Cover
Cover - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Jul. 28, 2023 | Jun. 30, 2022 | |
Cover [Abstract] | |||
Entity Registrant Name | AVENIR WELLNESS SOLUTIONS, INC. | ||
Entity Central Index Key | 0001643301 | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Entity Voluntary Filers | No | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | false | ||
Entity Current Reporting Status | No | ||
Document Period End Date | Dec. 31, 2022 | ||
Entity Filer Category | Non-accelerated Filer | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2022 | ||
Entity Common Stock Shares Outstanding | 71,704,091 | ||
Entity Public Float | $ 12.4 | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Entity File Number | 333-204857 | ||
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 801 | ||
Entity Address City Or Town | Sherman Oaks | ||
Entity Address State Or Province | CA | ||
Entity Address Postal Zip Code | 91411 | ||
City Area Code | 424 | ||
Icfr Auditor Attestation Flag | false | ||
Local Phone Number | 273-8675 | ||
Security 12g Title | Common stock, par value $0.001 | ||
Trading Symbol | CURR | ||
Entity Interactive Data Current | No | ||
Auditor Firm Id | 587 | ||
Auditor Name | RBSM LLP | ||
Auditor Location | Las Vegas, NV |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash | $ 2,943,000 | $ 16,000 |
Accounts receivable, net | 232,000 | 357,000 |
Due from related party | 167 | 0 |
Notes receivable | 2,000,000 | 0 |
Inventory, net | 145,000 | 710,000 |
Prepaid expenses and other assets | 441,000 | 358,000 |
Current assets held for sale | 0 | 340,000 |
Total current assets | 5,928,000 | 1,781,000 |
Property and equipment, net | 4,000 | 4,000 |
Operating lease right-of-use asset, net | 160,000 | 257,000 |
Notes receivable | 0 | 200,000 |
Investments, net | 411,000 | 216,000 |
Goodwill | 0 | 4,690,000 |
Patents, net | 244,000 | 261,000 |
Customer relationship, trade name, non-compete and other intangibles, net | 71,000 | 7,297,000 |
Other assets | 36,000 | 48,000 |
Long-term assets held for sale | 0 | 25,820,000 |
Total assets | 6,854,000 | 40,574,000 |
Current liabilities: | ||
Accounts payable | 1,065,000 | 2,848,000 |
Accrued expenses | 1,585,000 | 3,485,000 |
Operating lease payable | 124,000 | 104,000 |
Loans payable | 161,000 | 235,000 |
Related party payable | 0 | 2,011,000 |
Notes payable | 0 | 2,877,000 |
Convertible promissory notes | 550,000 | 550,000 |
Fair value convertible promissory notes, net | 9,180,000 | 9,932,000 |
Contract liabilities | 388,000 | 293,000 |
Contingent stock consideration | 860,000 | 1,430,000 |
Current liabilities held for sale | 0 | 496,000 |
Total current liabilities | 13,913,000 | 24,261,000 |
Operating lease payable | 46,000 | 174,000 |
Long-term liabilities held for sale | 0 | 27,000 |
Total liabilities | 13,959,000 | 24,462,000 |
Commitments and contingencies (see Note 21) | 0 | 0 |
Stockholders' equity: | ||
Common stock: $0.001 par value; authorized 150,000,000 shares; 71,426,801 and 68,201,900 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 71,000 | 69,000 |
Additional paid-in capital | 112,471,000 | 110,146,000 |
Common stock issuable | 308,000 | 343,000 |
Accumulated deficit | (119,955,000) | (94,446,000) |
Total stockholders' equity | (7,105,000) | 16,112,000 |
Total liabilities and stockholders' equity | $ 6,854,000 | $ 40,574,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
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 | 71,426,801 | 68,201,900 |
Common stock, shares outstanding | 71,426,801 | 68,201,900 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Revenue: | ||
Product sales, net of discounts, allowances and refunds | $ 4,896,000 | $ 5,715,000 |
PPE Sales | 0 | 363,000 |
Total revenue | 4,896,000 | 6,078,000 |
Cost of goods sold: | ||
Cost of goods sold | 1,557,000 | 1,749,000 |
Gross profit | 3,339,000 | 4,329,000 |
Operating expenses: | ||
Selling, general and administrative expenses | 11,725,000 | 16,496,000 |
Impairment of goodwill | 4,690,000 | 0 |
Impairment of intangible assets | 5,764,000 | 0 |
Change in fair value of contingent stock consideration | (570,000) | (1,775,000) |
Total operating expenses | 21,609,000 | 14,721,000 |
Net operating loss | (18,270,000) | (10,392,000) |
Other income (expense): | ||
Interest income | 51,000 | 62,000 |
Settlement income | 73,000 | 2,434,000 |
Gain on extinguishment of debt | 90,000 | 741,000 |
Loss on sale of property, plant and equipment | (17,000) | (41,000) |
Change in fair value of convertible promissory notes | 85,000 | (393,000) |
Reserve on investment | (71,000) | (350,000) |
Interest expense | (465,000) | (640,000) |
Other income | 26,000 | 0 |
Total other income (expense) | (228,000) | 1,813,000 |
Loss before income taxes | (18,498,000) | (8,579,000) |
Provision for income taxes | (42,000) | 0 |
Loss from continuing operations | (18,540,000) | (8,579,000) |
Disposal group | ||
Loss before provision for income taxes | (6,404,000) | (4,614,000) |
Loss on disposition | (565,000) | 0 |
Provision for income taxes | 0 | 0 |
Loss from disposal group | (6,969,000) | (4,614,000) |
Net loss | $ (25,509,000) | $ (13,193,000) |
Net loss per share - basic and diluted | ||
Continuing operations | $ (0.26) | $ (0.14) |
Disposal group | (0.10) | (0.07) |
Net loss per share | $ (0.36) | $ (0.21) |
Weighted average common shares outstanding - basic and diluted | 70,205,544 | 62,350,339 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Common Stock Issuable | Accumulated Deficit |
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 | 646,512 | ||||
Issuance of common stock for professional services, amount | 787 | $ 1 | 607 | 179 | 0 |
Issuance of common stock from the equity incentive plan, shares | 904,929 | ||||
Issuance of common stock from the equity incentive plan, amount | (50) | $ 1 | 187 | (238) | 0 |
Issuance of common stock for cashless exercise of warrants, shares | 26,936 | ||||
Issuance of common stock for cashless exercise of warrants, amount | 0 | $ 0 | 0 | 0 | 0 |
Issuance of common stock from conversion of convertible promissory notes, shares | 7,147,255 | ||||
Issuance of common stock from conversion of convertible promissory notes, amount | 4,146 | $ 7 | 4,402 | (263) | 0 |
Fair value of stock options and restricted stock granted | 2,571 | 0 | 2,571 | 0 | 0 |
Fair value of restricted stock units granted | 572 | 0 | 572 | 0 | 0 |
Net loss | (13,193) | $ 0 | 0 | (13,193) | |
Balance, shares at Dec. 31, 2021 | 68,201,900 | ||||
Balance, amount at Dec. 31, 2021 | 16,112 | $ 69 | 110,146 | 343 | (94,446) |
Issuance of common stock for professional services, shares | 271,666 | ||||
Issuance of common stock for professional services, amount | 38 | $ 0 | 73 | (35) | 0 |
Fair value of restricted stock units granted | 420 | 0 | 420 | 0 | 0 |
Net loss | (25,509) | $ 0 | 0 | 0 | (25,509) |
Issuance of common stock pursuant to vested restricted stock units, shares | 588,235 | ||||
Issuance of common stock pursuant to vested restricted stock units, amount | 0 | $ 0 | 0 | 0 | 0 |
Issuance of restricted stock, shares | 700,000 | ||||
Issuance of restricted stock, amount | 216 | $ 0 | 216 | 0 | 0 |
Fair value of stock options vested | 952 | $ 0 | 952 | 0 | 0 |
Issuance of common stock for conversion of convertible promissory notes, shares | 1,665,000 | ||||
Issuance of common stock for conversion of convertible promissory notes, amount | 666 | $ 2 | 664 | 0 | 0 |
Balance, shares at Dec. 31, 2022 | 71,426,801 | ||||
Balance, amount at Dec. 31, 2022 | $ (7,105) | $ 71 | $ 112,471 | $ 308 | $ (119,955) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Consolidated Statements of Cash Flows | ||
Loss from continuing operations | $ (18,540,000) | $ (8,579,000) |
Loss from disposal group | (6,969,000) | (4,614,000) |
Net loss | (25,509,000) | (13,193,000) |
Adjustment to reconcile net loss to net cash used in operating activities: | ||
Loss on disposal of pharmaceutical assets and liabilities | 565,000 | 0 |
Stock based compensation - services | 7,000 | 787,000 |
Stock issued from equity incentive plan | 0 | (50,000) |
Gain from settlement of accounts payable | (83,000) | 0 |
Gain from extinguishment of debt | (90,000) | (741,000) |
Change in fair value of contingent stock consideration | (570,000) | (1,775,000) |
Change in fair value of convertible promissory notes | (85,000) | 393,000 |
Reserve on investment | 71,000 | 350,000 |
Depreciation and amortization | 1,481,000 | 2,327,000 |
Impairment of goodwill | 4,690,000 | 0 |
Impairment of intangibles other than goodwill | 5,764,000 | 0 |
Amortization of right of use asset | 97,000 | 86,000 |
Bad debt expenses | 0 | 41,000 |
Recovery of bad debt expense | (35,000) | (221,000) |
Inventory reserve for obsolescence | 253,000 | 109,000 |
Fair value of vested stock options and restricted stock | 1,619,000 | 3,143,000 |
Original issue discount | 33 | 0 |
Change in operating assets and liabilities: | ||
Accounts receivable | 160,000 | (174,000) |
Inventory | 312,000 | (579,000) |
Due from related party | (167) | 0 |
Prepaid expenses and other assets | (96,000) | 926,000 |
Other assets | (69,000) | (25,000) |
Accounts payable | (1,661,000) | 719,000 |
Accrued expenses | (1,858,000) | 2,884,000 |
Operating lease liabilities | (108,000) | (93,000) |
Contract liabilities | 95,000 | (701,000) |
Assets and liabilities held for sale | 5,111,000 | 1,472,000 |
Cash used in operating activities | (10,073,000) | (4,315,000) |
Cash flows from investing activities | ||
Investment in company | (53,000) | (57,000) |
Purchase of property and equipment | (1,000) | 0 |
Proceeds from the sale of certain pharmaceutical assets | 13,891,000 | 0 |
Long term assets held for sale | 0 | (118,000) |
Purchase of note receivable | 0 | (200,000) |
Collection of note receivable | 0 | 200,000 |
Cash provided by (used in) investing activities | 13,837,000 | (175,000) |
Cash flows from financing activities | ||
Proceeds from notes payable disposal group | 3,702,000 | 415,000 |
Proceeds from notes payable | 3,935,000 | 1,600,000 |
Repayment of notes payable | (6,347,000) | 0 |
Proceeds from related party payable | 190,000 | 796,000 |
Repayment of related party payable | (2,243,000) | 0 |
Proceeds from loans payable | 161,000 | 279,000 |
Repayment of loans payable | (235,000) | (309,000) |
Cash provided by (used in) financing activities | (837,000) | 2,781,000 |
Net increase (decrease) in cash and cash equivalents | 2,927,000 | (1,709,000) |
Cash and cash equivalents, beginning of year | 16,000 | 1,725,000 |
Cash and cash equivalents, end of year | 2,943,000 | 16,000 |
Cash paid for interest and income taxes: | ||
Interest | 585,000 | 102,000 |
Income taxes | 0 | 0 |
Non-cash investing and financing activities: | ||
Common stock issued for conversion of promissory notes and accrued interest | 666,000 | 4,146,000 |
Repayment of Buyer advances | (4,150,000) | 0 |
Common stock received for conversion of note receivable | 213,000 | 0 |
Reclassification of accrued expenses to related parties | $ 42,000 | $ 0 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2022 | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | NOTE 1 – ORGANIZATION AND BUSINESS OPERATIONS Business Operations Avenir Wellness Solutions, Inc. (f/k/a CURE Pharmaceutical Holding Corp.) (“Avenir”), its wholly-owned subsidiaries including The Sera Labs, Inc. (“Sera Labs”) collectively (the “Company,” “we,” “our,” “us,” or “Avenir”) is a broad platform technology company focusing on the development of nutraceutical formulation and delivery technologies in novel dosage forms to improve efficacy and enhance wellness. Our mission is to improve lives by redefining how active ingredients are delivered and experienced. Our primary business model is to develop health, wellness and beauty products using our proprietary formulations and technology as well as incubate new technologies for commercial exploitation through product development of new products to be sold under existing or new proprietary brands through Sera Labs and the licensing and/or sale of the rights to such technologies to third parties for their use. Development may include conduction of clinical trials for substantiation of the efficacy of our products. Sera Labs is engaged in the development, production and sale of the Company’s products and is a trusted leader in the health, wellness, and beauty sectors with innovative products containing cutting-edge technology and superior ingredients. Sera Labs creates high quality products that use science-backed, proprietary oral and topical formulations. 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 and beauty products can be cosmetics, over-the-counter or dietary supplements which do not require approval from the U.S. Food and Drug Administration (“FDA”) but do require following all good manufacturing practices ("GMPs"). Thus, they are less costly and faster to launch in the marketplace than pharmaceutical products. More than 25 products are sold under the brand names Seratopical™, Seratopical Revolution™ SeraLabs™, and Nutri-Strips™ at affordable prices, making them easily accessible on a global scale. Strategically positioned in the growth categories of beauty, health & wellness, and pet care, Sera Labs products are sold in major national drug, mass retailers, grocery chains and convenience stores. 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. Background We were incorporated in the State of Nevada on May 15, 2014. The Company was formerly named Makkanotti Group Corp. which was formed to engage in the business of manufacturing food paper bags in Nicosia, Cyprus. On November 7, 2016, the board of directors and the majority stockholder of the then outstanding shares of registrant’s common stock executed a written consent to change registrant’s name from “Makkanotti Group Corp.” to “CURE Pharmaceutical Holding Corp.” The Certificate of Amendment to Articles of Incorporation was filed with the State of Nevada on November 30, 2016. On September 27, 2019, the Company reincorporated from the State of Nevada to the State of Delaware. On October 14, 2022, the Company completed the name change from Cure Pharmaceutical Holdings Corp to Avenir Wellness Solutions, Inc. On November 7, 2016, we, in a reverse take-over transaction, acquired a specialty pharmaceutical and bioscience company based in California that specializes in drug delivery technologies, by executing a Share Exchange Agreement and Conversion Agreement (“Exchange Agreement”) by and among us and a holder of a majority of our issued and outstanding capital stock prior to the closing (the “Majority Stockholder”), on the one hand, and CURE Pharmaceutical, all of the shareholders of CURE Pharmaceutical’s issued and outstanding share capital (the “CURE Pharm Shareholders”) and the holders of certain convertible promissory notes of CURE Pharmaceutical (“CURE Pharm Noteholders”), on the other hand. Hereinafter, this share exchange transaction is described as the “Share Exchange.” As a result of the Share Exchange, CURE Pharmaceutical became a wholly-owned subsidiary of the Company, and the CURE Pharmaceutical Shareholders and CURE Pharmaceutical Noteholders became our controlling shareholders owning, at such time, approximately 65% of our issued and outstanding common stock. On May 14, 2019, the Company, and CURE Chemistry Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), completed the transactions contemplated by the Agreement and Plan of Merger and Reorganization, dated March 31, 2019 (the “Merger Agreement”), with Chemistry Holdings, Inc., a Delaware corporation (“CHI”). 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 in exchange for all of the issued and outstanding shares of CHI. On October 2, 2020, the Company completed its acquisition of Sera Labs, a Delaware corporation, pursuant to an Agreement and Plan of Merger and Reorganization, dated as of September 23, 2020 (the “Sera Labs Merger Agreement”), by and among the Company, Cure Labs, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Sera Labs Merger Sub”), Sera Labs and Nancy Duitch, in her capacity as the security holders representative (“Ms. Duitch”; collectively with the Company, Sera Labs and Sera Labs Merger Sub, the “Parties”). The Sera Labs Merger Agreement provided 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”). On July 22, 2022, Avenir completed the sale of certain assets comprising the pharmaceutical segment of the Company pursuant to an Asset Purchase Agreement (the “APA”) with TF Tech Ventures, Inc. (the “Buyer”), under which the Buyer purchased certain assets (the “Asset Sale”), including certain pharmaceutical patents, trademarks, inventory and related machinery and equipment. The Company retained 15 other patents not included in the Asset Sale, which the Company expects to monetize through product development, licensing arrangements and/or the sale of such patents. See Note 22 – Discontinued Operations for additional information. The Coronavirus Disease 2019 (COVID-19) Pandemic The COVID-19 pandemic was declared a global pandemic by the World Health Organization in March 2020, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19, or other public health epidemic poses the risk that the Company or its employees, suppliers, and other partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the future impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by the governments of countries affected and in which the Company operates could disrupt the future 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. While the extent and duration of the economic downturn from the COVID-19 may no |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity. Principles of Consolidation The consolidated financial statements include the accounts of Avenir and its wholly owned subsidiaries, CURE Pharmaceutical, CHI, and Sera Labs, collectively referred to as (“Avenir”, “we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s film strip product represents the principal operations of the Company. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition. Going Concern and Management’s Liquidity Plans In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, the Company assesses going concern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to The Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, The Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent The Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15. The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2022, we had an accumulated deficit of approximately $120.0 million and a working capital deficit of approximately $7.9 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 December 31, 2022, the Company had approximately $2.9 million of cash on hand. We have previously funded, and intend to continue funding, our losses primarily through the issuance of common stock and/or promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations. We believe the funds available through these potential financings will be sufficient to meet the Company’s working capital requirements during the coming year. If we are unable to raise sufficient additional funds, we will have to develop and implement a plan to extend payables, reduce expenditures, or scale back our business plan until sufficient additional capital is raised to support further operations. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. Reclassifications Certain reclassifications have been made to prior year’s consolidated financial statements to enhance comparability with the current year’s consolidated financial statements. These reclassifications had no effect on the previously reported net loss. Use of Estimates The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts, valuation of intangible assets and goodwill, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent stock consideration, stock based compensation, beneficial conversion features, warrant values, valuation allowance on deferred taxes, incremental borrowing rate (“IBR”) relating to leases, assumption used for discounts and returns in relation to revenue and the assumptions used to calculate derivative liabilities and fair values of the purchase price allocations and convertible promissory notes. Actual results could differ materially from such estimates under different assumptions or circumstances. Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of December 31, 2022, and 2021, the Company had no cash equivalents. The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At December 31, 2022, the Company had $2.4 million in deposits in excess of the federal insurance limit and at December 31, 2021, the Company did not have deposits in excess of the federal insurance limit. Investment in Associates The Company follows Accounting Standards Codification (“ASC”) 325-20, Accounts Receivable Accounts receivable are generally unsecured. The Company closely monitors accounts receivable balances and estimates the allowance for credit losses. These estimates are based on historical collection experience and other factors, including those related to current market conditions and events. The Company’s allowances for accounts receivable have not historically been material. As of December 31, 2022 and 2021 management determined that an allowance of $-0- and $80 thousand were necessary. Property and Equipment The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred. Depreciation has been provided using the straight-line method on the following estimated useful lives: Manufacturing equipment 5-7 years Computer and other equipment 3-7 years Leasehold improvements 3-7 years In accordance with ASC 360, “Property Plant and Equipment,” the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Leases Effective January 2019, the Company accounts for its leases under ASC 842. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. The adoption of ASC 842 did not have a material impact to the Company’s consolidated financial statements because the Company did not have any significant operating leases at the time of adoption. In calculating the right of use and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial term of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. Inventory Inventory is stated at the lower of cost or net realizable value (“NRV”). NRV is the amount by which the estimated selling price of the product exceeds the sum of any additional costs expected to be incurred on the sale of such products 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 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 does not have intangible assets with indefinite useful lives other than goodwill. For the years ended, the Company recorded impairment loss on goodwill of $4.7 million and $0, respectively, related to continuing operations . Impairment loss on 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 cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. Impairment loss on other intangibles amounted to $5.8 million and $-0- for the years ended December 31, 2022 and 2021, respectively. Contingent consideration liabilities Certain of the Company’s business acquisitions involve the potential for future payment of consideration to former selling stockholders in amounts determined upon attainment of revenue and gross margin milestones from product sales. 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, “Business Combinations,” 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 stockholders in the future if certain future events occur or conditions are met, such as: (i) the attainment of product development milestones; and/or (ii) the achievement of components of earnings, such as “earn-out” provisions or percentage of future revenue. 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. Related Parties 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 performed the following five 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. 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 receipt of the merchandise by the customer. 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 is recorded upon delivery to the customer. Practical Expedients and Exemptions The Company has elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows: · The Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception; · The Company made the accounting policy election to exclude any sales and similar taxes from the transaction price; and · The Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Sales Tax The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to a customer, excluding sales taxes. The net amount of sales tax payable to the taxation authority is included in accrued expenses in the balance sheet. Sales Returns, Discounts and Warranties Sales returns, discount and warranties are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns, discounts and warranties which may occur with distributors and retailers. When evaluating the adequacy of sales returns, discounts and warranties, the Company analyzes the following: historical credit allowances, current sell-through of inventory of the Company’s products, current trends in retail industry, changes in customer demand, acceptance of products, and other related factors. Cost to Obtain a Contract The Company pays sales commission to its employees and outside sales representatives for contracts that they obtain relating to wholesale sales of its products. 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 revenue when customers remit contractual cash payments in advance before we satisfy performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied by us. Deferred revenue is generally classified as current based on the timing of when the Company expects to recognize revenue. The following table summarizes the changes in contract liabilities during the years ended December 31, 2022 and 2021 (in thousands): Balance at December 31, 2020 $ 994 Additions 435 Customer deposits returned (713 ) Transfers to revenue (208 ) Contract liabilities held for sale (215 ) Balance at December 31, 2021 293 Additions 48 Customer deposits returned - Transfers to Revenue (146 ) Contract liabilities not transferred 193 Balance at December 31, 2022 $ 388 Cost of Revenues Cost of revenues primarily consists of third-party manufacturing costs for our products. Marketing and Advertising Expense The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. The Company recorded marketing and advertising expense of $2.2 million and $2.9 million for the years ended December 31, 2022 and 2021, respectively. Research and Development Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred. The Company recorded research and development expenses of $492 thousand and $2.4 million for the years ended December 31, 2022 and 2021, respectively. Research and development expenses for 2022 and 2021 are presented as part of the loss from disposal group in the consolidated statements of operations. 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 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 financial statements for years ended December 31, 2022 and 2021. 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, “Stock Compensation,” 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). ASC 718 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 on the grant date, based on the closing stock price of the Company’s common stock reported on the OTCQB, Pink or Expert Markets, as applicable. Compensation expense is recognized for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to the Company generally using the straight-line single option method. In the case of award modifications, the Company accounts for the modification in accordance with Accounting Standards Update (“ASU”) No. 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting," whereby the Company recognizes the effect of the modification in the period the award is modified. As of January 1, 2019, the Company adopted ASU No. 2018-07, "Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which aligns the accounting of share-based payment awards issued to employees and nonemployees. The adoption did not materially impact our consolidated financial statements. Business combinations The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the value of the assets acquired and liabilities assumed is recognized as goodwill. Fair value measurements The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements and establishes a framework for measuring fair value and expands disclosure about such fair value measurements. ASC 820 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following: · Level 1 · Level 2 · Level 3 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 OTCQB, Pink or Expert Markets, as applicable, 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. As of December 31, 2022 and 2021, the Company had no financial assets recorded at fair value on a recurring basis. As of December 31, 2022 and 2021, the Company fair valued the Series A and Series B Notes and the contingent stock consideration for which we elected the fair value option. These liabilities are measured at fair value using either Black-Scholes model or Monte Carlo simulation model as a Level 3 input. The Company also has certain derivative liabilities and contingent consideration liabilities which are carried at fair value based on Level 3 inputs. The carrying amounts of cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair values because of the short-term nature of these items. The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earn outs may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from January 1, 2021 to December 31, 2021, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in a decrease of the fair value of the contingent stock consideration. From January 1, 2022 to December 31, 2022, 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 determining the fair value, the Company evaluated each of the target threshold scenarios as to the potential earn-out payment at each level based on the estimated net sales and gross profit. If the expected gross profit considered in the scenario with the lowest gross profit is less than $6.0 million during the Clawback Period, the value of the stock earn-out payment would be $-0-. However, if the expected gross profit during the Clawback Period was at least $8.0 million (and the net sales target is achieved), the value of the |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 12 Months Ended |
Dec. 31, 2022 | |
ACCOUNTS RECEIVABLE | |
ACCOUNTS RECEIVABLE | NOTE 3 – ACCOUNTS RECEIVABLE Accounts receivable consisted of the following as of December 31 (in thousands): 2022 2021 Customer billed $ 232 $ 437 Allowance for doubtful accounts - (80 ) Accounts receivable, net $ 232 $ 357 Allowances for doubtful accounts have been determined through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable based on current and past experience. |
PREPAID EXPENSES AND OTHER ASSE
PREPAID EXPENSES AND OTHER ASSETS | 12 Months Ended |
Dec. 31, 2022 | |
PREPAID EXPENSES AND OTHER ASSETS | |
PREPAID EXPENSES AND OTHER ASSETS | NOTE 4 – PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other current assets consisted of the following as of December 31 (in thousands): 2022 2021 Prepaid insurance $ 207 $ 302 Prepaid expenses 176 10 Prepaid media advertising 29 - Other current assets 29 46 Prepaid expenses and other current assets $ 441 $ 358 |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2022 | |
INVENTORY | |
INVENTORY | NOTE 5 – INVENTORY Inventory consists of packaging components 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 as of December 31 (in thousands): 2022 2021 Packaging components $ 88 $ 325 Finished goods 420 494 508 819 Reserve for obsolescence (363 ) (109 ) Inventory, net $ 145 $ 710 For the years ended December 31, 2022 and 2021, inventory reserve adjustments amounted to $359 thousand and $27 thousand, respectively |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2022 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | NOTE 6 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of December 31 (in thousands): 2022 2021 Computer and other equipment $ 8 $ 7 Less accumulated depreciation (4 ) (3 ) Property and equipment, net $ 4 $ 4 For the years ended December 31, 2022 and 2021, depreciation expense amounted to $1 thousand and $1 thousand, respectively. |
NOTES RECEIVABLE
NOTES RECEIVABLE | 12 Months Ended |
Dec. 31, 2022 | |
NOTES RECEIVABLE | |
NOTES RECEIVABLE | NOTE 7 – NOTES RECEIVABLE In May 2021, the Company purchased a convertible loan (the “May 2021 Loan”) with Biopharmaceutical Research Company (“BRC”) for a total amount of $200 thousand. The May 2021 Loan shall accrue interest 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 conversion by the Company, the outstanding amount of the May 2021 Loan and any unpaid accrued interest shall be converted into shares of BRC by dividing the sum of the May 2021 Loan and unpaid accrued interest by the price per share obtained by dividing $20.0 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion subject to certain exclusions. 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 of at least $4.0 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 obtained by dividing the sum of the May 2021 Loan and unpaid accrued interest 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) $20.0 million by the number of outstanding shares of common stock of BRC immediately prior to such conversion subject to certain exclusions. On July 5, 2022, the May 2021 Loan and unpaid accrued interest in the aggregate amount of $213 thousand was automatically converted into 11,026 shares of BRC preferred stock. The automatic conversion was triggered by the occurrence of a Qualified Financing by BRC. See Note 9 - Investments for additional information. On July 22, 2022, the Company received a promissory note in the amount of $2.0 million in connection with the Asset Sale. The note bears interest at 2.37% per annum and is due on or before July 22, 2023. The note is subject to offset for any claims related to the Assets Sale and is secured by the assets underlying the Asset Sale. As of December 31, 2022, there have been no claims made against the note. Accrued interest income as of December 31, 2022 and 2021 was $33 thousand and $4 thousand respectively. Notes receivable consists of the following as of December 31 (in thousands): 2022 2021 Biopharmaceutical Research Company $ - $ 200 TF Tech Ventures, Inc. 2,000 - Less: Current portion of notes receivable (2,000 ) - Notes receivable, non-current portion $ - $ 200 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2022 | |
GOODWILL AND INTANGIBLE ASSETS | |
GOODWILL AND INTANGIBLE ASSETS | NOTE 8 - GOODWILL AND INTANGIBLE ASSETS Intangible Asset Summary Goodwill and intangible assets, net, consisted of the following as of December 31 (in thousands): 2022 2021 Goodwill $ - $ 4,690 Intangible assets subject to amortization: Customer relationships $ - $ 7,110 Trade name - 2,610 Non-compete agreements - 462 Other intangibles 90 - 90 10,182 Accumulated amortization (19 ) (2,885 ) Customer relationships, trade name, non-compete and other intangibles, net $ 71 $ 7,297 Patents $ 316 $ 316 Accumulated amortization (72 ) (55 ) Patents, net $ 244 $ 261 The Company’s management determined that, customer relationships have no future value as of June 30, 2022 and recorded an impairment charge in the amount of $4.6 million as of that date , and g oodwill and trade name ha ve no future value as of December 31, 2022 and recorded impairment charge s in the amount of $4.7 million and $1.1 million , respectively, as of that date. Total i mpairment Amortization expense was $1.5 million and $2.3 million for the years ended December 31, 2022 and 2021, respectively. The estimated aggregate amortization expense over each of the next five years and thereafter is as follows (in thousands): 2023 $ 56 2024 43 2025 23 2026 19 2027 17 2028 and thereafter 157 Total Amortization $ 315 |
INVESTMENT
INVESTMENT | 12 Months Ended |
Dec. 31, 2022 | |
GOODWILL AND INTANGIBLE ASSETS | |
INVESTMENT | NOTE 9 – INVESTMENTS In accordance with ASC 325-20, equity securities that do not have readily determinable fair values (i.e., non-marketable equity securities) and are not required to be accounted for under the equity method are typically carried at cost (i.e., cost method investments). Investments of this nature are initially recorded at cost. From November 2019 to February 2020, the Company purchased Convertible Loans (“Loans”) from ReLeaf Europe B.V. (“ReLeaf”) in the amount of $509 thousand which shall bear interest at 6% per annum and shall become due and payable to the Company at the earlier of the conversion date, the date when the Loans are repaid or at the maturity date of October 31, 2021. In the event of conversion by the Company, the outstanding amount of the Loans and any unpaid accrued interest shall be converted into shares of ReLeaf (“Shares”) based on a price per share on a post money valuation of $10.9 million. During 2022, the Company made additional investments in ReLeaf in the aggregate amount of $54 thousand. As of December 31, 2022 and December 31, 2021, the Company recorded an investment in ReLeaf using the cost method of accounting and recorded accrued interest relating to these Loans as well as a reserve on the investment. As of the filing date of this Annual Report, the Company has agreed to convert the Loans and receive Shares as per the Loan terms. The issuance of such shares to the Company is currently pending completion of shareholder agreements and finalization of the capitalization table. In May 2021, the Company purchased a convertible loan (the “May 2021 Loan”) with Biopharmaceutical Research Company (“BRC”) for a total amount of $200 thousand. The May 2021 Loan accrued interest at 6% per annum and became due and payable to the Company on the conversion date of July 5, 2022. Pursuant to the conversion by the Company, the outstanding amount of the May 2021 Loan plus unpaid accrued interest of $13 thousand in the aggregate amount of $213 thousand was converted into 11,026 shares of BRC preferred stock, or a 0.39% interest. The automatic conversion of the loan was triggered by the occurrence of a Qualified Financing. See Note 7 - Notes Receivable for additional information. Investments, net, at cost, consisted of the following as of December 31 (in thousands): 2022 2021 Investment in ReLeaf Europe B.V. $ 619 $ 566 Valuation reserve (421 ) (350 ) Investment in ReLeaf Europe B.V., net 198 216 Investment in Biopharmaceutical Research Company 213 - Investments, net $ 411 $ 216 As of December 31, 2022 and 2021, the net investment is based on management’s best estimate of net realizable value, which resulted in a valuation reserve amount of $421 thousand and $350 thousand, respectively. |
ACCRUED EXPENSES
ACCRUED EXPENSES | 12 Months Ended |
Dec. 31, 2022 | |
ACCRUED EXPENSES | |
ACCRUED EXPENSES | NOTE 10 – ACCRUED EXPENSES Accrued expenses consisted of the following as of December 31 (in thousands): 2022 2021 Accounts payable factoring $ - $ 1,722 Refunds and returns liability 551 445 Accrued interest expense (see Note 11 for amount of related party interest included) 233 390 Accrued payroll 82 178 Accrued vacation leave 64 173 Accrued expenses 324 243 Sales tax payable 331 334 Accrued Expenses $ 1,585 $ 3,485 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2022 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 11 - RELATED PARTY TRANSACTIONS 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. Due to Related Parties In August 2020, the Company entered into an unsecured promissory note (the “August Note”) with John Bell (“Mr. Bell”), for a principal amount of $200 thousand. The August Note was due on August 6, 2021 and had an interest rate of 8% per annum, payable in quarterly payments. On August 6, 2021, both the Company and Mr. Bell agreed to roll the amount of principal and accrued interest as of August 6, 2021 into a new secured promissory note (“Secured August Note”) with a new principal amount of $200 thousand and an interest rate of 10% per annum, payable at maturity. The Secured August Note was due on June 30, 2022 and was secured by all the Company’s personal property. On July 22, 2022, the Secured August Note was paid. In October 2020, the Company completed its acquisition of Sera Labs and pursuant to the Sera Labs Merger Agreement, the Company issued a promissory note in the principal amount of $1.1 million owed to the Chief Executive Officer of Sera Labs (“Duitch Note”), of which $1.0 million is the upfront payment in connection with the closing of the Sera Labs Merger, and $140 thousand is for certain liabilities of Sera Labs due to Mrs. Duitch. The Duitch Note was due on September 30, 2021 and had an interest rate of 8% per annum. On November 9, 2020, a payment of $250 thousand was made and applied to principal only. On June 30, 2021, both the Company and the Chief Executive Officer of Sera Labs agreed to roll the amount of principal and accrued interest as of June 30, 2021 as well as other amounts due to the Chief Executive Officer of Sera Labs into a new secured promissory note (“Secured Duitch Note”) with a new principal amount of $1.0 million and an interest rate of 10% per annum, payable at maturity. The Secured Duitch Note was secured by all the Company’s personal property. The Secured Duitch Note was due on April 15, 2022, and on July 22, 2022, the Secured Duitch Note was paid. On November 16, 2021, the Company entered into a secured promissory note (the “Secured November Note”) with Mr. Bell for a principal amount of $50 thousand. The Secured November Note was due on June 30, 2022 and had an interest rate of 10% per annum, payable at maturity. The Secured November Note was secured by all the Company’s personal property. On July 22, 2022, the Secured November Note was paid. From May 3, 2021 through December 28, 2021, the Company entered into several secured promissory notes (the “Secured Notes”) with several of Dov Szapiro’s affiliated investment companies (“Mr. Szapiro”) for a total principal amount of $720 thousand. The Secured Notes were due on June 30, 2022 and had an interest rate of 10% per annum, payable at maturity. The Secured Notes were secured by all the Company’s personal property. On July 22, 2022, the Secured Notes were paid. On January 12, 2022, the Company entered into a secured promissory note (the “Secured January Note”) with the Chief Executive Officer of Sera Labs for a principal amount of $42 thousand (the “Second Duitch Note”) with an interest rate of 10% per annum, payable at maturity. The Second Duitch Note was secured by all the Company’s personal property. The Second Duitch Note was due on April 11, 2022, and on July 22, 2022, the Second Duitch Note was paid. On January 10, 2022, the Company entered into several secured promissory notes (the “Secured January Notes”) with Mr. Szapiro for a total principal amount of $215 thousand. The Secured January Notes were due on June 30, 2022 and had an interest rate of 10% per annum, payable at maturity. The Secured January Notes were secured by all the Company’s personal property. On July 22, 2022, the Secured January Notes were paid. As of December 31, 2022 and 2021, unpaid accrued interest to related parties was $-0- and $83 thousand, respectively. Interest expense in regard to related party payables for the years ended December 31, 2022 and 2021 was $111 thousand and $127 thousand, respectively. Other Related Party Transactions On April 1, 2022, the Company entered into a distribution services agreement with Advanced Legacy Technologies, LLC (“ALT”) which is beneficially owned by Nancy Duitch under which ALT will provide auxiliary services in connection with the distribution of certain of our products. Compensation for such services amounts to 5% of the net proceeds received from the sale of the products. Total compensation earned for the year ended December 31, 2022 was approximately $9 thousand. As of December 31, 2022, unpaid net proceeds due to the Company was approximately $167 thousand, including merchant account reserves in the amount of $153 thousand due from third-party merchant account processors. On July 25, 2022, the Company entered into a consulting agreement with Rob Davidson under which Mr. Davidson will provide advisory services on matters including strategic, financial, fund raising, product development and technology in exchange for compensation in the amount of $12 thousand per month. The term of the agreement is through July 25, 2023 and requires Mr. Davidson provide approximately 20 to 25 hours of service per week. Total consulting expense incurred for the year ended December 31, 2022 was $63 thousand. As of December 31, 2022, unpaid consulting fees due to Mr. Davidson was $12 thousand. |
LOANS PAYABLE
LOANS PAYABLE | 12 Months Ended |
Dec. 31, 2022 | |
LOANS PAYABLE | |
LOANS PAYABLE | NOTE 12 – LOANS PAYABLE Loans payable consists of the following as of December 31 (in thousands): 2022 2021 Note to a company due September 29, 2022, including interest at 4.32% per annum; unsecured; interest due monthly $ - $ 195 Note to a company due June 6, 2022, including interest at 4.42% per annum; unsecured; interest due monthly - 40 Note to a company due September 29, 2023, including interest at 7.07% per annum; unsecured; interest due monthly 136 - Note to a company due June 6, 2023, including interest at 8.07% per annum; unsecured; interest due monthly 25 - Current portion of loans payable (161 ) (235 ) Loans payable, less current portion $ - $ - Interest expense for the years ended December 31, 2022 and 2021 was approximately $12 thousand and $7 thousand, respectively. |
NOTES PAYABLE AND PAYCHECK PROT
NOTES PAYABLE AND PAYCHECK PROTECTION PROGRAM LOAN | 12 Months Ended |
Dec. 31, 2022 | |
NOTES PAYABLE AND PAYCHECK PROTECTION PROGRAM LOAN | |
NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN | NOTE 13 – NOTES PAYABLE AND PAYCHECK PROTECTION PROGRAM LOAN Notes payable consist of the following at December 31 (in thousands): 2022 2021 Note to an individual, non-interest bearing, unsecured and due upon receipt of equity funding from an entity related to the individual $ - $ 50 Promissory note to a company originally due May 18, 2021 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity - 270 Promissory note to a company originally due May 18, 2021 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity - 540 Promissory note to a company originally due January 13, 2022 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity - 500 Secured promissory notes to a company originally due April 8, 2022 and October 30, 2021 was rolled into a new secured promissory notes now due June 15, 2022; interest at 10% per annum payable at maturity - 502 Secured promissory note to a company due April 15, 2022; interest at 10% per annum payable at maturity - 300 Secured promissory note to a company due April 15, 2022; interest at 10% per annum payable at maturity - 100 Promissory notes to a company, as of the filing date of this report, terms of the promissory notes are still being negotiated - 415 Secured promissory notes to a company due June 15, 2022; as of the filing date of this report, terms of the promissory notes are still being negotiated - 200 Current portion of note payable $ - $ 2,877 In May 2020 and August 2020, the Company entered into unsecured promissory notes (the “ Notes”) with an investor for $250 thousand and $500 thousand, respectively. The Notes were due on May 18, 2021 and August 12, 2021, respectively, and have an interest rate of 8% per annum, payable in quarterly payments. On October 30, 2021, both the Company and the investor agreed to roll the amount of principal and accrued interest as of October 30, 2021 into new secured promissory notes (“New August & May Notes”) with a new principal amount of $250 thousand and $500 thousand, respectively. The New August & May Notes were due on June 15, 2022 and had an interest rate of 10% per annum, payable at maturity. The New August & May Notes were secured by all the Company’s personal property. On July 22, 2022, the New August & May Notes were paid. In January 2021 and February 2021, the Company received a total of $500 thousand from an investment company in exchange for a promissory note. At the time the Company received the $500 thousand, terms of promissory note were not yet finalized. In October 2021, both the Company and the investment company agreed to roll the amount of principal and accrued interest as of October 30, 2021 into a new secured promissory note (“New January 2021 Note”) with a principal amount of $500 thousand. The New January 2021 Note was due on June 15, 2022 and had an interest rate of 10% per annum, payable at maturity. The New January 2021 Note was secured by all the Company’s personal property. On July 22, 2022, the New January 2021 Note was paid. In April 2021 and September 2021, the Company received $250 thousand and $250 thousand, respectively, from an investment company in exchange for two promissory notes. At the time the Company received the total amount of $500 thousand, terms of promissory notes were not yet finalized. On October 30, 2021, both the Company and the investment company agreed to roll the amount of principal and accrued interest as of October 30, 2021 into new secured promissory notes (“New April & September 2021 Notes”) with principal amounts of $250 thousand and $250 thousand. The New April & September 2021 Notes were due on June 15, 2022 and had an interest rate of 10% per annum, payable at maturity. The New April & September 2021 Notes were secured by all the Company’s personal property. On July 22, 2022, the New April & September 2021 Notes were paid. In October 2021, the Company received $250 thousand from an investment company in exchange for a secured promissory note (“October 2021 Note”). The October 2021 Note was due on May 31, 2022 and had an interest rate of 10% per annum, payable at maturity. The October 2021 Note was secured by all the Company’s personal property. On July 22, 2022, the October 2021 Note was paid. In November 2021, the Company received $100 thousand from an investment company in exchange for a secured promissory note (“November 2021 Note”). The November 2021 Note was due on May 31, 2022 and had an interest rate of 10% per annum, payable at maturity. The November 2021 Note was secured by all the Company’s personal property. On July 22, 2022, the November 2021 Note was paid. From October 2021 to December 2021, the Company received at total of $415 thousand from an investment company in exchange for promissory notes. On July 22, 2022, these promissory notes were paid. In December 2021, the Company received at total of $200 thousand from an investment company in exchange for secured promissory note (“December 2021 Note”). The December 2021 Note was due on June 15, 2022 and had an interest rate of 10% per annum, payable at maturity. The December 2021 Note was secured by all the Company’s personal property. On July 22, 2022, the December 2021 Note was paid. On January 18, 2022, the Company received $200 thousand from an investment company in exchange for a secured promissory note (“January 2022 Note”). The January 2022 Note was due on June 30, 2022 and had an interest rate of 10% per annum, payable at maturity. The January 2022 Note was secured by all the Company’s personal property. On July 22, 2022, the January 2022 Note was paid. In April 2020, the Company and Sera Labs received loan proceeds in the amount of $399 thousand and $206 thousand, respectively, 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. In February 2021, $399 thousand 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. In June 2021, $206 thousand was forgiven as permitted under Section 1106 of the CARES Act and the Company recorded a gain on extinguishment of debt during the three months ended September 30, 2021. Interest expense for the year ended December 31, 2022 and 2021 was approximately $232 thousand and $153 thousand, respectively. |
CONVERTIBLE PROMISSORY NOTES
CONVERTIBLE PROMISSORY NOTES | 12 Months Ended |
Dec. 31, 2022 | |
CONVERTIBLE PROMISSORY NOTES | |
CONVERTIBLE PROMISSORY NOTES | NOTE 14 – CONVERTIBLE PROMISSORY NOTES Convertible promissory notes consist of the following at December 31 (in thousands): 2022 2021 Convertible promissory notes due January 31, 2019, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $1.32 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 have them converted into shares common stock of the Company. The beneficial owners of the convertible promissory notes have not yet communicated their intent to either receive funds or shares. $ 550 $ 550 Current portion of convertible promissory notes $ 550 $ 550 Interest expense for the year ended December 31, 2022 and 2021 was approximately $44 thousand and $44 thousand, respectively. |
FAIR VALUE OF CONVERTIBLE PROMI
FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES | 12 Months Ended |
Dec. 31, 2022 | |
FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES | |
FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES | NOTE 15 – FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES Fair value of convertible promissory notes consists of the following at December 31 (in thousands): 2022 2021 Series A subordinated convertible note at fair value $ 5,221 $ 3,074 Series B subordinated convertible note at fair value 3,959 11,858 Total convertible promissory notes 9,180 14,932 Less: Investor Note offset – Series B Note - (5,000 ) Carrying value of convertible promissory notes at fair value 9,180 9,932 Less: current portion of convertible promissory notes at fair value (9,180 ) (9,932 ) Convertible promissory notes at fair value, less current portion $ - $ - In October 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 $11.5 million. 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 $4.6 million 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 $6.9 million in a private placement (the “Private Placement”). The Series A Note was sold with an original issue discount of $600 thousand and the Series B Note was sold with an original issue discount of $900 thousand. The Investor paid for the Series A Note to be issued to the Investor by delivering $4.0 million 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 $6.0 million. 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 thousand 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 $2.34 million. 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 thousand, and the aggregate net cash proceeds from the Private Placement as a whole will be approximately $8.85 million. In addition, the placement agent received a warrant (the “Warrant”) exercisable for two years for the purchase of an aggregate of up to 242,424 shares of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock (collectively with the shares underlying the Warrant, the “Warrant Shares”). The Warrant Shares, when issued, will have the same rights, preferences and privileges (including the registration rights described under “Registration Rights Agreement” below) as the shares underlying the Convertible Notes. The Convertible Notes matured 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 Convertible Notes shall bear no interest unless there is an occurrence, and during the continuance, of an Event of Default at which point interest shall be 18%. Each Convertible Note (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet anti-dilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. On January 5, 2022, the Company entered into a Forbearance Agreement (the “Forbearance Agreement”) with the Investor pursuant to which the Investor has agreed not to exercise, with certain exclusions, any of its judicial or administrative enforcement actions to obtain cash or other assets (excluding Common Stock or other assets issuable upon conversion or exchange of the Series B Note in accordance with the terms thereof) from the Company on account of any payment obligations of the Company under the Series B Note or the Event of Default Redemption Notice that exist as of the date of the Forbearance Agreement or that may arise from the date of this Agreement through February 15, 2022. On April 12, 2022, the Company filed a civil action in the California Superior Court against the Investor, alleging that the Investor entered into the Purchase Agreement as an unregistered securities dealer and unlicensed finance lender in violation of California law. The Company’s complaint seeks rescission of the Purchase Agreement, damages, attorneys’ fees and other relief. The Investor responded to the complaint by filing a demurrer/motion to dismiss and on August 31, 2022, the Company and Investor entered into a stipulation to stay the litigation for 30 days and allow the parties to engage in further settlement discussions. The matter was unable to be resolved within the 30 days, and, pursuant to the Stipulation, the Company refiled its action in New York where a New York court will be required to apply California law to our causes of action for rescission and unfair competition. On November 18, 2022, the Company filed an amended complaint alleging six additional causes of action, including fraud, breach of contract and unfair competition. The Investor responded to the New York amended complaint by filing a motion to dismiss and on February 3, 2023, the Company filed its opposition response to the Investor’s motion to dismiss. As of the filing date of this Annual Report, the Investor has not filed a response to our opposition to their motion to dismiss. Settlement discussions between the parties are ongoing. 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). 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 compounded monthly. See “ —Events of Default Conversion; Alternate Conversion upon Event of Default Each Convertible Note (other than restricted amounts under a Series B Note) is convertible, at the option of the Investor, into shares of Common Stock at a conversion price of $1.32 per share. The conversion price is subject to full ratchet anti-dilution protection upon any transaction in which the Company is deemed to have granted, issued or sold, any shares of Common Stock. If the Company enters into any agreement to issue any variable rate securities, other than a bona fide at-the-market offering or equity line of credit, the Investor has the additional right to substitute such variable price (or formula) for the conversion price. If an Event of Default has occurred under the Convertible Notes, the Investor may elect to alternatively convert the Convertible Notes at the redemption premium described therein. Conversion Limitation The Investor will not have the right to convert any portion of a Convertible Notes, to the extent that, after giving effect to such conversion, the Investor (and other certain related parties) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such conversion. This limit may, from time to time, be increased, up to 9.99%, or decreased; provided that any such increase will not be effective until the 61 st 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 each of October 2, 2020 and December 31, 2020, in connection with the Series A Note and Series B Note, respectively, a placement agent received a warrant (the “Warrants”) exercisable for two 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 Warrants expired unexercised on the two-year anniversary of their respective issuance. Fair Value Option for the Series A and Series B Notes The Company elected the fair value option under ASC 825, “ The Company recorded a loss of $2.1 million and a gain of $2.2 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, 2022 and were recorded in the consolidated statement of operations. The Company recorded a gain of $1.0 million and a loss of $1.4 million relating to the Series A and Series B Notes, respectively, attributed to the change if fair value of the Series A and Series B Notes for the year ended December 31, 2021 and were recorded in the consolidated statement of operations. As of December 31, 2022, the Company has valued the Series A and B notes with consideration of the terms under an existing default. This was evaluated by the Company’s management and their third-party valuation firm. In light of the forbearance agreement, litigation filed by the Company, and communications between the Company and the Investor the likelihood of settlement under those terms was considered remote. If the Company is required to settle the Series A and B Notes under the default terms, the settlement would be either a cash only payment of approximately $6.4 million or the issuance of 3,751,392 shares of the Company’s common stock plus a cash payment of approximately $6.1 million at the option of the Investor. |
WARRANT AGREEMENTS
WARRANT AGREEMENTS | 12 Months Ended |
Dec. 31, 2022 | |
WARRANT AGREEMENTS | |
WARRANT AGREEMENTS | NOTE 16 – WARRANT AGREEMENTS During the years ended December 31, 2022 and 2021, the Company did not issue any warrants. The Company’s warrant activity was as follows: Warrants Weighted Average Exercise Price Weighted Average Contractual Remaining Life Outstanding, December 31, 2020 2,479,849 $ 1.86 1.23 Granted - - - Exercised (96,250 ) 1.00 - Forfeited/Expired (818,152 ) 1.58 - Outstanding, December 31, 2021 1,565,447 $ 2.18 0.66 Granted - - - Exercised - - - Forfeited/Expired (1,252,947 ) 2.23 - Outstanding, December 31, 2022 312,500 $ 2.00 1.12 Exercisable at December 31, 2022 312,500 $ 2.00 1.12 Warrant summary as of December 31, 2022: 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 $2.00–$2.00 312,500 1.12 $ 2.00 312,500 $ 2.00 312,500 1.12 $ 2.00 312,500 $ 2.00 Warrant summary as of December 31, 2021: Range of Exercise Price Number of Warrants Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number of Warrants Exercisable Weighted Average Exercise Price $1.98–$2.31 1,565,447 0.66 $ 2.18 1,565,447 $ 2.18 1,565,447 0.66 $ 2.18 1,565,447 $ 2.18 The aggregate intrinsic value of warrants outstanding and exercisable at December 31, 2022 and 2021 was $-0- and $-0-, respectively. |
STOCK INCENTIVE PLANS
STOCK INCENTIVE PLANS | 12 Months Ended |
Dec. 31, 2022 | |
STOCK INCENTIVE PLANS | |
STOCK INCENTIVE PLANS | NOTE 17 – STOCK INCENTIVE PLANS On December 29, 2017 (“Effective Date”), the Company adopted the CURE Pharmaceutical Holding Corp. 2017 Equity Incentive Plan (the “2017 Equity Plan” or “Plan”), pursuant to which an aggregate of 5,000,000 shares of the common stock of the Company are available for grant. On November 25, 2020, the Company registered an additional 5,000,000 shares of common stock of the Company that are available to be granted by filing a Form S-8 Registration Statement under the Securities Act of 1933. The Board of Directors have determined that it is in the best interests of the Company and its stockholders to provide an additional incentive for certain employees, including executive officers, and non-employee members of the Board of Directors of the Company by granting to them awards with respect to the common stock of the Company pursuant to the Plan. The Plan seeks to achieve this purpose by providing for awards in the form of Options, Stock Appreciation Rights, Restricted Common Stock (“RCS”), Restricted Stock Units (“RSUs”), Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards (“Awards”). The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date. The Company did not issue any Incentive Stock Options (“ISOs”) during the years ended December 31, 2022 and 2021. The Company issued 1,555,526 Nonstatutory Stock Options (“NSOs”) to employees of the Company and 338,443 Restricted Common Stock (“Restricted Common Stock”) to various consultants of the Company and 629,338 RSUs to the members of the Board of Directors during the year ended December 31, 2021. Vesting periods for awarded RCSs, ISOs and NSOs range from immediate to quarterly over a 4-year period. Vesting periods for RSUs is the earlier of (i) the day prior to the next Annual Meeting of Stockholder following the date of grant, and (ii) one (1) year from the Date of Grant. For ISOs and NSOs awarded, the term to exercise the ISO or NSO is 10 years. No stock options that contain performance-based vesting conditions vested during the year ended December 31, 2022 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, 2020 6,285,792 $ 1.52 8.86 Granted 1,555,526 0.95 9.25 Exercised - - - Forfeited/Expired (611,250 ) 0.97 - Outstanding, December 31, 2021 7,230,068 $ 1.45 8.27 Granted 315,000 0.27 9.69 Exercised - - - Forfeited/Expired (4,375,129 ) 1.54 - Outstanding, December 31, 2022 3,169,939 $ 1.20 8.05 Exercisable at December 31, 2022 1,107,980 $ 1.39 7.80 Stock option summary as of December 31, 2022: 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 $ 0.156-$3.40 3,169,939 8.05 $ 1.20 1,107,980 $ 1.39 3,169,939 8.05 $ 1.20 1,107,980 $ 1.39 Stock option summary as of December 31, 2021: Number of Awards Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number of Awards Exercisable Weighted Average Exercise Price $0.61 - $4.01 7,230,068 8.27 $ 1.45 4,067,452 $ 1.51 7,230,068 8.27 $ 1.45 4,067,452 $ 1.51 The aggregate intrinsic value of options outstanding and exercisable at each of December 31, 2022 and 2021 was $-0-. The aggregate grant date fair value of options granted during the year ended December 31, 2022 and 2021 amounted to $80 thousand and $1.5 million, respectively. Compensation expense related to stock options for the year ended December 31, 2022 and 2021 was $1.0 million and $2.0 million, respectively. As of December 31, 2022, the total unrecognized fair value compensation cost related to unvested stock options was $328 thousand, which is to be recognized over a remaining weighted average period of approximately 1.24 years. The weighted-average fair value of options granted during the years ended December 31, 2022 and 2021, and the weighted-average significant assumptions used to determine those fair values, using a Black-Scholes-Merton (“Black-Scholes”) option pricing model are as follows for the years ended December 31: 2022 2021 Significant assumptions (weighted-average): Risk-free interest rate at grant date 3.24 % 1.18 % Expected stock price volatility 123.49 % 76.95 % Expected dividend payout - - Expected option life (in years) 10 10 Expected forfeiture rate 0 % 0 % Restricted Stock Subject to the restrictions set with respect to the particular Award, a recipient of Restricted Stock generally shall have the rights and privileges of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld for the recipient’s account, and interest may be credited on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the recipient in cash or, at the discretion of the Board or Committee, in shares of common stock having a fair market value equal to the amount of such dividends, if applicable, upon the release of restrictions on the Restricted Stock and, if the Restricted Stock is forfeited, the recipient shall have no right to the dividends. The Company’s restricted stock activity was as follows: Restricted Stock Shares Weighted Average Grant Date Fair Value Non-vested, December 31, 2020 50,000 $ 1.60 Granted 338,443 1.20 Vested (388,443 ) 1.26 Forfeited/Expired - - Non-vested, December 31, 2021 - $ - Granted 971,664 0.30 Vested (971,664 ) 0.30 Forfeited/Expired - - Non-vested, December 31, 2022 - $ - Compensation expense related to restricted shares for the years ended December 31, 2022 and 2021 was $0.4 million and $0.5 million, respectively. At December 31, 2022 and 2021, the Company had approximately $-0- and $-0-, respectively, of total unrecognized compensation expense related to restricted stock awards. Restricted Stock Units The terms and conditions of Restricted Stock Unit (“RSU”) grants shall be determined by the Board or a Board Committee. No shares of common stock shall be issued at the time an RSU is granted. A recipient of RSUs shall have no voting rights with respect to the RSUs. Upon the expiration of the restrictions applicable to an RSU, the Company will issue to the recipient, without charge, either one share of common stock per RSU 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, 2020 431,578 $ 1.33 Granted 629,338 0.74 Vested (411,027 ) 1.33 Forfeited/Expired (61,654 ) 1.33 Outstanding, December 31, 2021 588,235 $ 0.70 Granted 1,351,688 0.29 Vested (588,235 ) 0.70 Forfeited/Expired - - Outstanding, December 31, 2022 1,351,688 $ 0.29 At December 31, 2022 and 2021, the Company had $244 thousand and $273 thousand, respectively, of total unrecognized compensation expense related to restricted stock units. Compensation will be recognized over a weighted-average period of approximately 0.50 years and 0.85 years, respectively. Compensation expense related to restricted stock units for the years ended December 31, 2022 and 2021 was $420 thousand and $572 thousand, respectively. All compensation expense related to restricted stock units were included in selling, general and administrative expenses for the years ended December 31, 2022 and 2021. |
STOCKHOLDERS EQUITY
STOCKHOLDERS EQUITY | 12 Months Ended |
Dec. 31, 2022 | |
STOCKHOLDERS EQUITY | |
STOCKHOLDERS' EQUITY | NOTE 18 – STOCKHOLDERS’ EQUITY Authorized Stock The Company is authorized to issue 150,000,000 common shares with a par value of $0.001 per share. Common Share Issuances From January 1, 2021 to December 31, 2021, the Company issued 904,929 shares of common stock, at prices per share ranging from $0.98 to $1.85, in connection to issuances from our 2017 Equity Plan. The total value of these issuances was $0.2 million. From January 1, 2021 to December 31, 2021, the Company issued 646,512 shares of common stock, at prices per share ranging from $0.98 to $1.85, in connection to several consulting and financing agreements. The total value of these issuances was $0.6 million. From January 1, 2021 to December 31, 2021, the Company issued 26,936 shares of common stock, at a price of $1.30 per share, from a cash-less exercise of 96,250 warrants. Total value of these issuances was $-0- as this was a cash-less exercise. From January 1, 2021 to December 31, 2021, the Company issued 297,288 shares of common stock, at a price of $0.89 per share, from conversion of a convertible note and accrued interest totaling $0.3 million. From January 1, 2021 to December 31, 2021, the Company issued 1,439,394 shares of common stock, at a price per share of $1.32 in connection to conversion of $1.9 million of the Series A Note plus 2,598,573 common stock shares at a price per share ranging from $0.43 to $0.64 in connection to the make-whole-amounts totaling $1.3 million per the terms of the Series A Note. From January 1, 2021 to December 31, 2021, the Company issued 1,580,042 shares of common stock, at a price per share of $0.24, the Alternative Conversion Price, in connection to conversion of $0.4 million of the Series B Note plus 1,231,958 common stock shares at a price per share of $0.24, in connection to the make-whole-amounts totaling $0.3 million per the terms of the Series B Note. From January 1, 2022 to December 31, 2022, the Company issued 588,235 shares of common stock, pursuant to vested restricted stock units provided to the Board of Directors. From January 1, 2022 to December 31, 2022, the Company issued 700,000 shares of restricted stock to two directors. The total value of these issuances was $0.2 million. From January 1, 2022 to December 31, 2022, the Company issued an aggregate of 271,666 shares of common stock, at an average price per share of $0.27, in connection to several consulting agreements. The total value of these issuances was $73 thousand. Prior to issuance of these shares the Company recorded common stock issuable during 2021 and 2022. From January 1, 2022 to December 31, 2022, the Company issued an aggregate of 1,665,000 shares of common stock including 1,192,369 shares at a price per share of $0.19, the Alternative Conversion Price (as defined in the Series B Note), in connection to the conversion of $0.7 million of the Series B Note and 472,631 shares at a price per share of $0.19, in connection to the make-whole-amounts totaling $0.2 million per the terms of the Series B Note. Common Stock Issuable In 2018, the Company entered into an amendment to extend the maturity date of a convertible promissory note. As compensation for extending the note, the Company is to issue 150,000 common stock shares of the Company at a price of $2.05 per share. As of the filing of this Annual Report, the Company has not yet issued these shares of common stock and has recorded a stock issuable of $308 thousand. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2022 | |
INCOME TAXES | |
INCOME TAXES | NOTE 19 – INCOME TAXES The Company accounts for income taxes under ASC Topic 740: "Income Taxes" which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. The Company does not have any uncertain tax positions. The Company generated a deferred tax asset through the accumulation of net operating loss carry-forwards (“NOL”).The total deferred tax asset is calculated by multiplying the domestic (U.S.) 21% marginal tax rate by the cumulative amount of the NOL. The Company currently has a NOL of approximately $35.1 million, of which $6.5 million expire through 2038, in general, and approximately $28.6 million, which has an infinite life. The provision for income taxes for the years ending December 31 consists of the following (in thousands): 2022 2021 Current expense: Federal $ 39 $ - State 3 - Total current expense 42 - Deferred expense: Federal - - State - - Total deferred expense - - Total income tax expense $ 42 $ - Deferred income tax assets (liabilities) at December 31 are as follows (in thousands): 2022 2021 Deferred income tax assets: Net operating loss carryforward $ 7,581 $ 6,862 Change in fair value of convertible promissory notes 1,358 2,517 Noncash compensation 1,181 899 Deferred revenue 114 142 Reserves and accruals 98 74 Lease liability 3 89 Other intangibles (423 ) 195 Inventory reserve 124 31 Stock - based compensation 94 79 Allowance for doubtful accounts - 22 Section 174 R&D Expenses 116 135 Total deferred tax assets 10,246 11,045 Deferred income tax liabilities State income taxes - - ROU assets - (83 ) Prepaid expenses and other assets (172 ) (43 ) Depreciation and amortization (19 ) (48 ) Valuation allowance (10,055 ) (10,871 ) Total deferred tax liabilities (10,196 ) (11,045 ) Deferred income tax, net $ - $ - Internal Revenue Code Section 382 (“IRC Section 382”) places a limitation (“Section 382 Limitation”) on the amount of taxable income that can be offset by NOL carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. The State of California has similar rules. Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the NOL and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods. The Company has not completed a valuation pursuant to IRC Section 382 and the potential Change in Control, as defined, might limit our NOL usage or render our NOLs completely worthless. Therefore, based upon Management’s evaluation of all available information, the Company has recorded a full valuation reserve (100%) on the deferred tax assets related to the NOLs, since it is more likely than not that no benefit will be realized for the deferred tax assets. The change in the valuation allowance was $816 thousand and $7.8 million for the years ended December 31, 2022 and 2021, respectively. Open income tax years for audit purposes (Federal and State) are from 2019 through 2022. The Company has not been serviced with any audit notices, as of the year ended December 31, 2022. In addition, the Company is current in filing our sales and income tax returns. In general, the Company is no longer subject to tax examination by the Internal Revenue Service or state taxing authorities for years before 2016. Although the federal and state statutes are closed for purposes of assessing additional income tax in those prior years, the taxing authorities may still make adjustments to the NOL and credit carryforwards used in open years. Therefore, the tax statutes should be considered open as it relates to the NOL and credit carryforwards used in open years. For tax years that remain open to examination, potential examinations may include questioning of the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with the Internal Revenue Code or state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. The Company’s practice is to recognize interest and penalties related to income tax matters in tax expense. As of December 31, 2022 and 2021, the Company has no accrued interest and penalties. |
INTELLECTUAL PROPERTY AND COLLA
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | 12 Months Ended |
Dec. 31, 2022 | |
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | |
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS | NOTE 20 - INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS In September 2018, the Company entered into a multi-year licensing agreement (the “Licensing Agreement”) with Canopy Growth Corporation, a company that engages in the production and sale of medical cannabis (“Canopy”). In October 2020, the Company filed a demand to commence arbitration against Canopy for Canopy’s failure to perform under the Licensing Agreement. On April 28, 2021 the Company entered into an agreement resolving the dispute between the parties, pursuant to which neither party admitted liability, the parties released their respective claims and obligations, and Canopy agreed to pay a total of $3.9 million, of which $2.3 million was paid to the Company on May 6, 2021, and the balance of $1.6 million was paid to the Company’s attorneys. The Company recognized a settlement income of $2.4 million during 2021 as a result of this agreement. During the years ended December 31, 2022 and 2021, the Company did not recognize any revenue relating to the Licensing Agreement. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2022 | |
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 April 12, 2022, the Company filed a civil action in the California Superior Court against the Investor referenced in Note 15, alleging that the Investor entered into the Purchase Agreement as an unregistered securities dealer and unlicensed finance lender in violation of California law. The Company’s complaint seeks rescission of the Purchase Agreement, damages, attorneys’ fees and other relief. The Investor responded to the complaint by filing a demurrer/motion to dismiss and on August 31, 2022, the Company and Investor entered into a stipulation to stay the litigation for 30 days and allow the parties to engage in further settlement discussions. The matter was unable to be resolved within the 30 days, and, pursuant to the Stipulation, the Company refiled its action in New York where a New York court will be required to apply California law to our causes of action for rescission and unfair competition. On November 18, 2022, the Company filed an amended complaint alleging six additional causes of action, including fraud, breach of contract and unfair competition. The Investor responded to the New York amended complaint by filing a motion to dismiss and on February 3, 2023, the Company filed its opposition response to the motion to dismiss. As of the filing date of this Annual Report, the Investor has not filed a response to our opposition to their motion to dismiss. Settlement discussions between the parties are ongoing. Tax Filings The Company tax filings are subject to audit by taxing authorities in jurisdictions where it conducts business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. As of December 31, 2022, the Company is not subject to any such these audits. Employment Contracts The Company has entered into employment agreements with two executive officers. Under the provisions of the agreements, the Company may be required to incur severance obligations for matters relating to changes in control, as defined, and certain terminations of executives. As of December 31, 2022, the Company had no such severance obligations, in accordance with the severance benefit provisions of the respective employment agreements. See Note 23 – Subsequent Events for additional information. Indemnification In the normal course of business, the Company may provide indemnification of varying scope under the Company’s agreements with other companies or consultants, typically the Company’s clinical research organizations, suppliers and others. Pursuant to these agreements, the Company will generally agree to indemnify, hold harmless, and reimburse the indemnified parties for losses and expenses suffered or incurred by the indemnified parties arising from claims of third parties in connection with the use or testing of the Company’s products. Indemnification provisions could also cover third party infringement claims with respect to patent rights, copyrights, or other intellectual property pertaining to the Company’s products. The Company’s office and laboratory facility leases also will generally contain indemnification obligations, including obligations for indemnification of the lessor for environmental law matters and injuries to persons or property of others, arising from the Company’s use or occupancy of the leased property. The term of these indemnification agreements will generally continue in effect after the termination or expiration of the particular research, development, services, lease, or license agreement to which they relate. Historically, the Company has not been subject to any claims or demands for indemnification. The Company also maintains various liability insurance policies that limit the Company’s financial exposure. As a result, the Company management believes that the fair value of these indemnification agreements is minimal. Accordingly, the Company has not recorded any liabilities for these agreements as of December 31, 2022 and 2021. Operating leases The Company currently maintains its corporate offices at 5805 Sepulveda Boulevard, Suite 801, Sherman Oaks, CA 91411 which was previously occupied solely by Sera Labs. The 3,822 square feet of office space was absorbed by the Company in connection with its acquisition of Sera Labs in October 2020. The lease agreement (the “Lease”) which expires on April 30, 2024 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. The lease provides for the payment of base monthly rent in the amount of $10 thousand during the first 12 months of the term with annual increases, 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. Following the Asset Sale, the Company vacated its offices and manufacturing facility at 1620 Beacon Place, Oxnard, CA 93033. The month-to-month lease was assumed by the Buyer. Total rent expense was $122 thousand and $123 thousand for the years ended December 31, 2022 and 2021, respectively. The Company classified the Sera Labs lease as an operating lease in accordance with ASC 842 and has recognized a right-of-use asset and a lease liability based on the present values of its lease payments over its respective lease term. The Company used the services of a valuation company to compute the IBR, which is necessary to determine the present value of its lease payments since a borrowing rate is not explicitly available on the lease agreement. The concluded IBR is 11.30%. Operating lease payments and lease expense are recognized on a straight-line basis over the lease term. As of December 31, 2022, the current portion and long-term portion of operating lease liability is $124 thousand and $46 thousand, respectively. The future payments due under the operating lease for the years ended December 31 are as follows (in thousands): 2023 $ 138 2024 46 2025 - 2026 - 2027 - Undiscounted cash flow 184 Effects of discounting (14 ) Lease liabilities recognized $ 170 Operating lease The following table presents supplemental balance sheet information related to operating leases as of December 31 (in thousands, except lease term and discount rate): 2022 2021 Operating lease Right-of-use assets, net $ 160 $ 257 Right-of-use lease liabilities, current $ 124 $ 104 Right-of-use lease liabilities, noncurrent 46 174 Total operating lease liabilities $ 170 $ 278 Weighted average remaining lease term Operating lease 1.29 years 2.29 years Weighted average discount rate Operating lease 11.3 % 11.3 % Finance lease During 2019, the Company entered into a 5-year equipment lease rental, which required the Company to pay monthly payments of $1 thousand. The Company determined the payments represented substantially all of the fair value of the asset and recorded a right of use asset for $62 thousand and a finance lease liability for $62 thousand as of December 31, 2019 within other assets and liabilities. The Company paid off the balance of the remaining lease payments in connection with the Asset Sale and the related equipment was transferred to the Buyer upon the closing of the Asset Sale. The related asset and liability were written off during the third quarter of 2022. Sera Labs Acquisition Contingent stock consideration In October 2020, the Company acquired all of the issued and outstanding stock of Sera Labs in exchange for consideration of, subject to customary adjustments, an aggregate of approximately (i) $1.0 million in cash and (ii) up to 6,909,091 shares of the Company’s common stock. 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 and gross margin milestones. On August 11, 2022, the Board agreed to extend the period in which the Clawback Shares may be earned to December 31, 2024. The acquisition was accounted for in accordance with ASC 805. 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 and gross margin milestones (“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 $3.2 million was initially recorded as a liability as contingent stock consideration as of October 2, 2020. The following table presents the changes in fair value of contingent stock consideration (in thousands): Fair value at December 31, 2020 $ 3,205 Change in fair value of contingent stock consideration (1,775 ) Fair value at December 31, 2021 1,430 Change in fair value of contingent stock consideration (570 ) Fair value at December 31, 2022 $ 860 |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 12 Months Ended |
Dec. 31, 2022 | |
DISCONTINUED OPERATIONS | |
DISCONTINUED OPERATIONS | NOTE 22 – DISCONTINUED OPERATIONS On July 22, 2022, Avenir completed the sale of certain assets comprising the pharmaceutical segment of the Company pursuant to an Asset Purchase Agreement (the “APA”) with TF Tech Ventures, Inc. (the “Buyer”), under which the Buyer purchased certain assets of the Company (the “Asset Sale”), including certain pharmaceutical patents, trademarks and related machinery and equipment. The total consideration received at closing in connection with the Asset Sale was $20.0 million, which consisted of (i) the cancellation of indebtedness owed by the Company to the Buyer in an amount equal to $4.15 million, (ii) a $2.0 million one-year note payable in the form of a secured promissory note, and (iii) the remainder in cash reduced by $41 thousand in assumed liabilities transferred to the Buyer at closing. The Company retained 15 other patents that were not included in the Asset Sale, which the Company expects to monetize through product development, licensing arrangements and/or the sale of such patents. The following table calculates the net cash received from the Asset Sale (in thousands): Sales price $ 20,000 Forgiveness of Buyer advances (4,150 ) Holdback secured by promissory note (2,000 ) Obligations assumed by Buyer (41 ) Buyer expenses paid by seller 82 Net cash received $ 13,891 The following table calculates the loss incurred from the Asset Sale (in thousands): Sales price for assets sold $ 20,000 Net book value of assets sold 20,616 Net book value of liabilities sold (51 ) Net book value of net assets sold 20,565 Loss on sale of net assets $ (565 ) As of June 30, 2022, the cost of assets and liabilities held for sale were $20.6 million and $4.0 million, respectively. Included in the liabilities held for sale were notes payable amounting to $3.4 million which form part of the $20.0 million in total consideration received from the Buyer. To write down the total net assets to fair value an additional impairment loss of $2.0 million, including $100 thousand of estimated costs to sell, was charged to impairment of goodwill as of June 30, 2022 and included in the loss from disposal group. The following table presents the aggregate carrying amounts of assets and liabilities held for sale in the consolidated balance sheet as of the date indicated (in thousands): December 31, 2021 Carrying amounts of assets included as part of assets held for sale: Inventory, net $ 243 Prepaid expenses and other assets 97 Property and equipment, net 1,837 Finance lease right-of-use assets, net 40 Goodwill, net 9,178 Intellectual property and patents, net 14,401 In-process research and development, net 329 Other assets 35 Total assets classified as assets held for sale $ 26,160 Carrying amounts of liabilities included as part of liabilities held for sale: Accrued expenses $ 268 Finance lease payable 40 Contract liabilities 215 Total liabilities classified as liabilities held for sale $ 523 The following table presents the financial results of the pharmaceutical segment for the years ended December 31, 2022 and 2021 which is presented as loss from disposal group in our consolidated statements of operations (in thousands): For the Y ear Ended December 31, 2022 2021 Revenue: Product sales, net of discounts and refunds $ 108 $ 351 Consulting research & development income 58 52 Shipping and other sales 40 74 Total revenue 206 477 Cost of goods sold: Cost of goods sold 75 424 Gross profit 131 53 Operating expenses: Research and development expenses 487 2,371 Selling, general and administrative expenses 526 1,155 Depreciation and amortization 794 1,141 Impairment of goodwill 4,728 - Total operating expenses 6,535 4,667 Net loss before income taxes (6,404 ) (4,614 ) Provision for income taxes - - Net loss $ (6,404 ) $ (4,614 ) |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2022 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 23 - SUBSEQUENT EVENTS Except for the event discussed below, there were no subsequent events that required recognition or disclosure. The Company evaluated subsequent events through the filing date of this Annual Report, July 28, 2023, and there are no subsequent events that would have required adjustment or disclosure in the audited consolidated financial statements. On March 8, 2023, the Company entered into the Employment Agreement with Nancy Duitch (the “Employment Agreement”) as the Company’s Chief Executive Officer effective as of January 1, 2023. The term of the Employment Agreement is for two years unless terminated earlier pursuant to the terms of the Employment Agreement, and will be automatically extended, upon the same terms and conditions, for a period of one year unless either party provides written notice of its intention not to extend the term of the Employment Agreement. The Employment Agreement provides Ms. Duitch with: (i) a base salary of $275,000 per year; and (ii) an incentive discretionary bonus, of which will be determined by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) prior to January 31 of each year, which date may be extended to March 31 at the Compensation Committee’s discretion, and the Compensation Committee will promptly provide certification following achievement of the applicable goals, which shall be based upon business plans, forecasts and metrics presented by management of the Company and approved by the Compensation Committee on an annual basis. Ms. Duitch is entitled to 20 days’ vacation time during each year and other benefits as described in the Employment Agreement. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of Company’s management, who is responsible for their integrity and objectivity. |
Principles of Consolidation | The consolidated financial statements include the accounts of Avenir and its wholly owned subsidiaries, CURE Pharmaceutical, CHI, and Sera Labs, collectively referred to as (“Avenir”, “we”, “us”, “our” or the “Company”). All significant inter-company balances and transactions have been eliminated in consolidation. The Company’s film strip product represents the principal operations of the Company. Business acquisitions are included in the Company’s consolidated financial statements from the date of the acquisition. |
Going Concern and Management's Liquidity Plans | In accordance with the Financial Accounting Standards Board’s (“FASB”) standard on going concern, Accounting Standard Update, or ASU No. 2014-15, the Company assesses going concern uncertainty in its consolidated financial statements to determine if it has sufficient cash, cash equivalents and working capital on hand, including marketable equity securities, and any available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued, which is referred to as the “look-forward period” as defined by ASU No. 2014-15. As part of this assessment, based on conditions that are known and reasonably knowable to The Company, it will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary or applicable, The Company makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent The Company deems probable those implementations can be achieved and it has the proper authority to execute them within the look-forward period in accordance with ASU No. 2014-15. The accompanying consolidated financial statements have been prepared on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. At December 31, 2022, we had an accumulated deficit of approximately $120.0 million and a working capital deficit of approximately $7.9 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 December 31, 2022, the Company had approximately $2.9 million of cash on hand. We have previously funded, and intend to continue funding, our losses primarily through the issuance of common stock and/or promissory notes, combined with or without warrants, and cash generated from our product sales and research and development and license agreements. We are currently discussing various financing alternatives with potential investors, but there can be no assurance that these funds will be available on terms acceptable to us or will be enough to fully sustain operations. We believe the funds available through these potential financings will be sufficient to meet the Company’s working capital requirements during the coming year. If we are unable to raise sufficient additional funds, we will have to develop and implement a plan to extend payables, reduce expenditures, or scale back our business plan until sufficient additional capital is raised to support further operations. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. |
Reclassifications | Certain reclassifications have been made to prior year’s consolidated financial statements to enhance comparability with the current year’s consolidated financial statements. These reclassifications had no effect on the previously reported net loss. |
Use of Estimates | The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Significant areas requiring the use of management estimates include, but are not limited to, the allowance for doubtful accounts, valuation of intangible assets and goodwill, depreciative and amortization useful lives, assumptions used to calculate the fair value of the contingent stock consideration, stock based compensation, beneficial conversion features, warrant values, valuation allowance on deferred taxes, incremental borrowing rate (“IBR”) relating to leases, assumption used for discounts and returns in relation to revenue and the assumptions used to calculate derivative liabilities and fair values of the purchase price allocations and convertible promissory notes. Actual results could differ materially from such estimates under different assumptions or circumstances. |
Cash and Cash Equivalents | The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. As of December 31, 2022, and 2021, the Company had no cash equivalents. The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (“FDIC”) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At December 31, 2022, the Company had $2.4 million in deposits in excess of the federal insurance limit and at December 31, 2021, the Company did not have deposits in excess of the federal insurance limit. |
Investment in Associates | The Company follows Accounting Standards Codification (“ASC”) 325-20, |
Account Receivable | Accounts receivable are generally unsecured. The Company closely monitors accounts receivable balances and estimates the allowance for credit losses. These estimates are based on historical collection experience and other factors, including those related to current market conditions and events. The Company’s allowances for accounts receivable have not historically been material. As of December 31, 2022 and 2021 management determined that an allowance of $-0- and $80 thousand were necessary. |
Property Plant And Equipment | The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred. Depreciation has been provided using the straight-line method on the following estimated useful lives: Manufacturing equipment 5-7 years Computer and other equipment 3-7 years Leasehold improvements 3-7 years In accordance with ASC 360, “Property Plant and Equipment,” the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and a current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. |
Leases | Effective January 2019, the Company accounts for its leases under ASC 842. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. The adoption of ASC 842 did not have a material impact to the Company’s consolidated financial statements because the Company did not have any significant operating leases at the time of adoption. In calculating the right of use and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial term of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. |
Inventory | Inventory is stated at the lower of cost or net realizable value (“NRV”). NRV is the amount by which the estimated selling price of the product exceeds the sum of any additional costs expected to be incurred on the sale of such products 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 | 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 does not have intangible assets with indefinite useful lives other than goodwill. For the years ended, the Company recorded impairment loss on goodwill of $4.7 million and $0, respectively, related to continuing operations . Impairment loss on 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 cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. Impairment loss on other intangibles amounted to $5.8 million and $-0- for the years ended December 31, 2022 and 2021, respectively. |
Contingent Consideration Liabilities | Certain of the Company’s business acquisitions involve the potential for future payment of consideration to former selling stockholders in amounts determined upon attainment of revenue and gross margin milestones from product sales. 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, “Business Combinations,” 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 stockholders in the future if certain future events occur or conditions are met, such as: (i) the attainment of product development milestones; and/or (ii) the achievement of components of earnings, such as “earn-out” provisions or percentage of future revenue. 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. |
Related Party | |
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 performed the following five 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. 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 receipt of the merchandise by the customer. 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 is recorded upon delivery to the customer. Practical Expedients and Exemptions The Company has elected certain practical expedients and policy elections as permitted under ASC Topic 606 as follows: · The Company adopted the practical expedient related to not adjusting the promised amount of consideration for the effects of a significant financing component if the period between transfer of product and customer payment is expected to be less than one year at the time of contract inception; · The Company made the accounting policy election to exclude any sales and similar taxes from the transaction price; and · The Company adopted the practical expedient not to disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Sales Tax The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring the promised goods or services to a customer, excluding sales taxes. The net amount of sales tax payable to the taxation authority is included in accrued expenses in the balance sheet. Sales Returns, Discounts and Warranties Sales returns, discount and warranties are considered variable consideration under ASC 606. The Company reduces revenue for estimated future returns, discounts and warranties which may occur with distributors and retailers. When evaluating the adequacy of sales returns, discounts and warranties, the Company analyzes the following: historical credit allowances, current sell-through of inventory of the Company’s products, current trends in retail industry, changes in customer demand, acceptance of products, and other related factors. Cost to Obtain a Contract The Company pays sales commission to its employees and outside sales representatives for contracts that they obtain relating to wholesale sales of its products. 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 revenue when customers remit contractual cash payments in advance before we satisfy performance obligations under contractual arrangements. Contract liabilities are derecognized when revenue is recognized, and the performance obligation is satisfied by us. Deferred revenue is generally classified as current based on the timing of when the Company expects to recognize revenue. The following table summarizes the changes in contract liabilities during the years ended December 31, 2022 and 2021 (in thousands): Balance at December 31, 2020 $ 994 Additions 435 Customer deposits returned (713 ) Transfers to revenue (208 ) Contract liabilities held for sale (215 ) Balance at December 31, 2021 293 Additions 48 Customer deposits returned - Transfers to Revenue (146 ) Contract liabilities not transferred 193 Balance at December 31, 2022 $ 388 |
Cost of Revenues | Cost of revenues primarily consists of third-party manufacturing costs for our products. |
Marketing and Advertising Expense | The Company expenses marketing, promotions and advertising costs as incurred. Such costs are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. The Company recorded marketing and advertising expense of $2.2 million and $2.9 million for the years ended December 31, 2022 and 2021, respectively. |
Research and Development | Costs incurred in connection with the development of new products and processes are charged to research and development expenses as incurred. The Company recorded research and development expenses of $492 thousand and $2.4 million for the years ended December 31, 2022 and 2021, respectively. Research and development expenses for 2022 and 2021 are presented as part of the loss from disposal group in the consolidated statements of operations. |
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 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 financial statements for years ended December 31, 2022 and 2021. 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, “Stock Compensation,” 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). ASC 718 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 on the grant date, based on the closing stock price of the Company’s common stock reported on the OTCQB, Pink or Expert Markets, as applicable. Compensation expense is recognized for the portion of the award that is ultimately expected to vest over the period during which the recipient renders the required services to the Company generally using the straight-line single option method. In the case of award modifications, the Company accounts for the modification in accordance with Accounting Standards Update (“ASU”) No. 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting," whereby the Company recognizes the effect of the modification in the period the award is modified. As of January 1, 2019, the Company adopted ASU No. 2018-07, "Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which aligns the accounting of share-based payment awards issued to employees and nonemployees. The adoption did not materially impact our consolidated financial statements. |
Business combinations | The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the value of the assets acquired and liabilities assumed is recognized as goodwill. |
Fair value measurements | The Company follows FASB ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements and establishes a framework for measuring fair value and expands disclosure about such fair value measurements. ASC 820 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following: · Level 1 · Level 2 · Level 3 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 OTCQB, Pink or Expert Markets, as applicable, 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. As of December 31, 2022 and 2021, the Company had no financial assets recorded at fair value on a recurring basis. As of December 31, 2022 and 2021, the Company fair valued the Series A and Series B Notes and the contingent stock consideration for which we elected the fair value option. These liabilities are measured at fair value using either Black-Scholes model or Monte Carlo simulation model as a Level 3 input. The Company also has certain derivative liabilities and contingent consideration liabilities which are carried at fair value based on Level 3 inputs. The carrying amounts of cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate fair values because of the short-term nature of these items. The fair value of contingent stock consideration is evaluated each reporting period using projected financial information, discount rates, and key inputs. Projected contingent payment amounts are discounted back to the current period using a discount rate. Financial information is based on the Company’s most recent internal forecasts. Changes in projected financial information, the Company’s stock price, discount rate and time for settlement of milestones and earn outs may result in higher or lower fair value measurements. Increases (decreases) in any of those inputs in isolation may result in a significantly lower (higher) fair value measurement. For the period from January 1, 2021 to December 31, 2021, the Company’s stock price, volatility percentage and the weighted average present value probability of each the various estimates of milestones, earn-out amounts and achievements being accomplished resulted in a decrease of the fair value of the contingent stock consideration. From January 1, 2022 to December 31, 2022, 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 determining the fair value, the Company evaluated each of the target threshold scenarios as to the potential earn-out payment at each level based on the estimated net sales and gross profit. If the expected gross profit considered in the scenario with the lowest gross profit is less than $6.0 million during the Clawback Period, the value of the stock earn-out payment would be $-0-. However, if the expected gross profit during the Clawback Period was at least $8.0 million (and the net sales target is achieved), the value of the stock earn-out payment would be approximately $1.0 million. 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. As of December 31, 2022, due to the default status of the Series A and B Notes, the Company has valued the Series A and B Notes with consideration of the terms under an existing default. This was evaluated by the Company’s management and their third-party valuation firm. However, in light of the prior forbearance agreement, litigation filed by the Company, and communications between the Company and the Investor the likelihood of settlement under those terms was considered remote. The following table summarizes fair value measurements by level at December 31, 2022 for assets and liabilities measured at fair value on a recurring basis (in thousands): Total Level 1 Level 2 Level 3 Fair value of contingent stock consideration $ 860 $ - $ - $ 860 Fair value of Series A Note $ 5,221 $ - $ - $ 5,221 Fair value of Series B Note $ 3,959 $ - $ - $ 3,959 The following table summarizes fair value measurements by level at December 31, 2021 for assets and liabilities measured at fair value on a recurring basis (in thousands): Total Level 1 Level 2 Level 3 Fair value of contingent stock consideration $ 1,430 $ - $ - $ 1,430 Fair value of Series A Note $ 3,075 $ - $ - $ 3,075 Fair value of Series B Note $ 6,857 $ - $ - $ 6,857 The following table summarizes the changes in Level 3 financial instruments during the years ended December 31, 2022 and 2021 (in thousands): Fair value of Series A and B Notes at December 31, 2020 $ 13,684 Change in fair value of Series A Note (1,054 ) Change in fair value of Series B Note 1,448 Conversion of Series A Note (2,881 ) Conversion of Series B Note (1,265 ) Fair value of Series A and B Notes at December 31, 2021 9,932 Change in fair value of Series A Note 2,146 Change in fair value of Series B Note (2,232 ) Conversion of Series B Note (666 ) Fair value of Series A and B Notes at December 31, 2022 $ 9,180 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 for December 31: Date of valuation 2022 2021 Stock price $ 0.25 $ 0.36 Conversion price $ 1.32 $ 1.32 Term (in years) – Series A Note 0.0 0.83 Term (in years) – Series B Note 0.0 0.13 Volatility – Series A Note 85.0 % 85.0 % Volatility – Series B Note 85.0 % 65.0 % Risk-free interest rate – Series A Note 4.6 % 0.32 % Risk-free interest rate – Series B Note 4.6 % 0.06 % Interest rate 18.0 % 18.0 % The Company recorded a gain (loss) of $85 thousand and $(394) thousand, due to the change in fair value of Series A and B Notes for the years ended December 31, 2022 and 2021, respectively. |
Beneficial Conversion Feature | If the conversion features of conventional convertible debt provide 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 notes | As described further in Note 15 - the Company has elected the fair value option to record its Series A and Series B convertible debentures, which were issued in October 2020. The fair value of the Notes is classified within Level 3 of the fair value hierarchy because the fair values were estimated utilizing a Monte Carlo simulation model. Accordingly, the notes are marked-to-market at each reporting date with the change in fair value reported as a gain (loss) in the Consolidated Statement of Operations. All issuance costs related to the debentures were expensed as incurred in the Consolidated Statement of Operations. |
Accounting for warrants | The Company determines the accounting classification of warrants it issues, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," then in accordance with ASC 815-40, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock." Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the Company to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, and in order to conclude equity classification, the Company also assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. The Company does not have any liability classified warrants as of any period presented. |
Derivative Liabilities | ASC 815-40, requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula and present value pricing. |
Contingencies | We are exposed to claims and litigation arising in the ordinary course of business and use various methods to resolve these matters in a manner that we believe serves the best interest of our shareholders and other constituents. When a loss is probable, we record an accrual based on the reasonably estimable loss or range of loss. When no point of loss is more likely than another, we record the lowest amount in the estimated range of loss and, if material, disclose the estimated range of loss. We do not record liabilities for reasonably possible loss contingencies, but do disclose a range of reasonably possible losses if they are material and we are able to estimate such a range. If we cannot provide a range of reasonably possible losses, we explain the factors that prevent us from determining such a range. Historically, adjustments to our estimates have not been material. We believe the recorded reserves in our consolidated financial statements are adequate in light of the probable and estimable liabilities. We do not believe that any of these identified claims or litigation will be material to our results of operations, cash flows, or financial condition. Gain contingencies are recorded when the ultimate resolution of the contingency is resolved. As disclosed in Note 21, the Company recognized settlement income of $2.4 million during 2021. |
Net Loss per Common Share | We use ASC 260, “Earnings Per Share” for calculating the basic and diluted earnings (loss) per share. We compute basic earnings (loss) per share by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding exercisable stock options, warrants and convertible notes payable. For periods with a net loss, basic and diluted loss per share is the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share. Securities that could potentially dilute income (loss) per share in the future were not included in the computation of diluted income (loss) per share because their inclusion would be anti-dilutive as follows as of December 31: 2022 2021 Vested stock options from the Company’s 2017 Equity Incentive Plan 1,107,980 4,067,452 Warrants 312,500 1,565,447 Shares to be issued upon conversion of convertible notes 416,667 115,047 Total 1,837,147 5,747,946 In connection with the 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 and gross margin 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 not have reportable segments. |
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. 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 Not Yet Adopted | The Company’s management reviewed all recently issued Accounting Standard Updates (“ASU’s”) not yet adopted by the Company and does not believe the future adoptions of any such ASU’s may be expected to cause a material impact on the Company’s condensed consolidated financial condition or the results of its operations. |
Correction of an Error | 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 year ended December 31, 2021. The reported weighted average common shares outstanding and loss per share was 50,182,299 and ($0.26), respectively. The corrected weighted shares outstanding and loss per share was 62,350,339 and ($0.21), respectively. Based on an analysis of ASC 250 “Accounting Changes and Error Corrections” and Staff Accounting Bulletin 99 “Materiality,” the Company has determined that this error was immaterial to the previously issued consolidated financial statements for the year ended December 31, 2021. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of property plant and equipment | Manufacturing equipment 5-7 years Computer and other equipment 3-7 years Leasehold improvements 3-7 years |
Summary of changes in contract liabilities | Balance at December 31, 2020 $ 994 Additions 435 Customer deposits returned (713 ) Transfers to revenue (208 ) Contract liabilities held for sale (215 ) Balance at December 31, 2021 293 Additions 48 Customer deposits returned - Transfers to Revenue (146 ) Contract liabilities not transferred 193 Balance at December 31, 2022 $ 388 |
Summary of fair value measurements of assets and liabilities | Total Level 1 Level 2 Level 3 Fair value of contingent stock consideration $ 860 $ - $ - $ 860 Fair value of Series A Note $ 5,221 $ - $ - $ 5,221 Fair value of Series B Note $ 3,959 $ - $ - $ 3,959 Total Level 1 Level 2 Level 3 Fair value of contingent stock consideration $ 1,430 $ - $ - $ 1,430 Fair value of Series A Note $ 3,075 $ - $ - $ 3,075 Fair value of Series B Note $ 6,857 $ - $ - $ 6,857 |
Schedule of financial instruments | Fair value of Series A and B Notes at December 31, 2020 $ 13,684 Change in fair value of Series A Note (1,054 ) Change in fair value of Series B Note 1,448 Conversion of Series A Note (2,881 ) Conversion of Series B Note (1,265 ) Fair value of Series A and B Notes at December 31, 2021 9,932 Change in fair value of Series A Note 2,146 Change in fair value of Series B Note (2,232 ) Conversion of Series B Note (666 ) Fair value of Series A and B Notes at December 31, 2022 $ 9,180 |
Derivative Liabilities At Fair Value | Date of valuation 2022 2021 Stock price $ 0.25 $ 0.36 Conversion price $ 1.32 $ 1.32 Term (in years) – Series A Note 0.0 0.83 Term (in years) – Series B Note 0.0 0.13 Volatility – Series A Note 85.0 % 85.0 % Volatility – Series B Note 85.0 % 65.0 % Risk-free interest rate – Series A Note 4.6 % 0.32 % Risk-free interest rate – Series B Note 4.6 % 0.06 % Interest rate 18.0 % 18.0 % |
Schedule of asets and liabilities measured at fair value | 2022 2021 Vested stock options from the Company’s 2017 Equity Incentive Plan 1,107,980 4,067,452 Warrants 312,500 1,565,447 Shares to be issued upon conversion of convertible notes 416,667 115,047 Total 1,837,147 5,747,946 |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
ACCOUNTS RECEIVABLE | |
Schedule of accounts receivable | 2022 2021 Customer billed $ 232 $ 437 Allowance for doubtful accounts - (80 ) Accounts receivable, net $ 232 $ 357 |
PREPAID EXPENSES AND OTHER AS_2
PREPAID EXPENSES AND OTHER ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
PREPAID EXPENSES AND OTHER ASSETS | |
Schedule of prepaid expenses and other assets | 2022 2021 Prepaid insurance $ 207 $ 302 Prepaid expenses 176 10 Prepaid media advertising 29 - Other current assets 29 46 Prepaid expenses and other current assets $ 441 $ 358 |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
INVENTORY | |
Schedule of inventory | 2022 2021 Packaging components $ 88 $ 325 Finished goods 420 494 508 819 Reserve for obsolescence (363 ) (109 ) Inventory, net $ 145 $ 710 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment, net | 2022 2021 Computer and other equipment $ 8 $ 7 Less accumulated depreciation (4 ) (3 ) Property and equipment, net $ 4 $ 4 |
NOTES RECEIVABLE (Tables)
NOTES RECEIVABLE (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
NOTES RECEIVABLE | |
Schedule of note receivable | 2022 2021 Biopharmaceutical Research Company $ - $ 200 TF Tech Ventures, Inc. 2,000 - Less: Current portion of notes receivable (2,000 ) - Notes receivable, non-current portion $ - $ 200 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
GOODWILL AND INTANGIBLE ASSETS | |
Schedule of intangible assets, net | 2022 2021 Goodwill $ - $ 4,690 Intangible assets subject to amortization: Customer relationships $ - $ 7,110 Trade name - 2,610 Non-compete agreements - 462 Other intangibles 90 - 90 10,182 Accumulated amortization (19 ) (2,885 ) Customer relationships, trade name, non-compete and other intangibles, net $ 71 $ 7,297 Patents $ 316 $ 316 Accumulated amortization (72 ) (55 ) Patents, net $ 244 $ 261 |
Schedule of aggregate amortization expense | 2023 $ 56 2024 43 2025 23 2026 19 2027 17 2028 and thereafter 157 Total Amortization $ 315 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
GOODWILL AND INTANGIBLE ASSETS | |
Schedule of Investment | 2022 2021 Investment in ReLeaf Europe B.V. $ 619 $ 566 Valuation reserve (421 ) (350 ) Investment in ReLeaf Europe B.V., net 198 216 Investment in Biopharmaceutical Research Company 213 - Investments, net $ 411 $ 216 |
ACCRUED EXPENSES (Tables)
ACCRUED EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
ACCRUED EXPENSES | |
Schedule of accrued expenses | 2022 2021 Accounts payable factoring $ - $ 1,722 Refunds and returns liability 551 445 Accrued interest expense (see Note 11 for amount of related party interest included) 233 390 Accrued payroll 82 178 Accrued vacation leave 64 173 Accrued expenses 324 243 Sales tax payable 331 334 Accrued Expenses $ 1,585 $ 3,485 |
LOANS PAYABLE (Tables)
LOANS PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
LOANS PAYABLE | |
Schedule of loans Payable | 2022 2021 Note to a company due September 29, 2022, including interest at 4.32% per annum; unsecured; interest due monthly $ - $ 195 Note to a company due June 6, 2022, including interest at 4.42% per annum; unsecured; interest due monthly - 40 Note to a company due September 29, 2023, including interest at 7.07% per annum; unsecured; interest due monthly 136 - Note to a company due June 6, 2023, including interest at 8.07% per annum; unsecured; interest due monthly 25 - Current portion of loans payable (161 ) (235 ) Loans payable, less current portion $ - $ - |
NOTES PAYABLE AND PAYCHECK PR_2
NOTES PAYABLE AND PAYCHECK PROTECTION PROGRAM LOAN (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
NOTES PAYABLE AND PAYCHECK PROTECTION PROGRAM LOAN | |
Schedule of notes payable | 2022 2021 Note to an individual, non-interest bearing, unsecured and due upon receipt of equity funding from an entity related to the individual $ - $ 50 Promissory note to a company originally due May 18, 2021 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity - 270 Promissory note to a company originally due May 18, 2021 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity - 540 Promissory note to a company originally due January 13, 2022 was rolled into a new secured promissory note now due June 15, 2022; interest at 10% per annum payable at maturity - 500 Secured promissory notes to a company originally due April 8, 2022 and October 30, 2021 was rolled into a new secured promissory notes now due June 15, 2022; interest at 10% per annum payable at maturity - 502 Secured promissory note to a company due April 15, 2022; interest at 10% per annum payable at maturity - 300 Secured promissory note to a company due April 15, 2022; interest at 10% per annum payable at maturity - 100 Promissory notes to a company, as of the filing date of this report, terms of the promissory notes are still being negotiated - 415 Secured promissory notes to a company due June 15, 2022; as of the filing date of this report, terms of the promissory notes are still being negotiated - 200 Current portion of note payable $ - $ 2,877 |
CONVERTIBLE PROMISSORY NOTES (T
CONVERTIBLE PROMISSORY NOTES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
CONVERTIBLE PROMISSORY NOTES | |
Schedule of convertible promissory notes | 2022 2021 Convertible promissory notes due January 31, 2019, interest payable at 8% per annum; unsecured; principal and accrued interest convertible into common stock at the lower of $1.32 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 have them converted into shares common stock of the Company. The beneficial owners of the convertible promissory notes have not yet communicated their intent to either receive funds or shares. $ 550 $ 550 Current portion of convertible promissory notes $ 550 $ 550 |
FAIR VALUE OF CONVERTIBLE PRO_2
FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES | |
Schedule of promissory notes | 2022 2021 Series A subordinated convertible note at fair value $ 5,221 $ 3,074 Series B subordinated convertible note at fair value 3,959 11,858 Total convertible promissory notes 9,180 14,932 Less: Investor Note offset – Series B Note - (5,000 ) Carrying value of convertible promissory notes at fair value 9,180 9,932 Less: current portion of convertible promissory notes at fair value (9,180 ) (9,932 ) Convertible promissory notes at fair value, less current portion $ - $ - |
WARRANT AGREEMENTS (Tables)
WARRANT AGREEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
WARRANT AGREEMENTS | |
Schedule of change in warrant | Warrants Weighted Average Exercise Price Weighted Average Contractual Remaining Life Outstanding, December 31, 2020 2,479,849 $ 1.86 1.23 Granted - - - Exercised (96,250 ) 1.00 - Forfeited/Expired (818,152 ) 1.58 - Outstanding, December 31, 2021 1,565,447 $ 2.18 0.66 Granted - - - Exercised - - - Forfeited/Expired (1,252,947 ) 2.23 - Outstanding, December 31, 2022 312,500 $ 2.00 1.12 Exercisable at December 31, 2022 312,500 $ 2.00 1.12 |
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 $2.00–$2.00 312,500 1.12 $ 2.00 312,500 $ 2.00 312,500 1.12 $ 2.00 312,500 $ 2.00 Range of Exercise Price Number of Warrants Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number of Warrants Exercisable Weighted Average Exercise Price $1.98–$2.31 1,565,447 0.66 $ 2.18 1,565,447 $ 2.18 1,565,447 0.66 $ 2.18 1,565,447 $ 2.18 |
STOCK INCENTIVE PLANS (Tables)
STOCK INCENTIVE PLANS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
STOCK INCENTIVE PLANS | |
Schedule of stock option activity | Options Weighted Average Exercise Price Weighted Average Contractual Remaining Life Outstanding, December 31, 2020 6,285,792 $ 1.52 8.86 Granted 1,555,526 0.95 9.25 Exercised - - - Forfeited/Expired (611,250 ) 0.97 - Outstanding, December 31, 2021 7,230,068 $ 1.45 8.27 Granted 315,000 0.27 9.69 Exercised - - - Forfeited/Expired (4,375,129 ) 1.54 - Outstanding, December 31, 2022 3,169,939 $ 1.20 8.05 Exercisable at December 31, 2022 1,107,980 $ 1.39 7.80 |
Summary of Range of Exercise Price | 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 $ 0.156-$3.40 3,169,939 8.05 $ 1.20 1,107,980 $ 1.39 3,169,939 8.05 $ 1.20 1,107,980 $ 1.39 Number of Awards Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price Number of Awards Exercisable Weighted Average Exercise Price $0.61 - $4.01 7,230,068 8.27 $ 1.45 4,067,452 $ 1.51 7,230,068 8.27 $ 1.45 4,067,452 $ 1.51 |
Weighted-average fair value of options granted | 2022 2021 Significant assumptions (weighted-average): Risk-free interest rate at grant date 3.24 % 1.18 % Expected stock price volatility 123.49 % 76.95 % Expected dividend payout - - Expected option life (in years) 10 10 Expected forfeiture rate 0 % 0 % |
Schedule of non-vested restricted award shares | Restricted Stock Shares Weighted Average Grant Date Fair Value Non-vested, December 31, 2020 50,000 $ 1.60 Granted 338,443 1.20 Vested (388,443 ) 1.26 Forfeited/Expired - - Non-vested, December 31, 2021 - $ - Granted 971,664 0.30 Vested (971,664 ) 0.30 Forfeited/Expired - - Non-vested, December 31, 2022 - $ - |
Schedule of restricted stock unit | Restricted Stock Units Weighted Average Grant Date Fair Value Outstanding, December 31, 2020 431,578 $ 1.33 Granted 629,338 0.74 Vested (411,027 ) 1.33 Forfeited/Expired (61,654 ) 1.33 Outstanding, December 31, 2021 588,235 $ 0.70 Granted 1,351,688 0.29 Vested (588,235 ) 0.70 Forfeited/Expired - - Outstanding, December 31, 2022 1,351,688 $ 0.29 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
INCOME TAXES | |
Schedule of income tax expense benefit | 2022 2021 Current expense: Federal $ 39 $ - State 3 - Total current expense 42 - Deferred expense: Federal - - State - - Total deferred expense - - Total income tax expense $ 42 $ - |
Schedule of deferred income tax, net | 2022 2021 Deferred income tax assets: Net operating loss carryforward $ 7,581 $ 6,862 Change in fair value of convertible promissory notes 1,358 2,517 Noncash compensation 1,181 899 Deferred revenue 114 142 Reserves and accruals 98 74 Lease liability 3 89 Other intangibles (423 ) 195 Inventory reserve 124 31 Stock - based compensation 94 79 Allowance for doubtful accounts - 22 Section 174 R&D Expenses 116 135 Total deferred tax assets 10,246 11,045 Deferred income tax liabilities State income taxes - - ROU assets - (83 ) Prepaid expenses and other assets (172 ) (43 ) Depreciation and amortization (19 ) (48 ) Valuation allowance (10,055 ) (10,871 ) Total deferred tax liabilities (10,196 ) (11,045 ) Deferred income tax, net $ - $ - |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of future lease payments | 2023 $ 138 2024 46 2025 - 2026 - 2027 - Undiscounted cash flow 184 Effects of discounting (14 ) Lease liabilities recognized $ 170 |
Schedule of operating leases | 2022 2021 Operating lease Right-of-use assets, net $ 160 $ 257 Right-of-use lease liabilities, current $ 124 $ 104 Right-of-use lease liabilities, noncurrent 46 174 Total operating lease liabilities $ 170 $ 278 Weighted average remaining lease term Operating lease 1.29 years 2.29 years Weighted average discount rate Operating lease 11.3 % 11.3 % |
Schedule of changes in fair value of contingent stock consideration | Fair value at December 31, 2020 $ 3,205 Change in fair value of contingent stock consideration (1,775 ) Fair value at December 31, 2021 1,430 Change in fair value of contingent stock consideration (570 ) Fair value at December 31, 2022 $ 860 |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
DISCONTINUED OPERATIONS | |
Schedule of net cash received from the Asset Sale | Sales price $ 20,000 Forgiveness of Buyer advances (4,150 ) Holdback secured by promissory note (2,000 ) Obligations assumed by Buyer (41 ) Buyer expenses paid by seller 82 Net cash received $ 13,891 |
Schedule of loss incurred from the Asset Sale | Sales price for assets sold $ 20,000 Net book value of assets sold 20,616 Net book value of liabilities sold (51 ) Net book value of net assets sold 20,565 Loss on sale of net assets $ (565 ) |
Schedule of aggregate carrying amounts of assets and liabilities held for sale | December 31, 2021 Carrying amounts of assets included as part of assets held for sale: Inventory, net $ 243 Prepaid expenses and other assets 97 Property and equipment, net 1,837 Finance lease right-of-use assets, net 40 Goodwill, net 9,178 Intellectual property and patents, net 14,401 In-process research and development, net 329 Other assets 35 Total assets classified as assets held for sale $ 26,160 Carrying amounts of liabilities included as part of liabilities held for sale: Accrued expenses $ 268 Finance lease payable 40 Contract liabilities 215 Total liabilities classified as liabilities held for sale $ 523 |
Schedule of financial results of the pharmaceutical segment | For the Y ear Ended December 31, 2022 2021 Revenue: Product sales, net of discounts and refunds $ 108 $ 351 Consulting research & development income 58 52 Shipping and other sales 40 74 Total revenue 206 477 Cost of goods sold: Cost of goods sold 75 424 Gross profit 131 53 Operating expenses: Research and development expenses 487 2,371 Selling, general and administrative expenses 526 1,155 Depreciation and amortization 794 1,141 Impairment of goodwill 4,728 - Total operating expenses 6,535 4,667 Net loss before income taxes (6,404 ) (4,614 ) Provision for income taxes - - Net loss $ (6,404 ) $ (4,614 ) |
ORGANIZATION AND BUSINESS OPERA
ORGANIZATION AND BUSINESS OPERATIONS (Details Narrative) | Dec. 31, 2022 $ / shares |
Merger Agreement [Member] | |
Common stock par value | $ 0.001 |
CPHC [Member] | |
Ownership percentage | 65% |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | 12 Months Ended |
Dec. 31, 2022 | |
Minimum [Member] | Manufacturing Facility [Member] | |
Property plant and equipment and useful life | 5 years |
Minimum [Member] | Computer and other equipment [Member] | |
Property plant and equipment and useful life | 3 years |
Minimum [Member] | Leaseholds and Leasehold Improvements [Member] | |
Property plant and equipment and useful life | 3 years |
Maximum [Member] | Manufacturing Facility [Member] | |
Property plant and equipment and useful life | 7 years |
Maximum [Member] | Computer and other equipment [Member] | |
Property plant and equipment and useful life | 7 years |
Maximum [Member] | Leaseholds and Leasehold Improvements [Member] | |
Property plant and equipment and useful life | 7 years |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Contract liabilities beginning balance | $ 293,000 | $ 994,000 |
Additions | 48,000 | 435,000 |
Customer deposits returned | 0 | (713,000) |
Transfers to Revenue | (146,000) | (208,000) |
Contract liabilities held for sale | (215,000) | |
Contract liabilities not transferred | 193,000 | |
Contract liabilities ending balance | $ 388,000 | $ 293,000 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Fair value of contingent stock consideration | $ 860 | $ 1,430 | $ 3,205 |
Fair value of Series A Note | 5,221 | 3,075 | |
Fair value of Series B Note | 3,959 | 6,857 | |
Fair Value, Inputs, Level 1 [Member] | |||
Fair value of contingent stock consideration | 0 | 0 | |
Fair value of Series A Note | 0 | 0 | |
Fair value of Series B Note | 0 | 0 | |
Fair Value, Inputs, Level 2 [Member] | |||
Fair value of contingent stock consideration | 0 | 0 | |
Fair value of Series A Note | 0 | 0 | |
Fair value of Series B Note | 0 | 0 | |
Fair Value, Inputs, Level 3 [Member] | |||
Fair value of contingent stock consideration | 860 | 1,430 | |
Fair value of Series A Note | 5,221 | 3,075 | |
Fair value of Series B Note | $ 3,959 | $ 6,857 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Fair value at Beginning balance | $ 9,932 | $ 13,684 |
Change in fair value of Series A Note | (2,146) | (1,054) |
Change in fair value of Series B Notes | (2,232) | 1,448 |
Conversion of Series A Notes | (2,881) | |
Conversion of Series B Notes | (666) | (1,265) |
Fair value at Ending balance | $ 9,180 | $ 9,932 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Stock price | $ 0.25 | $ 0.36 |
Conversion price | $ 1.32 | $ 1.32 |
Interest Rate | 18% | 18% |
Series A Note [Member] | ||
Interest Rate | 4.60% | 0.32% |
Volatility | 85% | 85% |
Term | 0 years | 9 months 29 days |
Series B Note [Member] | ||
Interest Rate | 4.60% | 0.06% |
Volatility | 85% | 65% |
Term | 0 years | 1 month 17 days |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) - shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Vested stock options from the company's 2017 Equity Incentive plan | 1,107,980 | 4,067,452 |
Warrants | 312,500 | 1,565,447 |
Shares to be issued upon conversion of convertible notes | 416,667 | 115,047 |
Total | 1,837,147 | 5,747,946 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Oct. 10, 2020 | |
Impairment loss on goodwill from continuing operation | $ 4,700,000 | $ 0 | |
Imapirment loss on goodwill from discontinued operation | 4,700,000 | 0 | |
Allowance for doubtful accounts | 0 | 80,000 | |
Impairment loss on intangibles assets | 5,800,000 | 0 | |
Advertising costs | 2,200,000 | 2,900,000 | |
Clawback expected gross profit | 8,000,000 | ||
Gain (loss) from change in fair value of Series A and B convertible notes | $ 85,000 | (394,000) | |
Common Stock conversion price | $ 1.32 | ||
Value of Stock earn out payment | $ 1,000,000 | ||
Research and development expenses | $ 492,000 | 2,400,000 | |
Valuation allowance percentage | 100% | ||
Amount in excess of FDIC limit | $ 2,400,000 | ||
Working capital deficit | (7,900,000) | ||
Earn out payment in clawback period | $ 0 | ||
Description related to correction about Weighted average common stock and earning per share | Company became aware of an error in the calculation of its weighted average common shares outstanding and resultant reported loss per share for the year ended December 31, 2021. The reported weighted average common shares outstanding and loss per share was 50,182,299 and ($0.26), respectively. The corrected weighted shares outstanding and loss per share was 62,350,339 and ($0.21), respectively | ||
FDIC insured amount | $ 250,000 | ||
Gross Profit | 3,339,000 | 4,329,000 | |
Accumulated deficit | (119,955,000) | $ (94,446,000) | |
Cash in hand | $ 1,000,000 | ||
Accumulated Deficit [Member] | |||
Accumulated deficit | (120,000,000) | ||
Maximum [Member] | |||
Gross Profit | 6,000,000 | ||
Cash [Member] | |||
Cash in hand | $ 2,900,000 |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
ACCOUNTS RECEIVABLE | ||
Customer billed | $ 232 | $ 437 |
Allowance for doubtful accounts | 0 | (80) |
Accounts receivable, net | $ 232 | $ 357 |
PREPAID EXPENSES AND OTHER AS_3
PREPAID EXPENSES AND OTHER ASSETS (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
PREPAID EXPENSES AND OTHER ASSETS | ||
Prepaid insurance | $ 207 | $ 302 |
Prepaid expenses | 176 | 10 |
Prepaid media advertising | 29 | 0 |
Other assets | 29 | 46 |
Total Prepaid expenses and other assets | $ 441 | $ 358 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
INVENTORY | ||
Packaging Components | $ 88 | $ 325 |
Finished Goods | 420 | 494 |
Inventory, Gross | 508 | 819 |
Reserve for Obsolescence | (363) | (109) |
Inventory, net | $ 145 | $ 710 |
INVENTORY (Details Narrative)
INVENTORY (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
INVENTORY | ||
Inventory reserves | $ 359 | $ 27 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Less accumulated depreciation | $ (4) | $ (3) |
Property and equipment, net | 4 | 4 |
Computer and other equipment [Member] | ||
Property and equipment | $ 8 | $ 7 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
PROPERTY AND EQUIPMENT | ||
Depreciation | $ 1 | $ 1 |
NOTES RECEIVABLE (Details)
NOTES RECEIVABLE (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Less: Current portion of notes receivable | $ 2,000 | $ 0 |
Notes receivable, net of current portion | 0 | 200 |
Note receivable, non-current portion | 0 | 200 |
Biopharmaceutical Research Company [Member] | ||
Note receivable, non-current portion | 0 | 200 |
Tf Tech Ventures Llc [Member] | ||
Note receivable, non-current portion | $ 2,000 | $ 0 |
NOTES RECEIVABLE (Details Narra
NOTES RECEIVABLE (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2022 | Jul. 22, 2022 | Jul. 05, 2022 | Dec. 31, 2021 | May 26, 2021 |
Conversion of stock | 71,426,801 | 68,201,900 | |||
BRC [Member] | |||||
Interest rate | 2.37% | 6% | |||
Convertible loan | $ 20,000 | ||||
Loan by the price per share | 200 | ||||
Aggregate Proceeds | 4,000 | ||||
Outstanding shares of common stock of BRC | $ 20,000 | ||||
Price per share paid in percentage | 80% | ||||
Promissory Notes | $ 2,000 | ||||
Accrued interest income | $ 33,000 | $ 213 | $ 4,000 | ||
Conversion of stock | 11,026,000,000 |
GOODWILL AND INTANGIBLE ASSET_2
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Goodwill | $ 0 | $ 4,690 |
Total intangible assets subject to amortization | 90 | 10,182 |
Accumulated amortization | 19 | 2,885 |
Customer relationships, trade name, non-compete and other intangibles, net | 71 | 7,297 |
Customer Relationships [Member] | ||
Total intangible assets subject to amortization | 0 | 7,110 |
Tradename [Member] | ||
Total intangible assets subject to amortization | 0 | 2,610 |
Non-compete agreements [Member] | ||
Total intangible assets subject to amortization | 0 | 462 |
Other intangible Asset [Member] | ||
Total intangible assets subject to amortization | 90 | 0 |
Patents [Member] | ||
Accumulated amortization | 72 | 55 |
Customer relationships, trade name, non-compete and other intangibles, net | 244 | 261 |
Total intangible assets not subject to amortization | $ 316 | $ 316 |
GOODWILL AND INTANGIBLE ASSET_3
GOODWILL AND INTANGIBLE ASSETS (Details 1) | Dec. 31, 2022 USD ($) |
GOODWILL AND INTANGIBLE ASSETS | |
2023 | $ 56,000 |
2024 | 43,000 |
2025 | 23,000 |
2026 | 19,000 |
2027 | 17 |
2028 and thereafter | 157 |
Total Amortization | $ 315,000 |
GOODWILL AND INTANGIBLE ASSET_4
GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Jun. 30, 2022 | |
GOODWILL AND INTANGIBLE ASSETS | |||
Impairment charge | $ 4.7 | $ 1.1 | |
goodwill and trade name | $ 4.6 | ||
Impairment loss | 10.4 | 0 | |
Amortization expense | $ 1.5 | $ 2.3 |
INVESTMENT (Details)
INVESTMENT (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Valuation reserve | $ (421) | $ (350) |
Investment, net | 411 | 216 |
Investment in Biopharmaceutical Research Company | 213 | 0 |
Investment, net | 411 | 216 |
Investment Member | ||
Investment in Releaf Europe BV | 619 | 566 |
Valuation reserve | (421) | (350) |
Investment, net | $ 198 | $ 216 |
INVESTMENT (Details Narrative)
INVESTMENT (Details Narrative) - USD ($) $ in Thousands | 1 Months Ended | 4 Months Ended | 12 Months Ended | |
May 31, 2021 | Feb. 28, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | |
Valuation reserve | $ 421 | $ 350 | ||
Interest rate | 18% | 18% | ||
ReLeaf Europe B.V | ||||
Money valuation | $ 10,900 | |||
Interest rate | 6% | 6% | ||
Aggreagate amount | $ 54 | |||
convertible loan | $ 509 | |||
Biopharmaceutical Research Company [Member] | ||||
Interest rate | 6% | |||
Aggreagate amount | $ 213 | |||
Description of sonverted shares | converted into 11,026 shares of BRC preferred stock, or a 0.39% interest | |||
Unpaid accrued interest | $ 13 | |||
convertible loan | $ 200 |
ACCRUED EXPENSES (Details)
ACCRUED EXPENSES (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
ACCRUED EXPENSES | ||
Accounts payable factoring | $ 0 | $ 1,722 |
Refunds and returns liability | 551 | 445 |
Accrued interest | 233 | 390 |
Accrued payroll | 82 | 178 |
Accrued vacation leave | 64 | 173 |
Accrued expenses | 324 | 243 |
Sales tax payable | 331 | 334 |
Accrued Expenses net | $ 1,585 | $ 3,485 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||||||||||
Apr. 03, 2022 | Jan. 12, 2022 | Aug. 06, 2021 | Nov. 09, 2020 | Jul. 25, 2022 | Dec. 28, 2021 | Nov. 16, 2021 | Jun. 30, 2021 | Oct. 30, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Jan. 10, 2022 | |
Interest Expenses | $ 111,000 | $ 127,000 | ||||||||||
Accrued Expenses | 0 | $ 83,000 | ||||||||||
Mr Bell [Member] | Secured November Note [Member] | ||||||||||||
Interest rate | 10% | |||||||||||
Principal amount | $ 50,000 | |||||||||||
Due date | July 22, 2022 | |||||||||||
Dov Szapiro [Member] | Secured Notes [Member] | ||||||||||||
Interest rate | 10% | 10% | ||||||||||
Principal amount | $ 720,000 | $ 215,000 | ||||||||||
Due date | June 30, 2022 | June 30, 2022 | ||||||||||
Sera Labs [Member] | Second Duitch Note [Member] | ||||||||||||
Interest rate | 10% | |||||||||||
Principal amount | $ 42,000 | |||||||||||
Due date | April 11, 2022 | |||||||||||
Rob Davidson [Member] | ||||||||||||
Advisory Compensation | $ 12,000 | |||||||||||
Description Of Service | The term of the agreement is through July 25, 2023 and requires Mr. Davidson provide approximately 20 to 25 hours of service per week | |||||||||||
Consulting Expenses | 63,000 | |||||||||||
Unpaid consulting fees | 12,000 | |||||||||||
Advanced Legacy Technologies, LLC [Member] | ||||||||||||
Advisory Compensation | 9,000 | |||||||||||
Compensation percentage | 5% | |||||||||||
Unpaid net proceeds | 167,000 | |||||||||||
Account reserves | $ 153 | |||||||||||
Mr John Bell [Member] | August Note [Member] | ||||||||||||
Interest rate | 8% | |||||||||||
Principal amount | $ 200,000 | |||||||||||
Due date | August 6, 2021 | |||||||||||
Mr John Bell [Member] | Secured August Note [Member] | ||||||||||||
Interest rate | 10% | |||||||||||
Principal amount | $ 200,000 | |||||||||||
Due date | June 30, 2022 | |||||||||||
October 2020 [Member] | Sera labs [Member] | ||||||||||||
Certain liabilities | $ 140,000 | |||||||||||
Interest rate | 10% | 8% | ||||||||||
Principal amount | $ 1,000,000 | $ 1,100 | ||||||||||
Due date | April 15, 2022 | September 30, 2021 | ||||||||||
Upfront payment connection | $ 1,000 | |||||||||||
Description of sera labs | a payment of $250 thousand was made and applied to principal only |
LOANS PAYABLE (Details)
LOANS PAYABLE (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Current portion of loan payable | $ (161) | $ (235) |
Loan payable, less current portion | 0 | 0 |
Current portion of loan payable | 161 | 235 |
Loan Payable Four [Member] | ||
Current portion of loan payable | (25) | 0 |
Current portion of loan payable | 25 | 0 |
Loans Payable One [Member] | ||
Current portion of loan payable | 0 | (195) |
Current portion of loan payable | 0 | 195 |
Loans Payable Two [Member] | ||
Current portion of loan payable | 0 | (40) |
Current portion of loan payable | 0 | 40 |
Loan Payable Three [Member] | ||
Current portion of loan payable | (136) | 0 |
Current portion of loan payable | $ 136 | $ 0 |
LOANS PAYABLE (Details Narrativ
LOANS PAYABLE (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Loan Payable [Member] | ||
Interest expense | $ 12 | $ 7 |
NOTES PAYABLE AND PAYCHECK PR_3
NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Current portion of note payable | $ 0 | $ 2,877,000 |
Individual [Member] | ||
Notes payable | 0 | 50,000 |
Promissory note 2 [Member] | ||
Notes payable | 0 | 500,000 |
Promissory note 3 [Member] | ||
Notes payable | 0 | 502,000 |
Promissory Note [Member] | ||
Notes payable | 0 | 270,000 |
Promissory note 1 [Member] | ||
Notes payable | 0 | 540,000 |
Promissory Note 4[Member] | ||
Notes payable | 0 | 300,000 |
Promissory Note 5[Member] | ||
Notes payable | 0 | 100,000 |
Promissory Note 6 [Member] | ||
Notes payable | 0 | 415,000 |
Promissory Note 7 [Member] | ||
Notes payable | $ 0 | $ 200,000 |
NOTES PAYABLE AND PAYCHECK PR_4
NOTES PAYABLE AND PAYCHECK PROTECTION PROGAM LOAN (Details Narrative) - USD ($) | 1 Months Ended | 2 Months Ended | 12 Months Ended | ||||||||||||
Jan. 18, 2022 | Dec. 16, 2021 | Nov. 18, 2021 | Oct. 30, 2021 | Sep. 24, 2021 | Jun. 30, 2021 | Apr. 30, 2021 | Feb. 28, 2021 | Aug. 31, 2020 | May 31, 2020 | Apr. 30, 2020 | Dec. 15, 2021 | Feb. 25, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Interest Rate | 18% | 18% | |||||||||||||
Interest expense | $ 44,000 | $ 44,000 | |||||||||||||
Paycheck Protection Program [Member] | |||||||||||||||
Proceeds from loan | $ 500,000 | $ 399,000 | $ 500,000 | ||||||||||||
Loan proceed from company | $ 206 | ||||||||||||||
Loan forgiveness | $ 206,000 | $ 399,000 | |||||||||||||
Notes Payable And Paycheck Protection Program [Member] | |||||||||||||||
Interest expense | $ 232,000 | $ 153,000 | |||||||||||||
Investor [Member] | |||||||||||||||
Interest Rate | 10% | 10% | 10% | 10% | 10% | 10% | |||||||||
Proceeds from loan | $ 200,000 | $ 200,000 | $ 100,000 | $ 250,000 | $ 250,000 | $ 250,000 | $ 415,000 | $ 500,000 | |||||||
LLC [Member] | Promissory Note [Member] | |||||||||||||||
Principal, amount | 250,000 | $ 500,000 | |||||||||||||
Secured promissory note | $ 250,000 | ||||||||||||||
Board Members [Member] | |||||||||||||||
Interest Rate | 10% | 8% | 8% | ||||||||||||
Principal, amount | $ 250,000 | ||||||||||||||
Secured promissory note | $ 500,000 | $ 500,000 | $ 250,000 | ||||||||||||
Maturity date | June 15, 2022 | August 12, 2021 | May 18, 2021 |
CONVERTIBLE PROMISSORY NOTES (D
CONVERTIBLE PROMISSORY NOTES (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
CONVERTIBLE PROMISSORY NOTES | ||
Convertible promissory notes | $ 550 | $ 550 |
Current portion of convertible promissory notes | $ 550 | $ 550 |
CONVERTIBLE PROMISSORY NOTES _2
CONVERTIBLE PROMISSORY NOTES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CONVERTIBLE PROMISSORY NOTES | ||
Interest expense | $ 44 | $ 44 |
FAIR VALUE OF CONVERTIBLE PRO_3
FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES | ||
Series A subordinated convertible note at fair value | $ 5,221,000 | $ 3,074,000 |
Series B subordinated convertible note at fair value | 3,959,000 | 11,858 |
Total convertible promissory notes | 9,180,000 | 14,932,000 |
Less: Investor Note offset - Series B Note | 0 | (5,000,000) |
Carrying value of convertible promissory notes at fair value | 9,180,000 | 9,932,000 |
Less: current portion of convertible promissory notes at fair value | (9,180,000) | (9,932,000) |
Convertible promissory notes at fair value, less current portion | $ 0 | $ 0 |
FAIR VALUE OF CONVERTIBLE PRO_4
FAIR VALUE OF CONVERTIBLE PROMISSORY NOTES (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Oct. 30, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Proceeds from investor note | $ 6,100,000 | |||
Remaining balance of investor note | $ 6,400,000 | |||
Purchase of warrant description | In addition, the placement agent received a warrant (the “Warrant”) exercisable for two years for the purchase of an aggregate of up to 242,424 shares of the Company’s common stock, at an exercise price of $1.32 per share. The Warrant may also be exercised by means of a “cashless exercise” or “net exercise.” Upon the achievement of certain milestones, the placement agent is entitled to receive an additional warrant, on the same terms as the Warrant, exercisable for an aggregate of up to 363,636 shares of the Company’s common stock (collectively with the shares underlying the Warrant, the “Warrant Shares”). The Warrant Shares, when issued, will have the same rights | |||
Expected warrant life (in years) | 2 years | |||
Conversion price | $ 1.32 | |||
Interest rate | 18% | |||
Conversion price description | The Investor will not have the right to convert any portion of a Convertible Notes, to the extent that, after giving effect to such conversion, the Investor (and other certain related parties) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such conversion. This limit may, from time to time, be increased, up to 9.99%, or decreased | |||
Warranty exercise price per share | $ 1.32 | |||
Warrant, exercisable shares | 3,751,392 | |||
Original issue discount | $ 33 | $ 0 | ||
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 | 5,100,000 | ||
Initial principal amount | 4,600,000 | 5,000,000 | ||
Original issue discount | 600,000 | |||
Series B Senior Secured Convertible Note [Member] | ||||
Initial principal amount | 6,900,000 | 1,400,000 | 1,000,000 | |
Original issue discount | 900,000 | 4,400,000 | ||
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 | 2,100,000 | 1,000,000 | ||
Series B Note [Member] | ||||
Loss on fair value option | 2,200,000 | $ 1,400,000 | $ 5,100,000 | |
Gain (Loss) on change in fair value | $ 5,100,000 | |||
Placement Agent Warrants [Member] | Series A and Series B Note [Member] | ||||
Purchase of warrant description | Series B Note, respectively, a placement agent received a warrant (the “Warrants”) exercisable for two 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 $1.32 per share. The Warrants expired unexercised on the two-year anniversary of their respective issuance |
WARRANT AGREEMENTS (Details)
WARRANT AGREEMENTS (Details) - Warrants [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Warrants, beginning balance | 1,565,447 | 2,479,849 |
Warrants granted | $ 0 | $ 0 |
Exercised | (96,250) | |
Forfeited/Expired | (1,252,947) | (818,152) |
Warrants, ending balance | 312,500 | 1,565,447 |
Exercisable at ending balance | 312,500 | |
Weighted average exercise price beginning balance | $ 2.18 | $ 1.86 |
Weighted Average Exercise Price, Granted | 0 | 0 |
Weighted Average Exercise Price, Exercised | 0 | 1 |
Weighted Average Exercise Price, Forfeited/Expired | 2.23 | 1.58 |
Weighted Average Exercise Price, ending balance | 2 | $ 2.18 |
Weighted Average Exercise Price, Exercisable | $ 2 | |
Weighted Average Contractual Remaining Life, beginning | 7 months 28 days | 1 year 2 months 23 days |
Weighted Average Contractual Remaining Life, Ending | 1 year 1 month 13 days | 7 months 28 days |
Weighted Average Contractual Remaining Life, Exercisable | 1 year 1 month 13 days |
WARRANT AGREEMENTS (Details 1)
WARRANT AGREEMENTS (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Number of Warrants | 312,500 | 1,565,447 |
Weighted Average Remaining Contractual Life (years) | 1 year 1 month 13 days | 7 months 28 days |
Number of warrants exercisable | $ 312,500 | $ 1,565,447 |
Number of Warrants Exercisable, Weighted Average Exercise Price | $ 2 | $ 2.18 |
Weighted Average Exercise Price | $ 2 | $ 2.18 |
$1.98-$2.31 [Member] | ||
Weighted Average Remaining Contractual Life (years) | 7 months 28 days | |
Number of Warrants Exercisable, Weighted Average Exercise Price | $ 2.18 | |
Weighted Average Exercise Price | $ 2.18 | |
Number of Warrants Exercisable | 1,565,447 | |
Number of Warrants | 1,565,447 | |
$1.98-$2.00 [Member] | ||
Weighted Average Remaining Contractual Life (years) | 1 year 1 month 13 days | |
Number of Warrants Exercisable, Weighted Average Exercise Price | $ 2 | |
Weighted Average Exercise Price | $ 2 | |
Number of Warrants Exercisable | 312,500 | |
Number of Warrants | 312,500 |
WARRANT AGREEMENTS (Details Nar
WARRANT AGREEMENTS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
WARRANT AGREEMENTS | ||
Aggregate intrinsic value of warrants outstanding and exercisable | $ 0 | $ 0 |
STOCK INCENTIVE PLANS (Details)
STOCK INCENTIVE PLANS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Granted | 80,000 | 1,500,000 |
Options [Member] | ||
Outstanding, beginning balance | 7,230,068 | 6,285,792 |
Granted | 315,000 | 1,555,526 |
Forfeited/Expired | (4,375,129) | (611,250) |
Outstanding, ending balance | 3,169,939 | 7,230,068 |
Exercisable at ending balance | 1,107,980 | |
Weighted average exercise price beginning balance | $ 1.45 | $ 1.52 |
Weighted Average Exercise Price, Granted | 0.27 | 0.95 |
Weighted Average Exercise Price, Exercised | 0 | 0 |
Weighted Average Exercise Price, Forfeited/Expired | 1.54 | 0.97 |
Weighted Average Exercise Price, ending balance | 1.20 | $ 1.45 |
Weighted Average Exercise Price, Exercisable | $ 1.39 | |
Weighted Average Contractual Remaining Life, beginning balance | 8 years 3 months 7 days | 8 years 10 months 9 days |
Weighted Average Contractual Remaining Life, Granted | 9 years 8 months 8 days | 9 years 3 months |
Weighted Average Contractual Remaining Life, ending balance | 8 years 18 days | 8 years 3 months 7 days |
Weighted Average Contractual Remaining Life, Exercisable | 7 years 9 months 18 days |
STOCK INCENTIVE PLANS (Details
STOCK INCENTIVE PLANS (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Number of Awards | 3,169,939 | 7,230,068 |
Weighted Average Remaining Contractual Life (years) | 8 years 18 days | 8 years 3 months 7 days |
Weighted Average Exercise Price | $ 1.20 | $ 1.45 |
Number of Awards Exercisable | 1,107,980 | 4,067,452 |
Weighted Average Exercise Price, Exercisable | $ 1.39 | $ 1.51 |
Stock Options [Member] | ||
Number of Awards | 7,230,068 | |
Weighted Average Remaining Contractual Life (years) | 8 years 3 months 7 days | |
Weighted Average Exercise Price | $ 1.45 | |
Number of Awards Exercisable | 4,067,452 | |
Weighted Average Exercise Price, Exercisable | $ 1.51 | |
0.156-$3.40 [Member] | ||
Number of Awards | 3,169,939 | |
Weighted Average Remaining Contractual Life (years) | 8 years 18 days | |
Weighted Average Exercise Price | $ 1.20 | |
Number of Awards Exercisable | 1,107,980 | |
Weighted Average Exercise Price, Exercisable | $ 1.39 |
STOCK INCENTIVE PLANS (Detail_2
STOCK INCENTIVE PLANS (Details 2) - Stock Options [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Risk-free interest rate at grant date | 3.24% | 1.18% |
Expected stock price volatility | 123.49% | 76.95% |
Expected dividend payout | $ 0 | $ 0 |
Expected option life (in years) | 10 years | 0 years |
Expected forfeiture rate | 0% | 10% |
STOCK INCENTIVE PLANS (Detail_3
STOCK INCENTIVE PLANS (Details 3) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Non-vested, Granted | 80,000 | 1,500,000 |
Stock Options [Member] | ||
Non-vested, beginning balance | 50,000 | |
Non-vested, Granted | 971,664 | 338,443 |
Non-vested, Vested | (971,664) | (388,443) |
Weighted Average Exercise Price, Non-vested, beginning balance | $ 0 | $ 1.60 |
Weighted Average Exercise Price, Granted | 0.30 | 1.20 |
Weighted Average Exercise Price, Vested | 0.30 | 1.26 |
Weighted Average Exercise Price, Forfeited/Expired | 0 | 0 |
Weighted Average Exercise Price, Non-vested, ending balance | $ 0 | $ 0 |
STOCK INCENTIVE PLANS (Detail_4
STOCK INCENTIVE PLANS (Details 4) - Stock Options [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Restricted Stock Units, Outstanding beginning balance | 588,235 | 431,578 |
Restricted Stock Units, Granted | 1,351,688 | 629,338 |
Restricted Stock Units, Vested | (588,235) | (411,027) |
Restricted Stock Units, Forfeited/Expired | (61,654) | |
Restricted Stock Units, Outstanding ending balance | 1,351,688 | 588,235 |
Restricted Stock Units, Weighted Average Grant Date Fair Value Outstanding, ending balance | $ 0.70 | $ 1.33 |
Restricted Stock Units, Weighted Average Grant Date Fair Value Granted | 0.29 | 0.74 |
Restricted Stock Units, Weighted Average Grant Date Fair Value Vested | 0.70 | 1.33 |
Restricted Stock Units, Weighted Average Grant Date Fair Value Forfeited/Expired | 0 | 1.33 |
Restricted Stock Units, Weighted Average Grant Date Fair Value Outstanding | $ 0.29 | $ 0.70 |
STOCK INCENTIVE PLANS (Detail_5
STOCK INCENTIVE PLANS (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Nov. 25, 2020 | Dec. 29, 2017 | Dec. 31, 2022 | Dec. 31, 2021 | |
Fair value of options granted | 80,000 | 1,500,000 | ||
Compensation expense | $ 1,000,000 | $ 2,000,000 | ||
Unrecognized compensation expense | 328,000 | |||
Unrecognized fair value of compensation cost | $ 94,000 | $ 79,000 | ||
Weighted Average Remaining Contractual Life (years) | 1 year 2 months 26 days | |||
Term of exercise period | 10 years | |||
Equity Incentive Plan [Member] | ||||
Common stock available for grant | 5,000,000 | 5,000,000 | ||
Equity incentive plan, description | The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date. | |||
Stock Options [Member] | ||||
Fair value of options granted | 971,664 | 338,443 | ||
Aggregate Intrinsic Value, Outstanding | $ 0 | $ 0 | ||
Restricted Stock Units [Member] | ||||
Compensation expense | $ 400,000 | 500,000 | ||
Restricted common stock issued | 629,338 | |||
Unrecognized fair value of compensation cost | $ 0 | 0 | ||
Restricted Common Stock [Member] | ||||
Restricted common stock issued | 338,443 | |||
General and administrative expenses | $ 420,000 | 572,000 | ||
Unrecognized fair value of compensation cost | $ 244,000 | $ 273,000 | ||
Awarded vesting period | 6 months | 10 months 6 days | ||
Nonstatutory Stock Options [Member] | ||||
Restricted common stock issued | 1,555,526 | |||
Awarded vesting period | 4 years |
STOCKHOLDERS EQUITY (Details Na
STOCKHOLDERS EQUITY (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2021 | |
Common stock, shares authorized | 150,000,000 | 150,000,000 | |
Common stock, shares par value | $ 0.001 | $ 0.001 | |
2018 [Member] | |||
Common stock, shares issued | 150,000 | ||
Price per share | $ 2.05 | ||
Proceed from issuance of common stock | $ 308,000 | ||
From January 1, 2021 to December 31, 2021 [Member] | |||
Conversion price description | ranging from $0.98 to $1.85 | ||
Debt instrument converted into common stock | 646,512 | ||
Debt instrument converted amount, principal | $ 600,000 | ||
From January 1, 2021 to December 31, 2021 [Member] | Series B Note [Member] | |||
Price per share | $ 0.24 | ||
Conversion price description | per share of $0.24 | ||
Debt instrument converted into common stock | 1,231,958 | ||
Common stock conversion of shares, amount | $ 400,000 | ||
Common stock conversion of shares, aggregate amount | $ 300,000 | ||
Common stock conversion of shares | 1,580,042 | ||
From January 1, 2021 to December 31, 2021 [Member] | Series A Note [Member] | |||
Price per share | $ 1.32 | ||
Conversion price description | ranging from $0.43 to $0.64 | ||
Debt instrument converted into common stock | 2,598,573 | ||
From January 1, 2022 to December 31, 2022 [Member] | Series B Note [Member] | |||
Price per share | $ 0.19 | ||
Debt instrument converted into common stock | 472,631 | ||
Two [Member] | |||
Common stock, shares issued | 271,666 | ||
Price per share | $ 0.27 | ||
Conversion price description | price per share of $0.19 | ||
Debt instrument converted into common stock | 73,000 | ||
Debt instrument converted amount, principal | $ 200,000 | ||
Two [Member] | From January 1, 2021 to December 31, 2021 [Member] | |||
Common stock conversion of shares, amount | $ 1,900,000 | ||
Common stock conversion of shares, aggregate amount | $ 1,300,000 | ||
Common stock conversion of shares | 1,439,394 | ||
Two [Member] | From January 1, 2022 to December 31, 2022 [Member] | |||
Debt instrument converted into common stock | 700,000 | ||
Debt instrument converted amount, principal | $ 200,000 | ||
2017 Equity Plan [Member] | From January 1, 2021 to December 31, 2021 [Member] | |||
Conversion price description | ranging from $0.98 to $1.85 | ||
Debt instrument converted into common stock | 904,929 | ||
Debt instrument converted amount, principal | $ 200,000 | ||
1[Member] | From January 1, 2021 to December 31, 2021 [Member] | |||
Conversion price description | 1.30 per share | ||
Debt instrument converted into common stock | 26,936 | ||
Debt instrument converted amount, principal | $ 0 | ||
Cash-less exercise warrants | 962,500,000 | ||
1[Member] | From January 1, 2022 to December 31, 2022 [Member] | |||
Debt instrument converted into common stock | 588,235 | ||
Three [Member] | From January 1, 2021 to December 31, 2021 [Member] | |||
Conversion price description | 0.89 per share | ||
Debt instrument converted into common stock | 297,288 | ||
Debt instrument converted amount, principal | $ 300,000 | ||
Three [Member] | From January 1, 2022 to December 31, 2022 [Member] | |||
Debt instrument converted into common stock | 1,665,000 | ||
Debt instrument converted amount, principal | $ 1,192,369,000,000 | ||
Conversion price | $ 700,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Current expense | ||
Federal | $ 39 | $ 0 |
State | 3 | 0 |
Total current expense | 42 | 0 |
Deferred expense | ||
Federal | 0 | 0 |
State | 0 | 0 |
Total deferred expense | 0 | 0 |
Total income tax expense | $ 42 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred income tax assets | ||
Net operating loss carryforward | $ 7,581 | $ 6,862 |
Change in fair value of convertible promissory notes | 1,358 | 2,517 |
Non cash compensation | 1,181 | 899 |
Deferred revenue | 114 | 142 |
Reserves and accruals | 98 | 74 |
Lease liability | 3 | 89 |
Other intangibles | 423 | 195 |
Inventory reserve | 124 | 31 |
Stock based compensation | 94 | 79 |
Allowance for doubtful accounts | 0 | 22 |
Section 174 R&D Expenses | 116 | 135 |
Total deferred tax assets | 10,246 | 11,045 |
Deferred income tax liabilities | ||
State income taxes | 0 | 0 |
ROU Assets | 0 | (83) |
Prepaid expenses and other assets | (172) | (43) |
Depreciation and amortization | (19) | (48) |
Valuation allowance | (10,055) | (10,871) |
Total deferred tax liabilities | (10,196) | (11,045) |
Deferred income tax, net | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
INCOME TAXES | ||
Net operating loss carryforwards | $ 35,100 | |
Operating loss carryforwards, Infinite Life | 28,600 | |
Net operating loss carryforward expire | $ 6,500 | |
Net operating loss carryforwards expiration date | 2038 | |
Valuation reserve allowance percentage | 100% | |
Ownership interest | 50% | |
Change in valuation allowance | $ 816 | $ 7,800 |
Marginal tax rate | 21% |
INTELLECTUAL PROPERTY AND COL_2
INTELLECTUAL PROPERTY AND COLLABORATIVE AGREEMENTS (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
May 06, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Amount payable | $ (1,661) | $ 719 | |
License Agreement [Member] | |||
Settlement payment | $ 3,900 | ||
Amount payable | 1,600 | ||
Paid amount | $ 2,300 | ||
Settlement income | $ 2,400 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2022 USD ($) |
COMMITMENTS AND CONTINGENCIES | |
2023 | $ 138,000 |
2024 | 46,000 |
2025 | 0 |
2026 | 0 |
2027 | 0 |
Undiscounted cash flow | 184,000 |
Effect of discounting | (14,000) |
Lease liabilities recognized | $ 170,000 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details 1) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2019 | |
Operating leases | |||
Right-of-use assets, net | $ 160 | $ 257 | $ 62 |
Right-of-use lease liabilities, current | 124 | 104 | |
Right-of-use lease liabilities, noncurrent | 46 | 174 | |
Total operating lease liabilities | $ 170 | $ 278 | |
Weighted average remaining lease term, operating lease | 1 year 3 months 14 days | 2 years 3 months 14 days | |
Weighted average discount rate, Operating leases | 11.30% | 11.30% |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details 2) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
COMMITMENTS AND CONTINGENCIES | ||
Fair value, Beginning balance | $ 1,430 | $ 3,205 |
Change in fair value of contingent stock consideration | (570) | (1,775) |
Fair value, Ending balance | $ 860 | $ 1,430 |
COMMITMENTS AND CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2019 | Oct. 10, 2020 | Oct. 02, 2020 | |
Lease monthly payment | $ 1 | ||||
Weighted average discount rate | 11.30% | ||||
Description of lease | The lease agreement (the “Lease”) which expires on April 30, 2024 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. The lease provides for the payment of base monthly rent in the amount of $10 thousand during the first 12 months of the term with annual increases, over the base monthly rent then in effect, by 3%. | ||||
Long-term portion of operating lease liability | $ 46,000 | ||||
Right of use asset | $ 160,000 | $ 257,000 | 62,000 | ||
Finance lease liability | $ 62,000 | ||||
Common stock shares outstanding | 71,426,801 | 68,201,900 | |||
Cash | $ 1,000,000 | ||||
Receive shares of common stock | 5,988,024 | ||||
Fair value of the Contingent Shares amount | $ 3,200,000 | ||||
Current portion of operating lease liability | $ 124,000 | ||||
Lease Agreement [Member] | |||||
Monthly Rent | $ 122,000 | $ 123,000 | |||
Common stock shares outstanding | 690,909,100,000 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) $ in Thousands | 1 Months Ended |
Jul. 22, 2022 USD ($) | |
DISCONTINUED OPERATIONS | |
Sales price | $ 20,000 |
Forgiveness of Buyer advances | (4,150) |
Holdback secured by promissory note | (2,000) |
Obligations assumed by Buyer | (41) |
Buyer expenses paid by seller | 82 |
Net cash received | $ 13,891 |
DISCONTINUED OPERATIONS (Deta_2
DISCONTINUED OPERATIONS (Details 1) $ in Thousands | 1 Months Ended |
Jul. 22, 2022 USD ($) | |
DISCONTINUED OPERATIONS | |
Sales price for assets sold | $ 20,000 |
Net book value of assets sold | 20,616 |
Net book value of liabilities sold | (51) |
Loss on sale of net assets | (565) |
Net book value of net assets sold | $ 20,565 |
DISCONTINUED OPERATIONS (Deta_3
DISCONTINUED OPERATIONS (Details 2) $ in Thousands | Dec. 31, 2021 USD ($) |
Carrying amounts of assets included as part of assets held for sale | |
Inventory, net | $ 243 |
Prepaid expenses and other assets | 97 |
Property and equipment, net | 1,837 |
Finance lease right-of-use assets, net | 40 |
Goodwill, net | 9,178 |
Intellectual property and patents, net | 14,401 |
In-process research and development, net | 329 |
Other assets | 35 |
Total assets classified as assets held for sale | 26,160 |
Carrying amounts of liabilities included as part of liabilities held for sale: | |
Accrued expenses | 268 |
Finance lease payable | 40 |
Contract liabilities | 215 |
Total liabilities classified as liabilities held for sale | $ 523 |
DISCONTINUED OPERATIONS (Deta_4
DISCONTINUED OPERATIONS (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Revenue: | ||
Product sales, net of discounts and refunds | $ 108,000 | $ 351,000 |
Consulting research & development income | 58,000 | 52,000 |
Shipping and other sales | 40,000 | 74,000 |
Total revenues | 206,000 | 477,000 |
Cost of goods sold: | ||
Cost of goods sold | 75,000 | 424,000 |
Gross profit (loss) | 131,000 | 53,000 |
Operating expenses: | ||
Research and development expenses | 487,000 | 2,371,000 |
Depreciation and amortization | 794,000 | 1,141,000 |
Selling, general and administrative expenses | 526,000 | 1,155,000 |
Impairment of goodwill | 4,728,000 | 0 |
Total operating expenses | 6,535,000 | 4,667,000 |
Net loss before income taxes | (6,404,000) | (4,614,000) |
Provision for income taxes | 0 | 0 |
Net loss | $ (6,404,000) | $ (4,614,000) |
DISCONTINUED OPERATIONS (Deta_5
DISCONTINUED OPERATIONS (Details Narrative) | 1 Months Ended | 6 Months Ended |
Jul. 22, 2022 USD ($) integer | Jun. 30, 2022 USD ($) | |
Total consideration paid, Asset Sale | $ 20,000,000 | |
Cancellation of indebtedness owed by the Company to Buyer in amount equal | 41,500 | |
Cost of assets held for sale | $ 20,600,000 | |
Cash reduced by assumed liabilities | $ 41,000 | |
Retained other patents not included in the Asset Sale | integer | 15 | |
Cost of liabilities held for sale | 4,000,000 | |
Notes payable included in liabilities held for sale | 3,400,000 | |
Consideration to be received from the Buyer | 20,000,000 | |
Additional impairment loss | 2,000,000 | |
Estimated costs to sell charged to goodwill | $ 100,000 | |
Secured Debt [Member] | One Year Note Payable [Member] | ||
Promissory note | $ 2,000,000 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) | Mar. 08, 2023 |
Chief Executive Officers [Member] | Subsequent event [Member] | |
Employment agreement desription | (i) a base salary of $275,000 per year; and (ii) an incentive discretionary bonus, of which will be determined by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) prior to January 31 of each year |