Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Mar. 07, 2017 | Jun. 30, 2016 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Nemus Bioscience, Inc. | ||
Entity Central Index Key | 1,516,551 | ||
Trading Symbol | nmus | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Common Stock, Shares Outstanding | 25,729,663 | ||
Entity Public Float | $ 7,377,546.40 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2,016 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 64,820 | $ 3,221,209 |
Restricted cash | 37,500 | 37,500 |
Prepaid expenses | 170,155 | 158,946 |
Other current assets | 7,014 | 36,126 |
Total current assets | 279,489 | 3,453,781 |
Property and equipment, net | 9,584 | 13,383 |
Other assets | ||
Deposits and other assets | 34,290 | 43,884 |
Total other assets | 34,290 | 43,884 |
Total assets | 323,363 | 3,511,048 |
Current liabilities | ||
Accounts payable | 274,650 | 125,357 |
Accrued payroll and related expenses | 167,337 | 46,268 |
Accrued license and patent reimbursement fees | 97,500 | |
Accrued expenses | 98,700 | 228,645 |
Provision for conversion of Series B preferred stock | 118,821 | 84,090 |
Deferred rent | 2,450 | |
Total current liabilities | 661,958 | 581,860 |
Noncurrent liabilities | ||
Deferred rent | 3,233 | |
Series B warrants | 1,112,308 | 2,454,959 |
Total noncurrent liabilities | 1,112,308 | 2,458,192 |
Total liabilities | 1,774,266 | 3,040,052 |
Commitments and contingencies (Note 3) | ||
Stockholders' deficit | ||
Common stock, $0.001 par value; 236 million shares authorized; 21,563,163 issued and outstanding as of December 31, 2016 and 19,903,163 issued and outstanding as of December 31, 2015 | 21,563 | 19,903 |
Additional paid-in-capital | 7,163,064 | 6,086,987 |
Warrants | 837,711 | 759,386 |
Accumulated deficit | (10,936,573) | (7,758,480) |
Total stockholders' deficit | (2,914,235) | (892,204) |
Total liabilities and stockholders' deficit | 323,363 | 3,511,048 |
Redeemable Convertible Series B Preferred Stock | ||
Noncurrent liabilities | ||
Redeemable Convertible Preferred Stock, value | 1,169,663 | 1,363,200 |
Convertible Series C Preferred Stock | ||
Noncurrent liabilities | ||
Redeemable Convertible Preferred Stock, value | $ 293,669 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 236,000,000 | 236,000,000 |
Common stock, shares issued | 21,563,163 | 19,903,163 |
Common stock, shares outstanding | 21,563,163 | 19,903,163 |
Redeemable Convertible Series B Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 4,031 | 4,500 |
Preferred stock, shares outstanding | 4,031 | 4,500 |
Issuance costs | $ 493,770 | |
Liquidation preference value | $ 4,000,000 | |
Convertible Series C Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 386 | 0 |
Preferred stock, shares outstanding | 386 | 0 |
Issuance costs | $ 92,331 | |
Liquidation preference value | $ 386,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Operating expenses | ||
Research and development | $ 939,040 | $ 576,093 |
General and administrative | 3,531,540 | 3,741,017 |
Total operating expenses | 4,470,580 | 4,317,110 |
Operating loss | (4,470,580) | (4,317,110) |
Other expense (income) | ||
Change in fair value of warrant liability | (1,342,651) | (481,610) |
Net Loss before income taxes | (3,176,493) | (4,839,445) |
Provision for income taxes | 1,600 | 1,716 |
Net loss | (3,178,093) | (4,841,161) |
Less: Preferred deemed dividend | 325,000 | |
Net loss applicable to common shareholders | $ (3,503,093) | $ (4,841,161) |
Basic and diluted loss per common share (in dollars per share) | $ (0.17) | $ (0.29) |
Shares used in computing basic and diluted loss per share (in shares) | 18,947,375 | 16,938,318 |
Series A Preferred stock | ||
Other expense (income) | ||
Change in fair value of conversion rights | $ 986,000 | |
Series B Preferred Stock | ||
Other expense (income) | ||
Change in fair value of conversion rights | $ 48,564 | $ 17,945 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | ||
Cash flows from operating activities: | |||
Net loss | $ (3,178,093) | $ (4,841,161) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation | 14,916 | 9,953 | |
Stock-based compensation expense | 706,368 | 414,343 | |
Amortization of warrants and stock issued for services | [1],[2] | 51,538 | 585,111 |
Change in fair value of warrant liability | (1,342,651) | (481,610) | |
Warrant issued for services | 55,900 | ||
Common stock issued for license | 50,000 | ||
Changes in assets and liabilities: | |||
Restricted cash | (37,500) | ||
Prepaid expenses | [1] | (40,323) | (65,341) |
Deposits and other assets | 9,594 | (25,290) | |
Other current assets | 29,112 | 454 | |
Accounts payable | [2] | 149,293 | (274,142) |
Accrued payroll and related expenses | 121,069 | 702 | |
Accrued license and patent reimbursement fees | (97,500) | (21,928) | |
Stock subscription liability | (100,000) | ||
Accrued expenses and other liabilities | (130,728) | 104,475 | |
Net cash used in operating activities | (3,552,941) | (3,727,989) | |
Cash flows from investing activities: | |||
Purchases of property and equipment | (11,117) | (1,982) | |
Net cash used in investing activities | (11,117) | (1,982) | |
Cash flows from financing activities: | |||
Proceeds from common stock issuance, net of $3,920 issuance costs | 721,021 | ||
Net cash provided by financing activities | 407,669 | 6,743,850 | |
Net increase (decrease) in cash and cash equivalents | (3,156,389) | 3,013,879 | |
Cash and cash equivalents, beginning of period | 3,221,209 | 207,330 | |
Cash and cash equivalents, end of period | 64,820 | 3,221,209 | |
Cash paid during the period for: | |||
Interest | |||
Income taxes | 1,716 | ||
Supplemental disclosures of non-cash financing activities: | |||
Conversion of outstanding preferred stock into common stock | 114,000 | 1,450,000 | |
Conversion of outstanding preferred stock subject to redemption into common stock | 469,000 | 580,000 | |
Series A Preferred stock | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Change in fair value of conversion rights | 986,000 | ||
Cash flows from financing activities: | |||
Proceeds from preferred stock issuance | 1,430,300 | ||
Series B Preferred Stock | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Change in fair value of conversion rights | 48,564 | 17,945 | |
Cash flows from financing activities: | |||
Proceeds from preferred stock issuance | 4,592,529 | ||
Series C Preferred Stock | |||
Cash flows from financing activities: | |||
Proceeds from preferred stock issuance | [3] | $ 407,669 | |
[1] | During the year ended December 31, 2015, the Company issued warrants of our common stock for consulting services. The warrants were valued at $446,225 and were recorded as a Prepaid expense and was amortized over the service period. During the year ended December 31, 2015, the Company issued shares of common stock for consulting services valued at $168,000. Such amounts were recorded as a Prepaid expense and was amortized over the service period. During the year ended December 31, 2016, warrants issued to service providers for consulting services were valued at $22,425 and recorded as a Prepaid expense and was amortized over the service period. | ||
[2] | During the year ended December 31, 2015, the Company issued warrants of our common stock to a service provider in exchange for extinguishment of $10,000 of trade accounts payable owed to this vendor. | ||
[3] | During the year ended December 31, 2016 a preferred deemed dividend of $325,000 was recognized. |
CONSOLIDATED STATEMENTS OF CAS6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parentheticals) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | ||
Common stock issuance costs | $ 3,920 | ||
Warrants issued to purchase shares of common stock for consulting services (in shares) | 22,425 | 446,225 | |
Value of warrants issued to purchase shares of common stock for consulting services | $ 168,000 | ||
Warrants issued in exchange for extinguishment of trade accounts payable | 10,000 | ||
Preferred deemed dividend | $ 325,000 | ||
Series A Preferred stock | |||
Preferred stock issuance costs | $ 19,700 | ||
Series B Preferred Stock | |||
Preferred stock issuance costs | $ 407,521 | ||
Series C Preferred Stock | |||
Preferred stock issuance costs | [1] | $ 92,331 | |
[1] | During the year ended December 31, 2016 a preferred deemed dividend of $325,000 was recognized. |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) | Convertible Series C Preferred Stock | Redeemable Convertible Series B Preferred Stock | Convertible Series A Preferred Stock | Common Stock | Additional Paid-In Capital | Warrants | Accumulated Deficit | Total |
Balance at Dec. 31, 2014 | $ 16,000 | $ 2,257,771 | $ 190,000 | $ (2,917,319) | $ (453,548) | |||
Balance (in shares) at Dec. 31, 2014 | 16,000,000 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Issuance of common stock, net of issuance costs of $3,920 | $ 242 | 720,827 | 721,069 | |||||
Issuance of common stock, net of issuance costs of $3,920 (in shares) | 241,663 | |||||||
Issuance of common stock for services | $ 24 | 167,976 | 168,000 | |||||
Issuance of common stock for services (in shares) | 24,000 | |||||||
Issuance of Series A Preferred Stock and common stock warrants, net of issuance costs of $19,700 | $ 1,317,141 | 113,161 | 1,430,302 | |||||
Issuance of Series A Preferred Stock and common stock warrants, net of issuance costs of $19,700 (in shares) | 580,000 | |||||||
Common stock warrants issued for services | 456,225 | 456,225 | ||||||
Stock based compensation expense | 351,845 | 351,845 | ||||||
Issuance of Series B and Series C Preferred Stock net of issuance costs of $493,770 and $92,331 for December 31, 2015 and December 31, 2016, repectively | $ 1,580,422 | |||||||
Issuance of Series B and Series C Preferred Stock net of issuance costs of $493,770 and $92,331 for December 31, 2015 and December 31, 2016, repectively (in shares) | 5,000 | |||||||
Conversion of Series A and Series B Preferred Stock and conversion liability into common stock at $0.80 per share and $0.80 and $0.40 per share for 2015 and 2016, respectively | $ (1,317,141) | $ 1,812 | 2,301,329 | 986,000 | ||||
Conversion of Series A and Series B Preferred Stock and conversion liability into common stock at $0.80 per share and $0.80 and $0.40 per share for 2015 and 2016, respectively (in shares) | (580,000) | 1,812,500 | ||||||
Compensation expense from issuance of restricted common stock to employees and board members | $ 1,200 | 61,300 | 62,500 | |||||
Compensation expense from issuance of restricted common stock to employees and board members (in shares) | 1,200,000 | |||||||
Conversion of Series B and Series C Preferred Stock to common stock | $ (217,222) | $ 625 | 225,939 | 226,564 | ||||
Conversion of Series B and Series C Preferred Stock to common stock (in shares) | (500) | 625,000 | ||||||
Net loss for the year | (4,841,161) | (4,841,161) | ||||||
Balance at Dec. 31, 2015 | $ 1,363,200 | $ 19,903 | 6,086,987 | 759,386 | (7,758,480) | $ (892,204) | ||
Balance (in shares) at Dec. 31, 2015 | 4,500 | 19,903,163 | 19,903,163 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Issuance of common stock for license | $ 100 | 49,900 | $ 50,000 | |||||
Issuance of common stock for license (in shares) | 100,000 | |||||||
Common stock warrants issued for services | 78,325 | 78,325 | ||||||
Stock based compensation expense | 706,368 | 706,368 | ||||||
Issuance of Series B and Series C Preferred Stock net of issuance costs of $493,770 and $92,331 for December 31, 2015 and December 31, 2016, repectively | $ 407,669 | |||||||
Issuance of Series B and Series C Preferred Stock net of issuance costs of $493,770 and $92,331 for December 31, 2015 and December 31, 2016, repectively (in shares) | 500 | |||||||
Conversion of Series A and Series B Preferred Stock and conversion liability into common stock at $0.80 per share and $0.80 and $0.40 per share for 2015 and 2016, respectively | $ (193,537) | $ 1,162 | 206,207 | 207,369 | ||||
Conversion of Series A and Series B Preferred Stock and conversion liability into common stock at $0.80 per share and $0.80 and $0.40 per share for 2015 and 2016, respectively (in shares) | (469) | 1,162,500 | ||||||
Conversion of Series B and Series C Preferred Stock to common stock | $ (114,000) | $ 398 | 113,602 | 114,000 | ||||
Conversion of Series B and Series C Preferred Stock to common stock (in shares) | (114) | 397,500 | ||||||
Beneficial conversion feature upon issuanceof Series C Preferred Stock | 325,000 | 325,000 | ||||||
Deemed dividend from beneficial conversion feature of Series C Preferred Stock | (325,000) | (325,000) | ||||||
Net loss for the year | (3,178,093) | (3,178,093) | ||||||
Balance at Dec. 31, 2016 | $ 293,669 | $ 1,169,663 | $ 21,563 | $ 7,163,064 | $ 837,711 | $ (10,936,573) | $ (2,914,235) | |
Balance (in shares) at Dec. 31, 2016 | 386 | 4,031 | 21,563,163 | 21,563,163 |
CONSOLIDATED STATEMENTS OF STO8
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Parentheticals) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Share issuance costs | $ 3,920 | |
Series A Preferred stock | ||
Share issuance costs | $ 19,700 | |
Conversion of preferred stock price per share | $ 0.80 | |
Conversion liability into common stock per share | $ 0.80 | |
Series B Preferred Stock | ||
Share issuance costs | $ 493,770 | |
Conversion of preferred stock price per share | $ 0.80 | |
Conversion liability into common stock per share | $ 0.40 | |
Series C Preferred Stock | ||
Share issuance costs | $ 92,331 | |
Conversion of preferred stock price per share | $ 0.40 | |
Conversion liability into common stock per share | $ 0.25 |
Nature of Operations, Business
Nature of Operations, Business Activities and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Nature of Operations, Business Activities and Summary of Significant Accounting Policies | 1. Nature of Operations, Business Activities and Summary of Significant Accounting Policies Nature of Operations and Basis of Presentation Nemus Bioscience, Inc. is a biopharmaceutical company that plans to develop and commercialize therapeutics from cannabinoids through a partnership with the University of Mississippi. The University of Mississippi ("UM") is federally permitted and licensed to cultivate cannabis for research purposes. Unless otherwise specified, references in these Notes to the Consolidated Financial Statements to the "Company," "we" or "our" refer to Nemus Bioscience, Inc., a Nevada corporation formerly known as Load Guard Logistics, Inc. ("LGL"), together with its wholly-owned subsidiary, Nemus, a California corporation ("Nemus"). Nemus became the wholly owned subsidiary of Nemus Bioscience, Inc. through the Merger (as defined below). Nemus Bioscience, Inc. (formerly LGL) was incorporated in Nevada on March 16, 2011. Nemus was incorporated in California on July 17, 2012. Our headquarters are located in Costa Mesa, California. As of December 31, 2016, the Company has devoted substantially all of its efforts to securing product licenses, raising capital, and building infrastructure, and has not realized revenue from its planned principal operations. Business Activities On October 31, 2014, pursuant to an Agreement and Plan of Merger, dated October 17, 2014 (the "Merger Agreement"), LGL, Nemus Acquisition Corp. ("Acquisition Sub"), Nemus Bioscience, Inc. ("Name Change Merger Sub"), and Nemus Acquisition Sub merged with and into Nemus and Nemus survived as a wholly-owned subsidiary of LGL (the "Merger"). Immediately after the Merger, LGL changed its name to "Nemus Bioscience, Inc." by merging with Name Change Merger Sub. At the closing of the Merger and pursuant to the Merger Agreement, Nemus issued an aggregate of 3,120,000 shares of its common stock to the former stockholders of LGL in exchange for all of the outstanding shares of LGL's capital stock, which when combined with the 12,880,000 shares of Nemus common stock outstanding, amounted to 16,000,000 total shares outstanding upon completion of the merger. The Merger has been accounted for as a reverse-merger and recapitalization. Nemus was the acquirer for financial reporting purposes and LGL was the acquired company. Consequently, the assets and liabilities and the operations reflected in the historical consolidated financial statements prior to the Merger were those of Nemus and have been recorded at the historical cost basis of Nemus, and the consolidated financial statements after completion of the Merger included the assets and liabilities of LGL and Nemus, the historical operations of Nemus and the operations of the Nemus from and after the closing date of the Merger. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. Such estimates and judgments are utilized for stock-based compensation expense and equity securities with embedded features as discussed below. Liquidity and Going Concern The Company has incurred operating losses and negative cash flows from operations since our inception. As of December 31, 2016, we had cash and cash equivalents of $64,820. In January 2017, we raised an additional gross proceeds of $1,200,000 (see note 8) to be utilized to fund operations. The Company anticipates that it will continue to incur net losses into the foreseeable future as it continues to advance and develop a number of potential drug candidates into preclinical development activities and expands its corporate infrastructure which includes the costs associated with being a public company. Without additional funding, management believes that the Company will not have sufficient funds to meet its obligations within one year after the date the consolidated financial statements are issued. These conditions give rise to substantial doubt as to the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company plans to continue to fund its operations and capital funding needs through public or private equity or debt financings, strategic collaborations, licensing arrangements, asset sales, government grants or other arrangements. However, the Company cannot be sure that such additional funds will be available on reasonable terms, or at all. If the Company raises additional funds by issuing equity securities, substantial dilution to existing stockholders would result. If the Company is unable to secure adequate additional funding, the Company may be forced to make a reduction in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of those investments approximates their fair market value due to their short maturity and liquidity. Cash and cash equivalents include cash on hand and amounts on deposit with financial institutions, which amounts may at times exceed federally insured limits. The Company has not experienced any losses on such accounts and does not believe it is exposed to any significant credit risk. Restricted Cash A deposit of $37,500 as of December 31, 2016 and 2015 was restricted from withdrawal and held by a bank in the form of a certificate of deposit. This certificate serves as collateral for payment of the Company's credit cards. Fair Value Measurements Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, is used to measure fair value: Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources such as quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The carrying values of our financial instruments, including, cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses approximate their fair value due to the short maturities of these financial instruments. The Series B warrant liability and the conversion liability for the Series B Preferred Stock were valued utilizing Level 3 inputs primarily from a third party independent appraisal conducted as of December 31, 2016. Property and Equipment, Net As of December 31, 2016, property and equipment, net, was $9,584, consisting primarily of computers and equipment. The Company had $13,383 of property and equipment, net, as of December 31, 2015. Expenditures for additions, renewals and improvements will be capitalized at cost. Depreciation will generally be computed on a straight-line method based on the estimated useful life of the related assets currently ranging from two to three years. Maintenance and repairs that do not extend the life of assets are charged to expense when incurred. When properties are disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reported in the period the transaction takes place. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted cash flows expected to be generated by the asset. If the carrying amount exceeds its estimated future undiscounted cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset. The costs incurred for the rights to use licensed technologies in the research and development process, including licensing fees and milestone payments, will be charged to research and development expense as incurred in situations where the Company has not identified an alternative future use for the acquired rights, and are capitalized in situations where there is an identified alternative future use. No cost associated with the use of licensed technologies has been capitalized to date. Income Taxes The Company accounts for our deferred income tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities, and net operating loss carry forwards (the "NOLs") and other tax credit carry forwards. These items are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date. Any interest or penalties would be recorded in the Company's statement of operations in the period incurred. The Company records a valuation allowance to reduce the deferred income tax assets to the amount that is more likely than not to be realized. In making such determinations, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. As a result, there are no income tax benefits reflected in the statement of operations to offset pre-tax losses. The Company recognizes a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. Convertible Instruments We account for hybrid contracts that feature conversion options in accordance with generally accepted accounting principles in the United States. ASC 815, Derivatives and Hedging Activities Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument. We account for convertible instruments when we have determined that the embedded conversion options should not be bifurcated from their host instruments, in accordance with ASC 470-20, Debt with Conversion and Other Options We also follow ASC 480-10, Distinguishing Liabilities from Equity Warrants Issued in Connection with Financings We generally account for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that we may need to settle the warrants in cash. For warrants issued with a conditional obligation to issue a variable number of shares or the deemed possibility of a cash settlement, we record the fair value of the warrants as a liability at each balance sheet date and record changes in fair value in other income (expense) in the Consolidated Statements of Operations. Revenue Recognition The Company has not begun planned principal operations and has not generated any revenue since inception. Research and Development Expenses Research and development ("R&D") costs are expensed when incurred. These costs may consist of external research and development expenses incurred under agreements with third-party contract research organizations and investigative sites, third-party manufacturing organizations and consultants; license fees; employee-related expenses, which include salaries, benefits and stock-based compensation for the personnel involved in our preclinical and clinical drug development activities; and facilities expense, depreciation and other allocated expenses; and equipment and laboratory supplies. Stock-Based Compensation Expenses Stock-based compensation cost is estimated at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over the vesting period. We use the Black-Scholes option pricing model for estimating the grant date fair value of stock options and warrants using the following assumptions: · Exercise price - We determined the exercise price based on valuations using the best information available to management at the time of the valuations. · Volatility - We estimate the stock price volatility based on industry peers who are also in the early development stage given the limited market data available in the public arena. · Expected term - The expected term is based on a simplified method which defines the life as the weighted average of the contractual term of the options and warrants and the weighted-average vesting period for all open awards. · Risk-free rate - The risk-free interest rate for the expected term of the option or warrant is based on the average market rate on U.S. treasury securities in effect during the period in which the awards were granted. · Dividends - The dividend yield assumption is based on our history and expectation of paying no dividends. Stock-Based Compensation for Non-Employees The Company accounts for warrants and options issued to non-employees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 505-50, Equity - Equity Based Payments to Non-Employees, Segment Information FASB ASC No. 280, Segment Reporting Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company is required to record all components of comprehensive income (loss) in the consolidated financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss), net of their related tax effect, arrived at a comprehensive income (loss). For the years ended December 31, 2016 and 2015, the comprehensive income (loss) was equal to the net income (loss). Earnings per share The Company applies FASB ASC No. 260, Earnings per Share Recent accounting pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-9, Revenue from Contracts with Customers In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern In February 2016, the FASB issued ASU No. 2016-02 Leases In March 2016, the FASB issued ASU No. 2016-09 Improvement to Employee Share-Based Payment Accounting . |
University of Mississippi ("UM"
University of Mississippi ("UM") Agreements | 12 Months Ended |
Dec. 31, 2016 | |
University Of Mississippi Agreements [Abstract] | |
University of Mississippi ("UM") Agreements | 2. University of Mississippi Agreements In July 2013, the Company entered into a Memorandum of Understanding (MOU) with UM to engage in joint research of extracting, manipulating, and studying cannabis in certain forms to develop intellectual property (IP) with the intention to create and commercialize therapeutic medicines. Nemus will own all IP developed solely by its employees and will jointly own all IP developed jointly between Nemus and UM employees. The term of the MOU agreement is five years and the parties agree to negotiate separate research agreements upon the identification of patentable technologies as well as any deemed to be a trade secret. The agreement may be terminated by either party with three months’ written notice to the other party. UM 5050 pro-drug agreements On September 29, 2014, the Company executed three license agreements with UM pursuant to which UM granted us exclusive, perpetual, worldwide licenses, including the right to sublicense, to intellectual property related to UM 5050, a pro-drug formulation of tetrahydrocannabinol, or THC for products administered through each of ocular, oral or rectal delivery. The license agreement for the field of oral delivery also includes rights to UM 1250, a bio-adhesive hot melt extruded film for topical and mucosal adhesion application and drug delivery. The license agreements contain certain milestone and royalty payments, as defined therein. There is an annual fee of $25,000 per license agreement, payable on the anniversary of each effective date. The aggregate milestone payments under the license agreements, if the milestones are achieved, is $2.1 million. These licenses also require the Company to reimburse UM for patent costs incurred related to these products under license. The agreements will terminate upon expiration of the patents, breach or default of the license agreements, or upon 60 days’ written notice by the Company to UM. On October 15, 2014, we signed a renewable option agreement for the rights to explore other routes of delivery of UM 5050 not yet agreed upon and/or in combination with other cannabinoids or other compatible compounds. There was a one-time up-front option payment of $10,000 for a six-month option period that has subsequently been renewed under the same financial terms and conditions. The most recent renewal occurred for the period from December 14, 2016 to June 14, 2017. UM 8930 pro-drug agreements: On December 14, 2015, the Company executed two license agreements with UM pursuant to which UM granted us exclusive, perpetual, worldwide licenses, including the right to sublicense, to intellectual property related to UM 8930, a pro-drug formulation of cannabidiol ("CBD") for products administered through each of ocular or rectal delivery. The license agreements contain certain milestone and royalty payments, as defined therein. There is a one-time upfront payment of $65,000 per license agreement, payable in four equal monthly installments that started on December 15, 2015 and was expensed when incurred. There is an annual fee of $25,000 per license agreement, payable on the anniversary of each effective date. The aggregate milestone payments under the license agreements, if the milestones are achieved, is $1.4 million. These licenses also require the Company to reimburse UM for patent costs incurred related to these products under license. These license agreements will terminate upon expiration of the patents, breach or default of the license agreements, or upon 60 days’ written notice by the Company to UM. On December 14, 2015, we signed a renewable option agreement for the rights to explore other routes of delivery of UM8930 not yet agreed upon and/or in combination with other cannabinoids or other compatible compounds. There was a one-time up-front option payment of $10,000 for a six-month option period that has subsequently been renewed under the same financial terms and conditions. The most recent renewal occurred for the period from December 14, 2016 to June 14, 2017. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 3. Commitments and Contingencies Lease Commitments On September 1, 2014, the Company signed an operating lease for laboratory and office space at the Innovation Hub, Insight Park located on the University of Mississippi campus. The lease term commenced on October 1, 2014 and expires on December 31, 2017. There is annual escalating rent provisions and two months of free rent in the agreement. The total cash payments over the life of the lease are divided by the total number of months in the lease period and the average rent will be charged to expense each month during the lease period. The monthly amount charged to rent expense is $9,267. In October 2014, we signed a lease agreement for our corporate office headquarters that consists of approximately 4,087 square feet located at 650 Town Center Drive, Suite 1770, Costa Mesa, CA 92626. The lease expired on October 31, 2016 and our monthly rent was $5,373, payable in equal monthly installments with annual escalations. There was no subsequent renewal upon expiration of this lease. The Company currently maintains its principal executive offices located in a shared office suite located at 600 Anton Blvd., Suite 1100, Costa Mesa, CA, 92626 under a month-to-month agreement. In November 2015, the Company entered into an operating lease for its office and lab furnishings both in Costa Mesa and the Innovation Hub laboratory. The lease expires on November 3, 2017 and the monthly lease payments are $7,559. Total net rent expense related to our operating leases for the year ended December 31, 2016 and 2015, was $302,419 and $242,729, respectively. Future minimum payments under the non-cancelable portion of our operating leases as of December 31, 2016 are as follows: Years ending December 31, 2017 161,963 2018 - 2019 - 2020 - 2021 - Thereafter - Total $ 161,963 Related Party Matters In June 2014, our subsidiary entered into an independent contractor agreement with K2C, Inc. (“K2C”), which is wholly owned by Mr. Lykos, pursuant to which we pay K2C a monthly fee for services performed by Mr. Lykos for our company. The agreement expired on June 1, 2016 and was automatically renewed for one year pursuant to the terms of the agreement. The monthly fee under the agreement is $10,000. Total expense incurred under this agreement was $120,000 for each of the years ended December 31, 2016 and 2015. The Company had an outstanding balance of $30,000 due to K2C as of December 31, 2016. Under the agreement, Mr. Lykos is also eligible to participate in our health, death and disability insurance plans. In addition, beginning in 2015, Mr. Lykos is a participant in our change in control severance plan. Legal Matters General Litigation and Disputes On August 3, 2016, John B. Hollister filed to dismiss his complaint against the Company and its Executive Chairman, and the Company and its Executive Chairman filed to dismiss their complaint against Hollister filed on January 25, 2016 containing claims against him for defamation, false light, unfair competition, breach of contract, breach of fiduciary duty and fraud. Hollister's employment as the Company's Chief Executive Officer was terminated by the Company on August 24, 2015 for good and lawful reasons by the Company's Board of Directors as the Company decided to go in a different direction. As stated in the Company's December 28, 2015 Form 8-K, the Company maintains that Hollister's complaint and subsequent pleadings were grossly inaccurate and his claims were entirely without merit alleging various causes of action arising out of his termination, including a breach of contract claim. Neither the Company nor its Executive Chairman made any payment to Hollister to resolve the lawsuit or otherwise. According to the Orange County Superior Court's online case records posted on August 11, 2016, the court entered the order for dismissal of the entire action with prejudice effective as of the August 3, 2016 filing date. Government Proceedings Like other companies in the pharmaceutical industry, we are subject to extensive regulation by national, state and local government agencies in the United States. As a result, interaction with government agencies occurs in the normal course of our operations. It is possible that criminal charges and substantial fines and/or civil penalties or damages could result from any government investigation or proceeding. As of December 31, 2016, the Company had no current proceedings or inquiries. Change in Control Severance Plan In February 2015, we adopted a change in control severance plan, in which our named executive officers participate, that provides for the payment of severance benefits if the executive's service is terminated within twelve months following a change in control, either due to a termination without cause or upon a resignation for good reason (as each term is defined in the plan). In either such event, and provided the executive timely executes and does not revoke a general release of claims against the Company, he or she will be entitled to receive: (i) a lump sum cash payment equal to at least six months of the executive's monthly compensation, plus an additional month for each full year of service over six years, (ii) Company-paid premiums for continued health insurance for a period equal to length of the cash severance period or, if earlier, when executive becomes covered under a subsequent employer's healthcare plan, and (iii) full vesting of all then-outstanding unvested stock options and restricted stock awards. Contract Manufacturing Organization ("CMO") Agreement On February 5, 2016, the Company entered into a letter agreement ("Agreement") with a third party contract manufacturing organization ("CMO") pursuant to which the CMO is to provide services to Nemus for process development and analytical method development and qualification for Nemus' prodrug of tetrahydrocannabinol, or THC, as well as for sample production and a stability study. Pursuant to the terms of the Agreement, Nemus will pay an estimated $154,000 to $183,000 in fees and expenses for the initial evaluation and development of a process for the production of Nemus' pro-drug of THC to ensure reproducibility, quality and safety and an estimated $142,900 for analytical method development and qualification. The Company recognized $260,244 as research and development expense towards these fees for the year ended December 31, 2016. After the initial evaluation and development, Nemus has agreed to pay additional fees and expenses for sample production of Nemus' pro-drug of THC and a stability study, as well as possible extensions to or modifications of the aforementioned projects. Nemus may at any time cancel or delay any project under the Agreement prior to the scheduled start date. Nemus must reimburse the CMO for costs incurred prior to and including the date of cancellation plus any reasonable and foreseeable costs associated with stopping work on any project, including the CMO's loss of revenue incurred as the result of reserving production facilities for Nemus' exclusive use. Nemus may terminate the Agreement in whole or in part at any time upon 30 days' written notice. |
Stockholders' Deficit and Redee
Stockholders' Deficit and Redeemable Convertible Series B and Series C Preferred Stock | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Stockholders' Deficit and Redeemable Convertible Series B Preferred Stock | 4. Stockholders' Deficit and Redeemable Convertible Series B and Series C Preferred Stock Common Stock In June 2014, the Company sold 1,800,000 shares of common stock with no par value and warrants for a purchase price of $900,000 (the "June 2014 Stock Purchase Agreement") to a group of private investors. See additional discussion on warrants below. In August 2014, the Company sold 2,200,000 shares of common stock with no par value and warrants for a purchase price of $1,100,000 to a group of private investors. See additional discussion on warrants below. In October 2014, the Company issued 1,110,000 shares of common stock with no par value to eighteen individual investors that had participated in a prior entity founded by Nemus' then current president. Such entity has been insolvent and not operating since the inception date of Nemus. The issuance of these shares was in exchange for the signing of a release of claims against the Company, its President, and the former entity. The Company recorded a general and administrative expense of $466,200 in the fourth quarter of 2014 to reflect the fair market value of the common stock issued in exchange for the release of claims. The fair market value of the common stock issued was determined via an independent third-party valuation conducted as of October 31, 2014. In January 2015, the Company sold 241,663 shares of common stock with par value of $0.001 for a purchase price of $724,989 to a group of private investors. In March 2015, the Company issued 24,000 shares of common stock with par value of $0.001 to a third party in exchange for services to be performed related to raising additional capital. The Company recorded a prepaid expense of $168,000 in the first quarter of 2015 to reflect the fair market value of the common stock issued and amortized this expense over the contract service period which was one year. The fair market value was determined utilizing the Company's closing stock price as of the commencement date of the contract service period. For year ended December 31, 2016, the Company amortized $12,194 to general and administrative expense which represented the completion of this agreement. In August 2015, in conjunction with the Series B Preferred Stock sale (discussed below), the Company raised $5.0 million at $1,000 per share resulting in the automatic conversion of the Series A Preferred Stock to common stock. This resulted in the conversion of 580,000 shares of Series A Preferred Stock at $2.50 per share to the equivalent of 1,812,500 shares of common stock. In December 2015, a Series B Preferred stockholder converted 500 shares of its preferred stock to common stock as allowed under the Series B Preferred Stock Agreement (discussed below), resulting in the issuance of 625,000 shares of common stock at an effective price of $0.80 per share. In March 2016, another Series B Preferred stockholder converted 8 shares of its preferred stock to common stock, resulting in the issuance of 10,000 shares of common stock at an effective price of $0.80 per share. In October 2016, as a result of the Series C Preferred Stock Agreement (discussed below), the conversion price of the Series B Preferred Stock was reset to $0.40. From October 2016 to December 31, 2016, Series B Stockholders converted 461 shares of its preferred stock to common, resulting in the issuance of 1,152,500 shares of common stock. In October 2016, the Company entered into a technology license agreement with a third-party manufacturing company in order to biosynthetically manufacture cannabinoids. The terms of the agreement called for the issuance of 100,000 shares of common stock. In December 2016, the Series C Preferred stockholder converted 39 shares of its preferred stock to common stock as allowed under the Series C Preferred Stock Agreement, resulting in the issuance of 97,500 shares of common stock at an effective price of $0.40 per share. On December 29, 2016, as a result of the signing of the Series D Preferred Stock Agreement (discussed in Note 8 below), the conversion price of the Series B and Series C Preferred Stock was reset to $0.25. From the date of this reset to December 31, 2016, the Series C Stockholder converted 75 shares of their preferred stock to common, resulting in the issuance of 300,000 shares of common stock. Preferred Stock The Company has authorized 20,000,000 shares of preferred stock with a par value of $0.001 per share. Series A Preferred Stock: The Series A Preferred Stock issued also has a "down-round" protection feature provided to the investors if the Company subsequently issues or sells any shares in a round of equity financing of at least $1,000,000 prior to October 1, 2015 in which the shares of common stock to be acquired are at a price less than $2.50 per share. The Company is required to issue additional shares of common stock to the investors in an amount such that the subscription price paid, when divided by the total number of shares issued will result in an actual price paid per share of common stock equal to such lower price. This conversion occurred as discussed above in conjunction with the Series B Preferred Stock financing totaling $5.0 million and resulted in the conversion of 580,000 shares of Series A Preferred Stock at to 1,812,500 shares of common stock. Redeemable Convertible Series B Preferred Stock: In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, Series B Preferred stockholders receive an amount per share equal to the conversion price of $0.80, subject to down-round adjustment, multiplied by the as-if converted share amount of 5,625,000 common shares, totaling $4.5 million. If upon the liquidation, the assets are insufficient to permit payments to the Series B holders, all assets legally available will be distributed in a pro rata basis among the Series B holders in proportion to the full amounts they would otherwise be entitled to receive. Any remaining assets are distributed pro rata among the common stockholders. Subject to certain trigger events occurring, the Series B Preferred stock holders have the right to force the Company to redeem the shares of preferred stock at a price per preferred share equal to the greater of (A) 115% of the conversion amount and (B) the product of (1) the conversion rate in effect at such time and (2) the greatest closing sale price of the Common Stock during the period beginning on the date immediately preceding such triggering event and ending on the date such holder delivers the notice of redemption. Such triggering events include: · Failure of the Series B Registration Statement to be declared effective by the SEC on or prior to the date that is ninety days after the Effectiveness Deadline; · Suspension of the Company's common stock from trading for a period of (2) consecutive trading days; · Failure of the Company to deliver all the shares of the common stock or make the appropriate cash payments in a timely manner upon conversion of the Series B Preferred; · Any default of indebtedness; · Any filing of voluntary or involuntary bankruptcy by the Company; · A final judgment in excess of $100,000 rendered against the Company; · Breach of representations and warranties in the Stock Purchase Agreement; · Failure to comply with the Series B Certificate of Designation or Rule 144 requirements. As certain of these triggering events are considered to be outside the control of the Company, the Series B Preferred Stock is considered to be contingently redeemable convertible and as a result, has been classified as mezzanine equity in the Company's balance sheet. In December 2015, a Series B Preferred Stock holder converted 500 shares of its preferred stock to common stock at the conversion rate of 1,250:1 resulting in the issuance of 625,000 shares of common stock. In March 2016, another Series B Preferred stockholder converted 8 shares of its preferred stock to common stock at the same ratio resulting in the issuance of 10,000 shares of common stock. In October 2016, as a result of the Series C Preferred Stock Agreement (discussed below), the conversion price of the Series B Preferred Stock was reset to $0.40. From October 2016 to December 31, 2016, Series B Stockholders converted 461 shares of its preferred stock to common, at the conversion rate of 2,500:1 resulting in the issuance of 1,152,500 shares of common stock. As a result of these conversions, the liquidation preference for the Series B Preferred Stock has been reduced to $4.0 million as of December 31, 2016. Convertible Series C Preferred Stock: · Dividends: · Conversion: · Down-Round Protection: · Voting Rights: · Most Favored Nation Provision: · Participation Rights: · Liquidation Provision: The Company also considered the classification of the Series C Preferred Stock Agreement. Because the Most Favored Nation provision is a redemption feature that is outside the control of the Company, the Series C Preferred Stock is considered to be contingently redeemable convertible and as a result, has been classified as mezzanine equity in the Company's balance sheet. At the date of the financing, because the effective conversion rate of the preferred stock was less than the market value of the Company’s common stock, a beneficial conversion feature of $325,000 has been recorded as a discount to the preferred stock and an increase to additional paid in capital. Because the preferred stock is perpetual, in October 2016, the Company fully amortized the discount related to the beneficial conversion feature on the deemed dividend in the consolidated statement of operations. In December 2016, the Series C Preferred stockholder converted 39 shares of its preferred stock to common stock as allowed under the Series C Preferred Stock Agreement, resulting in the issuance of 97,500 shares of common stock at an effective price of $0.40 per share. On December 29, 2016, as a result of the signing of the Series D Preferred Stock Agreement (discussed in Note 8 below), the conversion price of the Series B and Series C Preferred Stock was reset to $0.25. From the date of this reset to December 31, 2016, the Series C Stockholder converted 75 shares of their preferred stock to common, resulting in the issuance of 300,000 shares of common stock. Warrants On July 17, 2012, the Company issued warrants to purchase up to 3,000,000 shares of our common stock to its founders and two advisors in consideration for services provided in the start-up of operations. The warrants are exercisable at a price of $1.00 per share and expire on June 20, 2023. The Company valued these warrants utilizing the Black-Scholes valuation model and they were determined to be of nominal value given the start-up nature of the Company's operations at the time of grant. In conjunction with the June 2014 Stock Purchase Agreement, the Company issued warrants to purchase up to 450,000 shares of common stock to a group of private investors. The warrants are exercisable at a price of $1.00 per share and expire on June 12, 2020. The Company valued these warrants at $85,500. This amount was recorded as warrants and was reclassified from the total consideration received for both the common stock and warrants purchased. In August 2014 as part of the June 2014 Stock Purchase Agreement, the Company issued warrants to purchase up to 550,000 shares of common stock with an exercise price of $1.00 per share that expire in August 2020. The Company valued these warrants at $104,500. This amount was recorded as warrants and was reclassified from the total consideration received for both the common stock and warrants purchased. In March 2015, the Company entered into an agreement with a financial advisory and public relations consulting firm which included the issuance of warrants to purchase up to 90,000 shares of common stock with an exercise price of $2.50 per share with a term of five years and vest quarterly over one year. These warrants were in exchange for services performed beginning in the first quarter and were subsequently issued in April 2015. The Company estimated the vested warrant value to be $85,950 utilizing the Black Scholes option pricing model and amortized $5,145 for services provided for the year ended December 31, 2016 and $80,805 for the year ended December 31, 2015. In April 2015, the Company entered into an agreement with one of its investors to provide advisory services on all matters including financing. In conjunction with this agreement, the Company issued warrants that vest immediately to purchase 100,000 shares of common stock with an exercise price of $5.00 per share with a term of ten years. The Company estimated the warrant value to be $326,000 utilizing the Black Scholes option pricing model and recorded this amount to general and administrative expense for the quarter due to the immediate vesting. In April 2015, the Company issued to a former service provider in exchange for payment of its outstanding invoice warrants that vest immediately to purchase 6,000 shares of common stock with an exercise price of $2.50 per share. The Company estimated the warrant value to be $10,000 which represented the value of the trade debt extinguished. In April 2015, the Company issued 50,000 warrants to purchase the Company's common stock in conjunction with its Series A Preferred Stock financing. The warrants are exercisable at a price of $5.00 per share and expire five years from the issuance date. In May 2015, the Company issued 30,000 warrants and in July 2015, 36,000 warrants under the same terms and conditions. In June 2015, the Company issued to a service provider in exchange for consulting services warrants that vest immediately to purchase 10,000 shares of common stock with an exercise price of $5.00 per share with a term of five years. The Company estimated the warrant value to be $14,700 utilizing the Black Scholes option pricing model. In August 2015, the Company issued 6,250,000 warrants to purchase common stock in conjunction with its Series B Preferred Stock financing. See further discussion in Note 6 below. In August 2015, the Company issued 187,500 warrants to purchase common stock to its investment banker in exchange for services rendered in conjunction with the Series B Preferred Stock financing. The warrants vest immediately and have an exercise price of $1.15 per share. The Company estimated the value of the warrants to be $86,250 utilizing the Black Scholes option pricing model and recorded this amount to offering costs. In November 2015, the Company entered into an agreement with a financial advisory and public relations consulting firm which included the issuance of warrants to purchase up to 120,000 shares of common stock with an exercise price of $1.15 per share with a term of five years. These warrants are in exchange for services to be performed from November 25, 2015 to May 25, 2016 and 60,000 shares vest immediately with the remainder in one quarter. The Company estimated the warrant value of vested warrants to be $42,000 utilizing the Black Scholes option pricing model and amortized $7,800 for the year ended December 31, 2015 and $34,200 for the year ended December 31, 2016. In November 2016, the Company entered into an agreement with one of its investors to provide advisory services on all matters including financing. In conjunction with this agreement, the Company issued warrants that vest immediately to purchase 40,000 shares of common stock with an exercise price of $1.15 per share with a term of ten years. The Company estimated the warrant value to be $18,400 utilizing the Black Scholes option pricing model and recorded this amount to general and administrative expense for the quarter due to the immediate vesting. In November 2016, the Company issued 125,000 warrants to purchase common stock to its investment banker in exchange for services rendered in conjunction with the Series C Preferred Stock financing. The warrants vest immediately and have an exercise price of $0.40 per share with a term of five years. The Company estimated the value of the warrants to be $37,500 utilizing the Black Scholes option pricing model and recorded this amount to offering costs. The Company's board of directors considered various objective and subjective factors, along with input from management, to determine the fair value of the warrants, including: · Contemporaneous valuation prepared by an independent third-party valuation specialist effective as of April 1, 2015, August 20, 2015, December 31, 2015, March 31, 2016, June 30, 2016, September 30, 2016, and December 31, 2016, · Its results of operations, financial position and the status of research and development efforts and achievement of enterprise milestones, · The composition of, and changes to, the Company's management team and board of directors, · The lack of liquidity of its common stock as a newly public company, · The Company's stage of development, business strategy and the material risks related to its business and industry, · The valuation of publicly-traded companies in the biotechnology sectors, · External market conditions affecting the biotechnology industry sectors, · The likelihood of achieving a liquidity event for the holders of its common stock, such as an initial public offering, or IPO, or a sale of the Company, given prevailing market conditions, and · The state of the IPO market for similarly situated biotechnology companies, · Discussions held with bankers, potential investors, and preliminary term sheets received as part of management's capital raise efforts. There are significant judgments and estimates inherent in the determination of the fair value of the Company's warrants. These judgments and estimates included the assumptions regarding its future operating performance, the time to completing an IPO or other liquidity event and the determination of the appropriate valuation methods. If the Company had made different assumptions, its warrant valuation could have been significantly different. Stock Option Plans: 2014 Omnibus Incentive Plan The 2014 Omnibus Incentive Plan (the "2014 Plan") was adopted to provide a means by which officers, non-employee directors, and employees of and consultants to the Company and its affiliates could be given an opportunity to acquire an equity interest in the Company. All officers, non-employee directors, and employees of and consultants to the Company are eligible to participate in the 2014 Plan. On October 31, 2014, after the closing of the Merger, our Board of Directors approved the 2014 Plan. The 2014 Plan reserved 3,200,000 shares for future grants. As of December 31, 2016, options (net of canceled or expired options) covering an aggregate of 1,142,500 shares of the Company's common stock had been granted under the 2014 Plan, and the Company had 1,142,500 options outstanding and 857,500 shares available for future grants under the 2014 Plan. Options granted under the 2014 Plan expire no later than 10 years from the date of grant. Options granted under the 2014 Plan may be either incentive or non-qualified stock options. For incentive and non-qualified stock option grants, the option price shall be at least 100% of the fair value on the date of grants, as determined by the Company's Board of Directors. If at any time the Company grants an option, and the optionee directly or by attribution owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, the option price shall be at least 110% of the fair value and shall not be exercisable more than five years after the date of grant. Options granted under the 2014 Plan may be immediately exercisable if permitted in the specific grant approved by the Board of Directors and, if exercised early may be subject to repurchase provisions. The shares acquired generally vest over a period of five years from the date of grant. The Company granted options to purchase 1,142,500 shares net of cancellations through December 31, 2016, under the 2014 Plan. The following is a summary of activity under the 2014 Plan as of December 31, 2016: Options Outstanding Weighted Shares Available Average for Grant of Number of Price per Exercise Options & Shares Shares Share Price Balance at December 31, 2015 820,000 1,180,000 $ 0.42-3.00 $ 0.63 Options granted - - $ - $ - Options exercised - - $ - $ - Options cancelled 37,500 (37,500 ) $ 1.15 $ 1.15 Balance at December 31, 2016 857,500 1,142,500 $ 0.42-3.00 $ 0.61 Vested and Exercisable at December 31, 2016 448,500 $ 0.42-3.00 $ 0.53 The weighted-average remaining contractual term of options vested and exercisable at December 31, 2016 was approximately 7.9 years Aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company's stock exceeded the exercise price of the stock options at December 31, 2016 for those stock options for which the quoted market price was in excess of the exercise price ("in-the-money options"). As of December 31, 2016, the aggregate intrinsic value of options outstanding was $0. As of December 31, 2016, 436,000 options to purchase shares of common stock were exercisable. Restricted Stock Awards Restricted stock awards ("RSAs") are granted to our board of directors and members of senior management and are issued pursuant to the Company's 2014 Omnibus Incentive Plan. On October 20, 2015, a total of 1,200,000 RSAs were granted to members of the Company's senior management and board of directors with a fair market value of approximately $900,000. These RSAs vest from one to three years from the grant date as services are rendered to the Company. For the years ended December 31, 2016 and 2015, the Company recorded $356,250 and $62,500, respectively, in stock-based compensation expense related to these awards. (See discussion below). The total amount of unrecognized compensation cost related to non-vested RSAs was $481,250 as of December 31, 2016. Stock Based Compensation Expense The Company recognizes stock-based compensation expense based on the fair value of that portion of stock options that are ultimately expected to vest during the period. Stock-based compensation expense recognized in the consolidated statements of operations includes compensation expense for stock-based awards based on the estimated grant date fair value over the requisite service period. For the years ended December 31, 2016 and 2015, the Company recognized stock-based compensation expense of $706,368 and $414,343 (including compensation expense for RSAs discussed above) which was recorded as a general and administrative expense in the consolidated statements of operations. The total amount of unrecognized compensation cost related to non-vested stock options was $1,023,418 as of December 31, 2016. This amount will be recognized over a weighted average period of 2.9 years. Valuation Assumptions The fair value of options was estimated at the date of grant using the Black-Scholes option pricing model. Expected volatility is based on industry peers who are also in the early development stage given the limited market data available in the public arena. The expected term was estimated using the simplified method as permitted under SAB No. 110, since the Company has no recent exercise or forfeiture history that is representative of options granted during the year. The expected term represents the estimated period of time that stock options are expected to be outstanding, which is less than the contractual term which is generally ten years. The risk-free interest rate is based on the U.S. Treasury yield. The expected dividend yield is zero, as the Company does not anticipate paying dividends in the near future. There were no options granted in the year ended December 31, 2016; the assumptions for options granted in the year ended December 31, 2015 are as follows: Years Ended December 31, 2016 2015 Dividend yield NA 0.00 % Volatility factor NA 75.00 % Risk-free interest rate NA 1.65-1.85 Expected term (years) NA 6.25-6.50 Weighted-average fair value of options granted during the periods NA $ 2.69 |
Provision for Conversion of Pre
Provision for Conversion of Preferred Stock | 12 Months Ended |
Dec. 31, 2016 | |
Provision For Conversion Of Preferred Stock [Abstract] | |
Provision for Conversion of Preferred Stock | 5. Provision for Conversion of Preferred Stock Series A Preferred Stock Conversion Liability In connection with the Series A Preferred Stock financing, the Company recorded a liability related to down-round protection provided to the stockholders in the event that the Company does another offering of common stock greater than $1,000,000 at a price below $2.50 per share. The down-round provision expires at the closing of a subsequent financing round or October 1, 2015 whichever is earlier. With the assistance of a third-party valuation specialist, the Company valued the conversion liability pursuant to the accounting guidance of ASC 820-10, Fair Value Measurements As of June 30, 2015, the Company re-evaluated the likelihood and valuation of a potential down-round given that management has been actively pursuing capital raising efforts. In the absence of any definitive agreement, the Company calculated the fair value of the conversion feature to be $700,000 by determining the highest probability of a per share price in the next anticipated round of financing, after considering all discussions with bankers, potential investors, and preliminary term sheets. This amount was booked as a current liability as of June 30, 2015 and was charged as a non-operating expense for the period. In July 2015, the Company increased its down-round provision by $286,000 based on the closing of an additional round of 180,000 Series A shares by determining the highest probability of a per share price in the next anticipated round of financing, after considering all discussions with bankers, potential investors, and preliminary term sheets. This amount was charged to non-operating expense for the three months ended September 30, 2015. As of August 21, 2015, upon the closing of the Series B Preferred Stock sale with proceeds totaling $5.0 million, the Company issued 1,232,000 additional shares of common stock at $0.80 per share thereby eliminating this liability of $986,000 and offsetting it to Additional Paid-in-Capital. This amount was calculated by determining the difference in per share pricing between the Series A Preferred Stock financing of $2.50 per share and the Series B Preferred Stock financing of $0.80 per share multiplied by the 580,000 total shares included in the Series A offering. Series B Preferred Stock Conversion Liability As of August 20, 2015, in connection with the Series B Preferred Stock financing, the Company recorded a liability related to down-round protection provided to the stockholders in the event that the Company does another sale or issuance of common stock, stock options or convertible securities where the share price is below $0.80 per share. With the assistance of a third-party valuation specialist, the Company valued the conversion liability pursuant to the accounting guidance of ASC 820-10, Fair Value Measurement Derivatives and Hedging/Contracts in Entity's Own Equity As of December 31, 2015, the Company engaged a third-party valuation specialist to re-measure the conversion liability to fair market value as of that date utilizing the same methodology previously performed. The derivative was valued at $84,090 and was recorded as a current liability and the change in fair market value was recorded as a non-operating expense totaling $17,945 for the year ended December 31, 2015. As of December 31, 2016, the Company engaged a third-party valuation specialist to re-measure the conversion liability to fair market value as of that date utilizing the same methodology previously performed. The derivative which was classified as a current liability was adjusted to $118,821 as of December 31, 2016. The change in fair market value was recorded as non-operating expense of $48,564 for the year ended December 31, 2016. |
Series B Warrants
Series B Warrants | 12 Months Ended |
Dec. 31, 2016 | |
Series B Warrants [Abstract] | |
Series B Warrants | 6. Series B Warrants In conjunction with the Series B Preferred Stock financing, the Company issued 6,437,500 common stock warrants that are exercisable at a price of $1.15 per share and expire five years from the issuance date. The warrants were initially valued at $2,935,800 utilizing the Black-Scholes pricing model. The warrants are exercisable in cash or through a cashless exercise provision. The Series B warrants also have a "down-round" protection feature provided to the investors if the Company subsequently issues or sells any shares of common stock, stock options, or convertible securities at a price less than the exercise price of $1.15 per each warrant. The exercise price is automatically adjusted down to the price of the instrument being issued. In October 2016, as a result of the Series C Preferred Stock financing, the exercise price was adjusted to $0.40 and in December, 2016, as a result of the Series D Preferred Stock financing, the exercise price was adjusted to $0.25. The Company reviewed the classification of the warrants as liabilities or equity under the guidance of ASC 480-10, Distinguishing Liabilities from Equity Years Ended December 31, 2016 2015 Dividend yield 0.00 % 0.00 % Volatility factor 70.00 % 70.00 % Risk-free interest rate 1.616 % 1.75 % Expected term (years) 3.63 4.61 Weighted-average fair value of warrants $ 0.17 $ 0.46 This resulted in a warrant value of $1,112,308 as of December 31, 2016. The change in fair market value at the re-measurement date was recorded as non-operating income totaling $1,342,651 for the year ended December 31, 2016. The Company performed the same valuation as of December 31, 2015 which resulted in the warrant value of $2,454,959. The change in fair market value at the re-measurement date was recorded as non-operating income totaling $481,610 for the year ended December 31, 2015. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 7. Income Taxes Under the FASB's accounting guidance related to income tax positions, among other things, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a fifty (50) % likelihood of being sustained. Additionally, the guidance provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company's policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on the Company's balance sheets as of December 31, 2016, and has not recognized interest and/or penalties in the consolidated statement of operations for the year ended December 31, 2016. The Company has no uncertain tax positions as of December 31, 2016. The Company is subject to taxation in the United States and California. The Company's tax years for 2013 (federal) and 2012 (California) and forward are subject to examination by the United States and California tax authorities. At December 31, 2016, the Company had federal and California net operating loss carry forwards ('NOLs') aggregating $9,959,336 and $9,956,136, respectively, which, if not used, will begin to expire from 2035. The utilization of these NOLs may become subject to limitations based on past and future changes in ownership of the Company pursuant to Internal Revenue Code Section 382. The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred income tax assets are as follows: As of December 31, 2016 2015 Current deferred tax assets/(liabilities): State taxes $ 560 $ (199,861 ) Capitalized research and development costs 51,118 298,621 Accrual to cash adjustment - 638,754 Other 250,284 34,588 Net operating loss 4,057,846 1,867,086 Gross deferred tax assets 4,359,808 2,639,188 Valuation allowance (4,359,808 ) (2,639,188 ) Total deferred tax assets $ - $ - The provision for income taxes on earnings subject to income taxes differs from the statutory Federal rate at December 31, 2016 and 2015, due to the following: As of December 31, 2016 2015 Expected income tax benefit at federal statutory tax rate $ (1,111,773 ) $ (1,693,806 ) State income taxes, net of federal benefit (241,899 ) (240,479 ) Change in fair value of warrant (452,930 ) - Change in valuation allowance 1,720,620 1,843,282 Stock compensation 83,332 - Other permanent difference 1,580 222,207 Other 2,671 (129,489 ) Provision (benefit) for income taxes $ 1,600 $ 1,716 The Company records a valuation allowance against deferred tax assets to the extent that it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Due to the substantial doubt related to the Company's ability to utilize its deferred tax assets, a valuation allowance for the full amount of the deferred tax assets has been established at December 31, 2016. As a result of this valuation allowance there are no income tax benefits reflected in the accompanying consolidated statement of operations to offset pre-tax losses. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | 8. Subsequent Events UM 5070 license agreement On January 10, 2017, the “Company entered into a license agreement with the University of Mississippi pursuant to which UM granted the Company an exclusive, perpetual license, including the right to sublicense, under intellectual property related to UM5070, a platform of cannabinoid-based molecules to research, develop and commercialize products for the treatment of infectious diseases. The license agreement culminates roughly one year of screening and target molecule identification studies especially focused on therapy-resistant infectious organisms like methicillin-resistant Staphylococcus aureus (MRSA). The license agreement contains certain milestone and royalty payments, as defined therein. There is a one-time upfront payment of $65,000 payable in four equal monthly installments that started on February 1, 2017. These licenses also require the Company to reimburse UM for patent costs incurred related to these products under license. These license agreements will terminate upon expiration of the patents, breach or default of the license agreements, or upon 60 days’ written notice by the Company to UM. Convertible Preferred Stock Issuance In January 2017, the Company sold 1,200 shares of convertible preferred stock with a purchase price of $1,000 per share for gross proceeds of $1,200,000 to a healthcare investment fund and private investors under the Series D Preferred Stock Agreement. Each share of preferred stock is convertible into 4,000 shares of common stock which results in an effective conversion price of $0.25 per common share. This results in the reduction of the conversion price of the Series B and Series C Preferred Stock to $0.25 and a reduction in the exercise price of the Series B warrants to $0.25. As part of the terms of the Series D Preferred Stock Agreement, the Company entered into a Registration Rights Agreement with the purchaser to file a registration statement to register for resale the shares of common stock underlying the preferred shares within 30 days following the closing of the agreement. In addition, the placement agent received a warrant to purchase up to 480,000 shares of common stock with an exercise price of $0.25 per share that expires in January, 2022. |
Nature of Operations, Busines17
Nature of Operations, Business Activities and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. Such estimates and judgments are utilized for stock-based compensation expense and equity securities with embedded features as discussed below. |
Liquidity and Going Concern | Liquidity and Going Concern The Company has incurred operating losses and negative cash flows from operations since our inception. As of December 31, 2016, we had cash and cash equivalents of $64,820. In January 2017, we raised an additional gross proceeds of $1,200,000 (see note 8) to be utilized to fund operations. The Company anticipates that it will continue to incur net losses into the foreseeable future as it continues to advance and develop a number of potential drug candidates into preclinical development activities and expands its corporate infrastructure which includes the costs associated with being a public company. Without additional funding, management believes that the Company will not have sufficient funds to meet its obligations within one year after the date the consolidated financial statements are issued. These conditions give rise to substantial doubt as to the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company plans to continue to fund its operations and capital funding needs through public or private equity or debt financings, strategic collaborations, licensing arrangements, asset sales, government grants or other arrangements. However, the Company cannot be sure that such additional funds will be available on reasonable terms, or at all. If the Company raises additional funds by issuing equity securities, substantial dilution to existing stockholders would result. If the Company is unable to secure adequate additional funding, the Company may be forced to make a reduction in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of those investments approximates their fair market value due to their short maturity and liquidity. Cash and cash equivalents include cash on hand and amounts on deposit with financial institutions, which amounts may at times exceed federally insured limits. The Company has not experienced any losses on such accounts and does not believe it is exposed to any significant credit risk. |
Restricted Cash | Restricted Cash A deposit of $37,500 as of December 31, 2016 and 2015 was restricted from withdrawal and held by a bank in the form of a certificate of deposit. This certificate serves as collateral for payment of the Company's credit cards. |
Fair Value Measurements | Fair Value Measurements Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, is used to measure fair value: Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources such as quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The carrying values of our financial instruments, including, cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses approximate their fair value due to the short maturities of these financial instruments. The Series B warrant liability and the conversion liability for the Series B Preferred Stock were valued utilizing Level 3 inputs primarily from a third party independent appraisal conducted as of December 31, 2016. |
Property and Equipment, Net | Property and Equipment, Net As of December 31, 2016, property and equipment, net, was $9,584, consisting primarily of computers and equipment. The Company had $13,383 of property and equipment, net, as of December 31, 2015. Expenditures for additions, renewals and improvements will be capitalized at cost. Depreciation will generally be computed on a straight-line method based on the estimated useful life of the related assets currently ranging from two to three years. Maintenance and repairs that do not extend the life of assets are charged to expense when incurred. When properties are disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reported in the period the transaction takes place. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted cash flows expected to be generated by the asset. If the carrying amount exceeds its estimated future undiscounted cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset. The costs incurred for the rights to use licensed technologies in the research and development process, including licensing fees and milestone payments, will be charged to research and development expense as incurred in situations where the Company has not identified an alternative future use for the acquired rights, and are capitalized in situations where there is an identified alternative future use. No cost associated with the use of licensed technologies has been capitalized to date. |
Income Taxes | Income Taxes The Company accounts for our deferred income tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities, and net operating loss carry forwards (the "NOLs") and other tax credit carry forwards. These items are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date. Any interest or penalties would be recorded in the Company's statement of operations in the period incurred. The Company records a valuation allowance to reduce the deferred income tax assets to the amount that is more likely than not to be realized. In making such determinations, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. As a result, there are no income tax benefits reflected in the statement of operations to offset pre-tax losses. The Company recognizes a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. |
Convertible Instruments | Convertible Instruments We account for hybrid contracts that feature conversion options in accordance with generally accepted accounting principles in the United States. ASC 815, Derivatives and Hedging Activities Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument. We account for convertible instruments when we have determined that the embedded conversion options should not be bifurcated from their host instruments, in accordance with ASC 470-20, Debt with Conversion and Other Options We also follow ASC 480-10, Distinguishing Liabilities from Equity |
Warrants Issued in Connection with Financings | Warrants Issued in Connection with Financings We generally account for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that we may need to settle the warrants in cash. For warrants issued with a conditional obligation to issue a variable number of shares or the deemed possibility of a cash settlement, we record the fair value of the warrants as a liability at each balance sheet date and record changes in fair value in other income (expense) in the Consolidated Statements of Operations. |
Revenue Recognition | Revenue Recognition The Company has not begun planned principal operations and has not generated any revenue since inception. |
Research and Development Expenses | Research and Development Expenses Research and development ("R&D") costs are expensed when incurred. These costs may consist of external research and development expenses incurred under agreements with third-party contract research organizations and investigative sites, third-party manufacturing organizations and consultants; license fees; employee-related expenses, which include salaries, benefits and stock-based compensation for the personnel involved in our preclinical and clinical drug development activities; and facilities expense, depreciation and other allocated expenses; and equipment and laboratory supplies. |
Stock-Based Compensation Expenses | Stock-Based Compensation Expenses Stock-based compensation cost is estimated at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over the vesting period. We use the Black-Scholes option pricing model for estimating the grant date fair value of stock options and warrants using the following assumptions: · Exercise price - We determined the exercise price based on valuations using the best information available to management at the time of the valuations. · Volatility - We estimate the stock price volatility based on industry peers who are also in the early development stage given the limited market data available in the public arena. · Expected term - The expected term is based on a simplified method which defines the life as the weighted average of the contractual term of the options and warrants and the weighted-average vesting period for all open awards. · Risk-free rate - The risk-free interest rate for the expected term of the option or warrant is based on the average market rate on U.S. treasury securities in effect during the period in which the awards were granted. · Dividends - The dividend yield assumption is based on our history and expectation of paying no dividends. |
Stock-Based Compensation for Non-Employees | Stock-Based Compensation for Non-Employees The Company accounts for warrants and options issued to non-employees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 505-50, Equity - Equity Based Payments to Non-Employees, |
Segment Information | Segment Information FASB ASC No. 280, Segment Reporting |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company is required to record all components of comprehensive income (loss) in the consolidated financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss), net of their related tax effect, arrived at a comprehensive income (loss). For the years ended December 31, 2016 and 2015, the comprehensive income (loss) was equal to the net income (loss). |
Earnings per share | Earnings per share The Company applies FASB ASC No. 260, Earnings per Share |
Recent accounting pronouncements | Recent accounting pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-9, Revenue from Contracts with Customers In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern In February 2016, the FASB issued ASU No. 2016-02 Leases In March 2016, the FASB issued ASU No. 2016-09 Improvement to Employee Share-Based Payment Accounting . |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum payments under non-cancelable operating leases | Years ending December 31, 2017 161,963 2018 - 2019 - 2020 - 2021 - Thereafter - Total $ 161,963 |
Stockholders' Deficit and Red19
Stockholders' Deficit and Redeemable Convertible Series B and Series C Preferred Stock (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Equity [Abstract] | |
Schedule of summary of stock option activity | Options Outstanding Weighted Shares Available Average for Grant of Number of Price per Exercise Options & Shares Shares Share Price Balance at December 31, 2015 820,000 1,180,000 $ 0.42-3.00 $ 0.63 Options granted - - $ - $ - Options exercised - - $ - $ - Options cancelled 37,500 (37,500 ) $ 1.15 $ 1.15 Balance at December 31, 2016 857,500 1,142,500 $ 0.42-3.00 $ 0.61 Vested and Exercisable at December 31, 2016 448,500 $ 0.42-3.00 $ 0.53 |
Schedule of weighted average assumptions for employee options | Years Ended December 31, 2016 2015 Dividend yield NA 0.00 % Volatility factor NA 75.00 % Risk-free interest rate NA 1.65-1.85 Expected term (years) NA 6.25-6.50 Weighted-average fair value of options granted during the periods NA $ 2.69 |
Series B Warrants (Tables)
Series B Warrants (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Series B Warrants [Abstract] | |
Schedule of Series B Warrants | Years Ended December 31, 2016 2015 Dividend yield 0.00 % 0.00 % Volatility factor 70.00 % 70.00 % Risk-free interest rate 1.616 % 1.75 % Expected term (years) 3.63 4.61 Weighted-average fair value of warrants $ 0.17 $ 0.46 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule for significant portions of deferred income tax assets | As of December 31, 2016 2015 Current deferred tax assets/(liabilities): State taxes $ 560 $ (199,861 ) Capitalized research and development costs 51,118 298,621 Accrual to cash adjustment - 638,754 Other 250,284 34,588 Net operating loss 4,057,846 1,867,086 Gross deferred tax assets 4,359,808 2,639,188 Valuation allowance (4,359,808 ) (2,639,188 ) Total deferred tax assets $ - $ - |
Schedule of provision for income taxes on earnings | As of December 31, 2016 2015 Expected income tax benefit at federal statutory tax rate $ (1,111,773 ) $ (1,693,806 ) State income taxes, net of federal benefit (241,899 ) (240,479 ) Change in fair value of warrant (452,930 ) - Change in valuation allowance 1,720,620 1,843,282 Stock compensation 83,332 - Other permanent difference 1,580 222,207 Other 2,671 (129,489 ) Provision (benefit) for income taxes $ 1,600 $ 1,716 |
Nature of Operations, Busines22
Nature of Operations, Business Activities and Summary of Significant Accounting Policies (Detail Textuals) | 1 Months Ended | 12 Months Ended | |||
Oct. 31, 2014shares | Dec. 31, 2016USD ($)Segment$ / sharesshares | Dec. 31, 2015USD ($)$ / sharesshares | Jan. 31, 2017USD ($) | Dec. 31, 2014USD ($) | |
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Cash and cash equivalents | $ | $ 64,820 | $ 3,221,209 | $ 207,330 | ||
Restricted cash | $ | 37,500 | 37,500 | |||
Property and equipment, net | $ | $ 9,584 | $ 13,383 | |||
Property, plant and equipment, depreciation methods | Straight-line method | ||||
Property plant and equipment estimated useful life | Two to three years | ||||
Number of reportable segment | Segment | 1 | ||||
Common stock outstanding | 21,563,163 | 19,903,163 | |||
Subsequent Event | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Additional fund operations raised | $ | $ 1,200,000 | ||||
Series B Preferred Stock | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Anti-dilutive excluded from the calculation of diluted loss per common share | 4,031 | 4,500 | |||
Preferred stock shares convertible into common stock | 16,124,000 | 5,625,000 | |||
Preferred stock, convertible price per share | $ / shares | $ 0.25 | $ 0.80 | |||
Series C Preferred Stock | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Anti-dilutive excluded from the calculation of diluted loss per common share | 386 | ||||
Preferred stock shares convertible into common stock | 1,544,000 | ||||
Preferred stock, convertible price per share | $ / shares | $ 0.25 | ||||
Warrants | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Anti-dilutive excluded from the calculation of diluted loss per common share | 11,044,500 | 10,879,500 | |||
Stock Option | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Anti-dilutive excluded from the calculation of diluted loss per common share | 1,142,500 | 1,180,000 | |||
Nemus Acquisition Corp | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Number of shares exchanged | 12,880,000 | ||||
Common stock outstanding | 16,000,000 | ||||
Nemus Acquisition Corp | Nemus Bioscience, Inc | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Reverse merger common stock issuance with par value (in shares) | 3,120,000 |
University of Mississippi ("U23
University of Mississippi ("UM") Agreements (Detail Textuals) | Dec. 14, 2015USD ($)License_agreement | Oct. 15, 2014USD ($) | Sep. 29, 2014USD ($)License_agreement | Jul. 31, 2013 | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) |
University Of Mississippi Agreements [Line Items] | ||||||
Research and development expense | $ 939,040 | $ 576,093 | ||||
University of Mississippi ("UM") Agreements | Intellectual Property | ||||||
University Of Mississippi Agreements [Line Items] | ||||||
Term of memorandum of understanding agreement | 5 years | |||||
Notice period for termination | 3 months | |||||
Option Agreement | Intellectual Property | ||||||
University Of Mississippi Agreements [Line Items] | ||||||
Number of license agreements | License_agreement | 3 | |||||
Notice period for termination | 60 days | |||||
Annual fees for license agreement | $ 25,000 | |||||
Aggregate milestone payments if milestones achieved | $ 2,100,000 | |||||
Option Agreement | Intellectual Property | October 2014 | ||||||
University Of Mississippi Agreements [Line Items] | ||||||
One time up front payment | $ 10,000 | |||||
License Agreement | University of Mississippi | Intellectual Property | ||||||
University Of Mississippi Agreements [Line Items] | ||||||
Number of license agreements | License_agreement | 2 | |||||
Notice period for termination | 60 days | |||||
One time up front payment | $ 65,000 | |||||
Annual fees for license agreement | 25,000 | |||||
Aggregate milestone payments if milestones achieved | 1,400,000 | |||||
License Agreement | University of Mississippi | Intellectual Property | December 2015 | ||||||
University Of Mississippi Agreements [Line Items] | ||||||
One time up front payment | $ 10,000 |
Commitments and Contingencies -
Commitments and Contingencies - Summary of Future minimum payments (Details) | Dec. 31, 2016USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2,017 | $ 161,963 |
2,018 | |
2,019 | |
2,020 | |
2,021 | |
Thereafter | |
Total | $ 161,963 |
Commitments and Contingencies25
Commitments and Contingencies (Detail Textuals) | Feb. 05, 2016USD ($) | Nov. 30, 2015USD ($) | Oct. 31, 2014USD ($)ft² | Sep. 30, 2014USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) |
Operating Leased Assets [Line Items] | ||||||
Rent expense | $ 7,559 | $ 9,267 | $ 302,419 | $ 242,729 | ||
Lease Agreement | ||||||
Operating Leased Assets [Line Items] | ||||||
Area of corporate office headquarters | ft² | 4,087 | |||||
Rent expense | $ 5,373 | |||||
Letter agreement ("Agreement") | Contract manufacturing organization ("CMO") | ||||||
Operating Leased Assets [Line Items] | ||||||
Fees and expenses for the initial evaluation and development | 260,244 | |||||
Estimated analytical method development and qualification | $ 142,900 | |||||
Letter agreement ("Agreement") | Contract manufacturing organization ("CMO") | Minimum | ||||||
Operating Leased Assets [Line Items] | ||||||
Fees and expenses for the initial evaluation and development | 154,000 | |||||
Letter agreement ("Agreement") | Contract manufacturing organization ("CMO") | Maximum | ||||||
Operating Leased Assets [Line Items] | ||||||
Fees and expenses for the initial evaluation and development | $ 183,000 | |||||
Independent contractor agreement | K2C, Inc. | ||||||
Operating Leased Assets [Line Items] | ||||||
Monthly fee | 10,000 | |||||
Total expense incurred under agreement | 120,000 | $ 120,000 | ||||
Outstanding balance due to K2C | $ 30,000 |
Stockholders' Deficit and Red26
Stockholders' Deficit and Redeemable Convertible Series B and Series C Preferred Stock (Details) - Stock Option - Omnibus Incentive Plan 2014 | 12 Months Ended |
Dec. 31, 2016$ / sharesshares | |
Shares Available for Grant of Option's & Shares | |
Balance at the beginning | shares | 820,000 |
Options cancelled | shares | 37,500 |
Balance at the ending | shares | 857,500 |
Number of Shares | |
Balance at the beginning | shares | 1,180,000 |
Options cancelled | shares | (37,500) |
Balance at the ending | shares | 1,142,500 |
Vested and Exercisable at December 31, 2016 | shares | 448,500 |
Price Per Share | |
Options granted | |
Options exercised | |
Options cancelled | 1.15 |
Weighted Average Exercise Price | |
Balance at the beginning | 0.63 |
Options granted | |
Options exercised | |
Options cancelled | 1.15 |
Balance at the ending | 0.61 |
Vested and Exercisable at December 31, 2016 | 0.53 |
Minimum | |
Price Per Share | |
Balance at the beginning | 0.42 |
Balance at the ending | 0.42 |
Vested and Exercisable at December 31, 2016 | 0.42 |
Maximum | |
Price Per Share | |
Balance at the beginning | 3 |
Balance at the ending | 3 |
Vested and Exercisable at December 31, 2016 | $ 3 |
Stockholders' Deficit and Red27
Stockholders' Deficit and Redeemable Convertible Series B and Series C Preferred Stock (Details 1) - Stock Option - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Dividend yield | 0.00% | |
Volatility factor | 75.00% | |
Weighted-average fair value of options granted during the periods | $ 2.69 | |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate | 1.65% | |
Expected term (years) | 6 years 3 months | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate | 1.85% | |
Expected term (years) | 6 years 6 months |
Stockholders' Deficit and Red28
Stockholders' Deficit and Redeemable Convertible Series B and Series C Preferred Stock (Detail Textuals) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||||||||||||||||||||
Dec. 31, 2016USD ($)$ / sharesshares | Nov. 30, 2016USD ($)$ / sharesshares | Oct. 31, 2016USD ($)$ / sharesshares | Mar. 31, 2016$ / sharesshares | Dec. 31, 2015$ / sharesshares | Aug. 31, 2015USD ($)$ / sharesshares | Aug. 21, 2015USD ($)$ / sharesshares | Jul. 31, 2015USD ($)shares | Jun. 30, 2015USD ($)$ / sharesshares | May 31, 2015$ / sharesshares | Apr. 30, 2015USD ($)$ / sharesshares | Mar. 31, 2015USD ($)$ / sharesshares | Jan. 31, 2015USD ($)$ / sharesshares | Oct. 31, 2014Investorshares | Jun. 30, 2014USD ($)$ / sharesshares | Jul. 17, 2012USD ($)Investor$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | Mar. 31, 2015USD ($)$ / sharesshares | Dec. 31, 2014USD ($) | Dec. 31, 2016USD ($)$ / sharesshares | Dec. 31, 2015USD ($)$ / shares | May 25, 2016USD ($)shares | Nov. 30, 2015$ / sharesshares | Aug. 31, 2014USD ($)$ / sharesshares | |
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares issued for services | 1,110,000 | |||||||||||||||||||||||
General and administrative expense | $ | $ 466,200 | $ 3,531,540 | $ 3,741,017 | |||||||||||||||||||||
Amortization of warrant service cost | $ | 5,145 | $ 80,805 | ||||||||||||||||||||||
Amortized general and administrative expense | $ | $ 12,194 | |||||||||||||||||||||||
Fair market value of common stock issued recorded as prepaid expense | $ | $ 168,000 | |||||||||||||||||||||||
Number of shares issued to group of private investors | 24,000 | 241,663 | ||||||||||||||||||||||
Par value of common stock issued (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||||||
Value of shares issued to group of private investors | $ | $ 724,989 | |||||||||||||||||||||||
Number of individual investor | Investor | 18 | |||||||||||||||||||||||
Preferred stock, shares authorized | 20,000,000 | 20,000,000 | 20,000,000 | |||||||||||||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | |||||||||||||||||||||
Beneficial conversion feature upon issuanceof Series C Preferred Stock | $ | $ 325,000 | |||||||||||||||||||||||
Series A Preferred stock | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares issued to group of private investors | 180,000 | 150,000 | 250,000 | |||||||||||||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | |||||||||||||||||||||||
Minimum equity financing under down-round protection feature | $ | $ 286,000 | $ 1,000,000 | $ 1,000,000 | |||||||||||||||||||||
Maximum common stock issuance price per share (in dollars per share) | $ / shares | 2.50 | $ 2.50 | $ 2.50 | $ 2.50 | ||||||||||||||||||||
Conversion price | $ / shares | $ 2.50 | |||||||||||||||||||||||
Number of shares converted | 580,000 | 580,000 | ||||||||||||||||||||||
Number of shares issued in conversion | 1,812,500 | |||||||||||||||||||||||
Proceeds from issuance of preferred stock and warrants | $ | $ 5,000,000 | |||||||||||||||||||||||
Series B Preferred Stock | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of preferred stock and warrants sold | 5,000 | |||||||||||||||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 1,000 | |||||||||||||||||||||||
Maximum common stock issuance price per share (in dollars per share) | $ / shares | 1,000 | |||||||||||||||||||||||
Conversion price | $ / shares | $ 0.25 | $ 0.40 | $ 0.80 | $ 0.80 | $ 0.80 | |||||||||||||||||||
Number of shares converted | 8 | 500 | 5,625,000 | |||||||||||||||||||||
Number of shares issued in conversion | 10,000 | 625,000 | 1,812,500 | |||||||||||||||||||||
Proceeds from issuance of preferred stock and warrants | $ | $ 5,000,000 | $ 5,000,000 | ||||||||||||||||||||||
Preferred stock, redemption terms | (A) 115% of the conversion amount and (B) the product of (1) the conversion rate in effect at such time and (2) the greatest closing sale price of the Common Stock during the period beginning on the date immediately preceding such triggering event and ending on the date such holder delivers the notice of redemption. | |||||||||||||||||||||||
Preferred stock, conversion rate | 1,250:1 | |||||||||||||||||||||||
Liquidation preference value | $ | $ 4,000,000 | $ 4,500,000 | $ 4,000,000 | $ 4,000,000 | ||||||||||||||||||||
Series C Preferred Stock | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ / shares | $ 0.40 | |||||||||||||||||||||||
Number of preferred stock and warrants sold | 500 | |||||||||||||||||||||||
Effective price per share | $ / shares | $ 0.40 | $ 0.40 | $ 0.40 | |||||||||||||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 1,000 | |||||||||||||||||||||||
Conversion price | $ / shares | $ 0.40 | |||||||||||||||||||||||
Number of shares converted | 1,250,000 | 461 | ||||||||||||||||||||||
Number of shares issued in conversion | 1,152,500 | |||||||||||||||||||||||
Proceeds from issuance of preferred stock and warrants | $ | $ 500,000 | |||||||||||||||||||||||
Preferred stock, participation rights | For a twelve month period from the date of the financing, the Series C investors will have the right to participate in subsequent financings up to fifty percent of such financing. | |||||||||||||||||||||||
Series C Preferred Stock | Issuance One | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Conversion price | $ / shares | $ 0.40 | |||||||||||||||||||||||
Number of shares converted | 39 | |||||||||||||||||||||||
Number of shares issued in conversion | 97,500 | |||||||||||||||||||||||
Series C Preferred Stock | Issuance Two | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares converted | 75 | |||||||||||||||||||||||
Number of shares issued in conversion | 300,000 | |||||||||||||||||||||||
Series B And C Preferred Stock | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Conversion price | $ / shares | $ 0.25 | |||||||||||||||||||||||
Technology license agreement | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares issued for services | 100,000 | |||||||||||||||||||||||
Founders and Board member | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares issued for services | 7,770,000 | |||||||||||||||||||||||
Value of shares exchanged for services | $ | $ 1,000 | |||||||||||||||||||||||
Warrants | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares called by warrants | 40,000 | 6,250,000 | 10,000 | 90,000 | 3,000,000 | 90,000 | 60,000 | 120,000 | 2,200,000 | |||||||||||||||
Warrant exercise price (in dollars per share) | $ / shares | $ 1.15 | $ 1.15 | $ 5 | $ 1.15 | $ 2.50 | $ 1 | $ 2.50 | $ 1.15 | ||||||||||||||||
Term of warrant | 10 years | 5 years | 5 years | 5 years | 5 years | |||||||||||||||||||
Number of advisors | Investor | 2 | |||||||||||||||||||||||
Value of common stock called by warrants | $ | $ 18,400 | $ 14,700 | $ 85,950 | $ 85,950 | $ 42,000 | $ 1,100,000 | ||||||||||||||||||
Amortization of warrant service cost | $ | $ 34,200 | $ 7,800 | ||||||||||||||||||||||
Number of shares issued to group of private investors | 36,000 | 30,000 | ||||||||||||||||||||||
Value of warrants issued | $ | $ 1,000 | $ 625,000 | ||||||||||||||||||||||
Warrants | Issuance One | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares called by warrants | 100,000 | |||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ / shares | $ 5 | |||||||||||||||||||||||
Term of warrant | 10 years | |||||||||||||||||||||||
Value of common stock called by warrants | $ | $ 326,000 | |||||||||||||||||||||||
Warrants | Issuance Two | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares called by warrants | 6,000 | |||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ / shares | $ 2.50 | |||||||||||||||||||||||
Value of common stock called by warrants | $ | $ 10,000 | |||||||||||||||||||||||
Warrants | Series A Preferred stock | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares called by warrants | 36,000 | 30,000 | 50,000 | |||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ / shares | $ 5 | |||||||||||||||||||||||
Term of warrant | 5 years | |||||||||||||||||||||||
Warrants | Series B Preferred Stock | Issuance One | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares called by warrants | 6,250,000 | |||||||||||||||||||||||
Warrants | Series B Preferred Stock | Issuance Two | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares called by warrants | 187,500 | |||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ / shares | $ 1.15 | |||||||||||||||||||||||
Value of common stock called by warrants | $ | $ 86,250 | |||||||||||||||||||||||
Warrants | Series C Preferred Stock | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares called by warrants | 125,000 | |||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ / shares | $ 0.40 | |||||||||||||||||||||||
Term of warrant | 5 years | |||||||||||||||||||||||
Value of common stock called by warrants | $ | $ 37,500 | |||||||||||||||||||||||
Warrants | Stock Purchase Agreement June 2014 | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Number of shares called by warrants | 450,000 | 550,000 | ||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ / shares | $ 1 | $ 1 | ||||||||||||||||||||||
Value of common stock called by warrants | $ | $ 85,500 | $ 104,500 | ||||||||||||||||||||||
Number of shares issued to group of private investors | 1,800,000 | |||||||||||||||||||||||
Value of shares issued to group of private investors | $ | $ 900,000 | |||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||
Equity [Line Items] | ||||||||||||||||||||||||
Conversion price | $ / shares | $ 0.40 | $ 0.80 | $ 0.80 | |||||||||||||||||||||
Number of shares converted | 2,500 | 1,250 |
Stockholders' Deficit and Red29
Stockholders' Deficit and Redeemable Convertible Series B and Series C Preferred Stock (Detail Textuals 1) - USD ($) | 1 Months Ended | 12 Months Ended | |
Oct. 20, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | |
Equity [Line Items] | |||
Total amount of unrecognized compensation cost related to non-vested stock options | $ 1,023,418 | ||
Recognized period of non-vested stock options | 2 years 10 months 24 days | ||
Number of restricted stock awards granted | $ 62,500 | ||
General and administrative expense | |||
Equity [Line Items] | |||
Recognized stock-based compensation expense | $ 706,368 | $ 414,343 | |
Stock Option | |||
Equity [Line Items] | |||
Dividend yield | 0.00% | ||
Stock Option | Minimum | |||
Equity [Line Items] | |||
Contractual term of option outstanding | 6 years 3 months | ||
Stock Option | Maximum | |||
Equity [Line Items] | |||
Contractual term of option outstanding | 6 years 6 months | ||
Omnibus Incentive Plan 2014 | Stock Option | |||
Equity [Line Items] | |||
Number of shares reserved for future grants | 3,200,000 | ||
Aggregate number of shares granted | 1,142,500 | ||
Number of shares available for future grant | 857,500 | ||
Expiry period of options granted | 10 years | ||
Percentage of option price at least of fair value on date of grants | 100.00% | ||
Voting percentage of common stock | 10.00% | ||
Percentage of fair value option price at date of grants | 110.00% | ||
Maximum exercisable period of fair value of option | 5 years | ||
Vested period of shares | 5 years | ||
Remaining contractual life of options outstanding | 7 years 10 months 24 days | ||
Options to purchase shares of common stock, exercisable | 436,000 | ||
Options outstanding | 1,142,500 | 1,180,000 | |
Aggregate intrinsic value of options outstanding | $ 0 | ||
Omnibus Incentive Plan 2014 | Restricted stock awards | Senior management and board of directors | |||
Equity [Line Items] | |||
Recognized stock-based compensation expense | 356,250 | $ 62,500 | |
Total amount of unrecognized compensation cost related to non-vested stock options | $ 481,250 | ||
Number of restricted stock awards granted | $ 1,200,000 | ||
Fair market value of shares granted | $ 900,000 | ||
Omnibus Incentive Plan 2014 | Restricted stock awards | Minimum | Senior management and board of directors | |||
Equity [Line Items] | |||
Vested period of shares | 1 year | ||
Omnibus Incentive Plan 2014 | Restricted stock awards | Maximum | Senior management and board of directors | |||
Equity [Line Items] | |||
Vested period of shares | 3 years |
Provision for Conversion of P30
Provision for Conversion of Preferred Stock (Detail Textuals) - USD ($) | 1 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2016 | Oct. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Aug. 31, 2015 | Aug. 21, 2015 | Jul. 31, 2015 | Apr. 30, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | |
Conversion of Stock [Line Items] | ||||||||||||
Fair value of the conversion feature | $ 118,821 | $ 84,090 | $ 118,821 | $ 84,090 | $ 75,488 | |||||||
Series A Preferred stock | ||||||||||||
Conversion of Stock [Line Items] | ||||||||||||
Minimum equity financing under down-round protection feature | $ 286,000 | $ 1,000,000 | $ 1,000,000 | |||||||||
Maximum common stock issuance price per share (in dollars per share) | $ 2.50 | $ 2.50 | $ 2.50 | |||||||||
Fair value of the conversion feature | $ 700,000 | |||||||||||
Proceeds received from the Series B financing | $ 5,000,000 | |||||||||||
Number of additional shares issued | 180,000 | |||||||||||
Shares issued, price per share (in dollars per share) | $ 2.50 | |||||||||||
Change in fair value of conversion rights | 986,000 | |||||||||||
Number of shares converted | 580,000 | 580,000 | ||||||||||
Conversion price | $ 2.50 | |||||||||||
Series B Preferred Stock | ||||||||||||
Conversion of Stock [Line Items] | ||||||||||||
Maximum common stock issuance price per share (in dollars per share) | $ 1,000 | |||||||||||
Proceeds received from the Series B financing | $ 5,000,000 | $ 5,000,000 | ||||||||||
Number of additional shares issued | 1,232,000 | |||||||||||
Shares issued, price per share (in dollars per share) | $ 0.80 | |||||||||||
Change in fair value of conversion rights | $ 986,000 | $ 48,564 | $ 17,945 | |||||||||
Number of shares converted | 8 | 500 | 5,625,000 | |||||||||
Conversion price | $ 0.25 | $ 0.40 | $ 0.80 | $ 0.80 | $ 0.80 |
Series B Warrants (Details)
Series B Warrants (Details) - Series B Warrants - $ / shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Class of Warrant or Right [Line Items] | ||
Dividend yield | 0.00% | 0.00% |
Volatility factor | 70.00% | 70.00% |
Risk-free interest rate | 1.616% | 1.75% |
Expected term (years) | 3 years 7 months 17 days | 4 years 7 months 10 days |
Weighted-average fair value of warrants | $ 0.17 | $ 0.46 |
Series B Warrants (Detail Textu
Series B Warrants (Detail Textuals) - USD ($) | 1 Months Ended | 12 Months Ended | |
Oct. 31, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Class of Warrant or Right [Line Items] | |||
Value of warrants | $ 837,711 | $ 759,386 | |
Series B warrants | 1,112,308 | 2,454,959 | |
Change in fair market value at the re-measurement date recorded as non-operating income | $ 1,342,651 | $ 481,610 | |
Series C Preferred Stock | |||
Class of Warrant or Right [Line Items] | |||
Warrant exercise price (in dollars per share) | $ 0.40 | ||
Proceeds received from the Series B financing | $ 500,000 | ||
Series D Preferred Stock | |||
Class of Warrant or Right [Line Items] | |||
Warrant exercise price (in dollars per share) | $ 0.25 | ||
Series B Warrants | |||
Class of Warrant or Right [Line Items] | |||
Number of warrants issued | 6,437,500 | ||
Warrant exercise price (in dollars per share) | $ 1.15 | ||
Warrants, expiration period | 5 years | ||
Value of warrants | $ 2,935,800 | ||
Proceeds received from the Series B financing | $ 5,000,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Current deferred tax assets/(liabilities): | ||
State taxes | $ 560 | $ (199,861) |
Capitalized research and development costs | 51,118 | 298,621 |
Accrual to cash adjustment | 638,754 | |
Other | 250,284 | 34,588 |
Net operating loss | 4,057,846 | 1,867,086 |
Gross deferred tax assets | 4,359,808 | 2,639,188 |
Valuation allowance | (4,359,808) | (2,639,188) |
Total deferred tax assets |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Expected income tax benefit at federal statutory tax rate | $ (1,111,773) | $ (1,693,806) |
State income taxes, net of federal benefit | (241,899) | (240,479) |
Change in fair value of warrant | (452,930) | |
Change in valuation allowance | 1,720,620 | 1,843,282 |
Stock compensation | 83,332 | |
Other permanent difference | 1,580 | 222,207 |
Other | 2,671 | (129,489) |
Provision (benefit) for income taxes | $ 1,600 | $ 1,716 |
Income Taxes (Detail Textuals)
Income Taxes (Detail Textuals) | Dec. 31, 2016USD ($) |
Income Tax Disclosure [Abstract] | |
Federal operating loss carry forwards | $ 9,959,336 |
California net operating loss carry forwards | $ 9,956,136 |
Subsequent Events (Detail Textu
Subsequent Events (Detail Textuals) | Jan. 10, 2017USD ($)Installment | Dec. 14, 2015USD ($) | Jan. 31, 2017USD ($)$ / sharesshares | Oct. 31, 2016$ / shares | Aug. 21, 2015$ / shares |
Series B Preferred Stock | |||||
Subsequent Event [Line Items] | |||||
Shares issued, price per share (in dollars per share) | $ 0.80 | ||||
Series C Preferred Stock | |||||
Subsequent Event [Line Items] | |||||
Warrant exercise price (in dollars per share) | $ 0.40 | ||||
License Agreement | University of Mississippi | Intellectual Property | |||||
Subsequent Event [Line Items] | |||||
One time up front payment payable in four equal monthly installments | $ | $ 65,000 | ||||
Notice period for termination | 60 days | ||||
Subsequent Event | Convertible Preferred Stock | |||||
Subsequent Event [Line Items] | |||||
Number of shares sold | shares | 1,200 | ||||
Shares issued, price per share (in dollars per share) | $ 1,000 | ||||
Gross proceeds received | $ | $ 1,200,000 | ||||
Preferred stock shares convertible into common stock | shares | 4,000 | ||||
Conversion price, per share | $ 0.25 | ||||
Term resale the shares of common stock underlying the preferred shares | 30 days | ||||
Subsequent Event | Series B Preferred Stock | |||||
Subsequent Event [Line Items] | |||||
Reduction in conversion price | $ 0.25 | ||||
Subsequent Event | Series C Preferred Stock | |||||
Subsequent Event [Line Items] | |||||
Reduction in conversion price | 0.25 | ||||
Subsequent Event | Series B Warrants | |||||
Subsequent Event [Line Items] | |||||
Reduction in exercise price | $ 0.25 | ||||
Subsequent Event | Common Stock | |||||
Subsequent Event [Line Items] | |||||
Number of common stock called by warrant | shares | 480,000 | ||||
Warrant exercise price (in dollars per share) | $ 0.25 | ||||
Subsequent Event | License Agreement | University of Mississippi | Intellectual Property | |||||
Subsequent Event [Line Items] | |||||
One time up front payment payable in four equal monthly installments | $ | $ 65,000 | ||||
Number of monthly installments | Installment | 4 | ||||
Notice period for termination | 60 days |