Business Context and Reporting Period
This Form 8-K Current Report was filed by Nemus Bioscience, Inc. (not Skye Bioscience, Inc.) on May 4, 2017, regarding events occurring on May 3, 2017. The Company is an emerging growth company incorporated in Nevada. The filing primarily discloses the entry into a material definitive agreement for a private placement financing and related amendments to existing preferred stock and warrant agreements.
Key Financial Metrics
The filing does not provide standard financial statements, revenue, profit, cash flow, or margin data. The primary financial metric disclosed is the capital raise:
- Financing Amount: $20,000,000 in aggregate gross proceeds.
- Instrument: 1,000,000 shares of new Series E Preferred Stock.
- Price Per Share: $20.00.
- Purchaser: Schneider Finance LLC (an affiliate of Schneider Brothers Ltd.).
- Guarantee: SB Securities Ltd. has guaranteed the payment of the $20,000,000 investment.
Material Changes and Agreements
The Company entered into a Securities Purchase Agreement to sell Series E Preferred Stock. Key terms and changes include:
- Board Composition: The Purchaser will propose three individuals to be added to the Board of Directors. As long as the Purchaser holds at least 33% of voting securities (on an as-converted basis), the Company must nominate these designees for election.
- Security Interest: The Company granted the Purchaser a continuing security interest in its net operating carryovers and intellectual property, subject to liquidation rights of Series B Preferred Stock holders.
- Exclusions: The agreement does not include warrants, registration rights, down-round anti-dilution rights, or redemption rights for the Purchaser.
- Series B Amendment: The Company amended the Certificate of Designation for Series B Preferred Stock and related warrants to exclude this financing from the definition of a "Fundamental Transaction."
Outlook, Risks, and Management Commentary
The transaction is expected to close in the second quarter of 2017 with no conditions precedent or further obligations prior to closing. The Company issued a press release on May 4, 2017, to comply with Regulation FD. The filing does not contain specific forward-looking guidance on revenue or product milestones, nor does it detail specific risks beyond the standard representations and warranties customary in such agreements.
Investor Verification Checklist
- Verify the closing of the $20,000,000 financing in the second quarter of 2017.
- Confirm the appointment of the three Purchaser Designees to the Board of Directors.
- Review the full text of the Securities Purchase Agreement (Exhibit 10.1) for detailed covenants and security interest terms.
- Assess the impact of the Series B Amendment on existing Series B Preferred Stock holders and warrant holders.
- Monitor the Company's cash position post-closing to evaluate runway for operations.