On Monday, April 1, we announced our plans to acquire Chemistry Holdings, a formulation technology company that is developing innovative delivery systems for the nutraceutical and pharmaceutical industry.

An Expansion of Our Platform
With this acquisition, we expect to expand our platform of oral dosage forms beyond dissolving films. We will also seek to combine proprietary encapsulation techniques within this broader range of dosage forms. Why is this valuable? A growing number of drugs in the pipeline, including cannabinoid molecules are poorly soluble with low bioavailability. Innovative strategies are needed to overcome these limitations. The technology we are acquiring will allow us to pursue multiple encapsulation methods for improving the solubility of active ingredients. Furthermore, with novel dosage forms like the chewable pods, gram-range doses of active ingredients can be delivered, well above the limits of oral dissolving films.

With our broader tool box, we may pursue a wider range of products and address more consumer needs. Below, we answer common questions on the deal terms.


FAQs

Updated May 14, 2019

Q: Where can I reference the original announcement? 
A: Please refer to the press release issued on April 1, 2019.

Q: You are issuing 5,700,000 shares upfront. What are you getting?
A: For 5,700,000 shares, we will be acquiring the company’s formulation technology (know-how and patents) with $10M to advance our overall product portfolio. For 9,483,147, additional formulation patent rights will be acquired.

Q: A total of up to 32,072,283 shares and warrants will be issued as part of this acquisition. What will trigger the issuance of the remaining shares and warrants?
A: The remaining shares and warrants are contingent upon successful implementation of the acquired technology – patents secured, products scaled up and revenues regenerated. Thus, the consideration is commensurate with actual value realized using the acquired technology. The cash warrants are exercisable at $5.01 upon meeting certain revenue targets which represent a potential source of capital for CURE of up to $40.17M

For further reference, please read our 8-K filing below.


From CURE Pharmaceutical’s 8-K filed April 1, 2019

Item 1.01.    Entry into a Material Definitive Agreement.

On March 31, 2019, Cure Pharmaceutical Holding Corp., a Nevada corporation (the “Company”), and CURE Chemistry Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Chemistry Holdings, Inc., a Delaware corporation (“Chemistry Holdings”) for the Company to acquire Chemistry Holdings pursuant to a merger of the Merger Sub with and into Chemistry Holdings (the “Merger”). Pursuant to the Merger, Chemistry Holdings will become a wholly owned subsidiary of the Company and the stockholders of Chemistry Holdings will receive shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) in exchange for all of the issued and outstanding shares of Chemistry Holdings.

Chemistry Holdings is a formulation technology company that is developing innovative delivery systems for nutraceutical, pharmaceutical and other industries.

There is an increased demand for solid, chewable or dissolvable products for immediate and controlled release, oral delivery of active ingredients and particularly poorly soluble active pharmaceutical ingredients (APIs). However, such dosage forms can pose challenges such as (i) stability of the active ingredient, (ii) overall integrity and shelf life of the product, and (iii) palatability.

Chemistry Holdings is developing a novel biopolymer technology for both liquid encapsulation and microencapsulation of dry powders, which are designed to improve the stability and solubility of the API. Encapsulated active ingredients can then be formulated in a final dosage form such as microcapsules or a proprietary protein polysaccharide macromolecular complex structure, referred to as a chewable pod, that can be produced in many shapes, colors and flavors.

The CH technology broadens the Company’s technology platform to include oral soluble films, chewables and fast dissolving tablets along with micro and nanoencapsulation methods.

Subject to the satisfaction of the conditions to the Merger, the Merger Agreement provides for the acquisition of Chemistry Holdings to occur on or before April 30, 2019 (the “Closing Date”). As a condition to closing, Chemistry Holdings is required to have a cash balance of at least $8,000,000 plus the amount of certain liabilities and expenses (the “Closing Cash Requirement”).

The maximum number of shares of Common Stock that may be issued to the stockholders of Chemistry Holdings in connection with the Merger, including escrowed shares and shares issuable pursuant to earnout provisions and warrants, is 32,072,283 shares allocated as follows: (i) between 5,700,000 and 9,483,147 shares of Common Stock as upfront consideration issued at the Closing (the “Upfront Consideration”); (ii) 3,348,346 shares to be held in escrow, subject to indemnification and clawback rights that lapse upon the achievement of certain milestones; (iii) 3,207,228 shares that may be issued pursuant to an earnout over five years upon the achievement of certain technological implementations; (iv) 8,018,071 shares that may be issued pursuant to an earnout over two years upon the achievement of certain revenue goals; and (v) 8,018,071 shares issuable upon exercise of warrants that become exercisable upon achieving certain revenue goals between the second and fourth anniversary of the Closing Date at an exercise price of $5.01 per share, exercisable, to the extent vested, for five years from the Closing Date. The determination of the number of shares issued as Upfront Consideration is dependent on the resolution of contractual matters related to one patent owned by Chemistry Holdings that is required to be resolved as a condition to closing the Merger.

In connection with signing the Merger Agreement, the Company received an investment of $2,000,000 (the “Principal Amount”) from Chemistry Holdings pursuant to a convertible note (the “Note”). If the Merger does not close by April 30, 2019, the Note will convert into 598,802 shares of the Common Stock on May 1, 2019 at a conversion price of $3.34. If the Merger closes by April 30, 2019, the Note will become an intercompany payable and will be cancelled without any shares of Common Stock being issued.

On the Closing Date, upon the issuance of the pro rata portion of the Upfront Consideration, each share of Chemistry Holdings’ common stock issued and outstanding immediately prior to the closing, other than shares with respect to which the holders have properly perfected a demand for appraisal rights in accordance with applicable law and have not effectively withdrawn such demand, shall be automatically canceled. Chemistry Holdings stockholders shall be subject to a LockUp Agreement pursuant to which one third of the shares issued to Chemistry Holdings stockholders will be released from the lockup 6 months after issuance, one third of the shares 12 months after issuance and one third of the shares 18 months after issuance.

The Merger Agreement contains customary representations and warranties and indemnities by the Company, Merger Sub and Chemistry Holdings. The closing of the Merger is subject to several closing conditions, including, among other things, (i) Chemistry Holdings’ founder and CEO, Joshua Held being appointed to the Board of Directors of the Company; (ii) confirmation that the Closing Cash Requirement is met; (iii) certain contract termination and patent assignment or license conditions specific to Chemistry Holdings; and (v) other customary closing conditions.

In addition to the shares issued pursuant to the Merger, Cure intends to issue warrants to purchase an additional 4,143,706 shares of Common Stock to certain affiliates of Chemistry Holdings in consideration for consulting and advisory services to be provided following the closing. The warrants would have a four-year term and an exercise price equal to at least $5.01 per share. The issuance of the warrants is conditioned on Cure amending its articles of incorporation to increase its authorized number of shares of Common Stock.

There are no assurances that the proposed Merger will be completed on a timely basis or at all or that the Company will recognize the anticipated benefits of the Merger.

There are a number of risks and uncertainties relating to the Merger. For example, the Merger may not be completed, or may not be completed in the time frame, on the terms or in the manner currently anticipated and the Company may not recognize the anticipated benefits of the Merger, as a result of a number of factors, including the following:

  • that one or more closing conditions to the Merger Agreement are not met;
  • unexpected costs, charges or expenses resulting from the Merger;
  • uncertainty of the expected financial performance of the Company following completion of the Merger;
  • the ability of the Company to implement its business strategy; and
  • the occurrence of any event that could give rise to termination of the Merger

The market price of the Company’s Common Stock may decline as a result of the Merger. The market price of the Company’s Common Stock may decline as a result of the Merger for a number of reasons including:

  • the Company may not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated;
  • the effect of the Merger on the Company’s business and prospects is not consistent with the expectations of financial or industry analysts; or
  • investors react negatively to the effect Company’s business and prospects resulting from the Merger.

The failure to integrate successfully the businesses and operations of the Company and Chemistry Holdings in the expected time frame may adversely affect the combined company’s future results.

The Company and Chemistry Holdings have operated and, until the completion of the merger, will continue to operate independently. There can be no assurances that their businesses can be integrated successfully. It is possible that the integration process could result in the loss of customers, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post completion integration process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in integrating the operations of the Company and Chemistry Holdings in order to realize the anticipated benefits of the merger so the combined company performs as expected:

  • combining the companies’ operations and corporate functions;
  • combining the businesses of the Company and Chemistry Holdings in a manner that permits the combined company to achieve the cost savings and revenue synergies anticipated to result from the merger, the failure of which would result in the anticipated benefits of the merger not being realized in the time frame currently anticipated or at all;
  • integrating personnel from the two companies;
  • integrating the companies’ technologies;
  • harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;
  • addressing possible differences in business backgrounds, corporate cultures and management philosophies and priorities;

In addition, at times the attention of certain members of either company’s or both companies’ management and resources may be focused on completion of the merger and the integration of the businesses of the two companies and diverted from day-to-day business operations, which may disrupt each company’s ongoing business and the business of the combined company.


FORWARD-LOOKING STATEMENTS:
This article contains forward-looking statements that involve risks and uncertainties. There are important factors that could cause actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the ability to successfully market our products, the difficulty in predicting the timing or outcome of other product research and development efforts, potential product characteristics and indications, marketing approvals and launches of other products, the impact of pharmaceutical industry regulation, the impact of competitive products and pricing, the acceptance and demand of new pharmaceutical products, the impact of patents and other proprietary rights held by competitors and other third parties and the ability to obtain financing on favorable terms. The forward-looking statements in this email reflect the Company's judgment as of the date of this email. The Company disclaims any intent or obligation to update these forward-looking statements. This email shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of our securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.