Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 15, 2018 | Jun. 30, 2017 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Nemus Bioscience, Inc. | ||
Entity Central Index Key | 1,516,551 | ||
Trading Symbol | nmus | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Common Stock, Shares Outstanding | 100,079,079 | ||
Entity Public Float | $ 16,886,577 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 259,955 | $ 64,820 |
Restricted cash | 4,428 | 37,500 |
Prepaid expenses | 291,428 | 170,155 |
Other current assets | 7,014 | |
Total current assets | 555,811 | 279,489 |
Property and equipment, net | 1,407 | 9,584 |
Other assets | ||
Deposits and other assets | 34,290 | |
Total other assets | 34,290 | |
Total assets | 557,218 | 323,363 |
Current liabilities | ||
Accounts payable | 100,921 | 274,650 |
Accrued payroll and related expenses | 54,512 | 167,337 |
Accrued expenses | 143,826 | 98,700 |
Provision for conversion of Series B preferred stock | 6,715 | 118,821 |
Convertible debt, net of discount | 235,000 | |
Provision for conversion of convertible debt | 265,000 | |
Deferred rent | 2,450 | |
Total current liabilities | 805,974 | 661,958 |
Noncurrent liabilities | ||
Series B warrants | 551,322 | 1,112,308 |
Total noncurrent liabilities | 551,322 | 1,112,308 |
Total liabilities | 1,357,296 | 1,774,266 |
Commitments and contingencies (Note 3) | ||
Stockholders' deficit | ||
Common stock, $0.001 par value; 236 million shares authorized; 33,622,829 issued and outstanding as of December 31, 2017 and 21,563,163 issued and outstanding as of December 31, 2016 | 33,623 | 21,563 |
Additional paid-in-capital | 9,444,831 | 7,163,064 |
Warrants | 982,911 | 837,711 |
Accumulated deficit | (14,030,871) | (10,936,573) |
Total stockholders' deficit | (3,569,506) | (2,914,235) |
Total liabilities and stockholders' deficit | 557,218 | 323,363 |
Redeemable Convertible Series B Preferred Stock | ||
Noncurrent liabilities | ||
Redeemable Convertible Preferred Stock, value | 822,201 | 1,169,663 |
Convertible Series C Preferred Stock | ||
Noncurrent liabilities | ||
Redeemable Convertible Preferred Stock, value | 293,669 | |
Convertible Series D Preferred Stock | ||
Noncurrent liabilities | ||
Redeemable Convertible Preferred Stock, value | 169,446 | |
Redeemable Convertible Series F Preferred Stock | ||
Noncurrent liabilities | ||
Redeemable Convertible Preferred Stock, value | $ 1,777,781 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 236,000,000 | 236,000,000 |
Common stock, shares issued | 33,622,829 | 21,563,163 |
Common stock, shares outstanding | 33,622,829 | 21,563,163 |
Redeemable Convertible Series B Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 2,833.55 | 4,031 |
Preferred stock, shares outstanding | 2,833.55 | 4,031 |
Issuance costs | $ 347,091 | |
Liquidation preference value | $ 2,800,000 | |
Convertible Series C Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 0 | 386 |
Preferred stock, shares outstanding | 0 | 386 |
Convertible Series D Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 200 | |
Preferred stock, shares outstanding | 200 | |
Issuance costs | $ 30,557 | |
Liquidation preference value | $ 200,000 | |
Redeemable Convertible Series F Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 2,000 | |
Preferred stock, shares outstanding | 2,000 | |
Issuance costs | $ 118,855 | |
Liquidation preference value | $ 2,000,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Operating expenses | ||
Research and development | $ 311,302 | $ 939,040 |
General and administrative | 3,547,927 | 3,531,540 |
Total operating expenses | 3,859,229 | 4,470,580 |
Operating loss | (3,859,229) | (4,470,580) |
Interest expense | 667 | |
Other expense (income) | ||
Change in fair value of warrant liability | (560,986) | (1,342,651) |
Change in fair value of conversion rights of Series B preferred stock | (102,848) | 48,564 |
Change in fair value of put option value of Series F preferred stock | (103,364) | |
Net Loss before income taxes | (3,092,698) | (3,176,493) |
Provision for income taxes | 1,600 | 1,600 |
Net loss | (3,094,298) | (3,178,093) |
Less: Preferred deemed dividend | 1,044,000 | 325,000 |
Net loss applicable to common shareholders | $ (4,138,298) | $ (3,503,093) |
Basic earnings per common share (in dollars per share) | $ (0.11) | $ (0.17) |
Diluted earnings per common share (in dollars per share) | $ (0.11) | $ (0.17) |
Weighted average shares of common stock outstanding | ||
Basic (in shares) | 27,906,090 | 18,947,375 |
Diluted (in shares) | 27,906,090 | 18,947,375 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | ||
Cash flows from operating activities: | |||
Net loss | $ (3,094,298) | $ (3,178,093) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Depreciation | 8,039 | 14,916 | |
Loss on disposal of fixed assets | 1,788 | ||
Fixed assets provided to university in lieu of cash | 18,004 | ||
Stock-based compensation expense | 608,676 | 706,368 | |
Amortization of warrants and stock issued for services | [1] | 30,000 | 51,538 |
Change in fair value of conversion rights of Series B preferred stock | (102,848) | 48,564 | |
Change in fair value of warrant liabilities | (560,986) | (1,342,651) | |
Change in fair value of contingent put option of Series F preferred stock | (103,364) | ||
Warrant issued for services | 55,900 | ||
Common stock issued for license | 50,000 | ||
Common stock issued for services | 187,550 | ||
Changes in assets and liabilities: | |||
Restricted cash | 33,072 | ||
Prepaid expenses | [1] | (121,273) | (40,323) |
Deposits and other assets | 34,290 | 9,594 | |
Other current assets | 7,014 | 29,112 | |
Accounts payable | (173,729) | 149,293 | |
Accrued payroll and related expenses | (112,825) | 121,069 | |
Accrued license and patent reimbursement fees | (97,500) | ||
Accrued expenses and other liabilities | 42,677 | (130,728) | |
Net cash used in operating activities | (3,298,213) | (3,552,941) | |
Cash flows from investing activities: | |||
Purchases of property and equipment | (19,654) | (11,117) | |
Net cash used in investing activities | (19,654) | (11,117) | |
Cash flows from financing activities: | |||
Proceeds from Convertible debt issuance | 500,000 | ||
Net cash provided by financing activities | 3,513,002 | 407,669 | |
Net increase (decrease) in cash and cash equivalents | 195,135 | (3,156,389) | |
Cash and cash equivalents, beginning of period | 64,820 | 3,221,209 | |
Cash and cash equivalents, end of period | 259,955 | 64,820 | |
Cash paid during the period for: | |||
Interest | 0 | 0 | |
Income taxes | 1,631 | ||
Supplemental disclosures of non-cash financing activities: | |||
Conversion of outstanding preferred stock into common stock | 1,386,000 | 114,000 | |
Conversion of outstanding preferred stock subject to redemption into common stock | 1,197,450 | 469,000 | |
Series C Preferred Stock | |||
Cash flows from financing activities: | |||
Proceeds from Issuance of Preferred Stock and Preference Stock | [2] | 0 | 407,669 |
Series D Preferred Stock | |||
Cash flows from financing activities: | |||
Proceeds from Issuance of Preferred Stock and Preference Stock | [3] | 1,131,857 | 0 |
Series F Preferred stock | |||
Cash flows from financing activities: | |||
Proceeds from Issuance of Preferred Stock and Preference Stock | $ 1,881,145 | $ 0 | |
[1] | During the year ended December 31, 2016, warrants issued to service providers for consulting services were valued at $22,245 and were recorded as a Prepaid expense and was amortized over the service period. During the year ended ended December 31, 2017, warrants issued to service providers for consulting services were valued at $30,000 and were recorded as a Prepaid expense and are being amortized over the service period | ||
[2] | During the year ended ended December 31, 2016, a preferred deemed divided of $325,000 was recognized. | ||
[3] | During the year ended December 31, 2017 preferred deemed dividends of $333,000 was recognized on Series F Preferred Stock, $536,000 was recognized on Series D Preferred Stock and $175,000 on Series C Preferred Stock. |
CONSOLIDATED STATEMENTS OF CAS6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parentheticals) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Value of warrants issued to purchase shares of common stock for consulting services | $ 30,000 | $ 22,245 |
Preferred deemed dividend | 1,044,000 | 325,000 |
Series C Preferred Stock | ||
Preferred stock issuance costs | 92,331 | 92,331 |
Preferred deemed dividend | 175,000 | |
Series D Preferred Stock | ||
Preferred stock issuance costs | 183,343 | 183,343 |
Preferred deemed dividend | 536,000 | |
Series F Preferred stock | ||
Preferred stock issuance costs | 118,855 | $ 118,855 |
Preferred deemed dividend | $ 333,000 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) | Redeemable Convertible Series F Preferred Stock | Convertible Series D Preferred Stock | Convertible Series C Preferred Stock | Redeemable Convertible Series B Preferred Stock | Common Stock | Additional Paid-In Capital | Warrants | Accumulated Deficit | Total |
Balance at Dec. 31, 2015 | $ 1,363,200 | ||||||||
Balance (Shares) at Dec. 31, 2015 | 4,500 | ||||||||
Balance at Dec. 31, 2015 | $ 19,903 | $ 6,086,987 | $ 759,386 | $ (7,758,480) | $ (892,204) | ||||
Balance (in shares) at Dec. 31, 2015 | 19,903,163 | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Common stock warrants issued for services | 78,325 | 78,325 | |||||||
Stock based compensation expense | 706,368 | 706,368 | |||||||
Issuance of Series D Preferred Stock net of issuance costs of $183,343 | $ 407,669 | ||||||||
Issuance of Series D Preferred Stock net of issuance costs of $183,343 (in shares) | 500 | ||||||||
Conversion of Series B Preferred Stock and conversion liability into common stock at $0.80 and $0.40 per share for December 31, 2016 and $0.25 and $0.15 per share for December 31, 2017 | $ (193,537) | $ 1,162 | 206,207 | 207,369 | |||||
Conversion of Series B Preferred Stock and conversion liability into common stock at $0.80 and $0.40 per share for December 31, 2016 and $0.25 and $0.15 per share for December 31, 2017 (in shares) | (469) | 1,162,500 | |||||||
Conversion of Series C Preferred Stock to common stock at $0.40 and $0.25 per share for December 31, 2016 and 2017 respectively | $ (114,000) | $ 398 | 113,602 | 114,000 | |||||
Conversion of Series C Preferred Stock to common stock at $0.40 and $0.25 per share for December 31, 2016 and 2017 respectively (in shares) | (114) | 397,500 | |||||||
Beneficial conversion feature upon issuance of Series C Preferred Stock | 325,000 | 325,000 | |||||||
Deemed dividend from beneficial conversion feature of Series C Preferred Stock | (325,000) | (325,000) | |||||||
Issuance of common stock for license | $ 100 | 49,900 | 50,000 | ||||||
Issuance of common stock for license (in shares) | 100,000 | ||||||||
Net loss for the year | (3,178,093) | (3,178,093) | |||||||
Balance at Dec. 31, 2016 | $ 21,563 | 7,163,064 | 837,711 | (10,936,573) | $ (2,914,235) | ||||
Balance (in shares) at Dec. 31, 2016 | 21,563,163 | 21,563,163 | |||||||
Balance at Dec. 31, 2016 | $ 293,669 | $ 1,169,663 | |||||||
Balance (Shares) at Dec. 31, 2016 | 386 | 4,031 | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Common stock issued for services | $ 605 | 186,945 | $ 187,550 | ||||||
Common stock issued for services (in shares) | 605,000 | ||||||||
Common stock warrants issued for services | 145,200 | 145,200 | |||||||
Stock based compensation expense | 608,676 | 608,676 | |||||||
Issuance of Series D Preferred Stock net of issuance costs of $183,343 | $ 1,016,657 | ||||||||
Issuance of Series D Preferred Stock net of issuance costs of $183,343 (in shares) | 1,200 | ||||||||
Issuance of Series F Preferred Stock net of issuance costs of $118,855 | $ 1,881,245 | ||||||||
Issuance of Series F Preferred Stock net of issuance costs of $118,855 (in shares) | 2,000 | ||||||||
Series F put option liability | $ 103,364 | ||||||||
Conversion of Series B Preferred Stock and conversion liability into common stock at $0.80 and $0.40 per share for December 31, 2016 and $0.25 and $0.15 per share for December 31, 2017 | $ (347,462) | $ 5,911 | 350,810 | 356,721 | |||||
Conversion of Series B Preferred Stock and conversion liability into common stock at $0.80 and $0.40 per share for December 31, 2016 and $0.25 and $0.15 per share for December 31, 2017 (in shares) | (1,197.45) | 5,910,666 | |||||||
Conversion of Series C Preferred Stock to common stock at $0.40 and $0.25 per share for December 31, 2016 and 2017 respectively | $ (293,669) | $ 1,544 | 292,125 | 293,669 | |||||
Conversion of Series C Preferred Stock to common stock at $0.40 and $0.25 per share for December 31, 2016 and 2017 respectively (in shares) | (386) | 1,544,000 | |||||||
Conversion of Series D Preferred Stock to common stock at $0.25 per share | $ (847,211) | $ 4,000 | 843,210 | 847,211 | |||||
Conversion of Series D Preferred Stock to common stock at $0.25 per share (in shares) | (1,000) | 4,000,000 | |||||||
Beneficial conversion feature upon issuance of Series C Preferred Stock | 175,000 | 175,000 | |||||||
Deemed dividend from beneficial conversion feature of Series C Preferred Stock | (175,000) | (175,000) | |||||||
Beneficial conversion feature upon issuance of Series D Preferred Stock | 536,000 | 536,000 | |||||||
Deemed dividend from beneficial conversion feature of Series D Preferred Stock | (536,000) | (536,000) | |||||||
Beneficial conversion feature upon issuance of Series F Preferred Stock | 333,000 | 333,000 | |||||||
Deemed dividend from beneficial conversion feature of Series F Preferred Stock | (333,000) | (333,000) | |||||||
Net loss for the year | (3,094,298) | (3,094,298) | |||||||
Balance at Dec. 31, 2017 | $ 33,623 | $ 9,444,831 | $ 982,911 | $ (14,030,871) | $ (3,569,506) | ||||
Balance (in shares) at Dec. 31, 2017 | 33,622,829 | 33,622,829 | |||||||
Balance at Dec. 31, 2017 | $ 1,777,781 | $ 169,446 | $ 822,201 | ||||||
Balance (Shares) at Dec. 31, 2017 | 2,000 | 200 | 0 | 2,833.55 |
CONSOLIDATED STATEMENTS OF STO8
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Parentheticals) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Series F Preferred Stock | ||
Share issuance costs | $ 118,855 | |
Series D Preferred Stock | ||
Share issuance costs | $ 183,343 | |
Conversion liability into common stock per share | $ 0.25 | |
Series B Preferred Stock | ||
Conversion of preferred stock price per share | 0.25 | $ 0.80 |
Conversion liability into common stock per share | 0.15 | $ 0.40 |
Series C Preferred Stock | ||
Share issuance costs | $ 92,331 | |
Conversion of preferred stock price per share | $ 0.40 | |
Conversion liability into common stock per share | $ 0.25 | $ 0.25 |
Nature of Operations, Business
Nature of Operations, Business Activities and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Nature of Operations, Business Activities and Summary of Significant Accounting Policies | 1. Nature of Operations, Business Activities and Summary of Significant Accounting Policies Nature of Operations and Basis of Presentation Nemus Bioscience, Inc. is a biopharmaceutical company that plans to develop and commercialize therapeutics from cannabinoids through a partnership with the University of Mississippi. The University of Mississippi (“UM”) is federally permitted and licensed to cultivate cannabis for research purposes. Unless otherwise specified, references in these Notes to the Consolidated Financial Statements to the “Company,” “we” or “our” refer to Nemus Bioscience, Inc., a Nevada corporation formerly known as Load Guard Logistics, Inc. (“LGL”), together with its wholly-owned subsidiary, Nemus, a California corporation (“Nemus”). Nemus became the wholly owned subsidiary of Nemus Bioscience, Inc. through the Merger (as defined below). Nemus Bioscience, Inc. (formerly LGL) was incorporated in Nevada on March 16, 2011. Nemus was incorporated in California on July 17, 2012. Our headquarters are located in Costa Mesa, California. As of December 31, 2017, the Company has devoted substantially all of its efforts to securing product licenses, raising capital, and building infrastructure, and has not realized revenue from its planned principal operations. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. Such estimates and judgments are utilized for stock-based compensation expense and equity securities with embedded features as discussed below. Liquidity and Going Concern The Company has incurred operating losses and negative cash flows from operations since our inception. As of December 31, 2017, we had cash and cash equivalents of $259,955. In January 2018, the Company received a second payment totaling $400,000 from a convertible bridge loan and completed the first closing of a common stock financing for gross proceeds totaling $1,500,000 (see note 9). In February 2018, the Company completed the final closing of its common stock financing for additional proceeds of $1,750,000 (see note 9). The Company anticipates that it will continue to incur net losses into the foreseeable future in order to advance and develop a number of potential drug candidates into preclinical development activities and support its corporate infrastructure which includes the costs associated with being a public company. Without additional funding, management believes that the Company will not have sufficient funds to meet its obligations within one year after the date the consolidated financial statements were issued. These conditions give rise to substantial doubt as to the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s continued existence is dependent on its ability to raise additional sufficient funding to cover operating expenses and to invest in operations and development activities. The Company plans to continue to pursue funding through public or private equity or debt financings, strategic collaborations, licensing arrangements, asset sales, government grants or other arrangements. However, the Company cannot provide any assurances that such additional funds will be available on reasonable terms, or at all. If the Company raises additional funds by issuing equity securities, substantial dilution to existing stockholders would result. If the Company is unable to secure adequate additional funding, the Company may be forced to reduce spending, extend payment terms with suppliers, liquidate assets where possible, suspend or curtail planned programs or cease operations. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of those investments approximates their fair market value due to their short maturity and liquidity. Cash and cash equivalents include cash on hand and amounts on deposit with financial institutions, which amounts may at times exceed federally insured limits. The Company has not experienced any losses on such accounts and does not believe it is exposed to any significant credit risk. Restricted Cash A deposit of $4,428 as of December 31, 2017 and $37,500 as of December 31, 2016 was restricted from withdrawal and held by a bank in the form of a certificate of deposit. This certificate serves as collateral for payment of the Company’s credit cards. Fair Value Measurements Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, is used to measure fair value: Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources such as quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The carrying values of our financial instruments, including, cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses approximate their fair value due to the short maturities of these financial instruments. The Series B warrant liability, put option, and the conversion liabilities for the Series B Preferred Stock, Series F Preferred Stock and the convertible bridge loan were valued utilizing Level 3 inputs primarily from a third party independent appraisal conducted as of December 31, 2017. Property and Equipment, Net As of December 31, 2017 and 2016, property and equipment, net, was $1,407 and $9,584 respectively, consisting primarily of computers and equipment. Expenditures for additions, renewals and improvements will be capitalized at cost. Depreciation will generally be computed on a straight-line method based on the estimated useful life of the related assets currently ranging from two to three years. Maintenance and repairs that do not extend the life of assets are charged to expense when incurred. When properties are disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reported in the period the transaction takes place. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted cash flows expected to be generated by the asset. If the carrying amount exceeds its estimated future undiscounted cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset. The costs incurred for the rights to use licensed technologies in the research and development process, including licensing fees and milestone payments, will be charged to research and development expense as incurred in situations where the Company has not identified an alternative future use for the acquired rights, and are capitalized in situations where there is an identified alternative future use. No cost associated with the use of licensed technologies has been capitalized to date. Income Taxes The Company accounts for deferred income tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities, and net operating loss carry forwards (the “NOLs”) and other tax credit carry forwards. These items are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date. Any interest or penalties would be recorded in the Company’s statement of operations in the period incurred. The Company records a valuation allowance to reduce the deferred income tax assets to the amount that is more likely than not to be realized. In making such determinations, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. As a result, there are no income tax benefits reflected in the statement of operations to offset pre-tax losses. The Company recognizes a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. Convertible Instruments We account for hybrid contracts that feature conversion options in accordance with generally accepted accounting principles in the United States. ASC 815, Derivatives and Hedging Activities Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument. We account for convertible instruments when we have determined that the embedded conversion options should not be bifurcated from their host instruments, in accordance with ASC 470-20, Debt with Conversion and Other Options We also follow ASC 480-10, Distinguishing Liabilities from Equity Warrants Issued in Connection with Financings We generally account for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that we may need to settle the warrants in cash. For warrants issued with a conditional obligation to issue a variable number of shares or the deemed possibility of a cash settlement, we record the fair value of the warrants as a liability at each balance sheet date and record changes in fair value in other (income) expense in the Consolidated Statements of Operations. Revenue Recognition The Company has not begun planned principal operations and has not generated any revenue since inception. Research and Development Expenses Research and development (“R&D”) costs are expensed when incurred. These costs may consist of external research and development expenses incurred under agreements with third-party contract research organizations and investigative sites, third-party manufacturing organizations and consultants; license fees; employee-related expenses, which include salaries, benefits and stock-based compensation for the personnel involved in our preclinical and clinical drug development activities; and facilities expense, depreciation and other allocated expenses; and equipment and laboratory supplies. Stock-Based Compensation Expenses Stock-based compensation cost is estimated at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over the vesting period. We use the Black-Scholes option pricing model for estimating the grant date fair value of stock options and warrants using the following assumptions: · Exercise price - We determined the exercise price based on valuations using the best information available to management at the time of the valuations. · Volatility - We estimate the stock price volatility based on industry peers who are also in the early development stage given the limited market data available in the public arena. · Expected term - The expected term is based on a simplified method which defines the life as the weighted average of the contractual term of the options and warrants and the weighted-average vesting period for all open awards. · Risk-free rate - The risk-free interest rate for the expected term of the option or warrant is based on the average market rate on U.S. treasury securities in effect during the period in which the awards were granted. · Dividends - The dividend yield assumption is based on our history and expectation of paying no dividends. Stock-Based Compensation for Non-Employees The Company accounts for warrants and options issued to non-employees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 505-50, Equity - Equity Based Payments to Non-Employees, Segment Information FASB ASC No. 280, Segment Reporting Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company is required to record all components of comprehensive income (loss) in the consolidated financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss), net of their related tax effect, arrived at a comprehensive income (loss). For the years ended December 31, 2017 and 2016, the comprehensive income (loss) was equal to the net income (loss). Earnings per share The Company applies FASB ASC No. 260, Earnings per Share Recent accounting pronouncements In February 2016, the FASB issued ASU No. 2016-02 Leases In August 2016, the FASB issued Accounting Standards Update No. 2016-15 Statement of Cash Flows 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 |
University of Mississippi Agree
University of Mississippi Agreements | 12 Months Ended |
Dec. 31, 2017 | |
University Of Mississippi Agreements [Abstract] | |
University of Mississippi Agreements | 2. University of Mississippi Agreements In July 2013, the Company entered into a Memorandum of Understanding (MOU) with UM to engage in joint research of extracting, manipulating, and studying cannabis in certain forms to develop intellectual property (IP) with the intention to create and commercialize therapeutic medicines. Nemus will own all IP developed solely by its employees and will jointly own all IP developed jointly between Nemus and UM employees. The term of the MOU agreement is five years and the parties agree to negotiate separate research agreements upon the identification of patentable technologies as well as any deemed to be a trade secret. The agreement may be terminated by either party with three months’ written notice to the other party. UM 5050 pro-drug agreements On September 29, 2014, the Company executed three license agreements with UM pursuant to which UM granted us exclusive, perpetual, worldwide licenses, including the right to sublicense, to intellectual property related to UM 5050, a pro-drug formulation of tetrahydrocannabinol, or THC for products administered through each of ocular, oral or rectal delivery. The license agreement for the field of oral delivery also includes rights to UM 1250, a bio-adhesive hot melt extruded film for topical and mucosal adhesion application and drug delivery. The license agreements contain certain milestone and royalty payments, as defined therein. There is an annual fee of $25,000 per license agreement, payable on the anniversary of each effective date. The aggregate milestone payments under the license agreements, if the milestones are achieved, is $2.1 million. These licenses also require the Company to reimburse UM for patent costs incurred related to these products under license. The agreements will terminate upon expiration of the patents, breach or default of the license agreements, or upon 60 days’ written notice by the Company to UM. On October 15, 2014, we signed a renewable option agreement for the rights to explore other routes of delivery of UM 5050 not yet agreed upon and/or in combination with other cannabinoids or other compatible compounds. There was a one-time up-front option payment of $10,000 for a six-month option period that has subsequently been renewed under the same financial terms and conditions. The most recent renewal occurred for the period from December 15, 2017 to June 14, 2018. UM 8930 analogue agreements: On December 14, 2015, the Company executed two license agreements with UM pursuant to which UM granted us exclusive, perpetual, worldwide licenses, including the right to sublicense, to intellectual property related to UM 8930, an analogue formulation of cannabidiol (“CBD”) for products administered through each of ocular or rectal delivery. The license agreements contain certain milestone and royalty payments, as defined therein. There is an annual fee of $25,000 per license agreement, payable on the anniversary of each effective date. The aggregate milestone payments under the license agreements, if the milestones are achieved, is $1.4 million. These licenses also require the Company to reimburse UM for patent costs incurred related to these products under license. These license agreements will terminate upon expiration of the patents, breach or default of the license agreements, or upon 60 days’ written notice by the Company to UM. On December 14, 2015, we signed a renewable option agreement for the rights to explore other routes of delivery of UM8930 not yet agreed upon and/or in combination with other cannabinoids or other compatible compounds. There was a one-time up-front option payment of $10,000 for a six-month option period that has subsequently been renewed under the same financial terms and conditions. The most recent renewal occurred for the period from December 15, 2017 to June 14, 2018. UM 5070 license agreement: On January 10, 2017, the Company entered into a license agreement with UM pursuant to which UM granted the Company an exclusive, perpetual license, including the right to sublicense, under intellectual property related to UM 5070, a platform of cannabinoid-based molecules to research, develop and commercialize products for the treatment of infectious diseases. The license agreement culminates roughly one year of screening and target molecule identification studies especially focused on therapy-resistant infectious organisms like methicillin-resistant Staphylococcus aureus (MRSA). The license agreement contains certain milestone and royalty payments, as defined therein. There was a one-time upfront payment of $65,000 paid in four equal monthly installments that started on February 1, 2017. There is an annual fee of $25,000 per license agreement, payable on the anniversary of each effective date. The aggregate milestone payment under the license agreements, if the milestones are achieved, is $0.7 million. These licenses also require the Company to reimburse UM for patent costs incurred related to these products under license. These license agreements will terminate upon expiration of the patents, breach or default of the license agreements, or upon 60 days’ written notice by the Company to UM. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 3. Commitments and Contingencies Lease Commitments On September 1, 2014, the Company signed an operating lease for laboratory and office space at the Innovation Hub, Insight Park located on the UM campus. The lease term commenced on October 1, 2014 and expired on December 31, 2017. There is annual escalating rent provisions and two months of free rent in the agreement. The total cash payments over the life of the lease were divided by the total number of months in the lease period and the average rent was charged to expense each month during the lease period. The monthly amount charged to rent expense was $9,267. Upon expiration, the Company did not renew the laboratory lease but has retained office space under a month-to-month agreement at the rate of $300 per month. In October 2014, we signed a lease agreement for our corporate office headquarters that consists of approximately 4,087 square feet located at 650 Town Center Drive, Suite 1770, Costa Mesa, CA 92626. The lease expired on October 31, 2016 and our monthly rent was $5,373, payable in equal monthly installments with annual escalations. There was no subsequent renewal upon expiration of this lease. The Company currently maintains its principal executive offices located in a shared office suite located at 600 Anton Blvd., Suite 1100, Costa Mesa, CA, 92626 under a month-to-month agreement. In November 2015, the Company entered into an operating lease for its office and lab furnishings both in Costa Mesa and the Innovation Hub laboratory. The monthly lease payments were $7,559. In November 2017, the Company bought out the remaining portion of the lease for $32,128 which covered the remaining lease payments as well as the value of the furniture amounting to $19,654. The lab furnishings were donated to the University of Mississippi and the office furnishings were written off due to non-use for a loss on disposal of $1,650. Total net rent expense related to our operating leases for the years ended December 31, 2017 and 2016 was $253,437 and $302,419, respectively. There are no future minimum payments under non-cancellable operating leases. Related Party Matters In June 2014, our subsidiary entered into an independent contractor agreement with K2C, Inc. (“K2C”), which is wholly owned by the Company’s Executive Chairman and Co-Founder, Mr. Cosmas N. Lykos, pursuant to which we pay K2C a monthly fee for services performed by Mr. Lykos for our company. The agreement expired on June 1, 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. For the year ended December 30, 2017 and 2016, total expense incurred under this agreement was $210,000 and $120,000 respectively. Under the agreement, Mr. Lykos is also eligible to participate in our health, death and disability insurance plans. In addition, Mr. Lykos is a participant in our change in control severance plan. The independent contractor agreement with K2C was terminated as of February 28, 2018. Legal Matters General Litigation and Disputes From time to time, in the normal course of our operations, we may be a party to litigation and other dispute matters and claims. Litigation can be expensive and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable outcome to any legal matter, if material, could have a materially adverse effect on our operations or our financial position, liquidity or results of operations. As of December 31, 2017, there were no pending or threatened lawsuits or claims that could reasonably be expected to have a material effect on the Company’s financial position or results of operations, but the Company has filed a petition commencing arbitration as described below. Pending Series E Preferred Stock Financing and Filing for Arbitration On May 3, 2017, the Company entered into a securities purchase agreement with a purchaser to sell 1,000,000 shares of a new Series E Preferred Stock, par value $0.001 per share, at a purchase price of $20.00 for each preferred share for aggregate gross proceeds of $20,000,000. The securities purchase agreement provides for no conditions precedent to the close and that closing is not to occur later than July 10, 2017. The purchaser did not provide funding to close the transaction on July 10, 2017 as required under the securities purchase agreement and requested an extension of the closing date. In connection with the signing of the securities purchase agreement, an affiliate of the purchaser entered into a financial guarantee to the benefit of the Company that provided for payment of the purchase price in full within 90 days of exercise. The Company exercised this guarantee on July 12, 2017. The guarantor has failed to pay the $20,000,000 within 90 days of notice of the purchaser’s default, as required by the terms of the guaranty. On November 8, 2017, the Company filed a petition commencing arbitration against the purchaser and guarantor as well as other related individuals. In the petition, the Company asserts, among other things, breach of contract against the purchaser for its failure to close its purchase of Series E Preferred Stock as required by the securities purchase agreement. The Company also asserts a breach of contract claim against the guarantor for its failure to honor its guarantee of the transaction. The petition was filed with Judicial Arbitration and Mediation Services, Inc., ENDISPUTE in Orange County, California, as required by the securities purchase agreement. The Company has engaged its legal counsel in the matter on a contingent-fee basis and intends to purse damages and remedies in connections with these agreements. Government Proceedings Like other companies in the pharmaceutical industry, we are subject to extensive regulation by national, state and local government agencies in the United States. As a result, interaction with government agencies occurs in the normal course of our operations. It is possible that criminal charges and substantial fines and/or civil penalties or damages could result from any government investigation or proceeding. As of December 31, 2017, the Company had no proceedings or inquiries. Change in Control Severance Plan In February 2015, we adopted a change in control severance plan, in which our named executive officers participate, that provides for the payment of severance benefits if the executive’s service is terminated within twelve months following a change in control, either due to a termination without cause or upon a resignation for good reason (as each term is defined in the plan). In either such event, and provided the executive timely executes and does not revoke a general release of claims against the Company, he or she will be entitled to receive: (i) a lump sum cash payment equal to at least six months of the executive’s monthly compensation, plus an additional month for each full year of service over six years, (ii) Company-paid premiums for continued health insurance for a period equal to length of the cash severance period or, if earlier, when executive becomes covered under a subsequent employer’s healthcare plan, and (iii) full vesting of all then-outstanding unvested stock options and restricted stock awards. Contract Manufacturing Organization (“CMO”) Agreement On February 5, 2016, the Company entered into a letter agreement (“Agreement”) with a third party contract manufacturing organization (“CMO”) pursuant to which the CMO is to provide services to Nemus for process development and analytical method development and qualification for Nemus’ pro-drug of tetrahydrocannabinol, or THC, as well as for sample production and a stability study. Pursuant to the terms of the Agreement, Nemus will pay an estimated $154,000 to $183,000 in fees and expenses for the initial evaluation and development of a process for the production of Nemus’ pro-drug of THC to ensure reproducibility, quality and safety and an estimated $142,900 for analytical method development and qualification. The Company recognized $0 and $260,244 as research and development expense for the years ended December 31, 2017 and 2016, respectively. After the initial evaluation and development, Nemus has agreed to pay additional fees and expenses for sample production of Nemus’ pro-drug of THC and a stability study, as well as possible extensions to or modifications of the aforementioned projects. Nemus may at any time cancel or delay any project under the Agreement prior to the scheduled start date. Nemus must reimburse the CMO for costs incurred prior to and including the date of cancellation plus any reasonable and foreseeable costs associated with stopping work on any project, including the CMO’s loss of revenue incurred as the result of reserving production facilities for Nemus’ exclusive use. Nemus may terminate the Agreement in whole or in part at any time upon 30 days’ written notice. |
Stockholders' Deficit and Redee
Stockholders' Deficit and Redeemable Convertible Series B and Convertible Series C, D and F Preferred Stock | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Stockholders' Deficit and Redeemable Convertible Series B and Convertible Series C, D and F Preferred Stock | 4. Stockholders’ Deficit and Redeemable Convertible Series B and Convertible Series C, D and F Preferred Stock Common Stock In March 2016, a Series B Preferred stockholder converted 8 shares of its preferred stock to common stock, resulting in the issuance of 10,000 shares of common stock at an effective price of $0.80 per share. In October 2016, as a result of the Series C Preferred Stock Agreement (discussed below), the conversion price of the Series B Preferred Stock was reset to $0.40. From October 2016 to December 31, 2016, Series B Stockholders converted 461 shares of its preferred stock to common stock, resulting in the issuance of 1,152,500 shares of common stock. In October 2016, the Company entered into a technology license agreement with a third-party manufacturing company in order to biosynthetically manufacture cannabinoids. The terms of the agreement called for the issuance of 100,000 shares of common stock. The Company recorded $50,000 as research and development expense for the fourth quarter of 2016 to reflect the fair market value of the common stock issued. The fair market value was determined utilizing the Company’s closing stock price as of the approval date of the license agreement by the Company’s Board of Directors. In December 2016, a Series C Preferred stockholder converted 39 shares of its preferred stock to common stock as allowed under the Series C Preferred Stock Agreement, resulting in the issuance of 97,500 shares of common stock at an effective price of $0.40 per share. On December 29, 2016, as a result of the signing of the Series D Preferred Stock Agreement (discussed below), the conversion price of the Series B and Series C Preferred Stock was reset to $0.25. From the date of this reset to December 31, 2016, a Series C Stockholder converted 75 shares of its preferred stock to common stock, resulting in the issuance of 300,000 shares of common stock. In March 2017, the Company issued 605,000 shares of common stock with par value of $0.001 to a third party in exchange for advisory services performed related to raising additional capital. The Company recorded $187,550 as general and administrative expense for the first quarter of 2017 to reflect the fair market value of the common stock issued. The fair market value was determined utilizing the Company’s closing stock price as of the approval date of the advisory fee by the Company’s Board of Directors. For the year ended December 31, 2017, a Series C Preferred stockholder converted 386 shares of its preferred stock to common stock as allowed under the Series C Preferred Stock Agreement, resulting in the issuance of 1,544,000 shares of common stock at an effective price of $0.25 per share. This represented the completion of converting all of the original Series C Preferred shares to common stock. For the year ended December 31, 2017, the Series B Preferred stockholders converted 1,197.45 shares of their preferred stock to common stock as allowed under the Series B Preferred Stock Agreement. This resulted in the issuance of 5,910,666 shares of common stock at an effective price of $0.25 per share prior to November 1, 2017 and $0.15 per share from November 1, 2017 to December 27, 2017 after issuance of the Series F Preferred Stock. On December 28, 2017, the conversion rate was reset to $0.10 per share as a result of the convertible bridge loan but no conversions occured from this date through-year end. For the year ended December 31, 2017, the Series D Preferred stockholders converted 1,000 shares of their preferred stock as allowed under the Series D Preferred Stock Agreement, resulting in the issuance of 4,000,000 shares of common stock at an effective price of $0.25 per share. Preferred Stock The Company has authorized 20,000,000 shares of preferred stock with a par value of $0.001 per share. Redeemable Convertible Series B Preferred Stock: In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, Series B Preferred stockholders receive an amount per share equal to the conversion price of $0.15, subject to down-round adjustment, multiplied by the as-if converted share amount of 18,890,333 common shares, totaling $2,833,550. If upon the liquidation, the assets are insufficient to permit payments to the Series B holders, all assets legally available will be distributed in a pro rata basis among the Series B holders in proportion to the full amounts they would otherwise be entitled to receive. Any remaining assets are distributed pro rata among the common stockholders. Subject to certain trigger events occurring, the Series B Preferred stockholders have the right to force the Company to redeem the shares of preferred stock at a price per preferred share equal to the greater of (A) 115% of the conversion amount and (B) the product of (1) the conversion rate in effect at such time and (2) the greatest closing sale price of the Common Stock during the period beginning on the date immediately preceding such triggering event and ending on the date such holder delivers the notice of redemption. Such triggering events include: · Failure of the Series B Registration Statement to be declared effective by the Securities and Exchange Commission, or the SEC, on or prior to the date that is ninety days after the Effectiveness Deadline; · Suspension of the Company’s common stock from trading for a period of (2) consecutive trading days; · Failure of the Company to deliver all the shares of the common stock or make the appropriate cash payments in a timely manner upon conversion of the Series B Preferred; · Any default of indebtedness; · Any filing of voluntary or involuntary bankruptcy by the Company; · A final judgment in excess of $100,000 rendered against the Company; · Breach of representations and warranties in the Stock Purchase Agreement; and · Failure to comply with the Series B Certificate of Designation or Rule 144 requirements. As certain of these triggering events are considered to be outside the control of the Company, the Series B Preferred Stock is considered to be contingently redeemable convertible and as a result, has been classified as mezzanine equity in the Company’s balance sheet. In December 2015, a Series B Preferred stockholder converted 500 shares of its preferred stock to common stock at the conversion rate of 1,250:1 resulting in the issuance of 625,000 shares of common stock. In March 2016, another Series B Preferred stockholder converted 8 shares of its preferred stock to common stock at the same ratio resulting in the issuance of 10,000 shares of common stock. In October 2016, as a result of the Series C Preferred Stock Agreement (discussed below), the conversion price of the Series B Preferred Stock was reset to $0.40. From October 2016 to December 31, 2016, Series B Stockholders converted 461 shares of its preferred stock to common stock, at the conversion rate of 2,500:1 resulting in the issuance of 1,152,500 shares of common stock. On December 29, 2016, as a result of the Series D Preferred Stock Agreement (as discussed below), the conversion price of the Series B Preferred Stock was reset to $0.25. In 2017, through October 31st, Series B stockholders converted 777.125 shares at a conversion rate of 4000:1 resulting in the issuance of 3,108,500 shares of common stock. Effective with the Series F Preferred Stock Agreement signed on November 1, 2017, the conversion price for the Series B Preferred Stock was reset to $0.15. From November 1 st Convertible Series C Preferred Stock: · Dividends: · Conversion: · Down-Round Protection: · Voting Rights: · Most Favored Nation Provision: · Participation Rights: · Liquidation Provision: The Company also considered the classification of the Series C Preferred Stock Agreement. Because the Most Favored Nation provision is a redemption feature that is outside the control of the Company, the Series C Preferred Stock is considered to be contingently redeemable convertible and as a result, has been classified as mezzanine equity in the Company’s balance sheet. At the date of the financing, because the effective conversion rate of the preferred stock was less than the market value of the Company’s common stock, a beneficial conversion feature of $325,000 has been recorded as a discount to the preferred stock and an increase to additional paid in capital. Because the preferred stock is perpetual, in October 2016, the Company fully amortized the discount related to the beneficial conversion feature on the deemed dividend in the consolidated statement of operations. In December 2016, the Series C Preferred stockholder converted 39 shares of its preferred stock to common stock as allowed under the Series C Preferred Stock Agreement, resulting in the issuance of 97,500 shares of common stock at an effective price of $0.40 per share. On December 29, 2016, as a result of the signing of the Series D Preferred Stock Agreement (as discussed below), the conversion price of the Series B and Series C Preferred Stock was reset to $0.25. From the date of this reset to December 31, 2016, a Series C Stockholder converted 75 shares of their preferred stock to common stock, resulting in the issuance of 300,000 shares of common stock. During 2017, all remaining Series C Preferred Stock totaling 386 shares has been converted at a conversion rate of 4000:1 resulting in the issuance of 1,544,000 shares of common stock. As a result, there is no liquidation preference outstanding as of December 31, 2017. In addition, as a result of the Series D financing and the adjustment in the conversion price, a beneficial conversion feature of $175,000 has been recorded as a discount to the preferred stock and an increase to additional paid in capital. Because the preferred stock is perpetual, in January 2017, the Company fully amortized the discount related to the beneficial conversion feature on the deemed dividend in the consolidated statement of operations. Convertible Series D Preferred Stock: The Series D stock has liquidation preference over common stock. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, Series D Preferred stockholders receive an amount per share equal to the conversion price of $0.25, subject to down-round adjustment, multiplied by the as-if converted share amount of 800,000 common shares, totaling $200,000 as of December 31, 2017. The Company also considered the classification of the Series D Preferred Stock Agreement, the Series D Preferred Stock is considered to be contingently redeemable convertible and as a result, has been classified as mezzanine equity in the Company’s balance sheet because the Most Favored Nation provision is a redemption feature that is outside the control of the Company. At the date of the financing, because the effective conversion rate of the preferred stock was less than the market value of the Company’s common stock, a beneficial conversion feature of $536,000 has been recorded as a discount to the preferred stock and an increase to additional paid in capital. Because the preferred stock is perpetual, in January 2017, the Company fully amortized the discount related to the beneficial conversion feature on the deemed dividend in the consolidated statement of operations. For the year ended December 31, 2017, the Series D stockholders converted 1,000 shares at a conversion rate of 4000:1 and a conversion price of $0.25 per share resulting in the issuance of 4,000,000 shares of common stock. Effective with the Series F Preferred Stock Agreement signed on November 1, 2017, the conversion price for the Series D Preferred Stock was reset to $0.15. On December 28, 2017 as a result of entering into a Secured Promissory Note for a convertible loan, the Series D Preferred Stock conversion price was reset to $0.10 per share. Convertible Series F Preferred Stock: · Dividends: · Conversion: · Down-Round Protection: · Voting Rights: · Discretionary Redemption Provision: · Participation Rights: · Liquidation Provision: Subject to certain trigger events occurring, the Series F Preferred stockholders have the right to force the Company to redeem the shares of preferred stock at a price per preferred share equal to the greater of (A) 130% of the conversion amount and (B) the product of (1) the conversion rate in effect at such time and (2) the greatest closing sale price of the Common Stock during the period beginning on the date immediately preceding such triggering event and ending on the date such holder delivers the notice of redemption. Such triggering events include: · Failure of the Series F Registration Statement to be declared effective by the Securities and Exchange Commission, or the SEC, on or prior to the date that is one hundred and eighty (180) days after the Effectiveness Deadline; · Suspension of the Company’s common stock from trading for a period of five (5) consecutive trading days; · Failure of the Company to deliver all the shares of the common stock or make the appropriate cash payments in a timely manner upon conversion of the Series F Preferred; · Any default of indebtedness; · Any filing of voluntary or involuntary bankruptcy by the Company; · A final judgment in excess of $100,000 rendered against the Company; · Breach of representations and warranties in the Stock Purchase Agreement; · Failure to comply with the Series F Certificate of Designation or Rule 144 requirements; and · A change in control that would result in the holder exercising its put option (discussed in Note 5 below). As certain of these triggering events are considered to be outside the control of the Company, the Series F Preferred Stock is considered to be contingently redeemable convertible and as a result, has been classified as mezzanine equity in the Company’s balance sheet. At the date of the financing, because the conversion of the preferred stock was contingent upon certain events, the conversion feature was determined to not be beneficial. In addition, on December 28, 2017, as a result of entering into a Secured Promissory Note for a convertible loan which resulted in the adjustment of the conversion price to $0.10, a beneficial conversion feature of $333,333 has been recorded as a discount to the preferred stock and an increase to additional paid in capital. Because the preferred stock is perpetual, in December 2017, the Company fully amortized the discount related to the beneficial conversion feature on the deemed dividend in the consolidated statement of operations. Warrants Warrants vested and outstanding as of December 31, 2017 are summarized as follows: Amount Exercise Term Issued and Source Price (Years) Outstanding Pre 2015 Common Stock Warrants $ 1.00 6-10 4,000,000 2015 Common Stock Warrants $ 1.15-$5.00 5-10 442,000 2015 Series B Financing (see Note 6) Common Stock Warrants to Series B Stockholders $ 0.25 5 6,250,000 Placement Agent Warrants $ 0.25 5 187,500 2016 Common Stock Warrants to Service Providers $ 1.15 10 40,000 2016 Series C Placement Agent Warrants $ 0.40 5 125,000 2017 Series D Placement Agent Warrants $ 0.25 5 480,000 2017 Common Stock Warrants to Service Provider $ 0.41 5 125,000 Total warrants vested and outstanding as of December 31, 2017 11,649,500 2016 Warrants In November 2016, the Company entered into an agreement with one of its investors to provide advisory services on all matters including financing. In conjunction with this agreement, the Company issued warrants that vest immediately to purchase 40,000 shares of common stock with an exercise price of $1.15 per share with a term of ten years. The Company estimated the warrant value to be $18,400 utilizing the Black-Scholes option pricing model and recorded this amount to general and administrative expense for the fourth quarter due to the immediate vesting. In November 2016, the Company issued 125,000 warrants to purchase common stock to its investment banker in exchange for services rendered in conjunction with the Series C Preferred Stock financing. The warrants vest immediately and have an exercise price of $0.40 per share with a term of five years. The Company estimated the value of the warrants to be $37,500 utilizing the Black-Scholes option pricing model and recorded this amount to issuance costs. 2017 Warrants In January 2017, the Company issued 480,000 warrants to purchase common stock to its investment banker in exchange for services rendered in conjunction with the Series D Preferred Stock financing. The warrants vest immediately and have an exercise price of $0.25 per share with a term of five years. The Company estimated the value of the warrants to be $115,200 utilizing the Black-Scholes option pricing model and recorded this amount to issuance costs. In February 2017, the Company entered into an agreement with one of its investors to provide advisory services on all matters including financing. In conjunction with this agreement, the Company issued warrants that vest immediately to purchase 125,000 shares of common stock with an exercise price of $0.41 per share with a term of five years. The Company estimated the warrant value to be $30,000 utilizing the Black-Scholes option pricing model and recorded this amount to general and administrative expense for the year due to the immediate vesting. 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, its warrant valuation could have been significantly different. Stock Option Plans: 2014 Omnibus Incentive Plan The 2014 Omnibus Incentive Plan (the “2014 Plan”) was adopted to provide a means by which officers, non-employee directors, and employees of and consultants to the Company and its affiliates could be given an opportunity to acquire an equity interest in the Company. All officers, non-employee directors, and employees of and consultants to the Company are eligible to participate in the 2014 Plan. On October 31, 2014, after the closing of the Merger, our Board of Directors approved the 2014 Plan. The 2014 Plan reserved 3,200,000 shares for future grants. As of December 31, 2017, options (net of canceled or expired options) covering an aggregate of 1,130,000 shares of the Company’s common stock had been granted under the 2014 Plan, and the Company had 1,130,000 options outstanding and 870,000 shares available for future grants under the 2014 Plan. Options granted under the 2014 Plan expire no later than 10 years from the date of grant. Options granted under the 2014 Plan may be either incentive or non-qualified stock options. For incentive and non-qualified stock option grants, the option price shall be at least 100% of the fair value on the date of grants, as determined by the Company’s Board of Directors. If at any time the Company grants an option, and the optionee directly or by attribution owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, the option price shall be at least 110% of the fair value and shall not be exercisable more than five years after the date of grant. Options granted under the 2014 Plan may be immediately exercisable if permitted in the specific grant approved by the Board of Directors and, if exercised early may be subject to repurchase provisions. The shares acquired generally vest over a period of five years from the date of grant. The Company granted options to purchase 1,130,000 shares net of cancellations and expirations through December 31, 2017 under the 2014 Plan. The following is a summary of activity under the 2014 Plan as of December 31, 2017: Shares Options Outstanding Available Weighted for Grant of Average Options & Number of Price per Exercise Shares Shares Share Price Balance at December 31, 2016 857,500 1,142,500 $ 0.42-3.00 $ 0.61 Options granted - - $ - $ - Options exercised - - $ - $ - Options cancelled 12,500 (12,500 ) $ 1.15 $ 1.15 Balance at December 31, 2017 870,000 1,130,000 $ 0.42-3.00 $ 0.60 Vested and Exercisable at December 31, 2017 662,000 $ 0.42-3.00 $ 0.54 The weighted-average remaining contractual term of options vested and exercisable at December 31, 2017 was approximately 6.89 years. The aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the stock options at December 31, 2017 for those stock options for which the quoted market price was in excess of the exercise price (“in-the-money options”). As of December 31, 2017, the aggregate intrinsic value of options outstanding was $0. As of December 31, 2017, 662,000 options to purchase shares of common stock were exercisable. Restricted Stock Awards Restricted stock awards (“RSAs”) are granted to our Board of Directors and members of senior management and are issued pursuant to the Company’s 2014 Omnibus Incentive Plan. On October 20, 2015, a total of 1,200,000 RSAs were granted to members of the Company’s senior management and Board of Directors with a fair market value of approximately $900,000. These RSAs vest from one to three years from the grant date as services are rendered to the Company. For the years ended December 31, 2017 and 2016, the Company recorded $262,500 and $356,250 during each period, in stock-based compensation expense related to these awards, as discussed below. The total amount of unrecognized compensation cost related to non-vested RSAs was $218,750 as of December 31, 2017. Stock-Based Compensation Expense The Company recognizes stock-based compensation expense based on the fair value of that portion of stock options that are ultimately expected to vest during the period. Stock-based compensation expense recognized in the consolidated statements of operations includes compensation expense for stock-based awards based on the estimated grant date fair value over the requisite service period. For the years ended December 31, 2017 and 2016, the Company recognized stock-based compensation expense of $608,680 and $706,368 (including compensation expense for RSAs discussed above) which was recorded as a general and administrative expense in the consolidated statements of operations. The total amount of unrecognized compensation cost related to non-vested stock options was $677,238 as of December 31, 2017. This amount will be recognized over a weighted average period of 1.9 years. |
Provision for Conversion of Pre
Provision for Conversion of Preferred Stock | 12 Months Ended |
Dec. 31, 2017 | |
Provision For Conversion Of Preferred Stock [Abstract] | |
Provision for Conversion of Preferred Stock | 5. Provision for Conversion of Preferred Stock Series B Preferred Stock Conversion Liability As of August 20, 2015, in connection with the Series B Preferred Stock financing, the Company recorded a liability related to down-round protection provided to the stockholders in the event that the Company would affect another sale or issuance of common stock, stock options or convertible securities with a price per share below $0.80. With the assistance of a third-party valuation specialist, the Company valued the conversion liability pursuant to the accounting guidance of ASC 820-10, Fair Value Measurement Derivatives and Hedging/Contracts in Entity’s Own Equity As of December 31, 2016, the Company engaged a third-party valuation specialist to re-measure the conversion liability to fair market value as of that date utilizing the same methodology previously performed. The derivative was classified as a current liability and was adjusted to $118,821 as of December 31, 2016. The change in fair market value was recorded as non-operating expense of $48,564 for the year ended December 31, 2016. As of December 31, 2017, the Company engaged a third-party valuation specialist to re-measure the conversion liability to fair market value as of that date utilizing the same methodology previously performed. The derivative was classified as a current liability and was adjusted to $6,715 as of December 31, 2017. The change in fair market value was recorded as non-operating income of $102,848 for the year ended December 31, 2017. Series F Preferred Stock Put Option Liability As of November 1 2017, in connection with the Series F Preferred Stock financing, the Company recorded a put option liability related to discretionary redemption provided to the stockholders in the event that the Company would undergo a subsequent financing that would result in a change in control. With the assistance of a third-party valuation specialist, the Company valued the conversion liability pursuant to the accounting guidance of ASC 820-10, Fair Value Measurement Derivatives and Hedging/Contracts in Entity’s Own Equity As of December 31, 2017, the Company engaged a third-party valuation specialist to re-measure the conversion liability to fair market value as of that date utilizing the same methodology previously performed. The derivative was classified as a current liability and was considered de minimus as of December 31, 2017. The change in fair market value was recorded as non-operating income of $103,364 for the year ended December 31, 2017. |
Series B Warrants
Series B Warrants | 12 Months Ended |
Dec. 31, 2017 | |
Series B Warrants [Abstract] | |
Series B Warrants | 6. Series B Warrants In conjunction with the Series B Preferred Stock financing, the Company issued 6,437,500 common stock warrants that are exercisable at a price of $1.15 per share and expire five years from the issuance date. The warrants were initially valued at $2,935,800 utilizing the Black-Scholes pricing model. The warrants are exercisable in cash or through a cashless exercise provision. The Series B warrants also have a “down-round” protection feature provided to the investors if the Company subsequently issues or sells any shares of common stock, stock options, or convertible securities at a price less than the exercise price of $1.15 per each warrant. The exercise price is automatically adjusted down to the price of the instrument being issued. In October 2016, as a result of the Series C Preferred Stock financing, the exercise price was adjusted to $0.40 and in December, 2016, as a result of the Series D Preferred Stock financing, the exercise price was adjusted to $0.25. In November 2017, as a result of the Series F Preferred Stock financing, the exercise price was adjusted to $0.15 and on December 28, 2017, the exercise price was adjusted to $0.10 after the company entered into a Secured Promissory Note for a convertible loan. The Company reviewed the classification of the warrants as liabilities or equity under the guidance of ASC 480-10, Distinguishing Liabilities from Equity Years Ended December 31, 2017 2016 Dividend yield 0.00 % 0.00 % Volatility factor 70.00 % 70.00 % Risk-free interest rate 1.39 % 1.616 Expected term (years) 0.25 3.63 Weighted-average fair value of warrants $ 0.15 $ 0.13 This resulted in a warrant value of $551,322 as of December 31, 2017. The change in fair market value at the re-measurement date was recorded as non-operating income totaling $560,986 for the year ended December 31, 2017. The Company performed the same valuation as of December 31, 2016, utilizing the same methodology. This resulted in a warrant value of $1,112,308 as of December 31, 2016. The change in fair market value at the re-measurement date was recorded as non-operating income totaling $1,342,651 for the year ended December 31, 2016. |
Convertible Bridge Loan
Convertible Bridge Loan | 12 Months Ended |
Dec. 31, 2017 | |
Convertible Bridge Loan [Abstract] | |
Convertible Bridge Loan | 7. Convertible Bridge Loan On December 28, 2017, the Company entered into a Secured Promissory Note and Security Agreement for a convertible loan with Emerald Health Sciences, Inc. (“Emerald”). The bridge loan provides for aggregate gross proceeds to Nemus of up to $900,000 and is secured by all of Nemus’ assets. Nemus received proceeds of $500,000 on December 28, 2017 and the bridge loan provides for the funding of the remaining $400,000 subject to certain conditions as described in Note 9 below. The bridge loan bears interest at 12% per annum and matures on June 30, 2018 unless earlier converted into Nemus common stock. The initial conversion price is $0.10 per share. In connection with the convertible bridge loan financing, the Company recorded a liability related to the conversion option of the bridge loan into the Company’s common stock stock due to a down-round protection feature present in the loan agreement. The Company valued the conversion liability pursuant to the accounting guidance of ASC 820-10, Fair Value Measurement |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 8. Income Taxes Under the FASB’s accounting guidance related to income tax positions, among other things, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, the guidance provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on the Company’s Balance Sheets at December 31, 2017 and 2016, and has not recognized interest and/or penalties in the statement of operations for the year ended December 31, 2017. The Company has no uncertain tax positions as of December 31, 2017. The Company is subject to taxation in the United States and California. The Company’s tax years for 2013 (federal) and 2012 (California) and forward are subject to examination by the United States and California tax authorities. On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”). The Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and business. For businesses, the Act reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January 1, 2018. As a result of the rate reduction, the Company has reduced the deferred tax asset balance as of December 31, 2017 by $1,831,504. As a result of the full valuation allowance on the net deferred tax assets, there was a corresponding adjustment to the valuation allowance for this same amount. Therefore, there is no impact on the Company’s 2017 earnings for the law change. Due to the uncertainties which currently exist in the interpretation of the provisions of the Tax Cuts and Jobs Act of 2017 regarding Internal Revenue Code Section 162(m), the Company has not evaluated all of the potential impacts as amended by the Tax Cuts and Jobs Act of 2017 on its financial statements. The SEC has issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, the Company has determined that there is no deferred tax benefit or expense with respect to the re-measurement of certain deferred tax assets and liabilities due to the full valuation allowance against net deferred tax assets. Additional analysis of the law and the impact to the Company will be performed and any impact will be recorded in the respective quarter in 2018. At December 31, 2017, the Company had federal and California net operating loss carry forwards (‘NOLs’) aggregating $13,213,110 and $13,208,310 respectively, which, if not used, it will begin to expire from 2035. The utilization of these NOLs may become subject to limitations based on past and future changes in ownership of the Company pursuant to Internal Revenue Code 382. The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred income tax assets are as follows: As of December 31, 2017 2016 Current deferred tax assets/(liabilities): State taxes $ 336 $ 560 Capitalized research and development costs 22,717 51,118 Accrual to cash adjustment - - Other 295,265 250,284 Net operating loss 3,697,169 4,057,846 Gross deferred tax assets 4,015,487 4,359,808 Valuation allowance (4,015,487 ) (4,359,808 ) Total deferred tax assets $ - $ - The provision for income taxes on earnings subject to income taxes differs from the statutory Federal rate at December 31, 2017 and 2016, due to the following: As of December 31, 2017 2016 Expected income tax benefit at federal statutory tax rate $ (1,082,444 ) $ (1,111,773 ) State income taxes, net of federal benefit (208,619 ) (241,899 ) Change in fair value of warrant (268,519 ) (452,930 ) Change in valuation allowance (344,321 ) 1,720,620 Stock Compensation 73,881 83,332 Other Perm Difference 12 4,250 Tax Cuts and Jobs Act 1,831,610 - Provision for Income Taxes $ 1,600 $ 1,600 The Company records a valuation allowance against deferred tax assets to the extent that it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Due to the substantial doubt related to the Company’s ability to utilize its deferred tax assets, a valuation allowance for the full amount of the deferred tax assets has been established at December 31, 2017. As a result of this valuation allowance, there are no income tax benefits reflected in the accompanying statement of operations to offset pre-tax losses. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | 9. Subsequent Events Emerald Financing and Change in Control On January 19, 2018, the Company received the remaining $400,000 in funding under the Secured Promissory Note for a convertible loan (discussed in Note 7 above) as it had satisfied the conditions of the funding which required receipt of conversion notices from all the existing Series B shareholders to convert their preferred shares to common stock. These conversions occurred in January and February of 2018. In addition, the Company entered into a Securities Purchase Agreement in which the Company sold to Emerald 15,000,000 shares of common stock and a warrant to purchase 20,400,000 shares of common stock at an exercise price of $0.10 for aggregate gross proceeds of $1,500,000. This transaction also resulted in the conversion of the $900,000 bridge loan (discussed in note 7 above) at $0.10 per share to 9,000,000 shares of common stock and represented the first of two closings under the agreement. Upon this first closing, Emerald owns a majority of the equity interest in Nemus resulting in a change in control. The current Board members, with the exception of Dr. Brian Murphy, the Company’s CEO/CMO, have tendered their resignation and Emerald has appointed its nominees to the new Board. Emerald Second Closing As previously disclosed, on January 19, 2018 the Company entered into a Securities Purchase Agreement with Emerald Health Sciences Inc. The second closing under the Agreement occurred on February 16, 2018, pursuant to which Nemus issued and sold to Emerald 15,000,000 shares of Nemus’ common stock, par value $0.001 per share, 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 and 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, for aggregate gross proceeds of $1,750,000. Restricted Stock Awards On January 18, 2018, the Company entered into Restricted Stock Agreements with each of Dr. Murphy, Elizabeth Berecz, CFO, and Cosmas N. Lykos, the Company’s Founder granting 900,000, 700,000, and 900,000 shares of restricted common stock, respectively. The restricted stock vests in equal 50% installments on the first and second anniversaries of the grant date, subject to continued employment with Nemus through the applicable vesting date. Each Restricted Stock Agreement provides that if an executive’s employment or service is terminated by us without cause, or is terminated by the grantee for good reason, then the executive shall be entitled to receive a cash severance payment equal to six months of their base compensation, payable in substantially equal installments during the six-month period following the termination date. K2C Independent Contractor Termination Agreement In February 2018, we entered into separation and release agreement with K2C, which provided for a lump sum payment of One Hundred Eighty Thousand Dollars ($180,000) and the immediate vesting of 900,000 shares of restricted common stock granted pursuant to the Restricted Stock Agreement, 325,000 shares of restricted common stock granted on October 20, 2015, 125,000 options granted on November 21, 2014, and 1,110,000 shares of common stock pursuant to the common stock purchase warrant agreement dated June 20, 2013, in exchange for a release of claims and certain other agreements. |
Nature of Operations, Busines18
Nature of Operations, Business Activities and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. Such estimates and judgments are utilized for stock-based compensation expense and equity securities with embedded features as discussed below. |
Liquidity and Going Concern | Liquidity and Going Concern The Company has incurred operating losses and negative cash flows from operations since our inception. As of December 31, 2017, we had cash and cash equivalents of $259,955. In January 2018, the Company received a second payment totaling $400,000 from a convertible bridge loan and completed the first closing of a common stock financing for gross proceeds totaling $1,500,000 (see note 9). In February 2018, the Company completed the final closing of its common stock financing for additional proceeds of $1,750,000 (see note 9). The Company anticipates that it will continue to incur net losses into the foreseeable future in order to advance and develop a number of potential drug candidates into preclinical development activities and support its corporate infrastructure which includes the costs associated with being a public company. Without additional funding, management believes that the Company will not have sufficient funds to meet its obligations within one year after the date the consolidated financial statements were issued. These conditions give rise to substantial doubt as to the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s continued existence is dependent on its ability to raise additional sufficient funding to cover operating expenses and to invest in operations and development activities. The Company plans to continue to pursue funding through public or private equity or debt financings, strategic collaborations, licensing arrangements, asset sales, government grants or other arrangements. However, the Company cannot provide any assurances that such additional funds will be available on reasonable terms, or at all. If the Company raises additional funds by issuing equity securities, substantial dilution to existing stockholders would result. If the Company is unable to secure adequate additional funding, the Company may be forced to reduce spending, extend payment terms with suppliers, liquidate assets where possible, suspend or curtail planned programs or cease operations. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of those investments approximates their fair market value due to their short maturity and liquidity. Cash and cash equivalents include cash on hand and amounts on deposit with financial institutions, which amounts may at times exceed federally insured limits. The Company has not experienced any losses on such accounts and does not believe it is exposed to any significant credit risk. |
Restricted Cash | Restricted Cash A deposit of $4,428 as of December 31, 2017 and $37,500 as of December 31, 2016 was restricted from withdrawal and held by a bank in the form of a certificate of deposit. This certificate serves as collateral for payment of the Company’s credit cards. |
Fair Value Measurements | Fair Value Measurements Certain assets and liabilities are carried at fair value under U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, is used to measure fair value: Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources such as quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The carrying values of our financial instruments, including, cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses approximate their fair value due to the short maturities of these financial instruments. The Series B warrant liability, put option, and the conversion liabilities for the Series B Preferred Stock, Series F Preferred Stock and the convertible bridge loan were valued utilizing Level 3 inputs primarily from a third party independent appraisal conducted as of December 31, 2017. |
Property and Equipment, Net | Property and Equipment, Net As of December 31, 2017 and 2016, property and equipment, net, was $1,407 and $9,584 respectively, consisting primarily of computers and equipment. Expenditures for additions, renewals and improvements will be capitalized at cost. Depreciation will generally be computed on a straight-line method based on the estimated useful life of the related assets currently ranging from two to three years. Maintenance and repairs that do not extend the life of assets are charged to expense when incurred. When properties are disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reported in the period the transaction takes place. Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted cash flows expected to be generated by the asset. If the carrying amount exceeds its estimated future undiscounted cash flows, an impairment charge is recognized by the amount by which the carrying amount exceeds the fair value of the asset. The costs incurred for the rights to use licensed technologies in the research and development process, including licensing fees and milestone payments, will be charged to research and development expense as incurred in situations where the Company has not identified an alternative future use for the acquired rights, and are capitalized in situations where there is an identified alternative future use. No cost associated with the use of licensed technologies has been capitalized to date. |
Income Taxes | Income Taxes The Company accounts for deferred income tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities, and net operating loss carry forwards (the “NOLs”) and other tax credit carry forwards. These items are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date. Any interest or penalties would be recorded in the Company’s statement of operations in the period incurred. The Company records a valuation allowance to reduce the deferred income tax assets to the amount that is more likely than not to be realized. In making such determinations, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. As a result, there are no income tax benefits reflected in the statement of operations to offset pre-tax losses. The Company recognizes a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position. |
Convertible Instruments | Convertible Instruments We account for hybrid contracts that feature conversion options in accordance with generally accepted accounting principles in the United States. ASC 815, Derivatives and Hedging Activities Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument. We account for convertible instruments when we have determined that the embedded conversion options should not be bifurcated from their host instruments, in accordance with ASC 470-20, Debt with Conversion and Other Options We also follow ASC 480-10, Distinguishing Liabilities from Equity |
Warrants Issued in Connection with Financings | Warrants Issued in Connection with Financings We generally account for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that we may need to settle the warrants in cash. For warrants issued with a conditional obligation to issue a variable number of shares or the deemed possibility of a cash settlement, we record the fair value of the warrants as a liability at each balance sheet date and record changes in fair value in other (income) expense in the Consolidated Statements of Operations. |
Revenue Recognition | Revenue Recognition The Company has not begun planned principal operations and has not generated any revenue since inception. |
Research and Development Expenses | Research and Development Expenses Research and development (“R&D”) costs are expensed when incurred. These costs may consist of external research and development expenses incurred under agreements with third-party contract research organizations and investigative sites, third-party manufacturing organizations and consultants; license fees; employee-related expenses, which include salaries, benefits and stock-based compensation for the personnel involved in our preclinical and clinical drug development activities; and facilities expense, depreciation and other allocated expenses; and equipment and laboratory supplies. |
Stock-Based Compensation Expenses | Stock-Based Compensation Expenses Stock-based compensation cost is estimated at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over the vesting period. We use the Black-Scholes option pricing model for estimating the grant date fair value of stock options and warrants using the following assumptions: · Exercise price - We determined the exercise price based on valuations using the best information available to management at the time of the valuations. · Volatility - We estimate the stock price volatility based on industry peers who are also in the early development stage given the limited market data available in the public arena. · Expected term - The expected term is based on a simplified method which defines the life as the weighted average of the contractual term of the options and warrants and the weighted-average vesting period for all open awards. · Risk-free rate - The risk-free interest rate for the expected term of the option or warrant is based on the average market rate on U.S. treasury securities in effect during the period in which the awards were granted. · Dividends - The dividend yield assumption is based on our history and expectation of paying no dividends. |
Stock-Based Compensation for Non-Employees | Stock-Based Compensation for Non-Employees The Company accounts for warrants and options issued to non-employees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 505-50, Equity - Equity Based Payments to Non-Employees, |
Segment Information | Segment Information FASB ASC No. 280, Segment Reporting |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company is required to record all components of comprehensive income (loss) in the consolidated financial statements in the period in which they are recognized. Net income (loss) and other comprehensive income (loss), net of their related tax effect, arrived at a comprehensive income (loss). For the years ended December 31, 2017 and 2016, the comprehensive income (loss) was equal to the net income (loss). |
Earnings per share | Earnings per share The Company applies FASB ASC No. 260, Earnings per Share |
Recent accounting pronouncements | Recent accounting pronouncements In February 2016, the FASB issued ASU No. 2016-02 Leases In August 2016, the FASB issued Accounting Standards Update No. 2016-15 Statement of Cash Flows 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 |
Stockholders' Deficit and Red19
Stockholders' Deficit and Redeemable Convertible Series B and Convertible Series C, D and F Preferred Stock (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Schedule of warrants vested and outstanding | Amount Exercise Term Issued and Source Price (Years) Outstanding Pre 2015 Common Stock Warrants $ 1.00 6-10 4,000,000 2015 Common Stock Warrants $ 1.15-$5.00 5-10 442,000 2015 Series B Financing (see Note 6) Common Stock Warrants to Series B Stockholders $ 0.25 5 6,250,000 Placement Agent Warrants $ 0.25 5 187,500 2016 Common Stock Warrants to Service Providers $ 1.15 10 40,000 2016 Series C Placement Agent Warrants $ 0.40 5 125,000 2017 Series D Placement Agent Warrants $ 0.25 5 480,000 2017 Common Stock Warrants to Service Provider $ 0.41 5 125,000 Total warrants vested and outstanding as of December 31, 2017 11,649,500 |
Schedule of summary of stock option activity | Shares Options Outstanding Available Weighted for Grant of Average Options & Number of Price per Exercise Shares Shares Share Price Balance at December 31, 2016 857,500 1,142,500 $ 0.42-3.00 $ 0.61 Options granted - - $ - $ - Options exercised - - $ - $ - Options cancelled 12,500 (12,500 ) $ 1.15 $ 1.15 Balance at December 31, 2017 870,000 1,130,000 $ 0.42-3.00 $ 0.60 Vested and Exercisable at December 31, 2017 662,000 $ 0.42-3.00 $ 0.54 |
Series B Warrants (Tables)
Series B Warrants (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Series B Warrants [Abstract] | |
Schedule of Series B Warrants | Years Ended December 31, 2017 2016 Dividend yield 0.00 % 0.00 % Volatility factor 70.00 % 70.00 % Risk-free interest rate 1.39 % 1.616 Expected term (years) 0.25 3.63 Weighted-average fair value of warrants $ 0.15 $ 0.13 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule for significant portions of deferred income tax assets | As of December 31, 2017 2016 Current deferred tax assets/(liabilities): State taxes $ 336 $ 560 Capitalized research and development costs 22,717 51,118 Accrual to cash adjustment - - Other 295,265 250,284 Net operating loss 3,697,169 4,057,846 Gross deferred tax assets 4,015,487 4,359,808 Valuation allowance (4,015,487 ) (4,359,808 ) Total deferred tax assets $ - $ - |
Schedule of provision for income taxes on earnings subject to income taxes differs from the statutory Federal rate | As of December 31, 2017 2016 Expected income tax benefit at federal statutory tax rate $ (1,082,444 ) $ (1,111,773 ) State income taxes, net of federal benefit (208,619 ) (241,899 ) Change in fair value of warrant (268,519 ) (452,930 ) Change in valuation allowance (344,321 ) 1,720,620 Stock Compensation 73,881 83,332 Other Perm Difference 12 4,250 Tax Cuts and Jobs Act 1,831,610 - Provision for Income Taxes $ 1,600 $ 1,600 |
Nature of Operations, Busines22
Nature of Operations, Business Activities and Summary of Significant Accounting Policies (Detail Textuals) - USD ($) | 1 Months Ended | 12 Months Ended | |||
Jan. 19, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Aug. 20, 2015 | |
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Cash and cash equivalents | $ 259,955 | $ 64,820 | $ 3,221,209 | ||
Restricted cash | 4,428 | 37,500 | |||
Property and equipment, net | $ 1,407 | 9,584 | |||
Property, plant and equipment, depreciation methods | Straight-line method | ||||
Proceeds from common stock issuance | $ 407,669 | ||||
Warrants | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Anti-dilutive excluded from the calculation of diluted loss per common share | 11,649,500 | 11,044,500 | |||
Stock Option | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Anti-dilutive excluded from the calculation of diluted loss per common share | 1,130,000 | 1,142,500 | |||
Series B Preferred Stock | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Number of preferred stock | 2,833.55 | 4,031 | |||
Preferred stock shares convertible into common stock | 28,335,500 | 16,124,000 | |||
Shares issued, price per share (in dollars per share) | $ 0.25 | $ 0.80 | |||
Series D Preferred Stock | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Number of preferred stock | 200 | ||||
Preferred stock shares convertible into common stock | 2,000,000 | ||||
Shares issued, price per share (in dollars per share) | $ 0.10 | ||||
Redeemable Convertible Series F Preferred Stock | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Number of preferred stock | 2,000 | ||||
Preferred stock shares convertible into common stock | 20,000,000 | ||||
Shares issued, price per share (in dollars per share) | $ 0.10 | ||||
Emerald Health Sciences Inc | Securities purchase agreement | Subsequent Event | |||||
Nature of Operations, Business Activities and Summary of Significant Accounting Policies [Line Items] | |||||
Shares issued, price per share (in dollars per share) | $ 0.10 | ||||
Payments received from convertible bridge loan | $ 400,000 | ||||
Proceeds from common stock issuance | $ 1,500,000 |
University of Mississippi Agr23
University of Mississippi Agreements (Detail Textuals) - University of Mississippi | Feb. 01, 2017USD ($) | Jan. 10, 2017USD ($) | Dec. 14, 2015USD ($)License_agreement | Oct. 15, 2014USD ($) | Sep. 29, 2014USD ($)License_agreement | Jul. 31, 2013 |
University Of Mississippi Agreements [Line Items] | ||||||
Term of agreement | 5 years | |||||
Notice period for termination | 3 months | |||||
UM 5050 pro-drug agreements | Intellectual Property | ||||||
University Of Mississippi Agreements [Line Items] | ||||||
Number of license agreements | License_agreement | 3 | |||||
Notice period for termination | 60 days | |||||
Annual fees for license agreement | $ 25,000 | |||||
Aggregate milestone payments if milestones achieved | $ 2,100,000 | |||||
UM 5050 pro-drug agreements | Intellectual Property | October 2014 | ||||||
University Of Mississippi Agreements [Line Items] | ||||||
One time up front payment | $ 10,000 | |||||
UM 8930 analogue agreements | Intellectual Property | ||||||
University Of Mississippi Agreements [Line Items] | ||||||
Number of license agreements | License_agreement | 2 | |||||
Notice period for termination | 60 days | |||||
Annual fees for license agreement | $ 25,000 | |||||
Aggregate milestone payments if milestones achieved | 1,400,000 | |||||
UM 8930 analogue agreements | Intellectual Property | December 2015 | ||||||
University Of Mississippi Agreements [Line Items] | ||||||
One time up front payment | $ 10,000 | |||||
UM 5070 license agreement | Intellectual Property | ||||||
University Of Mississippi Agreements [Line Items] | ||||||
Notice period for termination | 60 days | |||||
One time up front payment | $ 65,000 | |||||
Annual fees for license agreement | $ 25,000 | |||||
Aggregate milestone payments if milestones achieved | $ 700,000 |
Commitments and Contingencies (
Commitments and Contingencies (Detail Textuals) | Jul. 12, 2017USD ($) | May 03, 2017USD ($)$ / sharesshares | Apr. 01, 2017USD ($) | Feb. 05, 2016USD ($) | Nov. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Nov. 30, 2015USD ($) | Oct. 31, 2014USD ($)ft² | Sep. 30, 2014USD ($) | Dec. 31, 2017USD ($)shares | Dec. 31, 2016USD ($) |
Operating Leased Assets [Line Items] | |||||||||||
Rent expense | $ 32,128 | $ 7,559 | $ 9,267 | $ 253,437 | $ 302,419 | ||||||
Lease expenses per month | $ 300 | ||||||||||
Value of furniture lease payment | 19,654 | ||||||||||
Loss on disposal of fixed assets | $ 1,650 | $ 1,788 | |||||||||
Preferred stock, shares authorized | shares | 20,000,000 | ||||||||||
Series E Preferred Stock | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Preferred stock, shares authorized | shares | 1,000,000 | ||||||||||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | ||||||||||
Shares issued, price per share (in dollars per share) | $ / shares | $ 20 | ||||||||||
Aggregate gross proceeds | $ 20,000,000 | ||||||||||
Guarantor failed to pay within 90 days of notice of purchaser | $ 20,000,000 | ||||||||||
Lease Agreement | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Area of corporate office headquarters | ft² | 4,087 | ||||||||||
Rent expense | $ 5,373 | ||||||||||
Letter agreement ("Agreement") | Contract manufacturing organization ("CMO") | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Fees and expenses for the initial evaluation and development | $ 0 | 260,244 | |||||||||
Estimated analytical method development and qualification | $ 142,900 | ||||||||||
Letter agreement ("Agreement") | Contract manufacturing organization ("CMO") | Minimum | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Fees and expenses for the initial evaluation and development | 154,000 | ||||||||||
Letter agreement ("Agreement") | Contract manufacturing organization ("CMO") | Maximum | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Fees and expenses for the initial evaluation and development | $ 183,000 | ||||||||||
Independent contractor agreement | K2C, Inc. | |||||||||||
Operating Leased Assets [Line Items] | |||||||||||
Monthly fee | $ 20,000 | $ 10,000 | |||||||||
Terms of agreement renewed | 1 year | ||||||||||
Total expense incurred under agreement | $ 210,000 | $ 120,000 |
Stockholders' Deficit and Red25
Stockholders' Deficit and Redeemable Convertible Series B and Convertible Series C, D and F Preferred Stock (Details ) | 12 Months Ended |
Dec. 31, 2017USD ($)$ / shares | |
Class of Warrant or Right [Line Items] | |
Warrants vested and outstanding | $ | $ 11,649,500 |
Pre 2015 Common Stock Warrants | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 1 |
Warrants vested and outstanding | $ | $ 4,000,000 |
Pre 2015 Common Stock Warrants | Minimum | |
Class of Warrant or Right [Line Items] | |
Term of warrant | 6 years |
Pre 2015 Common Stock Warrants | Maximum | |
Class of Warrant or Right [Line Items] | |
Term of warrant | 10 years |
2015 Common Stock Warrants | |
Class of Warrant or Right [Line Items] | |
Warrants vested and outstanding | $ | $ 442,000 |
2015 Common Stock Warrants | Minimum | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 1.15 |
Term of warrant | 5 years |
2015 Common Stock Warrants | Maximum | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 5 |
Term of warrant | 10 years |
2015 series B financing Common Stock Warrants to Series B Stockholders | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0.25 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 6,250,000 |
2015 Series B financing Placement Agent Warrants | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0.25 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 187,500 |
2016 Common Stock Warrants to Service Providers | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 1.15 |
Term of warrant | 10 years |
Warrants vested and outstanding | $ | $ 40,000 |
2016 Series C Placement Agent Warrants | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0.40 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 125,000 |
2017 Series D Placement Agent Warrants | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0.25 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 480,000 |
2017 Common Stock Warrants to Service Provider | |
Class of Warrant or Right [Line Items] | |
Warrant exercise price | $ / shares | $ 0.41 |
Term of warrant | 5 years |
Warrants vested and outstanding | $ | $ 125,000 |
Stockholders' Deficit and Red26
Stockholders' Deficit and Redeemable Convertible Series B and Convertible Series C, D and F Preferred Stock (Details 1) - Stock Option - Omnibus Incentive Plan 2014 | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Shares Available for Grant of Option's & Shares | |
Balance at the beginning | shares | 857,500 |
Options & shares granted | shares | 0 |
Options & shares exercised | shares | 0 |
Options & shares cancelled | shares | 12,500 |
Balance at the ending | shares | 870,000 |
Number of Shares | |
Balance at the beginning | shares | 1,142,500 |
Options granted | shares | 0 |
Options exercised | shares | 0 |
Options cancelled | shares | (12,500) |
Balance at the ending | shares | 1,130,000 |
Vested and Exercisable at December 31, 2017 | shares | 662,000 |
Price Per Share | |
Options granted | $ 0 |
Options exercised | 0 |
Options cancelled | 1.15 |
Weighted Average Exercise Price | |
Balance at the beginning | 0.61 |
Options granted | 0 |
Options exercised | 0 |
Options cancelled | 1.15 |
Balance at the ending | 0.60 |
Vested and Exercisable at December 31, 2017 | 0.54 |
Minimum | |
Price Per Share | |
Balance at the beginning | 0.42 |
Balance at the ending | 0.42 |
Vested and Exercisable at December 31, 2017 | 0.42 |
Maximum | |
Price Per Share | |
Balance at the beginning | 3 |
Balance at the ending | 3 |
Vested and Exercisable at December 31, 2017 | $ 3 |
Stockholders' Deficit and Red27
Stockholders' Deficit and Redeemable Convertible Series B and Convertible Series C, D and F Preferred Stock (Detail Textuals) - USD ($) | Nov. 01, 2017 | Jan. 31, 2017 | Dec. 31, 2016 | Dec. 28, 2017 | Nov. 30, 2017 | Oct. 31, 2017 | Feb. 28, 2017 | Jan. 31, 2017 | Dec. 29, 2016 | Nov. 30, 2016 | Oct. 31, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Aug. 31, 2015 | Dec. 31, 2017 | Dec. 27, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | May 03, 2017 | Aug. 20, 2015 |
Equity [Line Items] | |||||||||||||||||||||||
Research and development expense | $ 311,302 | $ 939,040 | |||||||||||||||||||||
General and administrative expense | $ 187,550 | $ 3,547,927 | $ 3,531,540 | ||||||||||||||||||||
Par value of common stock issued (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||||||
Preferred stock, shares authorized | 20,000,000 | 20,000,000 | 20,000,000 | ||||||||||||||||||||
Beneficial conversion feature upon issuance of Series C Preferred Stock | $ 175,000 | $ 325,000 | |||||||||||||||||||||
Series B Preferred Stock | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ 0.25 | $ 0.15 | $ 0.25 | ||||||||||||||||||||
Number of preferred stock and warrants sold | 5,000 | ||||||||||||||||||||||
Conversion price | $ 0.15 | $ 0.10 | $ 0.25 | $ 0.40 | $ 0.80 | $ 0.15 | $ 0.15 | $ 0.25 | |||||||||||||||
Reduction of conversion price of preferred stock | 0.15 | 0.25 | |||||||||||||||||||||
Number of shares converted | 777.125 | 8 | 500 | 18,890,333 | 420.325 | 461 | 1,197.45 | ||||||||||||||||
Number of shares issued in conversion | 3,108,500 | 10,000 | 625,000 | 2,802,167 | 1,152,500 | 5,910,666 | |||||||||||||||||
Proceeds from issuance of preferred stock and warrants | $ 5,000,000 | ||||||||||||||||||||||
Preferred stock, conversion rate | 4000:1 | 1,250:1 | 6666.67:1 | 2,500:1 | |||||||||||||||||||
Liquidation preference value | $ 2,833,550 | $ 2,833,550 | $ 2,833,550 | $ 2,833,550 | |||||||||||||||||||
Aggregate purchase price | $ 1,000 | ||||||||||||||||||||||
Percentage of conversion amount | 115.00% | ||||||||||||||||||||||
Value of final judgment rendered against company | $ 100,000 | ||||||||||||||||||||||
Shares issued, price per share (in dollars per share) | 0.25 | $ 0.25 | $ 0.25 | $ 0.80 | |||||||||||||||||||
Convertible Series C Preferred Stock | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ 0.40 | ||||||||||||||||||||||
Number of preferred stock and warrants sold | 500 | ||||||||||||||||||||||
Conversion price | $ 0.25 | $ 0.40 | $ 0.25 | $ 0.40 | |||||||||||||||||||
Reduction of conversion price of preferred stock | $ 0.25 | ||||||||||||||||||||||
Number of shares converted | 75 | 386 | 39 | ||||||||||||||||||||
Number of shares issued in conversion | 300,000 | 1,544,000 | 97,500 | ||||||||||||||||||||
Proceeds from issuance of preferred stock and warrants | $ 500,000 | ||||||||||||||||||||||
Preferred stock, conversion rate | 4000:1 | ||||||||||||||||||||||
Beneficial conversion feature upon issuance of Series C Preferred Stock | $ 325,000 | ||||||||||||||||||||||
Aggregate purchase price | $ 1,000 | ||||||||||||||||||||||
Number of common stock issued upon conversion of preferred stock | 2,500 | ||||||||||||||||||||||
Liquidation provision common stock equivalent shares | 1,250,000 | ||||||||||||||||||||||
Convertible Series D Preferred Stock | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ 0.25 | $ 0.25 | $ 0.25 | $ 0.25 | |||||||||||||||||||
Number of preferred stock and warrants sold | 1,200 | ||||||||||||||||||||||
Conversion price | $ 0.15 | $ 0.25 | 0.10 | $ 0.25 | |||||||||||||||||||
Reduction of conversion price of preferred stock | 0.15 | ||||||||||||||||||||||
Number of shares converted | 1,000 | ||||||||||||||||||||||
Number of shares issued in conversion | 4,000,000 | ||||||||||||||||||||||
Proceeds from issuance of preferred stock and warrants | $ 1,200,000 | ||||||||||||||||||||||
Preferred stock, conversion rate | 4000:1 | ||||||||||||||||||||||
Beneficial conversion feature upon issuance of Series C Preferred Stock | $ 536,000 | $ 175,000 | |||||||||||||||||||||
Aggregate purchase price | $ 1,000 | ||||||||||||||||||||||
Number of common stock issued upon conversion of preferred stock | 4,000 | ||||||||||||||||||||||
Liquidation provision common stock equivalent shares | 800,000 | ||||||||||||||||||||||
Liquidation provision common stock equivalent value | $ 200,000 | ||||||||||||||||||||||
Shares issued, price per share (in dollars per share) | $ 0.10 | $ 0.10 | $ 0.10 | ||||||||||||||||||||
Series E Preferred Stock | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Preferred stock, shares authorized | 1,000,000 | ||||||||||||||||||||||
Preferred stock, par value (in dollars per share) | $ 0.001 | ||||||||||||||||||||||
Shares issued, price per share (in dollars per share) | $ 20 | ||||||||||||||||||||||
Redeemable Convertible Series F Preferred Stock | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Warrant exercise price (in dollars per share) | 0.10 | $ 0.15 | |||||||||||||||||||||
Number of preferred stock and warrants sold | 2,000 | ||||||||||||||||||||||
Conversion price | $ 0.10 | $ 0.15 | 0.15 | ||||||||||||||||||||
Proceeds from issuance of preferred stock and warrants | $ 2,000,000 | ||||||||||||||||||||||
Beneficial conversion feature upon issuance of Series C Preferred Stock | $ 333,333 | ||||||||||||||||||||||
Aggregate purchase price | $ 1,000 | ||||||||||||||||||||||
Percentage of conversion amount | 130.00% | ||||||||||||||||||||||
Value of final judgment rendered against company | $ 100,000 | ||||||||||||||||||||||
Number of common stock issued upon conversion of preferred stock | 6,666.67 | ||||||||||||||||||||||
Shares issued, price per share (in dollars per share) | $ 0.10 | $ 0.10 | $ 0.10 | ||||||||||||||||||||
Percentage of shares to be redeemed | 150.00% | ||||||||||||||||||||||
Proceeds from triggering transaction | $ 6,000,000 | ||||||||||||||||||||||
Redemption amount percentage | 50.00% | ||||||||||||||||||||||
Technology license agreement | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Common stock issued for services (in shares) | 100,000 | ||||||||||||||||||||||
Research and development expense | $ 50,000 | ||||||||||||||||||||||
Warrants | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Number of shares called by warrants | 125,000 | 40,000 | 6,250,000 | ||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ 0.41 | $ 1.15 | |||||||||||||||||||||
Term of warrant | 10 years | 10 years | |||||||||||||||||||||
Value of common stock called by warrants | $ 30,000 | $ 18,400 | |||||||||||||||||||||
Warrants | Series B Preferred Stock | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ 1.15 | ||||||||||||||||||||||
Term of warrant | 5 years | ||||||||||||||||||||||
Warrants | Convertible Series C Preferred Stock | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Number of shares called by warrants | 125,000 | ||||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ 0.40 | ||||||||||||||||||||||
Term of warrant | 5 years | ||||||||||||||||||||||
Value of common stock called by warrants | $ 37,500 | ||||||||||||||||||||||
Warrants | Convertible Series D Preferred Stock | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Number of shares called by warrants | 480,000 | 480,000 | |||||||||||||||||||||
Warrant exercise price (in dollars per share) | $ 0.25 | $ 0.25 | |||||||||||||||||||||
Value of common stock called by warrants | $ 115,200 | $ 115,200 | |||||||||||||||||||||
Common Stock | |||||||||||||||||||||||
Equity [Line Items] | |||||||||||||||||||||||
Common stock issued for services (in shares) | 605,000 | ||||||||||||||||||||||
Conversion price | $ 0.80 | ||||||||||||||||||||||
Number of shares converted | 1,250 |
Stockholders' Deficit and Red28
Stockholders' Deficit and Redeemable Convertible Series B and Convertible Series C, D and F Preferred Stock (Detail Textuals 1) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Oct. 20, 2015 | Oct. 31, 2014 | Dec. 31, 2017 | Dec. 31, 2016 | |
Equity [Line Items] | ||||
Total amount of unrecognized compensation cost related to non-vested stock options | $ 677,238 | |||
Recognized period of non-vested stock options | 1 year 10 months 24 days | |||
General and administrative expense | ||||
Equity [Line Items] | ||||
Recognized stock-based compensation expense | $ 608,680 | $ 706,368 | ||
Omnibus Incentive Plan 2014 | Stock Option | ||||
Equity [Line Items] | ||||
Number of shares reserved for future grants | 3,200,000 | |||
Aggregate number of shares granted | 0 | |||
Number of shares available for future grant | 870,000 | |||
Expiry period of options granted | 10 years | |||
Percentage of option price at least of fair value on date of grants | 100.00% | |||
Voting percentage of common stock | 10.00% | |||
Percentage of fair value option price at date of grants | 110.00% | |||
Maximum exercisable period of fair value of option | 5 years | |||
Vested period of shares | 5 years | |||
Weighted average remaining contractual term of options vested and exercisable (in years) | 6 years 10 months 21 days | |||
Options to purchase shares of common stock, exercisable | 662,000 | |||
Options outstanding | 1,130,000 | 1,130,000 | 1,142,500 | |
Aggregate intrinsic value of options outstanding | $ 0 | |||
Omnibus Incentive Plan 2014 | Restricted stock awards | ||||
Equity [Line Items] | ||||
Recognized stock-based compensation expense | 262,500 | $ 356,250 | ||
Total amount of unrecognized compensation cost related to non-vested stock options | $ 218,750 | |||
Omnibus Incentive Plan 2014 | Restricted stock awards | Senior management and board of directors | ||||
Equity [Line Items] | ||||
Number of restricted stock awards granted | $ 1,200,000 | |||
Fair market value of shares granted | $ 900,000 | |||
Omnibus Incentive Plan 2014 | Restricted stock awards | Minimum | Senior management and board of directors | ||||
Equity [Line Items] | ||||
Vested period of shares | 1 year | |||
Omnibus Incentive Plan 2014 | Restricted stock awards | Maximum | Senior management and board of directors | ||||
Equity [Line Items] | ||||
Vested period of shares | 3 years |
Provision for Conversion of P29
Provision for Conversion of Preferred Stock (Detail Textuals) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2017 | Dec. 31, 2016 | Nov. 01, 2017 | Dec. 31, 2015 | Aug. 20, 2015 | |
Series B Preferred Stock Conversion Liability | |||||
Conversion of Stock [Line Items] | |||||
Fair value of embedded derivative | $ 6,715 | $ 118,821 | $ 75,488 | ||
Series B Preferred Stock Conversion Liability | Nonoperating Income (Expense) | |||||
Conversion of Stock [Line Items] | |||||
Change in fair market value of embedded derivative | 102,848 | $ (48,564) | |||
Series F Preferred Stock Put Option Liability | |||||
Conversion of Stock [Line Items] | |||||
Fair value of embedded derivative | $ 103,364 | ||||
Series F Preferred Stock Put Option Liability | Nonoperating Income (Expense) | |||||
Conversion of Stock [Line Items] | |||||
Change in fair market value of embedded derivative | $ 103,364 | ||||
Series B Preferred Stock | |||||
Conversion of Stock [Line Items] | |||||
Shares issued, price per share (in dollars per share) | $ 0.25 | $ 0.80 | |||
Series F Preferred Stock | |||||
Conversion of Stock [Line Items] | |||||
Shares issued, price per share (in dollars per share) | $ 0.10 |
Series B Warrants (Details)
Series B Warrants (Details) - Series B Warrants - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Class of Warrant or Right [Line Items] | ||
Dividend yield | 0.00% | 0.00% |
Volatility factor | 70.00% | 70.00% |
Risk-free interest rate | 1.39% | 1.616% |
Expected term (years) | 3 months | 3 years 7 months 17 days |
Weighted-average fair value of warrants | $ 0.15 | $ 0.13 |
Series B Warrants (Detail Textu
Series B Warrants (Detail Textuals) - USD ($) | Jan. 31, 2017 | Nov. 30, 2017 | Oct. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 28, 2017 | Dec. 29, 2016 |
Class of Warrant or Right [Line Items] | |||||||
Value of warrants | $ 982,911 | $ 837,711 | |||||
Series B warrants | 551,322 | 1,112,308 | |||||
Change in fair market value at the re-measurement date recorded as non-operating income | $ (560,986) | $ (1,342,651) | |||||
Series C Preferred Stock | |||||||
Class of Warrant or Right [Line Items] | |||||||
Warrant exercise price (in dollars per share) | $ 0.40 | ||||||
Proceeds received from the Series B financing | $ 500,000 | ||||||
Convertible Series D Preferred Stock | |||||||
Class of Warrant or Right [Line Items] | |||||||
Warrant exercise price (in dollars per share) | $ 0.25 | $ 0.25 | |||||
Proceeds received from the Series B financing | $ 1,200,000 | ||||||
Redeemable Convertible Series F Preferred Stock | |||||||
Class of Warrant or Right [Line Items] | |||||||
Warrant exercise price (in dollars per share) | $ 0.15 | $ 0.10 | |||||
Proceeds received from the Series B financing | $ 2,000,000 | ||||||
Series B Warrants | |||||||
Class of Warrant or Right [Line Items] | |||||||
Number of warrants issued | 6,437,500 | ||||||
Warrant exercise price (in dollars per share) | $ 1.15 | ||||||
Warrants, expiration period | 5 years | ||||||
Value of warrants | $ 2,935,800 | ||||||
Proceeds from financing between conversion liability and warrants | $ 5,000,000 |
Convertible Bridge Loan (Detail
Convertible Bridge Loan (Detail textual) | 1 Months Ended | 12 Months Ended |
Dec. 28, 2017USD ($)Day$ / shares | Dec. 31, 2017USD ($) | |
Short-term Debt [Line Items] | ||
Proceeds from Convertible debt issuance | $ 500,000 | |
Convertible debt | $ 235,000 | |
Bridge Loan | Secured Promissory Note and Security Agreement | Emerald Health Sciences Inc | ||
Short-term Debt [Line Items] | ||
Aggregate gross proceeds | $ 900,000 | |
Proceeds from Convertible debt issuance | 500,000 | |
Funding of remaining bridge loan | $ 400,000 | |
Bridge loan interest rate | 12.00% | |
Bridge loan maturity date | Jun. 30, 2018 | |
Initial conversion price | $ / shares | $ 0.10 | |
Convertible debt | $ 235,000 | |
Number of trading days as of financing close date | Day | 1 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current deferred tax assets/(liabilities): | ||
State taxes | $ 336 | $ 560 |
Capitalized research and development costs | 22,717 | 51,118 |
Accrual to cash adjustment | 0 | 0 |
Other | 295,265 | 250,284 |
Net operating loss | 3,697,169 | 4,057,846 |
Gross deferred tax assets | 4,015,487 | 4,359,808 |
Valuation allowance | (4,015,487) | (4,359,808) |
Total deferred tax assets | $ 0 | $ 0 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Expected income tax benefit at federal statutory tax rate | $ (1,082,444) | $ (1,111,773) |
State income taxes, net of federal benefit | (208,619) | (241,899) |
Change in fair value of warrant | (268,519) | (452,930) |
Change in valuation allowance | (344,321) | 1,720,620 |
Stock Compensation | 73,881 | 83,332 |
Other Perm Difference | 12 | 4,250 |
Tax Cuts and Jobs Act | 1,831,610 | 0 |
Provision for Income Taxes | $ 1,600 | $ 1,600 |
Income Taxes (Detail Textuals)
Income Taxes (Detail Textuals) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Income Tax Disclosure [Abstract] | |
Corporate tax rate | 35.00% |
Reduction in corporate tax rate | 21.00% |
Reduction in deferred tax asset balance | $ 1,831,504 |
Federal operating loss carry forwards | 13,213,110 |
California net operating loss carry forwards | $ 13,208,310 |
Subsequent Events (Detail Textu
Subsequent Events (Detail Textuals) - USD ($) | 1 Months Ended | 2 Months Ended | 12 Months Ended | ||||||||
Feb. 16, 2018 | Jan. 19, 2018 | Jan. 18, 2018 | Feb. 28, 2018 | Dec. 31, 2016 | Dec. 31, 2017 | Nov. 30, 2017 | Mar. 31, 2017 | Jan. 31, 2017 | Oct. 31, 2016 | Aug. 20, 2015 | |
Subsequent Event [Line Items] | |||||||||||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||
Common stock gross proceeds | $ 407,669 | ||||||||||
Series B Preferred Stock | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Shares issued, price per share (in dollars per share) | $ 0.25 | $ 0.80 | |||||||||
Preferred stock shares convertible into common stock | 16,124,000 | 28,335,500 | |||||||||
Warrant exercise price (in dollars per share) | $ 0.15 | $ 0.25 | |||||||||
Series C Preferred Stock | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Warrant exercise price (in dollars per share) | $ 0.40 | ||||||||||
Subsequent Event | Securities purchase agreement | Emerald Health Sciences Inc | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Shares issued, price per share (in shares) | 15,000,000 | ||||||||||
Shares issued, price per share (in dollars per share) | $ 0.10 | ||||||||||
Funds received under the Secured Promissory Note | $ 400,000 | ||||||||||
Common stock issued | 15,000,000 | ||||||||||
Common stock, par value (in dollars per share) | $ 0.001 | ||||||||||
Number of common stock called by warrant | 20,400,000 | 20,400,000 | |||||||||
Warrant exercise price (in dollars per share) | $ 0.10 | ||||||||||
Term of warrants | 5 years | ||||||||||
Common stock gross proceeds | $ 1,500,000 | ||||||||||
Subsequent Event | Securities purchase agreement | Emerald Health Sciences Inc | Bridge Loan | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Aggregate gross proceeds | $ 900,000 | ||||||||||
Conversion price, per share (in dollars per share) | $ 0.10 | ||||||||||
Shares converted into common stock | 9,000,000 | ||||||||||
Subsequent Event | Securities purchase agreement | Emerald Health Sciences Inc | Accredited investor | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Common stock issued | 2,500,000 | ||||||||||
Number of common stock called by warrant | 3,400,000 | ||||||||||
Warrant exercise price (in dollars per share) | $ 0.10 | ||||||||||
Term of warrants | 5 years | ||||||||||
Common stock gross proceeds | $ 1,750,000 | ||||||||||
Subsequent Event | Restricted Stock Agreements | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Restricted stock vesting percentage | 50.00% | ||||||||||
Subsequent Event | Restricted Stock Agreements | Common Stock | Immediate vesting | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Number of restricted common stock vested | 900,000 | ||||||||||
Subsequent Event | Restricted Stock Agreements | Common Stock | October 20, 2015 | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Number of restricted common stock vested | 325,000 | ||||||||||
Subsequent Event | Restricted Stock Agreements | Common Stock | November 21, 2014 | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Number of restricted common stock vested | 125,000 | ||||||||||
Subsequent Event | Restricted Stock Agreements | Dr. Brian S. Murphy | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Shares of restricted common stock | 900,000 | ||||||||||
Subsequent Event | Restricted Stock Agreements | Elizabeth Berecz, CFO | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Shares of restricted common stock | 700,000 | ||||||||||
Subsequent Event | Restricted Stock Agreements | Cosmas N. Lykos | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Shares of restricted common stock | 900,000 | ||||||||||
Subsequent Event | Separation and release agreement | K2C, Inc. | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Common stock gross proceeds | $ 180,000 | ||||||||||
Subsequent Event | Common stock purchase warrant agreement | Common Stock | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Number of restricted common stock vested | 1,110,000 |