Quarterly report pursuant to Section 13 or 15(d)

Equity

v2.4.0.8
Equity
 9 Months Ended
Sep. 30, 2014
Equity [Abstract]  
Equity
4. Equity
Common Stock
On July 17, 2012, the Company issued 7,770,000 common shares with no par value and warrants (see first paragraph under warrants below) to its founders and one board member in exchange for the services provided to establish Nemus, valued at approximately $1,000.
In June of 2014, the Company sold 1,800,000 shares of common stock with no par value and warrants for a purchase price of $900,000 (the "June 2014 Stock Purchase Agreement") to a group of private investors. See additional discussion on warrants below.
In August of 2014, the Company sold 2,200,000 shares of common stock with no par value and warrants for a purchase price of $1,100,000 to a group of private investors. See additional discussion on warrants below.
Warrants
On July 17, 2012, the Company issued warrants to purchase up to 3,000,000 shares of our common stock to its founders and two advisors in consideration for services provided in the start-up of operations. The warrants are exercisable at a price of $1.00 per share and expire on June 20, 2023. The Company valued these warrants utilizing the Black-Scholes valuation model and they were determined to be of nominal value given the start-up nature of the Company's operations at the time of grant.
In conjunction with the June 2014 Stock Purchase Agreement, the Company issued warrants to purchase up to 450,000 shares of common stock to a group of private investors. The warrants are exercisable at a price of $1.00 per share and expire on June 12, 2020. The Company valued these warrants at $85,500. This amount was recorded as Warrants and was reclassified from the total consideration received for both the common stock and warrants purchased.
In August 2014 as part of the June 2014 Stock Purchase Agreement, the Company issued warrants to purchase up to 550,000 shares of common stock with an exercise price of $1.00 per share that expire in August 2020. The Company valued these warrants at $104,500. This amount was recorded as Warrants and was reclassified from the total consideration received for both the common stock and warrants purchased.
The Company's board of directors considered various objective and subjective factors, along with input from management, to determine the fair value of the warrants, including:
· Contemporaneous valuation prepared by an independent third-party valuation specialist effective as of June 30, 2014,
· Its results of operations, financial position and the status of research and development efforts and achievement of enterprise milestones,
· The composition of, and changes to, the Company's management team and board of directors,
· The lack of liquidity of its common stock as a private company,
· The Company's stage of development, business strategy and the material risks related to its business and industry,
· The valuation of publicly-traded companies in the biotechnology sectors,
· External market conditions affecting the biotechnology industry sectors,
· The likelihood of achieving a liquidity event for the holders of its common stock, such as an initial public offering, or IPO, or a sale of the Company, given prevailing market conditions, and
· The state of the IPO market for similarly situated privately held biotechnology companies.
There are significant judgments and estimates inherent in the determination of the fair value of the Company's warrants. These judgments and estimates include the assumptions regarding its future operating performance, the time to completing an IPO or other liquidity event and the determination of the appropriate valuation methods. If the Company had made different assumptions, its warrant valuation could have been significantly different.