement with Canopy, respectively. During the nine months ended September 30, 2021 and 2020, the Company recognized $0 and $0.01 million of revenue relating to work completed in regard to the transfer of technology fee as discussed in the License Agreement with Canopy, respectively.

 

NOTE 21 - COMMITMENTS AND CONTINGENCIES

 

Litigation

 

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

 

On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million will be paid to the Company’s attorneys within 45 calendar days.

 

On March 26, 2021, a vendor that the Company utilized for consulting services relating to various quality, compliance and regulatory filed a complaint against the Company for breach of contract. On May 18, 2021, the Company responded to the complaint denying their claims and also filed a cross complaint against this vendor for breach of contract by failing to provide deliverables as required by the contract. The Company is currently unable to determine what additional expenses will be incurred in order to defend this matter. As such, the Company cannot determine whether there is a reasonable possibility that a loss will be incurred, nor can it estimate the range of any such potential loss. Accordingly, the Company has not accrued an amount for any potential loss associated with this action.

 

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Tax Filings

 

The Company tax filings are subject to audit by taxing authorities in jurisdictions where it conducts business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. As of September 30, 2021, the Company is not subject to any such these audits.

 

Employment Contracts

 

The Company has entered into employment and severance benefit contracts with certain executive officers. Under the provisions of the contracts, The Company may be required to incur severance obligations for matters relating to changes in control, as defined, and certain terminations of executives. As of September 30, 2021, The Company had such severance obligations for certain executive officers, in accordance with the severance benefit provisions of their respective employment and severance benefit agreements.

 

On May 8, 2020 the Company entered into a separation agreement (the “Separation Agreement”) with Jessica Rousset whereby the parties have agreed to a mutual separation of Mrs. Rousset’s employment as the Company’s Chief Operating Officer, effective May 8, 2020.

 

Pursuant to the terms of the Separation Agreement, Mrs. Rousset will be entitled to the following severance benefits: (i) a gross sum of $93,461.54, paid in equal installments over a nine -month period; (ii) for a period of nine months, an amount equal to the cost of her COBRA health benefits if she enrolls for COBRA coverage; (iii) acceleration of vesting of each equity award held by her to the extent the award would have vested had she remained employed for nine months following her resignation; and (iv) an extended exercise period for certain equity awards held by her such that she may exercise vested shares under such outstanding equity awards until May 8, 2021. The Separation Agreement contains a release and certain restrictive covenants that are binding upon Mrs. Rousset

 

Indemnification

 

In the normal course of business, The Company may provide indemnification of varying scope under The Company’s agreements with other companies or consultants, typically The Company’s clinical research organizations, suppliers and others. Pursuant to these agreements, The Company will generally agree to indemnify, hold harmless, and reimburse the indemnified parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of The Company’s products. Indemnification provisions could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to The Company’s products. The Company’s office and laboratory facility leases also will generally contain indemnification obligations, including obligations for indemnification of the lessor for environmental law matters and injuries to persons or property of others, arising from The Company’s use or occupancy of the leased property. The term of these indemnification agreements will generally continue in effect after the termination or expiration of the particular research, development, services, lease, or license agreement to which they relate. Historically, The Company has not been subject to any claims or demands for indemnification. The Company also maintains various liability insurance policies that limit The Company’s financial exposure. As a result, The Company management believes that the fair value of these indemnification agreements is minimal. Accordingly, The Company has not recorded any liabilities for these agreements as of September 30, 2021 and December 31, 2020.

 

Operating leases

 

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

 

Sera Labs will pay base monthly rent in the amount of $0.1 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%. If the Lease is terminated based on the occurrence of an “event of default,” The Company will be obligated to pay the abated rent to the lessor.

 

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On May 1, 2019, Sera Labs entered into a lease agreement to lease a 3,822 square feet office space and was absorbed by the Company upon acquisition of Sera Labs on October 2, 2020. The agreement contains an option to extend the lease for an additional 36 months and the Company will reassess the lease term of the contract when it has determined it is reasonably certain to exercise the option. Sera Labs will pay base monthly rent in the amount of $0.01 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%. If the Lease is terminated based on the occurrence of an “event of default,” The Company will be obligated to pay the abated rent to the lessor.

 

Total rent expense was $0.1 million and $0.07 million for the three months ended September 30, 2021 and 2020, respectively. Total rent expense was $0.3 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively.

 

The Company classified the Sera Labs lease as an operating lease in accordance with ASC 842 and has recognized a right-of-use asset and a lease liability based on the present values of its lease payments over its respective lease term. The Company used the services of a valuation company to compute the IBR which is necessary to determine the present value of its lease payments since a borrowing rate is not explicitly available on the lease agreement. The concluded IBR is 11.30%. Operating lease payments and lease expense are recognized on a straight-line basis over the lease term.

 

As of September 30, 2021, the current portion and long-term portion of operating lease liability is $0.1 million and $0.2 million, respectively.

 

The future payments due under the operating lease as of September 30, 2021 are as follows (in thousands):

 

Years
2021 (remaining)		$	33
2022			134
2023			138
2024			46
2025			-
Undiscounted cash flow			351
Effects of discounting			(48	)
Lease liabilities recognized		$	303

 

Finance leases

 

During 2019 the Company entered into a 5-year equipment lease rental which requires the Company to pay monthly payments of $0.02 million. The Company determined the payments represented substantially all of the fair value of the asset and recorded a right of use asset for $0.06 million and a finance lease liability for $0.06 million during the year ended December 31, 2019 within other assets and liabilities. The company will make payment of $0.02 annually until October 2024. Interest associated with the lease is $0.1 million or less annually based on a discount rate of 9.0%. As of September 30, 2021, the current portion and long-term portion of finance capital lease liability was $0.013 million and $0.03 million, respectively. As of December 31, 2020, the Company the current and long-term portion of finance capital lease liability was $0.01 million and $0.04 million, respectively.

 

Future minimum lease payments under non-cancellable capital leases as of September 30, 2021 are as follows (in thousands):

 

2021 (remaining)			6
2022			14
2023			14
2024			9
2025			-
Thereafter			-
Finance lease liabilities recognized		$	43

 

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Operating and Financing leases

 

The following table presents supplemental balance sheet information related to operating and financing leases as of September 30, 2021 and December 31, 2020 (in thousands, except lease term and discount rate):

 

		September 30, 2021				December 31, 2020
Operating leases
Right-of-use assets, net		$	280				343
Right-of-use lease liabilities, current		$	104				93
Right-of-use lease liabilities, noncurrent			199				278
Total operating lease liabilities		$	303				371
Financing Leases
Finance lease right-to-use assets, net		$	43				52
Current liabilities		$	13				12
Noncurrent liabilities			30				40
Total financing lease liabilities		$	43				52
Weighted average remaining lease term
Operating leases		2.55 years				3.31 years
Financing leases		3.06 years				3.82 years
Weighted average discount rate
Operating leases			11.30	%			11.3	%
Financing leases			9.0	%			9.0	%

 

NOTE 22 – SUBSEQUENT EVENTS

 

On October 7, 2021 and October 19, 2021, the Company received $0.05 million and $0.02 million, respectively, from one of the Company’s board members (“Second Board Investor”) in exchange for two promissory notes. Both the Company and Second Board Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Second Board Investor are still negotiating the terms of the promissory notes.

 

On October 15, 2021, the Company received $0.3 million as an initial deposit from a distribution company (“Distributor”) for the distribution rights of the Company’s sildenafil OTF product (“Distribution Rights”).  As of the date of this report, the Company and the Distributor are still negotiating a definitive agreement to finalize the terms of the Distribution Rights per territory.

 

On October 27, 2021, the Company received $0.3 million from an investment company (“Investor”) in exchange for a promissory note. Both the Company and Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory notes.

 

On October 30, 2021, the Series B Note matured and is due according to its terms (see Note 13).  On November 3, 2021 the Company received an Event of Default Redemption Notice from the Investor citing non-payment of the maturity amount, and requesting payment of a default amount, including penalties, of $9.1 million by November 10, 2021. The Company reviewed and does not agree with the amount due. As of the filing date of this report, the Company is negotiating an extension of the maturity date and the amount due on terms satisfactory to the Company. There can be no guaranty that the Company will be successful in this effort in which case the Investor may endeavor to exercise its remedies.

   

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

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) our condensed consolidated financial statements and related notes appearing elsewhere in this Amendment No. 1 to Quarterly Report on Form 10-Q and (ii) our audited consolidated financial statements and the related notes and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2020 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 31, 2021. This Amendment No. 1 to Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are often identified by the use of words such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements include, but are not limited to, statements with respect to our outlook; the impact of new accounting standards; our ability to service our debt; our business strategy, including with respect to potential acquisitions; plans and objectives of future operations; the length and severity of the COVID-19 outbreak and its impact on the global economy and our financial results; and our future financial and business performance. The events described in these forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors”, set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, Part II, Item 1A of this Amendment No. 1 to Quarterly Report on Form 10-Q and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

 

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

 

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

 

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

 

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CUREfilm Blue

 

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

    

CUREfilm Canna

 

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

 

CUREfilm Anti-Viral

 

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

 

CUREfilm Central Nervous System (CNS)

 

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

 

Background

 

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

 

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

 

Impact of COVID-19

 

Our financial results and operations for the three months ended September 30, 2021 were not significantly impacted by the COVID-19 pandemic. The measures we have taken to ensure the availability and functioning of our critical infrastructure, and to promote the safety and security of our employees remain in place. In accordance with public and private sector policies and initiatives to reduce the transmission of COVID-19, we have imposed travel restrictions, adopted policies aimed at promoting social distancing, and implemented work-from-home arrangements for employees where practicable. These measures and our compliance with local and national guidelines aimed at containing the virus could impact our operations and disrupt our business. Currently, our single operating facility is operational, and no reduction in our work force has taken place.

 

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.

 

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

 

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

  

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

 

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

 

The FDA approves more reformulations than new chemical entities (NCEs) each year under Section 505(b)(2) of the Food, Drug, and Cosmetic Act (“505(b)(2)”). The number of 2018 NDA approvals that used the 505(b)(2) regulatory pathway rose dramatically from 45 approvals in 2016 to an all-time high of 75 in 2018 and 64 in 2019. Under Section (505)(b)(2), the FDA may grant market exclusivity for a term of up to three years of exclusivity following approval of a listed drug that contains previously approved active ingredients but is approved in a new dosage, dosage form, route of administration or indication for use. Taken together, the exclusivity period of a drug and the lower R&D cost for reformulating a drug, have led to some pharmaceutical companies investigating reformulating their drugs as part of their lifecycle management protocols.

 

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

 

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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 OTF – CUREfilm Blue. While we currently manufacture nutraceutical products in our state-of-the-art cGMP oral dissolving film manufacturing facility, we are undertaking steps to manufacture pharmaceutical products for commercial use.

 

Cannabinoids and Other Schedule 1 Drugs

 

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

  

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

 

Wellness

 

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

 

Our recently acquired wholly-owned subsidiary, Sera Labs, is a trusted leader in the health, wellness, and beauty sectors of innovative products with cutting edge technology and superior ingredients such as CBD. Sera Labs creates high quality products that use science-backed, proprietary formulations. Its more than 20 products are sold under the brand names Seratopical™, Seratopical® Revolution, SeraLabs™, and Gordon’s Herbals™. Sera Labs sells its products at affordable prices, making them easily accessible on a global scale. Strategically positioned in the growth market categories of beauty, health & wellness, and pet care, Sera Labs products are sold in major national drug, grocery chains and mass retailers. The company also sells products under private label to major retailers and multi-level marketers, as well as direct-to-consumer (DTC), via online website orders, including opt-in subscriptions.

 

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

 

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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 delivery systems for wellness and pharmaceutical products. This acquisition allows us to address the increased demand for solid, chewable, liquid and dermal products for immediate and controlled-release, particularly for poorly soluble molecules such as cannabinoids.

 

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

 

	·	Protect molecules from degradation during the manufacturing process and throughout shelf life;
	·	Protect molecules from degradation in the body (e.g. stomach acids);
	·	Increase a drug’s bioavailability and optimize its release kinetics through;

 

	·	Increased solubility in water and therefore bodily fluids; and
	·	Enhanced permeability and retention in target tissue.

  

CUREfilm^TM Technology

 

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

 

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

 

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.

 

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Patient Experience and Medication Adherence

 

	·	Difficulty swallowing tablets and capsules can be a problem for many individuals and can lead to a variety of adverse events and patient noncompliance with treatment regimens. It is estimated that over 16 million people in the United States have some difficulty swallowing, also known as dysphagia. Studies in adults evaluating the effect of tablet and capsule size on ease of swallowing suggest that increases in size are associated with increases in patient complaints related to swallowing difficulties at tablet sizes greater than approximately 8 mm in diameter. OTFs can readily be taken without the need to swallow or use of water or other beverages.
	·	Upon administration, there is a relatively low risk of the patient choking which can be most beneficial for patients suffering from motion sickness, dysphagia and repeated emesis.
	·	Easily administered to bedridden and non-cooperative patients (e.g., geriatric, pediatric, and psychiatric). They are hard to spit out.
	·	Configured with physical dimensions such that it is relatively easy and convenient to store and carry. Patients can conveniently carry multiple dissolvable films in his or her pocket or wallet. A single dose of strip can be carried individually without requiring the secondary container.
	·	OTFs are flexible with a pleasant mouth feel unlike oral dissolvable tablets which are brittle.

 

Manufacturing and logistics

 

	·	The pouches or sachets offer larger printable 2D areas which traditional drug product formats do not. This allows the manufacturer to adapt to rapidly evolving labeling and regulatory requirements for information and anti-counterfeiting, such as product serialization.
	·	The manufacturing process has a low carbon footprint, with lower use of water for component preparation and sterilization as compared with other dosage forms.
	·	Even though not necessarily sterile, each dose unit is packed individually avoiding contact with other units.
	·	Tensile strength and plasticity of OTF allow for handling single, individual dose units without damage to the dosage form.
	·	Multiple SKUs can be produced by simply modifying the length of the OTF.
	·	Enables anti-counterfeit management and dose management.
	·	Adaptable for use with dispensing devices for pharmacy preparation or self-administration.
	·	Can be easily and conveniently handled, stored, and transported at room temperature.

  

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

 

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

 

	·	loading of multiple active ingredients on one dose unit;
	·	ability to accommodate high drug load per dose unit (e.g. > 200 mg);
	·	quickly dissolving/disintegrating (e.g. < 2 minutes);
	·	potential for low moisture level (e.g. < 10 wt.% water);
	·	ability to achieve desired performance characteristics while maintaining pleasant feeling in the mouth (e.g. soft, plush feeling with pliable film);
	·	ability to achieve desired performance characteristics while formulating active ingredients susceptible to degradation from low pH environments, light, heat, moisture, and oxygen; and
	·	multiple and unique ways to mask the bitter, metallic or salty taste of an active ingredient.

 

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

 

	·	a method and apparatus for minimizing heat, moisture, and shear damage to medicant incorporated into an edible film;
	·	edible films for administration of medicaments to animals;
	·	methods for modulating dissolution, bioavailability, bioequivalence;
	·	pharmaceutical composition and method of manufacturing;

  

	·	pharmaceutical composition with ionically crosslinked polymer encapsulation of active ingredient;
	·	multi-layered high dosage dissolvable film for oral administration;
	·	thin films with high load of active ingredient;
	·	high dosage dissolvable films for oral administration;
	·	methods and composition for improving sleep;
	·	oral dissolvable film that includes plant extracts and controlled substances;

 

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	·	rapidly disintegrating film matrix for moisture sensitive compounds;
	·	protein-polysaccharide macromolecular complexes encapsulating ethyl alcohol;
	·	self-emulsifying oral thin film compositions; and
	·	topical preparation.

 

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

 

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

 

Competition

 

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

 

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 39 full-time employees. None of our employees are covered by collective bargaining agreements. We consider our relations with our employees to be good.

 

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RESULTS OF OPERATIONS

 

For the Three and Nine Months Ended September 30, 2021 and 2020

 

Revenues

 

Revenues for the three and nine months ended September 30, 2021 was $1.4 million and $4.9 million, respectively, as compared to $0.2 million and $0.5 million, respectively, for the three and nine months ended September 30, 2020. The increase in revenue for the three and nine months ended September 30, 2021 compared to the same period in 2020 was mainly due to $1.3 million and $4.3 million, respectively, of revenue attributed from Sera Labs. Revenue from Sera Labs was mainly from direct-to-consumer sales of our gummy products in both periods. The Company did not incur any revenues from Sera Labs during the three and nine months ended September 30, 2020 as Sera Labs was acquired on October 2, 2020.

 

Cost of Goods Sold

 

Cost of goods sold was $0.5 million and $1.7 million, respectively, in the three and nine months ended September 30, 2021 compared to $0.2 million and $0.4 million, respectively, in the three and nine months ended September 30, 2020. Cost of goods sold increased by approximately $0.3 million and $1.3 million during the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020. The increase was primarily due to the Company generating substantially more revenue from Sera Labs sales during the three and nine months ended September 30, 2021 as noted above compared to the same period in 2020. In addition, revenue from Sera Labs were from products that have a higher gross margin compared to products sold by Cure Pharmaceutical during the three and nine months ended September 30, 2021 compared to the same period in 2020.

 

Research and Development Expenses

 

For the three and nine months ended September 30, 2021, research and development expenses decreased to $0.6 million and $1.9 million, respectively, compared to the three and nine months ended September 30, 2020 of $0.7 million and $2.3 million, respectively. The decrease in research and development expenses is mainly due to the Company not incurring the same third party contractor expenses for our CUREfilm Blue product during the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020. However, the decrease in our third party contractor expenses was offset by the increase in expenses incurred in developing CUREfilm anti-Viral, CUREfilm CNS and various other OTF and other delivery forms during the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020.

 

Selling, General and Administrative Expenses

 

Our expenses for the three and nine months ended September 30, 2021 are summarized as follows in comparison to our expenses for the three and nine months ended September 30, 2020 (in thousands).

 

		Three Months Ended								Nine months Ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Consulting		$	105			$	126			$	497			$	728
Salaries and wages			701				280				2,066				804
Selling, general and administrative			2,869				452				8,132				1,859
Professional services and investor relations			222				634				2,011				1,668
Noncash compensation			687				583				2,194				1,652
Total selling, general and administrative expenses		$	4,584			$	2,075			$	14,900			$	6,711

 

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Consulting

 

Consulting expense decreased by $0.02 million and $0.2 million for the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020, respectively. This was due to the Company decreasing the number of consultants used during the three and nine months ended September 30, 2021 compared to the same periods in 2020. In addition, a majority of the expenses during the three and nine months ended September 30, 2020 related to noncash consulting services whereby the Company issued common stock shares in exchange for services performed over a period of time.

 

Salaries and wages

 

Salaries and wages expense increased by approximately $0.4 million and $1.3 million during the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020, respectively. This was due to an increase in twelve (12) new employees from the acquisition of Sera Labs in October 2020. These employees were not part of the Company during the three and nine months ended September 30, 2020.

 

Selling, General and Administrative

 

Selling, general and administrative expense increased by approximately $2.4 million and $6.3 million for the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020, respectively. This was mainly due to marketing and advertising spends as well as selling expenses incurred by Sera Labs, which was not part of the Company during the three and nine months ended September 30, 2020. Of the 2.4 million and $6.3 million increase in selling, general and administrative expenses during the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020, $1.7 million and $5.0 million, respectively, relate to advertising and marketing spend by Sera Labs. In addition, the Company incurred amortization expense relating to the Sera Labs intangible assets acquired of $0.6 million and $ 1.7 million during the three and nine months ended September 30, 2021 as well as the Company began amortizing completed IPR&D during the three months ended September 30, 2021 that were not incurred during the same periods in 2020.

 

Professional Services and Investor Relations

 

Professional Services and investor relations expenses decreased by approximately $0.4 million and increased by approximately $0.4 million for the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020, respectively. The decrease was a result of the Company reducing our investor relation efforts during the three months ended September 30, 2021 compared to the same period in 2020. The increase during the nine months ended September 30, 2021 compared to the same period in 2020 was due to the Company recording the fair value of the common stock issued to investor relation firms which was not present during the nine months ended September 30, 2020. The issuance of common stock to these investor relations firms was 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, 2021 compared to the same period in 2020 as to assist the Company in strategic planning and advisory for potential business acquisitions, tax planning, patent and technology acquisitions and general and corporate compliance services.

 

Non-cash Compensation

 

Non-cash compensation expense increased by approximately $0.1 million and $0.5 million for the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020, respectively. This was primarily due to the Company recording the fair value of vested stock options, restricted stock awards and restricted stock units issued from our 2017 Equity Plan during the three and nine months ended September 30, 2021. As the Company issued stock options, restricted stock awards and restricted stock units during 2020, the Company incurred more vested awards from our 2017 Equity Plan during the three and nine months period ended September 30, 2021 compared to the same period in 2020.

 

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Change in Fair Value Contingent Stock Consideration

 

The change in fair value of contingent stock consideration increased by approximately $0.6 million and decreased by $6.6 million for the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020. The increase during the three months ended September 30, 2021 was primarily due to the Company and CHI entering into a settlement arrangement on June 5, 2020 in order to settle the contingent shares in full and as result the Company did not have any change in fair value during the three months ended September 30, 2020. The decrease during the nine months ended September 30, 2021 was also due to the settlement with CHI on June 5, 2020, which resulted in a significant decrease in the change in fair value of contingent stock consideration during the nine months ended September 30, 2021 compared to the same period in 2020. No similar transaction incurred during the nine months ended September 30, 2021.

 

Other Income/ (Expense)

 

		For the three months ended								For the nine months ended
		September 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
(in thousands)
Interest income		$	2			$	12			$	4			$	32
Gain from settlement			-				35				2,434				61
Gain from extinguishment of debt			7				-				741				-
Loss on sale of property, plant and equipment			-				-				(41	)			-
Change in fair value of derivative liability			-				13				-				88
Change in fair value of convertible promissory notes			772				-				1,112				-
Interest expense			(178	)			(39	)			(377	)			(67	)
Total other income (expense)		$	603			$	21			$	3,873			$	114

 

Other income/(expense) increased by approximately $0.6 million and $3.8 million during the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020, respectively. This was primarily due to (i) an increase in the change in fair value of convertible promissory notes during the three and nine months ended September 30, 2021, (ii) a gain on extinguishment of the PPP loan that was forgiven during the three and nine months ended September 30, 2021, (iii) a gain on settlement of approximately $2.4 million relating to the settlement reached between the Company and Canopy during the nine months ended September 30, 2021and (iv) an increase in interest expense relating to the increase in notes payable and accounts payable factoring acquired during the three and nine months ended September 30, 2021.

 

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LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2021 and December 31, 2020

 

Working Capital Deficit (in thousands)

 

		September 30, 2021				December 31, 2020
Current assets		$	1,763			$	3,850
Current liabilities			(17,698	)			(14,467	)
Working capital (deficiency)		$	(15,935	)		$	(10,617	)

 

Working capital deficit as of September 30, 2021 was approximately $15.9 million, as compared to a working capital deficit of approximately $10.6 million as of December 31, 2020. As of September 30, 2021, current assets were approximately $1.8 million, comprised primarily of (i) cash of approximately $0.1 million, (ii) accounts receivable, net of approximately $0.2 million, (iii) inventory, net of approximately $1.0 million and (iv) prepaid expenses and other assets of approximately $0.4 million. As of December 31, 2020, current assets were approximately $3.9 million, comprised primarily of (i) cash of approximately $1.7 million, (ii) accounts receivable, net of approximately $0.2 million, (iii) inventory, net of approximately $0.5 million and (iv) prepaid expenses and other assets of approximately $1.5 million.

 

As of September 30, 2021, current liabilities were approximately $17.7 million, comprised primarily of (i) approximately $9.0 million in notes payable, loan payable, convertible notes payable and fair value of convertible promissory notes (ii) $1.4 million in related party payable, (iii) approximately $2.2 million in accounts payable; (iv) approximately $4.3 million in accrued expenses (v) approximately $0.6 million in contract liabilities and (vi) approximately $0.1 million of finance and operating lease payables. Comparatively, as of December 31, 2020, current liabilities were approximately $14.5 million, comprised primarily of (i) approximately $8.9 million in loans, notes payable, paycheck protection program loans convertible notes payable and fair value convertible promissory notes, (ii) approximately $2.1 million in accounts payable; (ii) approximately $1 million in contract liabilities and (iii) approximately $1.3 million in accrued expenses, (iv) approximately $0.1 million of finance and operating lease payables and (v) approximately $1.0 million in related party payable.

 

Net Cash (in thousands)

 

		For the Nine months Ended
		September 30, 2021				September 30, 2020
Net cash used in operating activities		$	(2,656	)		$	(5,130	)
Net cash used in investing activities			(100	)			(1,453	)
Net cash provided by financing activities			1,195				3,589
Decrease in cash		$	(1,561	)		$	(2,994	)

 

Net cash used in Operating Activities

 

Net cash used in operating activities was approximately $2.7 million during the nine months ended September 30, 2021. This was primarily due to the net loss of approximately $8.8 million, as well as (i) gain from extinguishment of debt of approximately $0.7 million, (ii) the change in fair value of contingent share consideration of $0.9 million, and (iii) change in fair value of convertible promissory notes of approximately $1.1 million and was partially offset by (i) stock based compensation for services of approximately $0.8 million, (ii) depreciation and amortization of approximately $2.6 million and (iii) fair value of vested stock options and restricted stock of approximately $2.5 million.

 

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Comparatively, net cash used in operating activities was approximately $5.1 million during the nine months ended September 30, 2020. This was primarily due to the net loss of approximately $14.1 million, partially offset by (i) the change in fair value of contingent share consideration of $5.7 million and (ii) stock based compensation of approximately $0.7 million, (iii) depreciation and amortization of approximately $0.3 million and (iv) the fair value of vested stock options and restricted stock of approximately $1.7 million.

 

Net cash used in Investing Activities

 

Net cash used in investing activities of approximately $0.1 million during the nine months ended September 30, 2021 was due to (i) the purchase of an intangible asset for approximately $0.07 million, (ii) the purchase of property and equipment for approximately $0.03 million (iii) purchase of a note receivable of approximately $0.2 million and (iv) collection of notes receivable of approximately $0.2 million. Comparatively, net cash used in investing activities of approximately $1.5 million during the nine months ended September 30, 2020 was due to (i) the investment in Relief Europe of $0.3 million, (ii) the purchase of an intangible asset for approximately $0.01 million, (iii) the purchase of property and equipment for approximately $0.7 million and (iv) purchase of notes receivable of approximately $0.6 million.

 

Net cash provided by Financing Activities

 

Net cash provided by financing activities of approximately $1.2 million during the nine months ended September 30, 2021 was due to (i) proceeds from notes payable of approximately of $1.0 million, (ii) proceeds from related party payable of approximately $0.4 million and (iii) repayment of loan payable of approximately $0.2 million. Correspondingly, net cash provided by financing activities of approximately $3.6 million during the nine months ended September 30, 2020 was due to (i) proceeds from the exercise of warrants of approximately $1.4 million, (ii) proceeds from notes payable of approximately of $2.3 million and (iii) repayment of loan payable of approximately $0.1 million.

 

We may need to raise additional operating capital in calendar year 2021 in order to maintain our operations and to realize our business plan. Without additional sources of cash and/or the deferral, reduction, or elimination of significant planned expenditures, we may not have the cash resources to continue as a going concern thereafter.

 

CRITICAL ACCOUNTING ESTIMATES

 

The preparation of financial statements in conformity with 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 estimates 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. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. 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.

 

Our 2020 Annual Report, contains additional information regarding the critical accounting estimates that affect our more significant estimates and judgments used in the preparation of our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Amendment No. 1 to Quarterly Report on Form 10-Q. There have been no material changes to these policies in 2021. Please refer to “Note 2 – Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Amendment No. 1 to Quarterly Report on Form 10-Q for information regarding recently adopted accounting standards.

 

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

See Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Amendment No. 1 to Quarterly Report on Form 10-Q for a summary of recently issued and adopted accounting pronouncements.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

As of the date of this Amendment No. 1 to Quarterly Report on Form 10-Q, 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.

 

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

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are designed to ensure that: (1) information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (2) such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

 

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2021. Based on this assessment, management concluded that the Company did not maintain effective internal controls over financial reporting as a result of the identified material weakness in our internal control over financial reporting described below. In making this assessment, management used the framework set forth in the report entitled Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication and (v) monitoring.

 

Identified Material Weakness

 

A material weakness in our internal control over financial reporting is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement or the financial statements will not be prevented or detected. Management identified the segregation of duties as a material weakness during its assessment of internal controls over financial reporting as of September 30, 2021. Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions planned include:

 

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	·	re-design of our accounting processes and control procedures; and
	·	identify gaps in our skills base and the expertise of our staff required to meet the financial reporting requirements of a public company.

 

During the fiscal year ended December 31, 2020 and into the nine months ended September 30, 2021, we continued to execute upon our planned remediation actions which are all intended to strengthen our overall control environment. During the second quarter of fiscal year 2019 management hired a Chief Financial Officer. Our Chief Financial Officer is an experienced C-Level executive. During the third quarter of fiscal year 2019 we hired a new Controller with expertise in functional areas of finance and accounting. During the first quarter of fiscal year 2021, we hired a senior accountant with over 15 years various accounting positions. We believe the above additions have improved our segregation of duties as well as added to the overall.

 

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

 

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

 

	·	Prepare accounting memos over the debt issuances made by the Company in fiscal 2020 which include derivative and warrants
	·	Review of the purchase accounting entries made in connection with acquisitions completed in 2019 and 2020
	·	Forms 10-Q and 10-K review to ensure the appropriate disclosures are made within the SEC filed documents

 

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

 

	·	Adoption of COSO 2013
	·	SOX risk assessment memo
	·	Entity level COSO mapping
	·	SOX control narratives for financial reporting as well as other processes

 

While we believe these additions have addressed our lack of segregation of duties, due to the timing of the events, we were not able to mitigate the material weakness for the three months period ended September 30, 2021. We are committed to maintaining a strong internal control environment and believe that these remediation efforts will represent significant improvements in our control environment. Our management will continue to monitor and evaluate the relevance of our risk-based approach and the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

 

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, 2021, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Company’s Principal Executive Officer and Principal Financial Officer have concluded that as of September 30, 2021, 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, 2021 that materially affected, or is reasonably likely to have a material effect, on our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

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

 

The information contained in “Note 21 – Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Amendment No. 1 to Quarterly Report on Form 10-Q is incorporated by reference into this Item 1. Except as set forth therein, there have been no new material legal proceedings and no material developments in the legal proceedings reported in our 2020 Annual Report.

 

ITEM 1A. RISK FACTORS

 

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business. For a detailed discussion of the risks that affect our business, please refer to Part I—Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 31, 2021. There have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K, except as follows:

 

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

 

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

 

In addition, the Company’s sales and operating results may be affected by uncertain or changing economic and market conditions, including inflation, deflation, prolonged weak consumer demand, political instability, public health crises or other changes that may affect the principal markets, trade channels, and industrial segments in which the Company conducts its business. Public health crises, including epidemics or pandemics, may affect the principal markets, trade channels, and industrial segments in which the Company conducts its business. For example, the Company is monitoring the impact of the recent global outbreak of COVID-19, which was first detected in China in 2019 and subsequently declared a global pandemic by the World Health Organization in March 2020. COVID-19 has already caused a significant disruption to global financial markets and supply chains. The significance of the operational and financial impact to the Company will depend on how long and widespread this disruption proves to be. The extent to which COVID-19 impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the outbreak and the international actions that are being taken to contain and treat it. While the Company currently expects this business disruption to be temporary, there is uncertainty around its duration and its broader impact, and therefore the effects it will have on the Company’s financial results and operations. If economic or market conditions in key global markets continue to deteriorate, the Company may experience material adverse effects on its business, financial condition and results of operations.

 

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Adverse economic and market conditions could also harm the Company’s business by negatively affecting the parties with whom it does business, including its customers and third-party contract manufacturers and suppliers. These conditions could impair the ability of the Company’s customers to pay for products they have purchased from the Company. As a result, allowances for doubtful accounts and write-offs of accounts receivable from the Company’s customers may increase. In addition, the Company’s third-party contract manufacturers and their suppliers may experience financial difficulties or business disruptions that could negatively affect their operations and their ability to supply the Company with finished goods and the raw materials, packaging, and components required for the Company’s products.

 

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

 

From January 1, 2021 to September 30, 2021, the Company issued 646,512 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to several consulting agreements. The total value of these issuances was $0.7 million.

 

From January 1, 2021 to September 30, 2021, the Company issued 26,936 common stock shares, at a price of $1.30 per share, from the exercise of certain warrants. Total value of these issuances was $0.03 million.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

As of September 30, 2021, there were two convertible promissory notes (the “Default Notes”) totaling $550,000 that were in default as the maturity dates of the Default Notes have expired and have not yet been repaid or converted into common stock shares of the Company. The Company has offered to either repay the Default 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, 2021, the note holders of the Default 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 Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
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**		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH**		Inline XBRL Taxonomy Extension Schema Document
101.CAL**		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE**		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104**		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

_____________

# The information in Exhibits 32.1 and 32.2 shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act (including this Quarterly Report on Form 10-Q), unless the Registrant specifically incorporates the foregoing information into those documents by reference.

 

** In accordance with Rule 402 of Regulation S-T, this interactive data file is deemed not filed or part of this Quarterly Report on Form 10-Q for purposes of Sections 11 or 12 of the Securities Act or Section 18 of the Exchange Act and otherwise is not subject to liability under these sections.

 

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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.

 

	AVENIR WELLNESS SOLUTIONS, INC.
Dated: October 9, 2024	By:	/s/ Nancy Duitch
		Nancy Duitch
		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/ Nancy Duitch
Nancy Duitch
Chief Executive Officer
October 9, 2024

 

/s/ Joel Bennett
Joel Bennett
Chief Financial Officer
October 9, 2024

  

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nullnullnullnullv3.24.3

Cover - shares	9 Months Ended
	Sep. 30, 2021	Nov. 12, 2021
Cover [Abstract]
Entity Registrant Name	AVENIR WELLNESS SOLUTIONS, INC.
Entity Central Index Key	0001643301
Document Type	10-Q/A
Amendment Flag	true
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 30, 2021
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021
Entity Ex Transition Period	true
Entity Common Stock Shares Outstanding		65,060,044
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	000-59908
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	90-1504639
Entity Address Address Line 1	5805 Sepulveda Boulevard
Entity Address Address Line 2	Suite 500
Entity Address City Or Town	Sherman Oaks
Entity Address State Or Province	CA
Entity Address Postal Zip Code	91411
City Area Code	424
Amendment Description	EXPLANATORY NOTE This Amendment No. 1 on Form 10-Q/A amends Part 1 of the Quarterly Report on Form 10-Q previously filed for the quarter ended September 30, 2021 by Avenir Wellness Solutions, Inc. (formerly known as CURE Pharmaceutical Holding Corp.) (the “Company”). This Form 10-Q/A is filed in connection with the restatement of our earnings per share presented in our Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021 and 2020 and the related disclosure of our earnings per share in Note 2 – Summary of Significant Accounting Policies – Net Loss per Common Share. Specifically, during the year ended December 31, 2022, the Company identified an error in the calculation of our weighted average shares outstanding that affects our presentation of earnings per share for the nine months ended September 30, 2021 as described in “Note 2 – Summary of Significant Accounting Policies – Restatement.” Other than as described above, all other information contained in this Form 10-Q/A is as of the date of the original filing and does not reflect subsequent information or events other than (i) the name change of the Company effective on October 14, 2022; (ii) the correction of the Company’s IRS Employer Identification Number and (iii) the address and telephone number changes of the Company effective on July 22, 2022. In addition, Exhibits 31.1, 31.2, 32.1 and 32.2 of the original filing have been amended to contain currently dated certifications from the current Chief Executive Officer and Chief Financial Officer.
Local Phone Number	273-8675
Entity Interactive Data Current	Yes

v3.24.3

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current assets:
Cash	$ 164	$ 1,725
Accounts receivable, net	208	224
Note receivable, net	0	0
Inventory, net	960	449
Prepaid expenses and other assets	431	1,452
Total current assets	1,763	3,850
Property and equipment, net	1,902	2,074
Finance lease right-of-use assets, net	43	52
Operating lease right-of-use assets, net	280	343
Note receivable	200	0
Investment	509	509
Goodwill	13,868	13,868
Intellectual property and patents, net	15,027	1,711
In-process research and development, net	329	14,288
Customer relationships, Tradename, and Non-compete, net	7,875	9,606
Other assets	83	58
Total assets	41,879	46,359
Current liabilities:
Accounts payable	2,242	2,135
Accrued expenses	4,295	1,299
Finance lease payable	13	12
Operating lease payable	104	93
Loan payable	60	265
Paycheck protection program loan	0	605
Related party payable	1,440	1,040
Notes payable	1,800	800
Convertible promissory notes	550	550
Fair value convertible promissory notes, net	6,583	6,674
Contract liabilities	611	994
Total current liabilities	17,698	14,467
License fees	0	80
Finance lease payable	30	40
Operating lease payable	199	278
Fair value convertible promissory notes, net	3,109	7,010
Contingent share considerations	2,258	3,205
Total liabilities	23,294	25,080
Stockholders' equity:
Common stock: $0.001 par value; authorized 150,000,000 shares; 65,060,044 and 59,476,268 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	66	60
Additional paid-in capital	108,004	101,807
Common stock issuable	603	665
Accumulated deficit	(90,088)	(81,253)
Total stockholders' equity	18,585	21,279
Total liabilities and stockholders' equity	$ 41,879	$ 46,359

v3.24.3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2021	Dec. 31, 2020
Stockholders' equity
Common stock, shares par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	65,060,044	59,476,268
Common stock, shares outstanding	65,060,044	59,476,268

v3.24.3

Unaudited Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenue:
Product sales, net of discounts and refunds	$ 1,345	$ 167	$ 4,817	$ 533
Consulting research & development income	0	0	52	169
Shipping and other sales	14	25	70	39
Total revenues	1,359	192	4,939	741
Cost of goods sold:
Cost of goods sold, current	512	145	1,725	346
Gross profit	847	47	3,214	395
Operating expenses:
Research and development expenses	601	744	1,944	2,284
Selling, general and administrative expenses	4,584	2,075	14,925	6,711
Change in fair value of contingent stock consideration	608	0	(947)	5,658
Total operating expenses	5,793	2,819	15,922	14,653
Net operating loss before other income (expense)	(4,946)	(2,772)	(12,708)	(14,258)
Other income (expense):
Interest income	2	12	4	32
Gain from settlement	0	35	2,434	61
Gain on extinguishment of debt	7	0	741	0
Loss on sale of property, plant and equipment	0	0	(41)	0
Change in fair value of derivative liability	0	13	0	88
Change in fair value of convertible promissory notes	772	0	1,112	0
Interest expense	(178)	(39)	(377)	(67)
Total other income (expense)	603	21	3,873	114
Net loss before income taxes	(4,343)	(2,751)	(8,835)	(14,144)
Provision for income taxes	0	0	0	0
Net loss	$ (4,343)	$ (2,751)	$ (8,835)	$ (14,144)
Net loss per share
Basic	$ (0.07)	$ (0.07)	$ (0.14)	$ (0.32)
Diluted	$ (0.07)	$ (0.07)	$ (0.14)	$ (0.32)
Weighted average common shares outstanding
Basic, Weihgted	62,174,822	41,344,256	61,462,300	43,647,388
Diluted Weighted	62,174,822	41,344,256	61,462,300	43,647,388

v3.24.3

Unaudited Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Common Stock Issuable	Accumulated Deficit
Balance, shares at Dec. 31, 2019		38,001,543
Balance, amount at Dec. 31, 2019	$ 13,507	$ 38	$ 63,035	$ 1,066	$ (50,632)
Issuance of common stock for professional services, shares		31,250
Issuance of common stock for professional services, amount	231	$ 0	68	163
Fair value of stock options and restricted stock granted	469		469
Fair value of restricted stock units granted	60		60
Net loss	2,046				2,046
Balance, shares at Mar. 31, 2020		38,032,793
Balance, amount at Mar. 31, 2020	16,313	$ 38	63,632	1,229	(48,586)
Balance, shares at Dec. 31, 2019		38,001,543
Balance, amount at Dec. 31, 2019	13,507	$ 38	63,035	1,066	(50,632)
Net loss	(14,144)
Balance, shares at Sep. 30, 2020		51,219,519
Balance, amount at Sep. 30, 2020	24,624	$ 51	88,777	572	(64,776)
Balance, shares at Mar. 31, 2020		38,032,793
Balance, amount at Mar. 31, 2020	16,313	$ 38	63,632	1,229	(48,586)
Issuance of common stock for professional services, shares		218,750
Issuance of common stock for professional services, amount	189	$ 0	600	411
Fair value of stock options and restricted stock granted	479		479
Fair value of restricted stock units granted	60		60
Net loss	(13,439)				(13,439)
Issuance of common stock from the equity incentive plan, shares		8,003
Issuance of common stock from the equity incentive plan, amount	0	$ 0	0
Issuance of common stock from exercise of warrants, shares		708,467
Issuance of common stock from exercise of warrants, amount	1,418	$ 1	1,417
Issuance of common stock from settlement with Chemistry Holdings, Inc., shares		12,058,623
Issuance of common stock from settlement with Chemistry Holdings, Inc., amount	21,701	$ 12	21,935	(246)
Balance, shares at Jun. 30, 2020		51,026,636
Balance, amount at Jun. 30, 2020	26,721	$ 51	88,123	572	(62,025)
Issuance of common stock for professional services, shares		31,250
Issuance of common stock for professional services, amount	49	$ 0	49	0
Fair value of stock options and restricted stock granted	515		515
Fair value of restricted stock units granted	68		68
Net loss	(2,751)				(2,751)
Issuance of common stock from the equity incentive plan, shares		161,633
Issuance of common stock from the equity incentive plan, amount	22	$ 0	22
Balance, shares at Sep. 30, 2020		51,219,519
Balance, amount at Sep. 30, 2020	24,624	$ 51	88,777	572	(64,776)
Balance, shares at Dec. 31, 2020		59,476,268
Balance, amount at Dec. 31, 2020	21,279	$ 60	101,807	665	(81,253)
Issuance of common stock for professional services, shares		265,512
Issuance of common stock for professional services, amount	508	$ 0	363	145
Fair value of stock options and restricted stock granted	961		961
Fair value of restricted stock units granted	144		144
Net loss	(3,171)				(3,171)
Issuance of common stock from the equity incentive plan, shares		157,693
Issuance of common stock from the equity incentive plan, amount	138	$ 0	190	(52)
Issuance of common stock for exercise of warrants, shares		26,936
Issuance of common stock for exercise of warrants, amount	0	$ 0	0	0
Balance, shares at Mar. 31, 2021		59,926,409
Balance, amount at Mar. 31, 2021	19,859	$ 60	103,465	758	(84,424)
Balance, shares at Dec. 31, 2020		59,476,268
Balance, amount at Dec. 31, 2020	21,279	$ 60	101,807	665	(81,253)
Net loss	(8,835)
Balance, shares at Sep. 30, 2021		65,060,044
Balance, amount at Sep. 30, 2021	18,585	$ 66	108,004	603	(90,088)
Balance, shares at Mar. 31, 2021		59,926,409
Balance, amount at Mar. 31, 2021	19,859	$ 60	103,465	758	(84,424)
Issuance of common stock for professional services, shares		381,000
Issuance of common stock for professional services, amount	243	$ 0	243
Fair value of stock options and restricted stock granted	591		591
Fair value of restricted stock units granted	143		143
Net loss	(1,321)				(1,321)
Issuance of common stock from the equity incentive plan, shares		141,693
Issuance of common stock from the equity incentive plan, amount	(157)	$ 0	(2)	(155)
Issuance of common stock from conversion of convertible promissory notes, shares		2,428,857
Issuance of common stock from conversion of convertible promissory notes, amount	1,835	$ 3	1,832
Balance, shares at Jun. 30, 2021		62,877,959
Balance, amount at Jun. 30, 2021	21,193	$ 63	106,272	603	(85,745)
Issuance of common stock for professional services, amount	0
Fair value of stock options and restricted stock granted	532		532
Fair value of restricted stock units granted	156		156
Net loss	(4,343)				(4,343)
Issuance of common stock from the equity incentive plan, shares		572,975
Issuance of common stock from the equity incentive plan, amount	0	$ 1	(1)
Issuance of common stock from conversion of convertible promissory notes, shares		1,609,110
Issuance of common stock from conversion of convertible promissory notes, amount	1,047	$ 2	1,045
Balance, shares at Sep. 30, 2021		65,060,044
Balance, amount at Sep. 30, 2021	$ 18,585	$ 66	$ 108,004	$ 603	$ (90,088)

v3.24.3

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Unaudited Condensed Consolidated Statements of Cash Flows
Net loss	$ (8,835)	$ (14,144)
Adjustment to reconcile net loss to net cash used in operating activities:
Stock based compensation - services	752	469
Stock based compensation - prepaid	0	342
Stock issued from equity incentive plan	(19)	22
Gain from settlement of accounts payable	0	(26)
Gain from extinguishment of debt	(741)	0
Change in fair value of contingent share consideration	(947)	5,658
Change in fair value of convertible promissory notes	(1,112)	0
Depreciation and amortization	2,584	277
Bad debt expenses	41	31
Recovery of bad debt expense	(221)	0
Loss on disposal of property, plant and equipment	41	0
Inventory reserve for obsolescence	(113)	(5)
Change of fair value in derivative liabilities	0	(88)
Fair value of vested stock options and restricted stock	2,527	1,652
Change in operating assets and liabilities:
Accounts receivable	(25)	65
Inventory	(398)	(77)
Prepaid expenses and other assets	1,042	(227)
Other assets	(25)	0
Accounts payable	139	550
Accrued expenses	3,126	63
Finance lease payable	(9)	(8)
Contract liabilities	(383)	(140)
License fees	(80)	(8)
Cash used in operating activities	(2,656)	(5,130)
Cash flows from investing activities
Investment in company	0	(250)
Purchase of intangible assets	(68)	(11)
Acquisition of property and equipment, net	(32)	(642)
Purchase of note receivable	(200)	(550)
Collection of note receivable	200	0
Cash provided by (used in) investing activities	(100)	(1,453)
Cash flows from financing activities
Proceeds from exercise of warrants	0	1,417
Proceeds from notes payable	1,000	2,299
Proceeds from related party payable	400	0
Repayment of loans payable	(205)	(127)
Cash provided by financing activities	1,195	3,589
Net decrease in cash and cash equivalents	(1,561)	(2,994)
Cash and cash equivalents, beginning of year	1,725	4,096
Cash and cash equivalents, end of year	164	1,102
Cash paid for interest and income taxes:
Interest	102	3
Income taxes	0	0
Non-cash investing and financing activities:
Common stock issued for conversion of promissory notes and accrued interest	2,881	0
Common stock issued for settlement of earnout liabilities from the acquisition of Chemistry Holdings, Inc	$ 0	$ 21,701

v3.24.3

ORGANIZATION AND DESCRIPTION OF BUSINESS	9 Months Ended
	Sep. 30, 2021
ORGANIZATION AND DESCRIPTION OF BUSINESS
ORGANIZATION AND DESCRIPTION OF BUSINESS	NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS   Business Operations   Avenir Wellness Solutions, Inc formerly known as CURE Pharmaceutical Holding Corp. (“CPHC”), its wholly-owned subsidiary, CURE Pharmaceutical Corporation (“CURE Pharmaceutical”), Cure Chemistry Inc. and its related subsidiaries (collectively referred to as “CHI”) and The Sera Labs, Inc. (“Sera Labs”) (collectively the “Company,” “we,” “our,” “us,” or “CURE”) is a biopharmaceutical company focusing on the development and manufacturing of drug formulation and drug delivery technologies in novel dosage forms to improve drug safety, efficacy and patient adherence. Our mission is to improve lives by redefining how medications are delivered and experienced. Our primary business model is to develop wellness and drug products using our proprietary technology, which development may include preclinical and clinical studies and regulatory approval, and grant product rights to partners responsible for marketing, sales and distribution, while retaining exclusive manufacturing rights. We operate in a 25,000 square foot cGMP manufacturing plant in Oxnard, CA.   Our technology platform includes oral dissolving film (“OTF”), and encapsulation systems (“microCURE”) compatible with OTF, chews, oral solutions, topical and transdermal dose forms. We apply our technology to pharmaceutical drugs and dietary supplements for the wellness market. OTF products are about the size of a postage stamp and composed of excipients such as polymers, stabilizers, lipids and surfactants which are all generally recognized as safe. They can be designed to deliver active ingredients to the gastrointestinal, or GI, tract when placed on the tongue and swallowed, or directly to the blood stream when placed under the tongue (sublingual) or on the inner lining of the cheek and lip (buccal).   Background   We were incorporated in the State of Nevada on May 15, 2014. On November 7, 2016, we changed our name from Makkanotti Group Corp to CURE Pharmaceutical Holding Corp. On September 27, 2019, the Company reincorporated from the State of Nevada to the State of Delaware.   On November 7, 2016, the board of directors and the majority stockholder of the then outstanding shares of registrant’s common stock executed a written consent to change registrant’s name from Makkanotti Group Corp. to CURE Pharmaceutical Holding Corp. The Certificate of Amendment to Articles of Incorporation was filed with the State of Nevada on November 30, 2016.   Further, on November 7, 2016, we, in a reverse take-over transaction, acquired a specialty pharmaceutical and bioscience company based in California that specializes in drug delivery technologies, by executing a Share Exchange Agreement and Conversion Agreement (“Exchange Agreement”) by and among us and a holder of a majority of our issued and outstanding capital stock prior to the closing (the “Majority Stockholder”), on the one hand, and CURE Pharmaceutical, all of the shareholders of CURE Pharmaceutical’s issued and outstanding share capital (the “CURE Pharm Shareholders”) and the holders of certain convertible promissory notes of CURE Pharmaceutical (“CURE Pharm Noteholders”), on the other hand. Hereinafter, this share exchange transaction is described as the “Share Exchange.”   As a result of the Share Exchange, CURE Pharmaceutical became a wholly owned subsidiary of CPHC, and the CURE Pharmaceutical Shareholders and CURE Pharmaceutical Noteholders became CPHC stockholders owning, at such time, approximately 65% of our issued and outstanding common stock.   On May 14, 2019 (the “Closing Date”), the Company, and CURE Chemistry Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), completed the transactions contemplated by the Agreement and Plan of Merger and Reorganization, dated March 31, 2019 (the “Merger Agreement”), with CHI., a Delaware corporation. As agreed in the Merger Agreement, the Company acquired CHI pursuant to a merger of the Merger Sub with and into CHI (the “Merger”). Pursuant to the Merger, CHI became a wholly-owned subsidiary of the Company and the stockholders of CHI received shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) in exchange for all of the issued and outstanding shares of CHI.   On October 2, 2020, the Company completed its acquisition of The Sera Labs, Inc. (“Sera Labs”) a Delaware corporation pursuant to an Agreement and Plan of Merger and Reorganization, dated as of September 23, 2020 (the “Sera Labs Merger Agreement”), by and among the Company, Cure Labs, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Sera Labs Merger Sub”), Sera Labs and Nancy Duitch, in her capacity as the security holders representative (“Ms. Duitch”; collectively with the Company, Sera Labs and Sera Labs Merger Sub, the “Parties”). The Sera Labs Merger Agreement provides for the acquisition of Sera Labs by the Company through the merger of Sera Labs Merger Sub with and into Sera Labs, with Sera Labs surviving as a wholly owned subsidiary of the Company (the “Sera Labs Merger”). The Coronavirus Disease 2019 (COVID-19) Pandemic   The COVID-19 pandemic was declared a global pandemic by the World Health Organization on March 11, 2020, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19, or other public health epidemic poses the risk that the Company or its employees, suppliers, and other partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the future impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by the governments of countries affected and in which the Company operates could continue to disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures have had an adverse impact on global economic conditions, and may continue to have such adverse impact, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company undertook temporary precautionary measures intended to help minimize the risk of the virus to its employees (with such measures still currently in effect), including temporarily requiring a majority of our employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact. Due to the speed with which the COVID-19 situation is developing, the Company is not able at this time to estimate the impact of COVID-19 on its consolidated financial statements and related disclosures, but the impact could be material for the remainder of fiscal year 2021 in all business aspects and could be material during any future period affected either directly or indirectly by this pandemic.   While the extent and duration of the economic downturn from the COVID-19 pandemic remains unclear, the Company has considered, among other things, whether the global operational disruptions indicate a change in circumstances that may trigger asset impairments and whether it needs to revisit accounting estimates and projections or its expectations about collectability of receivables. Additionally, the Company has considered the potential impacts on its fair value disclosures and on its internal control over financial reporting. During the nine months ended September 30, 2021 there was no significant direct impact on the Company’s operations as a result of the economic downturn. While significant uncertainty still exists concerning the magnitude of the impact and duration of the COVID-19 pandemic on the global economy, the Company has determined that there was no triggering event for an impairment with respect to any of its assets nor has there been an adverse change in the probability related to the collectability of its receivables. The Company continues to assess the potential impact of the global economic situation on its consolidated financial statements. Please see Item 1A. Risk Factors of this Quarterly Report on Form 10-Q.

v3.24.3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	9 Months Ended
	Sep. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Basis of Presentation   The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity.   The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2021, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2021 and 2020, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal period ended December 31, 2020 filed with the SEC on March 31, 2021.   Principle of Consolidation   The unaudited condensed financial statements include the accounts of CPHC and its wholly-owned subsidiaries, CURE Pharmaceutical, CHI and Sera Labs, collectively referred to as (“CURE”, “we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s film strip product represents the principal operations of the Company. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition. The Company’s purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. Going Concern and Management’s Liquidity Plans   In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, The Company assesses going concern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to the Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, the Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent the Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15. The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At September 30, 2021, we had an accumulated deficit of approximately $90.1 million and a working capital deficit of approximately $15.9 million. Our operating activities consume the majority of our cash resources. We anticipate that we will continue to incur operating losses and negative cash flows from operations, at least into the near future, as we execute our commercialization and development plans and strategic and business development initiatives. As of the date of this report, the Company had approximately $0.1 million of cash on hand.      We have previously funded, and intend to continue funding, our losses primarily through the issuance of common stock and/or convertible promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations. The Company believes the funds available through these potential financings will be sufficient to meet the Company’s working capital requirements during the coming year. If we are unable to raise sufficient additional funds it will have to develop and implement a plan to extend payables, reduce expenditures, or scale back our business plan until sufficient additional capital is raised to support further operations.   The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the unaudited condensed consolidated financial statements. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.   Reclassifications   Certain reclassifications have been made to prior year’s consolidated financial statements to enhance comparability with the current year’s consolidated financial statements. These reclassifications had no effect on the previously reported net loss.   Restatement   During the year ended December 31, 2022, the Company became aware of an error in the calculation of its weighted average common shares outstanding and resultant reported loss per share for the nine months ended September 30, 2021. The reported weighted average common shares outstanding and loss per share was 49,294,190 and ($0.18), respectively. The corrected weighted average shares outstanding and loss per share was 61,462,300 and ($0.14), respectively.  Based on an initial analysis of ASC 250 “Accounting Changes and Error Corrections” and Staff Accounting Bulletin 99 “Materiality,” the Company determined that the error was immaterial to the previously issued consolidated financial statements for the nine months ended September 30, 2021 and that the correction and disclosure of the error in its Annual Report on Form 10-K for the year ended December 31, 2022, which included the 2021 financial statements, was adequate. The Company has since determined that the errors in its previously reported earnings per share are material and is thus restating the impacted financial statements.   Use of Estimates   The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts, valuation of intangible assets and goodwill, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock based compensation, beneficial conversion features, warrant values, deferred taxes and the assumptions used to calculate derivative liabilities and fair values of the purchase price allocations and convertible promissory notes. Actual results could differ materially from such estimates under different assumptions or circumstances.   Cash and Cash Equivalents   The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of September 30, 2021 and December 31, 2020, the Company had no cash equivalents.    Investment in Associates   An associate is an entity over which the Company has significant influence through a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or joint control over those policies.   The results of assets and liabilities of associates are incorporated in the condensed consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Company’s share of the net assets of the associate, less any impairment in the value of the investment. Losses of an associate in excess of the Company’s interest in that associate are not recognized. Additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognized at the date of acquisition is recognized as goodwill. The goodwill is included within the carrying amount of the investment.   On November 1, 2019, the Company purchased a convertible loan (the “Releaf Loan”) with Releaf Europe BV (“Releaf”) in the amount of $0.2 million. Releaf shall accrue interest on the Releaf Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Releaf Loan is repaid or at the maturity date of October 31, 2021. In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amount of the Releaf Loan and any unpaid accrued interest shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2.0 million of debt and/or equity (“Releaf Qualified Financing”), the outstanding amount of the Releaf Loan and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf Qualified Financing less a discount of 20% on the subscription price. In addition, both the Company and Releaf agree in the event that the pre-money valuation of the Releaf Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of September 30, 2021, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to the Releaf Loan.   On February 5, 2020 and February 13, 2020, the Company purchased two convertible loans (the “February 2020 Loans”) with Releaf for a total amount of $0.3 million. Releaf shall accrue interest on the February 2020 Loans at 6% per annum and they shall become due and payable to the Company at the earlier of the conversion date or the maturity date of October 31, 2021. In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amounts of the February 2020 Loans and any unpaid accrued interests shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2.0 million of debt and/or equity (“Releaf February 2020 Qualified Financing”), the outstanding amount of the February 2020 Loans and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf February 2020 Qualified Financing, less a discount of 20% on the subscription price. In addition, in the event that the pre-money valuation of the Releaf February 2020 Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of September 30, 2021, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to the foregoing Releaf loans.   On May 26, 2021, the Company purchased a convertible loan (the “May 2021 Loan”) with Biopharmaceutical Research Company (“BRC”) for a total amount of $0.2 million, which is one of a series of notes “(Notes”) pursuant to the terms of the Note Purchase Agreement (“NPA”) offered by BRC. BRC shall accrue interest on the May 2021 Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date or the maturity date of May 26, 2023. In the event of a request for conversion by the Company, the outstanding amount of the May 2021 Loan and any unpaid accrued interest shall be converted into shares of BRC, rounded down to the nearest whole share, by dividing the May 2021 Loan by the price per share obtained by dividing $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (i) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes and (ii) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC. In the event the Company has not requested for conversion, the May 2021 Loan can automatically convert if BRC sells shares of preferred stock (the “Qualified Financing Securities”) to one or more investors in a single transaction or series of related transactions for aggregate proceeds to BRC (including cancellation of indebtedness under the Notes or any other convertible debt) of at least $4 million (a “Qualified Financing”). The May 2021 Loan shall automatically convert at the initial closing of and on the same terms and conditions of the Qualified Financing into a total number of Qualified Financing Securities, rounded down to the nearest whole share, obtained by dividing the May 2021 Loan by the lesser of (i) 80% of the price per share paid for the Qualified Financing Securities by investors in the Qualified Financing and (ii) $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (a) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes, (b) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC and (c) any equity incentive or similar plan to be created or increased in connection with the Qualified Financing). The Company follows Accounting Standards Codification (“ASC”) 325-20, Cost Method Investments (“ASC 325-20”), to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. The Company has determined that there was no impairment of our investment in Releaf during the nine months ended September 30, 2021.   Accounts Receivable   Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. At September 30, 2021 management determined that an allowance of $0.08 million was necessary. At December 31, 2020 management determined that an allowance of $0.04 million was necessary.   Inventory   Inventory is stated at the lower of cost or net realizable value (“NRV”). NRV is the amount by which the estimated selling price of the product exceeds the sum of any additional costs expected to be incurred on the sale of such product in the ordinary course of business. The Company determines the cost of its inventory, which includes amounts related to materials, direct labor, and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period. In order to state the inventory at the lower of cost or NRV, we maintain reserves against individual stocking units. Inventory reserves, once established, are not reversed until the related inventories have been sold or scrapped. If future demand or market conditions are less favorable than our projections, a write-down of inventory may be required, and would be reflected in cost of product revenues sold in the period the revision is made.   Goodwill and intangible assets   In accordance with ASC 350, Intangibles – Goodwill and Other, in-process research and development (“IPR&D”) projects acquired in a business combination that are not complete as of the acquisition date are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related research and development efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. The Company considers various factors and risks for potential impairment of IPR&D assets, including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, or significant delays, or the inability to bring a product to market and the introduction or advancement of competitors’ products could result in partial or full impairment of the related intangible assets. Consequently, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods. During the period between completion or abandonment, the IPR&D assets will not be amortized but will be tested for impairment on an annual basis and between annual tests if the Company becomes aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts (see Note 7). Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill, is not amortized but is tested for impairment at least annually, or if circumstances indicate its value may no longer be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company’s business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. The Company operates in two segments as result of the Sera Labs, Inc., acquisition in October 2020 and considered to be the two reporting units and, therefore, goodwill is tested for impairment at the segment level.   The Company does not have intangible assets with indefinite useful lives other than goodwill and trademark discussed in Note 19. As of September 30, 2021 and December 31, 2020, there has been no impairment of goodwill and intangible assets.   Business Combinations   The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the value of the assets acquired and liabilities assumed is recognized as goodwill.   Impairment of Long-Lived Assets   Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset.   Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cashflow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There was no impairment on our long-lived assets during the nine months ended September 30, 2021 and 2020.   Contingent consideration liabilities   Certain of the Company’s asset and business acquisitions involve the potential for future payment of consideration to third-parties and former selling shareholders in amounts determined upon attainment of revenue milestones, from product sales, as applicable. The fair value of such liabilities is determined using unobservable inputs. These inputs include the estimated amount and timing of projected cash flows and the risk-adjusted discount rate used to present value the cash flows. These obligations are referred to as contingent consideration. ASC 805 requires that contingent consideration be estimated and recorded at fair value as of the acquisition date as part of the total consideration transferred. Contingent consideration is an obligation of the acquirer to transfer additional assets or equity interests to the selling shareholders in the future if certain future events occur or conditions are met, such as the attainment of product development milestones. Contingent consideration also includes additional future payments to selling shareholders based on achievement of components of earnings, such as “earn-out” provisions or percentage of future revenues, including royalties paid to the selling shareholders based on a percentage of revenues generated from the Sera Labs’ products.   The fair value of contingent consideration after the acquisition date is reassessed by the Company as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in the consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that the Company records in its consolidated financial statements. See Note 19 for a full discussion of these liabilities.   Revenue Recognition   The Company recognizes revenue in accordance with ASC 606, “Revenue Recognition”. Revenues under Topic 606 are required to be recognized either at a “point in time” or “over time”, depending on the facts and circumstances of the arrangement, and are evaluated using a five-step model.   To achieve the core principle of Topic 606, we perform the following steps:     · Identify the contract(s) with customer;   · Identify the performance obligations in the contract;   · Determine the transactions price;   · Allocate the transactions price to the performance obligations in the contract; and   · Recognize revenue when (or as) we satisfy a performance obligation.   Under Topic 606, the Company recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer.   Cure Pharmaceutical Revenue   Cure Pharmaceutical derives revenues from two primary sources: products and services. Product revenue includes the shipment of products according to agreements with the Cure Pharmaceutical’s customers. Services include research and development contracts for the development of OTF products utilizing the Cure Pharmaceutical’s CureFilm Technology or our other proprietary technologies. Cure Pharmaceutical’s contracts with customers rarely contain multiple performance obligations. For these contracts, Cure Pharmaceutical accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices are typically estimated based on observable transactions when these services are sold on a standalone basis.   Cure Pharmaceutical’s formulation and product development income include services for the development of OTF products utilizing our CureFilm Technology. Our development contracts can have up to four phases. Revenue is recognized based on progress toward completion of the performance obligation in each phase. The method to measure progress toward completion requires judgment and is based on the nature of the products or services to be provided. Cure Pharmaceutical generally uses the input method to measure progress for its contracts because it best depicts the transfer of assets to the customer, which occurs as we incur costs for the contracts. Under the cost-to-cost measure of progress, the progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenue is recorded proportionally as costs are incurred. Costs to fulfill these obligations mainly include materials, labor, supplies and consultants. Cure Pharmaceutical has entered into a Collaboration and Joint Development Agreement (“Agreement”) with Medolife Rx (“Medolife”) on February 1, 2021 (“Effective Date”) for Medolife to produce Medolife Products (“Products”) in Cure Pharmaceutical’s cGMP facility. The term of this agreement is for five (5) years from the Effective Date (“Term”). Medolife is to pay $0.3 million to assist in completing the jointly developed production line at Cure Pharmaceutical’s cGMP facility. In addition, Cure Pharmaceutical will produce Products on behalf of Medolife and will grant access to Medolife for a joint production area within Cure Pharmaceutical’s production facility for the Term of this Agreement. The Company has determined that there are no distinct obligations for the $0.3 million and Cure Pharmaceutical does have further obligations as stated in the Agreement, thus the Company will recognize the revenue monthly over the Term, beginning February 1, 2021.   Sera Labs Revenue   Sera Labs recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer.   Revenue from eCommerce sales, including direct-to-consumer sales, are recognized upon shipment of merchandise. We also elected to adopt the practical expedient related to shipping and handling fees which allows us to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Therefore, shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred. Shipping revenue are recorded upon delivery to the customer.   Practical Expedients and Exemptions   The Company has elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows:     · The Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception;         · The Company made the accounting policy election to exclude any sales and similar taxes from the transaction price;         · The Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less   Sales Tax   The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to a customer, excluding sales taxes. The net amount of sales tax payable to the taxation authority is included in sales tax payable in the balance sheet. Sales Returns, Discounts and Warranties   Sales returns, discount and warranties are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns, discounts and warranties which may occur with distributors and retailers. When evaluating the adequacy of sales returns, discounts and warranties, the Company analyzes the following: historical credit allowances, current sell-through of inventory of the Company’s products, current trends in retail industry, changes in customer demand, acceptance of products, and other related factors.   Cost to Obtain a Contract   The Company pays sales commission to its employees and outside sales representatives for contracts that they obtain relating to wholesale and personal protective equipment. The Company applies the optional practical expedient to immediately expense costs to obtain a contract if the amortization period of the asset that would have been recognized is one year or less. As such, sales commissions are immediately recognized as an expense and included as part of sales and marketing expenses.   Contract Liabilities   Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded as deferred revenues when customers remit contractual cash payments in advance before satisfying performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied. Advance payments and billings in excess of revenue recognized are included in deferred revenue, which is classified as current or noncurrent based on the timing of when the Company expects to recognize revenue. At September 30, 2021 and December 31, 2020, we had contract liabilities of $0.6 million and $1.0 million, respectively.   Contract liabilities is made up of the following as of September 30, 2021 and December 31, 2020 (in thousands):       2021     2020   Customer deposits for commercial products   $ 611     $ 281   Customer deposits for personal protective equipment     -       713   Total contract liabilities   $ 611     $ 994     The following table summarizes the changes in contract liabilities during the nine months ended September 30, 2021 and year ended December 31, 2020 (in thousands):   Balance at December 31, 2019   $ 456   Additions     1,033   Transfers to Revenue     (495 ) Balance at December 31, 2020     994   Additions     435   Customer deposits returned     (713 ) Transfers to Revenue     (105 ) Balance at September 30, 2021   $ 611   Cost of Revenues   Cost of revenues primarily consists of labor and manufacturing costs for our products.     Advertising Expense   The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying statements of operations. The Company recorded advertising costs of $0.7 million and $2.4 million for the three and nine month periods ended September 30, 2021, respectively. The Company did not record advertising costs for the three and nine month periods ended September 30, 2020.   Research and Development   Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred. The Company recorded research and development expenses of $0.6 million and $1.9 million for the three and nine month periods ended September 30, 2021, respectively. The Company recorded research and development expenses of $0.7 million and $2.3 million for the three and nine month periods ended September 30, 2020, respectively.   Income Taxes   The utilizes FASB ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.   The Company generated a deferred tax asset through net operating loss carry-forward. However, a valuation allowance of 100% has been established due to the uncertainty of the Company’s realization of the net operating loss carry forward prior to its expiration.   On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the outbreak of a novel strain of the coronavirus, COVID-19. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Under the CARES Act, net operating losses (“NOLs”) arising in tax years beginning after December 31, 2017, and before January 1, 2021 may be carried back to each of the five tax years preceding the tax year of such loss. Moreover, under the 2017 Tax Act as modified by the CARES Act, federal NOLs of our corporate subsidiaries generated in tax years ending after December 31, 2017 may be carried forward indefinitely, but the deductibility of federal NOLs, particularly for tax years beginning on or after January 1, 2021, may be limited. The accounting for the material income tax impacts has been reflected in the year ended December 31, 2020 financial statements. It is uncertain if and to what extent various states will conform to the 2017 Tax Act or the CARES Act. The Company is currently assessing the impact the CARES Act will have on the Company’s consolidated financial statements. Stock-Based Compensation   Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.   Pursuant to ASC 2018-07 (“Topic 718”) for share-based payments to employees, consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the grant date. The Company uses the Black-Scholes option valuation model for estimating fair value at the date of grant.     The Company accounts for restricted stock awards and stock options issued at fair value, based the closing stock price of the Company’s common stock reported on the OTC Bulletin Board. Compensation expense is recognized for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to the Company generally using the straight-line single option method.   In the case of award modifications, the Company accounts for the modification in accordance with Accounting Standards Update (“ASU”) No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, whereby the Company recognizes the effect of the modification in the period the award is modified.   As of January 1, 2019, the Company adopted ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting of share-based payment awards issued to employees and nonemployees. The adoption did not materially impact our consolidated financial statements.   Fair value measurements   The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements and establishes a framework for measuring fair value and expands disclosure about such fair value measurements. ASC 820 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:     · Level 1 – Quoted prices in active markets for identical assets and liabilities.         · Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.         · Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. When a part of the purchase consideration consists of shares of the Company common stock, the Company calculates the purchase price attributable to those shares, a Level 1 security, by determining the fair value of those shares quoted on the OTC as of the acquisition date. The Company recognizes estimated fair values of the tangible assets and identifiable intangible assets acquired, including in-process research and development, and liabilities assumed, including any contingent consideration, as of the acquisition date. Goodwill is recognized as any amount of the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in excess of the consideration transferred. ASC 805 precludes the recognition of an assembled workforce as an asset, effectively subsuming any assembled workforce value into goodwill.   In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. At September 30, 2021 and December, 31, 2020, the Company had no financial assets or liabilities recorded at fair value on a recurring basis, except for cash and cash equivalents consisting of money market funds and the Series A and Series B Notes, which we elected the fair value option. These assets are measured at fair value using the period-end quoted market prices as a Level 3 input. The Company also has certain derivative liabilities and contingent consideration liabilities which are carried at fair value based on Level 3 inputs (see Note 14).    The carrying amounts of cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair values because of the short-term nature of these items.   The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earnouts may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from the date of acquisition to September 30, 2021, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in a decrease of the fair value of the contingent stock consideration. In June 2020, the Company settled all of its outstanding contingent consideration liabilities outstanding with CHI. In October 2020, the Company acquired Sera Labs and had an outstanding contingent consideration liability of $ 3.2 million in relation to the Sera Labs Merger.   The Company has elected the fair value option to account for the Series A and B Notes that were issued on October 30, 2020 and records this at fair value with changes in fair value recorded in the Consolidated Statements of Operations. As a result of applying the fair value option, direct costs and fees related to the Series A and B Notes were recognized in earnings as incurred and not deferred.   The following table summarizes the changes in Level 3 financial instruments during the nine months ended September 30, 2021 (in thousands):   Fair value at December 31, 2020   $ 18,684   Change in fair value of Series A Note     (1,020 ) Change in fair value of Series B Notes     (91 ) Conversion of Series A Notes     (2,881 ) Fair value of Series A and B Notes at September 30, 2021   $ 14,692   Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Series A and Series B Notes are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy is as follows:   Date of valuation   September 30, 2021     December 31, 2020   Stock price   $ 0.73     $ 1.30   Conversion price   $ 1.32     $ 1.32   Term (in years) – Series A Note     1.08       1.83   Term (in years) – Series B Note     0.08       0.83   Volatility – Series A Note     85 %     86 % Volatility – Series B Note     80 %     80 % Risk-free interest rate – Series A Note     0.11 %     0.12 % Risk-free interest rate – Series B Note     0.07 %     0.09 % Interest rate     18 %     1 %   The Company recorded a loss of $0.7 million and $1.1 million due to the change in fair value of Series A and B convertible notes for the three and nine months ended September 30, 2021 and $0 for the three and nine months ended September 30, 2020.   Beneficial Conversion Feature   If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.   Series A and Series B convertible notes:   As described further in Note 13 - the Company has elected the fair value option to record its Series A and Series B convertible debentures, which were issued in October 2020. The fair value of the Notes is classified within Level 3 of the fair value hierarchy because the fair values were estimated utilizing a Monte Carlo simulation model. Accordingly, the notes are marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the Consolidated Statement of Operations. All issuance costs related to the debentures were expensed as incurred in the Consolidated Statement of Operations.   Accounting for warrants   The Company determines the accounting classification of warrants it issues, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. The Company does not have any liability classified warrants as of any period presented. Derivative Liabilities   ASC 815-40, requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula and present value pricing. At September 30, 2021 and December 2020, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement of operations.   Contingencies   We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition.   Net Loss per Common Share   Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, excluding any unvested restricted stock awards. Diluted net earnings per share is computed by dividing net earnings by the weighted average common shares outstanding during the period plus dilutive securities or other contracts to issue common stock as if these securities were exercised or converted to common stock.   Diluted net loss per share includes the effect of common stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive. Net loss is adjusted for the dilutive effect of the change in fair value liability for price adjustable warrants, if applicable.   The following table sets forth the computation of basic and diluted net income per share for the three months ended (in thousands, except per share data):     For the Three Months Ended     For the Nine months Ended   (Dollars in thousands)   September 30, 2021     September 30, 2020     September 30, 2021     September 30, 2020                             Net income (loss)   $ (4,343 )   $ (2,751 )   $ (8,835 )   $ (14,144 ) Weighted average outstanding shares of common stock     62,174,822       41,344,256       61,462,300       43,647,388   Dilutive potential common stock shares from:     -       -       -           Vested Stock options from the Company’s 2017 Equity Incentive Plan     -       -       -           Conversion of convertible notes     -       -       -           Common stock and common stock equivalents     62,174,822       41,344,256       61,462,300       43,647,388   Income per share:                                 Basic net income per share     (0.07 )     (0.07 )     (0.14 )     (0.32 ) Diluted net income per share     (0.07 )     (0.07 )     (0.14 )     (0.32 )   The following number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive:       Three and nine months ended September 30,       2021     2020                 Vested stock options from the Company’s 2017 Equity Incentive Plan     3,845,124       3,517,577   Warrants     1,565,447       6,648,446   Shares to be issued upon conversion of convertible payable     115,047       115,047                     Total     5,525,618       10,281,070     In connection with Sera Labs Merger, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones. Due to the uncertainty of the number of Clawback Shares to be issued, these Clawback Shares were not included in the table above.   The Series A and B Notes (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. Due to the uncertainty of the number of shares to be issued, the shares to be issued from the conversion of the Series A and B Notes were also not included in the table above. Segment Reporting   The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it does have segment reporting relating to Cure Pharmaceutical and Sera Labs.   Emerging Growth Company   We are an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 (“JOBS Act”). For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i), and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.   Risks and Uncertainties   The COVID-19 pandemic has had, and may continue to have, an unfavorable impact on certain areas of the Company’s business. The broader implications of the COVID-19 pandemic on the Company’s financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, and the availability, distribution, and effectiveness of vaccines to address the COVID-19 virus. The impact on the Company’s customers and suppliers and the range of governmental and community reactions to the pandemic are uncertain. The Company may experience reduced customer demand or constrained supply that could materially adversely impact business, financial condition, results of operations, liquidity and cash flows in future periods.   Recent Accounting Pronouncements Adopted ASU 2020-01   In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815. ASU 2020-01 addresses the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. Observable transactions that require a company to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with ASC 321, Investments – Equity Securities, should be considered immediately before applying or upon discontinuing the equity method. Certain non-derivative forward contracts or purchased call options to acquire equity securities generally will be measured using the fair value principles of ASC 321 before settlement or exercise and consideration shall not be given to how entities will account for the resulting investments on eventual settlement or exercise. ASU 2020-01 is effective for the Company beginning in the first quarter of 2021 and early adoption is permitted. ASU 2020-01 should be applied prospectively. The adoption of this ASU did not have any impact on the Company’s consolidated financial statements. Recent Accounting Pronouncements Not Yet Adopted   ASU 2019-12   In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within that fiscal year. Early adoption is permitted. The Company is in the process of evaluating the impacts of this guidance on its consolidated financial statements and related disclosures.   ASU 2020-06   In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivative and Hedging - Contracts in Entity’s Own Equity, which simplifies the accounting for convertible instruments. This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is required to be adopted by us in the first quarter of 2023 and must be applied using either a modified or full retrospective approach. We are currently evaluating the impact this guidance will have on our consolidated financial statements.   Other accounting standard updates effective for interim and annual periods beginning after December 31, 2021 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.   There are various other updates recently issued, however, they are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

v3.24.3

PREPAID EXPENSES AND OTHER ASSETS	9 Months Ended
	Sep. 30, 2021
PREPAID EXPENSES AND OTHER ASSETS
PREPAID EXPENSES AND OTHER ASSETS	NOTE 3 - PREPAID EXPENSES AND OTHER ASSETS   As of September 30, 2021 and December 31, 2020, prepaid expenses and other assets consisted of the following (in thousands):       September 30, 2021     December 31, 2020                 Prepaid consulting services   $ -     $ 14   Prepaid clinical study     -       32   Prepaid insurance     113       347   PPE deposits     -       700   Prepaid equipment     67       61   Prepaid deposit for inventory     165       211   Prepaid expenses     40       66   Other assets     129       79   Prepaid expenses and other assets     514       1,510   Current portion of prepaid expenses and other assets     (431 )     (1,452 ) Prepaid expenses and other assets less current portion   $ 83     $ 58

v3.24.3

INVENTORY	9 Months Ended
	Sep. 30, 2021
INVENTORY
INVENTORY	NOTE 4 - INVENTORY   Inventory consists of raw materials, packaging components, work-in-process and finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or Net Realized Value.   The carrying value of inventory consisted of the following at September 30, 2021 and December 31, 2020 (in thousands):       September 30, 2021     December 31, 2020   Raw materials   $ 98     $ 64   Packaging components     133       54   Work-in-process     40       22   Finished goods     877       603         1,148       743   Reserve for obsolescence     (188 )     (294 ) Total inventory   $ 960     $ 449     For the three months ended September 30, 2021 and 2020, inventory reserves amounted to $0.003 million and $0.001 million, respectively. For the nine months ended September 30, 2021 and 2020, inventory reserves amounted to $0.2 million and $0.004 million, respectively.

v3.24.3

PROPERTY AND EQUIPMENT	9 Months Ended
	Sep. 30, 2021
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT	NOTE 5 - PROPERTY AND EQUIPMENT   As of September 30, 2021 and December 31, 2020, property and equipment consisted of the following (in thousands):       September 30, 2021     December 31, 2020                 Equipment not yet placed in service   $ 1,413     $ 1,465   Manufacturing equipment     1,093       1,047   Computer and other equipment     626       626   Less accumulated depreciation     (1,230 )     (1,091 ) Property and Equipment, net   $ 1,902     $ 2,074   For the three and nine month periods ended September 30, 2021, depreciation expense amounted to $0.05 million and $0.14 million, respectively. Depreciation expense for the three and nine month periods ended September 30, 2020 was $0.06 million and $0.16 million, respectively.

v3.24.3

NOTES RECEIVABLE	9 Months Ended
	Sep. 30, 2021
NOTES RECEIVABLE
NOTES RECEIVABLE	NOTE 6 – NOTES RECEIVABLE   On November 12, 2019, the Company purchased a $0.2 million convertible promissory note (the “Coeptis Note”) issued by Coeptis Pharmaceuticals, Inc.(“Coeptis”), a privately held biopharmaceutical company engaged in the acquisition, development and commercialization of pharmaceutical products. The Coeptis Note is due June 15, 2020, pays interest at the rate of 9% per annum and gives us the right, at any time, to convert the Coeptis Note into shares of common stock of Coeptis, at a price per share equal to $2.60 or the share price set by the latest qualified financing, whichever is less.   On July 31, 2020, the Company purchased a $0.5 million secured promissory note (the “Sera Labs Note”) issued by Sera Labs, in connection with the execution of the Memorandum of Understanding summarizing the terms and conditions of a proposed acquisition, pursuant to which Sera Labs will become a wholly-owned subsidiary of the Company. The Sera Labs Note bears an interest at the rate of 9% per annum and has a maturity date of December 31, 2020. On September 16, 2020, a Note Modification Agreement was signed, modifying the principal amount to $0.55 million with interest on $0.5 million of the principal amount accruing from and after July 31, 2020 and on $0.05 million of the principal amount from and after September 16, 2020. The note was settled as part of the Sera Labs acquisition, see Note 19.   On May 26, 2021, the Company purchased a convertible loan (the “May 2021 Loan”) with Biopharmaceutical Research Company (“BRC”) for a total amount of $0.2 million, which is one of a series of notes “(Notes”) pursuant to the terms of the Note Purchase Agreement (“NPA”) offered by BRC. BRC shall accrue interest on the May 2021 Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date or the maturity date of May 26, 2023. In the event of a request for conversion by the Company, the outstanding amount of the May 2021 Loan and any unpaid accrued interest shall be converted into shares of BRC, rounded down to the nearest whole share, by dividing the May 2021 Loan by the price per share obtained by dividing $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (i) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes and (ii) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC. In the event the Company has not requested for conversion, the May 2021 Loan can automatically convert if BRC sells shares of preferred stock (the “Qualified Financing Securities”) to one or more investors in a single transaction or series of related transactions for aggregate proceeds to BRC (including cancellation of indebtedness under the Notes or any other convertible debt) of at least $4 million(a “Qualified Financing”). The May 2021 Loan shall automatically convert at the initial closing of and on the same terms and conditions of the Qualified Financing into a total number of Qualified Financing Securities, rounded down to the nearest whole share, obtained by dividing the May 2021 Loan by the lesser of (i) 80% of the price per share paid for the Qualified Financing Securities by investors in the Qualified Financing and (ii) $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (a) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes, (b) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC and (c) any equity incentive or similar plan to be created or increased in connection with the Qualified Financing).     Note receivable consists of the following (in thousands):       September 30, 2021     December 31, 2020   Coeptis Pharmaceuticals, Inc.   $ -     $ 200   Biopharmaceutical Research Company     200       -   Less: allowance for doubtful accounts     -       (200 ) Current portion of note receivable, net     -       -   Note receivable, net less current portion   $ 200     $ -   On January 20, 2021 and February 10, 2021, the Company collected a total of $0.2 million from Coeptis relating to a convertible promissory note issued from Coeptis on November 7, 2019. The total payment of $0.2 million was full satisfaction of the principal amount and accrued interest until February 10, 2021. The Coeptis Note had a maturity date of June 15, 2020, which was not paid by the maturity date and was considered in default as of December 31, 2020 and fully reserved for. The Company recorded the collection of the Coeptis Note as a recovery of bad debt during the three months ended March 31, 2021.

v3.24.3

GOODWILL AND INTANGIBLE ASSETS	9 Months Ended
	Sep. 30, 2021
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS	NOTE 7 – GOODWILL AND INTANGIBLE ASSETS   The Company incurred $0.07 and $0.01 million of legal patent costs that were capitalized during the nine months ended June, 2021 and 2020, respectively. During the year ended December 31, 2020, the Company acquired from Sera Labs customer relationships at a fair value of $7.1 million, $2.6 million in Tradename intangibles, $0.5 million in non-compete and $4.7 million in Goodwill from the acquisition of Sera Labs. During the year ended December 31, 2019, the Company acquired from the CHI acquisition patents at a fair value of $0.7 million, $14.5 million in Intellectual Property Research & Development and $9.2 million in Goodwill from the acquisition of CHI.   Intangible Asset Summary   As of September 30, 2021 and December 31, 2020, goodwill and intangible assets, net, consisted of the following (in thousands):       September 30, 2021     December 31, 2020   Goodwill (1)   $ 13,868     $ 13,868                     Intangible assets:                 Acquired IPR&D – Chemistry (2)   $ 502     $ 14,460   Pending patents – Cure Pharmaceutical     327       259   Intangible assets subject to amortization:                 Customer relationships (2)     7,110       7,110   Acquired IPR&D – Chemistry (2)     13,958       -   Tradename (2)     2,610       2,610   Noncompete (2)     462       462   Intellectual property     972       972   Issued patents     1,034       1,044   Total intangible assets     26,975       26,917   Accumulated amortization     (3,744 )     (1,312 ) Intangible assets, net   $ 23,231     $ 25,605     (1) Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in the Merger (see Note 19). In 2020, the Company recorded additional goodwill of $4.7 million as a result of the Sera Labs acquisition.     (2) See Note 19 for information on the Mergers which were consummated in May 2019 and October 2020. During the three and nine months ended September 30, 2021 the Company completed a portion of their IPR&D project and begin amortizing $3.5 million and $13.9 million over its estimated useful life of 10 years on a straight-line basis.   Amortization expense was $1.0 million and $0.03 million for the three months ended September 30, 2021 and 2020, respectively. Amortization expense was $2.4 million and $0.09 million for the nine months ended September 30, 2021 and 2020, respectively.   The estimated aggregate amortization expense over each of the next five years is as follows (in thousands):   2021 (remaining)   $ 953   2022     3,765   2023     3,592   2024     3,429   2025     2,583   Thereafter     8,080   Total Amortization   $ 22,402

v3.24.3

ACCRUED EXPENSES	9 Months Ended
	Sep. 30, 2021
ACCRUED EXPENSES
ACCRUED EXPENSES	NOTE 8 – ACCRUED EXPENSES   As of September 30, 2021 and December 31, 2020, accrued expenses consisted of the following (in thousands):       September 30, 2021     December 31, 2020                 Accounts payable factoring   $ 2,325     $ -   Refunds and returns liability     434       -   Accrued interest     417       194   Accrued payroll     270       308   Accrued vacation leave     221       180   Accrued expenses     301       306   Sales tax payable     327       311   Accrued Expenses   $ 4,295     $ 1,299

v3.24.3

RELATED PARTY TRANSACTIONS	9 Months Ended
	Sep. 30, 2021
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS	NOTE 9 – RELATED PARTY TRANSACTIONS   Due to Related Party   The Company and other related entities have had a commonality of ownership and/or management control, and as a result, the reported operating results and /or financial position of the Company could significantly differ from what would have been obtained if such entities were autonomous. On January 2, 2019, Sera Labs entered into an administrative service agreement (“Service Agreement”) with Visionworx, an affiliate of Sera Labs. Visionworx will process payments related to Sera Lab’s operations using Visionworx’s contractual relationship with JPMorgan Chase Bank, N.A. via its Chase Paymentech Select Merchant Payment Instrument Processing Agreement. In consideration for the services, Sera Labs will pay to Visionworx a management fee equal to all associated fees and expenses in connection with the Service Agreement. The Service Agreement is effective on January 2, 2019 and will continue for a period of two years. The term of the Service Agreement will be renewed automatically for additional one-year periods until terminated. The Service Agreement may be terminated by (a) either party for any reason at least thirty days’ prior written notice to the other party; or (b) immediately upon the mutual consent of the parties.    On August 6, 2020, the Company entered into an unsecured promissory note (the “August Note”) with one of the Company’s board members (“Board Investor”), for a principal amount of $150,000. The August Note is due on August 6, 2021 and has an interest rate of 8% per annum, payable in quarterly payments. The principal and accrued interest under the August Note can convert into a convertible promissory note if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the August Note. Upon notice by the Company of such debt financing, the holder of the August Note shall have the right, but not the obligation, to convert the August Note into a convertible promissory note, with the same principal amount and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. The Board Investor did not elect to convert their August Note into a convertible promissory note, with the same principal and interest accruing from the date of issuance of the August Note, on the same terms as the convertible promissory notes issued to such new investors. As of the date of this report, both the Company and the Board Investor agreed to extend the August Note and are currently negotiating the terms of the amendment.   On October 2, 2020, the Company completed its acquisition of Sera Labs and pursuant to the Sera Labs Merger Agreement, the Company issued a promissory note in the principal amount of $1.1 million owed to the CEO of Sera Labs (“Duitch Note”), of which $1.0 million is the upfront payment in connection with the closing of the Sera Labs Merger, and $0.1 million is for certain liabilities of Sera Labs due to Mrs. Duitch. The Duitch Note is due September 30, 2021 and has an interest rate of 8% per annum. On November 9, 2020, a payment of $0.3 million was made and applied to principal only. As of September 30, 2021, total outstanding due to Mrs. Duitch was $0.9 million. As of the date of this report, both the Company and Mrs. Duitch agreed to extend the Duitch Note and are currently negotiating the terms of the amendment.   On May 3, 2021 and September 16, 2021, the Company received $0.2 million and $0.2 million, respectively, from one of the Company’s board members (“Second Board Investor”) in exchange for two promissory notes. Both the Company and Second Board Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Second Board Investor are still negotiating the terms of the promissory notes.   Interest expense in regard to related party payables for the three months ended September 30, 2021 and 2020 was $0.029 million and $0.002 million, respectively. Interest expense in regard to related party payables for the nine months ended September 30, 2021 and 2020 was $0.075 million and $0.002 million, respectively.

v3.24.3

LOAN PAYABLE	9 Months Ended
	Sep. 30, 2021
LOAN PAYABLE
LOAN PAYABLE	NOTE 10 – LOAN PAYABLE   Loan payable consists of the following at September 30, 2021 and December 31, 2020 (in thousands):       September 30, 2021     December 31, 2020                 Note to a company due September 29, 2021, including interest at 4.32% per annum; unsecured; interest due monthly   $ -     $ 182   Note to a company due September 6, 2021, including interest at 6.55% per annum; unsecured; interest due monthly     -       83   Note to a company due June 6, 2022, including interest at 4.42% per annum; unsecured; interest due monthly     60       -   Current portion of loan payable     (60 )     (265 ) Loan payable, less current portion   $ -     $ -     Interest expense for the three and nine month periods ended September 30, 2021 was $0.001 million and $0.003 million, respectively. Interest expense for the three and nine month periods ended September 30, 2020 was $0.001 million and $0.002 million, respectively.

v3.24.3

NOTES PAYABLE AND PPP LOAN	9 Months Ended
	Sep. 30, 2021
NOTES PAYABLE AND PPP LOAN
NOTES PAYABLE AND PPP LOAN	NOTE 11 – NOTES PAYABLE AND PPP LOAN   Notes payable consist of the following at September 30, 2021 and December 31, 2020 (in thousands):       September 30, 2021     December 31, 2020                 Note to an individual, non-interest bearing, unsecured and due on demand   $ 50     $ 50   Promissory note to a company due May 18, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note     250       250   Promissory note to a company due August 12, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note     500       500   Promissory note to a company due January 13, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note     500       -   Promissory note to a company due April 8, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note     250       -   Promissory note to a company due October 30, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note     250           Current portion of note payable   $ 1,800     $ 800     On May 18, 2020 and August 12, 2020, the Company entered into unsecured promissory notes (“Notes”) with an investor for $0.3 million and $0.5 million, respectively. The Notes are due on May 18, 2021 and August 12, 2021, respectively, and have an interest rate of 8% per annum, payable in quarterly payments. The principal and accrued interest under the Notes can convert into convertible promissory notes if the Company consummates a debt financing for the sale and issuance of promissory notes that are convertible into common stock of the Company on terms that are more favorable to new investors than the terms described in the term sheet included in the Notes. Upon notice by the Company of such debt financing, the holder of the Notes shall have the right, but not the obligation, to convert the Notes into convertible promissory notes, with the same principal amount and interest accruing from the date of issuance of the Notes, on the same terms as the convertible promissory notes issued to such new investors. The investor did not elect to convert their Notes into a convertible promissory note, with the same principal and interest accruing from the date of issuance of the Notes, on the same terms as the convertible promissory notes issued to such new investors. As of the date of this report, both the Company and the investor agreed to extend the $0.3 million and $0.5 million unsecured promissory notes and are currently negotiating the terms of the amendment.   On September 25, 2020 the Company issued a demand secured promissory note to Ionic Ventures, LLC (“Ionic”), dated September 25, 2020 (the “Promissory Note”), in the principal amount of $1.1 million with the Company receiving gross proceeds of $1.0 million and $0.1 million being an original issue discount. The Promissory Note is secured by certain assets of the Company as further set forth therein, bears no interest rate and is subject to payment on demand of Ionic after the earlier of either (a) the initial date after September 25, 2020 of any offering of securities by the Company with gross proceeds of at least $1.0 million or (b) October 31, 2020. The outstanding principal amount and any unpaid accrued Late Charges (as defined below) may be prepaid at any time, without notice, premium or penalty. Payments will be credited first to the accrued Late Charges then due and payable and the remainder applied to the outstanding principal. On October 30, 2020, the Company repaid in full the outstanding principal balance and all accrued but unpaid interest expense of $1.1 million from the proceeds of the Series A Note further described in Note 13. On January 13, 2021 and February 25, 2021, the Company received a total of $0.5 million from an investment company (“Investor”) in exchange for a promissory note. Both the Company and Investor agreed to negotiate the terms of the promissory note and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory note.   On April 8, 2021 and September 24, 2021, the Company received $0.3 million and $0.3 million, respectively, from an investment company (“Investor”) in exchange for two promissory notes. Both the Company and Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory notes.   Paycheck protection program consist of the following at September 30, 2021 and December 31, 2020 (in thousands):       September 30, 2021     December 31, 2020                 Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act.   $ -     $ 399   Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act.     -       206   Payment protection program loan   $ -     $ 605     In April 2020, the CURE Pharmaceutical and Sera Labs received loan proceeds in the amount of approximately $0.4 million and $0.2 million under the Paycheck Protection Program (“PPP”). The PPP, established as part of the CARES Act, provides for loans to qualifying businesses. A portion of the loans and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries. No collateral or guarantees were provided in connection with the PPP loans. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act and the Company recorded a gain on extinguishment of debt during the three months ended March 31, 2021. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act and the Company recorded a gain on extinguishment of debt during the three months ended September 30, 2021.   Interest expense for the three months ended September 30, 2021 and 2020 was $0.05 million and $0.01 million, respectively. Interest expense for the nine months ended September 30, 2021 and 2020 was $0.11 million and $0.01 million, respectively.

v3.24.3

CONVERTIBLE PROMISSORY NOTES	9 Months Ended
	Sep. 30, 2021
CONVERTIBLE PROMISSORY NOTES
CONVERTIBLE PROMISSORY NOTES	NOTE 12 – CONVERTIBLE PROMISSORY NOTES   Convertible promissory notes consist of the following at September 30, 2021 and December 31, 2020 (in thousands):       September 30, 2021     December 31, 2020                 Convertible promissory notes totaling $550,000 due January 31, 2019, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due January 31, 2019 and currently in default. The Company has offered to either repay the convertible promissory notes or request to have them converted into common stock shares of the Company. The beneficial owners of the convertible promissory notes have not yet communicated their intent to either receive payment or convert.   $ 550     $ 550   Current portion of convertible promissory notes   $ 550     $ 550

v3.24.3

FAIR VALUE CONVERTIBLE PROMISSORY NOTES	9 Months Ended
	Sep. 30, 2021
FAIR VALUE CONVERTIBLE PROMISSORY NOTES
FAIR VALUE CONVERTIBLE PROMISSORY NOTES	NOTE 13 – FAIR VALUE CONVERTIBLE PROMISSORY NOTES   Fair value of convertible promissory notes consists of the following at September 30, 2021 and December 31, 2020 (in thousands):       September 30, 2021     December 31, 2020                 Series A subordinated convertible note at fair value   $ 3,109     $ 7,010   Series B subordinated convertible note at fair value     11,583       11,674   Total convertible promissory notes     14,692       18,684   Less: Investor Note offset – Series B Note     (5,000 )     (5,000 ) Carrying value of convertible promissory notes at fair value     9,692       13,684   Less: current portion of convertible promissory notes at fair value     (6,583 )     (6,674 ) Convertible promissory notes, less current portion   $ 3,109     $ 7,010     On October 30, 2020, the Company entered into a Securities Purchase Agreement (“Purchase Agreement”) with an institutional investor (the “Investor”) for the purchase of two new series of convertible notes with an aggregate principal amount of $11,500,000. Concurrently the Company consummated the sale to the Investor of a Series A subordinated convertible note (the “Series A Note”) with an initial principal amount of $4,600,000 and a Series B senior secured convertible note (the “Series B Note,” and together with the Series A Note, the “Convertible Notes” and, each a “Convertible Note”) with an initial principal amount of $6,900,000 in a private placement (the “Private Placement”).   The Series A Note was sold with an original issue discount of $600,000 and the Series B Note was sold with an original issue discount of $900,000. The Investor paid for the Series A Note to be issued to the Investor by delivering $4,000,000 in cash consideration and paid for the Series B Note to be issued to the Investor by delivering a secured promissory note (the “Investor Note”) with an initial principal amount of $6,000,000. The Company will receive cash in respect of a Series B Note only upon cash repayment of the corresponding Investor Note. In certain circumstances, the Investor Note may be automatically satisfied through netting against the Series B Note, as described more fully below, rather than through the payment of cash. Until an Investor Note is repaid, the original issue discount and the rest of the principal under the corresponding Series B Note is considered to be “restricted.” Upon any repayment of the Investor Note, the principal of the corresponding Series B Note becomes “unrestricted” on dollar-for-dollar basis, along with a proportional amount of the original issue discount. During the year ended December 31, 2020, the Company received $1.0 million from the Investor Note, leaving a remaining balance of $5.0 million of the Investor Note as of December 31, 2020, which is netted against the Series B Note and included in convertible promissory notes in the balance sheet.   The placement agent received a placement agent fee of $306,000 at the closing of the Private Placement, representing 8% of the gross cash proceeds at the closing. After deducting the placement agent fee, the Company’s estimated expenses associated with the Private Placement and the repayment of the September Note, the Company’s net cash proceeds at the closing were approximately $2,340,000. If the Investor Note is subsequently satisfied in full by payment in cash, the additional financial advisory fee on the cash proceeds received from the Investor Note will be another $480,000, and the aggregate net cash proceeds from the Private Placement as a whole will be approximately $8,850,000.In addition, the placement agent received a warrant (the “Warrant”) exercisable for two years for the purchase of an aggregate of up to 242,424 shares of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636shares of the Company’s common stock (collectively with the shares underlying the Warrant, the “Warrant Shares”). The Warrant Shares, when issued, will have the same rights, preferences and privileges (including the registration rights described under “Registration Rights Agreement” below) as the shares underlying the Convertible Notes. The Convertible Notes mature on October 30, 2022 with respect to the Series A Note and October 30, 2021 with respect to the Series B Note (the “Maturity Date”), subject to extension in certain circumstances, including bankruptcy and outstanding events of default. On the Maturity Date, the Company shall pay to the Investor an amount in cash (other than restricted amounts under a Series B Note) presenting all outstanding principal, Make-Whole Amount (as defined in the Convertible Notes), if any, accrued and unpaid interest and accrued and unpaid Late Charges (as defined in the Convertible Notes) on such principal, except that any restricted amount under the Series B Note will be automatically satisfied on the Maturity Date (in lieu of a cash payment) by Maturity Netting (as defined in the Investor Note described below). The Company may not prepay any amounts due under the Convertible Notes. The Convertible Notes shall bear no interest unless there is an occurrence, and during the continuance, of an Event of Default at which point interest shall be 18%. As of the filing date of this report, the Series B Note has matured and is due according to its terms (see Note 22). The Company and Investor are currently negotiating to extend the maturity date of the Series B Note on terms satisfactory to the Company.   Each Convertible Note (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein.   Promptly after the consummation of the sale of the Convertible Notes, the Company repaid in full the outstanding principal balance and all accrued but unpaid interest expense on the Senior Promissory Note issued on September 25, 2020 to the Investor (the “September Note”). The cash payment to the Investor to satisfy the September Note was in the amount $1,100,000.   Payment of Amounts Due under the Convertible Notes   On the Maturity Date, the Company shall pay to the Investor an amount in cash (other than restricted amounts under a Series B Note) presenting all outstanding principal, Make-Whole Amount (as defined in the Convertible Notes), if any, accrued and unpaid interest and accrued and unpaid Late Charges (as defined in the Convertible Notes) on such principal, except that any restricted amount under the Series B Note will be automatically satisfied on the Maturity Date (in lieu of a cash payment) by Maturity Netting (as defined in the Investor Note described below). The Company may not prepay any amounts due under the Convertible Notes.   Interest   The Convertible Notes shall bear no interest unless there is an occurrence, and during the continuance, of an Event of Default (as defined in the Convertible Notes). During any such Event of Default, the Convertible Notes will accrue interest at the rate of 18% per annum. See “—Events of Default” below.   Conversion; Alternate Conversion upon Event of Default   Each Convertible Note (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein.   Conversion Limitation   The Investor will not have the right to convert any portion of a Convertible Notes, to the extent that, after giving effect to such conversion, the Investor (and other certain related parties) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such conversion. This limit may, from time to time, be increased, up to 9.99%, or decreased; provided that any such increase will not be effective until the 61st day after delivery of a notice to the Company of such increase.   Events of Default   The Convertible Notes include certain customary and other Events of Default. In connection with an Event of Default, the Investor may require the Company to redeem in cash any or all of the Convertible Notes. The redemption price will be at a premium to the amount due under the Convertible Notes as described therein.   Change of Control   In connection with a Change of Control (as defined in the Convertible Notes), the Investor may require the Company to redeem all or any portion of the Convertible Notes. The redemption price per share will be at a premium to the amount due under the Convertible Notes as described therein.   Covenants   The Company will be subject to certain customary affirmative and negative covenants including those regarding the payment of dividends, maintenance of its property, transactions with affiliates, and issue notes and certain securities.   Placement Agent Warrants   On October 2, 2020 and December 31, 2020, in connection with the Series A Note and Series B Note, respectively, a placement agent is to receive a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock.   The Company used the Black-Scholes model to determine the fair value of the Warrants issued to the Placement Agent. The Company has elected the Fair Value Option for the Series A Note and Series B Note, accordingly the fair value of the Warrants issued to the placement agent were expensed.   The following table sets forth the assumptions used and calculated aggregated fair values of the warrants:   Significant assumptions (weighted-average):       Risk-free interest rate at grant date     0.36 % Expected stock price volatility     81.14 % Expected dividend payout     -   Expected warrant life (in years)     2   Expected forfeiture rate     0 % Fair Value Option for the Series A and Series B Notes   The Company elected the fair value option under ASC 825, Financial Instruments , for both the Series A and Series B Notes and accounted for the Notes as follows (1) the portion of the change in the liability’s fair value that is attributable to a change in instrument-specific credit risk in other comprehensive income (2) the remaining change in the liability’s fair value in net income (3) the excess of the fair value over the proceeds is recognized as an expense and (4) upfront costs and fees are recognized in earnings as incurred Gains and losses attributable to changes in credit risk are determined using observable credit default spreads for the issuer or comparable companies; these gains and losses were insignificant during all periods presented. The Company recognized a loss of $4.4 million and $5.1 million at the time of issuance of the Series A and Series B Notes, respectively, as a result of the make whole provision noted within the debt arrangements as the debt holders would be awarded a variable number of shares at the time of conversion which would always equate to an amount greater than the principal amount of the debt.   The Company recorded a gain of $0.1 million and $0.6 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the three months period ended September 30, 2021 and were recorded in the consolidated statement of operations. The Company recorded a gain of $1.0 million and $0.1 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the nine months period ended September 30, 2021 and were recorded in the consolidated statement of operations. Based on discussions with our valuation expert and knowledge of the Company, there was no change in valuation caused by a change in the Company’s credit risk during the period from October 30, 2020 to December 31, 2020 and from January 1, 2021 to September 30, 2021.   The Company recorded a loss of $4.6 million and $4.7 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the year ended December 31, 2020 and were recorded in the consolidated statement of operations. The Company incurred debt issuance cost of $0.7 million and $0.1 million attributed to the Series A and Series B Notes, respectively, which were expensed as incurred.

v3.24.3

DERIVATIVE LIABILITY	9 Months Ended
	Sep. 30, 2021
DERIVATIVE LIABILITY
DERIVATIVE LIABILITY	NOTE 14 – DERIVATIVE LIABILITY   The Company evaluates its convertible instruments, options, warrants or other contracts, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instruments, the instrument is marked to fair value at the conversion date then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.   The following table presents a reconciliation of the derivative liability measured at fair value on a recurring basis from December 31, 2019 to September 30, 2021 (in thousands):       Fair value of derivative liabilities   Balance at December 31, 2019   $ 91   Loss on change in fair value included in earnings     (91 ) Balance at December 31, 2020     -   Gain on change in fair value included in earnings     -   Balance at September 30, 2021   $ -

v3.24.3

WARRANT AGREEMENTS	9 Months Ended
	Sep. 30, 2021
WARRANT AGREEMENTS
WARRANT AGREEMENTS	NOTE 15 – WARRANT AGREEMENTS   Warrants that vest at the end of a one-year period are amortized over the vesting period using the straight-line method.   In June 2020, as part of the Company’s settlement with CHI we amended the warrants to purchase up 8,018,071 common stock shares which vest based on various revenue achievement during year 3 and year 4 post the CHI acquisition Closing Date. As part of the settlement the Company reduced the number of warrants to 708,467 common stock shares at an exercise price of $2.00 per share which was reduced from the original exercise price of $5.01 per share. In addition, the expiration date of the warrants was amended to expire on June 5, 2020. The warrants were exercisable on the date of issuance and were exercised by the warrant holders and the Company received $1.4 million. The Company determined based on Black-Scholes value calculated for pre and post modification, there was no incremental value to the warrant modification as the exercise price was more than the fair value of the stock.   On October 2, 2020 and December 31, 2020, in connection with the Series A Note and Series B Note, respectively, a placement agent is to receive a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock.   On December 8, 2020, an individual exercised 62,851 warrants by means of a cashless exercise with an exercise price of $1.00 per share. As a result of the exercise, the Company is to issue 26,936 common stock shares of the Company.   Warrants that vest at the end of a one-year period are amortized over the vesting period using the straight-line method.   The Company’s warrant activity was as follows:       Warrants     Weighted Average Exercise Price     Weighted Average Contractual Remaining Life   Outstanding, December 31, 2019     14,666,518     $ 3.70       2.99   Granted     303,030       1.32       1.86   Exercised     (771,318 )     1.92       -   Forfeited/Expired     (11,718,381 )     5.01       -   Outstanding, December 31, 2020     2,479,849     $ 1.86       1.23   Granted     -       -       -   Exercised     (96,250 )     1.00       -   Forfeited/Expired     (818,152 )     5.01       -   Outstanding, September 30, 2021     1,565,447       2.18       0.92   Exercisable at September 30, 2021     1,565,447     $ 2.18       0.92   Warrant summary as of September 30, 2021:   Range of Exercise Price   Number of Warrants     Weighted Average Remaining Contractual Life (years)     Weighted Average Exercise Price     Number of Warrants Exercisable     Weighted Average Exercise Price   $ 1.00–$2.31     1,565,447       0.92     $ 2.18       1,565,447     $ 2.18         1,565,447       0.92     $ 2.18       1,565,447     $ 2.18     Warrant summary as of December 31, 2020:   Range of Exercise Price   Number of Warrants     Weighted Average Remaining Contractual Life (years)     Weighted Average Exercise Price     Number of Warrants Exercisable     Weighted Average Exercise Price   $ 1.00–$6.00     2,479,849       1.23     $ 1.86       2,479,849     $ 1.86         2,479,849       1.23     $ 1.86       2,479,849     $ 1.86     The change in warrant value for the three months ended September 30, 2021 and 2020 was $0 and $0.1 million, respectively. The change in warrant value for the nine months ended September 30, 2021 and 2020 was $0 and $0 million, respectively.   There were no warrants granted during the three and nine months ended September 30, 2021. The weighted-average fair value of warrants granted to during the three and nine months ended September 30, 2020, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes option pricing model are as follows:       September 30, 2021     September 30, 2020   Significant assumptions (weighted-average):             Risk-free interest rate at grant date   - %     0.29 % Expected stock price volatility   - %     74.46 % Expected dividend payout     -       -   Expected option life (in years)     -       3   Expected forfeiture rate   - %     0 %   The aggregate intrinsic value of warrants outstanding and exercisable at September 30, 2021 was $0.

v3.24.3

STOCK INCENTIVE PLANS	9 Months Ended
	Sep. 30, 2021
STOCK INCENTIVE PLANS
STOCK INCENTIVE PLANS	NOTE 16 – STOCK INCENTIVE PLANS   On December 29, 2017 (“Effective Date”), the Company adopted the CURE Pharmaceutical Holding Corp. 2017 Equity Incentive Plan (the “2017 Equity Plan”), pursuant to which an aggregate of 5,000,000 shares of the common stock of the Company are available for grant. On November 28, 2020, the Company registered an additional 5,000,000 shares of common stock of the Company that are available to be granted by filing a Form S-3 Registration Statement under the Securities Act of 1933.   The Board of Directors have determined that it is in the best interests of the Company and its stockholders to provide an additional incentive for certain employees, including executive officers, and non-employee members of the Board of Directors of the Company by granting to them awards with respect to the common stock of the Company pursuant to the Plan. The Plan seeks to achieve this purpose by providing for awards in the form of Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards (“Awards”). The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date. The Company issued 1,395,801 Nonstatutory Stock Options (“NSO”) to employees of the Company and 338,443 Restricted Common Stock (“Restricted Common Stock”) to various consultants of the Company. The Company did not issue any Incentive Stock Options (“ISO”) or Restricted Stock Units (“RSU”) during the nine months ended September 30, 2021. The Company issued 90,000 ISO’s to an officer of the Company, 150,000 RCS to a consultant and 431,578 RSU’s to the members of the Board of Directors during the nine months period ended September 30, 2020. The Company did not issue any NSO’s during the nine months ended September 30, 2020. Vesting periods for awarded RCS, ISO’s and NSO’s range from immediate to quarterly over a 4 year period. Vesting period for RSU’s is the earlier of (i) the day prior to the next Annual Meeting of Shareholders following the date of grant, and (ii) one (1) year from the Date of Grant. For ISO’s and NSO’s awarded, the term to exercise their ISO or NSO is 10 years.   The Company issued 1,518,194 stock options to a consultant that contains performance-based vesting conditions where revenue milestones are to be met over a certain period. Such stock option awards would be valued using a Monte Carlo simulation based on the probability of the performance condition being met and the underlying expense would be recognized as the associated vesting conditions are met. No stock options that contain performance-based vesting conditions vested during the nine months ended September 30, 2021 and the likelihood of meeting the performance-based condition is currently nil.   Stock Options   The Company’s stock option activity was as follows:       Options     Weighted Average Exercise Price     Weighted Average Contractual Remaining Life   Outstanding, December 31, 2019     3,467,650     $ 1.84       8.74   Granted     3,600,364       1.26       9.19   Exercised     (30,000 )     0.74       -   Forfeited/Expired     (752,222 )     1.76       -   Outstanding, December 31, 2020     6,285,792     $ 1.52       8.86   Granted     1,395,801       0.98       9.43   Exercised     -       -       -   Forfeited/Expired     (371,250 )     0.73       -   Outstanding, September 30, 2021     7,310,343       1.46       8.45   Exercisable at September 30, 2021     3,845,124       1.52       7.91     Range of Exercise Price   Number of Awards     Weighted Average Remaining Contractual Life (years)     Weighted Average Exercise Price     Number of Awards Exercisable     Weighted Average Exercise Price   $ 0.61 - $4.01     7,310,343       8.45     $ 1.46       3,845,124     $ 1.52         7,310,343       8.45     $ 1.46       3,845,124     $ 1.52     The aggregate intrinsic value of options outstanding and exercisable at September 30, 2021 was $0.2 million. The aggregate grant date fair value of options granted during the nine months ended September 30, 2021 and year ended December 31, 2020 amounted to $1.1 and $4.3 million, respectively. Compensation expense related to stock options for the three and nine month periods ended September 30, 2021 was $0.4 million and $1.7 million, respectively. Compensation expense related to stock options was $0.1 million and $0.4 million for the three and nine month periods ended September 30, 2020, respectively.   As of September 30, 2021, the total unrecognized fair value compensation cost related to unvested stock options was $2.5 million, which is to be recognized over a remaining weighted average period of approximately 9.03 years.   The weighted-average fair value of options granted during the three months ended September 30, 2021 and 2020, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes option pricing model are as follows:       September 30, 2021     September 30, 2020   Significant assumptions (weighted-average):             Risk-free interest rate at grant date   - %     0.29 % Expected stock price volatility   - %     74.46 % Expected dividend payout     -       -   Expected option life (in years)     -       10   Expected forfeiture rate     0 %     0 %   Restricted Stock   Subject to the restrictions set with respect to the particular Award, a recipient of Restricted Stock generally shall have the rights and privileges of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld for the recipient’s account, and interest may be credited on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the recipient in cash or, at the discretion of the Board or Committee, in shares of common stock having a fair market value equal to the amount of such dividends, if applicable, upon the release of restrictions on the Restricted Stock and, if the Restricted Stock is forfeited, the recipient shall have no right to the dividends.   The Company’s restricted stock activity was as follows:       Restricted Stock Shares     Weighted Average Grant Date Fair Value   Non-vested, December 31, 2019     82,086     $ 2.69   Granted     150,000       1.60   Vested     (181,849 )     2.08   Forfeited/Expired     (237 )     -   Non-vested, December 31, 2020     50,000     $ 1.60   Granted     338,443       1.86   Vested     (330,751 )     2.07   Forfeited/Expired     -       -   Non-vested, September 30, 2021     57,692     $ 1.30   Compensation expense related to restricted shares for the three and nine months ended September 30, 2021 was $0.1 million and $0.4 million, respectively. Compensation expense related to restricted shares for the three and nine months ended September 30, 2020 was $0.1 million and $0.3 million, respectively. At September 30, 2021 and December 31, 2020, the Company had approximately $0.1 million and $0.1 million, respectively, of total unrecognized compensation expense related to restricted stock awards. Compensation will be recognized over a weighted-average period of approximately 0.17 years and 0.14 years, respectively.   Restricted Stock Units   The terms and conditions of a grant of Restricted Stock Units shall be determined by the Board or Committee. No shares of common stock shall be issued at the time a Restricted Stock Unit is granted. A recipient of Restricted Stock Units shall have no voting rights with respect to the Restricted Stock Units. Upon the expiration of the restrictions applicable to a Restricted Stock Unit, The Company will either issue to the recipient, without charge, one share of common stock per Restricted Stock Unit or cash in an amount equal to the fair market value of one share of common stock.   The Company’s restricted stock unit activity was as follows:       Restricted Stock Units     Weighted Average Grant Date Fair Value   Outstanding, December 31, 2019     60,759       3.66   Granted     431,578       1.33   Vested     (60,759 )     3.66   Forfeited/Expired     -       -   Outstanding, December 31, 2020     431,578     $ 1.33   Granted     65,600       1.00   Vested     (497,178 )     1.29   Forfeited/Expired     -       -   Outstanding, September 30, 2021     -       -     At September 30, 2021 and December 31, 2020, the Company had approximately $0 and $0.6 million, respectively, of total unrecognized compensation expense related to restricted stock units. As of September 30, 2021 and December 31, 2020, compensation will be recognized over a weighted-average period of approximately 0 years 0.64 years, respectively.   Compensation expense related to restricted stock units for the three and nine month periods ended September 30, 2021 was $0.2 million and $0.4 million, respectively. Compensation expense related to restricted stock units was $0.1 million and $0.2 million for the three and nine month periods ended September 30, 2020, respectively. All compensation expense related to restricted stock units were included in selling, general and administrative expenses.

v3.24.3

STOCKHOLDERS EQUITY	9 Months Ended
	Sep. 30, 2021
STOCKHOLDERS EQUITY
STOCKHOLDERS' EQUITY	NOTE 17 – STOCKHOLDERS’ EQUITY   Authorized Stock   The Company has authorized to issue is 150,000,000 common shares with a par value of 0.001 per share. As of September 30, 2021 and December 31, 2020, there were 65,060,044 shares of the Company’s common stock issued and outstanding, respectively.   Common Share Issuances   From January 1, 2020 to December 31, 2020, the Company issued 281,250 common stock shares, at prices per share ranging from $1.40 to $3.93 in consideration for certain consulting services. The total value of these issuances was $0.5 million.   From January 1, 2020 to December 31, 2020, the Company issued 194,016 common stock shares, at prices per share ranging from $1.60 to $3.15 in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.02 million.   On June 5, 2020, the Company issued 12,058,623 shares of its common stock, at a price per share equal to$1.82, in connection with the Release, Waiver, and Amendment Agreement entered into with CHI. The total value of these issuances was $21.9 million. $0.2 million related to common stock issuable as of December 31, 2019 that was issued in during 2020.   On June 5, 2020, the Company issued 708,467 common stock shares, at a price of $2.00 per share, from the exercise of certain warrants. Total value of these issuances was $1.4 million.   On October 2, 2020, the Company issued 6,909,091 common stock shares at a price per share of $1.38, in connection with the Sera Labs Merger. The total value of this issuance was $9,534,546.   On December 9, 2020, the Company issued 757,576 common stock shares, at a price per share of $1.32 in connection to conversion of $1,000,000 of the Series A Note plus 565,702 common stock shares at a price per share of $0.89 in connection to the make-whole-amount of $500,000 per the terms of the Series A Note.   From January 1, 2021 to September 30, 2021, the Company issued 872,361 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.2 million.   From January 1, 2021 to September 30, 2021, the Company issued 646,512 common stock shares, at prices per share ranging from $0.98 to $1.85 in connection to several consulting agreements. The total value of these issuances was $0.7 million.   From January 1, 2021 to September 30, 2021, the Company issued 26,936 common stock shares, at a price of $1.30 per share, from a cash-less exercise of certain warrants. Total value of these issuances was $0.03 million.   From January 1, 2021 to September 30, 2021, the Company issued 1,439,394 common stock shares, at a price per share of $1.32 in connection to conversion of $1.9 million of the Series A Note plus 2,597,951 common stock shares at a price per share ranging from $0.43 to $0.64 in connection to the make-whole-amounts totaling $1.3 million per the terms of the Series A Note.   Common Stock Issuable   In 2018, the Company entered into an amendment to extend the maturity date of a convertible promissory note. As compensation for extending the note, the Company is to issue 150,000 common stock shares of the Company at a price of $2.05 per share. As of the filing of this Current Report on Form 10-Q, the Company has not yet issued these common stock shares and has recorded a stock issuable of $0.3 million.   In 2018, convertible promissory notes and accrued interests totaling $0.3 million was converted into 297,288 shares of common stock of the Company at a price of $0.89 per share. As of the filing of this Current Report on Form 10-Q, the Company has not yet issued these common stock shares and has recorded a stock issuable of $0.3 million. From January 1, 2021 to September 30, 2021, the Company entered into Consulting Agreements (“Agreements”) with individuals. Per the terms of the Agreements, the Company is to issue 18,104 common stock shares of the Company at a price per share of $1.72. As of our filing of this Current Report on Form 10-Q, the Company has not yet issued these common stock shares and has recorded a stock payable of $0.03 million.

v3.24.3

SEGMENT REPORTING	9 Months Ended
	Sep. 30, 2021
SEGMENT REPORTING	NOTE 18 – SEGMENT REPORTING   Business Segments   The Company manages its operations through two business segments: Cure, which develops and manufactures pharmaceutical and wellness products, and Sera Labs, which sells wellness products through direct to consumer and wholesale channels.   The Company evaluates performance based on net operating profit. Administrative functions such as finance, treasury, and information systems are centralized. However, where applicable, portions of the administrative function expenses are allocated between the operating segments. The operating segments do not share manufacturing or distribution facilities. In the event any materials and/or services are provided to one operating segment by the other, the transaction is valued according to the company’s transfer policy, which approximates market price. The costs of operating the manufacturing plant is captured discretely in the Cure segment. The Company’s property, plant and equipment, inventory, and accounts receivable are captured and reported discretely within each operating segment.   Summary financial information for the two reportable segments for the nine months ending September 30, 2021 is as follows (in thousands):       Cure     Sera Labs     Eliminations     Consolidated   Net Sales   $ 386     $ 4,654     $ (126 )   $ 4,914   Operating Loss   $ (7,019 )   $ (5,689 )   $ -     $ (12,708 ) Assets   $ 46,604     $ 9,450     $ (14,175 )   $ 41,879   Accounts receivable, net   $ 22     $ 186     $ -     $ 208   Inventory, net   $ 368     $ 592     $ -     $ 960     Summary financial information for the two reportable segments for the nine months ending September 30, 2020 is as follows (in thousands):       Cure     Sera Labs     Eliminations     Consolidated   Net Sales   $ 741     $ -     $ -     $ 741   Operating Loss   $ (14,258 )   $ -     $ -     $ (14,258 ) Assets   $ 30,066     $ -     $ -     $ 30,066   Accounts receivable, net   $ 46     $ -     $ -     $ 46   Inventory, net   $ 228     $ -     $ -     $ 228     Disaggregation of Revenues and Concentration Risk   The following table presents the percentage of consolidated revenues attributable to products or services classes that represent greater than ten percent of consolidated revenues for the three and nine months September 30, 2021 and 2020:     Three Months Ended     Nine months Ended       September 30, 2021     September 30, 2020     September 30, 2021     September 30, 2020                             CureFilm™ sales     21 %     98 %     14 %     75 % Research & Development services     -       -       1       23   Product sales - CBD     78       -       77       -   Product sales – PPE     -       -       7       -   Other sales less than 10%     1       2       1       2   Total     100 %     100 %     100 %     100 %   The Company did not receive revenue from one customer that individually represents 10% or more of consolidated revenues for the three and nine months ended September 30, 2021. The Company received revenue from two customers that individually represent greater than 10% of consolidated revenues, representing 81% of consolidated revenues for the three months ended September 30, 2020, and three customers that individually represent greater than 10% of consolidated revenues, representing 74% of consolidated revenues for the nine months ended September 30, 2020. Accounts receivable from these customers was $0.04 million and $0.13 million at September 30, 2021 and December 31, 2020, respectively.

v3.24.3

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY	9 Months Ended
	Sep. 30, 2021
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY	NOTE 19 – BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY   Sera Labs Acquisition   On October 2, 2020, the Company acquired all of the issued and outstanding stock of Sera Labs. All issued and outstanding shares of the capital stock of Sera Labs were converted into the right to receive, subject to customary adjustments, an aggregate of approximately (i) $1.0 million in cash (the “Upfront Payment”) and (ii) up to 6,909,091 shares of the Company’s common stock. On October 1, 2020, the Parties entered into a Waiver of Closing Condition, pursuant to which the Company’s obligation to pay the Upfront Payment at the Effective Time was extended to October 13, 2020. Pursuant to the Sera Labs Merger Agreement, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as set forth in the Sera Labs Merger Agreement. Subsequent to the Effective Time and for a period of two years, the Company agreed to make available to Sera Labs $4.0 million for working capital, less the outstanding amount of the Secured Promissory Note previously issued by the Company to Sera Labs.   Sera Labs is a trusted leader in the health, wellness, and beauty sectors of innovative products with cutting edge technology and superior ingredients such as CBD. Sera Labs creates high quality products that use science-backed, proprietary formulations. Its more than 20 products are sold under the brand names Seratopical™, SeraLabs™, and Gordon’s Herbals™. Sera Labs sells its products at affordable prices, making them easily accessible on a global scale. Strategically positioned in the growth market categories of beauty, health & wellness, and pet care, Sera Labs products are sold in major national drug, grocery chains and mass retailers. The company also sells products under private label to major retailers and multi-level marketers, as well as direct-to-consumer (DTC), via online website orders, including opt-in subscriptions.   The acquisition was accounted for in accordance with ASC 805, Business Combinations. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 12,897,115 total potential shares to be issued, 5,988,024 shares are considered contingent shares based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as described in the Sera Labs Merger Agreement. (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent Shares of $3.1 million will be recorded as a liability as contingent share consideration as of October 2, 2020. The following table presents the change in fair value of contingent consideration (in thousands):   (Dollars in thousands)   Fair Value of the Contingent Share Consideration   Fair value at December 31, 2020   $ 3,205   Fair value at September 30, 2021     2,258   Net change in fair value for the nine months ended September 30, 2021   $ (947 )   The Company estimated the fair value of the preliminary purchase price for the acquisition of Sera Labs is approximately $14.2 million. The Company acquired Sera Labs through the issuance of shares of Common Stock of the Company with $1 million of cash consideration to be provided. The preliminary total purchase price was determined based on the following: i) $1 million of the Upfront Payment ii) Company’s closing price ($1.38) on October 2, 2020 for the closing merger consideration shares; and iii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over a 24 month performance period applied to the Clawback Shares.   (Dollars in thousands)   Shares     Amount   Upfront Payment     -     $ 1,000   Closing Merger Consideration Shares     6,909,091       9,535   Contingent Consideration Shares (Clawback Shares)     5,988,024       3,083   Liabilities assumed     -       550   Total purchase price     12,897,115     $ 14,168     The Company allocated the acquisition consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The fair value of the acquired tangible and identifiable intangible assets were determined based on inputs that are unobservable and significant to the overall fair value measurement. It is also based on estimates and assumptions made by management at the time of the acquisition. As such, this was classified as Level 3 fair value hierarchy measurements and disclosures.   The excess of the purchase price over the estimated fair values is assigned to goodwill.   The following table summarizes the preliminary estimated fair values of the assets and liabilities assumed in the Sera Labs acquisition, which is subject to change during measurement period:   (Dollars in thousands)       Net assets acquired:       Cash   $ 1,357   Other assets     1,440   Property, plant and equipment     6   Other long term assets     384   Intangibles assets     10,182   Goodwill     4,687   Accounts payable and accrued expenses     (1,063 ) Contract liabilities     (1,963 ) Other current liabilities     (462 ) Other long-term liabilities     (400 ) Net assets acquired   $ 14,168   Information regarding identifiable intangible assets acquired in the Sera Labs acquisition is presented below:   (Dollars in thousands)   Weighted-average Estimated useful life   Preliminary Estimated Asset Fair Value   Finite-lived intangible assets:           Customer relationships   5.0 years   $ 7,110   Tradename   4.0 years   $ 2,610   Non-compete   2.0 years   $ 462   Total finite-lived intangible assets acquired   4.6 years   $ 10,182     CHI Acquisition   On May 14, 2019, the Company acquired all of the issued and outstanding stock of CHI for shares of the Company’s Common Stock. The maximum number of shares of Common Stock to be issued, including escrowed shares and shares issuable pursuant to a variety of earn-out provisions and warrants, is 32,072,283 shares. The shares are allocated as follows: (i) 5,700,000 shares of Common Stock as upfront consideration issued at the closing of the transaction (the “Closing Date”); (ii) 7,128,913 shares to be held in escrow, subject to indemnification and clawback rights that lapse upon the achievement of certain milestones; (iii) up to 3,207,228 shares that may be issued pursuant to an earn-out over five years upon the achievement of certain technological implementations; (iv) up to 8,018,071 shares that may be issued pursuant to an earn-out over two years upon the achievement of certain revenue goals; and (v) up to 8,018,071 shares issuable upon exercise of warrants (“Acquisition Warrant Shares”) that become exercisable upon achieving certain revenue goals between the second and fourth anniversary of the Closing Date at an exercise price of $5.01 per share, exercisable, to the extent vested, for five years from the Closing Date. In exchange for the assets and liabilities acquired, the Company received an investment of $2 million from Chemistry Holdings pursuant to a convertible note. Such convertible note, on the Closing Date, became an intercompany payable and was cancelled.   On June 5, 2020 (the “Release Effective Date”), the Company and CHI, entered into a Release, Waiver, and Amendment (the “Agreement”) and a related Warrant Amendment Agreement (“Warrant Amendment”), in order to make a full resolution of the shares issuable pursuant to the CHI Merger. The Agreement provided as follows: (a) all 7,128,913 shares held in escrow were released to the Holders as of the Release Effective Date, of which 140,828shares were returned to the Company for cancellation in consideration for the Company committing to pay certain outstanding liabilities, (b) of the 11,225,299 total shares issuable pursuant to the earn-out provisions in the CHI Merger Agreement, 5,612,654 shares were issued to the Holders as of the Release Effective Date (310,821 of which were assigned back to the Company as of the Release Effective Date) and the obligation of the Company to issue any further earn-out shares was terminated, and (c) certain Holders exercised warrants issued in the CHI Merger to purchase 708,467 shares of Common Stock on the Release Effective Date at a price of $2.00 per share (which reflects a reduced exercise price as a result of the Warrant Amendment) for gross proceeds to the Company of approximately $1.4million and the remaining warrants to purchase 7,309,605 shares of Common Stock issued in the CHI Merger expired on the Release Effective Date as a result of an amendment of such warrants effected pursuant to the Warrant Amendment.    As previously disclosed, the Company undertook to issue warrants to purchase an additional 4,143,706 shares of common stock to certain affiliates of CHI in consideration for consulting and advisory services to be provided following the closing of the CHI Merger (the “Service Warrants”). Pursuant to the Agreement, the undertaking by the Company to issue the Service Warrants was terminated as of the Release Effective Date.   CHI has developed a novel chewable delivery system, nanoemulsions, microemulsions, microcapsules and taste masking solutions. These technologies complement and expand the CUREfilm™ platform to enable the delivery of a wider range of active ingredients at higher doses. The combined technologies create a versatile platform for both immediate and controlled-release drug delivery.   The acquisition was accounted for in accordance with ASC 805, Business Combinations. The equity consideration to be provided is subject to a variety of earn-out and milestone provisions thus of the 32,072,283 total potential shares to be issued, 26,372,283 shares are considered contingent shares to be released or issued over a period from 5 months to 5 years based on the various contingency as described in the Merger Agreement. (“Contingent Shares”). Under ASC 480-10-25, based on the variable number of shares to be issued as part of the acquisition, the fair value of the Contingent Shares and Acquisition Warrant Shares of $14.6 million will be recorded as a liability as contingent share consideration as of May 14, 2019. Below is the change of Contingent Share consideration for the year ended December 31, 2020: (Dollars in thousands)   Fair Value of the Contingent Share Consideration   Fair Value at December 31, 2019   $ 16,043   Settlement of contingent consideration liability     (21,701 ) Net change in fair value during the year ended December 31, 2020     5,658   Fair Value at December 31, 2020   $ -     Supplemental Pro Forma Information   The following unaudited supplemental pro forma financial information is based on our historical consolidated financial statements and Sera Lab’s historical consolidated financial statements as adjusted to give effect to the October 2, 2020 acquisition of Sera Labs. The unaudited supplemental pro forma financial information for the periods presented gives effect to the acquisition for CHI as if it had occurred on January 1, 2020 for Sera Labs.   This unaudited pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have resulted had the acquisition been in effect at the beginning of the periods presented. In addition, the unaudited pro forma results are not intended to be a projection of future results and do not reflect any operating efficiencies or cost savings that might be achievable.   The following table presents pro forma sales, net loss attributable to Avenir Wellness Solutions, Inc. formerly known as CPHC, and net loss attributable to the Company per common share data assuming Sera Labs and CHI were acquired at the beginning of 2020 fiscal year.   For the three months ended September 30, 2020 (in thousands, except per share data):       Cure Pharmaceutical     Sera Labs     Pro forma Adjustments     Consolidated Pro Forma   Net product sales   $ 192     $ 1,744     $ -     $ 1,936   Net income (loss)   $ (2,751 )   $ (970 )   $ -     $ (3,721 )                                   Net income (loss) attributable to Cure per common share:                                 Basic   $ (0.07 )   $ (0.08 )           $ (0.07 ) Diluted   $ (0.07 )   $ (0.08 )           $ (0.07 )   For the nine months ended September 30, 2020 (in thousands, except per share data):       Cure Pharmaceutical     Sera Labs     Pro forma Adjustments     Consolidated Pro Forma   Net product sales   $ 741     $ 5,685     $ -     $ 6,426   Net loss   $ (14,144 )   $ (1,327 )   $ -     $ (15,471 )                                   Net loss attributable to Cure per common share:                                 Basic   $ (0.32 )   $ (0.11 )           $ 0.30 ) Diluted   $ (0.32 )   $ (0.11 )           $ (0.30 )

v3.24.3

INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS	9 Months Ended
	Sep. 30, 2021
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS	NOTE 20 - INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS   On September 4, 2018, Cure Pharmaceutical entered into its first multi-year licensing agreement (the “Licensing Agreement”) with Canopy Growth Corporation (“Canopy”), a company that engages in the production and sale of medical cannabis. Under the terms of the Licensing Agreement, Canopy will have an exclusive license to certain of Cure Pharmaceutical’s intellectual property rights, including Cure Pharmaceutical’s patented, multi-layer oral thin film (OTF), CUREfilm™ technology for use with cannabis extracts and biosynthetic cannabinoids and the Cure Pharmaceutical’s trademarks in markets around the world where it is legal for Canopy to sell such products, excluding Asia. Cure Pharmaceutical will retain the right to manufacture synthetic cannabinoids for pharmaceutical applications.   On November 7, 2019, the Company and Canopy entered into an Amendment Agreement (“Amendment”) to allow the Company to sell cannabinoid CUREfilm products to third parties internationally, excluding Canada, from the November 7, 2019 until December 31, 2020. However, Cure Pharmaceutical may not sell any cannabinoid CUREfilm products that are specifically developed for Canopy, as identified in the Development Agreement between the Company and Canopy, dated June 17, 2019.   Canopy will manufacture CUREfilms that deliver cannabis extracts, expanding the commercialization and monetization of the CUREfilm technology. The parties will collaborate on new products and uses for the products.   Canopy shall pay the Company approximately $0.3 million for costs associated with a feasibility study and technology transfer as well as certain milestone payments and royalties on product sales by Canopy with minimum royalties starting in 2020.   On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million will be paid to the Company’s attorneys within 45 calendar days.   During the three months ended September 30, 2021 and 2020, the Company recognized $0 and $0.05 million of revenue relating to work completed in regard to the transfer of technology fee as discussed in the License Agreement with Canopy, respectively. During the nine months ended September 30, 2021 and 2020, the Company recognized $0 and $0.01 million of revenue relating to work completed in regard to the transfer of technology fee as discussed in the License Agreement with Canopy, respectively.

v3.24.3

COMMITMENTS AND CONTINGENCIES	9 Months Ended
	Sep. 30, 2021
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES	NOTE 21 - COMMITMENTS AND CONTINGENCIES   Litigation   From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.   On October 21, 2020, the Company filed a demand to commence arbitration with the American Arbitration Association against Canopy for Canopy’s failure to perform under the License Agreement. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million will be paid to the Company’s attorneys within 45 calendar days.   On March 26, 2021, a vendor that the Company utilized for consulting services relating to various quality, compliance and regulatory filed a complaint against the Company for breach of contract. On May 18, 2021, the Company responded to the complaint denying their claims and also filed a cross complaint against this vendor for breach of contract by failing to provide deliverables as required by the contract. The Company is currently unable to determine what additional expenses will be incurred in order to defend this matter. As such, the Company cannot determine whether there is a reasonable possibility that a loss will be incurred, nor can it estimate the range of any such potential loss. Accordingly, the Company has not accrued an amount for any potential loss associated with this action. Tax Filings   The Company tax filings are subject to audit by taxing authorities in jurisdictions where it conducts business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. As of September 30, 2021, the Company is not subject to any such these audits.   Employment Contracts   The Company has entered into employment and severance benefit contracts with certain executive officers. Under the provisions of the contracts, The Company may be required to incur severance obligations for matters relating to changes in control, as defined, and certain terminations of executives. As of September 30, 2021, The Company had such severance obligations for certain executive officers, in accordance with the severance benefit provisions of their respective employment and severance benefit agreements.   On May 8, 2020 the Company entered into a separation agreement (the “Separation Agreement”) with Jessica Rousset whereby the parties have agreed to a mutual separation of Mrs. Rousset’s employment as the Company’s Chief Operating Officer, effective May 8, 2020.   Pursuant to the terms of the Separation Agreement, Mrs. Rousset will be entitled to the following severance benefits: (i) a gross sum of $93,461.54, paid in equal installments over a nine -month period; (ii) for a period of nine months, an amount equal to the cost of her COBRA health benefits if she enrolls for COBRA coverage; (iii) acceleration of vesting of each equity award held by her to the extent the award would have vested had she remained employed for nine months following her resignation; and (iv) an extended exercise period for certain equity awards held by her such that she may exercise vested shares under such outstanding equity awards until May 8, 2021. The Separation Agreement contains a release and certain restrictive covenants that are binding upon Mrs. Rousset   Indemnification   In the normal course of business, The Company may provide indemnification of varying scope under The Company’s agreements with other companies or consultants, typically The Company’s clinical research organizations, suppliers and others. Pursuant to these agreements, The Company will generally agree to indemnify, hold harmless, and reimburse the indemnified parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of The Company’s products. Indemnification provisions could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to The Company’s products. The Company’s office and laboratory facility leases also will generally contain indemnification obligations, including obligations for indemnification of the lessor for environmental law matters and injuries to persons or property of others, arising from The Company’s use or occupancy of the leased property. The term of these indemnification agreements will generally continue in effect after the termination or expiration of the particular research, development, services, lease, or license agreement to which they relate. Historically, The Company has not been subject to any claims or demands for indemnification. The Company also maintains various liability insurance policies that limit The Company’s financial exposure. As a result, The Company management believes that the fair value of these indemnification agreements is minimal. Accordingly, The Company has not recorded any liabilities for these agreements as of September 30, 2021 and December 31, 2020.   Operating leases   The Company maintains its corporate offices and manufacturing facility at 1620 Beacon Place, Oxnard, CA 93033, which contains approximately 25,000 square feet. The Company is currently on a month-to-month lease.   Sera Labs will pay base monthly rent in the amount of $0.1 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%. If the Lease is terminated based on the occurrence of an “event of default,” The Company will be obligated to pay the abated rent to the lessor. On May 1, 2019, Sera Labs entered into a lease agreement to lease a 3,822 square feet office space and was absorbed by the Company upon acquisition of Sera Labs on October 2, 2020. The agreement contains an option to extend the lease for an additional 36 months and the Company will reassess the lease term of the contract when it has determined it is reasonably certain to exercise the option. Sera Labs will pay base monthly rent in the amount of $0.01 million during the first 12 months of the Term. Base monthly rent will increase annually, over the base monthly rent then in effect, by 3%. If the Lease is terminated based on the occurrence of an “event of default,” The Company will be obligated to pay the abated rent to the lessor.   Total rent expense was $0.1 million and $0.07 million for the three months ended September 30, 2021 and 2020, respectively. Total rent expense was $0.3 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively.   The Company classified the Sera Labs lease as an operating lease in accordance with ASC 842 and has recognized a right-of-use asset and a lease liability based on the present values of its lease payments over its respective lease term. The Company used the services of a valuation company to compute the IBR which is necessary to determine the present value of its lease payments since a borrowing rate is not explicitly available on the lease agreement. The concluded IBR is 11.30%. Operating lease payments and lease expense are recognized on a straight-line basis over the lease term.   As of September 30, 2021, the current portion and long-term portion of operating lease liability is $0.1 million and $0.2 million, respectively.   The future payments due under the operating lease as of September 30, 2021 are as follows (in thousands):   Years       2021 (remaining)   $ 33   2022     134   2023     138   2024     46   2025     -   Undiscounted cash flow     351   Effects of discounting     (48 ) Lease liabilities recognized   $ 303     Finance leases   During 2019 the Company entered into a 5-year equipment lease rental which requires the Company to pay monthly payments of $0.02 million. The Company determined the payments represented substantially all of the fair value of the asset and recorded a right of use asset for $0.06 million and a finance lease liability for $0.06 million during the year ended December 31, 2019 within other assets and liabilities. The company will make payment of $0.02 annually until October 2024. Interest associated with the lease is $0.1 million or less annually based on a discount rate of 9.0%. As of September 30, 2021, the current portion and long-term portion of finance capital lease liability was $0.013 million and $0.03 million, respectively. As of December 31, 2020, the Company the current and long-term portion of finance capital lease liability was $0.01 million and $0.04 million, respectively.   Future minimum lease payments under non-cancellable capital leases as of September 30, 2021 are as follows (in thousands):   2021 (remaining)     6   2022     14   2023     14   2024     9   2025     -   Thereafter     -   Finance lease liabilities recognized   $ 43   Operating and Financing leases   The following table presents supplemental balance sheet information related to operating and financing leases as of September 30, 2021 and December 31, 2020 (in thousands, except lease term and discount rate):       September 30, 2021     December 31, 2020   Operating leases             Right-of-use assets, net   $ 280       343                     Right-of-use lease liabilities, current   $ 104       93   Right-of-use lease liabilities, noncurrent     199       278   Total operating lease liabilities   $ 303       371                     Financing Leases                 Finance lease right-to-use assets, net   $ 43       52                     Current liabilities   $ 13       12   Noncurrent liabilities     30       40   Total financing lease liabilities   $ 43       52                     Weighted average remaining lease term                 Operating leases   2.55 years     3.31 years   Financing leases   3.06 years     3.82 years                     Weighted average discount rate                 Operating leases     11.30 %     11.3 % Financing leases     9.0 %     9.0 %

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SUBSEQUENT EVENTS	9 Months Ended
	Sep. 30, 2021
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS	NOTE 22 – SUBSEQUENT EVENTS   On October 7, 2021 and October 19, 2021, the Company received $0.05 million and $0.02 million, respectively, from one of the Company’s board members (“Second Board Investor”) in exchange for two promissory notes. Both the Company and Second Board Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Second Board Investor are still negotiating the terms of the promissory notes.   On October 15, 2021, the Company received $0.3 million as an initial deposit from a distribution company (“Distributor”) for the distribution rights of the Company’s sildenafil OTF product (“Distribution Rights”).  As of the date of this report, the Company and the Distributor are still negotiating a definitive agreement to finalize the terms of the Distribution Rights per territory.   On October 27, 2021, the Company received $0.3 million from an investment company (“Investor”) in exchange for a promissory note. Both the Company and Investor agreed to negotiate the terms of the promissory notes and as of the filing date of this report, the Company and Investor are still negotiating the terms of the promissory notes.   On October 30, 2021, the Series B Note matured and is due according to its terms (see Note 13).  On November 3, 2021 the Company received an Event of Default Redemption Notice from the Investor citing non-payment of the maturity amount, and requesting payment of a default amount, including penalties, of $9.1 million by November 10, 2021. The Company reviewed and does not agree with the amount due. As of the filing date of this report, the Company is negotiating an extension of the maturity date and the amount due on terms satisfactory to the Company. There can be no guaranty that the Company will be successful in this effort in which case the Investor may endeavor to exercise its remedies.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
	Sep. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation	The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity.   The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by GAAP for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2021, and the results of operations and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2021 and 2020, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in Form 10-K for the fiscal period ended December 31, 2020 filed with the SEC on March 31, 2021.
Principles of Consolidation	The unaudited condensed financial statements include the accounts of CPHC and its wholly-owned subsidiaries, CURE Pharmaceutical, CHI and Sera Labs, collectively referred to as (“CURE”, “we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s film strip product represents the principal operations of the Company. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition. The Company’s purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates.
Going Concern and Management's Liquidity Plans	In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, The Company assesses going concern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to the Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, the Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent the Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15. The accompanying condensed consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At September 30, 2021, we had an accumulated deficit of approximately $90.1 million and a working capital deficit of approximately $15.9 million. Our operating activities consume the majority of our cash resources. We anticipate that we will continue to incur operating losses and negative cash flows from operations, at least into the near future, as we execute our commercialization and development plans and strategic and business development initiatives. As of the date of this report, the Company had approximately $0.1 million of cash on hand.      We have previously funded, and intend to continue funding, our losses primarily through the issuance of common stock and/or convertible promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations. The Company believes the funds available through these potential financings will be sufficient to meet the Company’s working capital requirements during the coming year. If we are unable to raise sufficient additional funds it will have to develop and implement a plan to extend payables, reduce expenditures, or scale back our business plan until sufficient additional capital is raised to support further operations.   The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the unaudited condensed consolidated financial statements. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.
Reclassifications	Certain reclassifications have been made to prior year’s consolidated financial statements to enhance comparability with the current year’s consolidated financial statements. These reclassifications had no effect on the previously reported net loss.
Restatement	During the year ended December 31, 2022, the Company became aware of an error in the calculation of its weighted average common shares outstanding and resultant reported loss per share for the nine months ended September 30, 2021. The reported weighted average common shares outstanding and loss per share was 49,294,190 and ($0.18), respectively. The corrected weighted average shares outstanding and loss per share was 61,462,300 and ($0.14), respectively.  Based on an initial analysis of ASC 250 “Accounting Changes and Error Corrections” and Staff Accounting Bulletin 99 “Materiality,” the Company determined that the error was immaterial to the previously issued consolidated financial statements for the nine months ended September 30, 2021 and that the correction and disclosure of the error in its Annual Report on Form 10-K for the year ended December 31, 2022, which included the 2021 financial statements, was adequate. The Company has since determined that the errors in its previously reported earnings per share are material and is thus restating the impacted financial statements.
Use of Estimates	The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts, valuation of intangible assets and goodwill, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent share consideration, stock based compensation, beneficial conversion features, warrant values, deferred taxes and the assumptions used to calculate derivative liabilities and fair values of the purchase price allocations and convertible promissory notes. Actual results could differ materially from such estimates under different assumptions or circumstances.
Cash and Cash Equivalents	The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of September 30, 2021 and December 31, 2020, the Company had no cash equivalents.
Investment in Associates	An associate is an entity over which the Company has significant influence through a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or joint control over those policies.   The results of assets and liabilities of associates are incorporated in the condensed consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Company’s share of the net assets of the associate, less any impairment in the value of the investment. Losses of an associate in excess of the Company’s interest in that associate are not recognized. Additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognized at the date of acquisition is recognized as goodwill. The goodwill is included within the carrying amount of the investment.   On November 1, 2019, the Company purchased a convertible loan (the “Releaf Loan”) with Releaf Europe BV (“Releaf”) in the amount of $0.2 million. Releaf shall accrue interest on the Releaf Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Releaf Loan is repaid or at the maturity date of October 31, 2021. In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amount of the Releaf Loan and any unpaid accrued interest shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2.0 million of debt and/or equity (“Releaf Qualified Financing”), the outstanding amount of the Releaf Loan and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf Qualified Financing less a discount of 20% on the subscription price. In addition, both the Company and Releaf agree in the event that the pre-money valuation of the Releaf Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of September 30, 2021, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to the Releaf Loan.   On February 5, 2020 and February 13, 2020, the Company purchased two convertible loans (the “February 2020 Loans”) with Releaf for a total amount of $0.3 million. Releaf shall accrue interest on the February 2020 Loans at 6% per annum and they shall become due and payable to the Company at the earlier of the conversion date or the maturity date of October 31, 2021. In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amounts of the February 2020 Loans and any unpaid accrued interests shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2.0 million of debt and/or equity (“Releaf February 2020 Qualified Financing”), the outstanding amount of the February 2020 Loans and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf February 2020 Qualified Financing, less a discount of 20% on the subscription price. In addition, in the event that the pre-money valuation of the Releaf February 2020 Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million. As of September 30, 2021, the Company recorded an investment using the cost method of accounting in Releaf and did not record any accrued interest relating to the foregoing Releaf loans.   On May 26, 2021, the Company purchased a convertible loan (the “May 2021 Loan”) with Biopharmaceutical Research Company (“BRC”) for a total amount of $0.2 million, which is one of a series of notes “(Notes”) pursuant to the terms of the Note Purchase Agreement (“NPA”) offered by BRC. BRC shall accrue interest on the May 2021 Loan at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date or the maturity date of May 26, 2023. In the event of a request for conversion by the Company, the outstanding amount of the May 2021 Loan and any unpaid accrued interest shall be converted into shares of BRC, rounded down to the nearest whole share, by dividing the May 2021 Loan by the price per share obtained by dividing $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (i) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes and (ii) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC. In the event the Company has not requested for conversion, the May 2021 Loan can automatically convert if BRC sells shares of preferred stock (the “Qualified Financing Securities”) to one or more investors in a single transaction or series of related transactions for aggregate proceeds to BRC (including cancellation of indebtedness under the Notes or any other convertible debt) of at least $4 million (a “Qualified Financing”). The May 2021 Loan shall automatically convert at the initial closing of and on the same terms and conditions of the Qualified Financing into a total number of Qualified Financing Securities, rounded down to the nearest whole share, obtained by dividing the May 2021 Loan by the lesser of (i) 80% of the price per share paid for the Qualified Financing Securities by investors in the Qualified Financing and (ii) $20 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants of BRC, but excluding (a) the shares of equity securities of BRC issued or issuable upon the conversion of the Notes, (b) all shares of the common stock reserved and available for future grant under any equity incentive or similar plan of BRC and (c) any equity incentive or similar plan to be created or increased in connection with the Qualified Financing). The Company follows Accounting Standards Codification (“ASC”) 325-20, Cost Method Investments (“ASC 325-20”), to account for its ownership interest in noncontrolled entities. Under ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. Income is recorded for dividends received that are distributed from net accumulated earnings of the noncontrolled entity subsequent to the date of investment. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions in the cost of the investment. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. The Company has determined that there was no impairment of our investment in Releaf during the nine months ended September 30, 2021.
Accounts Receivable	Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. At September 30, 2021 management determined that an allowance of $0.08 million was necessary. At December 31, 2020 management determined that an allowance of $0.04 million was necessary.
Inventory	Inventory is stated at the lower of cost or net realizable value (“NRV”). NRV is the amount by which the estimated selling price of the product exceeds the sum of any additional costs expected to be incurred on the sale of such product in the ordinary course of business. The Company determines the cost of its inventory, which includes amounts related to materials, direct labor, and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period. In order to state the inventory at the lower of cost or NRV, we maintain reserves against individual stocking units. Inventory reserves, once established, are not reversed until the related inventories have been sold or scrapped. If future demand or market conditions are less favorable than our projections, a write-down of inventory may be required, and would be reflected in cost of product revenues sold in the period the revision is made.
Goodwill and intangible assets	In accordance with ASC 350, Intangibles – Goodwill and Other, in-process research and development (“IPR&D”) projects acquired in a business combination that are not complete as of the acquisition date are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related research and development efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written off immediately. The Company considers various factors and risks for potential impairment of IPR&D assets, including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, or significant delays, or the inability to bring a product to market and the introduction or advancement of competitors’ products could result in partial or full impairment of the related intangible assets. Consequently, the eventual realized value of the IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods. During the period between completion or abandonment, the IPR&D assets will not be amortized but will be tested for impairment on an annual basis and between annual tests if the Company becomes aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts (see Note 7). Goodwill represents the excess of the purchase price over the fair value of net identifiable assets and liabilities. Goodwill, is not amortized but is tested for impairment at least annually, or if circumstances indicate its value may no longer be recoverable. Qualitative factors considered in this assessment include industry and market conditions, overall financial performance, and other relevant events and factors affecting the Company’s business. Based on the qualitative assessment, if it is determined that the fair value of goodwill is more likely than not to be less than its carrying amount, the fair value of a reporting unit will be calculated and compared with its carrying amount and an impairment charge will be recognized for the amount that the carrying value exceeds the fair value. The Company operates in two segments as result of the Sera Labs, Inc., acquisition in October 2020 and considered to be the two reporting units and, therefore, goodwill is tested for impairment at the segment level.   The Company does not have intangible assets with indefinite useful lives other than goodwill and trademark discussed in Note 19. As of September 30, 2021 and December 31, 2020, there has been no impairment of goodwill and intangible assets.
Business combinations	The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the value of the assets acquired and liabilities assumed is recognized as goodwill.
Impairment of Long-Lived Assets	Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset.   Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cashflow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. There was no impairment on our long-lived assets during the nine months ended September 30, 2021 and 2020.
Contingent consideration liabilities	Certain of the Company’s asset and business acquisitions involve the potential for future payment of consideration to third-parties and former selling shareholders in amounts determined upon attainment of revenue milestones, from product sales, as applicable. The fair value of such liabilities is determined using unobservable inputs. These inputs include the estimated amount and timing of projected cash flows and the risk-adjusted discount rate used to present value the cash flows. These obligations are referred to as contingent consideration. ASC 805 requires that contingent consideration be estimated and recorded at fair value as of the acquisition date as part of the total consideration transferred. Contingent consideration is an obligation of the acquirer to transfer additional assets or equity interests to the selling shareholders in the future if certain future events occur or conditions are met, such as the attainment of product development milestones. Contingent consideration also includes additional future payments to selling shareholders based on achievement of components of earnings, such as “earn-out” provisions or percentage of future revenues, including royalties paid to the selling shareholders based on a percentage of revenues generated from the Sera Labs’ products.   The fair value of contingent consideration after the acquisition date is reassessed by the Company as changes in circumstances and conditions occur, with the subsequent change in fair value recorded in the consolidated statements of operations. Changes in key assumptions can materially affect the estimated fair value of contingent consideration liabilities and, accordingly, the resulting gain or loss that the Company records in its consolidated financial statements. See Note 19 for a full discussion of these liabilities.
Revenue Recognition	The Company recognizes revenue in accordance with ASC 606, “Revenue Recognition”. Revenues under Topic 606 are required to be recognized either at a “point in time” or “over time”, depending on the facts and circumstances of the arrangement, and are evaluated using a five-step model.   To achieve the core principle of Topic 606, we perform the following steps:     · Identify the contract(s) with customer;   · Identify the performance obligations in the contract;   · Determine the transactions price;   · Allocate the transactions price to the performance obligations in the contract; and   · Recognize revenue when (or as) we satisfy a performance obligation.   Under Topic 606, the Company recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer.
Cure Pharmaceutical Revenue	Cure Pharmaceutical derives revenues from two primary sources: products and services. Product revenue includes the shipment of products according to agreements with the Cure Pharmaceutical’s customers. Services include research and development contracts for the development of OTF products utilizing the Cure Pharmaceutical’s CureFilm Technology or our other proprietary technologies. Cure Pharmaceutical’s contracts with customers rarely contain multiple performance obligations. For these contracts, Cure Pharmaceutical accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices are typically estimated based on observable transactions when these services are sold on a standalone basis.   Cure Pharmaceutical’s formulation and product development income include services for the development of OTF products utilizing our CureFilm Technology. Our development contracts can have up to four phases. Revenue is recognized based on progress toward completion of the performance obligation in each phase. The method to measure progress toward completion requires judgment and is based on the nature of the products or services to be provided. Cure Pharmaceutical generally uses the input method to measure progress for its contracts because it best depicts the transfer of assets to the customer, which occurs as we incur costs for the contracts. Under the cost-to-cost measure of progress, the progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenue is recorded proportionally as costs are incurred. Costs to fulfill these obligations mainly include materials, labor, supplies and consultants. Cure Pharmaceutical has entered into a Collaboration and Joint Development Agreement (“Agreement”) with Medolife Rx (“Medolife”) on February 1, 2021 (“Effective Date”) for Medolife to produce Medolife Products (“Products”) in Cure Pharmaceutical’s cGMP facility. The term of this agreement is for five (5) years from the Effective Date (“Term”). Medolife is to pay $0.3 million to assist in completing the jointly developed production line at Cure Pharmaceutical’s cGMP facility. In addition, Cure Pharmaceutical will produce Products on behalf of Medolife and will grant access to Medolife for a joint production area within Cure Pharmaceutical’s production facility for the Term of this Agreement. The Company has determined that there are no distinct obligations for the $0.3 million and Cure Pharmaceutical does have further obligations as stated in the Agreement, thus the Company will recognize the revenue monthly over the Term, beginning February 1, 2021.
Sera Labs Revenue	Sera Labs recognizes revenue as, or when, we satisfy performance obligations under a contract. We account for a contract when the parties approved the contract and are committed to perform on it, the rights of each party and the payment terms are identified, the contract has commercial substance and it is probable that we will collect substantially all of the consideration. A performance obligation is a promise in a contract to transfer a distinct good or service, or a series of distinct goods or services, to a customer. The transaction price of a contract must be allocated to each performance obligation and recognized as the performance obligation is satisfied. In essence, we recognize revenue when or as control of the promised goods or services transfer to the customer.   Revenue from eCommerce sales, including direct-to-consumer sales, are recognized upon shipment of merchandise. We also elected to adopt the practical expedient related to shipping and handling fees which allows us to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Therefore, shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred. Shipping revenue are recorded upon delivery to the customer.
Practical Expedients and Exemptions	The Company has elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows:     · The Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception;         · The Company made the accounting policy election to exclude any sales and similar taxes from the transaction price;         · The Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less
Sales Tax	The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to a customer, excluding sales taxes. The net amount of sales tax payable to the taxation authority is included in sales tax payable in the balance sheet.
Sales Returns, Discounts and Warranties	Sales returns, discount and warranties are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns, discounts and warranties which may occur with distributors and retailers. When evaluating the adequacy of sales returns, discounts and warranties, the Company analyzes the following: historical credit allowances, current sell-through of inventory of the Company’s products, current trends in retail industry, changes in customer demand, acceptance of products, and other related factors.
Cost to Obtain a Contract	The Company pays sales commission to its employees and outside sales representatives for contracts that they obtain relating to wholesale and personal protective equipment. The Company applies the optional practical expedient to immediately expense costs to obtain a contract if the amortization period of the asset that would have been recognized is one year or less. As such, sales commissions are immediately recognized as an expense and included as part of sales and marketing expenses.
Contract Liabilities	Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded as deferred revenues when customers remit contractual cash payments in advance before satisfying performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied. Advance payments and billings in excess of revenue recognized are included in deferred revenue, which is classified as current or noncurrent based on the timing of when the Company expects to recognize revenue. At September 30, 2021 and December 31, 2020, we had contract liabilities of $0.6 million and $1.0 million, respectively.   Contract liabilities is made up of the following as of September 30, 2021 and December 31, 2020 (in thousands):       2021     2020   Customer deposits for commercial products   $ 611     $ 281   Customer deposits for personal protective equipment     -       713   Total contract liabilities   $ 611     $ 994     The following table summarizes the changes in contract liabilities during the nine months ended September 30, 2021 and year ended December 31, 2020 (in thousands):   Balance at December 31, 2019   $ 456   Additions     1,033   Transfers to Revenue     (495 ) Balance at December 31, 2020     994   Additions     435   Customer deposits returned     (713 ) Transfers to Revenue     (105 ) Balance at September 30, 2021   $ 611
Cost of Revenues	Cost of revenues primarily consists of labor and manufacturing costs for our products.
Advertising Expense	The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in general and administrative expense in the accompanying statements of operations. The Company recorded advertising costs of $0.7 million and $2.4 million for the three and nine month periods ended September 30, 2021, respectively. The Company did not record advertising costs for the three and nine month periods ended September 30, 2020.
Research and Development	Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred. The Company recorded research and development expenses of $0.6 million and $1.9 million for the three and nine month periods ended September 30, 2021, respectively. The Company recorded research and development expenses of $0.7 million and $2.3 million for the three and nine month periods ended September 30, 2020, respectively.
Income Taxes	The utilizes FASB ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.   The Company generated a deferred tax asset through net operating loss carry-forward. However, a valuation allowance of 100% has been established due to the uncertainty of the Company’s realization of the net operating loss carry forward prior to its expiration.   On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the outbreak of a novel strain of the coronavirus, COVID-19. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Under the CARES Act, net operating losses (“NOLs”) arising in tax years beginning after December 31, 2017, and before January 1, 2021 may be carried back to each of the five tax years preceding the tax year of such loss. Moreover, under the 2017 Tax Act as modified by the CARES Act, federal NOLs of our corporate subsidiaries generated in tax years ending after December 31, 2017 may be carried forward indefinitely, but the deductibility of federal NOLs, particularly for tax years beginning on or after January 1, 2021, may be limited. The accounting for the material income tax impacts has been reflected in the year ended December 31, 2020 financial statements. It is uncertain if and to what extent various states will conform to the 2017 Tax Act or the CARES Act. The Company is currently assessing the impact the CARES Act will have on the Company’s consolidated financial statements.
Stock-Based Compensation	Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.   Pursuant to ASC 2018-07 (“Topic 718”) for share-based payments to employees, consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the grant date. The Company uses the Black-Scholes option valuation model for estimating fair value at the date of grant.     The Company accounts for restricted stock awards and stock options issued at fair value, based the closing stock price of the Company’s common stock reported on the OTC Bulletin Board. Compensation expense is recognized for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to the Company generally using the straight-line single option method.   In the case of award modifications, the Company accounts for the modification in accordance with Accounting Standards Update (“ASU”) No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, whereby the Company recognizes the effect of the modification in the period the award is modified.   As of January 1, 2019, the Company adopted ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns the accounting of share-based payment awards issued to employees and nonemployees. The adoption did not materially impact our consolidated financial statements.
Fair value measurements	The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements and establishes a framework for measuring fair value and expands disclosure about such fair value measurements. ASC 820 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:     · Level 1 – Quoted prices in active markets for identical assets and liabilities.         · Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.         · Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. When a part of the purchase consideration consists of shares of the Company common stock, the Company calculates the purchase price attributable to those shares, a Level 1 security, by determining the fair value of those shares quoted on the OTC as of the acquisition date. The Company recognizes estimated fair values of the tangible assets and identifiable intangible assets acquired, including in-process research and development, and liabilities assumed, including any contingent consideration, as of the acquisition date. Goodwill is recognized as any amount of the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed in excess of the consideration transferred. ASC 805 precludes the recognition of an assembled workforce as an asset, effectively subsuming any assembled workforce value into goodwill.   In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk in its assessment of fair value. At September 30, 2021 and December, 31, 2020, the Company had no financial assets or liabilities recorded at fair value on a recurring basis, except for cash and cash equivalents consisting of money market funds and the Series A and Series B Notes, which we elected the fair value option. These assets are measured at fair value using the period-end quoted market prices as a Level 3 input. The Company also has certain derivative liabilities and contingent consideration liabilities which are carried at fair value based on Level 3 inputs (see Note 14).    The carrying amounts of cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair values because of the short-term nature of these items.   The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earnouts may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from the date of acquisition to September 30, 2021, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in a decrease of the fair value of the contingent stock consideration. In June 2020, the Company settled all of its outstanding contingent consideration liabilities outstanding with CHI. In October 2020, the Company acquired Sera Labs and had an outstanding contingent consideration liability of $ 3.2 million in relation to the Sera Labs Merger.   The Company has elected the fair value option to account for the Series A and B Notes that were issued on October 30, 2020 and records this at fair value with changes in fair value recorded in the Consolidated Statements of Operations. As a result of applying the fair value option, direct costs and fees related to the Series A and B Notes were recognized in earnings as incurred and not deferred.   The following table summarizes the changes in Level 3 financial instruments during the nine months ended September 30, 2021 (in thousands):   Fair value at December 31, 2020   $ 18,684   Change in fair value of Series A Note     (1,020 ) Change in fair value of Series B Notes     (91 ) Conversion of Series A Notes     (2,881 ) Fair value of Series A and B Notes at September 30, 2021   $ 14,692   Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Series A and Series B Notes are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy is as follows:   Date of valuation   September 30, 2021     December 31, 2020   Stock price   $ 0.73     $ 1.30   Conversion price   $ 1.32     $ 1.32   Term (in years) – Series A Note     1.08       1.83   Term (in years) – Series B Note     0.08       0.83   Volatility – Series A Note     85 %     86 % Volatility – Series B Note     80 %     80 % Risk-free interest rate – Series A Note     0.11 %     0.12 % Risk-free interest rate – Series B Note     0.07 %     0.09 % Interest rate     18 %     1 %   The Company recorded a loss of $0.7 million and $1.1 million due to the change in fair value of Series A and B convertible notes for the three and nine months ended September 30, 2021 and $0 for the three and nine months ended September 30, 2020.
Beneficial Conversion Feature	If the conversion features of conventional convertible debt provides for a rate of conversion that is below market value, this feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a debt discount pursuant to ASC Topic 470-20 “Debt with Conversion and Other Options.” In those circumstances, the convertible debt is recorded net of the discount related to the BCF and the Company amortizes the discount to interest expense over the life of the debt using the effective interest method.
Series A and B Convertible Notes	As described further in Note 13 - the Company has elected the fair value option to record its Series A and Series B convertible debentures, which were issued in October 2020. The fair value of the Notes is classified within Level 3 of the fair value hierarchy because the fair values were estimated utilizing a Monte Carlo simulation model. Accordingly, the notes are marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the Consolidated Statement of Operations. All issuance costs related to the debentures were expensed as incurred in the Consolidated Statement of Operations.
Accounting for warrants	The Company determines the accounting classification of warrants it issues, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. The Company does not have any liability classified warrants as of any period presented.
Derivative Liabilities	ASC 815-40, requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula and present value pricing. At September 30, 2021 and December 2020, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statement of operations.
Contingencies	We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition.
Net Loss per Common Share	Basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period, excluding any unvested restricted stock awards. Diluted net earnings per share is computed by dividing net earnings by the weighted average common shares outstanding during the period plus dilutive securities or other contracts to issue common stock as if these securities were exercised or converted to common stock.   Diluted net loss per share includes the effect of common stock equivalents (stock options, unvested restricted stock, and warrants) when, under either the treasury or if-converted method, such inclusion in the computation would be dilutive. Net loss is adjusted for the dilutive effect of the change in fair value liability for price adjustable warrants, if applicable.   The following table sets forth the computation of basic and diluted net income per share for the three months ended (in thousands, except per share data):     For the Three Months Ended     For the Nine months Ended   (Dollars in thousands)   September 30, 2021     September 30, 2020     September 30, 2021     September 30, 2020                             Net income (loss)   $ (4,343 )   $ (2,751 )   $ (8,835 )   $ (14,144 ) Weighted average outstanding shares of common stock     62,174,822       41,344,256       61,462,300       43,647,388   Dilutive potential common stock shares from:     -       -       -           Vested Stock options from the Company’s 2017 Equity Incentive Plan     -       -       -           Conversion of convertible notes     -       -       -           Common stock and common stock equivalents     62,174,822       41,344,256       61,462,300       43,647,388   Income per share:                                 Basic net income per share     (0.07 )     (0.07 )     (0.14 )     (0.32 ) Diluted net income per share     (0.07 )     (0.07 )     (0.14 )     (0.32 )   The following number of shares have been excluded from diluted net income (loss) since such inclusion would be anti-dilutive:       Three and nine months ended September 30,       2021     2020                 Vested stock options from the Company’s 2017 Equity Incentive Plan     3,845,124       3,517,577   Warrants     1,565,447       6,648,446   Shares to be issued upon conversion of convertible payable     115,047       115,047                     Total     5,525,618       10,281,070     In connection with Sera Labs Merger, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones. Due to the uncertainty of the number of Clawback Shares to be issued, these Clawback Shares were not included in the table above.   The Series A and B Notes (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet antidilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. Due to the uncertainty of the number of shares to be issued, the shares to be issued from the conversion of the Series A and B Notes were also not included in the table above.
Segment Reporting	The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it does have segment reporting relating to Cure Pharmaceutical and Sera Labs.
Emerging Growth Company	We are an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012 (“JOBS Act”). For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i), and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.
Risks and Uncertainties	The COVID-19 pandemic has had, and may continue to have, an unfavorable impact on certain areas of the Company’s business. The broader implications of the COVID-19 pandemic on the Company’s financial condition and results of operations remain uncertain and will depend on certain developments, including the duration and severity of the COVID-19 pandemic, and the availability, distribution, and effectiveness of vaccines to address the COVID-19 virus. The impact on the Company’s customers and suppliers and the range of governmental and community reactions to the pandemic are uncertain. The Company may experience reduced customer demand or constrained supply that could materially adversely impact business, financial condition, results of operations, liquidity and cash flows in future periods.
Recent Accounting Pronouncements Adopted	ASU 2020-01   In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815. ASU 2020-01 addresses the accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. Observable transactions that require a company to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with ASC 321, Investments – Equity Securities, should be considered immediately before applying or upon discontinuing the equity method. Certain non-derivative forward contracts or purchased call options to acquire equity securities generally will be measured using the fair value principles of ASC 321 before settlement or exercise and consideration shall not be given to how entities will account for the resulting investments on eventual settlement or exercise. ASU 2020-01 is effective for the Company beginning in the first quarter of 2021 and early adoption is permitted. ASU 2020-01 should be applied prospectively. The adoption of this ASU did not have any impact on the Company’s consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted	ASU 2019-12   In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes” under ASC 740, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. This guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within that fiscal year. Early adoption is permitted. The Company is in the process of evaluating the impacts of this guidance on its consolidated financial statements and related disclosures.   ASU 2020-06   In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options and Derivative and Hedging - Contracts in Entity’s Own Equity, which simplifies the accounting for convertible instruments. This guidance eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is required to be adopted by us in the first quarter of 2023 and must be applied using either a modified or full retrospective approach. We are currently evaluating the impact this guidance will have on our consolidated financial statements.   Other accounting standard updates effective for interim and annual periods beginning after December 31, 2021 are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.   There are various other updates recently issued, however, they are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

v3.24.3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	9 Months Ended
	Sep. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Schedule of contract liabilities	2021     2020   Customer deposits for commercial products   $ 611     $ 281   Customer deposits for personal protective equipment     -       713   Total contract liabilities   $ 611     $ 994
Summary of changes in contract liabilities	Balance at December 31, 2019   $ 456   Additions     1,033   Transfers to Revenue     (495 ) Balance at December 31, 2020     994   Additions     435   Customer deposits returned     (713 ) Transfers to Revenue     (105 ) Balance at September 30, 2021   $ 611
Schedule of financial instruments	Date of valuation   September 30, 2021     December 31, 2020   Stock price   $ 0.73     $ 1.30   Conversion price   $ 1.32     $ 1.32   Term (in years) – Series A Note     1.08       1.83   Term (in years) – Series B Note     0.08       0.83   Volatility – Series A Note     85 %     86 % Volatility – Series B Note     80 %     80 % Risk-free interest rate – Series A Note     0.11 %     0.12 % Risk-free interest rate – Series B Note     0.07 %     0.09 % Interest rate     18 %     1 %
Summary of Financial instruments measured at fair value	Fair value at December 31, 2020   $ 18,684   Change in fair value of Series A Note     (1,020 ) Change in fair value of Series B Notes     (91 ) Conversion of Series A Notes     (2,881 ) Fair value of Series A and B Notes at September 30, 2021   $ 14,692
Schedule of basic and diluted loss per share	For the Three Months Ended     For the Nine months Ended   (Dollars in thousands)   September 30, 2021     September 30, 2020     September 30, 2021     September 30, 2020                             Net income (loss)   $ (4,343 )   $ (2,751 )   $ (8,835 )   $ (14,144 ) Weighted average outstanding shares of common stock     62,174,822       41,344,256       61,462,300       43,647,388   Dilutive potential common stock shares from:     -       -       -           Vested Stock options from the Company’s 2017 Equity Incentive Plan     -       -       -           Conversion of convertible notes     -       -       -           Common stock and common stock equivalents     62,174,822       41,344,256       61,462,300       43,647,388   Income per share:                                 Basic net income per share     (0.07 )     (0.07 )     (0.14 )     (0.32 ) Diluted net income per share     (0.07 )     (0.07 )     (0.14 )     (0.32 )
Schedule of antidilutive securities	Three and nine months ended September 30,       2021     2020                 Vested stock options from the Company’s 2017 Equity Incentive Plan     3,845,124       3,517,577   Warrants     1,565,447       6,648,446   Shares to be issued upon conversion of convertible payable     115,047       115,047                     Total     5,525,618       10,281,070

v3.24.3

PREPAID EXPENSES AND OTHER ASSETS (Tables)	9 Months Ended
	Sep. 30, 2021
PREPAID EXPENSES AND OTHER ASSETS
Schedule of prepaid expenses and other assets	September 30, 2021     December 31, 2020                 Prepaid consulting services   $ -     $ 14   Prepaid clinical study     -       32   Prepaid insurance     113       347   PPE deposits     -       700   Prepaid equipment     67       61   Prepaid deposit for inventory     165       211   Prepaid expenses     40       66   Other assets     129       79   Prepaid expenses and other assets     514       1,510   Current portion of prepaid expenses and other assets     (431 )     (1,452 ) Prepaid expenses and other assets less current portion   $ 83     $ 58

v3.24.3

INVENTORY (Tables)	9 Months Ended
	Sep. 30, 2021
INVENTORY
Schedule of inventory	September 30, 2021     December 31, 2020   Raw materials   $ 98     $ 64   Packaging components     133       54   Work-in-process     40       22   Finished goods     877       603         1,148       743   Reserve for obsolescence     (188 )     (294 ) Total inventory   $ 960     $ 449

v3.24.3

PROPERTY AND EQUIPMENT (Tables)	9 Months Ended
	Sep. 30, 2021
PROPERTY AND EQUIPMENT
Schedule of property and equipment, net	September 30, 2021     December 31, 2020                 Equipment not yet placed in service   $ 1,413     $ 1,465   Manufacturing equipment     1,093       1,047   Computer and other equipment     626       626   Less accumulated depreciation     (1,230 )     (1,091 ) Property and Equipment, net   $ 1,902     $ 2,074

v3.24.3

NOTES RECEIVABLE (Tables)	9 Months Ended
	Sep. 30, 2021
NOTES RECEIVABLE
Schedule of note receivable	September 30, 2021     December 31, 2020   Coeptis Pharmaceuticals, Inc.   $ -     $ 200   Biopharmaceutical Research Company     200       -   Less: allowance for doubtful accounts     -       (200 ) Current portion of note receivable, net     -       -   Note receivable, net less current portion   $ 200     $ -

v3.24.3

GOODWILL AND INTANGIBLE ASSETS (Tables)	9 Months Ended
	Sep. 30, 2021
GOODWILL AND INTANGIBLE ASSETS
Schedule of intangible assets, net	September 30, 2021     December 31, 2020   Goodwill (1)   $ 13,868     $ 13,868                     Intangible assets:                 Acquired IPR&D – Chemistry (2)   $ 502     $ 14,460   Pending patents – Cure Pharmaceutical     327       259   Intangible assets subject to amortization:                 Customer relationships (2)     7,110       7,110   Acquired IPR&D – Chemistry (2)     13,958       -   Tradename (2)     2,610       2,610   Noncompete (2)     462       462   Intellectual property     972       972   Issued patents     1,034       1,044   Total intangible assets     26,975       26,917   Accumulated amortization     (3,744 )     (1,312 ) Intangible assets, net   $ 23,231     $ 25,605
Schedule of future amortization expense	2021 (remaining)   $ 953   2022     3,765   2023     3,592   2024     3,429   2025     2,583   Thereafter     8,080   Total Amortization   $ 22,402

v3.24.3

ACCRUED EXPENSES (Tables)	9 Months Ended
	Sep. 30, 2021
ACCRUED EXPENSES
Schedule of accrued expenses	September 30, 2021     December 31, 2020                 Accounts payable factoring   $ 2,325     $ -   Refunds and returns liability     434       -   Accrued interest     417       194   Accrued payroll     270       308   Accrued vacation leave     221       180   Accrued expenses     301       306   Sales tax payable     327       311   Accrued Expenses   $ 4,295     $ 1,299

v3.24.3

LOAN PAYABLE (Tables)	9 Months Ended
	Sep. 30, 2021
LOAN PAYABLE
Schedule of loan Payable	September 30, 2021     December 31, 2020                 Note to a company due September 29, 2021, including interest at 4.32% per annum; unsecured; interest due monthly   $ -     $ 182   Note to a company due September 6, 2021, including interest at 6.55% per annum; unsecured; interest due monthly     -       83   Note to a company due June 6, 2022, including interest at 4.42% per annum; unsecured; interest due monthly     60       -   Current portion of loan payable     (60 )     (265 ) Loan payable, less current portion   $ -     $ -

v3.24.3

NOTES PAYABLE AND PPP LOAN (Tables)	9 Months Ended
	Sep. 30, 2021
NOTES PAYABLE AND PPP LOAN
Schedule of notes payable	September 30, 2021     December 31, 2020                 Note to an individual, non-interest bearing, unsecured and due on demand   $ 50     $ 50   Promissory note to a company due May 18, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note     250       250   Promissory note to a company due August 12, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note     500       500   Promissory note to a company due January 13, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note     500       -   Promissory note to a company due April 8, 2022; unsecured; principal and accrued interest automatically convert into a convertible promissory note     250       -   Promissory note to a company due October 30, 2021; interest payable at 8% per annum; unsecured; principal and accrued interest automatically convert into a convertible promissory note     250           Current portion of note payable   $ 1,800     $ 800       September 30, 2021     December 31, 2020                 Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On February 5, 2021, $0.4 million was forgiven as permitted under Section 1106 of the CARES Act.   $ -     $ 399   Payment Protection Program Loan due April 2022, including interest at 1% per annum; unsecured. On June 9, 2021, $0.2 million was forgiven as permitted under Section 1106 of the CARES Act.     -       206   Payment protection program loan   $ -     $ 605

v3.24.3

CONVERTIBLE PROMISSORY NOTES (Tables)	9 Months Ended
	Sep. 30, 2021
CONVERTIBLE PROMISSORY NOTES
Schedule of convertible promissory notes	September 30, 2021     December 31, 2020                 Convertible promissory notes totaling $550,000 due January 31, 2019, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $7.00 per share or the price per share of the latest closing of a debt or equity offering by the Company greater than $3,000,000; accrued interest due January 31, 2019 and currently in default. The Company has offered to either repay the convertible promissory notes or request to have them converted into common stock shares of the Company. The beneficial owners of the convertible promissory notes have not yet communicated their intent to either receive payment or convert.   $ 550     $ 550   Current portion of convertible promissory notes   $ 550     $ 550

v3.24.3

FAIR VALUE CONVERTIBLE PROMISSORY NOTES (Tables)	9 Months Ended
	Sep. 30, 2021
FAIR VALUE CONVERTIBLE PROMISSORY NOTES
Schedule of Fair value of convertible promissory notes	September 30, 2021     December 31, 2020                 Series A subordinated convertible note at fair value   $ 3,109     $ 7,010   Series B subordinated convertible note at fair value     11,583       11,674   Total convertible promissory notes     14,692       18,684   Less: Investor Note offset – Series B Note     (5,000 )     (5,000 ) Carrying value of convertible promissory notes at fair value     9,692       13,684   Less: current portion of convertible promissory notes at fair value     (6,583 )     (6,674 ) Convertible promissory notes, less current portion   $ 3,109     $ 7,010
Schedule Of aggregated fair values of the warrants	Significant assumptions (weighted-average):       Risk-free interest rate at grant date     0.36 % Expected stock price volatility     81.14 % Expected dividend payout     -   Expected warrant life (in years)     2   Expected forfeiture rate     0 %

v3.24.3

DERIVATIVE LIABILITY (Tables)	9 Months Ended
	Sep. 30, 2021
DERIVATIVE LIABILITY
Schedule of derivative liability measured at fair value on a recurring basis	Fair value of derivative liabilities   Balance at December 31, 2019   $ 91   Loss on change in fair value included in earnings     (91 ) Balance at December 31, 2020     -   Gain on change in fair value included in earnings     -   Balance at September 30, 2021   $ -

v3.24.3

WARRANT AGREEMENTS (Tables)	9 Months Ended
	Sep. 30, 2021
WARRANT AGREEMENTS
Schedule of warrant activity	Warrants     Weighted Average Exercise Price     Weighted Average Contractual Remaining Life   Outstanding, December 31, 2019     14,666,518     $ 3.70       2.99   Granted     303,030       1.32       1.86   Exercised     (771,318 )     1.92       -   Forfeited/Expired     (11,718,381 )     5.01       -   Outstanding, December 31, 2020     2,479,849     $ 1.86       1.23   Granted     -       -       -   Exercised     (96,250 )     1.00       -   Forfeited/Expired     (818,152 )     5.01       -   Outstanding, September 30, 2021     1,565,447       2.18       0.92   Exercisable at September 30, 2021     1,565,447     $ 2.18       0.92
Schedule of warrant summary	Range of Exercise Price   Number of Warrants     Weighted Average Remaining Contractual Life (years)     Weighted Average Exercise Price     Number of Warrants Exercisable     Weighted Average Exercise Price   $ 1.00–$2.31     1,565,447       0.92     $ 2.18       1,565,447     $ 2.18         1,565,447       0.92     $ 2.18       1,565,447     $ 2.18   Range of Exercise Price   Number of Warrants     Weighted Average Remaining Contractual Life (years)     Weighted Average Exercise Price     Number of Warrants Exercisable     Weighted Average Exercise Price   $ 1.00–$6.00     2,479,849       1.23     $ 1.86       2,479,849     $ 1.86         2,479,849       1.23     $ 1.86       2,479,849     $ 1.86
Schedule of assumptions for warrants	September 30, 2021     September 30, 2020   Significant assumptions (weighted-average):             Risk-free interest rate at grant date   - %     0.29 % Expected stock price volatility   - %     74.46 % Expected dividend payout     -       -   Expected option life (in years)     -       3   Expected forfeiture rate   - %     0 %

v3.24.3

STOCK INCENTIVE PLANS (Tables)	9 Months Ended
	Sep. 30, 2021
STOCK INCENTIVE PLANS
Schedule of stock option activity	Options     Weighted Average Exercise Price     Weighted Average Contractual Remaining Life   Outstanding, December 31, 2019     3,467,650     $ 1.84       8.74   Granted     3,600,364       1.26       9.19   Exercised     (30,000 )     0.74       -   Forfeited/Expired     (752,222 )     1.76       -   Outstanding, December 31, 2020     6,285,792     $ 1.52       8.86   Granted     1,395,801       0.98       9.43   Exercised     -       -       -   Forfeited/Expired     (371,250 )     0.73       -   Outstanding, September 30, 2021     7,310,343       1.46       8.45   Exercisable at September 30, 2021     3,845,124       1.52       7.91   Range of Exercise Price   Number of Awards     Weighted Average Remaining Contractual Life (years)     Weighted Average Exercise Price     Number of Awards Exercisable     Weighted Average Exercise Price   $ 0.61 - $4.01     7,310,343       8.45     $ 1.46       3,845,124     $ 1.52         7,310,343       8.45     $ 1.46       3,845,124     $ 1.52
Weighted-average fair value of options granted	September 30, 2021     September 30, 2020   Significant assumptions (weighted-average):             Risk-free interest rate at grant date   - %     0.29 % Expected stock price volatility   - %     74.46 % Expected dividend payout     -       -   Expected option life (in years)     -       10   Expected forfeiture rate     0 %     0 %
Schedule of restricted stock activity	Restricted Stock Shares     Weighted Average Grant Date Fair Value   Non-vested, December 31, 2019     82,086     $ 2.69   Granted     150,000       1.60   Vested     (181,849 )     2.08   Forfeited/Expired     (237 )     -   Non-vested, December 31, 2020     50,000     $ 1.60   Granted     338,443       1.86   Vested     (330,751 )     2.07   Forfeited/Expired     -       -   Non-vested, September 30, 2021     57,692     $ 1.30
Schedule of restricted stock unit	Restricted Stock Units     Weighted Average Grant Date Fair Value   Outstanding, December 31, 2019     60,759       3.66   Granted     431,578       1.33   Vested     (60,759 )     3.66   Forfeited/Expired     -       -   Outstanding, December 31, 2020     431,578     $ 1.33   Granted     65,600       1.00   Vested     (497,178 )     1.29   Forfeited/Expired     -       -   Outstanding, September 30, 2021     -       -

v3.24.3

SEGMENT REPORTING (Tables)	9 Months Ended
	Sep. 30, 2021
Schedule of business segments	Cure     Sera Labs     Eliminations     Consolidated   Net Sales   $ 386     $ 4,654     $ (126 )   $ 4,914   Operating Loss   $ (7,019 )   $ (5,689 )   $ -     $ (12,708 ) Assets   $ 46,604     $ 9,450     $ (14,175 )   $ 41,879   Accounts receivable, net   $ 22     $ 186     $ -     $ 208   Inventory, net   $ 368     $ 592     $ -     $ 960       Cure     Sera Labs     Eliminations     Consolidated   Net Sales   $ 741     $ -     $ -     $ 741   Operating Loss   $ (14,258 )   $ -     $ -     $ (14,258 ) Assets   $ 30,066     $ -     $ -     $ 30,066   Accounts receivable, net   $ 46     $ -     $ -     $ 46   Inventory, net   $ 228     $ -     $ -     $ 228
Schedule of disaggregation of revenue	Three Months Ended     Nine months Ended       September 30, 2021     September 30, 2020     September 30, 2021     September 30, 2020                             CureFilm™ sales     21 %     98 %     14 %     75 % Research & Development services     -       -       1       23   Product sales - CBD     78       -       77       -   Product sales – PPE     -       -       7       -   Other sales less than 10%     1       2       1       2   Total     100 %     100 %     100 %     100 %

v3.24.3

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Tables)	9 Months Ended
	Sep. 30, 2021
BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY
Schedule of change in fair value of contingent consideration	(Dollars in thousands)   Fair Value of the Contingent Share Consideration   Fair value at December 31, 2020   $ 3,205   Fair value at September 30, 2021     2,258   Net change in fair value for the nine months ended September 30, 2021   $ (947 )
Schedule of estimated fair value of preliminary price	(Dollars in thousands)   Shares     Amount   Upfront Payment     -     $ 1,000   Closing Merger Consideration Shares     6,909,091       9,535   Contingent Consideration Shares (Clawback Shares)     5,988,024       3,083   Liabilities assumed     -       550   Total purchase price     12,897,115     $ 14,168
Schedule of preliminary estimated fair value of assets	(Dollars in thousands)       Net assets acquired:       Cash   $ 1,357   Other assets     1,440   Property, plant and equipment     6   Other long term assets     384   Intangibles assets     10,182   Goodwill     4,687   Accounts payable and accrued expenses     (1,063 ) Contract liabilities     (1,963 ) Other current liabilities     (462 ) Other long-term liabilities     (400 ) Net assets acquired   $ 14,168
Schedule identifiable intangible assets acquired	(Dollars in thousands)   Weighted-average Estimated useful life   Preliminary Estimated Asset Fair Value   Finite-lived intangible assets:           Customer relationships   5.0 years   $ 7,110   Tradename   4.0 years   $ 2,610   Non-compete   2.0 years   $ 462   Total finite-lived intangible assets acquired   4.6 years   $ 10,182
Schedule Acquisition	(Dollars in thousands)   Fair Value of the Contingent Share Consideration   Fair Value at December 31, 2019   $ 16,043   Settlement of contingent consideration liability     (21,701 ) Net change in fair value during the year ended December 31, 2020     5,658   Fair Value at December 31, 2020   $ -
Schedule Supplemental Pro Forma Information	Cure Pharmaceutical     Sera Labs     Pro forma Adjustments     Consolidated Pro Forma   Net product sales   $ 192     $ 1,744     $ -     $ 1,936   Net income (loss)   $ (2,751 )   $ (970 )   $ -     $ (3,721 )                                   Net income (loss) attributable to Cure per common share:                                 Basic   $ (0.07 )   $ (0.08 )           $ (0.07 ) Diluted   $ (0.07 )   $ (0.08 )           $ (0.07 )     Cure Pharmaceutical     Sera Labs     Pro forma Adjustments     Consolidated Pro Forma   Net product sales   $ 741     $ 5,685     $ -     $ 6,426   Net loss   $ (14,144 )   $ (1,327 )   $ -     $ (15,471 )                                   Net loss attributable to Cure per common share:                                 Basic   $ (0.32 )   $ (0.11 )           $ 0.30 ) Diluted   $ (0.32 )   $ (0.11 )           $ (0.30 )

v3.24.3

COMMITMENTS AND CONTINGENCIES (Tables)	9 Months Ended
	Sep. 30, 2021
COMMITMENTS AND CONTINGENCIES
Schedule of future lease payments of operating lease	Years       2021 (remaining)   $ 33   2022     134   2023     138   2024     46   2025     -   Undiscounted cash flow     351   Effects of discounting     (48 ) Lease liabilities recognized   $ 303
Schedule of future minimum lease payments	2021 (remaining)     6   2022     14   2023     14   2024     9   2025     -   Thereafter     -   Finance lease liabilities recognized   $ 43
Schedule of operating and financing leases	September 30, 2021     December 31, 2020   Operating leases             Right-of-use assets, net   $ 280       343                     Right-of-use lease liabilities, current   $ 104       93   Right-of-use lease liabilities, noncurrent     199       278   Total operating lease liabilities   $ 303       371                     Financing Leases                 Finance lease right-to-use assets, net   $ 43       52                     Current liabilities   $ 13       12   Noncurrent liabilities     30       40   Total financing lease liabilities   $ 43       52                     Weighted average remaining lease term                 Operating leases   2.55 years     3.31 years   Financing leases   3.06 years     3.82 years                     Weighted average discount rate                 Operating leases     11.30 %     11.3 % Financing leases     9.0 %     9.0 %

v3.24.3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020	Dec. 31, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Customer deposits for commercial products	$ 611	$ 281
Customer deposits for personal protective equipment	0	713
Total contract liabilities	$ 611	$ 994	$ 456

v3.24.3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Contract liabilities beginning balance	$ 994	$ 456
Additions	435	1,033
Transfers to Revenue	(105)	(495)
Customer deposits returned	(713)
Contract liabilities ending balance	$ 611	$ 994

v3.24.3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fair value at December 31, 2020	$ 18,684
Change in fair value of Series A Note	(1,020)
Change in fair value of Series B Notes	(91)
Conversion of Series B Notes	(2,881)
Fair value of Series A and B Notes at September 30, 2021	$ 14,692

v3.24.3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Stock price	$ 0.73	$ 1.30
Conversion price	$ 1.32	$ 1.32
Interest Rate	18.00%	1.00%
Series A Note [Member]
Risk-free interest rate	0.11%	0.12%
Volatility	85.00%	86.00%
Term	1 year 29 days	1 year 9 months 29 days
Series B Note [Member]
Risk-free interest rate	0.07%	0.09%
Volatility	80.00%	80.00%
Term	29 days	9 months 29 days

v3.24.3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2021	Sep. 30, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net income (loss)	$ (4,343)	$ (1,321)	$ (3,171)	$ (2,751)	$ (13,439)	$ 2,046	$ (8,835)	$ (14,144)
Weighted average outstanding shares of common stock	62,174,822			41,344,256			61,462,300	43,647,388
Common stock and common stock equivalents	62,174,822			41,344,256			61,462,300	43,647,388
Income (loss) per share:
Basic net income per share	$ (0.07)			$ (0.07)			$ (0.14)	$ (0.32)
Diluted net income per share	$ (0.07)			$ (0.07)			$ (0.14)	$ (0.32)

v3.24.3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) - shares	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Vested stock options from the company's 2017 Equity Incentive plan	3,845,124	3,517,577
Warrants	1,565,447	6,648,446
Shares to be issued upon conversion of convertible notes	115,047	115,047
Total	5,525,618	10,281,070

v3.24.3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Weighted average outstanding shares of common stock	62,174,822	41,344,256	61,462,300	43,647,388
Basic net income per share	$ (0.07)	$ (0.07)	$ (0.14)	$ (0.32)
Conversion price	$ 1.32		$ 1.32		$ 1.32
Accumulated deficit	$ (90,100,000)		$ (90,100,000)
Allowance for doubtful accounts	80,000.00		80,000.00		$ 40,000.00
Contract liabilities	600,000		600,000		$ 1,000,000.0
Outstanding contingent consideration liability	3,200,000		3,200,000
Advertising costs	700,000		2,400,000
Gain on change of fair value	700,000	$ 0	1,100,000	$ 0
Research and development expenses	$ 600,000	$ 700,000	$ 1,900,000	$ 2,300,000
Valuation allowance percentage	100.00%		100.00%
Request for conversion description			the Company purchased two convertible loans (the “February 2020 Loans”) with Releaf for a total amount of $0.3 million. Releaf shall accrue interest on the February 2020 Loans at 6% per annum and they shall become due and payable to the Company at the earlier of the conversion date or the maturity date of October 31, 2021. In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amounts of the February 2020 Loans and any unpaid accrued interests shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2.0 million of debt and/or equity (“Releaf February 2020 Qualified Financing”), the outstanding amount of the February 2020 Loans and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf February 2020 Qualified Financing, less a discount of 20% on the subscription price. In addition, in the event that the pre-money valuation of the Releaf February 2020 Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million
Merger agreements description			In connection with Sera Labs Merger, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock
Working capital deficit	$ 15,900,000		$ 15,900,000
Reported
Weighted average outstanding shares of common stock			49,294,190
Basic net income per share			$ (0.18)
Cash [Member]
Cash in hand	$ 100,000		$ 100,000

v3.24.3

PREPAID EXPENSES AND OTHER ASSETS (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
PREPAID EXPENSES AND OTHER ASSETS
Prepaid consulting services	$ 0	$ 14
Prepaid clinical study	0	32
Prepaid insurance	113	347
PPE deposits	0	700
Prepaid equipment	67	61
Prepaid deposit for inventory	165	211
Prepaid expenses	40	66
Other assets	129	79
Total Prepaid expenses and other assets	514	1,510
Current portion of prepaid expenses and other assets	(431)	(1,452)
Prepaid expenses and other assets less current portion	$ 83	$ 58

v3.24.3

INVENTORY (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
INVENTORY
Raw Materials	$ 98	$ 64
Packaging Components	133	54
Work-In-Process	40	22
Finished Goods	877	603
Inventory, Gross	1,148	743
Reserve for Obsolescence	(188)	(294)
Total inventory	$ 960	$ 449

v3.24.3

INVENTORY (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
INVENTORY
Inventory reserves	$ 3	$ 1	$ 200	$ 4

v3.24.3

PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Less accumulated depreciation	$ (1,230)	$ (1,091)
Property and Equipment, net	1,902	2,074
Manufacturing equipmentt [Member]
Property and Equipment	1,093	1,047
Equipment not yet placed in service [Member]
Property and Equipment	1,413	1,465
Computer and other equipment [Member]
Property and Equipment	$ 626	$ 626

v3.24.3

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
PROPERTY AND EQUIPMENT
Depreciation expense	$ 50	$ 140	$ 60	$ 160

v3.24.3

NOTES RECEIVABLE (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Less: allowance for doubtful accounts	$ 0	$ 200
Current portion of note receivable, net	0	0
Note receivable, net	200	0
Coeptis Pharmaceuticals, Inc. [Member]
Note receivable, net	0	200
Biopharmaceutical Research Company [Member]
Note receivable, net	$ 200	$ 0

v3.24.3

NOTES RECEIVABLE (Details Narrative) - USD ($)			1 Months Ended			9 Months Ended	12 Months Ended
	Feb. 10, 2021	Nov. 12, 2019	May 26, 2021	Sep. 16, 2020	Jul. 31, 2020	Sep. 30, 2021	Dec. 31, 2020
Interest rate						18.00%	1.00%
Request for conversion description						the Company purchased two convertible loans (the “February 2020 Loans”) with Releaf for a total amount of $0.3 million. Releaf shall accrue interest on the February 2020 Loans at 6% per annum and they shall become due and payable to the Company at the earlier of the conversion date or the maturity date of October 31, 2021. In the event of a request for conversion by the Company or at the end of the maturity date, October 31, 2021, the outstanding amounts of the February 2020 Loans and any unpaid accrued interests shall be converted into shares of Releaf based on a price per share on a post money valuation of $10.9 million. In the event Releaf completes a financing round totaling at least $2.0 million of debt and/or equity (“Releaf February 2020 Qualified Financing”), the outstanding amount of the February 2020 Loans and any unpaid accrued interest shall automatically convert at a price per share paid by the investors in connection with the Releaf February 2020 Qualified Financing, less a discount of 20% on the subscription price. In addition, in the event that the pre-money valuation of the Releaf February 2020 Qualified Financing is higher than $15 million, the conversion shall be calculated with a cap of pre-money valuation of $14.5 million
Conversion price						$ 1.32	$ 1.32
Convertible promissory note						$ 6,583,000	$ 6,674,000
Coeptis Pharmaceuticals, Inc. [Member]
Request for conversion description			The May 2021 Loan shall automatically convert at the initial closing of and on the same terms and conditions of the Qualified Financing into a total number of Qualified Financing Securities, rounded down to the nearest whole share, obtained by dividing the May 2021 Loan by the lesser of (i) 80% of the price per share paid for the Qualified Financing Securities by investors in the Qualified Financing and (ii) $20 million by the number of outstanding shares of common stock
Principal amount	$ 200,000
Maturity date		Jun. 15, 2020
Conversion price		$ 2.60
Convertible debt		$ 200,000	$ 4,000,000
The Sera Labs, Inc. [Member]
Interest rate		9.00%			9.00%
Principal amount				$ 550,000
Convertible promissory note					$ 500,000
Maturity date					December 31, 2020
Interest upon principal amount				$ 50,000.00
BRC [Member]
Interest rate			6.00%
Convertible loan			$ 200,000
Loan by the price per share			20,000,000
Aggregate Proceeds			$ 4,000,000
Price per share paid			80.00%

v3.24.3

GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Goodwill	$ 13,868	$ 13,868
Total intangible assets	26,975	26,917
Less accumulated amortization	(3,744)	1,312
Intangible assets, net	23,231	25,605
Intellectual Property [Member]
Total intangible assets	972	972
Issued Patents [Member]
Total intangible assets	1,034	1,044
Pending patents - Cure Pharmaceutical [Member]
Total intangible assets not subject to amortization	327	259
Customer Relationships [Member]
Total intangible assets	7,110	7,110
Tradename [Member]
Total intangible assets	2,610	2,610
Non-compete [Member]
Total intangible assets	462	462
Acquired IPR&D - Chemistry [Member]
Total intangible assets	13,958	0
Total intangible assets not subject to amortization	$ 502	$ 14,460

v3.24.3

GOODWILL AND INTANGIBLE ASSETS (Details 1) $ in Thousands	Sep. 30, 2021 USD ($)
GOODWILL AND INTANGIBLE ASSETS
2021 (remaining)	$ 953
2022	3,765
2023	3,592
2024	3,429
2025	2,583
Thereafter	8,080
Total Amortization	$ 22,402

v3.24.3

GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020	Dec. 31, 2019
Completed two research and development projects of IPR&D	$ 3,500		$ 13,900
Goodwill from the acquisition of Chemistry Holdings, Inc					$ 4,700
Amortization expense	$ 1,000	$ 30	2,400	$ 90
Goodwill					4,700	$ 9,200
IPR and D Project
Estimated useful life	10 years
Sera Labs Customer Relationships [Member]
Acquired intangible assets					7,100
Intellectual Property [Member]
Acquired intangible assets						14,500
Patents [Member]
Acquired intangible assets						$ 700
Patent costs capitalized			$ 70	$ 10
Tradename [Member]
Acquired intangible assets					2,600
Non-compete [Member]
Acquired intangible assets					$ 500

v3.24.3

ACCRUED EXPENSES (Details) - USD ($)	Sep. 30, 2021	Dec. 31, 2020
ACCRUED EXPENSES
Accounts payable factoring	$ 2,325,000	$ 0
Refunds and returns liability	434,000	0
Accrued interest expense	417	194,000
Accrued payroll	270,000	308,000
Accrued vacation leave	221,000	180,000
Accrued expenses	301,000	306,000
Sales tax payable	327,000	311,000
Accrued Expenses net	$ 4,295,000	$ 1,299,000

v3.24.3

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)				3 Months Ended		9 Months Ended		12 Months Ended
	Nov. 09, 2020	Oct. 02, 2020	Aug. 06, 2020	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020	Sep. 16, 2021	May 03, 2021
Interest expense - related party				$ 290.000	$ 2,000.000	$ 75,000.000	$ 2,000.000
Carrying value of convertible promissory notes at fair value				9,692,000		$ 9,692,000		$ 13,684,000
Interest rate						18.00%		1.00%
Principal payment						$ 205,000	$ 127,000
Mrs. Duitch [Member]
Carrying value of convertible promissory notes at fair value				$ 900,000		$ 900,000
Second Board Investor
Initial Principal Payment									$ 200,000	$ 200,000
Board Investor [Member] | Unsecured Promissory Note [Member]
Principal amount			$ 150,000
Interest rate			8.00%
October 2, 2020 [Member] | Sera labs [Member]
Principal amount		$ 1,100,000
Interest rate		8.00%
Principal payment	$ 300,000
Upfront payment connection		$ 1,000,000.0
Certain liabilities		$ 100,000

v3.24.3

LOAN PAYABLE (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current portion of loan payable	$ 60	$ 265
Current portion of loan payable	(60)	(265)
Loan payable, less current portion	0	0
Loans Payable One [Member]
Current portion of loan payable	0	182
Current portion of loan payable	0	(182)
Loans Payable Two [Member]
Current portion of loan payable	0	83
Current portion of loan payable	0	(83)
Loans Payable Three [Member]
Current portion of loan payable	60	0
Current portion of loan payable	$ (60)	$ 0

v3.24.3

LOAN PAYABLE (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
LOAN PAYABLE
Interest expense	$ 1	$ 1	$ 3	$ 2

v3.24.3

NOTES PAYABLE AND PPP LOAN (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current portion of note payable	$ 1,800	$ 800
Individual [Member]
Notes payable	50	50
Promissory note 2 [Member]
Notes payable	500	0
Promissory note 3 [Member]
Notes payable	250	0
Promissory Note [Member]
Notes payable	250	250
Promissory note 1 [Member]
Notes payable	500	$ 500
Promissory Note 4[Member]
Notes payable	$ 250

v3.24.3

NOTES PAYABLE AND PPP LOAN (Details 1) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Loan due amount	$ 0	$ 605
Payment Protection Program [Member]
Loan due amount	0	399
Payment Protection Program 1 [Member]
Loan due amount	$ 0	$ 206

v3.24.3

NOTES PAYABLE AND PPP LOAN (Details Narrative) - USD ($) $ in Thousands			1 Months Ended					3 Months Ended		9 Months Ended		12 Months Ended
	Apr. 08, 2021	Aug. 12, 2020	Sep. 24, 2021	Feb. 25, 2021	Sep. 25, 2020	May 18, 2020	Apr. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Interest rate										18.00%		1.00%
Notes Payable PPP Loan [Member]
Interest expenses								$ 50	$ 10	$ 110	$ 10
Sera Lab [Member]
Proceeds from loan							$ 400
Investor [Member]
Proceeds from loan	$ 300		$ 300	$ 500
Ventures, LLC [Member] | Promissory Note Member
Gross proceeds, net					$ 1,000
original issue discount					100
Principal, amount					1,100
Unpaid interest expense					$ 1,100
Demand secured promissory					either (a) the initial date after September 25, 2020 of any offering of securities by the Company with gross proceeds of at least $1.0 million or (b) October 31, 2020. The outstanding principal amount and any unpaid accrued Late Charges (as defined below) may be prepaid at any time, without notice, premium or penalty
Sera Lab One [Member]
Proceeds from loan							$ 200
Board Members [Member]
Interest rate		8.00%				8.00%
Unsecured promissory note		$ 500				$ 300				$ 300

v3.24.3

CONVERTIBLE PROMISSORY NOTES (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
CONVERTIBLE PROMISSORY NOTES
Convertible promissory notes	$ 550	$ 550
Current portion of convertible promissory notes	$ 550	$ 550

v3.24.3

FAIR VALUE CONVERTIBLE PROMISSORY NOTES (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
FAIR VALUE CONVERTIBLE PROMISSORY NOTES
Series A subordinated convertible note at fair value	$ 3,109	$ 7,010
Series B subordinated convertible note at fair value	11,583	11,674
Total convertible promissory notes	14,692	18,684
Less: Investor Note offset - Series B Note	(5,000)	(5,000)
Carrying value of convertible promissory notes at fair value	9,692	13,684
Less: current portion of convertible promissory notes at fair value	(6,583)	(6,674)
Convertible promissory notes, less current portion	$ 3,109	$ 7,010

v3.24.3

FAIR VALUE CONVERTIBLE PROMISSORY NOTES (Details 1) - USD ($)	6 Months Ended	9 Months Ended
	Jun. 30, 2020	Sep. 30, 2021
Significant assumptions (weighted-average):
Risk-free interest rate at grant date	0.29%	0.36%
Expected stock price volatility	74.46%	81.14%
Expected dividend payout		$ 0
Expected warrant life (in years)	3 years	2 years
Expected forfeiture rate		0.00%

v3.24.3

FAIR VALUE CONVERTIBLE PROMISSORY NOTES (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended	9 Months Ended	12 Months Ended
	Oct. 30, 2020	Sep. 30, 2021	Sep. 30, 2021	Dec. 31, 2020	Sep. 25, 2020
Conversion price		$ 1.32	$ 1.32	$ 1.32
Proceeds from investor note				$ 1,000,000.0
Remaining balance of investor note				$ 5,000,000.0
Interest rate			18.00%	18.00%
Conversion price description			The Investor will not have the right to convert any portion of a Convertible Notes, to the extent that, after giving effect to such conversion, the Investor (and other certain related parties) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such conversion. This limit may, from time to time, be increased, up to 9.99%, or decreased; provided that any such increase will not be effective until the 61st day after delivery of a notice to the Company of such increase
Warrant, exercisable shares			363,636
Convertibles promissory notes					$ 1,100,000
Cash consideration			$ 14,200,000
Private Placement [Member]
Net cash proceeds				$ 2,340,000
Financial advisory fee				480,000
Proceeds from Private Placement				8,850,000
Placement agent fee				306,000
Series A Subordinated Convertible Note [Member]
Cash consideration	$ 4,000,000
Initial principal amount	4,600,000
Original issue discount	600,000
Series B Senior Secured Convertible Note [Member]
Initial principal amount	6,900,000
Original issue discount	900,000
Secured Convertible Note [Member]
Initial principal amount	6,000,000
Securities Purchase Agreement [Member] | Institutional Investor [Member]
Aggregate principal amount	$ 11,500,000
Series A Note [Member]
Loss on fair value option			4,400,000
Gain (Loss) on change in fair value		$ 100,000	1,000,000.0	4,600,000
Debt issuance cost				700,000
Series B Note [Member]
Loss on fair value option			5,100,000
Gain (Loss) on change in fair value		$ 600,000	$ 100,000	4,700,000
Debt issuance cost				$ 100,000
Series A and Series B Note [Member] | Placement Agent Warrants [Member]
Purchase of warrant description			In addition, the placement agent received a warrant (the “Warrant”) exercisable for two years for the purchase of an aggregate of up to 242,424 shares of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636shares of the Company’s common stock (collectively with the shares underlying the Warrant, the “Warrant Shares”). The Warrant Shares, when issued, will have the same rights
Receive warrant description			a placement agent is to receive a warrant (the “Warrant”) exercisable for 2 years for the purchase of an aggregate of up to 242,424 and 60,606 shares, respectively, of the Company’s common stock, at an exercise price of $1.32 per share

v3.24.3

DERIVATIVE LIABILITY (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
DERIVATIVE LIABILITY
Derivative liability	$ 0	$ 91
Loss on change in fair value included in earnings	0	(91)
Derivative liability end of period	$ 0	$ 0

v3.24.3

WARRANT AGREEMENTS (Details) - Warrants [Member] - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Warrants, beginning balance	2,479,849	14,666,518
Granted		303,030
Exercised	(96,250)	(771,318)
Forfeited/Expired	(818,152)	(11,718,381)
Warrants, ending balance	1,565,447	2,479,849
Exercisable at June 30, 2021	1,565,447
Weighted average exercise price beginning balance	$ 1.86	$ 3.70
Weighted Average Exercise Price, Granted	0	1.32
Weighted Average Exercise Price, Exercised	1.00	1.92
Weighted Average Exercise Price, Forfeited/Expired	5.01	5.01
Weighted Average Exercise Price, ending balance	2.18	$ 1.86
Weighted Average Exercise Price, Exercisable	$ 2.18
Weighted Average Contractual Remaining Life, beginning balance	1 year 2 months 23 days	2 years 11 months 26 days
Weighted Average Contractual Remaining Life, ending balance	11 months 1 day	1 year 2 months 23 days
Weighted Average Contractual Remaining Life, Exercisable	11 months 1 day

v3.24.3

WARRANT AGREEMENTS (Details 1) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Number of Warrants	1,565,447	2,479,849
Weighted Average Remaining Contractual Life (years)	11 months 1 day	1 year 2 months 23 days
Weighted Average Exercise Price	$ 2.18	$ 1.86
Number of Warrants Exercisable, Weighted Average Exercise Price		$ 1.86
Number of Warrants Exercisable	1,565,447	2,479,849
$1.98-$2.31 [Member]
Number of Warrants	1,565,447	2,479,849
Weighted Average Remaining Contractual Life (years)	11 months 1 day	1 year 2 months 23 days
Weighted Average Exercise Price	$ 2.18	$ 1.86
Number of Warrants Exercisable, Weighted Average Exercise Price	$ 2.18	$ 1.86
Number of Warrants Exercisable	1,565,447	2,479,849

v3.24.3

WARRANT AGREEMENTS (Details 2)	6 Months Ended	9 Months Ended
	Jun. 30, 2020	Sep. 30, 2021
WARRANT AGREEMENTS
Risk-free interest rate at grant date	0.29%	0.36%
Expected stock price volatility	74.46%	81.14%
Expected dividend payout		0.00%
Expected option life (in years)	3 years	2 years
Expected forfeiture rate	0.00%	0.00%

v3.24.3

WARRANT AGREEMENTS (Details Narrative) - USD ($)			1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Dec. 08, 2020	Oct. 02, 2020	Jun. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Change in warrant value				$ 0	$ 100,000	$ 0	$ 0
Warrant, exercisable shares						363,636
Aggregate intrinsic value of warrants outstanding and exercisable						$ 0
Warrants [Member]
Warrants issued			8,018,071
Fair market value			$ 1,400,000
Warrant exercise price			$ 2.00					$ 5.01
Warrants [Member] | October 2, 2020 [Member]
Warrants issued	62,851	242,424	708,467					60,606
Warrant exercise price	$ 1.00	$ 1.32
Stock issued during period shares	26,936
Warrant, exercisable shares								363,636

v3.24.3

STOCK INCENTIVE PLANS (Details) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Outstanding, beginning balance	2,479,849
Outstanding, ending balance	1,565,447	2,479,849
Exercisable at ending period	1,565,447	2,479,849
Options [Member]
Outstanding, beginning balance	6,285,792	3,467,650
Granted	1,395,801	3,600,364
Exercised	0	(30,000)
Forfeited/Expired	(371,250)	(752,222)
Outstanding, ending balance	7,310,343	6,285,792
Exercisable at ending period	3,845,124
Weighted average exercise price, beginning balance	$ 1.52	$ 1.84
Weighted Average Exercise Price, Granted	0.98	1.26
Weighted Average Exercise Price, Exercised	0	0.74
Weighted Average Exercise Price, Forfeited/Expired	0.73	1.76
Weighted Average Exercise Price, ending balance	1.46	$ 1.52
Weighted Average Exercise Price, Exercisable	$ 1.52
Weighted Average Contractual Remaining Life, beginning balance	8 years 10 months 9 days	8 years 8 months 26 days
Weighted Average Contractual Remaining Life, Granted	9 years 5 months 4 days	9 years 2 months 8 days
Weighted Average Contractual Remaining Life, ending balance	8 years 5 months 12 days	8 years 10 months 10 days
Weighted Average Contractual Remaining Life, Exercisable	7 years 10 months 28 days

v3.24.3

STOCK INCENTIVE PLANS (Details 1) - $ / shares	6 Months Ended	9 Months Ended	12 Months Ended
	Jun. 30, 2021	Sep. 30, 2021	Dec. 31, 2020
Weighted Average Remaining Contractual Life (years)		11 months 1 day	1 year 2 months 23 days
Weighted Average Exercise Price		$ 2.18	$ 1.86
0.61-$4.01 [Member]
Number of Awards	7,310,343
Weighted Average Remaining Contractual Life (years)	8 years 5 months 12 days
Weighted Average Exercise Price	$ 1.46
Number of Awards Exercisable	3,845,124
Weighted Average Exercise Price, Exercisable	$ 1.52
Stock Options [Member]
Number of Awards	7,310,343
Weighted Average Remaining Contractual Life (years)	8 years 5 months 12 days
Weighted Average Exercise Price	$ 1.46
Number of Awards Exercisable	3,845,124
Weighted Average Exercise Price, Exercisable	$ 1.52

v3.24.3

STOCK INCENTIVE PLANS (Details 2) - USD ($)	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Significant assumptions (weighted-average):
Expected dividend payout	$ 0
Expected forfeiture rate	0.00%
Stock Options [Member]
Significant assumptions (weighted-average):
Risk-free interest rate at grant date	0.00%	0.29%
Expected stock price volatility	0.00%	74.46%
Expected dividend payout	$ 0	$ 0
Expected option life (in years)		10 years
Expected forfeiture rate	0.00%	0.00%

v3.24.3

STOCK INCENTIVE PLANS (Details 3) - Stock Options [Member] - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Non-vested, beginning balance	50,000	82,086
Non-vested, Granted	338,443	150,000
Non-vested, Vested	(330,751)	(181,849)
Non-vested, Forfeited/Expired	0	(237)
Non-vested, ending balance	57,692	50,000
Weighted Average Exercise Price, Non-vested, beginning balance	$ 1.60	$ 2.69
Weighted Average Exercise Price, Granted	1.86	1.60
Weighted Average Exercise Price, Vested	2.07	2.08
Weighted Average Exercise Price, Forfeited/Expired	0	0
Weighted Average Exercise Price, Non-vested, ending balance	$ 1.30	$ 1.60

v3.24.3

STOCK INCENTIVE PLANS (Details 4) - Stock Options [Member] - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Restricted Stock Units, Outstanding beginning balance	431,578	60,759
Restricted Stock Units, Granted	65,600	431,578
Restricted Stock Units, Vested	(497,178)	(60,759)
Restricted Stock Units, Forfeited/Expired	0	0
Restricted Stock Units, Outstanding ending balance	0	431,578
Restricted Stock Units, Weighted Average Grant Date Fair Value Outstanding, begining balance	$ 1.33	$ 3.66
Restricted Stock Units, Weighted Average Grant Date Fair Value Granted	1.00	1.33
Restricted Stock Units, Weighted Average Grant Date Fair Value Vested	1.29	3.66
Restricted Stock Units, Weighted Average Grant Date Fair Value Forfeited/Expired	0	0
Restricted Stock Units, Weighted Average Grant Date Fair Value Outstanding, ending balance	$ 0	$ 1.33

v3.24.3

STOCK INCENTIVE PLANS (Details Narrative) - USD ($) $ in Millions	1 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	Nov. 28, 2020	Dec. 29, 2017	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Fair value of options granted					$ 1.1		$ 4.3
Compensation expense			$ 0.4	$ 0.1	1.7	$ 0.4
Unrecognized compensation expense					$ 2.5
Weighted Average Remaining Contractual Life (years)					9 years 10 days
Stock options issued, shares					1,395,801	90,000
Equity Incentive Plan [Member]
Common stock available for grant	5,000,000	5,000,000
Equity incentive plan, description		The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date
Consultant [Member]
Stock options issued, shares					1,518,194
Restricted Stock Units [Member]
Compensation expense			0.1	0.1	$ 0.4	$ 0.3
Unrecognized fair value of compensation cost			$ 0.0		$ 0.0		0.1
Weighted Average Remaining Contractual Life (years)			2 months 1 day		1 month 20 days
Stock options issued, shares					1,395,801	431,578
Restricted Common Stock [Member]
Compensation expense			$ 0.2	$ 0.1	$ 0.4	$ 0.2
Unrecognized fair value of compensation cost			0.1		$ 0.1		$ 0.6
Weighted Average Remaining Contractual Life (years)							7 months 20 days
Stock options issued, shares					1,395,801	150,000
Nonstatutory Stock Options [Member]
Stock options issued, shares					1,395,801
Restricted Common Stock issued shares					338,443
Awarded vesting period					4 years
Term of exercise period					10 years
Stock Options [Member]
Aggregate Intrinsic Value, Outstanding			$ 0.2		$ 0.2

v3.24.3

STOCKHOLDERS EQUITY (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020	Jun. 05, 2020	May 14, 2019
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares par value	$ 0.001	$ 0.001
Common stock, shares issued	65,060,044	65,060,044
Price per share			$ 2.00	$ 5.01
Common stock, shares outstanding	65,060,044	59,476,268
October 2, 2020 [Member] | Sera labs [Member]
Common stock, shares issued	6,909,091
Price per share	$ 1.38
Proceed from issuance of common stock	$ 9,534,546
From January 1, 2021 to September 30, 2021 [Member]
Common stock, shares issued	1,439,394
Price per share	$ 1.32
Conversion price per share	$ 1.9
From January 1, 2021 to September 30, 2021 [Member] | Warrants [Member]
Common stock, shares issued	26,936
Price per share	$ 1.30
Proceed from issuance of common stock	$ 30,000.00
From January 1, 2021 to September 30, 2021 [Member] | Series A Note [Member]
Common stock, shares issued	2,597,951
Proceed from issuance of common stock	$ 1,300,000
Conversion price description	ranging from $0.43 to $0.64
On June 5, 2020 [Member]
Common stock, shares issued	708,467
Price per share	$ 2.00
Proceed from issuance of common stock	$ 1,400,000
On June 5, 2020 [Member] | CHI [Member]
Common stock, shares issued	12,058,623
Price per share	$ 1.82
Common stock issuable		$ 200,000
Proceed from issuance of common stock	$ 21,900,000
December 9, 2020 [Member]
Common stock, shares issued	757,576
Price per share	$ 1.32
December 9, 2020 [Member] | Series A Note [Member]
Common stock, shares issued	565,702
Price per share	$ 0.89
Debt instrument converted amount, principal	$ 500,000
December 9, 2020 [Member] | Series A Note plus [Member]
Debt instrument converted amount, principal	$ 1,000,000
2018 Two [Member]
Price per share	$ 0.89
Proceed from issuance of common stock	$ 300,000
Debt instrument converted amount, principal	$ 300,000
Debt instrument converted into common stock	297,288
2018 [Member]
Common stock, shares issued	150,000
Price per share	$ 2.05
Proceed from issuance of common stock	$ 300,000
From January 1, 2020 to December 31, 2020 [Member]
Common stock, shares issued	281,250
Proceed from issuance of common stock	$ 500,000
Conversion price description	ranging from $1.40 to $3.93
2017 Equity Plan [Member] | From January 1, 2021 to September 30, 2021 [Member]
Common stock, shares issued	872,361
Proceed from issuance of common stock	$ 200,000
Conversion price description	ranging from $0.98 to $1.85
2017 Equity Plan [Member] | From January 1, 2020 to December 31, 2020 [Member]
Common stock, shares issued	194,016
Proceed from issuance of common stock	$ 20,000.00
Conversion price description	ranging from $1.60 to $3.15
Several Consulting Agreement [Member] | From January 1, 2021 to September 30, 2021 [Member]
Common stock, shares issued	646,512
Proceed from issuance of common stock	$ 700,000
Conversion price description	ranging from $0.98 to $1.85
Consulting Agreement [Member] | From January 1, 2021 to September 30, 2021 [Member]
Common stock, shares issued	18,104
Price per share	$ 1.72
Stock payable	$ 30,000.00

v3.24.3

SEGMENT REPORTING (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Operating loss	$ (4,946)	$ (2,772)	$ (12,708)	$ (14,258)
Assets	41,879		41,879		$ 46,359
Accounts receivable, net	208		208		224
Inventory	960		960		449
Total assets	41,879		41,879		46,359
Assets	(41,879)		(41,879)		$ (46,359)
Cure Operations [Member]
Net sales			386	741
Operating loss			(7,019)	(14,258)
Assets	46,604	30,066	46,604	30,066
Accounts receivable, net	22	46	22	46
Inventory	368	228	368	228
Total assets	46,604	30,066	46,604	30,066
Assets	(46,604)	(30,066)	(46,604)	(30,066)
Sera Labs Operations [Member]
Net sales			4,654	0
Operating loss			(5,689)	0
Assets	9,450	0	9,450	0
Accounts receivable, net	186	0	186	0
Inventory	592	0	592	0
Total assets	9,450	0	9,450	0
Assets	(9,450)	0	(9,450)	0
Eliminations [Member]
Net sales			(126)	0
Operating loss			0	0
Assets	14,175	0	14,175	0
Accounts receivable, net	0	0	0	0
Inventory	0	0	0	0
Total assets	14,175	0	14,175	0
Assets	(14,175)	0	(14,175)	0
Total [Member]
Net sales			4,914	741
Operating loss			(12,708)	(14,258)
Assets	41,879	30,066	41,879	30,066
Accounts receivable, net	208	46	208	46
Inventory	960	228	960	228
Total assets	41,879	30,066	41,879	30,066
Assets	$ (41,879)	$ (30,066)	$ (41,879)	$ (30,066)

v3.24.3

SEGMENT REPORTING (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenues and Concentration Risk	100.00%	100.00%	100.00%	100.00%
CureFilm sales [Member]
Revenues and Concentration Risk	21.00%	98.00%	14.00%	75.00%
Product sales - PPE [Member]
Revenues and Concentration Risk	$ 0	$ 0	$ 7	$ 0
Other Sales Less Than 10 Percentage [Member]
Revenues and Concentration Risk	1.00%	2.00%	1.00%	2.00%
Research & Development services [Member]
Revenues and Concentration Risk	$ 0	$ 0	$ 1	$ 23
Product sales - CBD [Member]
Revenues and Concentration Risk	$ 78	$ 0	$ 77	$ 0

v3.24.3

SEGMENT REPORTING (Details Narrative ) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Accounts receivable	$ 40		$ 40		$ 130
Revenues	10.00%	81.00%	10.00%	74.00%
Revenue received		10.00%

v3.24.3

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Fair Value of the Contingent Share Consideration
Fair value of contingent liability	$ 2,258	$ 3,205
Net change in fair value	$ (947)

v3.24.3

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 1) $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($) shares
Closing Merger Consideration Shares, Shares | shares	6,909,091
Contingent Consideration Shares (Clawback Shares), Shares | shares	5,988,024
Total purchase price, value	$ 14,200
October 2, 2020 [Member]
Upfront Payment, Value	$ 1,000
Closing Merger Consideration Shares, Shares | shares	6,909,091
Closing Merger Consideration Shares, Value	$ 9,535
Contingent Consideration Shares (Clawback Shares), Shares | shares	5,988,024
Contingent Consideration Shares (Clawback Shares), Value	$ 3,083
Liabilities Assumed, value	$ 550
Total purchase price, shares | shares	12,897,115
Total purchase price, value	$ 14,168

v3.24.3

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 2) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020	Dec. 31, 2019
Other assests	$ 83	$ 58
Total contract liabilities	(611)	$ (994)	$ (456)
October 2, 2020 [Member]
Cash	1,357
Other assests	1,440
Property, plant and equipment	6
Other long term assets	384
Intangibles assets	10,182
Goodwill	4,687
Accounts payable and accrued expenses	(1,063)
Total contract liabilities	(1,963)
Other current liabilities	(462)
Other long-term liabilities	(400)
Net assets acquired	$ 14,168

v3.24.3

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 3) $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($)
Weighted-average Estimated useful life	4 years 7 months 6 days
Preliminary Estimated Asset Fair Value	$ 10,182
Tradename [Member]
Weighted-average Estimated useful life	4 years
Preliminary Estimated Asset Fair Value	$ 2,610
Non-compete [Member]
Weighted-average Estimated useful life	2 years
Preliminary Estimated Asset Fair Value	$ 462
Customer Relationships [Member]
Weighted-average Estimated useful life	5 years
Preliminary Estimated Asset Fair Value	$ 7,110

v3.24.3

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 4) $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($)
Fair Value of the Contingent Share Consideration
Fair value Beginning Balance	$ 16,043
Settlement of contingent consideration liability	(21,701)
Net change in fair value	5,658
Fair Value Ending Balance	$ 0

v3.24.3

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details 5) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Net product sales	$ 1,359	$ 192	$ 4,939	$ 741
Pro forma Adjustment [Member]
Net product sales		0		0
Net income (loss)		0		0
Consolidated Pro Forma [Member]
Net product sales		1,936		6,426
Net income (loss)		$ (3,721)		$ (15,471)
Net loss attributable to Cure per common share, basic		$ (0.07)		$ 0.30
Net loss attributable to Cure per common share, dilued		$ (0.07)		$ (0.30)
Sera Labs [Member]
Net product sales		$ 1,744		$ 5,685
Net income (loss)		$ (970)		$ 1,327
Net loss attributable to Cure per common share, basic		$ (0.08)		$ (0.11)
Net loss attributable to Cure per common share, dilued		$ (0.08)		$ (0.11)
Cure Pharmaceutical [Member]
Net product sales		$ 192		$ 741
Net income (loss)		$ (2,751)		$ (14,144)
Net loss attributable to Cure per common share, basic		$ (0.07)		$ (0.32)
Net loss attributable to Cure per common share, dilued		$ (0.07)		$ (0.32)

v3.24.3

BUSINESS COMBINATION AND DECONSOLIDATION OF SUBSIDIARY (Details Narrative) - USD ($)			1 Months Ended	9 Months Ended
	Jun. 05, 2020	May 14, 2019	Oct. 21, 2020	Sep. 30, 2021
Warrants issue purchase additional shares				4,143,706
Purchase price for the acquisition				$ 14,200,000
Closing Merger Consideration Shares, shares				6,909,091
Contingent Consideration Shares (Clawback Shares), shares				5,988,024
Aggregate amount				$ 20,000,000
Acquisition descriptions				The Company acquired Sera Labs through the issuance of shares of Common Stock of the Company with $1 million of cash consideration to be provided. The preliminary total purchase price was determined based on the following: i) $1 million of the Upfront Payment ii) Company’s closing price ($1.38) on October 2, 2020 for the closing merger consideration shares; and iii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over a 24 month performance period applied to the Clawback Shares
Claw back shares		7,128,913
Upfront payment consideration		5,700,000
Acheivment shares		3,207,228
Earnout shares		8,018,071
Total potential shares to be issued				32,072,283
Upfront payment in cash			$ 1,000,000
Working capital				$ 4,000,000.0
Aggregate maximum milestones amount			$ 20,000,000
Received from investment		$ 2,000,000
Exercise price per share	$ 2.00	$ 5.01
Potential shares to be issued			5,988,024
Fair value of contingent shares			$ 3,100,000
Cash consideration				1,000,000
Note payable, principal amount				$ 2,000,000
Issuable shares	11,225,299			0
Returnback shares	140,828
Gross proceed from warrant	$ 1,400,000
Warrant to purchase common stock	7,309,605
Purchase of common stock	708,467
Assigned back shares	310,821
Shares issue to holders	5,612,654
Shares held in escrow	7,128,913
Potential shares issued				26,372,283
Earn out provisions and warrants				32,072,283
CHI [Member]
Total purchase price, shares			12,897,115
Convertible Note [Member]
Description issued over a period				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
Debt instrument converted amount, principal				$ 14,600,000

v3.24.3

INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS (Details Narrative) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	May 06, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Nov. 07, 2019
Feasibility study and technology cost						$ 300
Revenue		$ 0	$ 50	$ 0	$ 10
License Agreement [Member]
Settlement payment	$ 3,900
Amount payable	1,600
Paid amount	$ 2,300

v3.24.3

COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands	Sep. 30, 2021 USD ($)
COMMITMENTS AND CONTINGENCIES
2021 (remaining)	$ 33
2022	134
2023	138
2024	46
2025	0
Undiscounted cash flow	351
Effect of discounting	(48)
Lease liabilities recognized	$ 303

v3.24.3

COMMITMENTS AND CONTINGENCIES (Details 1) $ in Thousands	Sep. 30, 2021 USD ($)
COMMITMENTS AND CONTINGENCIES
2021 (remaining)	$ 6
2022	14
2023	14
2024	9
2025	0
Thereafter	0
Finance lease liabilities recognized	$ 43

v3.24.3

COMMITMENTS AND CONTINGENCIES (Details 2) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Operating leases
Right-of-use assets, net	$ 280	$ 343
Right-of-use lease liabilities, current	104	93
Right-of-use lease liabilities, noncurrent	199	278
Total operating lease liabilities	303	371
Finance lease right-to-use assets, net	43	52
Current liabilities	13	12
Noncurrent liabilities	30	40
Total financing lease liabilities	$ 43	$ 52
Weighted average remaining lease term, operating lease	2 years 6 months 18 days	3 years 3 months 21 days
Weighted average remaining lease term, finance lease	3 years 21 days	3 years 9 months 25 days
Weighted average discount rate, Operating leases	11.30%	11.30%
Weighted average discount rate, Financing leases	9.00%	9.00%

v3.24.3

COMMITMENTS AND CONTINGENCIES (Details Narrative)		3 Months Ended		9 Months Ended		12 Months Ended
	May 06, 2021 USD ($)	Sep. 30, 2021 USD ($) ft²	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) ft²	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2020 USD ($)
Monthly payment						$ 20,000.00
RIght of use assets		$ 43,000		$ 43,000		60,000.00	$ 52,000
Paid in installments				$ 93,461,000,000
Finance lease liability						60,000.00
Percent of base monthly rent				3.00%
Base monthly rent				$ 100,000
Annually payment						$ 20,000.00
Finance lease payable, current		100,000	$ 70,000.00	100,000	$ 200,000
Operating lease rent expense				$ 300,000
Weighted average discount rate				11.30%		9.00%
Operating capital lease liability, current portion		13,000.000		$ 13,000.000			100.00
Operating capital lease liability, long term portion		30,000.00		30,000.00			40,000.00
Lease term						5 years
Long-term portion of operating lease liability		199,000		199,000			278,000
Current portion of operating lease liability		$ 104,000		$ 104,000			$ 93,000
License Agreement [Member]
Settlement payment	$ 3,900,000
Agreed to pay	2,300,000
Amount payable	$ 1,600,000
May 1, 2019 [Member] | Lease Agreement [Member]
Percent of base monthly rent				3.00%
Base monthly rent				$ 10,000.00
Offices and manufacturing facility area | ft²		3,822		3,822
Long-term portion of operating lease liability		$ 100,000		$ 100,000
Current portion of operating lease liability		$ 200,000		$ 200,000
Offices And Manufacturing Facility [Member]
Offices and manufacturing facility area | ft²		25,000		25,000

v3.24.3

SUBSEQUENT EVENTS (Details Narrative) - USD ($) $ in Thousands				1 Months Ended
	Nov. 03, 2021	Oct. 15, 2021	Oct. 07, 2021	Oct. 27, 2021	Oct. 19, 2021
October 7 2021 [Member] | Second Board Investor
Payment received from related party			$ 50		$ 20
October 15 2021 [Member]
Received from initial deposit		$ 300
October 27 2021 [Member] | Investor [Member]
Received from an investment				$ 300
November 3 2021 [Member]
Due to penalties	$ 9,100

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