Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 09, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Nemus Bioscience, Inc. | |
Entity Central Index Key | 1,516,551 | |
Trading Symbol | nmus | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 132,701,579 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 1,874,720 | $ 259,955 |
Restricted cash | 4,502 | 4,428 |
Prepaid expenses | 155,521 | 291,428 |
Other current assets | 2,609 | |
Total current assets | 2,037,352 | 555,811 |
Property and equipment, net | 4,979 | 1,407 |
Total assets | 2,042,331 | 557,218 |
Current liabilities | ||
Accounts payable | 11,920 | 100,921 |
Accounts payable - related party | 65,000 | |
Accrued payroll and related expenses | 58,327 | 54,512 |
Accrued expenses | 60,524 | 143,826 |
Warrant liabilities, short-term | 10,091,839 | |
Provision for conversion of Series B preferred stock | 6,715 | |
Convertible debt | 235,000 | |
Provision for conversion of convertible debt | 265,000 | |
Total current liabilities | 10,287,610 | 805,974 |
Noncurrent liabilities | ||
Series B warrant liability, long-term | 551,322 | |
Total noncurrent liabilities | 551,322 | |
Total liabilities | 10,287,610 | 1,357,296 |
Commitments and contingencies (Note 7) | ||
Preferred stock, $0.001 par value; 20,000,000 shares authorized | ||
Stockholders' deficit | ||
Common stock, $0.001 par value; 236 million shares authorized; 132,701,579 issued and outstanding as of June 30, 2018 and 33,622,829 issued and outstanding as of December 31, 2017 | 132,702 | 33,623 |
Additional paid-in-capital | 15,545,772 | 9,444,831 |
Warrants | 982,911 | 982,911 |
Accumulated deficit | (24,906,664) | (14,030,871) |
Total stockholders' deficit | (8,245,279) | (3,569,506) |
Total liabilities and stockholders' deficit | $ 2,042,331 | 557,218 |
Convertible Series B Preferred Stock | ||
Noncurrent liabilities | ||
Redeemable Convertible Preferred Stock, value | 822,201 | |
Convertible Series D Preferred Stock | ||
Noncurrent liabilities | ||
Redeemable Convertible Preferred Stock, value | 169,446 | |
Convertible Series F Preferred Stock | ||
Noncurrent liabilities | ||
Redeemable Convertible Preferred Stock, value | $ 1,777,781 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Par value of common stock issued (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 236,000,000 | 236,000,000 |
Common stock, shares issued | 132,701,579 | 33,622,829 |
Common stock, shares outstanding | 132,701,579 | 33,622,829 |
Convertible Series B Preferred Stock | ||
Preferred stock, shares issued | 0 | 2,833.55 |
Preferred stock, shares outstanding | 0 | 2,833.55 |
Issuance costs (in dollars) | $ 347,091 | |
Convertible Series D Preferred Stock | ||
Preferred stock, shares issued | 0 | 200 |
Preferred stock, shares outstanding | 0 | 200 |
Issuance costs (in dollars) | $ 30,557 | |
Convertible Series F Preferred Stock | ||
Preferred stock, shares issued | 0 | 2,000 |
Preferred stock, shares outstanding | 0 | 2,000 |
Issuance costs (in dollars) | $ 118,855 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Operating expenses | ||||
Research and development | $ 60,651 | $ 25,000 | $ 152,751 | |
General and administrative | $ 1,080,190 | 670,276 | 2,306,551 | 1,958,329 |
Total operating expenses | 1,080,190 | 730,927 | 2,331,551 | 2,111,080 |
Operating loss | (1,080,190) | (730,927) | (2,331,551) | (2,111,080) |
Interest expense | 3,100 | |||
Interest income | (74) | (74) | ||
Other expense (income) | ||||
Change in fair value of warrant liabilities | 1,580,242 | (26,437) | 417,749 | (38,998) |
Fair value of warrant liability in excess of proceeds | 7,174,634 | |||
Change in fair value of conversion rights of Series B preferred stock | (3,326) | (88,532) | ||
Change in fair value of conversion rights of convertible debt | 185,000 | |||
Financing transaction costs | 137,191 | |||
Loss on extinguishment of convertible debt | 590,392 | |||
Amortization of convertible debt discount | 34,608 | |||
Loss before income taxes | (2,660,358) | (701,164) | (10,874,151) | (1,983,550) |
Provision for income taxes | 1,642 | 1,600 | 1,642 | 2,431 |
Net loss and comprehensive loss | (2,662,000) | (702,764) | (10,875,793) | (1,985,981) |
Less: Preferred deemed dividend | 711,000 | |||
Net loss applicable to common shareholders | $ (2,662,000) | $ (702,764) | $ (10,875,793) | $ (2,696,981) |
Basic earnings per common share (in dollars per share) | $ (0.02) | $ (0.02) | $ (0.10) | $ (0.10) |
Diluted earnings per common share (in dollars per share) | $ (0.02) | $ (0.02) | $ (0.10) | $ (0.10) |
Weighted average shares of common stock outstanding | ||||
Basic (in shares) | 130,668,887 | 28,376,141 | 109,767,054 | 25,814,315 |
Diluted (in shares) | 130,668,887 | 28,376,141 | 109,767,054 | 25,814,315 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | ||
Cash flows from operating activities: | |||
Net loss | $ (10,875,793) | $ (1,985,981) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation | 813 | 4,855 | |
Stock-based compensation expense | 330,212 | 304,338 | |
Amortization of warrants and stock issued for services | [1] | 12,500 | |
Change in fair value of conversion rights of Series B preferred stock | (88,532) | ||
Change in fair value of conversion rights of convertible debt | 185,000 | ||
Change in fair value of warrant liabilities | 417,749 | (38,998) | |
Fair value of warrant liability in excess of proceeds | 7,174,634 | ||
Loss on extinguishment of convertible debt | 590,392 | ||
Amortization of convertible debt discount | 34,608 | ||
Common stock issued for services | 187,550 | ||
Changes in assets and liabilities: | |||
Prepaid expenses | [1] | 135,907 | (104,830) |
Other current assets | (2,609) | 831 | |
Accounts payable | (89,001) | 404,843 | |
Accounts payable to related party | 65,000 | ||
Accrued payroll and related expenses | 3,815 | 114,829 | |
Accrued expenses and other liabilities | (83,302) | 100,777 | |
Net cash used in operating activities | (2,112,575) | (1,087,818) | |
Cash flows from investing activities: | |||
Purchases of property and equipment | (4,385) | ||
Net cash used in investing activities | (4,385) | ||
Cash flows from financing activities: | |||
Proceeds from Series D preferred stock issuance, net of $183,343 issuance costs | [2] | 1,131,857 | |
Proceeds from common stock issuance, net of $16,901 issuance costs | 3,233,099 | ||
Proceeds from warrant exercises | 98,700 | ||
Proceeds from convertible debt issuance | 400,000 | ||
Net cash provided by financing activities | 3,731,799 | 1,131,857 | |
Net increase in cash, cash equivalents and restricted cash | 1,614,839 | 44,039 | |
Cash, cash equivalents and restricted cash, beginning of period | 264,383 | 102,320 | |
Cash, cash equivalents and restricted cash, end of period | 1,879,222 | 146,359 | |
Reconciliation of cash, cash equivalents and restricted cash: | |||
Cash and cash equivalents | 1,874,720 | 108,859 | |
Restricted cash | 4,502 | 37,500 | |
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | 1,879,222 | 146,359 | |
Cash paid during the period for: | |||
Interest | 0 | 0 | |
Income taxes | 1,600 | 4,031 | |
Supplemental disclosures of non-cash financing activities: | |||
Conversion of outstanding preferred stock into common stock | 1,947,227 | 880,000 | |
Conversion of outstanding preferred stock subject to redemption into common stock | 828,916 | $ 405,625 | |
Fair value of common stock issued in extinguishment of convertible debt | 1,710,000 | ||
Fair value of warrants issued in connection with Emerald financing | 10,424,634 | ||
Reclassification of warrant liabilities due to exercise of warrants | $ 1,301,866 | ||
[1] | During the six months ended June 30, 2017, warrants issued to service providers for consulting services were valued at $22,245 and were recorded as a Prepaid expense and amortized over the service period. During the six months ended June 30, 2017, warrants issued to service providers for consulting services were valued at $30,000 and are being amortized over the service period. | ||
[2] | During the six months ended June 30, 2017 preferred deemed dividends of $536,000 were recognized on Series D Preferred Stock and $175,000 on Series C Preferred Stock. |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Parentheticals) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Stock issuance costs | $ 16,901 | |
Value of warrants issued to purchase shares of common stock for consulting services | $ 30,000 | |
Preferred deemed dividend | 711,000 | |
Issuance of Stock and Warrants for Services or Claims | 22,245 | |
Series C Preferred Stock | ||
Preferred deemed dividend | 175,000 | |
Series D Preferred Stock | ||
Stock issuance costs | 183,343 | |
Preferred deemed dividend | $ 536,000 |
Nature of Operations and Busine
Nature of Operations and Business Activities | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Nature of Operations and Business Activities | 1. Nature of Operations and Business Activities Nature of Operations Nemus Bioscience, Inc. is an ophthalmic biopharmaceutical company that plans to research, develop and commercialize therapeutics derived 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 Unaudited Condensed 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 Long Beach, California. In January 2018, the Company entered into a securities purchase agreement with Emerald Health Sciences, Inc. (“Emerald”) discussed in Note 4 below in which Emerald purchased a majority of the equity interest in Nemus resulting in a change in control. As a result, the Board members, with the exception of Dr. Brian Murphy, the Company’s CEO/CMO, tendered their resignation and Emerald has appointed its nominees to the new Board. As of June 30, 2018, 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. Liquidity and Going Concern The Company has incurred operating losses and negative cash flows from operations since inception and as of June 30, 2018, had an accumulated deficit of $24,906,664, a stockholders’ deficit of $8,245,279 and a working capital deficit of $8,250,258. The Company anticipates that it will continue to incur net losses into the foreseeable future in order to advance and develop a number of potential drug candidates into preclinical development activities and support its corporate infrastructure which includes the costs associated with being a public company. As of June 30, 2018, the Company had cash and cash equivalents of $1,874,720, as compared to $259,955 of cash and cash equivalents as of December 31, 2017. This increase is primarily attributable to the proceeds of $3,250,000 from the Emerald Financing along with $400,000 of the $900,000 convertible bridge loan from Emerald. However, without additional funding management believes that the Company will not have sufficient funds to meet its obligations within one year from the date the condensed 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 condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s continued existence is dependent on its ability to raise additional sufficient funding to cover operating expenses and to invest in operations and development activities. The Company plans to continue to pursue funding through public or private equity or debt financings, strategic collaborations, licensing arrangements, asset sales, government grants or other arrangements. However, the Company cannot provide any assurances 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 reduce spending, extend payment terms with suppliers, liquidate assets where possible, suspend or curtail planned programs or cease operations. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared on a consistent basis with the audited consolidated financial statements for the fiscal year ended December 31, 2017, and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth herein. The condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and therefore, omit certain information and footnote disclosure necessary to present the financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the year ended December 31, 2018 or any future periods. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC on March 19, 2018, which includes a broader discussion of the Company’s business and the risks inherent therein. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed 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 or debt with embedded features. Risks and Uncertainties The Company’s operations are subject to a number of risks and uncertainties, including but not limited to, changes in the general economy, the size and growth of the potential markets for any of the Company’s product candidates, results of research and development activities, uncertainties surrounding regulatory developments in the Unites States and the Company’s ability to attract new funding. (see Note 7) 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 $4,502 and $4,428 as of June 30, 2018 and December 31, 2017, respectively, 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 GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (the “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, with the exception of the warrant liabilities, 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 derivative liabilities related to the warrants and Series B preferred conversion liability were valued utilizing Level 3 inputs primarily from third-party independent appraisals conducted as of December 31, 2017 and June 30, 2018. Property and Equipment, Net Property and equipment, net, consists primarily of computers and equipment. Expenditures for additions, renewals and improvements are capitalized at cost. Depreciation is computed on a straight-line method based on the estimated useful life of the related asset 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. Costs incurred for the rights to use licensed technologies in the research and development process, including licensing fees and milestone payments, are 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 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 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. 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. 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 June 30, 2018. As a result of this valuation allowance there are no income tax benefits reflected in the accompanying condensed consolidated 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 (50%) 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. The Company has no material uncertain tax positions as of June 30, 2018. Convertible Instruments The Company accounts for hybrid contracts with embedded conversion features in accordance with GAAP. ASC 815, Derivatives and Hedging Activities When determining short-term vs. long-term classification of derivative liabilities, the Company first evaluates the instruments exercise provisions. Generally, if a derivative is a liability and exercisable within one year, it will be classified as short term. However, because of the unique provisions and circumstances that may impact the accounting for derivative instruments, the Company carefully evaluates all factors that could potentially restrict the instrument from being exercised or create a situation where exercise would be considered remote. The Company re-evaluates its derivative liabilities at each reporting period end and makes updates for any changes in facts and circumstances that may impact classification. 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. The Company accounts for convertible instruments with embedded conversion features in accordance with ASC 470-20, Debt with Conversion and Other Options The Company also follows ASC 480-10, Distinguishing Liabilities from Equity Warrants Issued in Connection with Financings The Company generally accounts 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 the Company 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, the Company records the fair value of the warrants as a liability at each balance sheet date and records changes in fair value in other (income) expense in the condensed consolidated statements of operations and comprehensive loss. 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 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 with forfeitures accounted for as they occur. The Company uses the Black-Scholes Merton option pricing model for estimating the grant date fair value of stock options and warrants using the following assumptions: · Volatility - Stock price volatility is estimated 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 Upon the adoption of ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, Compensation – Stock Compensation – Overall, 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. ASC 220 requires that an entity records all components of comprehensive income (loss), net of their related tax effects, in its financial statements in the period in which they are recognized. For the three and six months ended June 30, 2018 and 2017, the comprehensive income (loss) was equal to the net loss. Earnings Per Share The Company applies FASB ASC No. 260, Earnings per Share Three Months Ended June 30, (Unaudited) Six Months Ended June 30, (Unaudited) 2018 2017 2018 2017 Stock options 1,850,073 1,130,000 1,850,073 1,130,000 Unvested restricted stock 1,918,501 1,050,000 1,918,501 1,050,000 Common shares underlying convertible preferred stock - 14,301,500 - 14,301,500 Warrants 51,155,750 11,649,500 51,155,750 11,649,500 Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02 Leases In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception Topic 480, Distinguishing Liabilities from Equity Recently Adopted Accounting Standards In July 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic ): Scope of Modification Accounting · The award’s fair value (or calculated value or intrinsic value, if those measurement methods are used), · The award’s vesting conditions, and · The award’s classification as an equity or liability instrument. ASU 2017-09 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 for all entities. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued or made available for issuance. The ASU will be applied prospectively to awards modified on or after the adoption date. The adoption of ASU 2017-09 effective January 1, 2018 did not have a material effect on the Company’s results of operations, financial condition or cash flows. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic ) The Company adopted the new standard effective January 1, 2018 under the modified retrospective transition method, applying the new guidance to the most current period presented. Since the Company has not yet generated revenues the adoption of the new standard resulted in no cumulative effect to the opening accumulated deficit balance. However, the adoption of this standard will impact the Company’s revenue recognition if revenue is generated in future periods. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic ): Restricted Cash In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic ): Classification of Certain Cash Receipts and Cash Payments, Immaterial Correction of an Error in Previously Issued Financial Statements During the period ended June 30, 2018, the Company revised its condensed consolidated balance sheet as of and for the period ended March 31, 2018, to correct an immaterial error related the previous classification of its warrant liabilities as long-term. The Company accounts for its warrant liabilities under ASC 815. However, ASC 815 does not provide specific guidance on the balance sheet classification of derivatives. When the Company reassessed the balance sheet classification as of June 30, 2018, it considered the classification of the warrant liabilities under the guidance of ASC 210-10-45-7 which requires short-term classification for liabilities due on demand and the current circumstances surrounding the liquidity of the Company after the Emerald Financing Transaction. Based on these considerations, the Company determined that a short-term classification of the warrant liabilities was more appropriate at March 31, 2018, and at June 30, 2018. The Company will continue to update its assessment in each subsequent period and has included an update to its accounting policy on convertible instruments to disclose its policy for determining the classification of its derivative liabilities. The Company has concluded that the impact of the misstatement was not material to the previously issued financial statements and has no impact on the condensed consolidated statements of operations and other comprehensive loss, earnings per share, total liabilities, total assets, stockholders’ deficit, or the condensed consolidated statements of cash flows in any period. |
Warrants and Derivative Liabili
Warrants and Derivative Liabilities | 6 Months Ended |
Jun. 30, 2018 | |
Warrants And Derivative Liabilities [Abstract] | |
Warrants And Derivative Liabilities | 3. Warrants and Derivative Liabilities Warrants 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 a liquidity event and the determination of the appropriate valuation methods. If the Company had made different assumptions, the fair value of the warrants could have been significantly different. (See Note 2) Warrants vested and outstanding as of June 30, 2018 are summarized as follows: Amount Exercise Term Issued and Source Price (Years) Outstanding Pre 2015 Common Stock Warrants $ 1.00 6-10 4,000,000 2015 Common Stock Warrants $ 1.15-$5.00 5-10 442,000 2015 Series B Financing Common Stock Warrants to Series B Stockholders $ 0.00 5 1,556,250 Placement Agent Warrants $ 0.00 5 187,500 2016 Common Stock Warrants to Service Providers $ 1.15 10 40,000 2016 Series C Placement Agent Warrants $ 0.40 5 125,000 2017 Series D Placement Agent Warrants $ 0.25 5 480,000 2017 Common Stock Warrants to Service Provider $ 0.41 5 125,000 2018 Emerald Financing Warrants $ 0.10 5 44,200,000 Total warrants vested and outstanding as of June 30, 2018 51,155,750 2018 Emerald Financing Warrants In January and February 2018, the Company issued an aggregate of 40,800,000 and 3,400,000 fully vested common stock warrants to Emerald Health Sciences and an accredited investor, respectively, in conjunction with the Emerald Financing discussed below (See Note 4). The Company reviewed the warrants for liability or equity classification under the guidance of ASC 480-10, Distinguishing Liabilities from Equity Derivative Liabilities- Emerald Warrant Liability 2017 Series D Placement Agent Warrants In January 2017, the Company issued 480,000 warrants to purchase common stock to its investment banker in exchange for services rendered in conjunction with the Series D Preferred Stock financing. The warrants vested immediately and had an estimated fair value of $115,200 utilizing the Black-Scholes option pricing model, this amount was recorded to issuance costs for the six months ended June 30, 2017. 2017 Common Stock Warrants to Service Provider In February 2017, the Company entered into an agreement with one of its investors to provide advisory services on all matters including financing in exchange for 125,000 common stock warrants. The warrants vested immediately and had an estimated fair value of $30,000 utilizing the Black-Scholes option pricing model, this amount was recorded to general and administrative expense during the six months ended June 30, 2017. Derivative Liabilities The following tables summarize the activity of derivative liabilities for the periods indicated: Six Months Ended June 30, 2018 December 31, 2017 Fair Value of Derivative Liabilities Fair Value of Derivative Liabilities Issued Change in Fair value of Derivative Liabilities Reclassification of Derivatives to Equity June 30, 2018 Fair Value of Derivative Liabilities Emerald Financing - Warrant Liability $ - $ 10,424,634 $ (814,071 ) $ - $ 9,610,563 Series B Warrant Liability 551,322 - 1,231,820 (1,301,866 ) 481,276 Series B Preferred Stock Conversion Liability 6,715 - - (6,715 ) - Total $ 558,037 $ 10,424,634 $ 417,749 $ (1,308,581 ) $ 10,091,839 Six Months Ended June 30, 2017 December 31, 2016 Fair Value of Derivative Liabilities Fair Value of Change in Fair value of Derivative Liabilities Reclassification of Derivatives to Equity June 30, 2017 Fair Value of Derivative Liabilities Series B Warrant Liability $ 1,112,308 $ - $ (38,998 ) $ - $ 1,073,310 Series B Preferred Stock Conversion Liability 118,821 - (88,532 ) (5,238 ) 25,051 Total $ 1,231,129 $ - $ (127,530 ) $ (5,238 ) $ 1,098,361 Emerald Financing Warrant Liability In January and February 2018, the Company issued 44,200,000 warrants to purchase common stock in conjunction with the Emerald Financing discussed above. The warrants vest immediately and have an exercise price of $0.10 per share with a term of five years and are exercisable in cash or through a cashless exercise provision. The warrants contain an anti-dilution 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 $0.10. The exercise price is automatically adjusted down to the price of the instrument being issued. In addition, the warrants contain a contingent put option in the event that the Company undergoes a subsequent financing that results in a change in control. The warrant holders also have the right to participate in subsequent financing transactions on an as-if converted basis. The Company reviewed the warrants for liability or equity classification under the guidance of ASC 480-10, Distinguishing Liabilities from Equity Derivatives and Hedging/Contracts in Entity’s Own Equity Fair Value Measurement The warrant liabilities have been valued using Monte Carlo simulations conducted at the closing dates of January 19, 2018 and February 16, 2018 and at June 30, 2018 using the following assumptions: June 30, 2018 At issuance Dividend yield 0.00 % 0.00 % Volatility factor 70.00 % 70.00 % Risk-free interest rate 2.70-2.71 % 2.45-2.6 % Expected term (years) 4.55-4.63 5.0 Closing price per share of common stock $ 0.28 $ 0.29-0.30 Because fair value assigned to the warrants exceeded the proceeds received in the Emerald Financing, none of the consideration was allocated to common stock and the Company recorded an adjustment for the difference between the fair value of the warrant liabilities and the total proceeds received to other expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the six months ended June 30, 2018 as follows: Closing January 2018 February 2018 Total Proceeds from Emerald Financing $ 1,500,000 $ 1,750,000 $ 3,250,000 Initial Fair Value of Emerald Financing Warrant Liability 4,717,211 5,707,423 10,424,634 Excess over proceeds adjustment $ 3,217,211 $ 3,957,423 $ 7,174,634 In addition, because the aggregate proceeds were allocated to the fair value of the Emerald Financing Warrant Liability, issuance costs totaling $137,191 were charged to other expense for the six months ended June 30, 2018. For the three months ended June 30, 2018 the Company recorded other expense of $1,504,529 related to the change in fair value of the Emerald Financing Warrant Liability included in the Statement of Operations and Other Comprehensive Loss. Series B Warrant Liability In conjunction with the Series B Preferred Stock financing, the Company issued 6,437,500 common stock warrants exercisable at a price of $1.15 per share, the warrants 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 and contain certain cash redemption rights. The Series B warrants also had a “down-round” protection feature if the Company subsequently issued or sold any shares of common stock, stock options, or convertible securities at a price less than the current exercise price. The down round provision was triggered and automatically adjusted down to $0.10 on December 28, 2017, after the Company entered into the Secured Promissory Note for a convertible bridge loan (See Note 8) and again to $0.00 on January 19, 2018, as a result of the Emerald Financing. The strike price for these warrants is now permanently reset. However, because the remaining warrant holders still have certain cash redemption rights upon the occurrence of certain fundamental transactions, as defined in the Series B warrant agreements, the warrants continue to require liability classification. The Company reviewed the classification of the warrants as liabilities or equity under the guidance of ASC 480-10, Distinguishing Liabilities from Equity The Company utilized the Black Scholes Merton Option Pricing Model to compute the fair value of the warrants, the assumptions are outlined as follows: As of June 30, 2018 As of December 31, 2017 Dividend yield 0.00 % 0.00 % Volatility factor 70.00 % 70.00 % Risk-free interest rate 2.536-2.537 % 1.947-1.949 % Expected term (years) 2.14-2.16 2.64-2.65 Weighted-average fair value of warrants $ 0.276 $ 0.086 In January 2018, 987,000 Series B warrants were exercised at a price of $0.10 resulting in cash proceeds to the Company of $98,700. Prior to exercise, these Series B Warrants were adjusted to fair market value using a Black Scholes Merton Option Pricing Model which considered the closing trading price on the exercise dates. From January 19, 2018 through June 30, 2018, 3,706,750 Series B warrants were exercised at a price of $0.00 for no consideration. Prior to exercise, these Series B Warrants were adjusted to fair market value using a Black Scholes Merton Option Pricing Model which considered the closing trading price on the exercise dates. Because the exercise price of these options had been reset to $0.00, the fair value derived from the valuation model equaled the market value of the Company’s common stock on the exercise dates. (See Note 4) For the three months ended June 30, 2018 and 2017, the Company recorded other expense of $75,713 and $26,437, respectively, related to the change in fair value of the Series B Warrant Liability included in the Condensed Consolidated Statements of Operations and Other Comprehensive Loss. Series B Preferred Stock Conversion Liability On August 20, 2015, in connection with the Series B Preferred Stock financing, the Company bifurcated a conversion liability related to a down-round protection provided to the Series B investors. The value of this embedded derivative was determined utilizing a “with and without” method by valuing the preferred stock with and without the down round protection. During the first fiscal quarter of 2018, all of the remaining Series B Preferred Stock was converted to common stock (See Note 4) and as a result, the Series B conversion liability was reduced to zero. The reduction of this liability totaling $6,715 was recorded to equity for the six months ended June 30, 2018. |
Stockholders' Deficit and Capit
Stockholders' Deficit and Capitalization | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Deficit and Capitalization | 4. Stockholders’ Deficit and Capitalization Common Stock On January 19, 2018, the Company entered into a Securities Purchase Agreement in which the Company sold to Emerald 15,000,000 shares of common stock and a warrant to purchase 20,400,000 shares of common stock at an exercise price of $0.10 for aggregate gross proceeds of $1,500,000 (“the Emerald Financing”). This transaction also resulted in the conversion of the $900,000 Secured Promissory Note (discussed in Note 8 below) at $0.10 per share to 9,000,000 shares of common stock and represented the first of two closings under the Agreement. As a result of this transaction, the Company had a change in control and all Board members, with the exception of Dr. Brian Murphy, the Company’s CEO/CMO, tendered their resignation. Emerald has appointed its nominees to the new Board. The Securities Purchase Agreement also provides that in the case of a subsequent financing in which the purchase price is less than $0.10 per share, Emerald shall be issued additional shares in order to protect against anti-dilution. The second closing under the Emerald Financing occurred on February 16, 2018, pursuant to which Nemus issued and sold to Emerald 15,000,000 shares of Nemus’ common stock, and a warrant to purchase 20,400,000 shares of Common Stock at an exercise price of $0.10 per share for a term of five years. In addition, an accredited investor purchased 2,500,000 shares of common stock and a warrant to purchase 3,400,000 shares of common stock at an exercise price of $0.10 per share for a term of five years. The Company received aggregate gross proceeds of $1,750,000 from the second closing. In connection with the private placement, the Company was liable to reimburse Emerald for legal fees up to $25,000, total billings received as of June 30, 2018 are insignificant to the condensed consolidated financial statements. During the six months ended June 30, 2018, all remaining Series B, D, and F stockholders converted their shares of preferred stock to common stock. This resulted in 2,833.5 shares of Series B Preferred Stock being converted into 28,335,000 shares of common stock at an effective price of $0.10 per share and 0.05 shares of Series B Preferred Stock being converted into 50,000 shares of common stock at an effective price of $0.001 per share, 200 shares of Series D Preferred Stock being converted into 2,000,000 shares of common stock at an effective price of $0.10 per share, and 2,000 shares of Series F Preferred Stock being converted into 20,000,000 shares of common stock at an effective price of $0.10 per share. In addition, the Series B warrant holders exercised warrants with an intrinsic value of $1,276,175 which resulted in the issuance of 4,693,750 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. As of June 30, 2018, all of the redeemable Convertible Series B and Convertible Series C, D and F Preferred Stock was fully converted, as disclosed above under “Common Stock” and is no longer outstanding. For a description of the provisions of each preferred series previously issued and outstanding at December 31, 2017, refer to annual report on Form 10-K for the year ended December 31, 2017. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | 5. Stock-Based Compensation Stock Incentive Plan On October 31, 2014, after the closing of the Merger, our Board of Directors approved the 2014 Omnibus Incentive Plan (the “2014 Plan”). The 2014 Plan reserved 3,200,000 shares for future grants. As of June 30, 2018, the Company had 701,499 shares available for future grant under the 2014 Plan. The 2014 Plan authorizes the issuance of awards including stock options, stock appreciation rights, restricted stock, stock units and performance units to employees, directors, and consultants of the Company. The following is a summary of option activity under the Company’s 2014 Plan as of June 30, 2018: Weighted Average Weighted Remaining Number of Shares Average Exercise Price Contractual Term Outstanding, December 31, 2017 1,130,000 $ 0.60 6.89 Granted - - - Exercised - - - Cancelled (48,000 ) 2.57 - Forfeited (427,000 ) 0.66 - Outstanding, June 30, 2018 655,000 $ 0.42 6.36 Exercisable, June 30, 2018 393,000 $ 0.42 6.36 During the six months ended June 30, 2018, no stock options were exercised. The 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 June 30, 2018 for those stock options for which the quoted market price was in excess of the exercise price (“in-the-money options”). The aggregate intrinsic value of options exercisable, and vested and expected to vest as of June 30, 2018, was $-0- and $-0-, respectively. No options were granted to non-employees during the three and six months ended June 30, 2018 and 2017. The following is a summary of RSA activity under the Company’s 2014 Plan as of June 30, 2018: Number of Shares Weighted Average Grant Date Fair Value Outstanding, December 31, 2017 1,050,000 $ 0.75 Granted 643,501 0.26 Released (675,000 ) 0.75 Outstanding, June 30, 2018 1,018,501 $ 0.44 Expected to vest, June 30, 2018 1,018,501 $ 0.44 On February 28, 2018, in conjunction with the signing of the K2C separation agreement discussed in Note 8 below, Mr. Lykos’ RSA’s amounting to 325,000 shares vested immediately resulting in a Type III award modification and a credit to stock compensation of $98,042 for the six months ended June 30, 2018 due to a lower fair market value of those shares as of the modification date. On May 25, 2018, in conjunction with the signing of her separation agreement, the former Nemus CFO, Ms. Elizabeth Berecz’s RSA’s amounting to 350,000 shares vested immediately resulting in a Type III award modification and a credit to stock compensation of $97,183 for the three and six months ended June 30, 2018 due to a lower fair market value of those shares as of the modification date as compared to the fair value immediately prior to acceleration. Awards Granted Outside the 2014 Plan Options On May 25, 2018, the Company entered into Stock Option Agreement with Douglas Cesario, CFO, granting 1,195,073, stock options with an exercise price equal to $0.25 and a grant date fair market value of $200,172. The options vest 25% on July 23, 2018, and the remaining 75% will vest 1/33 on each of the next 33 months thereafter. Options will fully vest upon a Triggering Event, including a Sale of the Company or a Merger that results in change of control. Restricted Stock Awards On January 18, 2018, the Company entered into Restricted Stock Agreements with each of Dr. Murphy, Elizabeth Berecz, CFO, and Cosmas N. Lykos, the Company’s Founder granting 900,000, 700,000, and 900,000 shares of restricted common stock, respectively, with a fair market value of $475,000. These agreements were issued outside of the 2014 Omnibus Incentive Plan. The restricted stock vests in equal 50% installments on the first and second anniversaries of the grant date, subject to continued employment with Nemus through the applicable vesting date. Each Restricted Stock Agreement provides that if an executive’s employment or service is terminated by the Company without cause, or is terminated by the grantee for good reason, then the executive shall be entitled to receive a cash severance payment equal to six months of their base compensation, payable in substantially equal installments during the six-month period following the separation along with accelerated vesting of all outstanding stock awards. On February 28, 2018, in conjunction with the signing of the K2C separation agreement discussed in Note 8 above, Mr. Lykos’ Restricted stock awards amounting to 900,000 shares became immediately vested resulting in a Type III award modification and stock compensation expense of $216,000 for the six months ended June 30, 2018, due to an increase in the fair value of the award immediately before and after the modification date. On May 25, 2018, in conjunction with the signing of her separation agreement discussed above, the former Nemus CFO, Ms. Elizabeth Berecz’s Restricted stock awards amounting to 700,000 shares became immediately vested resulting in the recording of compensation expense of $184,800 for the three and six months ended June 30, 2018, due to an increase in the fair value of the award immediately before and after the modification date. 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 condensed consolidated statements of operations and comprehensive loss includes compensation expense for stock-based awards based on the estimated grant date fair value over the requisite service period. For the three months ended June 30, 2018 and 2017, the Company recognized stock-based compensation expense of $100,602 and $152,171, respectively (including compensation expense for RSAs discussed above), which was recorded as a general and administrative expense in the condensed consolidated statements of operations and comprehensive loss. For the six months ended June 30, 2018 and 2017, the Company recognized stock-based compensation expense of $330,212 and $304,338, respectively (including compensation expense for RSAs discussed above), which was recorded as a general and administrative expense in the condensed consolidated statements of operations and comprehensive loss. The total amount of unrecognized compensation cost was $678,514 as of June 30, 2018. This amount will be recognized over a weighted average period of 2.3 years. |
Significant Contracts
Significant Contracts | 6 Months Ended |
Jun. 30, 2018 | |
Significant Contracts [Abstract] | |
Significant Contracts | 6. Significant Contracts University of Mississippi 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. This MOU resulted in Nemus entering into several licenses and research agreements with UM, related to a prodrug of tetrahydrocannabinol (THC) and an analog of cannabidiol (CBD). The term of the MOU agreement expired in 2018 and was not renewed since the Company and the University entered into research agreements for the aforementioned compounds. UM 5050 pro-drug agreements On September 29, 2014, the Company executed three license agreements with UM pursuant to which UM granted the Company 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. Nemus has decided to focus product development on developing ocular medicines for the treatment of ophthalmic-related diseases of the eye. In July 2018, the Company notified UM that it will renew the license for UM5050 related to ocular delivery of the prodrug of THC. The license agreement for ocular delivery contains certain milestone and royalty payments, as defined therein. There is an annual fee of $25,000, payable on the anniversary of the effective date. The aggregate milestone payments under the license agreement, if the milestones are achieved, is $0.7 million. The license agreement also requires the Company to reimburse UM for patent costs incurred related to these products under license. The license agreement will terminate upon expiration of the patents, breach or default of the license agreement, or upon 60 days’ written notice by the Company to UM. On October 15, 2014, the Company 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. The Company is working with UM to establish new licenses derived from this option agreement and has let the other routes of administration option expire. UM 8930 analogue agreements: On December 14, 2015, the Company executed two license agreements with UM pursuant to which UM granted the Company exclusive, perpetual, worldwide licenses, including the right to sublicense, to intellectual property related to UM 8930, an analogue formulation of cannabidiol (“CBD”) for products administered through each of ocular or rectal delivery. In July 2018, the Company renewed the ocular delivery license. The license agreement for ocular delivery contains certain milestone and royalty payments, as defined therein. There is an annual fee of $25,000, payable on the anniversary of the effective date. The aggregate milestone payments under the license agreement, if the milestones are achieved, is $0.7 million. The license agreement also requires the Company to reimburse UM for patent costs incurred related to these products under license. The license agreement will terminate upon expiration of the patents, breach or default of the license agreement, or upon 60 days’ written notice by the Company to UM. On December 14, 2015, the Company 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. The Company is working with UM to establish new licenses derived from this option agreement and has let the other routes of administration option expire. UM 5070 license agreement: On January 10, 2017, the Company entered into a license agreement with UM pursuant to which UM granted the Company an exclusive, perpetual license, including the right to sublicense, under intellectual property related to UM 5070, 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 an annual fee of $25,000, payable on the anniversary of the effective date and this amount was paid in January 2018. The aggregate milestone payment under the license agreement, if the milestones are achieved, is $0.7 million. This license agreement also requires the Company to reimburse UM for patent costs incurred related to these products under the license. This license agreement will terminate upon expiration of the patents, breach or default of the license agreement, or upon 60 days’ written notice by the Company to UM. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 7. Commitments and Contingencies Legal Matters General Litigation and Disputes From time to time, in the normal course of our operations, we may be a party to litigation and other dispute matters and claims. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable outcome to any legal matter, if material, could have a materially adverse effect on our operations or our financial position, liquidity or results of operations. As of June 30, 2018, there were no pending or threatened lawsuits or claims that could reasonably be expected to have a material effect on the Company’s financial position or results of operations, but the Company has filed a petition commencing arbitration as described below. Pending Series E Preferred Stock Financing and Filing for Arbitration On May 3, 2017, the Company entered into a securities purchase agreement with a purchaser to sell 1,000,000 shares of a new Series E Preferred Stock, par value $0.001 per share, at a purchase price of $20.00 for each preferred share for aggregate gross proceeds of $20,000,000. The securities purchase agreement provides for no conditions precedent to the close and that closing is not to occur later than July 10, 2017. The purchaser did not provide funding to close the transaction on July 10, 2017 as required under the securities purchase agreement and requested an extension of the closing date. In connection with the signing of the securities purchase agreement, an affiliate of the purchaser entered into a financial guarantee to the benefit of the Company that provided for payment of the purchase price in full within 90 days of exercise. The Company exercised this guarantee on July 12, 2017. The guarantor has failed to pay the $20,000,000 within 90 days of notice of the purchaser’s default, as required by the terms of the guaranty. On November 8, 2017, the Company filed a petition commencing arbitration against the purchaser and guarantor as well as other related individuals. In the petition, the Company asserts, among other things, breach of contract against the purchaser for its failure to close its purchase of Series E Preferred Stock as required by the securities purchase agreement. The Company also asserts a breach of contract claim against the guarantor for its failure to honor its guarantee of the transaction. The petition was filed with Judicial Arbitration and Mediation Services, Inc., ENDISPUTE in Orange County, California, as required by the securities purchase agreement. The Company has engaged its legal counsel in the matter on a contingent-fee basis and intends to purse damages and remedies in connections with these agreements. This legal action remains on-going. 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 June 30, 2018, the Company had no 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. |
Related Party Matters
Related Party Matters | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Matters | 8. Related Party Matters K2C, Inc. In June 2014, our subsidiary entered into an independent contractor agreement with K2C, Inc. (“K2C”), which is wholly owned by the Company’s then Executive Chairman and Co-Founder, Mr. Cosmas N. Lykos, pursuant to which we paid K2C a monthly fee for services performed by Mr. Lykos for our company. The agreement expired on June 1, 2017 and was automatically renewed for one year pursuant to the terms of the agreement. The monthly fee under the agreement was $10,000 and increased to $20,000 effective April 1, 2017. In February 2018, the Company entered into a separation and release agreement with K2C, which provided for a lump sum payment of $180,000 and the immediate vesting of 900,000 shares of restricted common stock granted on January 18, 2018, 325,000 shares of restricted common stock granted on October 20, 2015, and 125,000 options granted on November 21, 2014, in exchange for a release of claims and certain other agreements. The Company recognized additional stock-based compensation expense of $112,270 for these restricted stock and option awards. For the three months ended June 30, 2018, no expense was incurred under this agreement. Total expense incurred under this agreement was $60,000 for the three months ended June 30, 2017. For the six months ended June 30, 2018 and 2017, total expense incurred under this agreement was $220,000 (including the previously discussed lump sum payment) and $90,000 respectively. Under the separation agreement, Mr. Lykos was allowed to participate in the Company’s health, death and disability insurance plans for six months subsequent to K2C’s separation. Emerald Health Sciences On February 1, 2018, the Company entered into an Independent Contractor Agreement with Emerald, pursuant to which Emerald will provide such services as are mutually agreed between the Company and Emerald, including reimbursement for reasonable expenses incurred in the performance of the Independent Contractor Agreement. These services can include, but are not limited to, corporate advisory services and technical expertise in the areas of business development, marketing, investor relations, information technology and product development. The Independent Contractor Agreement has an initial term of ten years and specifies a compensation rate as is agreed between our chief executive officer and Emerald’s chief executive officer on a month-to-month basis. The fee due under this agreement is payable on a monthly basis, however, if the Company is unable to make payments due to insufficient funds, then interest on the outstanding balance will accrued at a rate of 12% per annum, calculated semi-annually. Under this agreement, for the three and six months ended June 30, 2018, the Company incurred expenses of $150,000 and $250,000, respectively. At June 30, 2018, $50,000 is accrued and included in accounts payable – related party in the condensed consolidated balance sheets. On February 6, 2018, the Company entered into a Consulting Agreement with the chief executive officer of Emerald. The services under the Consulting Agreement include, corporate finance and strategic business advisory. The Consulting Agreement has an initial term of one year and renews automatically unless terminated by either party. The agreement specifies an annual fee of $60,000 payable semi-monthly in installments, including reimbursement for reasonable expenses incurred in the performance of the services. The contractor is also entitled to a discretionary annual bonus, payable 120 days after each fiscal year end, to be determined by the Board upon its annual review. Under this agreement, for the three and six months ended June 30, 2018, the Company incurred $15,000 and $30,000, respectively. At June 30, 2018, $15,000 is accrued and included in accounts payable – related party in the condensed consolidated balance sheets. Convertible Debt – Related Party On December 28, 2017, the Company entered into a Secured Promissory Note and Security Agreement for a convertible bridge loan with Emerald. The bridge loan provides for aggregate gross proceeds to Nemus of up to $900,000 and is secured by all of Nemus’ assets. Nemus received proceeds of $500,000 on December 28, 2017 and on January 19, 2018, the Company received the remaining $400,000 in funding as it had satisfied the conditions of the funding. These conditions required receipt of conversion notices from all the existing Series B shareholders to convert their preferred shares to common stock. Such conversions occurred in January and February of 2018. In connection with the convertible bridge loan, the Company recorded a liability related to the conversion option of the bridge loan into the Company’s common stock due to a down-round protection feature present in the loan agreement. The Company valued the conversion liability pursuant to the accounting guidance of ASC 820-10, Fair Value Measurement On January 19, 2018, in conjunction with the Emerald Financing (discussed in Note 4 above), the bridge loan was converted in to common stock at $0.10 per share and 9,000,000 common shares were issued. Upon conversion the debt and associated conversion liability were extinguished resulting in a loss on extinguishment of $590,392 which was recorded as an other expense for the six months ended June 30, 2018. For the six months ended June 30, 2018, the Company recorded interest expense related to the amortization of the debt discount of $34,608 and marked to market the conversion liability to $810,000 which resulted in a change in fair value of $185,000. At June 30, 2018, $3,767 in accrued interest related to the convertible debt has been recorded in other current liabilities. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | 9. Subsequent Events AMRI Agreement On July 31, 2018, Nemus, entered into a letter agreement, with Albany Molecular Research Inc., or AMRI, pursuant to which AMRI 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 $64,200 in fees and expenses for the initial evaluation and development of a process for the production of Nemus’s pro-drug of THC to ensure reproducibility, quality and safety. After the initial evaluation, Nemus has agreed to pay additional fees and expenses for development, sample production of Nemus’s 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 AMRI 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 AMRI’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. Either party may terminate the Agreement in writing in the event of default by the other party that is not cured within 30 days of receipt of notice of default for the following events of default: (i) insolvency of such party, (ii) any assignment for the benefit of creditors of such party, (iii) voluntary or involuntary filing of a petition order or other decree in bankruptcy by or against such party, (iv) commencement of any proceeding for liquidation of, reorganization of, or the composition, extension, arrangement or readjustment of the obligations of such party, (v) failure by such party to comply with any provision of the Agreement in any material respect, and (vi) proof that any representations by such party were false when made. |
Nature of Operations, Business
Nature of Operations, Business Activities and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Liquidity and Going Concern | Liquidity and Going Concern The Company has incurred operating losses and negative cash flows from operations since inception and as of June 30, 2018, had an accumulated deficit of $24,906,664, a stockholders’ deficit of $8,245,279 and a working capital deficit of $8,250,258. The Company anticipates that it will continue to incur net losses into the foreseeable future in order to advance and develop a number of potential drug candidates into preclinical development activities and support its corporate infrastructure which includes the costs associated with being a public company. As of June 30, 2018, the Company had cash and cash equivalents of $1,874,720, as compared to $259,955 of cash and cash equivalents as of December 31, 2017. This increase is primarily attributable to the proceeds of $3,250,000 from the Emerald Financing along with $400,000 of the $900,000 convertible bridge loan from Emerald. However, without additional funding management believes that the Company will not have sufficient funds to meet its obligations within one year from the date the condensed 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 condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s continued existence is dependent on its ability to raise additional sufficient funding to cover operating expenses and to invest in operations and development activities. The Company plans to continue to pursue funding through public or private equity or debt financings, strategic collaborations, licensing arrangements, asset sales, government grants or other arrangements. However, the Company cannot provide any assurances 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 reduce spending, extend payment terms with suppliers, liquidate assets where possible, suspend or curtail planned programs or cease operations. |
Basis of Presentation | Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared on a consistent basis with the audited consolidated financial statements for the fiscal year ended December 31, 2017, and include all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the information set forth herein. The condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and therefore, omit certain information and footnote disclosure necessary to present the financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the year ended December 31, 2018 or any future periods. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC on March 19, 2018, which includes a broader discussion of the Company’s business and the risks inherent therein. |
Use of Estimates | Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed 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 or debt with embedded features. |
Risks and Uncertainties | Risks and Uncertainties The Company’s operations are subject to a number of risks and uncertainties, including but not limited to, changes in the general economy, the size and growth of the potential markets for any of the Company’s product candidates, results of research and development activities, uncertainties surrounding regulatory developments in the Unites States and the Company’s ability to attract new funding. (see Note 7) |
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 $4,502 and $4,428 as of June 30, 2018 and December 31, 2017, respectively, 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 GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (the “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, with the exception of the warrant liabilities, 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 derivative liabilities related to the warrants and Series B preferred conversion liability were valued utilizing Level 3 inputs primarily from third-party independent appraisals conducted as of December 31, 2017 and June 30, 2018. |
Property and Equipment, Net | Property and Equipment, Net Property and equipment, net, consists primarily of computers and equipment. Expenditures for additions, renewals and improvements are capitalized at cost. Depreciation is computed on a straight-line method based on the estimated useful life of the related asset 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. Costs incurred for the rights to use licensed technologies in the research and development process, including licensing fees and milestone payments, are 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 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 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. 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. 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 June 30, 2018. As a result of this valuation allowance there are no income tax benefits reflected in the accompanying condensed consolidated 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 (50%) 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. The Company has no material uncertain tax positions as of June 30, 2018. |
Convertible Instruments | Convertible Instruments The Company accounts for hybrid contracts with embedded conversion features in accordance with GAAP. ASC 815, Derivatives and Hedging Activities When determining short-term vs. long-term classification of derivative liabilities, the Company first evaluates the instruments exercise provisions. Generally, if a derivative is a liability and exercisable within one year, it will be classified as short term. However, because of the unique provisions and circumstances that may impact the accounting for derivative instruments, the Company carefully evaluates all factors that could potentially restrict the instrument from being exercised or create a situation where exercise would be considered remote. The Company re-evaluates its derivative liabilities at each reporting period end and makes updates for any changes in facts and circumstances that may impact classification. 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. The Company accounts for convertible instruments with embedded conversion features in accordance with ASC 470-20, Debt with Conversion and Other Options The Company also follows ASC 480-10, Distinguishing Liabilities from Equity |
Warrants Issued in Connection with Financings | Warrants Issued in Connection with Financings The Company generally accounts 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 the Company 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, the Company records the fair value of the warrants as a liability at each balance sheet date and records changes in fair value in other (income) expense in the condensed consolidated statements of operations and comprehensive loss. |
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 | Stock-Based Compensation 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 with forfeitures accounted for as they occur. The Company uses the Black-Scholes Merton option pricing model for estimating the grant date fair value of stock options and warrants using the following assumptions: · Volatility - Stock price volatility is estimated 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 Upon the adoption of ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, Compensation – Stock Compensation – Overall, |
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. ASC 220 requires that an entity records all components of comprehensive income (loss), net of their related tax effects, in its financial statements in the period in which they are recognized. For the three and six months ended June 30, 2018 and 2017, the comprehensive income (loss) was equal to the net loss. |
Earnings per share | Earnings Per Share The Company applies FASB ASC No. 260, Earnings per Share Three Months Ended June 30, (Unaudited) Six Months Ended June 30, (Unaudited) 2018 2017 2018 2017 Stock options 1,850,073 1,130,000 1,850,073 1,130,000 Unvested restricted stock 1,918,501 1,050,000 1,918,501 1,050,000 Common shares underlying convertible preferred stock - 14,301,500 - 14,301,500 Warrants 51,155,750 11,649,500 51,155,750 11,649,500 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02 Leases In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception Topic 480, Distinguishing Liabilities from Equity Recently Adopted Accounting Standards In July 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic ): Scope of Modification Accounting · The award’s fair value (or calculated value or intrinsic value, if those measurement methods are used), · The award’s vesting conditions, and · The award’s classification as an equity or liability instrument. ASU 2017-09 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 for all entities. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued or made available for issuance. The ASU will be applied prospectively to awards modified on or after the adoption date. The adoption of ASU 2017-09 effective January 1, 2018 did not have a material effect on the Company’s results of operations, financial condition or cash flows. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic ) The Company adopted the new standard effective January 1, 2018 under the modified retrospective transition method, applying the new guidance to the most current period presented. Since the Company has not yet generated revenues the adoption of the new standard resulted in no cumulative effect to the opening accumulated deficit balance. However, the adoption of this standard will impact the Company’s revenue recognition if revenue is generated in future periods. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic ): Restricted Cash In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic ): Classification of Certain Cash Receipts and Cash Payments, |
Immaterial Correction of an Error in Previously Issued Financial Statements | Immaterial Correction of an Error in Previously Issued Financial Statements During the period ended June 30, 2018, the Company revised its condensed consolidated balance sheet as of and for the period ended March 31, 2018, to correct an immaterial error related the previous classification of its warrant liabilities as long-term. The Company accounts for its warrant liabilities under ASC 815. However, ASC 815 does not provide specific guidance on the balance sheet classification of derivatives. When the Company reassessed the balance sheet classification as of June 30, 2018, it considered the classification of the warrant liabilities under the guidance of ASC 210-10-45-7 which requires short-term classification for liabilities due on demand and the current circumstances surrounding the liquidity of the Company after the Emerald Financing Transaction. Based on these considerations, the Company determined that a short-term classification of the warrant liabilities was more appropriate at March 31, 2018, and at June 30, 2018. The Company will continue to update its assessment in each subsequent period and has included an update to its accounting policy on convertible instruments to disclose its policy for determining the classification of its derivative liabilities. The Company has concluded that the impact of the misstatement was not material to the previously issued financial statements and has no impact on the condensed consolidated statements of operations and other comprehensive loss, earnings per share, total liabilities, total assets, stockholders’ deficit, or the condensed consolidated statements of cash flows in any period. |
Summary of Significant Accoun17
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Schedule of anti-dilutive securities | Three Months Ended June 30, (Unaudited) Six Months Ended June 30, (Unaudited) 2018 2017 2018 2017 Stock options 1,850,073 1,130,000 1,850,073 1,130,000 Unvested restricted stock 1,918,501 1,050,000 1,918,501 1,050,000 Common shares underlying convertible preferred stock - 14,301,500 - 14,301,500 Warrants 51,155,750 11,649,500 51,155,750 11,649,500 |
Warrants and Derivative Liabi18
Warrants and Derivative Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Warrants And Derivative Liabilities [Abstract] | |
Schedule of warrants vested and outstanding | Amount Exercise Term Issued and Source Price (Years) Outstanding Pre 2015 Common Stock Warrants $ 1.00 6-10 4,000,000 2015 Common Stock Warrants $ 1.15-$5.00 5-10 442,000 2015 Series B Financing Common Stock Warrants to Series B Stockholders $ 0.00 5 1,556,250 Placement Agent Warrants $ 0.00 5 187,500 2016 Common Stock Warrants to Service Providers $ 1.15 10 40,000 2016 Series C Placement Agent Warrants $ 0.40 5 125,000 2017 Series D Placement Agent Warrants $ 0.25 5 480,000 2017 Common Stock Warrants to Service Provider $ 0.41 5 125,000 2018 Emerald Financing Warrants $ 0.10 5 44,200,000 Total warrants vested and outstanding as of June 30, 2018 51,155,750 |
Schedule summary of the activity of derivative liabilities | Six Months Ended June 30, 2018 December 31, 2017 Fair Value of Derivative Liabilities Fair Value of Derivative Liabilities Issued Change in Fair value of Derivative Liabilities Reclassification of Derivatives to Equity June 30, 2018 Fair Value of Derivative Liabilities Emerald Financing - Warrant Liability $ - $ 10,424,634 $ (814,071 ) $ - $ 9,610,563 Series B Warrant Liability 551,322 - 1,231,820 (1,301,866 ) 481,276 Series B Preferred Stock Conversion Liability 6,715 - - (6,715 ) - Total $ 558,037 $ 10,424,634 $ 417,749 $ (1,308,581 ) $ 10,091,839 Six Months Ended June 30, 2017 December 31, 2016 Fair Value of Derivative Liabilities Fair Value of Change in Fair value of Derivative Liabilities Reclassification of Derivatives to Equity June 30, 2017 Fair Value of Derivative Liabilities Series B Warrant Liability $ 1,112,308 $ - $ (38,998 ) $ - $ 1,073,310 Series B Preferred Stock Conversion Liability 118,821 - (88,532 ) (5,238 ) 25,051 Total $ 1,231,129 $ - $ (127,530 ) $ (5,238 ) $ 1,098,361 |
Schedule of input and valuation technique used to value warrant liabilities | June 30, 2018 At issuance Dividend yield 0.00 % 0.00 % Volatility factor 70.00 % 70.00 % Risk-free interest rate 2.70-2.71 % 2.45-2.6 % Expected term (years) 4.55-4.63 5.0 Closing price per share of common stock $ 0.28 $ 0.29-0.30 |
Schedule of the adjustment for the difference between the fair value of the warrant liabilities and the total proceeds received | Closing January 2018 February 2018 Total Proceeds from Emerald Financing $ 1,500,000 $ 1,750,000 $ 3,250,000 Initial Fair Value of Emerald Financing Warrant Liability 4,717,211 5,707,423 10,424,634 Excess over proceeds adjustment $ 3,217,211 $ 3,957,423 $ 7,174,634 |
Schedule of Assumptions Used to compute the fair value of the warrants | As of June 30, 2018 As of December 31, 2017 Dividend yield 0.00 % 0.00 % Volatility factor 70.00 % 70.00 % Risk-free interest rate 2.536-2.537 % 1.947-1.949 % Expected term (years) 2.14-2.16 2.64-2.65 Weighted-average fair value of warrants $ 0.276 $ 0.086 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of summary of stock option activity | Weighted Average Weighted Remaining Number of Shares Average Exercise Price Contractual Term Outstanding, December 31, 2017 1,130,000 $ 0.60 6.89 Granted - - - Exercised - - - Cancelled (48,000 ) 2.57 - Forfeited (427,000 ) 0.66 - Outstanding, June 30, 2018 655,000 $ 0.42 6.36 Exercisable, June 30, 2018 393,000 $ 0.42 6.36 |
Schedule of RSA activity | Number of Shares Weighted Average Grant Date Fair Value Outstanding, December 31, 2017 1,050,000 $ 0.75 Granted 643,501 0.26 Released (675,000 ) 0.75 Outstanding, June 30, 2018 1,018,501 $ 0.44 Expected to vest, June 30, 2018 1,018,501 $ 0.44 |
Nature of Operations and Busi20
Nature of Operations and Business Activities (Detail Textuals) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Nature Of Operations And Business Activities [Line Items] | ||
Accumulated deficit | $ (24,906,664) | $ (14,030,871) |
Stockholders' deficit | (8,245,279) | (3,569,506) |
Working capital deficit | (8,250,258) | |
Cash and cash equivalents | 1,874,720 | $ 259,955 |
BridgeLoan | 900,000 | |
Emerald Financing | ||
Nature Of Operations And Business Activities [Line Items] | ||
Proceeds from Emerald Financing | 3,250,000 | |
BridgeLoan | $ 400,000 |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Warrant | ||||
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 | 51,155,750 | 11,649,500 | 51,155,750 | 11,649,500 |
Common shares underlying convertible 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 | 0 | 14,301,500 | 0 | 14,301,500 |
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 | 1,850,073 | 1,130,000 | 1,850,073 | 1,130,000 |
Restricted 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 | 1,918,501 | 1,050,000 | 1,918,501 | 1,050,000 |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Detail Textuals) | 6 Months Ended | |
Jun. 30, 2018USD ($)segment | Dec. 31, 2017USD ($) | |
Accounting Policies [Abstract] | ||
Restricted cash | $ | $ 4,502 | $ 4,428 |
Property, plant and equipment, depreciation methods | straight-line method | |
Number of reportable segments | segment | 1 |
Warrants and Derivative Liabi23
Warrants and Derivative Liabilities (Details) | 6 Months Ended |
Jun. 30, 2018USD ($)$ / shares | |
Class of Warrant or Right [Line Items] | |
Warrants vested and outstanding | $ | $ 51,155,750 |
Pre 2015 Common Stock Warrants | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 1 |
Warrants vested and outstanding | $ | $ 4,000,000 |
Pre 2015 Common Stock Warrants | Minimum | |
Class of Warrant or Right [Line Items] | |
Term of warrant | 6 years |
Pre 2015 Common Stock Warrants | Maximum | |
Class of Warrant or Right [Line Items] | |
Term of warrant | 10 years |
2015 Common Stock Warrants | |
Class of Warrant or Right [Line Items] | |
Warrants vested and outstanding | $ | $ 442,000 |
2015 Common Stock Warrants | Minimum | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 1.15 |
Term of warrant | 5 years |
2015 Common Stock Warrants | Maximum | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 5 |
Term of warrant | 10 years |
2015 series B financing Common Stock Warrants to Series B Stockholders | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 1,556,250 |
2015 Series B financing Placement Agent Warrants | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 187,500 |
2016 Common Stock Warrants to Service Providers | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 1.15 |
Term of warrant | 10 years |
Warrants vested and outstanding | $ | $ 40,000 |
2016 Series C Placement Agent Warrants | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0.40 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 125,000 |
2017 Series D Placement Agent Warrants | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0.25 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 480,000 |
2017 Common Stock Warrants to Service Provider | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0.41 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 125,000 |
2018 Emerald Financing Warrants | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0.10 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 44,200,000 |
Warrants and Derivative Liabi24
Warrants and Derivative Liabilities (Details 1) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Feb. 28, 2018 | Jan. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Fair Value Of Derivative Liabilities [Roll Forward] | ||||||
Fair Value of Derivative Liabilities | $ 558,037 | $ 558,037 | $ 1,231,129 | |||
Fair Value of Derivative Liabilities Issued | $ 5,707,423 | 4,717,211 | 10,424,634 | |||
Change in fair value of warrant liabilities | $ 1,580,242 | $ (26,437) | 417,749 | (38,998) | ||
Reclassification of Derivatives to Equity | (1,308,581) | (5,238) | ||||
Fair Value of Derivative Liabilities | 10,091,839 | 1,098,361 | 10,091,839 | 1,098,361 | ||
Emerald Financing - Warrant Liability | ||||||
Fair Value Of Derivative Liabilities [Roll Forward] | ||||||
Fair Value of Derivative Liabilities | 0 | 0 | ||||
Fair Value of Derivative Liabilities Issued | 10,424,634 | |||||
Change in fair value of warrant liabilities | (814,071) | |||||
Reclassification of Derivatives to Equity | 0 | |||||
Fair Value of Derivative Liabilities | 9,610,563 | 9,610,563 | ||||
Series B Preferred Stock Conversion Liability | ||||||
Fair Value Of Derivative Liabilities [Roll Forward] | ||||||
Fair Value of Derivative Liabilities | 6,715 | 6,715 | 118,821 | |||
Fair Value of Derivative Liabilities Issued | 0 | 0 | ||||
Change in fair value of warrant liabilities | 0 | (88,532) | ||||
Reclassification of Derivatives to Equity | (6,715) | (5,238) | ||||
Fair Value of Derivative Liabilities | 0 | 25,051 | 0 | 25,051 | ||
Series B Warrant Liability | ||||||
Fair Value Of Derivative Liabilities [Roll Forward] | ||||||
Fair Value of Derivative Liabilities | $ 551,322 | 551,322 | 1,112,308 | |||
Fair Value of Derivative Liabilities Issued | 0 | 0 | ||||
Change in fair value of warrant liabilities | 1,231,820 | (38,998) | ||||
Reclassification of Derivatives to Equity | (1,301,866) | 0 | ||||
Fair Value of Derivative Liabilities | $ 481,276 | $ 1,073,310 | $ 481,276 | $ 1,073,310 |
Warrants and Derivative Liabi25
Warrants and Derivative Liabilities (Details 2) | Jun. 30, 2018USD_per_warrants$ / shares | Feb. 16, 2018$ / shares | Jan. 19, 2018$ / shares | Dec. 31, 2017USD_per_warrants |
Dividend yield | Pricing Model | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 0 | 0 | ||
Dividend yield | Monte Carlo simulations | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 0 | 0 | 0 | |
Volatility factor | Pricing Model | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 70 | 70 | ||
Volatility factor | Monte Carlo simulations | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 70 | 70 | 70 | |
Expected term (years) | Monte Carlo simulations | ||||
Class of Warrant or Right [Line Items] | ||||
Expected Term | 5 years | 5 years | ||
Closing price per share of common stock | Monte Carlo simulations | ||||
Class of Warrant or Right [Line Items] | ||||
Closing price per share of common stock | $ 0.28 | |||
Weighted-average fair value of warrants | Pricing Model | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | USD_per_warrants | 0.276 | 0.086 | ||
Minimum | Risk-free interest rate | Pricing Model | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 2.536 | 1.947 | ||
Minimum | Risk-free interest rate | Monte Carlo simulations | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 2.70 | 2.45 | 2.45 | |
Minimum | Expected term (years) | Pricing Model | ||||
Class of Warrant or Right [Line Items] | ||||
Expected Term | 2 years 1 month 21 days | 2 years 7 months 21 days | ||
Minimum | Expected term (years) | Monte Carlo simulations | ||||
Class of Warrant or Right [Line Items] | ||||
Expected Term | 4 years 6 months 18 days | |||
Minimum | Closing price per share of common stock | Monte Carlo simulations | ||||
Class of Warrant or Right [Line Items] | ||||
Closing price per share of common stock | $ 0.29 | $ 0.29 | ||
Maximum | Risk-free interest rate | Pricing Model | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 2.537 | 1.949 | ||
Maximum | Risk-free interest rate | Monte Carlo simulations | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 2.71 | 2.6 | 2.6 | |
Maximum | Expected term (years) | Pricing Model | ||||
Class of Warrant or Right [Line Items] | ||||
Expected Term | 2 years 1 month 28 days | 2 years 7 months 24 days | ||
Maximum | Expected term (years) | Monte Carlo simulations | ||||
Class of Warrant or Right [Line Items] | ||||
Expected Term | 4 years 7 months 17 days | |||
Maximum | Closing price per share of common stock | Monte Carlo simulations | ||||
Class of Warrant or Right [Line Items] | ||||
Closing price per share of common stock | $ 0.30 | $ 0.30 |
Warrants and Derivative Liabi26
Warrants and Derivative Liabilities (Details 3) - USD ($) | 1 Months Ended | 6 Months Ended | |
Feb. 28, 2018 | Jan. 31, 2018 | Jun. 30, 2018 | |
Warrants and Rights Note Disclosure [Abstract] | |||
Proceeds from Emerald Financing | $ 1,750,000 | $ 1,500,000 | $ 3,250,000 |
Initial Fair Value of Emerald Financing Warrant Liability | 5,707,423 | 4,717,211 | 10,424,634 |
Excess over proceeds adjustment | $ 3,957,423 | $ 3,217,211 | $ 7,174,634 |
Warrants and Derivative Liabi27
Warrants and Derivative Liabilities (Detail Textuals) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||||
Feb. 28, 2018 | Jun. 30, 2018 | Jun. 30, 2018 | Feb. 16, 2018 | Jan. 31, 2018 | Jan. 19, 2018 | Dec. 31, 2017 | Feb. 28, 2017 | |
Class of Warrant or Right [Line Items] | ||||||||
Issuance costs related to warrant liability | $ 137,191 | |||||||
Warrant | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Value of common stock called by warrants | $ 30,000 | |||||||
Total number of warrants issued | 125,000 | |||||||
Warrant | Emerald Health Sciences | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Number of warrants issued | 3,400,000 | 40,800,000 | ||||||
Total number of warrants issued | 44,200,000 | |||||||
Warrant exercise price | $ 0.10 | |||||||
Term of warrant | 5 years | |||||||
Series D Preferred Stock | Warrant | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Value of common stock called by warrants | $ 115,200 | |||||||
Total number of warrants issued | 480,000 | |||||||
Securities purchase agreement | Emerald Health Sciences | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Total number of warrants issued | 20,400,000 | 20,400,000 | ||||||
Warrant exercise price | $ 0.10 | $ 0.10 | ||||||
Securities purchase agreement | Accredited investor | Emerald Health Sciences | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Total number of warrants issued | 3,400,000 | |||||||
Warrant exercise price | $ 0.10 | |||||||
Emerald Warrant Liabilities | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Value of common stock called by warrants | $ 5,700,000 | $ 4,700,000 | ||||||
Issuance costs related to warrant liability | $ 13,719 | |||||||
Change in fair value of warrant liability | $ 1,504,529 |
Warrants and Derivative Liabi28
Warrants and Derivative Liabilities (Detail Textuals 1) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||||
Jan. 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jan. 19, 2018 | Dec. 31, 2017 | Feb. 28, 2017 | |
Class of Warrant or Right [Line Items] | ||||||||
Value of warrants | $ 982,911 | $ 982,911 | $ 982,911 | |||||
Proceeds from Warrant Exercises | 98,700 | |||||||
Warrant liabilities | 551,322 | |||||||
Change in fair market value at the re-measurement date recorded as non-operating income | 1,580,242 | $ (26,437) | 417,749 | $ (38,998) | ||||
Provision for conversion of Series B preferred stock | $ 6,715 | |||||||
Series B conversion liability | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Provision for conversion of Series B preferred stock | $ 6,715 | $ 6,715 | ||||||
Series B Warrants | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Number of warrants issued | 6,437,500 | 6,437,500 | ||||||
Warrant exercise price | $ 0.10 | $ 1.15 | $ 1.15 | $ 0 | $ 0.10 | |||
Warrants, expiration period | 5 years | |||||||
Value of warrants | $ 293,580 | $ 293,580 | ||||||
Proceeds from financing between conversion liability and warrants | $ 5,000,000 | |||||||
Number Of Warrants Exercisable | 987,000 | 3,706,750 | ||||||
Proceeds from Warrant Exercises | $ 98,700 | |||||||
Change in fair market value at the re-measurement date recorded as non-operating income | $ 75,713 | $ 26,437 | ||||||
Series B Warrants | Bridge Loan | Secured promissory note and security agreement | ||||||||
Class of Warrant or Right [Line Items] | ||||||||
Initial conversion price | $ 0 |
Stockholders' Deficit and Cap29
Stockholders' Deficit and Capitalization (Detail Textuals) - USD ($) | 1 Months Ended | 6 Months Ended | |||
Feb. 28, 2018 | Feb. 16, 2018 | Jan. 31, 2018 | Jan. 19, 2018 | Jun. 30, 2018 | |
Equity [Line Items] | |||||
Common stock gross proceeds | $ 1,750,000 | $ 1,500,000 | $ 3,250,000 | ||
Aggregate gross proceeds | 900,000 | ||||
Securities purchase agreement | Emerald Health Sciences Inc | |||||
Equity [Line Items] | |||||
Common stock issued | 15,000,000 | 15,000,000 | |||
Number of warrants issued | 20,400,000 | 20,400,000 | |||
Warrant exercise price | $ 0.10 | $ 0.10 | |||
Common stock gross proceeds | $ 1,500,000 | ||||
Term of warrants | 5 years | ||||
Legal reimbursement fees | $ 25,000 | ||||
Securities purchase agreement | Emerald Health Sciences Inc | Accredited investor | |||||
Equity [Line Items] | |||||
Common stock issued | 2,500,000 | ||||
Number of warrants issued | 3,400,000 | ||||
Warrant exercise price | $ 0.10 | ||||
Common stock gross proceeds | $ 1,750,000 | ||||
Term of warrants | 5 years | ||||
Securities purchase agreement | Emerald Health Sciences Inc | Promissory Note | |||||
Equity [Line Items] | |||||
Aggregate gross proceeds | $ 900,000 | ||||
Conversion price, per share (in dollars per share) | $ 0.10 | ||||
Shares converted into common stock | 9,000,000 | ||||
Subsequent financing purchase price, description | The Securities Purchase Agreement also provides that in the case of a subsequent financing in which the purchase price is less than $0.10 per share, Emerald shall be issued additional shares in order to protect against anti-dilution. |
Stockholders' Deficit and Cap30
Stockholders' Deficit and Capitalization (Detail Textuals 1) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Equity [Line Items] | ||
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.001 | |
Series B Preferred Stock Conversion Liability | ||
Equity [Line Items] | ||
Number of shares converted | 2,833.5 | |
Number of shares issued in conversion | 28,335,500 | |
Conversion price | $ 0.10 | |
Reduction of conversion price of preferred stock | $ 0.05 | |
Number of shares issued in conversion, decreased conversion price | 50,000 | |
Number of shares converted, decreased conversion price | $ 0.001 | |
Series D Preferred Stock | ||
Equity [Line Items] | ||
Number of shares converted | 200 | |
Number of shares issued in conversion | 2,000,000 | |
Conversion price | $ 0.10 | |
Series F Preferred Stock | ||
Equity [Line Items] | ||
Number of shares converted | 2,000 | |
Number of shares issued in conversion | 20,000,000 | |
Conversion price | $ 0.10 | |
Series B warrant | ||
Equity [Line Items] | ||
Intrinsic value of warrant exercises | $ 1,276,175 | |
Common stock issued | 4,693,750 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - Stock Incentive Plan - Omnibus Incentive Plan 2014 - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Number of Shares | ||
Outstanding, December 31, 2017 | 1,130,000 | |
Granted | 0 | |
Exercised | 0 | |
Cancelled | (48,000) | |
Forfeited | (427,000) | |
Outstanding, June 30, 2018 | 655,000 | 1,130,000 |
Exercisable, June 30, 2018 | 393,000 | |
Weighted Average Exercise Price | ||
Outstanding, December 31, 2017 | $ 0.60 | |
Granted | 0 | |
Exercised | 0 | |
Cancelled | 2.57 | |
Forfeited | 0.66 | |
Outstanding, June 30, 2018 | 0.42 | $ 0.60 |
Exercisable, June 30, 2018 | $ 0.42 | |
Weighted average remaining contractual term, outstanding | 6 years 4 months 10 days | 6 years 10 months 21 days |
Weighted Average Remaining Contractual Term, Exercisable | 6 years 4 months 10 days |
Stock-Based Compensation (Det32
Stock-Based Compensation (Details 1) - Restricted stock awards - Omnibus Incentive Plan 2014 | 6 Months Ended |
Jun. 30, 2018$ / sharesshares | |
Number of Shares | |
Outstanding, December 31, 2017 | shares | 1,050,000 |
Granted | shares | 643,501 |
Released | shares | (675,000) |
Outstanding, June 30, 2018 | shares | 1,018,501 |
Expected to vest, June 30, 2018 | shares | 1,018,501 |
Weighted Average Grant Date Fair Value | |
Outstanding, December 31, 2017 | $ / shares | $ 0.75 |
Granted | $ / shares | 0.26 |
Released | $ / shares | 0.75 |
Outstanding, June 30, 2018 | $ / shares | 0.44 |
Expected to vest, June 30, 2018 | $ / shares | $ 0.44 |
Stock-Based Compensation (Det33
Stock-Based Compensation (Detail Textuals) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
May 25, 2018 | Feb. 28, 2018 | Jun. 30, 2018 | Jun. 30, 2018 | Oct. 13, 2014 | |
Restricted Stock Agreements | K2C, Inc. | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of restricted common stock vested | 325,000 | ||||
Stock compensation expenses | $ 98,042 | ||||
Stock Option | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Aggregate intrinsic value of options exercisable, and vested and expected to vest | $ 0 | $ 0 | |||
Omnibus Incentive Plan 2014 | Stock Option | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of shares reserved for future grants | 701,499 | 701,499 | 3,200,000 | ||
Elizabeth Berecz, CFO | Restricted Stock Agreements | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of restricted common stock vested | 350,000 | ||||
Stock compensation expenses | $ 97,183 | $ 97,183 |
Stock-Based Compensation (Det34
Stock-Based Compensation (Detail Textuals 1) - Douglas Cesario, CFO - Restricted Stock Agreements | 1 Months Ended |
May 25, 2018USD ($)$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Granted | shares | 1,195,073 |
Exercise price | $ / shares | $ 0.25 |
Fair market value of stock options | $ | $ 200,172 |
Vesting percentage | 25.00% |
Description of stock option agreement | The options vest 25% on July 23, 2018, and the remaining 75% will vest 1/33 on each of the next 33 months thereafter. |
Stock-Based Compensation (Det35
Stock-Based Compensation (Detail Textuals 2) - USD ($) | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
May 25, 2018 | Feb. 28, 2018 | Jan. 18, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Total stock-based compensation expense | $ 100,602 | $ 152,171 | $ 330,212 | $ 304,338 | |||
Total amount of unrecognized compensation cost | $ 678,514 | $ 678,514 | |||||
Recognized weighted average period | 2 years 3 months 18 days | ||||||
Restricted stock awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Fair market value of shares granted | $ 475,000 | ||||||
Restricted stock vesting percentage | 50.00% | ||||||
Restricted stock awards | K2C, Inc. | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of restricted common stock granted | 900,000 | ||||||
Stock compensation expenses | $ 216,000 | ||||||
Restricted stock awards | Dr. Murphy | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of restricted common stock granted | 900,000 | ||||||
Restricted stock awards | Elizabeth Berecz, CFO | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of restricted common stock granted | 700,000 | 700,000 | |||||
Stock compensation expenses | $ 184,800 | ||||||
Restricted stock awards | Cosmas N. Lykos | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of restricted common stock granted | 900,000 |
Significant Contracts (Detail T
Significant Contracts (Detail Textuals) - University of Mississippi - Intellectual Property | Jan. 10, 2017USD ($) | Dec. 14, 2015USD ($)License_agreement | Sep. 29, 2014USD ($)License_agreement |
UM 5050 pro-drug agreements | |||
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 | $ 700,000 | ||
UM 8930 analogue agreements | |||
University Of Mississippi Agreements [Line Items] | |||
Number of license agreements | License_agreement | 2 | ||
Notice period for termination | 60 days | ||
Annual fees for license agreement | $ 25,000 | ||
Aggregate milestone payments if milestones achieved | $ 700,000 | ||
UM 5070 license agreement | |||
University Of Mississippi Agreements [Line Items] | |||
Term of agreement | 1 year | ||
Notice period for termination | 60 days | ||
Annual fees for license agreement | $ 25,000 | ||
Aggregate milestone payments if milestones achieved | $ 700,000 |
Commitments and Contingencies (
Commitments and Contingencies (Detail Textuals) - USD ($) | Jul. 12, 2017 | May 03, 2017 | Jun. 30, 2017 | Jun. 30, 2018 | |
Operating Leased Assets [Line Items] | |||||
Preferred stock, par value (in dollars per share) | $ 0.001 | ||||
Aggregate gross proceeds | [1] | $ 1,131,857 | |||
Series E Preferred Stock | |||||
Operating Leased Assets [Line Items] | |||||
Preferred stock, shares authorized | 1,000,000 | ||||
Preferred stock, par value (in dollars per share) | $ 0.001 | ||||
Shares issued, price per share (in dollars per share) | $ 20 | ||||
Aggregate gross proceeds | $ 20,000,000 | ||||
Guarantor failed to pay within 90 days of notice of purchaser | $ 20,000,000 | ||||
Term of purchase agreement | 90 days | ||||
[1] | During the six months ended June 30, 2017 preferred deemed dividends of $536,000 were recognized on Series D Preferred Stock and $175,000 on Series C Preferred Stock. |
Related Party Matters (Detail T
Related Party Matters (Detail Textuals) - USD ($) | Feb. 06, 2018 | Apr. 01, 2017 | Feb. 28, 2018 | Jan. 31, 2018 | Jan. 19, 2018 | Dec. 28, 2017 | Mar. 31, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 |
Related Party Transaction [Line Items] | ||||||||||||
Common stock gross proceeds | $ 1,750,000 | $ 1,500,000 | $ 3,250,000 | |||||||||
Aggregate gross proceeds | $ 900,000 | 900,000 | ||||||||||
Proceeds from convertible debt issuance | 400,000 | |||||||||||
Convertible debt | $ 235,000 | |||||||||||
Loss on extinguishment of debt | (590,392) | |||||||||||
Amortization of convertible debt discount | 34,608 | |||||||||||
Change in fair value of conversion rights of convertible debt | 185,000 | |||||||||||
Accrued interest related to the convertible debt | 3,767 | 3,767 | ||||||||||
Independent contractor agreement | K2C, Inc. | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Monthly fee | $ 20,000 | $ 10,000 | ||||||||||
Total expense incurred under agreement | 0 | $ 60,000 | 220,000 | $ 90,000 | ||||||||
Independent contractor agreement | Emerald Health Sciences Inc | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Total expense incurred under agreement | 150,000 | 250,000 | ||||||||||
Accrued and accounts payable - related party | 50,000 | $ 50,000 | ||||||||||
Percentage of accrued interest on outstanding balance | 12.00% | |||||||||||
Separation and release agreement | K2C, Inc. | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Common stock gross proceeds | 180,000 | |||||||||||
Recognized additional stock based compensation expense of restricted stock and option awards | $ 112,270 | |||||||||||
Separation and release agreement | K2C, Inc. | Immediate vesting | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Number of restricted common stock vested | 900,000 | |||||||||||
Separation and release agreement | K2C, Inc. | October 20, 2015 | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Number of restricted common stock vested | 325,000 | |||||||||||
Separation and release agreement | K2C, Inc. | November 21, 2014 | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Number of restricted common stock vested | 125,000 | |||||||||||
Consulting Agreement | Emerald Health Sciences Inc | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Total expense incurred under agreement | 15,000 | $ 30,000 | ||||||||||
Terms of agreement renewed | 1 year | |||||||||||
Accrued and accounts payable - related party | 15,000 | 15,000 | ||||||||||
Annual fee | $ 60,000 | |||||||||||
Secured promissory note and security agreement | Emerald Health Sciences Inc | Bridge Loan | ||||||||||||
Related Party Transaction [Line Items] | ||||||||||||
Aggregate gross proceeds | $ 900,000 | |||||||||||
Proceeds from convertible debt issuance | $ 500,000 | 500,000 | ||||||||||
Funds received under the Secured Promissory Note | $ 400,000 | 400,000 | ||||||||||
Convertible debt | 265,000 | |||||||||||
Increase in conversion liability | $ 360,000 | |||||||||||
Initial conversion price | $ 0.10 | |||||||||||
Shares converted into common stock | 9,000,000 | |||||||||||
Loss on extinguishment of debt | 590,392 | |||||||||||
Amortization of convertible debt discount | 34,608 | |||||||||||
Marked to market the conversion liabilities | $ 810,000 | 810,000 | ||||||||||
Change in fair value of conversion rights of convertible debt | $ 185,000 |
Subsequent Events (Detail Textu
Subsequent Events (Detail Textuals) | 1 Months Ended |
Jul. 31, 2018USD ($) | |
Subsequent Event | AMRI Agreement | |
Subsequent Event [Line Items] | |
Fees and expenses | $ 64,200 |