Business Context and Reporting Period
This Form 8-K filing by Nemus Bioscience, Inc. (not Skye Bioscience, Inc.) reports events occurring on December 28, 2017, with the report filed on January 3, 2018. The company, an emerging growth company incorporated in Nevada, entered into a material definitive agreement involving a secured convertible bridge loan and proposed equity transactions with Emerald Health Sciences Inc.
Key Financial Metrics and Obligations
- Bridge Loan Proceeds: Up to $900,000 total; $500,000 received on December 28, 2017, with $400,000 contingent on future conditions.
- Interest Rate: 12% per annum.
- Maturity Date: June 30, 2018.
- Conversion Price: $0.10 per share of Common Stock.
- Collateral: The loan is secured by all of Nemus's assets.
- Proposed Equity Raise: Emerald committed to purchase or facilitate the purchase of not less than $2,500,000 of Common Stock at $0.10 per share, plus warrants.
Material Changes and Proposed Transactions
The filing details a significant restructuring of Nemus's capital and governance:
- Debt Financing: Execution of a Secured Promissory Note and Security Agreement with Emerald Health Sciences Inc.
- Equity Acquisition: A binding term sheet for Emerald to acquire outstanding preferred stock from certain holders and purchase new common stock.
- Change of Control: Upon closing the proposed private placement, Emerald would own a majority of the equity interest. The current Board of Directors would appoint Emerald nominees, and all current directors except Dr. Brian Murphy would tender their resignations.
- Conditions Precedent: The remaining $400,000 of the bridge loan and the private placement are conditioned on the conversion of all remaining preferred stock and satisfactory completion of scientific and operational due diligence.
Outlook, Risks, and Contingencies
The filing outlines several critical contingencies that could alter the company's financial position:
- Funding Risk: If Nemus does not receive all conversion notices or if Emerald does not purchase the preferred stock by January 15, 2018, or fails to close the private placement by February 28, 2018, Emerald has no obligation to fund the remaining $400,000 of the bridge loan.
- Use of Proceeds: Net proceeds are intended for general corporate purposes, including paying down existing obligations and working capital.
- Management Commentary: The company intends to use the transaction to secure necessary capital and restructure its equity base, subject to the successful completion of due diligence.
Investor Verification Checklist
- Verify the status of the conversion notices for remaining preferred stock by the January 15, 2018 deadline.
- Confirm whether the scientific and operational due diligence required by Emerald has been completed satisfactorily.
- Monitor the closing of the proposed private placement by the February 28, 2018 deadline to ensure the remaining $400,000 loan funding is secured.
- Review the attached Secured Promissory Note (Exhibit 10.1) for specific covenants and default provisions.
- Check for subsequent filings regarding the resignation of current board members and the appointment of Emerald nominees.