NuGene International, Inc. - FORM 10-Q

NuGene International, Inc. - FORM 10-Q - August 11, 2015

Attached files

Attached files

NuGene International, Inc. Reports

file	filename
EX-32.1 - EXHIBIT 32.1 - NuGene International, Inc.	s101624_ex32-1.htm
EX-31.2 - EXHIBIT 31.2 - NuGene International, Inc.	s101624_ex31-2.htm
EX-31.1 - EXHIBIT 31.1 - NuGene International, Inc.	s101624_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2015

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 333-192997

NuGene International, Inc.

(Exact name of registrant as specified in its charter)

Nevada		46-3999052
(State of incorporation)		(I.R.S. Employer Identification No.)

17912 Cowan, Suite A, Irvine, California 92614		(949) 468-5116
(Address of principal executive offices)		(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:
Title of each class registered:	Name of each exchange on which registered:
None	None

Securities registered under Section 12(g) of the Act: None (Title of class)

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

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

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company þ

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

The outstanding number of shares of common stock as of August 11, 2015 was: 39,584,673

Documents incorporated by reference: None

NuGene International, Inc.

Form 10-Q

Table of Contents

PART I. FINANCIAL INFORMATION
	ITEM 1.	Financial Statements	3
		Consolidated Balance Sheets at June 30, 2015 (unaudited) and December 31, 2014	3
		Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014 (unaudited)	4
		Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014 (unaudited)	5
		Notes to Consolidated Financial Statements (unaudited)	6
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	24
	ITEM 4.	Controls and Procedures	24

PART II. OTHER INFORMATION
	ITEM 1.	Legal Proceedings	25
	ITEM 1A.	Risk Factors	25
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
	ITEM 3.	Defaults Upon Senior Securities	38
	ITEM 4.	Mine Safety Disclosures.	38
	ITEM 5	Other Information	38
	ITEM 6.	Exhibits	38
		SIGNATURES	39

PART I

ITEM 1. FINANCIAL STATEMENTS

NUGENE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS


	June 30, 2015			December 31, 2014
	(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	486,506		$	1,344,737
Accounts receivable, net		296,650			15,567
Inventories		100,331			110,953
Brand participation fee, net		150,000			300,000
Other current assets		133,713			15,520
Total current assets		1,167,200			1,786,777

Property and equipment, net		187,831			60,674
Intellectual property, net		150,000			—
Other long term assets		45,168			12,800

Total assets	$	1,550,199		$	1,860,251

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and accrued liabilities	$	217,422		$	135,563
Accounts payable - related party		51,060			122,084
Deferred revenue		—			234,916
Total current liabilities		268,482			492,563

Total liabilities		268,482			492,563

Commitments

Stockholders’ equity:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; 1,917,720 issued and outstanding at June 30, 2015 and December 31, 2014, respectively		192			192
Common stock, $0.0001 par value; 100,000,000 shares authorized; 39,584,673 and 39,197,400 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively		3,959			3,920
Additional paid-in capital		3,639,402			2,713,016
Accumulated deficit		(2,361,836	)		(1,349,440	)

Total stockholders’ equity		1,281,717			1,367,688

Total liabilities and stockholders’ equity	$	1,550,199		$	1,860,251

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

NUGENE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2015			2014		2015			2014

Sales	$	536,363		$	211,667	$	1,017,723		$	267,030
Cost of goods sold		116,629			39,528		293,532			71,413
Gross profit		419,734			172,139		724,191			195,617

Operating expenses:
Wages and professional fees		815,576			143,646		1,058,193			183,606
Research and development		21,912			5,021		73,203			11,750
General and administrative		354,516			7,973		605,191			15,491
Total operating expenses		1,192,004			156,641		1,736,587			210,847

Net income (loss)	$	(772,270	)	$	15,498	$	(1,012,396	)	$	(15,230	)

Weighted average number of common shares outstanding - basic and diluted		39,582,096			20,552,760		39,390,810			20,552,760

Net loss per share - basic and diluted	$	(0.02	)	$	0.00	$	(0.03	)	$	(0.00	)

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

	Six Months ended June 30,
	2015			2014
Cash flows from operating activities
Net loss	$	(1,012,396	)	$	(15,230	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Depreciation and amortization		13,888			—
Bad debt expense		88,760			—
Stock based compensation		436,425			—
Changes in operating assets and liabilities
Accounts receivable		(369,843	)		8,152
Inventories		10,622			—
Brand participation fee		150,000			—
Other assets		(137,345	)		—
Accounts payable and accrued liabilities		81,860			(1,214	)
Accounts payable - related parties		(71,024	)		—
Deferred revenue		(234,917	)		—

Net cash used in operating activities		(1,043,970	)		(8,292	)

Cash flows from investing activities
Deposits		(13,216	)		—
Purchase of property and equipment		(141,045	)		—

Net cash used in investing activities		(154,261	)		—

Cash flows from financing activities
Proceeds from issuance of common stock		340,000			—

Net cash provided by investing activities		340,000			—

Net change in cash		(858,231	)		(8,292	)

Cash, beginning of period		1,344,737			14,301

Cash, end of period	$	486,506		$	6,009

Supplemental disclosure of cash flow information:
Income taxes paid	$	—		$	—
Interest paid	$	—		$	—

Supplementary disclosure of noncash financing activities:
Issuance of common stock for intellectual property	$	250,000		$	—
Cancellation of common stock for intellectual property	$	(100,000	)	$	—

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

NUGENE INTERNATIONAL, INC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the period ended June 30, 2015

NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION

NuGene International, Inc. (the “Company” or “NuGene Int’l”) was incorporated in the State of Nevada on October 31, 2013 under the name “Bling Marketing, Inc.” Until December 29, 2014, we were a wholesaler of jewelry, principally earrings, rings and pendants (“BMI Business”). On December 26, 2014 we entered into an Agreement and Plan of Merger (“Merger Agreement”) with NuGene Inc., a California corporation (“NuGene”), and on December 29, 2014 (the “Closing Date”) we filed a certificate of merger in the State of California whereby our subsidiary, NG Acquisition Inc. merged with NuGene. As a result, NuGene, which is the surviving entity, became our wholly owned subsidiary. The transaction contemplated under the Merger Agreement is deemed to be a reverse merger, whereby the Company (the legal acquirer) is considered the accounting acquiree and NuGene (the legal acquiree) is considered the accounting acquirer. On January 22, 2015 we changed our name to NuGene International, Inc., effected a 15.04 to one stock split in the form of a stock dividend (“Stock Split”) and changed our trading symbol from BLMK to NUGN. All amounts shown for common stock and additional paid in capital included in these financial statements are presented post Stock Split. See also Note 6 below.

NuGene, our wholly-owned subsidiary, was incorporated in the state of California in December 2006. We have since developed our initial line of cosmeceutical products based on adipose derived stem cells (undifferentiated cells found throughout the body that multiply by cell division to replenish dying cells and regenerate tissues) as the foundation of the formulation for our products. The Company has developed the ability to culture adult human stem cells to render human conditioned stem cell media at a proprietary concentration which is the primary ingredient in the NuGene line of cosmeceuticals. We currently have branded this advanced skin and hair care line under the NuGene Kathy Ireland name (the “NuGene Line”).

On January 20, 2015, we formed NuGene BioPharma, Inc (“BioPharma”) as a wholly-owned subsidiary of NuGene Int’l, in the state of California. BioPharma’s primary focus will be on stem cell derived treatments and other biologically active ingredients that may be subject to guidelines established by the Food and Drug Administration (“FDA”). We are actively researching methods in which we can use our stem cell based proprietary technology for clinical applications that can be patented, protected and commercialized.

Basis of Presentation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and applicable regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of financial position and results of operations have been included. Our operating results for the six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The accompanying unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2014, which are included in our Annual Report on Form 10-K.

The accompanying consolidated financial statements reflect the accounts of NuGene International, Inc. and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Conformity with Generally Accepted Accounting Principles (“GAAP”) requires the use of estimates and judgments that affect the reported amounts in the financial statements and accompanying notes. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities which are not readily apparent from other sources. We base our estimates and judgments on historical information and on various other assumptions that we believe are reasonable under the circumstances. GAAP requires us to make estimates and judgments in several areas, including, but not limited to, those related to revenue recognition, collectability of accounts receivable, contingent liabilities, fair value of financial instruments, fair value of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, excess and obsolete inventory, deferred tax asset valuation and income taxes. These estimates are based on management’s knowledge about current events and expectations about actions we may undertake in the future. Actual results could differ materially from those estimates.

Risks and Uncertainties

The Company operates in an industry that is subject to rapid change. The Company's operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks, including the potential of business failure.

Reclassifications

For comparability, certain prior period amounts have been reclassified, where appropriate, to conform to the financial statement presentation used in 2015. These reclassifications have no impact on net loss.

Cash and Cash Equivalents

Cash and cash equivalents include investments with initial maturities of three months or less. The Company maintains its cash balances at credit-worthy financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000.

Inventories

The Company’s skin and hair care inventories consist of raw materials and finished goods and are valued at the lower of cost (first-in, first-out) or market. The Company evaluates its inventory for excess quantities and obsolescence on a regular basis. To determine if the cost of the Company's inventory should be written down, current and anticipated demand, customer preferences and the age of the merchandise are considered. For the three and six months ended June 30, 2015 and 2014, the Company did not recognize any charges to operations associated with excess and obsolete inventory.

Property and Equipment

Property and equipment consist of office furniture, computer equipment, laboratory equipment, purchased software, website development and improvements made to our leased offices and are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the three year useful life of the assets or the remaining term of the lease. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Expenditures for maintenance and repairs are expensed as incurred.

Website Development

Under Accounting Standards Codification (“ASC”) 350-50 – Intangibles – Goodwill and Other – Website Development Costs, costs and expenses incurred during the planning and operating stages of the Company’s website development are expensed as incurred. The Company accounts for the development of its website by expensing all costs associated with the planning of the website as incurred and capitalizing the costs to develop the website. Once the website is available for use, the asset will be amortized over its estimated useful life on a straight line basis, estimated to be 3 years, and tested for impairment annually.

Intangible Assets

Identifiable intangible assets with indefinite lives are not amortized but instead are tested for impairment annually or more frequently if circumstances indicate a possible impairment may exist. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives, generally on a straight-line basis, and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses are carried at amortized cost and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

Deferred Revenue

As of June 30, 2015 and December 31, 2014, we had a remaining balance of $0 and $234,916, respectively, in deferred revenues included in current liabilities related to the sale of products undelivered at each respective date.

Revenue Recognition

In accordance with ASC 605 - Revenue Recognition, the Company recognizes revenue from product sales when the product has been ordered by the customer, the selling price is fixed or determinable, the product is shipped to the customer, title has transferred and collectability is reasonably assured.

In addition to revenues recognized through the sale of our NuGene Line of skin care products, during 2014 we generated revenues from an affiliate, Advanced Surgical Partners (“ASP”) which is also principally owned by our CEO and our Chairman of the Board, Ali and Saeed Kharazmi, M.D., respectively. Revenues generated from ASP resulted from NuGene providing plasma rich platelet and adipose derived stem cells for orthopedic and plastic surgery procedures to ASP. We provided these products to ASP as we transitioned into the cosmeceutical side of NuGene and have not provided such products to ASP during the six months ended June 30, 2015.

Concentration of Revenues

For the three and six months ending June 30, 2014, the Company recognized revenues from ASP in the amount of approximately $150,000 and $170,000, respectively or 71% and 64%, respectively of total revenues. As discussed previously, such revenues resulted from NuGene providing plasma rich platelet and adipose derived stem cells for orthopedic and plastic surgery procedures to ASP. We provided these products to ASP as we transitioned into marketing the cosmeceutical lines of NuGene. No such sales were provided to ASP by NuGene during the six months ended June 30, 2015.

During the three months ended June 30, 2015, 83% of our revenues were derived from a single wholesale distributor. During the six months ended June 30, 2015, 44% and 18% of our revenues were derived from two wholesale distributors. These two distributors purchase products from us on a purchase order basis on standard terms. The distributors are under no obligation to continue to purchase our products. The loss of either of the distributors, a material reduction in their purchases or the cancellation of product orders or unexpected returns of unsold products could decrease our revenues and impede our future growth prospects. We do not have long-term purchase commitments with our distributors. We are actively expanding our distributor base in order to reduce the impact the loss of any one distributor would have on our Company.

Cost of Goods Sold

Cost of goods sold include all of the costs to manufacture the Company’s products. For products manufactured in the Company’s own facilities, such costs include raw materials and supplies, direct labor and factory overhead. For products manufactured for the Company by third-party contractors, such cost represents the amounts invoiced by the contractors.

Royalty Expense

We recognize royalty expenses according to our license agreement. The licensee will pay the licensor up to 5% of our net sales or a minimum guaranteed royalty of $100,000 beginning in year one, which includes the period from approximately November 4, 2014 through December 31, 2015, and increasing in annual increments of $50,000 for the following seven calendar years of the contract. Royalties are charged to cost of goods sold in the period that the related revenues are recognized.

Research and Development

Internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed. Research and development consists of consulting fees, direct labor and raw materials associated with the development of new products to be commercialized by our Company.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Our allowance for doubtful accounts was $86,060 and $300 at June 30, 2015 and December 31, 2014, respectively. Bad debt expense totaled $86,060 and $88,760 for the three and six months ended June 30, 2015, respectively. We recognized no bad debt expense for the three and six months ended June 30, 2014.

Share Based Payments

The Company recognizes compensation expense for all equity–based payments in accordance with ASC 718 - Share-based payments. Under ASC 718’s fair value recognition provisions, the Company recognizes equity–based compensation net of an estimated forfeiture rate and recognizes compensation cost only for those shares expected to vest over the requisite service period of the award.

Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the accompanying statements of operations based on the fair values of the related payments. Such expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The Company accounts for share–based payments granted to non–employees in accordance with ASC 505 - Equity Based Payments to Non–Employees. The Company determines the fair value of the stock–based payment as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.

Earnings per Share of Common Stock

The Company computes earnings per share in accordance with ASC 260 - Earnings Per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to common shareholders and the weighted average number of common shares outstanding for the effects of all potential dilutive common shares, such as stock issuable pursuant to the exercise of stock warrants or the conversion of preferred stock into common stock.

Common stock equivalents totaling, 2,417,720 on June 30, 2015 were not included in the computation of diluted earnings per share in 2015 on the consolidated statement of operations because the Company reported a net loss during the three and six months ended June 30, 2015 and therefore would be anti-dilutive. There were no common stock equivalents outstanding at June 30, 2014.

Income Taxes

Income taxes are accounted for in accordance with ASC Topic 740 - Income Taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future consequences of differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases (temporary differences). Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are recovered or settled. Valuation allowances for deferred tax assets are established when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Management evaluates its tax positions on an annual basis and has determined that as of December 31, 2014, no additional accrual for income taxes is necessary. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they were filed.

Fair Value of Financial Instruments

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements. Fair value represents the estimated amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

The following are the hierarchical levels of inputs to measure fair value:

- Level 1: Quoted prices in active markets for identical instruments;

- Level 2: Other significant observable inputs (including quoted prices in active markets for similar instruments);

- Level 3: Significant unobservable inputs (including assumptions in determining the fair value of certain investments).

The carrying values for cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities, and deferred revenue approximate their fair value due to their short maturities.

Recent Accounting Standards Updates

In May 2014, the FASB issued ASU No. 2014-09 - Revenue From Contracts With Customers, that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The ASU is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

NOTE 3 – INVENTORIES

Inventories consist of the following:

	June 30, 2015		December 31, 2014
Raw materials	$	94,608	$	52,045
Finished goods		5,723		58,908
Total Inventories	$	100,331	$	110,953

NOTE 4 – INTANGIBLE ASSETS

Licensee Agreement

In November 2014 we entered into a License Agreement with kathy ireland Worldwide^® ("kiWW^®") whereby we licensed the right to utilize the trademarks and rights to the name, likeness and visual representations of Kathy Ireland in connection with our cosmeceutical line of products. The initial term of the license is for eight years and it may be renewed at the option of the Company for up to an additional four years.

In accordance with the License Agreement, we will pay 5% of the net sales for all licensed products sold and collected under the licensed marks or a minimum guaranteed royalty of $100,000 in year one, which includes the period from approximately November 4, 2014 through December 31, 2015 (“Contract Year 1”), of the License Agreement. The minimum guaranteed royalty increases $50,000 each year in years two through eight of the License Agreement. As of June 30, 2015, we have recognized approximately $60,400 in royalty fees applicable to Contract Year 1 of which $44,664 was recognized during the six months ended June 30, 2015.

Additionally, we are obligated to pay an annual Brand Participation Fee to kiWW^®which provides for general advertising, good will and promotion of the overall kathy ireland brand. NuGene paid kiWW $350,000 effective upon execution of the License as a Brand Participation fee for Contract Year 1. Accordingly, we are amortizing this initial Brand Participation Fee over the 14 month period of Contract Year 1. The net carrying value of the Brand Participation Fee at June 30, 2015 and December 31, 2014 was $150,000 and $300,000, respectively. The Brand Participation Fee for Contract Years 2 through 8 is $50,000 annually with an additional 1% of the total gross sales of Licensed Products of the prior year beginning in Contract Year 4.

SkinGuardian Intellectual Property

On March 17, 2015, BioPharma entered into an Intellectual Property Asset Purchase Agreement (“IP Agreement”) with Dr. H. R. Christopher O'Brien to acquire all of the rights, title and interest in and to SkinGuardian, a skin protectant, antiseptic, and moisturizing lotion, including but not limited to (all formulae and any and all other rights, title, and interest in and to the SkinGuardian™ product (collectively, the “Intellectual Property”) and Intellectual Property Rights, free and clear of any liabilities, claims, liens or encumbrances.

The SkinGuardian product is an anti-bacterial, anti-fungal first aid product containing benzalkonium which can be developed as an antiseptic or moisturizing lotion and possibly as an antiseptic spray. First aid antiseptics combined with skin protectant active ingredients, such as SkinGuardian, are subject to Tentative Final Monograph (“TFM”) through the Federal Drug Administration (the “FDA”), which permits manufacturing and related activities so long as the drug formulation and labeling meet the requirements described in the relevant TFM. The TFM establishes the conditions under with the product is Generally Recognized as Safe and Effective (“GRASE”) and not misbranded. Pending a final monograph, the FDA does not object to the marketing of over the counter drugs, such as SkinGuardian, that meet the formulation and labeling requirements described in the relevant TFM. SkinGuardian, as marketed under TFM FR. 56, No. 140 (1991) is permitted to be manufactured, labeled, packaged and distributed without further FDA approval or review. Management has assessed and anticipates that the principal value of the SkinGuardian Intellectual Property for the Company lies in the compliance of that IP with the respective formulation and labeling requirement of the TFM, as well as, the trade secret formulae of such skin protectant. Management anticipates that, due to the represented SkinGuardian formulation and labeling compliance with the TFM, upon inclusion of the Company’s proprietary stem cell media, as an inactive ingredient, into the SkinGuardian formulation, we will be able to enter the marketplace for our BioPharma products at a materially faster rate and at a lower cost than had we gone through the TFM testing and reporting regime on our own. Our business plan objective in completing the March 2015 acquisition of SkinGuardian was to develop and market a topical skin protectant for treatment and prophylactic purposes. We regard treatment products based on a combination of SkinGuardian IP and our proprietary stem cell media as a natural extension of our cosmeceutical skincare lines marketed by our NuGene Inc. subsidiary. We anticipate the launching of the SkinGuardian product, with our added stem cell media, during the latter part of 2015 or early 2016 in over the counter departments of pharmacies and other distribution channels.

Upon acquisition of SkinGuardian and the Intellectual Property, the Company issued 250,000 shares of restricted common stock to Dr. O’Brien valued at $250,000. The fair market value of $1.00 per share was determined by taking into consideration the 18 month lock-up agreement that the shares were subject to. Management subsequently reviewed the Intellectual Property and determined that a patent had not been issued and that, while still in the application stage, had been abandoned in the fall of 2011. Upon further review of the IP Agreement during the second quarter of 2015, management determined that, considering the abandonment of the patent application, it was appropriate for the parties to adjust the consideration paid for the Intellectual Property and Dr. O'Brien agreed to return 100,000 shares of common stock to the Company. On June 30, 2015, these 100,000 shares were cancelled and returned to the Company’s treasury. As a result, the carrying value of the Intellectual Property was adjusted to $150,000 at June 30, 2015, with a corresponding reduction to shareholders’ equity.

The FDA approval of the SkinGuardian product is considered by the Company to have an indefinite life. Accordingly, management will review the asset for impairment on at least an annual basis and will write the asset down to fair value if its review determines that to be necessary. Management believes that the SkinGuardian product will facilitate our entry into over the counter based treatment markets which in our view ought to expand revenue both domestically and internationally over the course of the next 18 to 24 months. Although no assurance can be given that we will be successful in doing so, we expect to protect our product formulations through a combination of maintaining trade secrets and securing non-disclosure agreements. Accordingly, we assess that there is no impairment in the carrying value of the SkinGuardian acquisition and IP as of June 30, 2015.

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment, net consist of the following:

	June 30, 2015			December 31, 2014
Software	$	4,138		$	2,139
Website development		4,081			—
Equipment		100,248			35,698
Leasehold improvements		94,507			24,092

Property and equipment, gross		202,974			61,929
Accumulated depreciation		(15,143	)		(1,255	)
Property and equipment, net	$	187,831		$	60,674

Depreciation expense for the six months ended June 30, 2015 and 2014 was $13,888 and $0, respectively.

NOTE 6 – STOCKHOLDERS’ EQUITY

Merger Agreement

On December 26, 2014, Bling Marketing Inc. entered into a Merger Agreement with NuGene, Inc. and on December 29, 2014 (the “Closing Date”) we filed a certificate of merger in the State of California whereby our subsidiary, NG Acquisition Inc. merged with NuGene, Inc. As a result, NuGene, which is the surviving entity, became our wholly owned subsidiary. In connection with the Merger Agreement, we entered into a Business Transfer and Indemnity Agreement dated December 29, 2014 (the “Indemnity Agreement”) with our former Chief Executive Officer and Director, Dena Kurland providing for:

The transfer of our jewelry business operations existing on the date of the Indemnity Agreement;

The assumption by Ms. Kurland of all liabilities of our Company and the indemnification by Ms. Kurland holding our Company harmless for any and all liabilities arising at or before the date of the Indemnity Agreement;

The payment by NuGene Int’l. to Ms. Kurland of $350,000 in cash; and

The surrender by Ms. Kurland of 15,000,000 shares (before giving effect to the Stock Split discussed below) (the "Indemnity Shares") of our Company’s common stock representing 95% of the then outstanding common stock (all of which shares have been cancelled by the Company and are now included in the Company’s pool of authorized but unissued shares).

In conjunction with the Merger Agreement, all of the issued and outstanding shares of NuGene at December 29, 2014 were exchanged, after giving effect to the Stock Split, for 26,052,760 shares of NuGene Int’l common stock and 1,917,720 NuGene Int’l Series A Preferred Stock.

Common Stock

On December 23, 2014, we amended our articles of incorporation to provide for the authorization of 100,000,000 shares of Company common stock with a par value of $0.0001.

On December 26, 2014, our Board of Directors approved a 15.04 to one stock split (“Stock Split”) in the form of a stock dividend to holders of our common stock as of that date. To effect that board action, we delivered to each recipient of the stock dividend 14.04 additional shares of common stock for every share of common stock held. Unless otherwise noted, all share numbers shown in these consolidated financial statements give effect to the Stock Split as approved by our Board of Directors.

On December 29, 2014 we completed the sale of 2,000,000 shares of our common stock to 18 purchasers (“Stock Placement”) for proceeds totaling $2,000,000, including (a) $1,625,000 of cash and (b) automatic conversion of $375,000 of NuGene promissory notes. Stock Placement proceeds totaling $350,000 were used as payment to Ms. Kurland in accordance with the Indemnity Agreement and $75,000 were used as repayment of a short term loan incurred in connection with the license with kiWW^®. The remaining proceeds of approximately $1.2 million were earmarked principally to fund our operations and to support our product lines.

Prior to the Merger Agreement, NuGene received proceeds totaling $1,333 for the purchase of 4,000,000 shares of common stock from five persons and issued 1,500,000 shares of common stock, valued at $500, to a consultant for services rendered during the last quarter of 2014.

On March 31, 2015, as consideration for the purchase of the Intellectual Property discussed in Note 4, the Company issued 250,000 shares of common stock, valued at $250,000, to Dr. O’Brien. In issuing these shares we relied on an exemption from registration under federal securities laws pursuant to Section 4(a)(2) of the Securities Act of 1933. In determining the value of the shares, management took into consideration the fact that the shares include a lock-up agreement whereby those shares may not be sold for a period of 18 months following the closing of the IP Agreement. As discussed in Note 4, Dr. O’Brien subsequently returned 100,000 shares of our common stock, valued at $100,000 on June 30, 2015.

On March 31, 2015 (the “Closing”), we entered into a stock purchase agreement with a current shareholder of the Company (the “Buyer”) resulting in the issuance of 50,000 shares of common stock to the shareholder for proceeds of $50,000. Under the agreement we extended to the Buyer an option to purchase an additional 60,000 shares of common stock at $1 per share within 45 days of the Closing. On May 8, 2015, the Buyer exercised his option to purchase the remaining shares under the stock purchase agreement and accordingly, we issued the Buyer an additional 60,000 shares of our common stock for cash proceeds of $60,000. In issuing these shares we relied on an exemption from registration under federal securities laws pursuant to Section 4(a)(2) of the Securities Act of 1933. These shares are subject to a lock-up agreement whereby those shares may not be sold for a period of 18 months following the closing(“Lock Up Period”). Additionally, for a period commencing after the end of the Lock Up Period and continuing for 12 consecutive 30 day periods, the shareholder shall not sell any of these shares, except in an amount not to exceed 8.33% of the total shares acquired under the securities purchase agreement per 30 day period.

On April 20, 2015, the Company entered into a stock purchase agreement with an unaffiliated accredited investor for the sale of 27,273 shares of common stock at $1.10 per share, resulting in total cash proceeds of $30,000. In determining the sale price of the shares, management took into consideration the fact that the shares include a lock-up agreement whereby those shares may not be sold for a period of 12 months and for a period commencing on the next day after the 12 month period and continuing for 12 consecutive 30 day periods, the investor shall not sell any shares, except in an amount not to exceed 8.33% of the total shares purchased.

On June 2, 2015, the Company entered into a stock purchase agreement with an unaffiliated accredited investor for the sale of 100,000 shares of common stock at $2.00 per share, resulting in total cash proceeds of $200,000. In determining the sale price of the shares, management took into consideration the fact that the shares include a lock-up agreement whereby those shares may not be sold for a period of 12 months and for a period commencing on the next day after the 12 month period and continuing for 12 consecutive 30 day periods, the investor shall not sell any shares, except in an amount not to exceed 8.33% of the total shares purchased.

Preferred Stock

On December 23, 2014, we amended our articles of incorporation to provide for the authorization of 25,000,000 shares of Preferred Stock with a par value of $0.0001. We designated 2,000,000 shares of Preferred Stock as “Series A Convertible Preferred Stock.” The Series A Preferred Stock is (i) initially convertible into common stock at a ratio of one to one, (ii) as long as there are a minimum of 900,000 shares of Series A Preferred Stock outstanding, the holders of the Series A Preferred Stock have the right to elect a majority of the board of directors and (iii) the holders of the Series A Preferred Stock, generally voting as a class with the holders of common stock, have three times the number of votes available for every vote of available common stock. As of June 30, 2015 and December 31, 2014, we had 1,917,720 shares of Series A Preferred Stock outstanding which were issued to the founders of NuGene, Ali and Saeed Kharazmi, in conjunction with the Merger Agreement. Ali and Saeed Kharazmi each own 50% of the outstanding Series A Preferred Stock and are the Company’s Chief Executive Officer and Chairman of the Board, respectively.

Stock Based Compensation

As discussed in Note 8, as of June 30, 2015 the Company has entered into Advisory Agreements with the five members on its Advisory Board. The terms of the individual Advisory Agreements vary and provide for up to 50,000 initial sign on shares vesting for a maximum of an 18 month period, and up to 50,000 shares of common stock per annum issued on the anniversary of the effective date of the agreement. Stock based compensation related to these shares is recognized over the service period in which the shares are earned or over the respective vesting period, as applicable, and calculated based on the average closing price per share of our common stock, during the respective quarter, as quoted on the OTC Marketplace. Stock based compensation in connection with the Advisory Agreements for the three and six months ended June 30, 2015 totaled $256,340 and $296,714, respectively and is included in wages and professional fees in the accompanying consolidated statement of operations.

On May 26, 2015, Donna Queen accepted a position on the Company’s Board of Directors. In addition to an annual cash stipend of $30,000, Ms. Queen was granted a total of 100,000 shares of the Company’s common stock vesting on the third, sixth, ninth and twelfth month following the acceptance date of her position. Stock based compensation related to these shares is recognized over the service period in which the shares are earned and calculated based on the average closing price per share of our common stock, during the respective quarter, as quoted on the OTC Marketplace. Stock based compensation in connection with Ms. Queen’s grant for the six months ended June 30, 2015 totaled $28,951 and is included in wages and professional fees in the accompanying consolidated statement of operations.

On February 3, 2015, we entered into a six-month consulting agreement with an investor relations firm. In addition to a $27,000 retainer, the consulting agreement calls for the vesting of 100,000 shares of our common stock over the six-month term, issuable upon the conclusion of the agreement. Stock based compensation in connection with these shares is recognized over the service period in which the shares are earned. We recognized $110,760 of stock based compensation in connection with the consulting agreement during the six months ended June 30, 2015.

Warrants

At the time of the merger, an outstanding warrant to acquire shares of NuGene Inc. was exchanged for a warrant of Bling Marketing Inc. The warrant upon issuance, after giving effect to the Stock Split, evidenced the right of the holder to acquire up to 500,000 shares of common stock of the Company, had a strike price of $2.50 per share, was not exercisable for 12 months (the "Initial Exercise Date"), and any shares acquired thereunder upon exercise may not be sold for six months commencing from the Initial Exercise Date. The warrant was issued to an entity that is not directly or indirectly an affiliate of the Company.

NOTE 7 – RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial and operating decisions. A related party transaction is considered to be a transfer of resources or obligations between related parties, regardless of whether or not a price is charged.

The following individuals and entities have been identified as related parties:

Ali Kharazmi		Chief Executive Officer, President, Board Member and greater than 10% shareholder
Saeed Kharazmi		Chairman of the Board, Acting Chief Financial Officer and greater than 10% shareholder
Genetics Institute of Anti-Aging		Company with common ownership and management
Applied M.A.K. Enterprises, Inc (“MAK”)		Company with common ownership and management
Advanced Surgical Partners, LLC (“ASP”)		Company with common ownership and management
Center for Weight Management		Company with common ownership and management
Center for Regenerative Science, Inc		Company with common ownership and management

The following amounts were owed to related parties at the dates indicated:

	June 30, 2015		December 31, 2014
ASP	$	35,358	$	45,000
MAK		—		40,084
Ali Kharazmi		13,294		37,000
Saeed Kharazmi		2,409		—
Accounts payable - Related Parties	$	51,060	$	122,084

The amount owed to ASP at June 30, 2015 of $35,358 relates to legal and administrative services provided by ASP employees to the Company. Prior to December 31, 2014, all managerial, legal and administrative services were provided to the Company by related parties, free of charge. The amounts owed to Ali Kharazmi and all amounts outstanding at December 31, 2014 represent advances which bear no interest and are due on demand or expense reimbursements incurred in the ordinary course of business. The amounts owed to Saeed Kharazmi at June 30, 2015 related to expense reimbursements incurred in the ordinary course of business.

For the three and six months ending June 30, 2014, the Company recognized revenues from ASP in the amount of approximately $150,000 and $170,000, respectively. As discussed previously, such revenues resulted from NuGene providing plasma rich platelet and adipose derived stem cells for orthopedic and plastic surgery procedures to ASP. We provided these products to ASP as we transitioned into marketing the cosmeceutical lines of NuGene. The transactions were on terms no more favorable than between two parties negotiating at an arm’s length. No such sales were provided to ASP by NuGene during the six months ended June 30, 2015.

Beginning on December 1, 2014, the Company sublet office space from ASP as discussed further in Note 8. Prior to December 1, 2014, the Company utilized corporate office space at ASP, free of charge.

Messrs. Ali and Saeed Kharazmi, our CEO and our Acting CFO, respectively, have been foregoing salaries since the Company was incorporated in 2006.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

Commitments

We entered into a sub-lease of our corporate offices in Orange County, California, on December 1, 2014. The property consists of approximately 11,000 square feet of office, manufacturing and assembly space. After completing various leasehold improvements, we occupied the property in early March 2015. We currently sublease the property from ASP, an affiliate of the Company, for approximately $12,000 per month, consistent with the amount that is charged to ASP by the landlord. On February 5, 2015, ASP entered into a new five year lease for the property beginning July 1, 2015 and subsequently amended to begin June 1, 2015. The lease calls for a base rent of $9,968 per month plus payment of approximately $2,000 per month for common area maintenance. The lease includes annual increases in the monthly lease payments of approximately 3% each year. Additionally, in conjunction with the new lease agreement, NuGene paid a commission to the real estate agent of $19,152. The commission has been recorded in Other Long Term Assets in the accompanying consolidated balance sheet as of March 31, 2015 and will be amortized over the life of the lease.

At June 30, 2015, aggregate future minimum payments under the lease, including common area maintenance costs, are as follows:

2015	$	71,232
2016		144,816
2017		148,848
2018		152,880
2019		156,912
Thereafter		66,080
Total	$	740,768

As of June 30, 2015, the Company had entered into Advisory Board agreements (“Advisory Agreements”) with five individuals from the fields of medicine related to the Company’s industry focus. The Company believes our Advisory Board consists of leaders in their respective fields. The Advisory Agreements are for a period of three years and will begin expiring in December 2017. The terms of each Advisory Agreement vary but generally provide our advisory members with up to 50,000 initial sign on shares vesting over an 18 month period, base compensation of $3,000 per month and up to 50,000 shares of common stock per annum issued on the anniversary of the effective date of the agreement. Our Advisory Board members are required to attend two Advisory Board meetings per year for which they will be compensated $2,000 - $6,000 per meeting plus travel expenses.

On May 26, 2015, Donna Queen accepted a position on the Company’s Board of Directors. As compensation for her services, Ms. Queen shall receive an annual stipend of $30,000 and a total of 100,000 shares of the Company’s common stock which vests on the third, sixth, ninth and twelfth month following the acceptance date of her position.

Legal Proceedings

On July 10, 2015 Stemage Skin Care, LLC (the “Plaintiff”) filed a complaint in the U.S. District Court for the Central District of California entitled “Stemage Skin Care LLC, a North Carolina limited liability company vs. NuGene International, Inc. et al.” (Civil Action No.8:15-cv-01078-AG-JCG). The complaint also names as defendants NuGene, Inc., Ali Kharazmi, Saeed Kharazmi, Kathy Ireland Worldwide, Stephen Roseberry, Steve Rosenblum and Erik Sterling. The complaint contains allegations of damage asserted to be grounded on:

copyright infringement,
interference with contract,
intentional interference with prospective economic advantage,
negligent interference with prospective economic advantage, and
conspiracy.

The complaint allegedly arises out of an August 20, 2012 agreement among the Plaintiff and kathy ireland inc. ("KI") pursuant to which KI made Kathy Ireland available to perform “Ambassador Services" as defined within that agreement. That agreement effectively terminated in October 2014 and is the subject of a separate arbitration with KI and Kathy Ireland before the American Arbitration Association. Although this matter is at an early stage and we have not as of the date of this report filed any response we do not find it probable that any material losses will be incurred as a result of this complaint.

On July 31, 2015 Star Health & Beauty, LLC (“SH&B”) filed a complaint in the U.S. District Court for the Northern District of Georgia entitled “Star Health & Beauty, LLC vs. NuGene, Inc. and NuGene International, Inc. Defendants” (Case No. 1:15-cv-02634-CAP). The complaint alleges that our use of the NUGENE name and trademark infringes on their NUGEN name. SH&B seeks cancelation of our NUGENE trademark, as well as unspecified monetary damages. We are in the process of evaluating the merits of this lawsuit and intend to defend our intellectual property rights vigorously. As this matter is at an early stage we are unable to determine a range of potential losses that are reasonably possible of occurring as a result of this complaint.

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events.

Other than that described above, we are not currently a party to any other material legal proceedings. We are not aware of any pending or threatened litigation against us that in our view would have a material adverse effect on our business, financial condition, liquidity, or operating results. However, legal claims are inherently uncertain, and we cannot assure you that we will not be adversely affected in the future by legal proceedings.

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

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I of this report include forward-looking statements. Information in this report contains “forward looking statements” which may be identified by the use of forward-looking terminology, such as “may”, “shall”, “will”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, “believes”, “estimates”, “projects”, “targets”, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. Statements in this report concerning the following are forward looking statements:

•	future financial and operating results;
•	our ability to fund operations and business plans, and the timing of any funding or corporate development transactions we may pursue;
•	the ability of our suppliers to provide products or services in the future of an acceptable quality on a timely and cost-effective basis;
•	expectations concerning market acceptance of our products;
•	current and future economic and political conditions;
•	overall industry and market trends;
•	management’s goals and plans for future operations; and
•	other assumptions described in this report underlying or relating to any forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

Unless otherwise noted, the terms "NuGene Int’l", the "Company", "we", "us", and "our" refer to the ongoing business operations of NuGene International, Inc. and our wholly-owned subsidiaries, NuGene, Inc. and NuGene BioPharma, Inc., as well as, the past operations of NuGene, Inc. The terms “Bling Marketing, Inc.” or “Bling” refer to the operations of Bling Marketing, Inc. prior to December 29, 2014.

ORGANIZATIONAL HISTORY

We were incorporated in the State of Nevada on October 30, 2013 under the name “Bling Marketing, Inc.”. Until December 29, 2014, we were a wholesaler of jewelry, principally earrings, rings and pendants (“BMI Business”). We recognized a minimal amount of sales from operations prior to the three months ended June 30, 2014 and were accordingly classified as a shell company. During the three month ended June 30, 2014, we began working with several distributors to sell our jewelry products to retail outlets and as a result, recognized sales revenue of $22,025 during said period. On September 11, 2014, we filed a Current Report on Form 8-K indicating that we were no longer a shell company as defined by Rule12b-2 of the Exchange Act in light of our operations through the quarter ended June 30, 2014.

On December 26, 2014 we entered into an Agreement and Plan of Merger (“Merger Agreement”) with NuGene Inc., a California corporation (“NuGene”), and on December 29, 2014 (the “Closing Date”) we filed a certificate of merger in the State of California whereby our subsidiary, NG Acquisition Inc. (“Acquisition Sub”) merged with NuGene. As a result, NuGene, which is the surviving entity, became our wholly owned subsidiary. The transaction contemplated under the Merger Agreement is deemed to be a reverse merger, whereby the Company (the legal acquirer) is considered the accounting acquiree and NuGene is considered the accounting acquirer and NuGene (the legal acquiree) is considered the accounting acquirer. The assets, liabilities and operations of the acquired entity, NuGene, have been brought forward at their book value and no goodwill has been recognized.

In connection with the Merger Agreement, we entered into a Business Transfer and Indemnity Agreement dated December 29, 2014 (the “Indemnity Agreement”) with our former Chief Executive Officer and Director, Dena Kurland providing for:

The transfer of our jewelry business operations existing on the date of the Indemnity Agreement (the “BMI Business”);

The payment by NuGene to Ms. Kurland of $350,000 in cash; and

Pursuant to the terms of the Merger Agreement, the Company issued 26,052,760 shares of Company common stock and 1,917,720 Company Series A Preferred Stock to the former NuGene, Inc. shareholders. The Series A Preferred Stock is (i)is initially convertible into common stock at a ratio of one to one, (ii) as long as there are a minimum of 900,000 shares of Series A Preferred Stock outstanding, provide the holders of the Series A Preferred Stock have the right to elect a majority of the board of directors as long as there are a minimum of 900,000 shares of Series A Preferred Stock outstanding and (iii) entitle the holders of the Series A Preferred Stock, generally voting as a class with the holders of common stock, have for each share of Series A Preferred Stock owned, three times the number of votes permitted to each share of common stock.

On December 26, 2014 our board of directors approved a 15.04 to one stock split (“Stock Split”) in the form of a stock dividend to holders of our common stock as of that date. To effect that board action, shareholders received as a stock dividend 14.04 additional shares of common stock for every share of common stock held. Unless otherwise noted, all share numbers shown in this Quarterly Report give effect to the Stock Split.

At the Closing Date subsequent to the transactions described above (and giving effect to the Stock Split), we had approximately 39,197,400 shares of common stock outstanding and 1,917,720 shares of Series A Preferred Stock outstanding. At the time of the merger, an outstanding warrant to acquire shares of NuGene Inc. was exchanged for a warrant of Bling Marketing Inc. The warrant on its issuance, after giving effect to the Stock Split, evidenced the right of the holder to acquire up to 500,000 shares of common stock of the Company, had a strike price of $2.50 per share, was not exercisable for 12 months (the "Initial Exercise Date"), and any shares acquired thereunder upon exercise thereafter would be locked up and could not be sold for six months following the Initial Exercise Date. The warrant was issued to an entity that is not directly or indirectly an affiliate of either NuGene or of the Company.

On January 22, 2015 we were advised that the Financial Industry Regulatory Association had approved our (i) 15.04 to one Stock Split, (ii) name change from Bling Marketing Inc. to NuGene International, Inc., and (iii) change of trading symbol from BLMK to NUGN.

THE COMPANY’S HISTORY AND BUSINESS

NuGene, Inc. (“NuGene”)

NuGene was incorporated in California in December 2006 and formed organized and funded by our founders, Ali Kharazmi and Saeed Kharazmi. The initial focus of NuGene was to develop and market customized skin care products. As part of that focus NuGene sought to leverage the working relationships developed by our founders with the plastic surgery community. NuGene directed significant time and resources on developing anti-aging and scar treatment/reduction products.

In 2007 we continued to focus on age defying products utilizing peptide complexes (see further description, below) and nano-encapsulation for absorption into the skin (see further description, below). We introduced a limited product line under the NuGene name, and co-branded the products with an affiliated entity, Genetic Institute of Anti Aging, Inc. (“GIAA”), which is also owned by our founders. We utilized the services of a Korean based contract manufacturer to supply our products. This product line (the “GIAA Line”) was based on the use of peptides and did not utilize stem cells. We had very modest sales in 2007, with our sole customer being GIAA, a related party.

In 2008 we stopped production of the GIAA Line and sales were limited to selling remaining inventory through medical offices and through GIAA. With the GIAA Line discontinued, we spent the remainder of 2008 considering different formulations and methodologies for improved anti-aging products.

In 2009 and 2010 we had limited activity and very limited sales. Our sales were mostly overseas and limited to the remaining inventory of the GIAA Line. We continued to explore how we might advance our formulations and methodologies. We expended funds on research and development, carried out mostly by scientists engaged by the Company.

In 2011 our founders decided to use adult adipose human stem cells (undifferentiated cells found throughout the body that multiply by cell division to replenish dying cells and regenerate tissues) as the foundation of the formulation for its products. During 2011 the Company developed a proprietary process to extract human adult stem cells from fat cells that the Company then used in its customized NuGene line made specifically for those client(s). Throughout 2011 we continued to provide autologous, or mature, fat-derived stem cells for use in clinical procedures, utilizing this technology. Through this process, the Company refined its ability to culture adult human stem cells to render human conditioned stem cell media at a proprietary concentration which is a primary ingredient in the NuGene line of cosmeceuticals. The Company believes that this proprietary concentration in conjunction with our unique formulations will provide NuGene with a significant competitive advantage.

In 2012 we completed our initial line of cosmeceutical products based on these adipose derived stem cells. We branded this advanced skin care line solely under the NuGene name (the “NuGene Line”). We were able to eliminate the generally unpleasant odor associated with stem cells by adding a fragrance with a very low incidence of allergic reaction. The packaging of this new product line bears no resemblance to the prior GIAA Line. We also manufactured the NuGene Line ourselves at a small laboratory facility that we leased from an affiliated entity owned by one of our founders.

Throughout 2013 we continued to expand the product offerings of the NuGene Line. The Company focused its stem cell work in the surgical arena and orthopedic regeneration. These services were delivered to one client, which was an affiliated entity. Sales of the NuGene Line were limited as we were in an initial rollout and branding phase.

During 2014, we focused our efforts on transitioning to a cosmeceutical skincare business for mass distribution. With this transition and expanded attention to our consumer products we sought to develop our marketing plan and distribution channels. By the end of 2014 we had wholesalers distributing products from the NuGene Line to medical offices and medical spas throughout the United States. In addition to the NuGene Line, we generated revenues from an affiliate, Advanced Surgical Partners (“ASP”) which is also owned by our CEO and Chairman of the Board, Messrs. Ali and Saeed Kharazmi, respectively. Revenues generated from ASP resulted from NuGene providing plasma rich platelet and adipose derived stem cells for orthopedic and plastic surgery procedures to ASP. We provided these products to ASP as we transitioned into the commercialization of our cosmeceutical product lines. No such sales have been generated from ASP during the six months ended June 30, 2015.

During the first quarter of 2015, we moved into our new corporate offices consisting of approximately 11,000 square feet of office, manufacturing and assembly space. We invested heavily in laboratory equipment and leasehold improvements in order to position the Company for its anticipated growth. We increased our marketing, sales and accounting department to better support our plans and continued expanding our fleet of wholesalers to distribute the NuGene Line. We continuously look to improve our product line and in doing so, developed a “Fragrance-Free, Color-Free” line for each of our skin care products.

During the second quarter of 2015, we initiated the development of a dedicated sales force in order to provide our customers with trained sales representatives, as well as, maintain greater control over the sales force. Additionally, utilizing our own sales force helps mitigate the impact the loss of a major distributor would have on our sales. We currently have several sales representatives in California and one in the tri-city area of New York and anticipate adding at least three more full time representatives before the end of the year. As an expansion to our product line, we began offering a Skin Care Trial Pack during June 2015 which includes our Universal Cream, Universal Serum, Eye Serum and the Light & Bright Gel in convenient 10ml bottles. Lastly, our research continues to broaden the NuGene Line with the development of a facial mask, facial scrub and hydrating shampoo which are expected to launch during the third quarter of 2015.

Our target customers primarily consist of females and males, thirty five years of age and older, concerned with their aging skin and hair loss. We are currently engaged in marketing our NuGene Line of products, generally described as a line of proprietary skin and hair care cosmeceuticals derived from adult adipose stem cells and growth factors. We anticipate that we will also need to seek substantial additional funding to further implement our other programs and fully activate our business plan and further expand our advertising, secure further channels of distribution, build inventory and recruit experienced sales personnel. No assurance can be given that the anticipated amounts of required funding will prove to be adequate or that we will be able to accomplish our goals within the timeframes projected even if such funds are obtained. In addition, no assurance can be given that we will be able to obtain any required financing on commercially reasonable terms or otherwise. If we are unable to obtain adequate funding, we may be required to significantly curtail or even discontinue our proposed operations.

NuGene BioPharma, Inc.

On January 20, 2015, we formed NuGene BioPharma, Inc (“BioPharma”) as a wholly-owned subsidiary, in the state of California. We intend BioPharma’s primary focus to be on stem cell derived treatments and other biologically active ingredients that may require FDA approval. We are actively researching methods in which we can use our stem cell based proprietary technology for clinical applications that can be patented and protected.

On March 17, 2015, BioPharma entered into an Intellectual Property Asset Purchase Agreement (“IP Agreement”) with Dr. H.R. Christopher O'Brien, an individual, acquiring all of the rights, title and interest in and to SkinGuardian, a skin protectant, antiseptic, and moisturizing lotion, including but not limited to any and all other rights, title, and interest in and to the SkinGuardian™ product (collectively, the “Intellectual Property”) and Intellectual Property Rights, free and clear of any liabilities, claims, liens or encumbrances. We intend that the acquisition of the rights, title and interest to the SkinGuardian topical skin protectant will provide us a foundation for a variety of topical treatments we will be developing that incorporate the use of stem cell media.

The SkinGuardian product is an anti-bacterial, anti-fungal first aid product containing benzalkonium which can be developed as an antiseptic or moisturizing lotion and possibly as an antiseptic spray. First aid antiseptics combined with skin protectant active ingredients, such as SkinGuardian, are subject to Tentative Final Monograph (“TFM”) through the Federal Drug Administration (the “FDA”), which permits manufacturing and related activities so long as the drug formulation and labeling meet the requirements described in the relevant TFM. The TFM establishes the conditions under with the product is generally recognized as safe and effective (GRASE) and not misbranded. Pending a final monograph, the FDA generally does not object to the marketing of over the counter drugs, such as SkinGuardian, that meet the formulation and labeling requirements described in the relevant TFM. SkinGuardian, as marketed under TFM FR. 56, No. 140 (1991) is permitted to be manufactured, labeled, packaged and distributed without further FDA approval or review. Management has assessed and anticipates that the principal value of the SkinGuardian Intellectual Property for the Company lies in the compliance of that IP with the respective formulation and labeling requirement of the TFM, as well as, the trade secret formulae of such skin protectant. Management anticipates that, due to the represented SkinGuardian formulation and labeling compliance with the TFM, upon inclusion of the Company's proprietary stem cell media, as an inactive ingredient, into the SkinGuardian formulation, we will be able to enter the marketplace for our BioPharma products at a materially faster rate and lower cost than had we gone through the TFM testing and reporting regime on our own.. Our business plan objective in completing the March 2015 acquisition of SkinGuardian was to develop and market a topical skin protectant for treatment and prophylactic purposes. We regard treatment products based on a combination of SkinGuardian IP and our proprietary stem cell media as a natural extension of our cosmeceutical skincare lines marketed by our NuGene Inc. subsidiary. We anticipate launching the SkinGuardian product, with our added stem cell media, during the latter part of 2015 or early 2016 in over the counter departments of pharmacies and other distribution channels.

Upon acquisition of SkinGuardian and the Intellectual Property, the Company issued 250,000 shares of restricted common stock, valued at $250,000. The fair market value of $1.00 per share was determined by taking into consideration the 18 month lock-up agreement that the shares were subject to. Management subsequently reviewed the Intellectual Property and determined that the Patent had not been issued and that, while still in the application stage, had been abandoned in the fall of 2011. Upon further review of the IP Agreement, during the second quarter of 2015 management determined that, considering the abandonment of the Patent, we had over paid for the Intellectual Property and Dr. O'Brien agreed to return 100,000 shares of common stock to the Company. On June 30, 2015, these 100,000 shares were cancelled and returned to the Company’s treasury. As a result, the carrying value of the Intellectual Property was adjusted to $150,000 at June 30, 2015, with a corresponding reduction to shareholders’ equity.

Overview

“Cosmeceuticals” refer to cosmetic products with biologically active ingredients purporting to have medicinal or drug-like benefits. The term is more of a marketing term rather than a legal term, with the cosmetics industry having adopted the term in the late 1990’s. The US Food and Drug Administration (the “FDA”) does not recognize the term. While drugs are subject to a review and approval process by the FDA, cosmetics and cosmeceuticals are not subject to the same stringent regulatory regime and scrutiny. As such, if a product has drug properties, it must be approved as a drug. However, cosmeceuticals are not subject to this review and approval process.

Cosmeceuticals offer consumers cosmetic-like treatments with active ingredients, which in our view give them pharmaceutical-like efficacy. Driven by aesthetic-consciousness, according to the May 2014 RNCOS research publication entitled, “Global Cosmeceuticals Market Outlook 2018” the global market for cosmeceutical products is expected to reach an estimated size of $48.9 billion in 2018. We believe that this market benefits from the growing segment of a younger generation of consumers as well as baby boomers who want to preserve their youthful looks. In our view the U.S. cosmeceutical market will continue to be favorably influenced by these growing segments of people who want beautiful and younger looking skin while aging.

Two of the fastest growing cosmeceutical segments are the age-defying and hair restoration markets which focus on mechanisms that control the aging of skin and prevent/restore hair loss. Also according to the same RNCOS research, skin care garnered a material share of the cosmeceutical market in 2013 with a 60%, $21.4 billion worldwide market share with the anti-aging segment accounting for 37% of the skin care cosmeceutical market. The hair care segment represented 14% or $4.75 billion of the cosmeceutical market in 2013. The global skincare cosmeceutical market is expected to reach $30.3 billion by 2018, accounting for a 62% share in the total cosmeceutical markets. In particular it is anticipated that with an aging baby boomer population and increased male grooming, skin whitening, facial care and sun-damaged products will drive the expected global demand.

The use of stem cell based media as a foundation for cosmeceutical products is designed to promote the age-defying process. Every human being has stem cells in his or her body. These cells exist from the early stages of human development until the end of a person’s life. Throughout our lives, our body continues to produce stem cells that regenerate to produce differentiated cells that make up various aspects of the body such as skin, blood, muscles, and nerves. These are generally referred to as adult stem cells (non-embryonic). These cells are important for the purpose of medical therapies aiming to replace lost or damaged cells or tissues or to otherwise treat disorders. Our NuGene Line of products uses human adult stem cells culture media that we believe, when applied to human skin cells, may reduce the appearance of aging skin.

Strategy

NuGene initially focused on providing stem cell derived medical products to medical providers. These products included Plasma Rich Platelet and Stem Cell injections for orthopedic and plastic surgery procedures. It was eventually decided that the medical product services has a limited growth potential and thus NuGene changed its focus to developing cosmeceuticals which has a much larger market potential and provides greater scalability.

In our view age-defying products represent and will continue to represent a significant portion of the facial skincare market and seems to be resilient to a recessionary economy. In key markets such as the U.S. and Asia, we believe that the facial skincare market is positioned for significant growth.

In order to make claims that products can diminish the signs of aging, marketers are constantly looking for new combinations of specialty ingredients. The category of skincare products based on biotechnology such as human stem cell is in our view just beginning to be developed, and therefore we expect that it has significant growth potential. Our goal is to leverage our knowledge in human adult stem cell technology to develop and commercialize advanced anti-aging skincare products for the retail and professional channels. We intend to develop, manufacture, and market cosmetic skin care and hair products to address this significant market opportunity.

Our business plan entails having our NuGene Line of products sold domestically and internationally through professional channels, including dermatologists, plastic surgeons, medical offices, and day and resort spas. We also expect to recruit and use a network of distributors. We plan to increase distribution of our products by promoting brand awareness through advertising, increasing sales personnel, other marketing and public relations. We will also rely upon the marketing expertise and name recognition of Kathy Ireland under the License Agreement discussed below. We propose to further expand our sales efforts through a branded website (www.nugene.com) and additional online commerce.

In addition to our product enhancement and marketing activities, our success will also depend on our ability to develop and protect our proprietary technology. We intend to rely on a combination of patent, trade secret and know-how, copyright and trademark laws, as well as confidentiality agreements, licensing agreements and other agreements, to establish and protect our proprietary rights. Our success will also depend upon our ability to avoid infringing upon the proprietary rights of others. If we are judicially determined to have infringed such rights, we may

incur significant costs of defense,

be ordered to pay damages,

become obligated to alter our services, products or processes,

be required to obtain licenses for products or process at additional cost, or

cease certain marketing activities.

Our Products

All of our products listed below have been formulated, fully developed and are currently being marketed. We have formulated and are testing other products, such as an acne cream and a burn cream, which we expect to introduce later during 2015 once product testing and marketing materials are completed. None of our products are licensed from third parties.

NuGene Skin Care Products

Universal Cream: Rich with NuGene’s proprietary stem cell technology, our moisturizer works to smooth fine lines and wrinkles, improve aging skin tone and texture, and reduce puffiness and dark circles—without any heaviness or oiliness.

Universal Serum: Formulated with multiple human growth factors, polypeptides, vitamins, minerals and amino acids, our signature serum encourages skin’s natural defense mechanisms against premature aging, while boosting other vital matrix structures, preventing environmental damage, improving texture and thickness, and restoring skin’s natural luminosity.

Eye Serum: Designed to prevent and correct wrinkles, fine lines, puffiness, dryness and dark circles, this innovative product relies on our cutting-edge stem cell technology, along with multiple growth factors and other nourishing ingredients, to breathe new life into the area of the face most susceptible to the visible signs of age: the eye contour. It works continuously to help reverse skin damage, minimize the appearance of future signs of aging, and restore youthful luminosity around the eyes, fostering skin that looks younger, smoother and fresher.

Light & Bright Gel: This product was designed to address issues of hyperpigmentation using a unique combination of actives while avoiding toxic chemical such as hydroquinone. In addition to reducing the look of dark spots and excess pigmentation, it works to increase overall radiance, restoring a youthful glow.

Face Wash: Our Face Wash is formulated with a unique blend of multiple growth factors, cytokines and rich pentapeptide complexes. NuGene’s Face Wash minimizes the visibility of pores and softens imperfections for a flawless appearance while the natural cleansing agents gently wash away dirt, oil, and makeup leaving the skin refreshed, smooth, clean and hydrated.

NuGene Hair Care Products

Regenerative Shampoo: Rich in growth factors, polypeptide complexes and vitamins, this product has been formulated to rejuvenate the hair and scalp. In addition to increasing hydration, vibrancy and shine, it works to protect hair from environmental assault, preventing and correcting breakage, thinning and split ends.

Regenerative Conditioner: This hydrating, shine-enhancing conditioner utilizes additional key ingredients, vitamins and polypeptide complexes, to name a few, to instantly smooth even the coarsest, most damaged hair strands. With regular use, it fosters stronger, shinier, younger-looking hair that’s that is easier to style.

Anti-Hair Loss Serum: This potent formula revs up sluggish hair follicles with essential growth factors that may revitalize and restore a youthful head of hair.

Pharmaceutical Products

In 2014, we initiated research and formulation for a new topical burn cream for treatment of burns that we expect may reduce infection and could improve healing time. Despite recent advances in wound management, infection continues to be a signicant problem in treating burns. This has resulted in the routine use of prophylactic topical antimicrobial agents. The most common topical antimicrobial agent used is silver sulfadiazine cream. However, the side effects of delayed wound healing have remained a challenge to overcome.

Tissue healing research has demonstrated adipose-derived stem cell culture conditioned media exhibit human dermal fibroblast proliferation and enhanced secretion of type I, III collagen and fibronectin. These properties are well suited for dermal wound healing. In order to develop and bring this product to market, we intend to work with a contract manufacturer to combine the product with our stem cell media technology. Preclinical FDA work consists of in vitro and in vivo efficacy studies, experimental toxicology testing, formulation study, storage condition, stability testing, and ensuring Good Manufacturing Practices are all followed in the manufacturing process. This topical product will require FDA approval and we can give no assurance that we will obtain that approval.

On January 20, 2015, we formed a new subsidiary, NuGene BioPharma, Inc. (“BioPharma”) in the State of California. BioPharma will focus on acquiring and developing intellectual property and products that, subject to FDA approval, treat various conditions utilizing stem cell derived technology.

The SkinGuardian product is an anti-bacterial, anti-fungal first aid product containing benzalkonium which can be developed as an antiseptic or moisturizing lotion and possibly as an antiseptic spray. First aid antiseptics combined with skin protectant active ingredients, such as SkinGuardian, are subject to Tentative Final Monograph (“TFM”) through the Federal Drug Administration (the “FDA”), which permits manufacturing and related activities so long as the drug formulation and labeling meet the requirements described in the relevant TFM. The TFM establishes the conditions under with the product is generally recognized as safe and effective (GRASE) and not misbranded. Pending a final monograph, the FDA generally does not object to the marketing of over the counter drugs, such as SkinGuardian, that meet the formulation and labeling requirements described in the relevant TFM. SkinGuardian, as marketed under TFM FR. 56, No. 140 (1991) is permitted to be manufactured, labeled, packaged and distributed without further FDA approval or review. Management has assessed and anticipates that the principal value of the SkinGuardian Intellectual Property for the Company lies in the compliance of that IP with the respective formulation and labeling requirement of the TFM, as well as, the trade secret formulae of such skin protectant. Management anticipates that, due to the represented SkinGuardian formulation and labeling compliance with the TFM, upon inclusion of the Company's proprietary stem cell media, as an inactive ingredient, into the SkinGuardian formulation, we will be able to enter the marketplace for our BioPharma products at a materially faster rate and lower cost than had we gone through the TFM testing and reporting regime on our own.. Our business plan objective in completing the March 2015 acquisition of SkinGuardian was to develop and market a topical skin protectant for treatment and prophylactic purposes. We regard treatment products based on a combination of SkinGuardian IP and our proprietary stem cell media as a natural extension of our cosmeceutical skincare lines marketed by our NuGene Inc. subsidiary. We anticipate launching the SkinGuardian product, with our added stem cell media, during the latter part of 2015 or early 2016 in over the counter departments of pharmacies and other distribution channels.

Strategic Relationships and Licensing Arrangements

kiWW License Agreement

In November 2014 we entered into a License Agreement with kathy ireland Worldwide^® ("kiWW^®") whereby we licensed the right to utilize the trademarks and rights to the name, likeness and visual representations of Kathy Ireland in connection with our cosmeceutical line of products containing adult human adipose stem cell derived or containing biologically active or biologically derived ingredients. The initial term of the license is for eight years and it may be renewed for up to an additional four years.

In accordance with the License Agreement, we are required to submit a Business Plan to the kiWW^®within ninety days of the effective date of the License Agreement. We have submitted our Business Plan to the Licensor within the required time frame and received the necessary approvals. The License Agreement defines the Licensed Products as those NuGene products containing stem cell derived or containing biologically active or biologically derived ingredients including: NuGene Face Wash, NuGene Universal Cream, NuGene Universal Serum, NuGene Light and Bright, NuGene Eye Serum, NuGene Anti-Hair Loss Serum, NuGene Regenerative Shampoo & Conditioner, and Advanced Infusion Serums as well as the following products which have not yet been commercially launched and/or developed: NuGene FaceMask, NuGene Melasma Serum, NuGene Acne Serum, NuGene Revitalizing Night Cream, NuGene Toner, NuGene Body Lotion, NuGene Specialty Soap, NuGene Neck and Décolleté Lotion, and other age defying products that are stem cell derived or which contain biologically active or biologically derived ingredients. On March 5, 2015, we announced the launch of the NuGene kathy ireland^® brand. The campaign includes a re-branded internet presence and new videos featuring Ms. Ireland.

NuGene is obligated to utilize commercially reasonable efforts to meet the following minimum totals of net sales of Licensed Products for the specified periods:

Period	Forecasted Minimum Net Sales
Contract Year 1	$	1,500,000
Contract Year 2	$	2,500,000
Contract Year 3	$	3,750,000
Contract Year 4	$	5,000,000

A "Contract Year" corresponds to a calendar year ending December 31 and commences with the year 2015.

For each of these Contract Years we are obligated to pay a minimum royalty as follows:

Period	Minimum Royalty
Contract Year 1	$	100,000
Contract Year 2	$	150,000
Contract Year 3	$	200,000
Contract Year 4	$	250,000

As of June 30, 2015 we had recognized approximately $60,400 of royalty expense toward Contract Year 1 under the License Agreement.

Additionally, we are obligated to pay an annual Brand Participation fee to kiWW^®which provides for general advertising, good will and promotion of the overall kathy ireland brand. NuGene paid kiWW $350,000 effective upon execution of the License. This onetime fee includes a "Brand Participation" fee for Contract Year 1. Brand Participation fees for Contract Years 2 through 8 are $50,000 annually with an additional 1% of the total gross sales of Licensed Products of the prior year beginning in Contract Year 4.

This description of the License Agreement is a summary and does not purport to describe all material conditions, obligations and payments that are the responsibility of NuGene to the Licensor. The description provided of the License Agreement in this Quarterly Report is qualified in its entirety by reference to the License Agreement attached as an Exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on January 6, 2015, and that agreement is incorporated herein by this reference as if fully set forth in this Report.

Advisory Board

In an effort to improve our product line and retain the latest and most forward looking state of the art services, the Company has assembled an Advisory Board consisting of Board Certified Dermatologists and Plastic Surgeons consisting of medical professionals whom the Company believes are leaders in their respective fields. We intend to continue expanding our Advisory Board throughout 2015. We anticipate that our Advisory Board members, among other things, will provide us with strategic and business development ideas, insight into major trends in the highly competitive cosmeceutical marketplace and input regarding their specific expertise.

Competition

NuGene experiences and will experience intense competition from companies developing cosmeceuticals with stem cell derived active ingredients as well other ingredients. Our pharmaceutical division will have competition from companies developing stem cell based pharmaceuticals. Our cosmeceutical line of products also competes with other companies that offer a plant derived stem cell skin care line or stem-cell derived extracts. Many of these companies have substantially greater financial, technological, research and development, marketing and personnel resources.

Governmental Regulation

U.S. Government Regulation

The health care industry is highly regulated in the United States. The federal government, through various departments and agencies, state and local governments, and private third-party accreditation organizations regulate and monitor the health care industry, associated products, and operations. The following is a general overview of the laws and regulations pertaining to our business.

FDA Regulation of Stem Cell Treatment and Products

The FDA regulates the manufacture of human stem cell treatments and associated products under the authority of the Public Health Safety Act (“PHSA”) and the Federal Food, Drug, and Cosmetic Act (“FDCA”). Stem cell derived products can be regulated under FDA’s Human Cells, Tissues, and Cellular and Tissue-Based Products Regulations (“HCT/Ps”), or may also be subject to FDA’s drug, biological product, or medical device regulations.

Cosmetic and Skin Care Regulation

Depending upon product labeling claims and ingredient formulation, skin care products may be regulated as cosmetics, drugs, devices, or combination cosmetics and drugs. We currently only market cosmetic skin care products and are evaluating entry into the pharmaceutical market. The FDA has authority to regulate cosmetics marketed in the United States under the FDCA and the Fair Packaging and Labeling Act (“FPLA”) and implementing regulations. The Federal Trade Commission (the “FTC”) regulates the advertising of cosmetics under the FTCA.

The FDCA prohibits the marketing of adulterated and misbranded cosmetics. Cosmetic ingredients must also comply with the FDA’s ingredient, quality, and labeling requirements and the FTC’s requirements pertaining to truthful and non-misleading advertising. Cosmetic products and ingredients, with the exception of color additives, are not required to have FDA premarket approval. Manufacturers of cosmetics are also not required to register their establishments, file data on ingredients, or report cosmetic-related injuries to the FDA. Consumers, health care providers and salon owners are encouraged to report complaints and injuries to the FDA.

We will be responsible for substantiating the safety and labeling claims of the cosmetic products and ingredients before marketing. The FDA or FTC may disagree with our characterization of one or more of the skin care products as a cosmetic or the labeling claims. This could result in a variety of enforcement actions which could require the reformulation or relabeling of our products, the submission of information in support of the product claims or the safety and effectiveness of our products, or more punitive action, all of which could have a material adverse effect on our business. If the FDA determines we have failed to comply with applicable requirements under the FDCA or FPLA, it can impose a variety of enforcement actions from public warning letters, injunctions, consent decrees, and civil penalties to seizure of our products, total or partial shutdown of our production, and criminal prosecutions. If any of these events were to occur, it could materially adversely affect us. If the FTC determines we have failed to substantiate our claims, it can pursue a variety of actions including disgorgement of profits, injunction from further violative conduct, and consent decrees.

Some types of skin-care products are regulated as both cosmetics and drugs under the FDCA. Examples of drug-cosmetic combination products are facial moisturizers that contain sunscreen and skin protectant hand lotions. Products that are both cosmetics and drugs because of ingredients or intended use must satisfy the regulatory requirements for both cosmetics and drugs. The drug requirements include either FDA premarket approval under an NDA or an abbreviated new drug application (“ANDA”), or, more typically, indirect approval through conformance with the applicable FDA final regulation (also known as an over-the-counter drug monograph) that specifies the conditions that must be met for the drug to be generally recognized as safe and effective.

At present, we do not anticipate that any of the products we market will be regulated as a combination cosmetic and drug or solely as a drug or device. However, the FDA may disagree with such a determination which could result in a variety of enforcement actions and significant additional expenditure to comply with regulations which the FDA may deem applicable to such products. We are in the process of researching new products that may be classified as combination cosmetics and drugs which would require FDA approval.

Domestic State and Local Government Regulation

Some states and local governments in the United States regulate the labeling, operation, sale, and distribution of our skin care products. To the extent additional state or local laws apply, we intend to comply with them.

Foreign Government Regulation

In general, we will need to comply with the government regulations of each individual country in which our products are to be distributed and sold. These regulations vary in complexity and can be as stringent, and on occasion even more stringent, than FDA regulations in the United States. The level of complexity and stringency is not always precisely understood today for each country, creating greater uncertainty for the international regulatory process. Furthermore, government regulations can change with little to no notice and may result in up-regulation of our product(s), thereby creating a greater regulatory burden for us. We have not yet thoroughly explored the applicable laws and regulations that we will need to comply with in foreign jurisdictions. As a result it is possible that we may not be permitted to sell our products in foreign markets or expand our business into one or more foreign jurisdictions.

THE SCIENCE BEHIND OUR PRODUCTS

Human Stem Cells

Cells are the basic living units that make up humans, animals, plants and other organisms. Stem cells have two important characteristics that distinguish them from other types of cells. First, they can renew themselves for long periods of time. Second, they are unspecialized and under certain conditions can be induced to become cells with special functions such as metabolically active cells of the liver or transparent and protective cells of the eye. Until recently, scientists have worked with two major kinds of stem cells, embryonic stem cells and adult stem cells each category of which has different properties and characteristics.

Adipose Stem Cell-Derived Media

We use human fat tissue (adipose tissue) to derive adult human stem cells. Adipose stem cell derived growth factors have been shown to contribute to exerting diverse regenerative effects on skin cells. These growth factors help in stimulating collagen synthesis and migration of dermal fibroblasts (a major contributor in skin repair, regeneration, and revitalization). Using a proprietary technique for the isolation of these cytokines from adipose derived stem cells, NuGene has been able to incorporate these proteins into its cosmeceutical line of products.

Peptides

Peptides are molecular links of amino acids that help your skin to produce the anti-wrinkle protein known as collagen. Peptides are closely related to proteins. Peptides and proteins are present in every living cell and are responsible for many biochemical activities including acting in enzymes, hormones, signals, etc. Peptides are listed in many better skin care products, and they perform important functions in the skin. As people age, they lose collagen which results in sagging and wrinkled skin. Since collagen is a protein composed of long chains of amino acids linked together by peptide bonds, peptides play an important role in replacing lost collagen. As collagen breaks down, the protein chains break up into smaller chains of peptides. The resulting peptide chains send signals to the body to produce more collagen. Since peptides are small, they can penetrate the skin’s protective barriers. Applying peptides directly to the skin through good skin care products tricks the skin into thinking that it has lost collagen recently and needs to produce more. Research has identified a number of peptides which mimic the function of the naturally produced growth factors in the human body. The advantage of using peptides over growth factors in skin care formula is their stability, but they are not complete in structural integrity as expressed by proteins in vivo.

Mass Production of Growth Factors

NuGene has been able to mass produce biologically active growth factors derived from adipose stem cells. With patent-pending technology, the process has achieved a high yield rate and superior quality of biomolecules. Our purifcation technique enables NuGene to have a high concentration of growth factors and cytokines in our skincare line.

Nano-encapsulation

One of the material challenges of the skincare science is the delivery of the active ingredients to the skin. At NuGene, we met this challenge by using nano-encapsulation technology. This technology allowed us to effectively deliver adipose stem cell derived cytokines and growth factors through embedding them within a nanosome or capsule. This added step enhances the penetration of these biomolecules into the skin cells. Additionally, it prevents these growth factors/cytokines from becoming degraded by proteases present in the mixture. We believe this enhances the effectiveness of our products.

NuGene’s Anti-Aging Mechanism

We have uncovered the following benefits from research on adipose derived stem cell cultured media:

Increases the proliferation of epithelial cells

Increases the synthesis of hyaluronic acid

Increases the synthesis of collagen and elastin

Adipose stem cell-derived EGF, bFGF increases the proliferation of fibroblast which synthesizes collagen and elastin

Adipose stem cell-derived EGF, IGF, bFGF, aFGF increases the skin elasticity by up-regulation of collagen, elastin, hyaluronic acid, and other extracellular matrixes (ECMs).

RESULTS OF OPERATIONS

Our results of operations for the three and six months ended June 30, 2014 were minimal as we were still in the process of developing and refining our product offerings. Accordingly, the following discussion and analysis of the results of operations and financial condition of the Company is for the three and six months ended June 30, 2015 and 2014, with an emphasis on our operations during the 2015 periods. Such analysis should be read in conjunction with the NuGene Int’l financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. An investment in our common stock involves a high degree of risk. Readers of this Quarterly Report on Form 10-Q should carefully consider the risks set forth in the Risk Factors and Business sections of our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 30, 2015, as well as those Risk Factors set out in Part II, Item 1A below. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” or similar expressions, variations of those terms or the negative of those terms to identify forward-looking statements. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

For the three months ended June 30, 2015 (“Q2 2015”) as compared to the three months ended June 30, 2014 (“Q2 2014”)

	Three Months Ended June 30,
	2015						2014
	$			% of Revenues			$		% of Revenues
Sales	$	536,363			100	%	$	211,667		100	%
Cost of goods sold		116,629			22	%		39,528		19	%
Gross profit		419,734			78	%		172,139		81	%
Operating expenses:
Wages and professional fees		815,576			152	%		143,646		54	%
Research and development		21,912			4	%		5,021		2	%
General and administrative		354,516			66	%		7,973		3	%
Total operating expenses		1,192,004			222	%		156,641		74	%
Net income (loss)	$	(772,270	)		(144	)%	$	15,499		7	%

Sales.

Sales generated during Q2 2015 of $536,363 resulted primarily from the sale of our cosmeceutical products to select wholesale distributors. During 2015, we began exploring other avenues of distribution for our NuGene Line and began developing a dedicated sales force during Q2 2015. Management believes that by using a sales force under its control, this will result in product personnel with a greater understanding of the science behind the NuGene products and an improved ability to market and sell our products, as well as, mitigate the impact any significant distributors can have on our operations. We currently have several sales representatives in California, one in the tri-city area of New York and anticipate adding at least three more full time sales representatives before the end of 2015. Sales recognized during Q2 2014 totaled $211,667 and consisted primarily of sales to an affiliated entity, ASP, totaling $150,000. Revenues received from ASP resulted from NuGene providing plasma rich platelet and stem cell injections for orthopedic and plastic surgery procedures to ASP. We provided these products to ASP as we transitioned our efforts towards cosmeceutical sales and have recognized no such revenues during 2015.

Cost of Goods Sold.

Cost of goods sold during Q2 2015 of $116,629 and represented 22% of sales. These costs consisted primarily of the cost of raw materials, product packaging, and direct labor used in the manufacture of our cosmeceutical products, as well as shipping and handling. Cost of goods sold during Q2 2014 totaled $39,528, or 19% of sales and related primarily to direct labor and the cost of raw materials.

Wages and Professional Fees.

Wages and professional fees during Q2 2015 consisted primarily of wages ($118,000), legal expenses ($58,000), advisory board fees ($45,000), accounting and auditing fees ($15,000), investor and public relations ($34,000), marketing ($39,000), general business consulting ($52,000) and stock based compensation ($396,000). Wages during Q2 2015 increased nearly 500% in comparison to Q1 2015 as a result of bringing additional accounting, marketing, manufacturing, sales and office personnel on board. Stock based compensation was nine times of the amount recognized during our first fiscal quarter. This increase is due in part to the grant of stock to consultants, advisory board members and members of our Board of Directors. Additionally, an increase in the market price of our publicly traded common stock drove increases in the value of the stock granted pursuant to previously committed quantities of common shares. Wages and professional fees during Q2 2014 consisted primarily of business development consulting fees. We anticipate that our wages and professional fees will continue to grow as we expand our Company’s operations.

Research and Development.

Research and development costs relate primarily to: 1) the fees associated with the testing of our products; 2) the preparation of reports validating testing; 3) the development of new products within the NuGene Line; and 4) the further development of our BioPharma line of business. We expect that our research and development costs will continue to increase.

General and Administrative Costs.

General and administrative costs consist primarily of the recognition of the kiWW Brand Participation Fee ($75,000) discussed in Note 4 of the June 30, 2015 consolidated financial statements included herein, corporate costs associated with being a publicly traded company ($24,000), rent of our corporate offices ($38,000), as well as office and laboratory supplies, insurance expense, travel and entertainment costs and general operating expenses. Additionally, we recognized a charge for bad debt expense of $86,000 to reserve against potentially uncollectible accounts receivable. We expect our operating expenses to continue to increase with the overall growth of the Company, the continued development of our products, the expansion of our marketing efforts and the additional costs of being a publicly traded company.

Net Loss.

We reported a net loss of $772,270 during Q2 2015 and net income of $15,499 during Q2 2014. As discussed above, the net loss during Q2 2015 includes non-cash expenses totaling $471,000 relating to stock based compensation and the recognition of the kiWW Brand Participation Fee over the current contract period.

For the six months ended June 30, 2015 as compared to the six months ended June 30, 2014

	Six Months Ended June 30,
	2015						2014
	$			% of Revenues			$			% of Revenues
Sales	$	1,017,723			100	%	$	267,030			100	%
Cost of goods sold		293,532			29	%		71,413			27	%
Gross profit		699,186			71	%		195,617			73	%
Operating expenses:
Wages and professional fees		1,058,193			104	%		183,606			69	%
Research and development		73,203			7	%		11,750			4	%
General and administrative		605,191			59	%		15,491			6	%
Total operating expenses		1,736,587			171	%		210,847			79	%
Net loss	$	(1,012,396	)		-99	%	$	(15,230	)		-6	%

Sales.

Sales generated during the six months ended June 30, 2015 totaling $1,017,723 resulted primarily from sale of our cosmeceutical products to select wholesale distributors. As discussed previously, we have been exploring other avenues of distribution for our NuGene Line and began developing a dedicated sales force during Q2 2015. Management expects that bringing the sales department in house will result in a sales force with a greater understanding of the science behind the NuGene products and an improved ability to market and sell our products, as well as, mitigate the impact any significant distributors have on our operations. We currently have several sales representatives in California, one in the tri-city area of New York and anticipate adding at least three more full time sales representatives before the end of 2015. Sales recognized during the six months ended June 30, 2014 totaled $267,030 and consisted primarily of sales to ASP, totaling $170,000.

Cost of Goods Sold.

Cost of goods sold during the six months ended June 30, 2015 of $318,537 represented 31% of sales. Such costs related primarily to the cost of raw materials, product packaging, and direct labor in the manufacturing of our cosmeceutical products, as well as shipping and handling. Cost of goods sold during the six months ended June 30, 2014 totaled $71,413, or 27% of sales and related primarily to direct labor and the cost of raw materials.

Wages and Professional Fees.

Wages and professional fees during the six months ended June 30, 2015 consisted primarily of wages ($131,000), legal expenses ($86,000), advisory board fees ($75,000), accounting and auditing fees ($62,000), investor and public relations ($65,000), marketing ($58,000), general business consulting ($83,000) and stock based compensation ($436,000). Wages during the six months ended June 30, 2015 increased significantly over the corresponding period in 2014 with the addition of accounting, marketing, manufacturing, sales and office personnel. Stock based compensation costs have also increased due primarily to the grant of stock to consultants, advisory board members and members of our Board of Directors, as well as increases in our stock price as previously noted. Wages and professional fees during the six months ended June 30, 2014 consisted primarily of business development consulting fees. We anticipate that our wages and professional fees will continue to grow as we build and expand the Company’s operations.

Research and Development.

General and Administrative Costs.

General and administrative costs consist primarily of the recognition of the kiWW Brand Participation Fee ($150,000) discussed in Note 4 of the June 30, 2015 consolidated financial statements included herein, corporate costs associated with our being a publicly traded company ($39,000), the rent of our corporate offices ($75,000), office and laboratory supplies, insurance expense, travel and entertainment costs and general operating expenses. Additionally, we recognized bad debt expense totaling $89,000 to reserve against potentially uncollectible accounts receivable. We expect our operating expenses will continue to increase due to the overall growth of the Company, the continued development of new products, the expansion of our marketing efforts and the additional costs of being a publicly traded company.

Net Loss.

During the six months ended June 30, 2015 and 2014, we reported net losses of $1,012,396 and $15,230, respectively. As discussed above, the net loss during the six months ended June 30, 2015 includes non-cash expenses totaling $586,000 relating to stock based compensation and the recognition of the kiWW Brand Participation Fee over the current contract period. We anticipate continuing to incur net losses as we build new sales channels for our products prior to the realization of significant sales and gross margin from such efforts.

Related Party Transactions

During the year ended December 31, 2014, 66% of our revenues were received from ASP, an affiliated company. The revenues generated through ASP were contracted at rates that would have been charged to a non-affiliated company. As we continue to grow our cosmeceutical product line, we have minimized the operations associated with ASP and have recognized no revenues associated with the ASP products during the six months ended June 30, 2015. We expect that the resulting reduction in revenues from sales to ASP will be offset by revenues generated from the sale of our NuGene Line.

ASP also provided the Company with office space, free of charge, through November 30, 2014. We have since sublet a property from ASP encompassing 11,000 square feet of office, manufacturing and assembly space. The lease expires on May 31, 2020 and currently calls for a base rent of $9,968 per month plus payments of approximately $2,000 per month for common area maintenance. The lease includes annual increases in the monthly lease payments of approximately 3% each year. Our CEO, M. Ali Kharazmi, has personally guaranteed the payment of the lease between ASP and the landlord.

During the six months ended June 30, 2015, the Company utilized employees of ASP for legal and administrative services. Management estimated the time associated with the services provided and accrued approximately $35,000 at June 30, 2015. Such amounts will be repaid once we begin generating sales that are able to support our operations.

During December 2014, ASP provided NuGene a $45,000, interest free, short-term loan to cover operating expenses. NuGene repaid the loan during January 2015.

Mr. Ali Kharazmi has purchased equipment and paid for various expenses on behalf of NuGene. As of June 30, 2015 and December 31, 2014, the Company owed Ali approximately $13,000 and $37,000, respectively, related to such payments.

Mr. Saeed Kharazmi has incurred various business expenses on behalf of NuGene. As of June 30, 2015, the Company owed Saeed approximately $2,400 related to such payments.

Messrs. Ali and Saeed Kharazmi, our CEO and our Chairman of the Board, respectively, have been foregoing salaries since the Company was incorporated in 2006.

Liquidity and Capital Resources.

We had cash and cash equivalents of $486,506 and $1,344,737 as of June 30, 2015 and December 31, 2014, respectively and working capital of $898,718 and $1,294,214 as of June 30, 2015 and December 31, 2014, respectively. On December 29, 2014, we completed the sale of 2,000,000 shares of our common stock in a private placement resulting in gross proceeds of $2,000,000. The decrease in cash and cash equivalents and working capital relates to the expansion and results of operations of our Company as more fully discussed below.

During the six months ended June 30, 2015, we reported a net loss of $1,012,396 or $337,396 net of non-cash expenses relating to stock based compensation totaling $436,000, recognition of the kiWW Brand Participation Fee totaling $150,000 and bad debt expense of $89,000. We reported net cash used in operating activities of $1,043,970 for the same period which was primarily due to an increase in accounts receivable, the prepayment of various contracts and security deposits, the payment of amounts payable to related parties and the recognition of deferred revenue.

Cash outflows from investing activities during the six months ended June 30, 2015 totaled $154,261 and consisted primarily of the acquisition of laboratory equipment to support the manufacturing of our product as well as leasehold improvements and office furniture at our new corporate offices. Additionally, we paid deposits totaling approximately $13,000 during the period related to our new office space.

Cash inflows from financing activities during the six months ended June 30, 2015 totaled $340,000 and resulted from the sale of 237,273 shares of the Company’s common stock at prices ranging from $1.00 to $2.00 per share. In determining the fair value of the shares sold, management took into consideration that the shares were subject to lock-up agreements whereby they may not be sold for a periods ranging from 12-18 months following the closing (“Lock Up Period”), and for a period commencing after the end of the Lock Up Period and continuing for 12 consecutive 30 day periods, the shareholder shall not sell any of these shares, except in an amount not to exceed 8.33% of the total shares acquired under the related securities purchase agreements per 30 day period.

Since inception through December 31, 2014, we have paid only nominal salaries, rent, insurance, legal and other expenses as many of these services were provided free of charge by related parties. Our two founders have waived salaries since the formation of NuGene. Additionally, we elected in December 2006 to be treated as a "sub-chapter S corporation". Under the Internal Revenue Code we have paid no federal taxes and generally paid a state of California income tax of about 1.5% of taxable income. We terminated our sub-chapter S election in December 2014 and accordingly are now subject to taxation as a C corporation. We expect that going forward, we will incur significant additional expenses, including salaries, rent, insurance, investor relations, marketing, legal and accounting fees, corporate fees associated with being a publicly traded company and other expenses in order to carry out our business plan. During the six months ended 2015 we expended approximately $255,000 per month, comprised of cash paid for rent and utilities ($15,000), marketing ($15,000), royalties ($10,000) corporate fees ($8,000), insurance ($12,000), professional fees ($47,000), wages ($74,000), inventory ($30,000), equipment and leasehold improvement ($14,000) and general and administrative type expenses ($30,000). Additionally, we prepaid various contracts totaling $27,000 for services that will be rendered in future periods and made payments of security deposits, real estate commissions and prepaid rent totaling $44,000. During the six months ended June 30, 2015, we experienced significant sales growth when compared to prior periods. However, we cannot be sure that our revenues from product sales will continue to grow or support our anticipated growth of related expenses. Accordingly, we anticipate needing to raise additional capital through equity and/or debt financing in order to fund our operations going forward. No assurance can be given that we will be successful in raising the required additional capital or that such capital will be available at terms agreeable to our Company or at all.

On June 2, 2015, the Company entered into a stock purchase agreement with an unaffiliated accredited investor for the sale of 100,000 shares of common stock at $2.00 per share, resulting in cash proceeds totaling $200,000. In determining the sale price of the shares, management took into consideration the fact that the shares include a lock-up agreement whereby those shares may not be sold for a period of 12 months and for a period commencing on the next day after the 12 month period and continuing for 12 consecutive 30 day periods, the investor shall not sell any shares, except in an amount not to exceed 8.33% of the total shares purchased.

On March 31, 2015 (the “Closing”), we entered into a stock purchase agreement with a current shareholder of the Company (the “Buyer”) resulting in the issuance of 50,000 shares of common stock to the shareholder for proceeds of $50,000. The Buyer had the option to purchase an additional 60,000 shares of common stock at $1 per share within 45 days of the Closing. On May 8, 2015, the Buyer exercised his option to purchase the remaining shares under the stock purchase agreement and accordingly, we issued the Buyer an additional 60,000 shares of our common stock for cash proceeds of $60,000. In issuing these shares we relied on an exemption from registration under federal securities laws pursuant to Section 4(a)(2) of the Securities Act of 1933. These shares are subject to a lock-up agreement whereby those shares may not be sold for a period of 18 months following the closing(“Lock Up Period”). Additionally, for a period commencing after the end of the Lock Up Period and continuing for 12 consecutive 30 day periods, the shareholder shall not sell any of these shares, except in an amount not to exceed 8.33% of the total shares acquired under the securities purchase agreement per 30 day period.

During the fourth quarter of 2014, we entered into three convertible promissory notes totaling $375,000. Proceeds from the notes were used primarily to purchase a license with kathy ireland Worldwide, Inc. (see discussion in Part 1. Item 2 “Strategic Relationships and Licensing Arrangements”). On December 29, 2014, we completed the private sale of our securities which consisted of the sale of 2,000,000 shares of our common stock in exchange for cash proceeds totaling $2,000,000, including (a) $1,625,000 of cash and (b) conversion of the notes in the principal amount of $375,000. Proceeds totaling $350,000 were used as payment to Ms. Kurland in accordance with the aforementioned Indemnity Agreement and $75,000 were used as repayment of a short term loan associated with the license with kathy ireland Worldwide, Inc.

As of the date of the Quarterly Report, the Company has entered into Advisory Board agreements (“Advisory Agreements”) with five medical professionals whom the Company believes are leaders in their respective fields. The Advisory Agreements are for a period of three years and will begin expiring in December 2017. The Advisory Agreements provide for up to 50,000 sign on shares vesting over an 18 month period, base compensation of $3,000 per month and up to 50,000 shares of common stock per annum issued on the anniversary of the effective date of the agreement. The Advisory Board members are required to attend two Advisory Board meeting per year for which they will be compensated $2,000 - $6,000 per meeting plus travel expenses.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Off-Balance Sheet Arrangements

Inflation

Inflation and changing prices have had no material effect on our net sales and revenues or on our income from continuing operations over our two most recent fiscal years.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to the fair market value of our assets and accrued stock-based compensation expense. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimates and judgments, management employs critical accounting policies.

For a description of our critical accounting policies, please see Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2014. There have not been any material changes to our critical accounting policies since December 31, 2014.

ITEM 3:

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation.

ITEM 4:

CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company's management, including the Company's Chief Executive Officer ("CEO") and the Company's Acting Chief Financial Officer ("Acting CFO"), of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of June 30, 2015. Based upon that evaluation, the Company's CEO and Acting CFO concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2015 due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review.

Management is in the process of determining how best to change our current system and implement a more effective system to insure that information required to be disclosed in the reports that we file or submit under the Exchange Act have been recorded, processed, summarized and reported accurately. Our management intends to develop procedures to address the current deficiencies to the extent possible given limitations in financial and manpower resources. While management is working on a plan, no assurance can be made at this point that the implementation of such controls and procedures will be completed in a timely manner or that they will be adequate once implemented.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the six months ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

copyright infringement,
interference with contract,
intentional interference with prospective economic advantage,
negligent interference with prospective economic advantage, and
conspiracy.

ITEM 1A:

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Quarterly Report, before making an investment decision. Our future operating results may vary substantially from anticipated results due to a number of risks and uncertainties, many of which are beyond our control. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. The following discussion highlights some of these risks and uncertainties and the possible impact of these risks on future results of operations. If any of the following risks occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, the market value of our stock could decline substantially and you could lose part or all of your investment.

RISKS RELATED TO OUR BUSINESS

Our products and product candidates may not achieve or maintain widespread market acceptance.

We may not achieve or maintain widespread market acceptance of our products or product candidates among physicians, patients or healthcare providers. Our products are highly susceptible to physician and patient preference and market acceptance. We have a limited history of promoting our cosmeceutical products. We recently began actively marketing and our marketing efforts are focused primarily on dermatologists and plastic surgeons.

We believe that market acceptance of our products will depend on many factors including:

· The perceived advantages of our products over competing products;

· The effectiveness of our sales and marketing efforts;

· The convenience and ease of administration of our products;

· The safety and efficacy of our products and the prevalence and severity of adverse side effects;

· The availability and success of alternative treatments;

· Our product pricing and cost effectiveness;

· Publicity concerning our products, product candidates or competitive products;

· Whether or not patients routinely use our products, refill prescriptions and purchase additional product, and

· Our ability to respond to changes in physician and patient preferences for the treatment of dermatological conditions and the improvement of the appearance of skin.

If our products fail to achieve or maintain market acceptance or if new products or technologies are introduced by others that are more favorably received than our products, are more cost effective or that otherwise render our products obsolete, we may experience a decline in the demand for our products.

If we are unable to market and sell our products successfully, our business, financial condition, results of operation and future growth would suffer. Our ability to compete depends upon the success of our business development activities and our ability, and the ability of our collaborators, to innovate, develop and commercialize new products and product enhancements, as well as to identify new markets for our products

Our business strategy requires us to develop or acquire new and innovative applications of our products, identify new markets for our existing products, and develop or acquire new technology. We are currently developing products for the treatment of burns and exploring several delivery technologies to improve our existing products. However, our development efforts may not lead to new commercial products. To successfully expand our product offerings, we must:

Develop or acquire new products that either add to or significantly improve our current product lines;

Convince our target customers that any new cosmeceutical products or line extensions would be an attractive revenue-generating addition to their practices;

Protect our products with defensible intellectual property; and

Satisfy and maintain all regulatory requirements for commercialization.

The process of developing product candidates involves a high degree of risk and may take several years. Product candidates we may acquire or license in the future that appear promising in the early phases of development may fail to reach the market for several reasons, including:

Pharmaceutical product candidates may fail to receive regulatory approvals required to bring the products to market;

Manufacturing costs or other factors may make our pharmaceutical and cosmeceutical product candidates uneconomical;

The proprietary rights of others and their competing products and technologies may prevent our product candidates from being commercialized;

Success of pharmaceutical product candidates in nonclinical and early clinical studies does not ensure that later stage clinical trials will be successful;

The length of time necessary to complete clinical trials and to submit an application for marketing approval of pharmaceutical product candidates for a final decision by a regulatory authority varies significantly and may be difficult to predict; and

Developing pharmaceutical and cosmeceutical product candidates is very expensive and will have a significant impact on our ability to generate profits.

We may be unable to continue to develop new products, enhancements to our existing products and other technologies in the near term, if at all, in part because new products or enhancements to our existing products must meet regulatory standards and receive requisite regulatory approvals.

Our failure to introduce new products or enhancements to our existing products for any one of these reasons could adversely affect our expected growth rate and adversely affect our overall business and financial results.

Our marketed products and our products under development could be rendered obsolete by technological or medical advances.

The development of medical advances to treat the conditions that our products are designed to address may render our marketed products and our products under development obsolete or uneconomical. The enhancement of the appearance of skin, the regeneration of hair growth and the treatment of burns, acne or other skin disorders are the subjects of active research and development by many potential competitors, including major pharmaceutical companies, specialized biotechnology firms, universities and other research institutions, as well as other major cosmeceutical companies which develop wrinkle reduction or age defying skin and hair care products. While we intend to expand our technological capabilities to remain competitive, research and development by others may render our technology or products obsolete or noncompetitive or result in treatments superior to any therapy we develop.

Technological advances affecting costs of production also could adversely affect our ability to sell products. Our products could become more expensive to produce, or not competitive, which would decrease our revenues and adversely affect our results of operations and financial condition.

During the six months ended June 30, 2015, the majority of our revenues were derived from two wholesale distributors. The loss of the distributors could have a material negative effect on our financial condition.

If we breach any of our key license or supply agreements, we could lose exclusivity rights or the agreements could be terminated.

We have an international licensing agreement with kiWW for all cosmetic products for a term of eight years. These rights are important to our business, and any breach of the related agreements could result in a termination of the respective rights, which, in turn, would prevent us from marketing the affected products or developing the affected product candidates. Our agreements with kiWW require milestone and royalty payments, minimum revenue requirements or minimum annual royalty payments and other obligations. If we have insufficient demand for these products or otherwise fail to meet the minimum purchase requirements or any of the other requirements set forth in these agreements, we could lose the exclusive nature of our right to market products under the kiWW brand.

If we fail to comply with any of the requirements under our key license and supply agreements, we may lose exclusive rights under these agreements or they may be terminated in their entirety. In that event, others could obtain rights to sell products that compete directly with ours and our revenues and market share would decrease. The loss of any rights under any of our license and supply agreements would adversely affect our ability to sell our products and adversely affect our revenues and results of operations

We rely on third parties to perform many necessary commercial services for our products, including services related to the distribution, storage, transportation and regulatory monitoring of our pharmaceutical products. We rely on third parties to perform a variety of functions related to the sale and distribution of our cosmeceutical products. These services include distribution, logistics management, inventory storage and transportation, invoicing and collections, the key aspects of which are out of our direct control. If any third-party service provider fails to comply with applicable laws and regulations, fails to meet expected deadlines or otherwise does not carry out its contractual duties to us, our ability to deliver products to meet commercial demand would be significantly impaired. In addition, we may retain one or more third parties to perform various regulatory monitoring services for our products, including adverse event reporting, safety database management and other product maintenance services. If the quality or accuracy of the data maintained by these regulatory service providers is insufficient, our ability to continue to market our approved products could be jeopardized or we could be subject to regulatory sanctions.

If our competitors develop and market products faster than we do or if the products of our competitors are considered more desirable than ours, revenues for any of our products or product candidates that may be approved for marketing will not develop or grow.

The dermatology market in particular, is highly competitive and includes a number of established, large and mid-sized pharmaceutical and cosmeceutical companies, as well as smaller emerging companies and specialty pharmaceutical and cosmeceutical companies, whose activities are focused on our target markets and areas of expertise. We face, and will continue to face, competition for our products and in the commercialization, development, licensing and discovery of our product candidates, which could severely impact our ability to achieve significant market acceptance of our products and product candidates. Furthermore, new developments, including the development of other drug technologies, delivery methods and improved formulations, occur in the pharmaceutical industry at a rapid pace. These developments may render our currently marketed products and product candidates or technologies obsolete or noncompetitive.

Compared to us, many of our competitors and potential competitors have substantially greater:

	•		Capital resources;
	•		Research and development resources, including personnel and technology;
	•		Regulatory experience;
	•		Clinical trial experience; and
	•		Manufacturing, distribution and sales and marketing experience.

As a result of these factors, our competitors may obtain regulatory approval of their pharmaceutical products more rapidly than us. Our competitors may obtain patent protection or other intellectual property rights that limit our ability to develop or commercialize our product candidates or technologies. Our competitors may also develop pharmaceutical and cosmeceutical products that are more effective and less costly than ours and may also be more successful than us in manufacturing and marketing their products.

Other competitors may invest significant amounts in advertising and marketing their products, including through television and other direct-to-consumer methods.

It is possible that our competitors may be able to reduce their cost of production so that they can aggressively price their products and secure a greater market share to our detriment. Our competitors may also be able to attract and retain qualified personnel and to secure capital resources more effectively than we can. Any of these events could adversely affect our ability to compete and our results of operations could suffer.

If we are unable to attract and retain key personnel, our business will suffer.

We currently have ten full-time and two part-time employees. Our success depends on our continued ability to attract, retain and motivate highly qualified management, business development, sales and marketing, manufacturing, product development and other personnel. We may not be able to recruit and retain qualified personnel, particularly for senior sales and marketing and research and development positions, in the future due to intense competition for personnel among businesses like ours, and the failure to do so could have a significant negative impact on our future product revenues and business results. Our success depends on a number of key management and technical personnel, including Ali Kharazmi, our President and Chief Executive Officer, Saeed Kharazmi, our Chairman of the Board, Acting Chief Financial Officer, and Sanjay Dhar, Ph.D, our Director of Research and Development. We are not aware of any present intention of these persons or any of our other executive officers to leave our company. In addition, we do not have “key person” insurance policies on any of our executive officers that would compensate us for the loss of their services. If we lose the services of one or more of these individuals, replacement could be difficult and may take an extended period of time and could impede significantly the achievement of our business objectives. This may have a material adverse effect on our results of operations and financial condition.

Our products and product candidates may cause undesirable side effects that could limit their use.

Although rare, among the reported side effects for our cosmeceutical products are skin irritation and skin rash. Although these side effects generally are not severe, they may limit the use of our products, particularly if physicians or patients perceive the risks to outweigh the benefits or the side effects of competitive products to be less significant. If more severe side effects associated with any of our cosmeceutical products were to be reported or observed, we could be required to suspend our marketing of the products, conduct additional safety tests and potentially cease the sale of the products. In addition, we face the potential for product liability claims from any patients who experience side effects, whether from our pharmaceutical products or our cosmeceutical products and whether or not any action is taken by a regulatory authority.

Undesirable side effects caused by our product candidates could interrupt, delay or halt our development programs, including clinical trials, and could result in the denial of any required regulatory approval by the FDA or other regulatory authorities.

We may face liability and indemnity claims that could result in unexpected costs and damage to our reputation.

Our business exposes us to potential liability risks that arise from the testing, manufacture and sale of our pharmaceutical and cosmeceutical products. Plaintiffs in the past have received substantial damage awards against pharmaceutical companies based upon claims for injuries allegedly caused by the use of their products. Although we currently maintain product liability insurance, there is no guarantee that any claims brought against us would be within our existing or future insurance policy coverage or limits. Any judgment against us that is in excess of our policy limits would have to be paid from our cash reserves, which would reduce our capital resources. Further, we may not have sufficient capital resources to pay a judgment, in which case our creditors could levy against our assets. Also, it may be necessary for us to recall products that do not meet approved specifications, which would result in adverse publicity, potentially significant costs in connection with the recall and a loss of revenues. Any product liability claim or series of claims brought against us could harm our business significantly, particularly if a claim resulted in adverse publicity or damage awards outside or in excess of our insurance policy limits.

Failure to adequately comply with information security policies or to safeguard against breaches of such policies could adversely affect our operations and could damage our business, reputation, financial position and results of operations.

In the process of making sales using consumer credit cards as a method of payment, we may handle and transfer such information as part of our business. These activities are subject to laws and regulations, as well as industry standards, in the United States and other jurisdictions in which our products and services are available. These requirements, which often differ materially and sometimes conflict among the many jurisdictions in which we operate, are designed to protect the privacy of consumers’ personal information and to prevent that information from being inappropriately used or disclosed. We maintain and review technical and operational safeguards designed to protect this information and generally require others with whom we work to do so as well. However, despite those safeguards, it is possible that hackers, employees acting contrary to our policies, third-party agents or others could improperly access relevant systems or improperly obtain or disclose data about our consumers, or that we may be determined not to be in compliance with applicable legal requirements and industry standards for data security, such as the Payment Card Industry guidelines. A breach or purported breach of relevant security policies that compromises consumer data or determination of non-compliance with applicable legal requirements or industry standards for data security could expose us to regulatory enforcement actions, card association or other monetary fines or sanctions, or contractual liabilities, limit our ability to provide our products and services, subject us to legal action and related costs and damage our business reputation, financial position, and results of operations.

Changes in economic conditions could materially affect our ability to maintain or increase sales.

The cosmeceutical industry depends on consumer discretionary spending. The United States in general or the specific markets in which we operate may suffer from depressed economic activity, recessionary economic cycles, higher fuel or energy costs, low consumer confidence, high levels of unemployment, reduced home values, increases in home foreclosures, investment losses, personal bankruptcies, reduced access to credit or other economic factors that may affect consumers discretionary spending. Economic conditions may remain volatile and may continue to depress consumer confidence and discretionary spending for the near term. Negative economic conditions might cause consumers to make changes to their discretionary spending behavior, including spending currently made on our cosmeceutical line of products. If such sales decrease, our profitability could decline as we spread fixed costs across a lower level of sales and this could materially adversely affect our business, financial condition or results of operations.

Our business is subject to intense competition and we may be unable to compete effectively against entrenched companies with larger resources and established channels of distribution.

Competition from other cosmeceutical businesses could impact sales and seriously harm our business, financial condition and results of operations. We strive to provide direct and indirect benefits to our distributors that are superior to, or competitive with, other cosmeceutical companies. If we are unable to provide our distributors with adequate benefits, or if any significant number of our distributors are not successful, we may be unable to maintain or renew our contractual relationships with distributors, causing our business, financial condition and results of operations to suffer.

The cosmeceutical industry in which we operate is highly competitive and increased competition could reduce our sales and profitability.

We compete in different markets within the cosmeceutical industry on the basis of the uniqueness of our product offerings, the quality of our products, customer service, price and distribution. Our markets are highly competitive. Our competitors vary in size and many may have greater financial and marketing resources than we do. If we cannot maintain quality and pricing that are comparable or superior to our competitors, we may not be able to grow our revenues and operating profits and we may lose market share. Competitive conditions could result in our experiencing reduced revenues, gross margins and operating results and could cause an investor in our Company to lose a substantial amount or all of its investment in our Company.

The loss of suppliers or shortages in ingredients could harm our business.

We acquire ingredients and products from third-party suppliers and manufacturers. A loss of any of these suppliers and any difficulties in finding or transitioning to alternative suppliers could harm our business. In addition, we obtain some of our products from sole suppliers that own or control the product formulations, ingredients, or other intellectual property rights associated with such products. In the event we are unable to renew these contracts, we may need to discontinue some products or develop substitute products, which could harm our revenue. In addition, if we experience supply shortages or regulatory impediments with respect to the raw materials and ingredients we use in our products, we may need to seek alternative supplies or suppliers and may experience difficulties in finding ingredients that are comparable in quality and price. Some of our products incorporate products that may have limited supplies. If demand exceeds forecasts, we may have difficulties in obtaining additional supplies to meet the excess demand. If we are unable to successfully respond to such issues, our business could be harmed.

FINANCIAL RISKS

We have a limited operating history and investors will have no ability to gauge market acceptance for our products or the ability of management to execute on our business plan.

We are an early-stage company with a limited operating history and limited revenues derived from our operations. We began commercial sales of our cosmeceutical products in March 2014 and sales from the NuGene Line represent less than 40% of our total sales during 2014. Our operations to date have been primarily focused on our formation, the hiring of our management team, acquiring, licensing and developing our technology and products, building and expanding our sales force, marketing department and investor relations and preparing for and commencing the commercial launch of our products.

It is difficult to predict future performance and our success is dependent upon a number of factors over which we have limited control. As a result, it is difficult to predict our quarterly financial results and they are likely to fluctuate significantly. We are a relatively new company with a limited operating history and our sales prospects are uncertain. In particular, we began selling our cosmeceuticals in March 2014 and have yet to begun active marketing. We also have relatively limited experience selling our other products. Accordingly, we cannot predict with any certainty the timing or level of sales of our products in the future. If our quarterly sales or operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. In addition to the other factors discussed under these “Risk Factors,” specific factors that may cause fluctuations in our operating results include:

Demand and pricing for our products, including any change in wholesaler purchasing patterns for our pharmaceutical products;

Physician and patient acceptance of our products;

Timing of new product offerings, acquisitions, licenses or other significant events by us, our partners or our competitors;

Regulatory approvals and legislative changes affecting our cosmeceutical products;

Any interruption in the manufacturing or distribution of our products, including events affecting our third-party suppliers and any failure to comply with manufacturing specifications;

Changes in treatment practices of physicians or other providers that currently recommend our products;

Significant product returns and rebates;

Implementation of new or revised accounting or tax rules or policies;

Our ability to grow and maintain a productive sales force; and

The effect of competing technological and market developments.

Because we have a limited operating history we are subject to all of the risks and uncertainties of a new business.

We only initiated the rollout of the NuGene Line in 2013 and sales from the NuGene Line represented less than 40% of our total sales during 2014. Although we entered into a License Agreement with kiWW during November 2014, we have not yet been able to determine the impact that the License Agreement will have on our results of operations.

Because we have had only minimal operations during the past two years, we are subject to all of the risks and uncertainties normally associated with a new business, including potential manufacturing issues, difficulties establishing our marketing and distribution operations, lack of name recognition, lack of adequate capital, difficulties hiring and retaining qualified employees, and difficulties in complying with all applicable federal, state and local regulatory and administrative requirements. As a new company, we expect to incur operating losses until, if ever, we successfully release a line of products that will generate enough revenues to become profitable or thereafter maintain profitability. There is no assurance that we will be able to validate and market products that will generate enough revenues for us to become profitable or thereafter maintain profitability. As a result, the Company cannot predict when, if ever, it might achieve profitability and cannot be certain that it will be able to sustain profitability, if achieved. Our lack of an operating history may make it difficult for you to evaluate our business prospects in connection with an investment in our securities.

We have had operating losses since inception and expect to continue to incur net losses for the near term.

As of June 30, 2015, we had an accumulated deficit of approximately $2,360,000 and we have reported a net loss of approximately $1,012,000 for the six months ended June 30, 2015. Unless our sales revenues increase significantly, we anticipate that we will continue to incur net losses in the near term.

If we cannot achieve and maintain profitable operations, we will need to raise additional capital to continue our operations, which may not be available on commercially reasonable terms, or at all, and which may dilute your investment.

Continuing profitability will require us to increase our revenues and manage our product, operating and administrative expenses. If we are unable to generate sufficient revenues to pay our expenses and our existing sources of cash and cash flows are otherwise insufficient to fund our activities, we will need to raise additional funds to continue our operations. We do not have any arrangements in place for additional funds. If needed, those funds may not be available on favorable terms, or at all. Furthermore, if we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. If we are unsuccessful in achieving profitability, and we cannot obtain additional funds on commercially reasonable terms or at all, we may be required to curtail significantly or cease our operations, which could result in the loss of all of your investment in our stock.

Should we be successful in growing our revenues according to our operating plans, we may not be able to manage our growth effectively, which could adversely affect our operations and financial performance.

The ability to manage and operate our business as we execute our growth strategy will require effective planning. Significant rapid growth could strain our internal resources, leading to a lower quality of customer service, reporting problems and delays in meeting important deadlines resulting in loss of market share and other problems that could adversely affect our financial performance. Our efforts to grow could place a significant strain on our personnel, management systems, infrastructure, liquidity and other resources. If we do not manage our growth effectively, our operations could be adversely affected, resulting in slower growth, critical shortages of cash and a failure to achieve or sustain profitability.

We do not expect to pay dividends for the foreseeable future, and we may never pay dividends and, consequently, the only opportunity for investors to achieve a return on their investment is if a trading market develops and investors are able to sell their shares for a profit or if our business is sold at a price that enables investors to recognize a profit.

We currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends for the foreseeable future. Our payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the time. In addition, our ability to pay dividends on our common stock may be limited by state law. Accordingly, we cannot assure investors any return on their investment, other than in connection with a sale of their shares or a sale of our business. At the present time there is a limited trading market for our shares. Therefore, holders of our securities may be unable to sell them. We cannot assure investors that an active trading market will develop or that any third party will offer to purchase our business on acceptable terms and at a price that would enable our investors to recognize a profit.

Significant differences between actual and estimated demand for our products could adversely affect us.

If we overestimate demand, we may be required to write off inventories and increase our reserves for product returns or liabilities to customers in future periods. If we underestimate demand, we may not have sufficient inventory of products to ship to our customers. Our cosmeceutical products have expiration dates that generally range from 24 to 36 months from the date of manufacture. Judgment is required in estimating these reserves. The actual amounts could be materially different from our estimates, and differences will need to be accounted for in the period in which they become known. If we determine that the actual amounts exceed our reserve amounts, we will record a charge to earnings to approximate the difference. A material reduction in earnings resulting from a charge could have a material adverse effect on our net income, results of operations and financial condition.

We will need to raise additional funds to pursue our growth strategy or continue our operations and we may be unable to raise capital when needed.

We believe that our current cash and cash equivalents will be sufficient to fund our operations through 2015. However, we have based this estimate on assumptions that may prove wrong, and we could spend our available financial resources much faster than we currently expect. We expect we will need to raise additional funds to finance our operations and to fund product development programs, sales and marketing initiatives for our current marketed products. Factors affecting our product development expenses include, but are not limited to:

The number of our products in early-stage clinical development;

Our licensing or other partnership activities, including the timing and amount of related development funding, licensee fees or milestone payments;

The number and outcome of clinical trials conducted by us and/or our collaborators; and

Our future levels of revenue.

We expect to satisfy our future cash needs through public or private equity offerings, debt financings or collaboration, licensing and other similar arrangements, as well as through interest earned on cash balances. Additional funding may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital by issuing equity securities, our stockholders’ ownership will be diluted.

If we raise additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish potentially valuable rights to our current products, potential products or proprietary technologies, or grant licenses on terms that are not favorable to us.

If adequate funds are not available, our ability to achieve profitability or to respond to competitive pressures would be significantly limited and we may be required to delay, significantly curtail or eliminate the sales of one or more of our current products and/or the development of one or more of our potential products.

CORPORATE AND OTHER RISKS

Our executive officers, directors and principal stockholders beneficially own or control a substantial portion of our outstanding common stock, which may limit your ability and the ability of our other stockholders, whether acting alone or together, to propose or direct the management or overall direction of our Company.

Additionally, this concentration of ownership could discourage or prevent a potential takeover of our Company that might otherwise result in an investor receiving a premium over the market price for his shares. A substantial portion of our outstanding shares of common stock is beneficially owned and controlled by a group of insiders, including our directors and Chief Executive Officer. Accordingly, our principal stockholders together with our directors, Chief Executive Officer and insider shareholders would have the power to control the election of our directors and the approval of actions for which the approval of our stockholders is required. If you acquire shares of our common stock, you may have no effective voice in the management of our Company. Such concentrated control of our Company may adversely affect the price of our common stock. Our principal stockholders may be able to control matters requiring approval by our stockholders, including the election of directors, mergers or other business combinations. Such concentrated control may also make it difficult for our stockholders to receive a premium for their shares of our common stock in the event we merge with a third party or enter into different transactions which require stockholder approval. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock.

Our Chief Executive Officer and our Acting Chief Financial Officer have no prior experience in these roles in a public company.

To serve in the roles of officer and/or director for a public company, an individual needs to be aware of responsibilities in addition to those shouldered by the leader of a private company. Among such additional responsibilities, a senior executive officer must be able to communicate fairly and effectively with the stakeholders of a public company, be aware of the controls required to be maintained by a public company and act in accordance with the legal requirements incumbent upon such senior executives and directors. Neither of these persons, who currently also represent the majority of our directors, have such experience, the absence of which could increase our exposure to untimely compliance with applicable regulation that could result in possible added liability and cost to the material detriment of our operations and financial interests.

We do not have an Audit Committee.

As of the date of this Quarterly Report, we do not have an independent Audit Committee. An Audit Committee qualitatively enhances a company’s internal controls over financial reporting. Among its functions, independent Audit Committees review the financial reporting, internal controls safeguarding Company assets, interact with auditors, may oversee material financial decisions and provide a sounding board for individuals who believe that there are irregularities in a Company’s accounting policies and procedures. With our lack of an Audit Committee at this time, we run a greater risk that a significant error or irregularity could occur that could be materially damaging to our shareholders.

Issuances of our Series A Preferred Stock or other authorized shares of preferred stock may make it more difficult for a third party to effect a change-of-control.

Our articles of incorporation authorize the Board of Directors to issue up to 25,000,000 shares of "blank check" preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors without further action by the stockholders. These terms may include preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. In connection with the Merger we issued, in addition to common stock, 1,917,720 shares of Series A Preferred Stock to NuGene's two founders. The Series A Preferred Stock is initially convertible into common stock at a ratio of one to one, has the right to elect a majority of the board of directors and has in connection with any other vote of shareholders three votes for every vote available to the common stock. These outstanding shares of Series A Preferred Stock diminish and any future issuances of other series of preferred stock could further diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, the Series A Preferred Stock could be used to restrict our ability to merge with, or sell assets to, a third party. The Series A Preferred Stock specifically, and the ability of the Board of Directors generally, to issue preferred stock make it more difficult, and could delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock. The summary description of the Series A Preferred Stock contained in this Quarterly Report is qualified in its entirety by reference to the Certificate of Designations filed with Secretary of State of Nevada on December 24, 2014 and included in our Current Report on Form 8-k filed with the SEC on January 6, 2015.

As a result of the acquisition, our operations will incur increased costs of being a public company.

In reviewing the past operations of NuGene and future prospects, investors should recognize that we will incur significant legal, accounting and other expenses that NuGene did not incur as a private company, particularly if we are no longer an "emerging growth company" as defined under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, as well as under the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), and the JOBS Act, have created uncertainty for public companies and increased costs and time that boards of directors and management must devote to complying with these rules and regulations. The Sarbanes-Oxley Act and related rules of the U.S. Securities and Exchange Commission, or SEC, and the NASDAQ Global Select Market regulate corporate governance practices of public companies. We expect compliance with these rules and regulations to increase our legal and financial compliance costs and lead to a diversion of management time and attention from revenue generating activities. For example, we may be required to adopt new internal controls and disclosure controls and procedures. In addition, we will incur additional expenses associated with our SEC reporting requirements.

For as long as we remain an "emerging growth company" as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies."

These exceptions provide for, but are not limited to, relief from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved and an extended transition period for complying with new or revised accounting standards. We may take advantage of these reporting exemptions until we are no longer an "emerging growth company." We may remain an "emerging growth company" for up to five years. To the extent we use exemptions from various reporting requirements under the JOBS Act, we may be unable to realize our anticipated cost savings from those exemptions.

Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act for so long as we are an "emerging growth company." Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we file with the SEC as a public company, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an "emerging growth company."

CAPITAL MARKET RISKS

The recent public market for our shares has been and may continue to be volatile. This volatility may affect the ability of our investors to sell their shares as well as the price at which they sell their shares.

The market price for our shares may be significantly affected by factors such as variations in the volume of trading activity, quarterly and yearly operating results, general trends in the markets we serve, press releases announcing developments, and changes in state or federal regulations affecting us and our industry. Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies. Such broad market fluctuations may adversely affect the market price of our common stock, if a market for it develops.

The application of the “penny stock” rules to our common stock could limit the trading and liquidity of the common stock, adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

As long as the trading price of our common stock is below $5 per share, the open-market trading of our common stock will be subject to the “penny stock” rules, unless we otherwise qualify for an exemption from the “penny stock” definition. The “penny stock” rules impose additional sales practice requirements on certain broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets, excluding principal residence, in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). These regulations, if they apply, require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the associated risks. Under these regulations, certain brokers who recommend such securities to persons other than established customers or certain accredited investors must make a special written suitability determination regarding such a purchaser and receive such purchaser’s written agreement to a transaction prior to sale. These regulations may have the effect of limiting the trading activity of our common stock, reducing the liquidity of an investment in our common stock and increasing the transaction costs for sales and purchases of our common stock as compared to other securities. The stock market in general and the market prices for penny stock companies in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our stock, regardless of our operating performance. Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include 1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; 2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; 3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; 4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and 5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices could increase the volatility of our share price.

We may not be able to attract the attention of major brokerage firms, which could have a material adverse impact on the market value of our common stock.

Security analysts of major brokerage firms may not provide coverage of our common stock since there is no incentive to brokerage firms to recommend the purchase of our common stock. The absence of such coverage limits the likelihood that an active market will develop for our common stock. It will also likely make it more difficult to attract new investors at times when we require additional capital.

Future sales of our equity securities could put downward selling pressure on our securities, and adversely affect the stock price.

There is a risk that this downward pressure may make it impossible for an investor to sell his or her securities at any reasonable price, if at all. Future sales of substantial amounts of our equity securities in the public market, or the perception that such sales could occur, could put downward selling pressure on our securities, and adversely affect the market price of our common stock.

Risks Related to Regulatory Matters

While we believe that that our principal cosmeceutical products and product candidates do not require FDA approval as new drugs, the FDA could disagree and we may be required to conduct clinical trials to establish efficacy and safety or cease to market these products.

Our cosmeceutical products are marketed without FDA approval on the basis that they are generally recognized as safe and effective for their intended use and thus do not require new drug approval. The FDA has not challenged this position. The FDA may at any time disagree with our position for a variety of reasons, including new information about the particular product or its active ingredients, how the product is promoted, if another company obtains FDA approval for a prescription drug with the same active ingredient, or based on a change of FDA regulatory policy. This could require us to seek new drug approval for these products to remain on the market or to withdraw a product until required clinical trials are performed and new drug approval is obtained.

If the active ingredients of the products are finally determined by the FDA not to be generally recognized as safe and effective for OTC use, the FDA may seek to apply those findings to prescription products as well, leading to potential objections to the continued marketing of the products or a demand that marketing continue only on the basis of a new drug approval. Either of these outcomes could affect the way our products are marketed or our ability to market them at all. Further, the FDA could decide that growth factors derived from human adipose stem cells do not come within this policy and thus must seek new drug approval to remain on the market or must be withdrawn until approval is obtained.

Our pharmaceutical products under development may not be approved by the FDA or foreign regulatory authorities, and any failure or delay associated with our product development and clinical trials or obtaining regulatory approval of these products would increase our product development costs and time to market. We face substantial risks of failure inherent in developing pharmaceutical products. The pharmaceutical industry is subject to stringent regulation by many different agencies at the federal, state and international levels. Our pharmaceutical products must satisfy rigorous standards of safety and efficacy before the FDA approves them, and before any foreign regulatory authorities approve them for commercial use in any countries outside the U.S. where we decide to market them. Even if a regulatory filing is accepted, the FDA or foreign regulatory authorities may request additional information from us, including data from additional clinical trials, and, ultimately, may not grant marketing approval for some of our products or may grant approval only under conditions which are less commercially attractive than anticipated. To the extent that these products do not perform successfully in our planned pivotal clinical trials, we may need to develop alternative candidates. Product development is generally a long, expensive and uncertain process. Successful development of our new pharmaceutical product formulations, including our burn cream will depend on many factors, including:

	•	Our ability to select key components, establish a stable formulation and optimize characteristics;
	•	Our ability to develop a formulation that demonstrates our intended safety and efficacy profile; and
	•	Our ability to transfer from an early-stage company to a commercial-scale operations and the costs associated with commercial manufacturing.

If we are unable to develop suitable clinical formulations of our pharmaceutical products or are significantly delayed in doing so, our ability to commercialize these products will be adversely affected. Once we have manufactured a formulation that we believe is suitable for pivotal clinical testing, we will need to complete our clinical testing, and failure can occur at any stage of testing. These clinical tests must comply with FDA and other applicable regulations. We may suffer significant setbacks in advanced clinical trials, even after showing promising results in earlier trials. The results of later clinical trials may not replicate the results of prior clinical trials. Based on results at any stage of clinical trials, we may decide to discontinue development of a product candidate. We, or the FDA, may suspend clinical trials at any time if the patients participating in the trials are exposed to unacceptable health risks or if the FDA finds deficiencies in our applications to conduct the clinical trials or in the conduct of our trials. Moreover, not all products in clinical testing will receive timely, or any, regulatory approval. Even if clinical trials are completed as planned, their results may not support our assumptions or our product claims. The clinical process may fail to demonstrate that our products are safe for humans or effective for intended uses. In addition, these failures could cause us to abandon a product entirely. If we fail to take any current or future product from the development stage to market, we will have incurred significant expenses without the possibility of generating revenues, and our business will be adversely affected.

Although we intend to add stem cell media to our SkinGuardian product and rely on its compliance with its previously issued TFM, FDA regulations may delay or make prohibitively uneconomical the marketing of any such product; the SkinGuardian product is not protected by patent and no assurance can be given that we will be able to launch products based on this IP or that if launched that these products will be acceptable in the markets we intend to serve.

Our SkinGuardian product as marketed under the TFM on First Aid Antiseptics (FR.56, No. 140 (1991)) is permitted to be manufactured, labeled, packaged and distributed without further FDA approval or review. Any alterations to the current formula, such as through the addition of a new active ingredient like stem cell medium, must continue to comply with the TFM or we must file a New Drug Application. Compliance with the TFM means adherence to active ingredient restrictions, Generally Recognized as Safe and Effective (“GRASE”) status of inactive ingredients, and labeling requirements. As of the date of this quarterly report, the FDA has not classified stem cell media as an active ingredient. Accordingly, we intend to add our stem cell media to the SkinGuardian product and market the formula under the TFM. The FDA may question the addition of the stem cell media to the SkinGuardian product if it is considered an inactive ingredient. Should such question arise, the FDA may rule that the stem cell media is in fact an active ingredient and require us to substantiate that the formulae remains in compliance with the TFM or file a New Drug Application. Such a ruling may result in additional costs to the Company to determine such compliance and the cessation of production, marketing and sale of the product until that time in which we are in compliance with the TFM.

We will be subject to ongoing regulatory review of products currently under development that may be marketed in the future.

Our pharmaceutical products under development will be subject to extensive regulation. These regulations will impact many aspects of our operations, including the manufacture, labeling, packaging, adverse event reporting, storage, advertising, promotion and record keeping related to the products. The FDA also may require post-marketing testing and surveillance to monitor the effects of approved products or place conditions on any approvals that could restrict the commercial applications of these products. In addition, the subsequent discovery of previously unknown problems with a product may result in restrictions on the product, including withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, injunctions against their distribution, disgorgement of money, operating restrictions and criminal prosecution.

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. Violations of the federal anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare programs. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions under the federal anti-kickback statute, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing, arranging for or recommending prescription or purchase may be subject to scrutiny if they do not qualify for a statutory exemption or safe harbor. Federal false claims laws prohibit any person from knowingly making, or causing to be made, a false claim to the federal government, or knowingly making, or causing to be made a false statement to have a false claim paid. The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines and imprisonment.

In addition, as part of the sales and marketing process, pharmaceutical companies frequently provide samples of approved drugs to physicians. This practice is overseen by the FDA and other governmental authorities under regulations that include, in particular, requirements concerning record keeping and control procedures. Any failure to comply with these regulations may result in significant criminal and civil penalties as well as damage to our credibility in the marketplace. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of these laws, which could have a material adverse effect on our business, financial condition and results of operations.

The regulatory status of our cosmeceutical products could change, and we may be required to conduct clinical trials to establish efficacy and safety or cease to market these products.

The Federal Food, Drug, and Cosmetic Act does not recognize “cosmeceuticals” as a category of products. We use the term “cosmeceuticals” as a marketing term to describe our non-prescription, cosmetic products. The FDA does not have a premarket approval system for cosmetic products outside of new color additive, and we believe we are permitted to market our cosmeceutical products and have them manufactured without submitting safety or efficacy data to the FDA. However, the FDA may in the future determine to regulate what we term as cosmeceuticals or the ingredients included in our cosmeceuticals as drugs or biologics, rather than cosmetics. If any of our products are deemed to be drugs or biologics, rather than cosmetics, we would be required to conduct clinical trials to demonstrate the safety and efficacy of our cosmeceutical products in order to continue to market and sell them. In such event, we may not have sufficient resources to conduct any required clinical trials and we may not be able to establish sufficient efficacy or safety data to resume the sale of our cosmeceutical products. Any inquiries by the FDA or any foreign regulatory authorities into the regulatory status of our cosmeceutical products and any related interruption in the marketing and sale of our cosmeceutical products could severely damage our brands and image in the marketplace, including our relationships with physicians and their patients.

If our manufacturers do not comply with U.S. and federal regulations, our supply of product could be disrupted or terminated.

Our manufacturers must comply with U.S. regulations and corresponding foreign standards, including the FDA’s current Good Manufacturing Practice regulations for drug manufacturing and processing, or cGMPs, applicable to the manufacturing processes related to prescription products, and their facilities must be inspected and approved by the FDA and other regulatory agencies as part of their business. We will have limited control over the FDA compliance of our third-party manufacturers. If any of our manufacturers fail to meet or are found to be non-compliant with the cGMPs or any other FDA requirements or similar regulatory requirements outside of the U.S., obtaining the required regulatory approvals, including from the FDA, to use alternative suppliers may be a lengthy and uncertain process. A lengthy interruption in the manufacturing of one or more of our products as a result of non-compliance could adversely affect our product inventories and supply of products available for sale which could reduce our sales, margins and market share, as well as harm our overall business and financial results. Additionally, the FD&C may hold labelers/specification developers (brands selling a product) criminally and civilly liable for the violations, acts, and omission of their manufacturers.

Under the FDCA, cosmetics, which we refer to as cosmeceuticals, are defined as articles applied to the human body to cleanse, beautify or alter the appearance. The manufacturing of cosmetics is subject to the misbranding and adulteration sections of the FDCA applicable to cosmetics. Cosmetics are not subject to premarket approval by the FDA but the product and ingredients must be tested to assure safety. If the product or ingredients are not tested for safety, a specific warning is required. The FDA monitors compliance of cosmetic products through random inspections of cosmetic manufacturers and distributors. The FDA utilizes an “intended use” doctrine to determine whether a product is a drug or cosmetic by the labeling claims made for the product. If a cosmetic product is intended for a disease condition or to affect the structure or any function of the human body, the FDA will regulate the product as a drug rather than as a cosmetic. The product will then be subject to all drug requirements under the FDCA. The labeling of cosmetic products is subject to the requirements of the FDCA, the Fair Packaging and Labeling Act and other FDA regulations.

We have only limited experience in regulatory affairs, which may affect our ability or the time we require to obtain necessary regulatory approvals. We have only limited experience in regulatory affairs, including the preparation and filing of applications to gain the regulatory approvals necessary for pharmaceutical product candidates. Moreover, some of the products that are likely to result from our product development, licensing and acquisition programs may be based on new technologies that have not been extensively tested in humans. As a result, we may experience a longer regulatory process in connection with obtaining regulatory approvals for any products that we develop, license or acquire.

If we move forward with production of an FDA regulated product, then our operations could be harmed if we are found not to be in compliance with Good Manufacturing Practices.

In the United States, FDA regulations on Good Manufacturing Practices and Adverse Event Reporting requirements require us and our vendors to maintain good manufacturing processes, including stringent vendor qualifications, ingredient identification, manufacturing controls and record keeping. The ingredient identification requirement, which requires us to confirm the levels, identity and potency of ingredients listed on our product labels within a narrow range, is particularly burdensome and difficult for us with respect to a products that contain many different ingredients. We are also required to report serious adverse events associated with consumer use of our products. Our operations could be harmed if regulatory authorities make determinations that we, or our vendors, are not in compliance with these regulations or public reporting of adverse events harms our reputation for quality and safety. A finding of noncompliance may result in administrative warnings, penalties or actions impacting our ability to continue selling certain products. In addition, compliance with these regulations has increased and may further increase the cost of manufacturing certain of our products as we work with our vendors to assure they are qualified and in compliance.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

If we are unable to obtain and maintain protection for our intellectual property, the value of our technology and products may be adversely affected, which would materially affect our business.

Patents. Our commercial success will continue to depend in part on the patent rights we plan to obtain related to future products we may market. Our success also depends on our and our licensors’, collaborators’, and suppliers’ ability to maintain these patent rights against third-party challenges to their validity, scope or enforceability of these patent rights.

Our patent position, and those of our licensors, collaborators and suppliers, is subject to the same uncertainty as other pharmaceutical and consumer product companies. Our patents and patent applications, and those of our licensors, collaborators and suppliers, may not protect our technologies and products because, among other things, our pending applications may not result in issued patents; we may develop additional proprietary technologies that are not patentable; patents issued to us, our licensors, collaborators or suppliers may not provide a basis for future commercially viable products; and patents issued to us, our licensors, collaborators or suppliers may not provide us with any competitive advantage, or may be challenged, circumvented, invalidated or rendered unenforceable by third parties. For example, the USPTO or the courts may deny, narrow or invalidate patent claims, particularly those that concern biotechnology and pharmaceutical inventions. Inventors, or third parties of whom we are unaware, may challenge the ownership of patents and applications we own, license or benefit from through supply agreements with our collaborators and suppliers. We, our licensors, collaborators and suppliers may not be successful in securing or maintaining proprietary or patent protection for our products, and protection that is secured may be challenged and possibly lost.

The formulation of our SkinGuardian product does not have patent protection.

We maintain no patent protection for the formulation of our SkinGuardian product and expect to protect our product formulations through a combination of maintaining trade secrets and securing non-disclosure agreements. However, no assurance can be given that we will be successful in doing so. We believe that SkinGuardian product will serve as a platform to manufacture various products with stem cell media and enable us to enter the market at a faster rate and lower cost due to its compliance with the TFM requirements for the SkinGuardian formulation. We provide no assurance that such products will be accepted by the marketplace nor do we provide assurance that others will not be able to duplicate and manufacture the SkinGuardian formulation as we have no patent protection.

Our competitors may develop products similar to ours using methods and technologies that are beyond the scope of our intellectual property rights.

Composition of matter patents on active pharmaceutical ingredients may provide protection for pharmaceutical products without regard to formulation or other type of limitation.

Our primary patent protection strategy consists of obtaining patents for the formulation and methods of manufacturing our products and product candidates when appropriate, in addition to our pending composition patent claims. Our competitors or other third parties, including generic drug companies, may challenge the scope, validity or enforceability of our patent claims. As a result, these patents may be narrowed in scope, invalidated or deemed unenforceable and may fail to provide us with any market exclusivity or competitive advantage even after significant investment in efforts to obtain and maintain a meaningful competitive patent position. Additionally, rights we issue to U.S. and foreign patents that we own or license will be limited to the terms of the patents in the respective countries where the patents issued.

We also may not be able to protect our intellectual property rights against third-party infringement, which may be difficult to detect, especially for infringement of patent claims for methods of manufacturing. If we become involved in any dispute regarding our intellectual property rights, regardless of whether we prevail, we could be required to engage in costly, distracting and time-consuming litigation that could harm our business. As a result of general uncertainties in the patent prosecution process, we cannot be sure that any additional patents will ever be issued. Issued patents generally require the payment of maintenance or similar fees; failure to make these payments could result in the unenforceability of patents not maintained.

Trade Secrets and Proprietary Know-how. We, our licensors, collaborators and suppliers also rely upon trade secrets, proprietary know-how and other technological innovation, particularly when patent protection is not appropriate or available. However, trade secrets are difficult to protect, and we have limited control over the protection of trade secrets used by our licensors, collaborators and suppliers. Although we attempt to protect our trade secrets by requiring our employees, consultants, advisors and current and prospective business partners to enter into confidentiality agreements prohibiting them from disclosing or taking our proprietary information and technology, these agreements may not provide meaningful protection for our trade secrets and proprietary know-how. If our employees or consultants breach these agreements, we may not have adequate remedies for any of these breaches. Further, third parties that are not parties to confidentiality agreements may obtain access to our trade secrets or know-how. Others may independently develop similar or equivalent trade secrets or know-how. If our confidential or proprietary information is divulged to third parties, including our competitors, our competitive position in the marketplace will be harmed and our ability to successfully penetrate our target markets could be severely compromised.

Trademarks. Our trademarks will continue to be important to our success and competitive position. We have received U.S. trademark registration for our corporate name, NuGene^®, and own or have rights to use our product and component names. We also have license regarding the use of Kathy Ireland^®who acts as our brand ambassador. We also will need to pursue trademark registration for any new trademarks that we select. We may not be able to secure any of our trademark registrations with the PTO or comparable foreign authorities. If we do not adequately protect our rights in our various trademarks from infringement, any goodwill that has been developed in those marks would be lost or impaired. We could also be forced to cease using any of our trademarks that are found to infringe upon or otherwise violate the trademark or service mark rights of another company, and, as a result, we could lose all the goodwill which has been developed in those marks and could be liable for damages caused by any infringement or violation.

Our ability to market our products may become subject to the intellectual property rights of third parties, and we may have to engage in costly litigation to enforce or defend challenges to our intellectual property by third parties, which may harm our results of operations, financial condition and cash flow.

Our commercial success will continue to depend in part on our ability, as well as the ability of our collaborators and suppliers, to make, use and sell our products without infringing the patents or proprietary rights of third parties. Our competitors, many of which have substantially greater resources than us and have made significant investments in competing technologies or products, may seek to apply for and obtain patents that will prevent, limit or interfere with our ability to make, use and sell products either in the U.S. or international markets. We may not be aware of all of the patents and other intellectual property rights of others potentially adverse to our interests that may be owned by third parties.

Our third-party suppliers may also be notified of alleged infringement, and potentially be sued for infringement of patents or other proprietary rights. We may have limited control or involvement over the defense of these claims, and these third parties could be subject to injunctions and temporary or permanent exclusionary orders in the U.S. or in the countries in which they are based. Because of the uncertainty inherent in any patent or other litigation involving proprietary rights, we, our licensors, collaborators or suppliers, may not be successful in defending claims of intellectual property infringement by third parties, which could have a material adverse effect on our results of operations. Regardless of the outcome of any litigation, defending the litigation may be expensive, time-consuming and distracting to management.

	•		pay actual damages, royalties, lost profits and/or increased damages and the third party’s attorneys’ fees, which may be substantial;
	•		cease the development, manufacture, use and/or sale of products that use the intellectual property in question through a court-imposed sanction called an injunction;
	•		expend significant resources to modify or redesign our products, manufacturing processes or other technology so that it does not infringe others’ intellectual property rights or to develop or acquire non-infringing technology, which may not be possible; or
	•		obtain licenses to the disputed rights, which could require us to pay substantial upfront fees and future royalty payments and may not be available to us on acceptable terms, if at all, or to cease marketing the challenged products.

Ultimately, we could be prevented from selling a product, commercializing a product candidate, or otherwise forced to cease some aspect of our business operations as a result of any intellectual property litigation. Even if we, our collaborators and suppliers are successful in defending an infringement claim, the expense, time delay, and burden on management of litigation and negative publicity could have a material adverse effect on our business.

We may be subject to claims that we, or our employees, have inadvertently or otherwise used or disclosed alleged trade secrets or other proprietary information of our employees' former employers.

We employ individuals who were previously employed at other personal care product or nutritional supplement companies, including our competitors or potential competitors. To the extent that our employees are involved in research areas that are similar to those in which they were involved with their former employers, we may be subject to claims that such employees have inadvertently or otherwise used or disclosed the alleged trade secrets or other proprietary information of the former employers. Litigation may be necessary to defend against such claims.

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

On June 3, 2015 we sold 100,000 shares of common stock in exchange for proceeds of $200,000 which will be used for general operating and marketing expenses.

The above issuance is exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

2.1		Agreement and Plan of Merger dated December 26, 2014, among the Company, NG Acquisition, Inc. and NuGene Inc. ⁽¹⁾
3.1		Certificate of Amendment of Articles of Incorporation of the Registrant, (increase of authorized, new class of preferred). ⁽¹⁾
3.2		Certificate of Amendment of Articles of Incorporation of the Registrant, name change.⁽¹⁾
4.1		Certificate of Designation of Series A Preferred Stock. ⁽¹⁾
10.1		Form of Lock Up Agreement-NuGene Shareholders⁽¹⁾
10.2		Form of Lock Up/Leak Out Agreement-- Stock Placement Investors⁽¹⁾
10.3		License Agreement between the Registrant and kathy ireland Worldwide, Inc. ⁽¹⁾
10.4		Sublease Agreement between the Registrant and Advanced Surgical Partners, Inc. ⁽¹⁾
10.5		Form of Convertible Promissory Note. ⁽¹⁾
10.6		Business Transfer and Indemnity Agreement, dated December 29, 2014, between the Registrant and Dena Kurland. ⁽¹⁾
10.7		Form of Stock Purchase Agreement (April 2015)⁽³⁾
10.8		Offer Letter to join Board of Directors between NuGene International, Inc. and Donna Queen⁽⁴⁾
21.1		List of subsidiaries of the Registrant. ⁽²⁾
31.1		Certification of Principal Executive Officer of NuGene International, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2		Certification of Principal Financial and Accounting Officer of NuGene International, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certifications of Principal Executive Officer and Principal Financial and Accounting Officer of NuGene International, Inc. pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

Included herein.

⁽¹⁾

Incorporated by reference to the registrant’s filing on a Form 8-K, filed with the Securities and Exchange Commission on January 6, 2015.

⁽²⁾

Incorporated by reference to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 30, 2015.

⁽³⁾

Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2015, filed with the Securities and Exchange Commission on May 15, 2015.

⁽⁴⁾

Incorporated by reference to the registrant’s filing on a Form 8-K, filed with the Securities and Exchange Commission on May 29, 2015.

Signatures

In accordance with Section 13 or 15(d) of the Exchange Act, the company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NuGene International, Inc. (Registrant)

Date: August 11, 2015	By:	/s/ ALI KHARAZMI
		Ali Kharazmi
		Chief Executive Officer
Date: August 11, 2015	By:	/s/ SAEED KHARAZMI
		Saeed Kharazmi, M.D.
		Acting Chief Financial Officer

NUGENE INTERNATIONAL, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)