Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 12, 2019 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Emerald Bioscience, Inc. | |
Entity Central Index Key | 0001516551 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 134,095,247 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Entity Shell Company | false | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Ex Transition Period | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash | $ 1,319,360 | $ 1,853,373 |
Restricted cash | 4,512 | 4,512 |
Prepaid expenses | 395,441 | 93,193 |
Other current assets | 3,375 | 2,609 |
Total current assets | 1,722,688 | 1,953,687 |
Property and equipment, net | 2,349 | 3,445 |
Total assets | 1,725,037 | 1,957,132 |
Current liabilities | ||
Accounts payable | 206,930 | 15,597 |
Other current liabilities | 318,930 | 184,461 |
Derivative liabilities | 13,737,783 | 15,738,913 |
Total current liabilities | 14,263,643 | 15,938,971 |
Noncurrent liabilities | ||
Convertible multi-draw credit agreement - related party, net of discount | 3,296,249 | 1,360,960 |
Derivative liabilities, non-current | 567,606 | 219,453 |
Total liabilities | 18,127,498 | 17,519,384 |
Commitments and contingencies | ||
Stockholders' deficit | ||
Convertible preferred stock, $0.001 par value; 20,000,000 shares authorized; none issued and outstanding at September 30, 2019 and December 31, 2018 | ||
Common stock, $0.001 par value; 500,000,000 shares authorized; 134,095,247 issued and outstanding at September 30, 2019 and December 31, 2018 | 134,095 | 133,908 |
Additional paid-in-capital | 20,488,778 | 17,528,947 |
Accumulated deficit | (37,025,334) | (33,225,107) |
Total stockholders' deficit | (16,402,461) | (15,562,252) |
Total liabilities and stockholders' deficit | $ 1,725,037 | $ 1,957,132 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
Convertible preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Convertible preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 134,095,247 | 134,095,247 |
Common stock, shares outstanding | 134,095,247 | 134,095,247 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Operating expenses | ||||
Research and development | $ 513,004 | $ 67,291 | $ 1,522,031 | $ 92,291 |
General and administrative | 990,110 | 978,329 | 3,267,037 | 3,284,880 |
Total operating expenses | 1,503,114 | 1,045,620 | 4,789,068 | 3,377,171 |
Operating loss | (1,503,114) | (1,045,620) | (4,789,068) | (3,377,171) |
Other expense (income) | ||||
Change in fair value of derivative liabilities | 3,126,464 | 1,050,729 | (2,024,660) | 1,653,477 |
Fair value of derivative liabilities in excess of proceeds | 322,644 | 7,174,634 | ||
Financing transaction costs | 137,192 | |||
Loss on extinguishment of secured convertible promissory note - related party | 590,392 | |||
Interest expense | 301,547 | 0 | 711,575 | 37,708 |
Interest income | (74) | |||
Total other expense (income) | 3,428,011 | 1,050,729 | (990,441) | 9,593,329 |
Loss before income taxes | (4,931,125) | (2,096,349) | (3,798,627) | (12,970,500) |
Provision for income taxes | 0 | 0 | 1,600 | 1,642 |
Net Loss and comprehensive loss | $ (4,931,125) | $ (2,096,349) | $ (3,800,227) | $ (12,972,142) |
Loss per common share: | ||||
Basic (in dollars per share) | $ (0.04) | $ (0.02) | $ (0.03) | $ (0.11) |
Diluted (in dollars per share) | $ (0.04) | $ (0.02) | $ (0.03) | $ (0.11) |
Weighted average shares of common stock outstanding used to compute earnings per share: | ||||
Basic (in shares) | 133,001,746 | 131,445,057 | 132,885,675 | 117,434,563 |
Diluted (in shares) | 133,001,746 | 131,445,057 | 167,690,989 | 117,434,563 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities: | ||
Net loss | $ (3,800,227) | $ (12,972,142) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 1,096 | 1,178 |
Loss on disposal of assets | 804 | |
Stock-based compensation expense | 514,683 | 484,720 |
Change in fair value of derivative liabilities | (2,024,660) | 1,653,477 |
Fair value of derivative liabilities in excess of proceeds | 322,644 | 7,174,634 |
Loss on extinguishment of secured convertible promissory note - related party | 590,392 | |
Amortization of debt discount | 438,964 | 34,608 |
Changes in assets and liabilities: | ||
Prepaid expenses | (302,248) | 194,906 |
Other current assets | (766) | (2,609) |
Accounts payable | 191,333 | (55,418) |
Accounts payable to related party | 15,000 | |
Other current liabilities | 134,469 | (48,407) |
Net cash used in operating activities | (4,524,712) | (2,928,857) |
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 Common stock issuance, net of $16,901 issuance costs | 3,233,099 | |
Proceeds from Series B warrant exercises | 98,700 | |
Proceeds from secured convertible promissory note - related party | 400,000 | |
Proceeds from convertible multi-draw credit agreement, net of $9,301 issuance costs | 3,990,699 | |
Net cash provided by financing activities | 3,990,699 | 3,731,799 |
Net (decrease) increase in cash and restricted cash | (534,013) | 798,557 |
Cash and restricted cash, beginning of period | 1,857,885 | 264,383 |
Cash and restricted cash, end of period | 1,323,872 | 1,062,940 |
Reconciliation of cash and restricted cash: | ||
Cash | 1,319,360 | 1,058,438 |
Restricted cash | 4,512 | 4,502 |
Total cash and restricted cash shown in the condensed consolidated statements of cash flows | 1,323,872 | 1,062,940 |
Cash paid during the period for: | ||
Interest | 272,611 | |
Income taxes | 1,600 | 1,642 |
Supplemental disclosures of non-cash financing activities: | ||
Conversion of outstanding preferred stock into common stock | 1,947,227 | |
Conversion of outstanding preferred stock subject to redemption into common stock | 828,916 | |
Reclassification of warrant liabilities to equity from exercise of warrants | 144,375 | 1,333,866 |
Fair value of common stock issued in extinguishment of convertible debt | 1,710,000 | |
Fair value of warrants issued in connection with financings | $ 10,424,634 | |
Proceeds allocated to equity classified warrants issued with convertible multi-draw credit agreement | 716,110 | |
Fair value of compound derivative liability bifurcated from convertible multi-draw credit agreement | 193,414 | |
Beneficial conversion feature on convertible multi-draw credit agreement | $ 1,584,850 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Parentheticals) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Common stock issuance costs | $ 16,901 |
Issuance costs from convertible multi-draw credit agreement | $ 9,301 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (UNAUDITED) - USD ($) | Convertible Series F Preferred Stock | Convertible Series D Preferred Stock | Redeemable Convertible Series B Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Balance at Dec. 31, 2017 | $ 1,777,781 | $ 169,447 | $ 822,201 | $ 33,623 | $ 10,427,742 | $ (14,030,871) | $ (3,569,506) |
Balance (in shares) at Dec. 31, 2017 | 2,000 | 200 | 2,834 | 33,622,829 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock based compensation expense | $ 2,500 | 227,109 | 229,609 | ||||
Stock based compensation expense (in shares) | 2,500,000 | ||||||
Issuance of common stock net of issuance costs of $16,900 | $ 32,500 | (32,500) | |||||
Issuance of common stock net of issuance costs of $16,900 (in shares) | 32,500,000 | ||||||
Conversion of Series B Preferred Stock and conversion liability into common stock at $0.10 and $0.001 per share | $ (822,201) | $ 28,385 | 800,530 | 828,915 | |||
Conversion of Series B Preferred Stock and conversion liability into common stock at $0.10 and $0.001 per share (in shares) | (2,834) | 28,385,000 | |||||
Conversion of Series D Preferred Stock to common stock at $0.10 per share | $ (169,447) | $ 2,000 | 167,447 | 169,447 | |||
Conversion of Series D Preferred Stock to common stock at $0.10 per share (in shares) | (200) | 2,000,000 | |||||
Conversion of Series F Preferred Stock to common stock at $0.10 per share | $ (1,777,781) | $ 20,000 | 1,757,781 | 1,777,781 | |||
Conversion of Series F Preferred Stock to common stock at $0.10 per share (in shares) | (2,000) | 20,000,000 | |||||
Conversion of secured convertible promissory note - related party and accrued interest | $ 9,000 | 1,691,878 | 1,700,878 | ||||
Conversion of secured convertible promissory note - related party and accrued interest (in shares) | 9,000,000 | ||||||
Series B warrant exercises | $ 4,406 | 1,318,284 | 1,322,690 | ||||
Series B warrant exercises (in shares) | 4,406,250 | ||||||
Net loss | (8,213,793) | (8,213,793) | |||||
Balance at Mar. 31, 2018 | $ 132,414 | 16,358,271 | (22,244,664) | (5,753,979) | |||
Balance (in shares) at Mar. 31, 2018 | 132,414,079 | ||||||
Balance at Dec. 31, 2017 | $ 1,777,781 | $ 169,447 | $ 822,201 | $ 33,623 | 10,427,742 | (14,030,871) | (3,569,506) |
Balance (in shares) at Dec. 31, 2017 | 2,000 | 200 | 2,834 | 33,622,829 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net loss | (12,972,142) | ||||||
Balance at Sep. 30, 2018 | $ 133,445 | 16,714,448 | (27,003,013) | (10,155,120) | |||
Balance (in shares) at Sep. 30, 2018 | 133,445,080 | ||||||
Balance at Mar. 31, 2018 | $ 132,414 | 16,358,271 | (22,244,664) | (5,753,979) | |||
Balance (in shares) at Mar. 31, 2018 | 132,414,079 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock based compensation expense | 100,603 | 100,603 | |||||
Common stock issuance costs paid of $7,778 | (7,778) | (7,778) | |||||
Series B warrant exercises | $ 288 | 77,587 | 77,875 | ||||
Series B warrant exercises (in shares) | 287,500 | ||||||
Net loss | (2,662,000) | (2,662,000) | |||||
Balance at Jun. 30, 2018 | $ 132,702 | 16,528,683 | (24,906,664) | (8,245,279) | |||
Balance (in shares) at Jun. 30, 2018 | 132,701,579 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock based compensation expense | $ 643 | 153,865 | 154,508 | ||||
Stock based compensation expense (in shares) | 643,501 | ||||||
Series B warrant exercises | $ 100 | 31,900 | 32,000 | ||||
Series B warrant exercises (in shares) | 100,000 | ||||||
Net loss | (2,096,349) | (2,096,349) | |||||
Balance at Sep. 30, 2018 | $ 133,445 | 16,714,448 | (27,003,013) | (10,155,120) | |||
Balance (in shares) at Sep. 30, 2018 | 133,445,080 | ||||||
Balance at Dec. 31, 2018 | $ 133,908 | 17,528,947 | (33,225,107) | (15,562,252) | |||
Balance (in shares) at Dec. 31, 2018 | 133,907,747 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock based compensation expense | 171,493 | 171,493 | |||||
Warrants issued in connection with convertible multi-draw credit agreement, related party | 716,110 | 716,110 | |||||
Beneficial conversion feature in connection with convertible multi-draw credit agreement - related party | 1,584,850 | 1,584,850 | |||||
Net loss | (14,774,392) | (14,774,392) | |||||
Balance at Mar. 31, 2019 | $ 133,908 | 20,001,400 | (47,999,499) | (27,864,191) | |||
Balance (in shares) at Mar. 31, 2019 | 133,907,747 | ||||||
Balance at Dec. 31, 2018 | $ 133,908 | 17,528,947 | (33,225,107) | (15,562,252) | |||
Balance (in shares) at Dec. 31, 2018 | 133,907,747 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net loss | (3,800,227) | ||||||
Balance at Sep. 30, 2019 | $ 134,095 | 20,488,778 | (37,025,334) | (16,402,461) | |||
Balance (in shares) at Sep. 30, 2019 | 134,095,247 | ||||||
Balance at Mar. 31, 2019 | $ 133,908 | 20,001,400 | (47,999,499) | (27,864,191) | |||
Balance (in shares) at Mar. 31, 2019 | 133,907,747 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock based compensation expense | 173,084 | 173,084 | |||||
Series B warrant exercises | $ 187 | 144,188 | 144,375 | ||||
Series B warrant exercises (in shares) | 187,500 | ||||||
Net loss | 15,905,290 | 15,905,290 | |||||
Balance at Jun. 30, 2019 | $ 134,095 | 20,318,672 | (32,094,209) | (11,641,442) | |||
Balance (in shares) at Jun. 30, 2019 | 134,095,247 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock based compensation expense | 170,106 | 170,106 | |||||
Net loss | (4,931,125) | (4,931,125) | |||||
Balance at Sep. 30, 2019 | $ 134,095 | $ 20,488,778 | $ (37,025,334) | $ (16,402,461) | |||
Balance (in shares) at Sep. 30, 2019 | 134,095,247 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (UNAUDITED) (Parentheticals) - USD ($) | 3 Months Ended | |
Jun. 30, 2018 | Mar. 31, 2018 | |
Share issuance costs | $ 7,778 | $ 16,900 |
Series F Preferred Stock | ||
Conversion of preferred stock price per share | $ 0.10 | |
Series D Preferred Stock | ||
Conversion of preferred stock price per share | 0.10 | |
Redeemable Convertible Series B Preferred Stock | ||
Conversion of preferred stock price per share | 0.10 | |
Conversion liability into common stock per share | $ 0.001 |
Nature of Operations and Busine
Nature of Operations and Business Activities | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Nature of Operations and Business Activities | 1. Nature of Operations and Business Activities Nature of Operations Emerald Bioscience, Inc. (the “Company”) was initially incorporated in Nevada on March 16, 2011 as Load Guard Logistics, Inc. On October 31, 2014, the Company closed a reverse merger transaction (the “Merger”) pursuant to which Nemus, a California corporation (“Nemus Sub”), became the Company’s wholly-owned subsidiary, and the Company assumed the operations of Nemus Sub. Nemus Sub was incorporated in the State of California on July 17, 2012. On November 3, 2014, the Company changed its name to Nemus Bioscience, Inc. by merging with Nemus Sub. In August 2019, the Company formed a new subsidiary in Australia, EMBI Australia Pty Ltd., an Australian proprietary limited company (“EMBI Australia”), in order to qualify for the Australian government’s research and development tax credit for research and development dollars spent in Australia. The primary purpose of EMBI Australia is to conduct clinical trials for the Company’s product candidates. On February 11, 2019, the Company’s Board of Directors (the “Board”) and majority stockholder unanimously approved an amendment to the Company’s articles of incorporation to change the name of the Company to Emerald Bioscience, Inc. Effective March 25, 2019, the Company filed a Certificate of Amendment with the Nevada Secretary of State changing the Company’s name to Emerald Bioscience, Inc. Emerald Bioscience, Inc. is a biopharmaceutical company located in Long Beach, California that plans to research, develop and commercialize therapeutics derived from cannabinoids through several license agreements with the University of Mississippi (“UM”). UM is the only entity federally permitted and licensed to cultivate cannabis for research purposes in the United States. In January 2018, the Company entered into a securities purchase agreement with Emerald Health Sciences, Inc. (“Emerald Health Sciences”) discussed in Note 5, pursuant to which Emerald Health Sciences purchased a majority of the equity interest in the Company, resulting in a change in control. As part of the transaction, the Company’s Board members, with the exception of Dr. Brian Murphy, the Company’s CEO/CMO, tendered their resignation and Emerald Health Sciences appointed two new nominees to the Board. Later, in October 2018, the Board appointed Dr. Avtar Dhillon, the Chairman, Chief Executive Officer and President of Emerald Health Sciences, as the Executive Chairman of the Company’s Board. As of September 30, 2019, the Company has devoted substantially all its efforts to securing product licenses, carrying out research and development, building infrastructure and raising capital. The Company has not yet realized revenue from its planned principal operations and is a number of years from potentially being able to do so. Liquidity and Going Concern The Company has incurred operating losses and negative cash flows from operations since inception and as of September 30, 2019, had an accumulated deficit of $37,025,334, a stockholders’ deficit of $16,402,461 and a working capital deficit of $12,540,955. 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 and clinical development activities and support its corporate infrastructure which includes the costs associated with being a public company. As of September 30, 2019, the Company had cash in the amount of $1,319,360, as compared to $1,853,373 in cash as of December 31, 2018. During the nine months ended September 30, 2019, the Company received net cash proceeds of $3,990,699 from the Credit Agreement (defined below) with Emerald Health Sciences. However, the Company’s cash balance as of September 30, 2019, including the cash balance as of December 31, 2018 and the net cash proceeds from the Credit Agreement, has been offset by cash used in operating activities of $4,524,712 for the nine months ended September 30, 2019. The Company had operating cash outflows primarily due to net loss from operations and a non-cash adjustment to add back the gain from the change in the fair value of derivative liabilities. Without additional funding, management believes that the Company will not have enough 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 research and development activities. On October 5, 2018, the Company entered into a Multi Draw Credit Agreement (the “Credit Agreement”) with Emerald Health Sciences (See Note 4). Under the Credit Agreement the Company can draw down up to $20,000,000 from time to time in principal amounts of at least $250,000. The drawdowns are subject to approval by the Company’s Board, which is controlled by the directors and principal executive officer of Emerald Health Sciences. The Company plans to continue to pursue funding through public or private equity or debt financings, 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 | 9 Months Ended |
Sep. 30, 2019 | |
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 Company’s Audited Consolidated Financial Statements for the fiscal year ended December 31, 2018, 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 nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or any future periods. The Condensed Consolidated Balance sheet as of December 31, 2018 was derived from the Company’s audited financial statements as of December 31, 2018, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2019. The unaudited financial statements included in this Quarterly Report on Form 10-Q 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, 2018, which includes a broader discussion of the Company’s business and the risks inherent therein. Certain reclassifications have been made to prior year amounts to conform to the current period’s presentation. Such reclassifications had no net effect on total assets, total liabilities, total stockholders’ deficit, net losses and cash flows. Use of Estimates The preparation of the Unaudited 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 income and expense during the reporting period. Actual results could differ from those estimates. The most significant accounting estimates inherent in the preparation of the Company’s 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, derivative liabilities and 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 United States and the Company’s ability to attract new funding. 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 the Company’s financial instruments, with the exception of the convertible multi draw credit agreement - related party and derivative liabilities, including, cash, prepaid expenses, accounts payable, and other current liabilities approximate their fair value due to the short maturities of these financial instruments. The derivative liabilities were valued on a recurring basis utilizing Level 3 inputs. Advances under the convertible multi draw credit agreement - related party, noncurrent are not recorded at fair value. However, fair value can be approximated and disclosed utilizing Level 3 inputs and independent third-party valuation techniques (See Note 3). At September 30, 2019, the fair value of the advances under the Credit Agreement were estimated at $8,247,319. The carrying amount of the liability at September 30, 2019 was $3,296,249 and is included in Convertible multi draw credit agreement - related party, net of discount in the Company’s balance sheets. Convertible Instruments The Company accounts for hybrid contracts with embedded conversion features in accordance with GAAP. ASC 815, Derivatives and Hedging Activities The Company accounts for convertible debt 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 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. 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 Comprehensive Loss. Debt Issuance Costs and Interest Discounts related to bifurcated derivatives, freestanding instruments issued in bundled transactions and issuance costs are recorded as a reduction to the carrying value of the debt and amortized over the life of the debt using the effective interest method. The Company makes changes to the effective interest rate, as necessary, on a prospective basis. For debt facilities that provide for multiple advances, the Company initially defers any issuance costs until the first advance is made and then amortizes the costs over the life of the facility. Research and Development Expenses and Licensed Technology Research and development 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 and benefits for the personnel involved in the Company’s preclinical and clinical drug development activities; and facilities expense, depreciation and other allocated expenses; and equipment and laboratory supplies. 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. Stock-Based Compensation for Employees 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 using the following assumptions: · Volatility - Stock price volatility is estimated over the expected term based on a blended rate of industry peers and the Company’s actual stock volatility adjusted for periods in which significant financial variability was identified. · 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 the vesting period for each award. · Risk-free rate - The risk-free interest rate for the expected term of the option 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 the Company’s history and expectation of paying no dividends in the foreseeable future. Earnings/ Loss Per Share of Common Stock The Company applies FASB ASC No. 260, Earnings per Share The computations of basic and diluted net loss per common share are as follows: Three Months Ended September 30, (Unaudited) Nine Months Ended September 30, (Unaudited) 2019 2018 2019 2018 Basic net loss per share: Net loss (as adjusted) $ (4,931,125 ) $ (2,096,349 ) $ (3,800,227 ) $ (12,972,142 ) Weighted average common shares outstanding – basic 133,001,746 131,445,057 132,885,675 117,434,563 Net loss per share - basic $ (0.04 ) $ (0.02 ) $ (0.03 ) $ (0.11 ) Diluted net loss per share: Net loss (as adjusted) $ (4,931,125 ) $ (2,096,349 ) $ (5,656,982 ) $ (12,972,142 ) Weighted average common shares outstanding – diluted 133,001,746 131,445,057 167,690,989 117,434,563 Net loss per share - diluted $ (0.04 ) $ (0.02 ) $ (0.03 ) $ (0.11 ) The following outstanding shares of common stock equivalents were excluded from the computation of diluted earnings per share of common stock for the periods presented because including them would have been antidilutive: As of Three Months Ended September 30 , (Unaudited) As of Nine Months Ended September 30 , (Unaudited) 2019 2018 2019 2018 Stock options 4,512,715 1,850,073 4,512,715 1,850,073 Unvested restricted stock 1,093,501 1,918,501 1,093,501 1,918,501 Common shares underlying convertible debt 15,000,000 — 15,000,000 — Warrants 57,943,250 51,055,750 23,137,935 51,055,750 Recent Accounting Pronouncements In November 2018, the FASB issued ASU No. 2018-08 Collaborative Arrangements Revenue from Contracts with Customers Recently Adopted Accounting Standards 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 |
Warrants and Derivative Liabili
Warrants and Derivative Liabilities | 9 Months Ended |
Sep. 30, 2019 | |
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 September Amount Exercise Term Vested 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 Common Stock Warrants to Series B Stockholders $ 0.00 5 1,031,250 2016 Common Stock Warrants to Service Providers $ 1.15 10 40,000 2016 Series C Common Stock Warrants to Placement Agent $ 0.40 5 125,000 2017 Series D Common Stock Warrants to Placement Agent $ 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 Emerald Multi Draw Credit Agreement Warrants $ 0.50 5 7,500,000 Total warrants vested and outstanding as of September 30, 2019 57,943,250 Emerald Multi Draw Credit Agreement Warrants During the nine months ended September 30, 2019, the Company issued 5,000,000 fully vested common stock warrants to Emerald Health Sciences, in conjunction with advances under the Credit Agreement discussed below (See Note 4). The warrants are equity classified at issuance and the Company allocated an aggregate of $716,110 of the gross proceeds to the warrants on a relative fair value basis. The proceeds allocated to the warrants were recorded as discounts to each advance and are being amortized over the term of the debt. The warrants vested immediately and had an estimated aggregate fair value of $1,830,573 utilizing the Black-Scholes option pricing model with the following assumptions: At Issuance Dividend yield 0.00 % Volatility factor 91.6 - % Risk-free interest rate 2.23 - % Expected term (years) 5.0 Underlying common stock price $ 0.33—0.69 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 5). The Company reviewed the warrants for liability or equity classification under the guidance of ASC 480-10, Distinguishing Liabilities from Equity Derivative Liabilities- Emerald Financing Warrant Liability Derivative Liabilities The following tables summarize the activity of derivative liabilities for the periods indicated: Nine Months Ended September 30, 2019 December 31, 2018, Fair Value of Derivative Liabilities Fair Value of Derivative Liabilities Issued Change in Fair value of Derivative Liabilities Reclassification of Derivatives to Equity September 30, 2019, Fair Value of Derivative Liabilities Emerald Multi Draw Credit Agreement — compound derivative liability (1) $ 219,453 $ 516,058 $ (167,905 ) $ — $ 567,606 Emerald Financing — warrant liability (2) 15,251,413 — (1,895,193 ) — 13,356,220 Series B — warrant liability (3) 487,500 — 38,438 (144,375 ) 381,563 Total derivative liabilities $ 15,958,366 $ 516,058 $ (2,024,660 ) $ (144,375 ) $ 14,305,389 Less, noncurrent portion of derivative liabilities (219,453 ) (567,606 ) Current balance of derivative liabilities $ 15,738,913 $ 13,737,783 Nine Months Ended September 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 September 30, 2018, Fair Value of Derivative Liabilities Emerald Financing — warrant liability (2) $ — $ 10,424,634 $ 192,808 $ — $ 10,617,442 Series B — warrant liability (3) 551,322 — 1,275,669 (1,333,866 ) 493,125 Emerald Convertible Promissory Note — conversion liability (4) 265,000 360,000 185,000 (810,000 ) — Series B Preferred Stock — conversion liability (5) 6,715 — — (6,715 ) — Total derivative liabilities $ 823,037 $ 10,784,634 $ 1,653,477 $ (2,150,581 ) $ 11,110,567 Less, noncurrent portion of derivative liabilities (551,322 ) — Current balance of derivative liabilities $ 271,715 $ 11,110,567 Emerald Multi Draw Credit Agreement Compound Derivative Liability (1) In connection with the advances under the Credit Agreement (See Note 4), the Company bifurcated a compound derivative liability related to a contingent interest feature and acceleration upon default provision (contingent put option) provided to Emerald Health Sciences. The Company’s estimate of fair value of the compound derivative liability was determined by using a differential cash flows valuation model, wherein the fair value of the underlying debt facility and its conversion right are estimated both with and without the presence of the contingent interest feature, holding all other assumptions constant. The resulting difference between the estimated fair values in both scenarios is the estimated fair value of the compound derivative. The fair value of the underlying debt facility is estimated by calculating the expected cash flows with consideration of the estimated probability of a change in control transaction, defined as an event of default by the agreement, and applying the expected default interest rate from the date of such default through maturity. The expected cash flows are then discounted back to the reporting date using a benchmark market yield. The conversion right component of the compound derivative is measured using a standard Black-Scholes model for each payment period. Because Emerald Health Sciences would forgo the contingent interest if the contingent put option was exercised upon an event of default, the value ascribed to the contingent put option within the compound derivative is de minimis. Emerald Financing Warrant Liability (2) 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 if 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 the balance sheet dates using the following assumptions: September 30, 2019 December 31, 2018 At Issuance Dividend yield 0.00 % 0.00 % 0.00 % Volatility factor 81.9—82.1 % 92.1—92.4 % 70.0 % Risk-free interest rate 1.56 % 2.49 % 2.45—2.60 % Expected term (years) 3.31—3.38 4.05—4.13 5.0 Underlying common stock price $ 0.37 $ 0.40 $ 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 Comprehensive Loss for the nine months ended September 30, 2018 as follows: Closing January 2018 February 2018 Total Initial Fair Value of Emerald Financing Warrant Liability $ 4,717,211 $ 5,707,423 $ 10,424,634 Less: Proceeds from Emerald Financing 1,500,000 1,750,000 3,250,000 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 $137,192 were charged to other expense during the nine months ended September 30, 2018. Series B Warrant Liability (3) In conjunction with the Redeemable Convertible Series B Preferred Stock financing, the Company issued the 2015 Series B Financing Warrants originally exercisable at a price of $1.15 per share. 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 Convertible Promissory Note (See Note 4) and again to $0.00 on January 19, 2018, as a result of the Emerald Financing (See Note 5). 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. Subsequent to the repricing that occurred as a result of the Emerald Financing, the warrants have been valued using a Black Scholes Merton Option Pricing Model. The Company reviewed the classification of the warrants as liabilities or equity under the guidance of ASC 480-10, Distinguishing Liabilities from Equity To compute the fair value of the warrants, the Company utilized the following assumptions in the Black Scholes Merton Option Pricing Model for the periods indicated: As of September 30, 2019 As of December 31, 2018 Dividend yield 0.00 % 0.00 % Volatility factor 79.4 % 93.0 % Risk-free interest rate 1.75 % 2.79 % Expected term (years) 0.89 1.64—1.65 Underlying common stock price $ 0.37 $ 0.40 Emerald Convertible Promissory Note Conversion Liability (4) In connection with the Convertible Promissory Note (See Note 4), the Company bifurcated a conversion liability related to an embedded conversion feature with a down-round protection provision. The Company valued the conversion liability pursuant to the accounting guidance of ASC 820-10, Fair Value Measurement January 19, 2018 December 28, 2017 Dividend yield 0.00 % 0.00 % Volatility factor 70.0 % 70.0 % Risk-free interest rate 1.29 % 1.39 % Expected term (years) 0.003 0.25 Underlying common stock price $ 0.19 $ 0.15 The fair values of the conversion liabilities on December 28, 2017 and January 19, 2018 were $265,000 and $360,000, respectively. The change in value related to the conversion liability at December 31, 2017 was deemed immaterial due to no substantial change in the assumptions from issuance until year end. In connection with the Emerald Financing discussed in Note 5 below, the Convertible Promissory Note was converted, and the conversion liability was extinguished with the debt. Series B Preferred Stock Conversion Liability (5) On August 20, 2015, in connection with the Redeemable Convertible 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 Series B Preferred Stock with and without the down round protection. During the first fiscal quarter of 2018, all the remaining Series B Preferred Stock was converted to common stock 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 during the nine months ended September 30, 2018. |
Convertible Debt - Related Part
Convertible Debt - Related Party | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Convertible Debt - Related Party | 4. Convertible Debt - Related Party The Company’s Convertible Debt with Emerald Health Sciences consists of the following: As of September 30, 2019 As of December 31, 2018 Total principal value $ 6,000,000 $ 2,000,000 Unamortized debt discount (2,652,112 ) (587,617 ) Unamortized debt issuance costs (51,639 ) (51,423 ) Carrying value of total convertible debt — related party $ 3,296,249 $ 1,360,960 Less, noncurrent portion (3,296,249 ) (1,360,960 ) Current convertible debt — related party $ — $ — The Company’s interest expense consists of the following: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Interest expense – stated rate $ 107,334 $ — $ 272,611 $ 3,100 Non-cash interest expense: Amortization of debt discount 190,886 — 429,355 34,608 Amortization of transaction costs 3,327 — 9,609 — $ 301,547 $ — $ 711,575 $ 37,708 Multi Draw Credit Agreement On October 5, 2018, the Company entered into the Credit Agreement with Emerald Health Sciences, a related party (See Note 8). The Credit Agreement provides for a credit facility to the Company of up to $20,000,000 and is unsecured. Advances under the Credit Agreement bear interest at an annual rate of 7% (payable quarterly in arrears) and mature on October 5, 2022. At Emerald Health Sciences’ election, advances and unpaid interest may be converted into common stock at a fixed conversion price of $0.40, subject to customary adjustments for stock splits, stock dividends, recapitalizations, etc. As of September The Credit Agreement provides for customary events of default which may result in the acceleration of the maturity of the advances in addition to, but not limited to, cross acceleration to certain other indebtedness of the Company or a change in control. In the case of an event of default arising from specified events of bankruptcy or insolvency or reorganization, all outstanding advances will become due and payable immediately without further action or notice. If any other event of default under the Credit Agreement occurs or is continuing, Emerald Health Sciences may, by written notice, terminate its commitment to make any advances and/or declare all the advances with any other amounts payable due immediately. If any amount under the Credit Agreement is not paid when due, such overdue amount shall bear interest at an annual default interest rate of the applicable rate plus 10%, until such amount is paid in full. In connection with each advance under the Credit Agreement, the Company agreed to issue to Emerald Health Sciences warrants to purchase shares of common stock in an amount equal to 50% of the number of shares of common stock that each advance may be converted into. The warrants have an exercise price of $0.50 per share, a term of five years and are immediately exercisable upon issuance. The exercise price is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events or upon any distributions of assets, including cash, stock or other property to the Company’s stockholders (See Note 3). In accounting for each convertible advance and the warrants issued under the Credit Agreement, the Company allocates the proceeds between the debt host and the freestanding warrants on a relative fair value basis for each advance. On the date of each advance if the effective conversion rate of the debt is less than the market value of the Company’s common stock the Company records a beneficial conversion feature as a discount to the debt and an increase to additional paid in capital. The debt discounts related to the warrants, beneficial conversion features and compound derivatives, if any, are being amortized over the term of the Credit Agreement using the effective interest rate method. Amortization of the debt discount is recognized as non-cash interest expense and the compound derivatives related to the contingent interest feature and acceleration upon default provision are remeasured at fair value in subsequent periods in the Company’s Condensed Consolidated Balance Sheets. On November 1, 2018, the initial advance under Credit Agreement was made for $2,000,000 and the Company issued 2,500,000 warrants (See Note 3). In accounting for the convertible advances and warrants under the Credit Agreement $1,684,920 of the proceeds was allocated to the debt and $315,080 was allocated to equity classified warrants. A beneficial conversion feature of $90,080 and a compound derivative liability of $204,102 were also recorded. During the nine September nine September Aggregate financing costs of $63,007 incurred in connection with the Credit Agreement have been recorded as a discount to the debt host and are being amortized using the effective interest rate method and recognized as non-cash interest expense over the term of the Credit Agreement. As of September September September Secured Convertible Promissory Note On December 28, 2017, the Company entered into a convertible Secured Promissory Note and Security Agreement with Emerald Health Sciences (the “Convertible Promissory Note”). The Convertible Promissory Note provided for aggregate gross proceeds to the Company of up to $900,000 and was secured by all the Company’s assets. Drawdowns on the Convertible Promissory Note were interest bearing at an annual rate of 12% (compounding semi-annually), payable at maturity. The Convertible Promissory Note matured upon the earlier of June 30, 2018 or upon a default event, as defined, and elected by Emerald Health Sciences. At Emerald Health Sciences’ election, drawdowns and unpaid interest were convertible into common stock at a conversion price of $0.10, subject to a full-ratchet antidilution right. The Convertible Promissory Note was automatically converted upon the occurrence of the private placement transaction with Emerald Health Sciences (the Emerald Financing) in January 2018. The Company 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 required. These conditions required receipt of conversion notices from all the existing Series B stockholders to convert their preferred shares to common stock. Such conversions occurred in January and February of 2018. On each financing date, the Company bifurcated a conversion liability from the Convertible Promissory Note related to the embedded conversion feature with a down-round protection provision (See Note 3). This resulted in a conversion liability of $265,000 at the first financing date which was one trading day prior to December 31, 2017. The second funding in January 2018 resulted in an additional conversion liability of $360,000. The conversion liabilities were recorded as a discount to the debt at each draw down date and were being amortized to interest expense. On January 19, 2018, in conjunction with the Emerald Financing (See Note 5), the Convertible Promissory Note was automatically converted into common stock at a conversion price of $0.10 per share for 9,000,000 shares of common stock. Upon conversion, the debt and associated conversion liability were extinguished resulting in a loss on extinguishment of $590,392 which was recorded as other expense for the nine September nine September |
Stockholders' Deficit and Capit
Stockholders' Deficit and Capitalization | 9 Months Ended |
Sep. 30, 2019 | |
Equity [Abstract] | |
Stockholders' Deficit and Capitalization | 5. Stockholders’ Deficit and Capitalization Common Stock On November 14, 2018, the Company amended its articles of incorporation to increase the number of authorized shares of common stock available for issuance to 500,000,000. Emerald Financing On January 19, 2018, the Company entered into a Securities Purchase Agreement pursuant to which the Company sold to Emerald Health Sciences 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 Convertible Promissory Note (See Note 4). As part of the transaction, the Company’s Board members, with the exception of Dr. Brian Murphy, the Company’s CEO/CMO, tendered their resignation and Emerald Health Sciences appointed two new nominees to the 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 Health Sciences 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 the Company issued and sold to Emerald Health Sciences 15,000,000 shares of the Company’s 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 incurred issuance costs of $154,092, of which $137,192 was allocated to the warrant liability and expensed during the period and $16,900 was recorded as a reduction to additional paid in capital from the issuance of common stock. Preferred Stock The Company has 20,000,000 authorized shares of preferred stock, with a par value of $0.001 per share. As of September 30, 2019, there were no shares of preferred stock issued and outstanding. During the nine months ended September 30, 2018, all remaining Preferred Series B, D, and F shares that were previously issued and outstanding were converted to common stock. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | 6. Stock-Based Compensation Stock Incentive Plan On October 31, 2014, after the closing of the Merger, the Board approved the Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”). The 2014 Plan initially reserved 3,200,000 shares for future grants, and in October 2018, the Company increased the share reserve under the 2014 Plan to equal 10% of the number of issued and outstanding shares of common stock of the Company. 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. As of September 30, 2019, the Company had 8,248,381 shares available for future grant under the 2014 Plan. Stock Options The following is a summary of option activities under the Company’s 2014 Plan for the nine months ended September 30, 2019: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Outstanding, December 31, 2018 2,405,000 $ 0.33 8.71 Granted 1,262,642 0.30 — Cancelled (196,875 ) 0.26 — Forfeited (153,125 ) 0.26 — Outstanding, September 30, 2019 3,317,642 $ 0.33 8.59 Exercisable, September 30, 2019 1,807,333 $ 0.43 7.90 During the nine months ended September 30, 2019, no stock options were exercised. The weighted-average fair value of stock options granted during the nine months ended September 30, 2019 was $0.22. No options were granted to non-employees during the three and nine months ended September 30, 2019. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model under the following assumptions: Nine Months Ended September 30, 2019 Dividend yield 0.00 % Risk-free interest rate 1.49 % Expected term (years) 5.65 Volatility 93.72 % Restricted Stock Awards There was no restricted stock award (“RSA”) activity under the Company’s 2014 Plan during the three and nine months ended September 30, 2019. On February 28, 2018, in conjunction with the signing of the K2C separation agreement discussed in Note 8 below, Mr. Lykos’ RSAs 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 nine months ended September 30, 2018 due to a lower fair 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 nine months ended September 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 There was no option activity outside of the 2014 Plan during the three and nine months ended September 30, 2019. 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% vest 1/33 on each of the next 33 months thereafter. Options will fully vest upon a Triggering Event (as defined in the Stock Option Agreement), including a Sale of the Company (as defined in the Stock Option Agreement) or a Merger (as defined in the Stock Option Agreement) that results in change of control. Restricted Stock Awards The following is a summary of RSA activity outside of the Company’s 2014 Plan during the nine months ended September 30, 2019: Number of Shares Weighted Average Grant Date Fair Value Unvested, December 31, 2018 900,000 $ 0.19 Granted — — Released (450,000 ) 0.19 Unvested, September 30, 2019 450,000 $ 0.19 On February 28, 2018, in conjunction with the signing of the K2C separation agreement discussed in Note 8 below, 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 nine months ended September 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 nine months ended September 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 using the straight-line method over the requisite service period. For the three months ended September 30, 2019 and 2018, the Company recognized stock-based compensation expense of $170,106 and $154,508, respectively (including compensation expense for RSAs discussed above), which was recorded as a general and administrative expense in the Condensed Consolidated Statements of Comprehensive Loss. For the nine months ended September 30, 2019 and 2018, the Company recognized stock-based compensation expense of $514,683 and $484,720, respectively (including compensation expense for RSAs discussed above), which was recorded as a general and administrative expense in the Condensed Consolidated Statements of Comprehensive Loss . The total amount of unrecognized compensation cost was $478,442 as of September 30, 2019. This amount will be recognized over a weighted average period of 0.99 years. |
Significant Contracts - Univers
Significant Contracts - University of Mississippi | 9 Months Ended |
Sep. 30, 2019 | |
Significant Contracts [Abstract] | |
Significant Contracts - University of Mississippi | 7. Significant Contracts - University of Mississippi UM 5050 Pro-Drug and UM 8930 Analog Agreements In July 2018, the Company renewed its ocular licenses for UM 5050, related to the pro-drug formulation of tetrahydrocannabinol (“THC”), and UM 8930, related to an analog formulation of cannabidiol (“CBD”). On May 24, 2019, the ocular delivery licenses were replaced by “all fields of use” licenses for both UM 5050 and UM 8930 (collectively, the “License Agreements”). Pursuant to the License Agreements, UM granted the Company an exclusive, perpetual license, including, with the prior written consent of UM, the right to sublicense, to intellectual property related to UM 5050 and UM 8930 for all fields of use. The License Agreements contain certain milestone payments, royalty and sublicensing fees payable by the Company, as defined therein. Each License Agreement provides for an annual maintenance fee of $75,000 payable on the anniversary of the effective date. The upfront payment for UM 5050 is $100,000 and the upfront payment for UM 8930 is $200,000. Additionally, there is also a $200,000 fee due within 30 days upon receipt of the first United States Patent and Trademark Office Notice of Allowance for UM 8930. The milestone payments payable for each license are as follows: i) $100,000 paid within 30 days following the submission of the first Investigational New Drug Application to the Food and Drug Administration or an equivalent application to a regulatory agency anywhere in the world, for a product; ii) $200,000 paid within 30 days following the first submission of an NDA, or an equivalent application to a regulatory agency anywhere in the world, for each product that is administered in a different route of administration from that of the early submitted product(s); and iii) $400,000 paid within 30 days following the approval of an NDA, or an equivalent application to a regulatory agency anywhere in the world, for each product that is administered in a different route of administration from that of the early approved product(s). The royalty percentage due on net sales under each License Agreement is in the mid-single digits. The Company must also pay to UM a portion of all licensing fees received from any sublicensees, subject to a minimum royalty on net sales, and the Company is required to reimburse patent costs incurred by UM related to the licensed products. The royalty obligations apply by country and by licensed product, and end upon the later of the date that no valid claim of a licensed patent covers a licensed product in a given country, or 10 years after the first commercial sale of such licensed product in such country. Each License Agreement continues, unless terminated, until the later of the expiration of the last to expire of the patents or patent applications within the licensed technology or the expiration of the Company’s payment obligations under such License Agreement. UM may terminate each License Agreement, by giving written notice of termination, upon the Company’s material breach of such License Agreement, including failure to make payments or satisfy covenants, representations or warranties without cure, noncompliance, a bankruptcy event, the Company’s dissolution or cessation of operations, the Company’s failure to make reasonable efforts to commercialize at least one product or failure to keep at least one product on the market after the first commercial sale for a continuous period of one year, other than for reasons outside the Company’s control, or the Company’s failure to meet certain pre-established development milestones. The Company may terminate each License Agreement upon 60 days’ written notice to UM. UM 5070 License Agreement In January 2017, the Company entered into a license agreement with UM pursuant to which UM granted us an exclusive, perpetual license, including the right to sublicense, to intellectual property related to a platform of cannabinoid-based molecules (“UM 5070”), 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 Company paid UM an upfront license fee under the license agreement. Under the license agreement, the Company is also responsible for annual maintenance fees that will be credited against royalties in the current fiscal year, contingent milestone payments upon achievement of development and regulatory milestones, and royalties on net sales of licensed products sold for commercial use. The aggregate milestone payments due under the license agreement if all the milestones are achieved is $700,000 and the royalty percentage due on net sales is in the mid-single digits. The Company must also pay to UM a percentage of all licensing fees we receive from any sublicensees, subject to a minimum royalty on net sales by such sublicensees. The Company’s royalty obligations apply on a country by country and licensed product by licensed product basis, and end upon the later of the date that no valid claim of a licensed patent covers a licensed product in a given country, or ten years after first commercial sale of such licensed product in such country. The license agreement continues, unless terminated, until the later of the expiration of the last to expire of the patents or patent applications within the licensed technology or expiration of the Company’s payment obligations under the license. UM may terminate the license agreement, effective with the giving of notice, if: (a) the Company fails to pay any material amount payable to UM under the license agreement and do not cure such failure within 60 days after UM notifies us of such failure, (b) the Company materially breaches any covenant, representation or warranty in the license agreement and do not cure such breach within 60 days after UM notifies the Company of such breach, (c) the Company fails to comply in any material respect with the terms of the license and do not cure such noncompliance within 60 days after UM notifies us of such failure, (d) the Company is subject to a bankruptcy event, (e) the Company dissolves or ceases operations or (f) if after the first commercial sale of a product during the term of the license agreement, the Company materially fails to make reasonable efforts to commercialize at least one product or fail to keep at least one product on the market after the first commercial sale for a continuous period of one year, other than for reasons outside of the Company’s control. The Company may terminate the license agreement upon 60 days’ written notice to UM. |
Related Party Matters
Related Party Matters | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Matters | 8. Related Party Matters K2C, Inc. In June 2014, the Company’s U.S. subsidiary entered into an independent contractor agreement with K2C, Inc. (“K2C”), which is wholly owned by the Company’s former Executive Chairman and Co-Founder, Mr. Cosmas N. Lykos, pursuant to which the Company paid K2C a monthly fee for services performed by Mr. Lykos for the 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. During the nine months ended September 30, 2018, the Company recognized additional stock-based compensation expense of $112,270 for these restricted stock and option awards. For the three and nine months ended September 30, 2018, total expense incurred under this agreement was $-0- and $220,000 (including the previously discussed lump sum payment), respectively. For the three and nine months ended September 30, 2019, no expense was incurred under this agreement. 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 Health Sciences, pursuant to which Emerald Health Sciences agreed to provide such services as are mutually agreed between the Company and Emerald Health Sciences, 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 10 years and specifies compensation which is agreed upon between the Company’s Chief Executive Officer and Emerald Health Sciences’ Chairman, CEO and President 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 accrue at a rate of 12% per annum, calculated semi-annually. Under this agreement, for the three months ended September 30, 2019 and 2018, the Company incurred expenses of $150,000 in each period. For the nine months ended September 30, 2019 and 2018, the Company incurred expenses of $450,000 and $400,000, respectively. On February 6, 2018, the Company entered into a Consulting Agreement with Dr. Avtar Dhillon, the Chairman, Chief Executive Officer and President of Emerald Health Sciences. The services under the Consulting Agreement included corporate finance and strategic business advisory services. The Consulting Agreement had an initial term of one year and was renewable automatically unless terminated by either party. The agreement specified an annual fee of $60,000, payable semi-monthly in installments, and included reimbursement for reasonable expenses incurred in the performance of the services. Under the agreement, Dr. Avtar Dhillon was 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 nine months ended September 30, 2018, the Company incurred $15,000 and $45,000, respectively. The Consulting Agreement was canceled on October 5, 2018 in connection with the Company’s entry into the Credit Agreement with Emerald Health Sciences (See Note 4), and Dr. Avtar Dhillon was appointed as the Executive Chairman of the Company’s Board. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | 9. Subsequent Events There have been no subsequent events since September 30, 2019. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
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 Company’s Audited Consolidated Financial Statements for the fiscal year ended December 31, 2018, 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 nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or any future periods. The Condensed Consolidated Balance sheet as of December 31, 2018 was derived from the Company’s audited financial statements as of December 31, 2018, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2019. The unaudited financial statements included in this Quarterly Report on Form 10-Q 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, 2018, which includes a broader discussion of the Company’s business and the risks inherent therein. Certain reclassifications have been made to prior year amounts to conform to the current period’s presentation. Such reclassifications had no net effect on total assets, total liabilities, total stockholders’ deficit, net losses and cash flows. |
Use of Estimates | Use of Estimates The preparation of the Unaudited 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 income and expense during the reporting period. Actual results could differ from those estimates. The most significant accounting estimates inherent in the preparation of the Company’s 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, derivative liabilities and 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 United States and the Company’s ability to attract new funding. |
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 the Company’s financial instruments, with the exception of the convertible multi draw credit agreement - related party and derivative liabilities, including, cash, prepaid expenses, accounts payable, and other current liabilities approximate their fair value due to the short maturities of these financial instruments. The derivative liabilities were valued on a recurring basis utilizing Level 3 inputs. Advances under the convertible multi draw credit agreement - related party, noncurrent are not recorded at fair value. However, fair value can be approximated and disclosed utilizing Level 3 inputs and independent third-party valuation techniques (See Note 3). At September 30, 2019, the fair value of the advances under the Credit Agreement were estimated at $8,247,319. The carrying amount of the liability at September 30, 2019 was $3,296,249 and is included in Convertible multi draw credit agreement - related party, net of discount in the Company’s balance sheets. |
Convertible Instruments | Convertible Instruments The Company accounts for hybrid contracts with embedded conversion features in accordance with GAAP. ASC 815, Derivatives and Hedging Activities The Company accounts for convertible debt 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 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. |
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 Comprehensive Loss. |
Debt Issuance Costs and Interest | Debt Issuance Costs and Interest Discounts related to bifurcated derivatives, freestanding instruments issued in bundled transactions and issuance costs are recorded as a reduction to the carrying value of the debt and amortized over the life of the debt using the effective interest method. The Company makes changes to the effective interest rate, as necessary, on a prospective basis. For debt facilities that provide for multiple advances, the Company initially defers any issuance costs until the first advance is made and then amortizes the costs over the life of the facility. |
Research and Development Expenses and Licensed Technology | Research and Development Expenses and Licensed Technology Research and development 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 and benefits for the personnel involved in the Company’s preclinical and clinical drug development activities; and facilities expense, depreciation and other allocated expenses; and equipment and laboratory supplies. 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. |
Stock-Based Compensation for Employees | Stock-Based Compensation for Employees 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 using the following assumptions: · Volatility - Stock price volatility is estimated over the expected term based on a blended rate of industry peers and the Company’s actual stock volatility adjusted for periods in which significant financial variability was identified. · 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 the vesting period for each award. · Risk-free rate - The risk-free interest rate for the expected term of the option 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 the Company’s history and expectation of paying no dividends in the foreseeable future. |
Earnings/ Loss Per Share of Common Stock | Earnings/ Loss Per Share of Common Stock The Company applies FASB ASC No. 260, Earnings per Share The computations of basic and diluted net loss per common share are as follows: Three Months Ended September 30, (Unaudited) Nine Months Ended September 30, (Unaudited) 2019 2018 2019 2018 Basic net loss per share: Net loss (as adjusted) $ (4,931,125 ) $ (2,096,349 ) $ (3,800,227 ) $ (12,972,142 ) Weighted average common shares outstanding – basic 133,001,746 131,445,057 132,885,675 117,434,563 Net loss per share - basic $ (0.04 ) $ (0.02 ) $ (0.03 ) $ (0.11 ) Diluted net loss per share: Net loss (as adjusted) $ (4,931,125 ) $ (2,096,349 ) $ (5,656,982 ) $ (12,972,142 ) Weighted average common shares outstanding – diluted 133,001,746 131,445,057 167,690,989 117,434,563 Net loss per share - diluted $ (0.04 ) $ (0.02 ) $ (0.03 ) $ (0.11 ) The following outstanding shares of common stock equivalents were excluded from the computation of diluted earnings per share of common stock for the periods presented because including them would have been antidilutive: As of Three Months Ended September 30 , (Unaudited) As of Nine Months Ended September 30 , (Unaudited) 2019 2018 2019 2018 Stock options 4,512,715 1,850,073 4,512,715 1,850,073 Unvested restricted stock 1,093,501 1,918,501 1,093,501 1,918,501 Common shares underlying convertible debt 15,000,000 — 15,000,000 — Warrants 57,943,250 51,055,750 23,137,935 51,055,750 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In November 2018, the FASB issued ASU No. 2018-08 Collaborative Arrangements Revenue from Contracts with Customers Recently Adopted Accounting Standards 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 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Schedule of basic and diluted net loss per share | Three Months Ended September 30, (Unaudited) Nine Months Ended September 30, (Unaudited) 2019 2018 2019 2018 Basic net loss per share: Net loss (as adjusted) $ (4,931,125 ) $ (2,096,349 ) $ (3,800,227 ) $ (12,972,142 ) Weighted average common shares outstanding – basic 133,001,746 131,445,057 132,885,675 117,434,563 Net loss per share - basic $ (0.04 ) $ (0.02 ) $ (0.03 ) $ (0.11 ) Diluted net loss per share: Net loss (as adjusted) $ (4,931,125 ) $ (2,096,349 ) $ (5,656,982 ) $ (12,972,142 ) Weighted average common shares outstanding – diluted 133,001,746 131,445,057 167,690,989 117,434,563 Net loss per share - diluted $ (0.04 ) $ (0.02 ) $ (0.03 ) $ (0.11 ) |
Schedule of outstanding shares of common stock equivalents were excluded from the computation of diluted earnings per share | As of Three Months Ended September 30 , (Unaudited) As of Nine Months Ended September 30 , (Unaudited) 2019 2018 2019 2018 Stock options 4,512,715 1,850,073 4,512,715 1,850,073 Unvested restricted stock 1,093,501 1,918,501 1,093,501 1,918,501 Common shares underlying convertible debt 15,000,000 — 15,000,000 — Warrants 57,943,250 51,055,750 23,137,935 51,055,750 |
Warrants and Derivative Liabi_2
Warrants and Derivative Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Derivative Liabilities Line Items | |
Schedule of warrants vested and outstanding | Amount Exercise Term Vested 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 Common Stock Warrants to Series B Stockholders $ 0.00 5 1,031,250 2016 Common Stock Warrants to Service Providers $ 1.15 10 40,000 2016 Series C Common Stock Warrants to Placement Agent $ 0.40 5 125,000 2017 Series D Common Stock Warrants to Placement Agent $ 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 Emerald Multi Draw Credit Agreement Warrants $ 0.50 5 7,500,000 Total warrants vested and outstanding as of September 30, 2019 57,943,250 |
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 Initial Fair Value of Emerald Financing Warrant Liability $ 4,717,211 $ 5,707,423 $ 10,424,634 Less: Proceeds from Emerald Financing 1,500,000 1,750,000 3,250,000 Excess over proceeds adjustment $ 3,217,211 $ 3,957,423 $ 7,174,634 |
Schedule of the activity of derivative liabilities | Nine Months Ended September 30, 2019 December 31, 2018, Fair Value of Derivative Liabilities Fair Value of Derivative Liabilities Issued Change in Fair value of Derivative Liabilities Reclassification of Derivatives to Equity September 30, 2019, Fair Value of Derivative Liabilities Emerald Multi Draw Credit Agreement — compound derivative liability (1) $ 219,453 $ 516,058 $ (167,905 ) $ — $ 567,606 Emerald Financing — warrant liability (2) 15,251,413 — (1,895,193 ) — 13,356,220 Series B — warrant liability (3) 487,500 — 38,438 (144,375 ) 381,563 Total derivative liabilities $ 15,958,366 $ 516,058 $ (2,024,660 ) $ (144,375 ) $ 14,305,389 Less, noncurrent portion of derivative liabilities (219,453 ) (567,606 ) Current balance of derivative liabilities $ 15,738,913 $ 13,737,783 Nine Months Ended September 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 September 30, 2018, Fair Value of Derivative Liabilities Emerald Financing — warrant liability (2) $ — $ 10,424,634 $ 192,808 $ — $ 10,617,442 Series B — warrant liability (3) 551,322 — 1,275,669 (1,333,866 ) 493,125 Emerald Convertible Promissory Note — conversion liability (4) 265,000 360,000 185,000 (810,000 ) — Series B Preferred Stock — conversion liability (5) 6,715 — — (6,715 ) — Total derivative liabilities $ 823,037 $ 10,784,634 $ 1,653,477 $ (2,150,581 ) $ 11,110,567 Less, noncurrent portion of derivative liabilities (551,322 ) — Current balance of derivative liabilities $ 271,715 $ 11,110,567 |
Emerald Multi-Draw Credit Agreement Warrants | |
Derivative Liabilities Line Items | |
Schedule of input and valuation technique used to value warrant liabilities | At Issuance Dividend yield 0.00 % Volatility factor 91.6 - % Risk-free interest rate 2.23 - % Expected term (years) 5.0 Underlying common stock price $ 0.33—0.69 |
Emerald Financing Warrant Liability | |
Derivative Liabilities Line Items | |
Schedule of input and valuation technique used to value warrant liabilities | September 30, 2019 December 31, 2018 At Issuance Dividend yield 0.00 % 0.00 % 0.00 % Volatility factor 81.9—82.1 % 92.1—92.4 % 70.0 % Risk-free interest rate 1.56 % 2.49 % 2.45—2.60 % Expected term (years) 3.31—3.38 4.05—4.13 5.0 Underlying common stock price $ 0.37 $ 0.40 $ 0.29—0.30 |
Series B Warrant Liability | |
Derivative Liabilities Line Items | |
Schedule of input and valuation technique used to value warrant liabilities | As of September 30, 2019 As of December 31, 2018 Dividend yield 0.00 % 0.00 % Volatility factor 79.4 % 93.0 % Risk-free interest rate 1.75 % 2.79 % Expected term (years) 0.89 1.64—1.65 Underlying common stock price $ 0.37 $ 0.40 |
Emerald Convertible Promissory Note Conversion Liability | |
Derivative Liabilities Line Items | |
Schedule of input and valuation technique used to value warrant liabilities | January 19, 2018 December 28, 2017 Dividend yield 0.00 % 0.00 % Volatility factor 70.0 % 70.0 % Risk-free interest rate 1.29 % 1.39 % Expected term (years) 0.003 0.25 Underlying common stock price $ 0.19 $ 0.15 |
Convertible Debt - Related Pa_2
Convertible Debt - Related Party (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of convertible debt | As of September 30, 2019 As of December 31, 2018 Total principal value $ 6,000,000 $ 2,000,000 Unamortized debt discount (2,652,112 ) (587,617 ) Unamortized debt issuance costs (51,639 ) (51,423 ) Carrying value of total convertible debt — related party $ 3,296,249 $ 1,360,960 Less, noncurrent portion (3,296,249 ) (1,360,960 ) Current convertible debt — related party $ — $ — |
Schedule of interest expense | Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Interest expense – stated rate $ 107,334 $ — $ 272,611 $ 3,100 Non-cash interest expense: Amortization of debt discount 190,886 — 429,355 34,608 Amortization of transaction costs 3,327 — 9,609 — $ 301,547 $ — $ 711,575 $ 37,708 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of summary of stock option activity | Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Outstanding, December 31, 2018 2,405,000 $ 0.33 8.71 Granted 1,262,642 0.30 — Cancelled (196,875 ) 0.26 — Forfeited (153,125 ) 0.26 — Outstanding, September 30, 2019 3,317,642 $ 0.33 8.59 Exercisable, September 30, 2019 1,807,333 $ 0.43 7.90 |
Schedule of fair value assumptions of stock option granted | Nine Months Ended September 30, 2019 Dividend yield 0.00 % Risk-free interest rate 1.49 % Expected term (years) 5.65 Volatility 93.72 % |
Schedule of RSA activity | Number of Shares Weighted Average Grant Date Fair Value Unvested, December 31, 2018 900,000 $ 0.19 Granted — — Released (450,000 ) 0.19 Unvested, September 30, 2019 450,000 $ 0.19 |
Nature of Operations and Busi_2
Nature of Operations and Business Activities (Detail Textuals) - USD ($) | 9 Months Ended | ||||||||
Sep. 30, 2019 | Sep. 30, 2018 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Oct. 05, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | |
Nature Of Operations And Business Activities [Line Items] | |||||||||
Accumulated deficit | $ (37,025,334) | $ (33,225,107) | |||||||
Stockholders' deficit | (16,402,461) | $ (10,155,120) | $ (11,641,442) | $ (27,864,191) | (15,562,252) | $ (8,245,279) | $ (5,753,979) | $ (3,569,506) | |
Working capital deficit | (12,540,955) | ||||||||
Cash and cash equivalents | 1,319,360 | $ 1,853,373 | |||||||
Proceeds from convertible multi-draw credit agreement | 3,990,699 | ||||||||
Cash used in operating activities | $ (4,524,712) | $ (2,928,857) | |||||||
Emerald Financing | Multi-Draw Credit Agreement | |||||||||
Nature Of Operations And Business Activities [Line Items] | |||||||||
Maximum borrowing capacity | $ 20,000,000 | ||||||||
Principal amounts of borrowing capacity | $ 250,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Basic net loss per share: | ||||||||
Net loss (as adjusted) | $ (4,931,125) | $ 15,905,290 | $ (14,774,392) | $ (2,096,349) | $ (2,662,000) | $ (8,213,793) | $ (3,800,227) | $ (12,972,142) |
Weighted average common shares outstanding - basic | 133,001,746 | 131,445,057 | 132,885,675 | 117,434,563 | ||||
Net loss per share - basic | $ (0.04) | $ (0.02) | $ (0.03) | $ (0.11) | ||||
Diluted net loss per share: | ||||||||
Net loss (as adjusted) | $ (4,931,125) | $ (2,096,349) | $ (12,972,142) | |||||
Weighted average common shares outstanding - diluted | 133,001,746 | 131,445,057 | 167,690,989 | 117,434,563 | ||||
Net loss per share - diluted | $ (0.04) | $ (0.02) | $ (0.03) | $ (0.11) |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details 1) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Warrants | ||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | ||||
Anti-dilutive excluded from the calculation of diluted loss per common share | 57,943,250 | 51,055,750 | 23,137,935 | 51,055,750 |
Common shares underlying convertible debt | ||||
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 | 15,000,000 | 0 | 15,000,000 | 0 |
Stock options | ||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | ||||
Anti-dilutive excluded from the calculation of diluted loss per common share | 4,512,715 | 1,850,073 | 4,512,715 | 1,850,073 |
Unvested 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 | 1,093,501 | 1,918,501 | 1,093,501 | 1,918,501 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies (Detail Textuals) | Sep. 30, 2019USD ($) |
Accounting Policies [Abstract] | |
Fair value of advance under credit agreement | $ 8,247,319 |
Carrying value of total convertible debt - related party | $ 3,296,249 |
Warrants and Derivative Liabi_3
Warrants and Derivative Liabilities (Details) | 9 Months Ended |
Sep. 30, 2019$ / sharesshares | |
Class of Warrant or Right [Line Items] | |
Amount Vested and Outstanding | shares | 57,943,250 |
Pre 2015 Common Stock Warrants | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 1 |
Amount Vested and Outstanding | shares | 4,000,000 |
Pre 2015 Common Stock Warrants | Minimum | |
Class of Warrant or Right [Line Items] | |
Term (Years) | 6 years |
Pre 2015 Common Stock Warrants | Maximum | |
Class of Warrant or Right [Line Items] | |
Term (Years) | 10 years |
2015 Common Stock Warrants | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 1.15 |
Amount Vested and Outstanding | shares | 442,000 |
2015 Common Stock Warrants | Minimum | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 1.15 |
Term (Years) | 5 years |
2015 Common Stock Warrants | Maximum | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 5 |
Term (Years) | 10 years |
Common Stock Warrants to Series B Stockholders | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 0 |
Term (Years) | 5 years |
Amount Vested and Outstanding | shares | 1,031,250 |
2016 Common Stock Warrants to Service Providers | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 1.15 |
Term (Years) | 10 years |
Amount Vested and Outstanding | shares | 40,000 |
2016 Series C Common Stock Warrants to Placement Agent | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 0.40 |
Term (Years) | 5 years |
Amount Vested and Outstanding | shares | 125,000 |
2017 Series D Common Stock Warrants to Placement Agent | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 0.25 |
Term (Years) | 5 years |
Amount Vested and Outstanding | shares | 480,000 |
2017 Common Stock Warrants to Service Provider | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 0.41 |
Term (Years) | 5 years |
Amount Vested and Outstanding | shares | 125,000 |
2018 Emerald Financing Warrants | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 0.10 |
Term (Years) | 5 years |
Amount Vested and Outstanding | shares | 44,200,000 |
Emerald Multi-Draw Credit Agreement Warrants | |
Class of Warrant or Right [Line Items] | |
Exercise Price | $ 0.50 |
Term (Years) | 5 years |
Amount Vested and Outstanding | shares | 7,500,000 |
Warrants and Derivative Liabi_4
Warrants and Derivative Liabilities (Details 1) - Pricing Model - Emerald Multi-Draw Credit Agreement Warrants | Sep. 30, 2019$ / shares |
Minimum | |
Class of Warrant or Right [Line Items] | |
Underlying common stock price | $ 0.33 |
Maximum | |
Class of Warrant or Right [Line Items] | |
Underlying common stock price | $ 0.69 |
Dividend yield | |
Class of Warrant or Right [Line Items] | |
Warrants and rights outstanding measurement input | 0 |
Volatility factor | Minimum | |
Class of Warrant or Right [Line Items] | |
Warrants and rights outstanding measurement input | 0.916 |
Volatility factor | Maximum | |
Class of Warrant or Right [Line Items] | |
Warrants and rights outstanding measurement input | 0.921 |
Risk-free interest rate | Minimum | |
Class of Warrant or Right [Line Items] | |
Warrants and rights outstanding measurement input | 0.0223 |
Risk-free interest rate | Maximum | |
Class of Warrant or Right [Line Items] | |
Warrants and rights outstanding measurement input | 0.0251 |
Expected term (years) | |
Class of Warrant or Right [Line Items] | |
Expected Term | 5 years |
Warrants and Derivative Liabi_5
Warrants and Derivative Liabilities (Details 2) - USD ($) | 1 Months Ended | 9 Months Ended | ||||
Feb. 16, 2018 | Jan. 19, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Fair Value Of Derivative Liabilities [Roll Forward] | ||||||
Fair Value of Derivative Liabilities | $ 823,037 | $ 15,958,366 | $ 823,037 | |||
Fair Value of Derivative Liabilities Issued | 516,058 | 10,784,634 | ||||
Change in Fair value of Derivative Liabilities | (2,024,660) | 1,653,477 | ||||
Reclassification of Derivatives to Equity | (144,375) | (2,150,581) | ||||
Fair Value of Derivative Liabilities | 14,305,389 | 11,110,567 | ||||
Less, noncurrent portion of derivative liabilities | (567,606) | 0 | $ (219,453) | $ (551,322) | ||
Current balance of derivative liabilities | 13,737,783 | 11,110,567 | $ 15,738,913 | $ 271,715 | ||
Series B Preferred Stock - conversion liability | ||||||
Fair Value Of Derivative Liabilities [Roll Forward] | ||||||
Fair Value of Derivative Liabilities | 6,715 | 6,715 | ||||
Fair Value of Derivative Liabilities Issued | 0 | |||||
Reclassification of Derivatives to Equity | (6,715) | |||||
Fair Value of Derivative Liabilities | 0 | |||||
Emerald Multi-Draw Credit Agreement - compound derivative liability | ||||||
Fair Value Of Derivative Liabilities [Roll Forward] | ||||||
Fair Value of Derivative Liabilities | 219,453 | |||||
Fair Value of Derivative Liabilities Issued | 516,058 | |||||
Change in Fair value of Derivative Liabilities | (167,905) | |||||
Reclassification of Derivatives to Equity | 0 | |||||
Fair Value of Derivative Liabilities | 567,606 | |||||
Series B Warrant Liability | ||||||
Fair Value Of Derivative Liabilities [Roll Forward] | ||||||
Fair Value of Derivative Liabilities | 551,322 | 487,500 | 551,322 | |||
Fair Value of Derivative Liabilities Issued | 0 | 0 | ||||
Change in Fair value of Derivative Liabilities | 38,438 | 1,275,669 | ||||
Reclassification of Derivatives to Equity | (144,375) | (1,333,866) | ||||
Fair Value of Derivative Liabilities | 381,563 | 493,125 | ||||
Emerald Convertible Promissory Note - conversion liability | ||||||
Fair Value Of Derivative Liabilities [Roll Forward] | ||||||
Fair Value of Derivative Liabilities | 265,000 | 265,000 | ||||
Fair Value of Derivative Liabilities Issued | 360,000 | |||||
Change in Fair value of Derivative Liabilities | 185,000 | |||||
Reclassification of Derivatives to Equity | (810,000) | |||||
Fair Value of Derivative Liabilities | 0 | |||||
Emerald Financing - Warrant Liability | ||||||
Fair Value Of Derivative Liabilities [Roll Forward] | ||||||
Fair Value of Derivative Liabilities | 0 | 15,251,413 | 0 | |||
Fair Value of Derivative Liabilities Issued | $ 5,707,423 | $ 4,717,211 | 0 | 10,424,634 | ||
Change in Fair value of Derivative Liabilities | (1,895,193) | 192,808 | ||||
Reclassification of Derivatives to Equity | 0 | 0 | ||||
Fair Value of Derivative Liabilities | $ 13,356,220 | $ 10,617,442 |
Warrants and Derivative Liabi_6
Warrants and Derivative Liabilities (Details 3) - Monte Carlo simulations - Emerald Financing | Sep. 30, 2019$ / shares | Dec. 31, 2018$ / shares | Feb. 16, 2018$ / shares | Jan. 19, 2018$ / shares |
Class of Warrant or Right [Line Items] | ||||
Underlying common stock price | $ 0.37 | $ 0.40 | ||
Minimum | ||||
Class of Warrant or Right [Line Items] | ||||
Underlying common stock price | $ 0.29 | $ 0.29 | ||
Maximum | ||||
Class of Warrant or Right [Line Items] | ||||
Underlying common stock price | $ 0.30 | $ 0.30 | ||
Dividend yield | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 0 | 0 | 0 | 0 |
Volatility factor | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 0.700 | 0.700 | ||
Volatility factor | Minimum | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 0.819 | 0.921 | ||
Volatility factor | Maximum | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 0.821 | 0.924 | ||
Risk-free interest rate | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 0.0156 | 0.0249 | ||
Risk-free interest rate | Minimum | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 0.0245 | 0.0245 | ||
Risk-free interest rate | Maximum | ||||
Class of Warrant or Right [Line Items] | ||||
Warrants and rights outstanding measurement input | 0.0260 | 0.0260 | ||
Expected term (years) | ||||
Class of Warrant or Right [Line Items] | ||||
Expected Term | 5 years | 5 years | ||
Expected term (years) | Minimum | ||||
Class of Warrant or Right [Line Items] | ||||
Expected Term | 3 years 3 months 21 days | 4 years 18 days | ||
Expected term (years) | Maximum | ||||
Class of Warrant or Right [Line Items] | ||||
Expected Term | 3 years 4 months 17 days | 4 years 1 month 17 days |
Warrants and Derivative Liabi_7
Warrants and Derivative Liabilities (Details 4) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Feb. 16, 2018 | Jan. 19, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Derivative Liabilities Line Items | ||||
Initial Fair Value of Emerald Financing Warrant Liability | $ 516,058 | $ 10,784,634 | ||
Less: Proceeds from Emerald Financing | (3,233,099) | |||
Emerald Financing - Warrant Liability | ||||
Derivative Liabilities Line Items | ||||
Initial Fair Value of Emerald Financing Warrant Liability | $ 5,707,423 | $ 4,717,211 | $ 0 | 10,424,634 |
Less: Proceeds from Emerald Financing | 1,750,000 | 1,500,000 | 3,250,000 | |
Excess over proceeds adjustment | $ 3,957,423 | $ 3,217,211 | $ 7,174,634 |
Warrants and Derivative Liabi_8
Warrants and Derivative Liabilities (Details 5) - Pricing Model - Series B warrant | Sep. 30, 2019$ / shares | Dec. 31, 2018$ / shares |
Class of Warrant or Right [Line Items] | ||
Underlying common stock price | $ 0.37 | $ 0.40 |
Dividend yield | ||
Class of Warrant or Right [Line Items] | ||
Warrants and rights outstanding measurement input | 0 | 0 |
Volatility factor | ||
Class of Warrant or Right [Line Items] | ||
Warrants and rights outstanding measurement input | 0.794 | 0.930 |
Risk-free interest rate | ||
Class of Warrant or Right [Line Items] | ||
Warrants and rights outstanding measurement input | 0.0175 | 0.0279 |
Expected term (years) | ||
Class of Warrant or Right [Line Items] | ||
Expected Term | 10 months 20 days | |
Expected term (years) | Minimum | ||
Class of Warrant or Right [Line Items] | ||
Expected Term | 1 year 7 months 20 days | |
Expected term (years) | Maximum | ||
Class of Warrant or Right [Line Items] | ||
Expected Term | 1 year 7 months 24 days |
Warrants and Derivative Liabi_9
Warrants and Derivative Liabilities (Details 6) - Pricing Model - Emerald Convertible Promissory Note - conversion liability | Jan. 19, 2018$ / shares | Dec. 28, 2017$ / shares |
Class of Warrant or Right [Line Items] | ||
Underlying common stock price | $ 0.19 | $ 0.15 |
Dividend yield | ||
Class of Warrant or Right [Line Items] | ||
Warrants and rights outstanding measurement input | 0 | 0 |
Volatility factor | ||
Class of Warrant or Right [Line Items] | ||
Warrants and rights outstanding measurement input | 0.700 | 0.700 |
Risk-free interest rate | ||
Class of Warrant or Right [Line Items] | ||
Warrants and rights outstanding measurement input | 0.0129 | 0.0139 |
Expected term (years) | ||
Class of Warrant or Right [Line Items] | ||
Expected Term | 1 day | 3 months |
Warrants and Derivative Liab_10
Warrants and Derivative Liabilities (Detail Textuals) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Feb. 16, 2018 | Jan. 19, 2018 | Mar. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Class of Warrant or Right [Line Items] | |||||
Warrants issued in connection with convertible multi draw credit agreement related party value | $ 716,110 | ||||
Warrant vested aggregate fair value utilizing the Black-Scholes option pricing model | $ (2,024,660) | $ 1,653,477 | |||
Issuance costs related to warrant liability | $ 137,192 | ||||
Warrant | Emerald Health Sciences Inc | |||||
Class of Warrant or Right [Line Items] | |||||
Number of warrants issued | 3,400,000 | 40,800,000 | 5,000,000 | ||
Total number of warrants issued | 44,200,000 | 44,200,000 | |||
Warrant exercise price | $ 0.10 | $ 0.10 | |||
Term of warrant | 5 years | 5 years | |||
Warrants issued in connection with convertible multi draw credit agreement related party value | $ 716,110 | ||||
Warrant vested aggregate fair value utilizing the Black-Scholes option pricing model | $ 1,830,573 | ||||
Emerald Warrant Liabilities | |||||
Class of Warrant or Right [Line Items] | |||||
Value of common stock called by warrants | $ 5,700,000 | $ 4,700,000 |
Warrants and Derivative Liab_11
Warrants and Derivative Liabilities (Detail Textuals 1) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Jan. 19, 2018 | Dec. 28, 2017 | Sep. 30, 2019 | Sep. 30, 2018 | |
Series B conversion liability | ||||
Class of Warrant or Right [Line Items] | ||||
Provision for conversion of Series B preferred stock | $ 6,715 | |||
Emerald Convertible Promissory Note - conversion liability | ||||
Class of Warrant or Right [Line Items] | ||||
Change in fair value of warrant liability | $ 360,000 | $ 265,000 | ||
Series B Warrants | ||||
Class of Warrant or Right [Line Items] | ||||
Warrant exercise price | $ 0.10 | |||
Proceeds from financing between conversion liability and warrants | $ 5,000,000 | |||
Series B Warrants | Bridge Loan | Secured promissory note and security agreement | ||||
Class of Warrant or Right [Line Items] | ||||
Initial conversion price | $ 0 | |||
2015 Common Stock Warrants | ||||
Class of Warrant or Right [Line Items] | ||||
Warrant exercise price | $ 1.15 | |||
2015 Common Stock Warrants | Minimum | ||||
Class of Warrant or Right [Line Items] | ||||
Warrant exercise price | $ 1.15 |
Convertible Debt - Related Pa_3
Convertible Debt - Related Party (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Short-term Debt [Line Items] | ||
Less, noncurrent portion | $ (3,296,249) | $ (1,360,960) |
Convertible debt | Emerald Health Sciences Inc | ||
Short-term Debt [Line Items] | ||
Total principal value | 6,000,000 | 2,000,000 |
Unamortized debt discount | (2,652,112) | (587,617) |
Unamortized debt issuance costs | (51,639) | (51,423) |
Carrying value of total convertible debt - related party | 3,296,249 | 1,360,960 |
Less, noncurrent portion | (3,296,249) | (1,360,960) |
Current convertible debt - related party | $ 0 | $ 0 |
Convertible Debt - Related Pa_4
Convertible Debt - Related Party (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Debt Disclosure [Abstract] | ||||
Interest expense - stated rate | $ 107,334 | $ 0 | $ 272,611 | $ 3,100 |
Non-cash interest expense: | ||||
Amortization of debt discount | 190,886 | 0 | 429,355 | 34,608 |
Amortization of transaction costs | 3,327 | 0 | 9,609 | 0 |
Interest Expense | $ 301,547 | $ 0 | $ 711,575 | $ 37,708 |
Convertible Debt - Related Pa_5
Convertible Debt - Related Party (Detail Textuals) - USD ($) | Nov. 01, 2018 | Oct. 05, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Debt Instrument [Line Items] | ||||||
Derivative liability | $ 14,305,389 | $ 11,110,567 | $ 15,958,366 | $ 823,037 | ||
Fair value of derivative liabilities in excess of proceeds | 322,644 | 7,174,634 | ||||
Multi-Draw Credit Agreement | ||||||
Debt Instrument [Line Items] | ||||||
Warrants | $ 2,000,000 | 2,000,000 | ||||
Aggregate Principal Amount | $ 4,000,000 | |||||
Number of warrant issued | 2,500,000 | 5,000,000 | ||||
Allocation of debt on the basis of relative fair value | $ 1,684,920 | $ 3,283,890 | ||||
Allocation of warrant on the basis of relative fair value | 315,080 | 716,110 | ||||
Beneficial conversion feature | 90,080 | 1,584,850 | ||||
Derivative liability | $ 204,102 | 516,058 | ||||
Convertible multi-draw credit agreement issuance costs | $ 63,007 | |||||
Unamortized debt discount period | 3 years 7 days | |||||
Carrying value of the equity component | $ 5,550,000 | |||||
Emerald Financing | ||||||
Debt Instrument [Line Items] | ||||||
Derivative liability | 13,356,220 | $ 10,617,442 | $ 15,251,413 | $ 0 | ||
Emerald Financing | Multi-Draw Credit Agreement | ||||||
Debt Instrument [Line Items] | ||||||
Maximum amount that can be borrowed over the life of the credit facility | $ 20,000,000 | |||||
The annual stated interest rate on the debt instrument | 7.00% | |||||
Maturity date | Oct. 5, 2022 | |||||
Conversion price | $ 0.40 | |||||
Unused portion of the credit facility | $ 14,000,000 | |||||
Warrant coverage on the debt facility | 50.00% | |||||
Warrant exercise price | $ 0.50 |
Convertible Debt - Related Pa_6
Convertible Debt - Related Party (Detail Textuals 1) | 1 Months Ended | 9 Months Ended | ||
Jan. 19, 2018$ / sharesshares | Dec. 28, 2017USD ($)Day$ / shares | Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | |
Short-term Debt [Line Items] | ||||
Proceeds from secured convertible promissory note - related party | $ 400,000 | |||
Funding of remaining bridge loan | $ 9,301 | |||
Loss on extinguishment of secured convertible promissory note - related party | $ (590,392) | |||
Emerald Health Sciences Inc | ||||
Short-term Debt [Line Items] | ||||
Initial conversion price | $ / shares | $ 0.10 | |||
Number of notes converted into common stock | shares | 9,000,000 | |||
Effective interest rate | 13.94% | |||
Bridge Loan | Secured promissory note and security agreement | Emerald Health Sciences Inc | ||||
Short-term Debt [Line Items] | ||||
Aggregate gross proceeds | $ 900,000 | |||
Bridge loan interest rate | 12.00% | |||
Initial conversion price | $ / shares | $ 0.10 | |||
Proceeds from secured convertible promissory note - related party | $ 500,000 | |||
Funding of remaining bridge loan | 400,000 | |||
Convertible debt | $ 265,000 | |||
Number of trading days as of financing close date | Day | 1 | |||
Additional conversion liability | $ 360,000 |
Stockholders' Deficit and Cap_2
Stockholders' Deficit and Capitalization (Detail Textuals) - USD ($) | 1 Months Ended | 9 Months Ended | |||
Feb. 16, 2018 | Jan. 19, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Equity [Line Items] | |||||
Common stock, shares authorized | 500,000,000 | 500,000,000 | |||
Proceeds from Common stock issuance, net of $16,901 issuance costs | $ 3,233,099 | ||||
Convertible preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |||
Emerald financing issuance costs | $ 154,092 | ||||
Warrant liability, issuance costs | 137,192 | ||||
Reduction to APIC from the issuance of common stock | $ 16,900 | ||||
Preferred stock, shares authorized | 20,000,000 | 20,000,000 | |||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | |||
Emerald Health Sciences Inc | |||||
Equity [Line Items] | |||||
Conversion price, per share (in dollars per share) | $ 0.10 | ||||
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 | |||
Proceeds from Common stock issuance, net of $16,901 issuance costs | $ 1,500,000 | ||||
Term of warrants | 5 years | ||||
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 | ||||
Proceeds from Common stock issuance, net of $16,901 issuance costs | $ 1,750,000 | ||||
Term of warrants | 5 years | ||||
Securities purchase agreement | Emerald Health Sciences Inc | Promissory Note | |||||
Equity [Line Items] | |||||
Maximum aggregate gross proceeds | $ 900,000 | ||||
Conversion price, per share (in dollars per share) | $ 0.10 | ||||
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 Health Sciences shall be issued additional shares in order to protect against anti-dilution. | ||||
Bridge Loan | $ 900,000 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - Omnibus Incentive Plan 2014 - Stock Option - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Number of Shares | ||
Balance, December 31, 2018 | 2,405,000 | |
Granted | 1,262,642 | |
Cancelled | (196,875) | |
Forfeited | (153,125) | |
Balance, September 30, 2019 | 3,317,642 | 2,405,000 |
Exercisable, September 30, 2019 | 1,807,333 | |
Weighted Average Exercise Price | ||
Balance, December 31, 2018 | $ 0.33 | |
Granted | 0.30 | |
Cancelled | 0.26 | |
Forfeited | 0.26 | |
Balance, September 30, 2019 | 0.33 | $ 0.33 |
Exercisable, September 30, 2019 | $ 0.43 | |
Weighted Average Remaining Contractual Term (Years) | 8 years 7 months 2 days | 8 years 8 months 15 days |
Weighted Average Remaining Contractual Term (Years), Exercisable | 7 years 10 months 24 days |
Stock-Based Compensation (Det_2
Stock-Based Compensation (Details 1) - Stock Option | 9 Months Ended |
Sep. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Dividend yield | 0.00% |
Risk-free interest rate | 1.49% |
Expected term (years) | 5 years 7 months 24 days |
Volatility | 93.72% |
Stock-Based Compensation (Det_3
Stock-Based Compensation (Details 2) - Restricted stock awards | 9 Months Ended |
Sep. 30, 2019$ / sharesshares | |
Number of Shares | |
Unvested, December 31, 2018 | shares | 900,000 |
Granted | shares | 0 |
Released | shares | (450,000) |
Unvested, March 31, 2019 | shares | 450,000 |
Weighted Average Grant Date Fair Value | |
Unvested, December 31, 2018 | $ / shares | $ 0.19 |
Granted | $ / shares | 0 |
Released | $ / shares | 0.19 |
Unvested, March 31, 2019 | $ / shares | $ 0.19 |
Stock-Based Compensation (Det_4
Stock-Based Compensation (Detail Textuals) - USD ($) | 1 Months Ended | 9 Months Ended | |||
May 25, 2018 | Feb. 28, 2018 | Oct. 31, 2014 | Sep. 30, 2019 | Sep. 30, 2018 | |
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 | ||||
Separation and release agreement | K2C, Inc. | Immediate vesting | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of restricted common stock vested | 900,000 | ||||
Stock compensation expenses | 216,000 | ||||
Restricted stock awards | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of restricted common stock granted | 0 | ||||
Number of restricted common stock vested | 450,000 | ||||
Omnibus Incentive Plan 2014 | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of shares reserved for future grants | 8,248,381 | ||||
Omnibus Incentive Plan 2014 | Stock Option | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of shares reserved for future grants | 3,200,000 | ||||
Weighted-average fair value of stock options granted | $ 0.22 | ||||
Percentage of share reserve of the number of issued and outstanding shares | 10.00% | ||||
Granted | 1,262,642 | ||||
Exercise Price | $ 0.30 | ||||
Douglas Cesario, CFO | Restricted Stock Agreements | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Granted | 1,195,073 | ||||
Exercise Price | $ 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% vest 1/33 on each of the next 33 months thereafter. | ||||
Elizabeth Berecz, CFO | Restricted Stock Agreements | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of shares reserved for future grants | 350,000 | ||||
Stock compensation expenses | 97,183 | ||||
Elizabeth Berecz, CFO | Restricted stock awards | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of restricted common stock granted | 700,000 | ||||
Stock compensation expenses | $ 184,800 |
Stock-Based Compensation (Det_5
Stock-Based Compensation (Detail Textuals 1) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Share-based Payment Arrangement [Abstract] | ||||
Share-based Payment Arrangement, Noncash Expense | $ 170,106 | $ 154,508 | $ 514,683 | $ 484,720 |
Total amount of unrecognized compensation cost related to non-vested stock options | $ 478,442 | $ 478,442 | ||
Recognized weighted average period | 11 months 26 days |
Significant Contracts - Unive_2
Significant Contracts - University of Mississippi (Detail Textuals) - USD ($) | Jan. 10, 2017 | Jul. 31, 2018 | Sep. 30, 2019 |
University Of Mississippi Agreements [Line Items] | |||
Annual maintenance fee payable | $ 75,000 | ||
UM 5050 pro-drug agreements | University of Mississippi | Intellectual Property | |||
University Of Mississippi Agreements [Line Items] | |||
Payment for upfront fees | $ 100,000 | ||
UM 8930 analogue agreements | University of Mississippi | Intellectual Property | |||
University Of Mississippi Agreements [Line Items] | |||
Payment for upfront fees | 200,000 | ||
Annual fees for license agreement | $ 200,000 | ||
UM 5070 license agreement | University of Mississippi | Intellectual Property | |||
University Of Mississippi Agreements [Line Items] | |||
Term of agreement | 1 year | ||
Notice period for termination | 60 days | ||
Aggregate milestone payments if milestones achieved | $ 700,000 | ||
Um 5050 Pro-Drug And Um 8930 Analog Agreements | University of Mississippi | Intellectual Property | Milestone 1 | |||
University Of Mississippi Agreements [Line Items] | |||
Term of agreement | 30 days | ||
Aggregate milestone payments if milestones achieved | $ 100,000 | ||
Um 5050 Pro-Drug And Um 8930 Analog Agreements | University of Mississippi | Intellectual Property | Milestone 2 | |||
University Of Mississippi Agreements [Line Items] | |||
Term of agreement | 30 days | ||
Aggregate milestone payments if milestones achieved | $ 200,000 | ||
Um 5050 Pro-Drug And Um 8930 Analog Agreements | University of Mississippi | Intellectual Property | Milestone 3 | |||
University Of Mississippi Agreements [Line Items] | |||
Term of agreement | 30 days | ||
Aggregate milestone payments if milestones achieved | $ 400,000 |
Related Party Matters (Detail T
Related Party Matters (Detail Textuals) - USD ($) | Feb. 06, 2018 | Apr. 01, 2017 | Feb. 28, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 |
Related Party Transaction [Line Items] | |||||||
Monthly fee | $ 10,000 | $ 20,000 | |||||
Total expense incurred under agreement | $ 0 | $ 220,000 | |||||
Independent contractor agreement | Emerald Health Sciences Inc | |||||||
Related Party Transaction [Line Items] | |||||||
Initial term of agreement | 10 years | ||||||
Percentage of accrued interest on outstanding balance | 12.00% | ||||||
Total expense incurred under agreement | $ 150,000 | 150,000 | $ 450,000 | 400,000 | |||
Separation and release agreement | K2C, Inc. | |||||||
Related Party Transaction [Line Items] | |||||||
Lump sum payment in agreement | $ 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] | |||||||
Initial term of agreement | 1 year | ||||||
Annual fee | $ 60,000 | ||||||
Total expense incurred under agreement | $ 15,000 | $ 45,000 | |||||
Period of discretionary annual bonus payable to contractor after each fiscal year end | 120 days |