1.	Organization and Basis of Presentation

Evoke Pharma, Inc. (the “Company”) was incorporated in the state of Delaware on January 29, 2007 (inception). The Company is a specialty pharmaceutical company focused primarily on the development of drugs to treat gastroenterological disorders and disease.

As of September 30, 2013, the Company has devoted substantially all of its efforts to product development, raising capital and building infrastructure, and has not realized revenues from its planned principal operations. Accordingly, the Company is considered to be in the development stage.

Reverse Stock Split

On August 30, 2013, the Company filed an amendment to its amended and restated certificate of incorporation, effecting a one-for-five reverse stock split of the Company’s issued and outstanding shares of common stock. All issued and outstanding common stock and per share amounts contained in the Company’s financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented.

Unaudited Interim Financial Information

The accompanying interim condensed financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and following the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. In management’s opinion, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position and its results of operations and comprehensive loss and its cash flows for periods presented. These statements do not include all disclosures required by GAAP and should be read in conjunction with the Company’s financial statements and accompanying notes for the fiscal year ended December 31, 2012, which is contained in the Company’s final prospectus filed by the Company with the SEC on September 25, 2013 relating to the Company’s Registration Statement on Form S-1/A (File No. 333-188838) for the Company’s initial public offering (“IPO”). The results for interim periods are not necessarily indicative of the results expected for the full fiscal year or any other interim period.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Initial Public Offering and Related Transactions

On September 30, 2013, the Company completed its IPO whereby it sold 2,100,000 shares of common stock at a price of $12.00 per share. Net proceeds from the IPO were determined as follows:


Gross proceeds (excluding over-allotment)	$	25,200,000
Underwriting discounts and commissions and non-accountable expense allowance		(2,080,275	)
Total offering costs (excluding value of warrants granted to underwriter of $470,000)		(1,444,043	)

Net proceeds	$	21,675,682

Additionally, upon the closing of the IPO, certain transactions occurred based on a successful completion of the IPO:

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the conversion of all outstanding shares of convertible preferred stock into 2,439,002 shares of the Company’s common stock;

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retention bonuses in the amount of $355,000 became payable to the Company’s executive officers. Such amount will be recorded as expense on a straight-line basis from May 22, 2013 (the date of the retention agreements entered into with the executive officers) through December 24, 2013, the date at which the final payment is due based on continued employment. Since the terms of the payment required the occurrence of either a change in control of the Company, or an equity financing, neither of which are considered probable to occur until they happen, a catch-up expense of $202,857 was recorded at the time of the Company’s IPO. Should the executive officers voluntarily terminate their employment or are terminated by the Company for cause, the executive would forfeit any portion of the retention payment that has not been paid to them;

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the issuance of warrants to purchase 84,000 shares of the Company’s common stock to the representative of the underwriters of the Company’s IPO and certain of its affiliates. The warrants will become exercisable at a price of $21.00 per share beginning on September 24, 2014 and will expire on September 24, 2018. The $470,000 initial fair value of the warrants was determined using the Black-Scholes option pricing model and recorded as a cost of the Company’s IPO and charged to additional paid-in capital;

The fair value of the issued warrants was estimated using the Black-Scholes option pricing model with the following assumptions:


Assumed risk-free interest rate	1.44	%
Assumed volatility	71	%
Expected warrant life	5 years
Expected dividend yield	0.0	%

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the conversion of warrants to purchase 110,000 shares of convertible preferred stock into warrants to purchase 22,000 shares of the Company’s common stock and the resultant reclassification of the $187,000 warrant liability to additional paid-in capital; and

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the filing of an amended and restated certificate of incorporation to authorize 50,000,000 shares of common stock and 5,000,000 shares of undesignated preferred stock.

In addition to the above, the following benefit plans became effective in connection with the Company’s IPO:

2013 Equity Incentive Award Plan

The 2013 Equity Incentive Award Plan (“2013 Plan”) became effective on the day prior to the public trading date of our common stock. Under the 2013 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other awards to individuals who are then employees, officers, non-employee directors or consultants of the Company or its subsidiaries. A total of 510,000 shares of common stock were initially reserved for issuance under the 2013 Plan. In addition, the number of shares of common stock available for issuance under the 2013 Plan will be annually increased on the first day of each fiscal year during the term of the 2013 Plan, beginning with the 2014 fiscal year, by an amount equal to the least of: (i) 300,000 shares; (ii) four percent of the outstanding shares of common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Company’s board of directors may determine.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (“ESPP”) became effective on the day prior to the public trading date of our common stock. The ESPP permits participants to purchase common stock through payroll deductions of up to 20% of their eligible compensation. A total of 30,000 shares of common stock were initially reserved for issuance under the ESPP. In addition, the number of shares of common stock available for issuance under the ESPP will be annually increased on the first day of each fiscal year during the term of the ESPP, beginning with the 2014 fiscal year, by an amount equal to the least of: (i) 30,000 shares; (ii) one percent of the outstanding shares of common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Company’s board of directors may determine.

On October 3, 2013, the underwriters for the Company’s IPO exercised their over-allotment option to purchase an additional 315,000 shares of the Company’s common stock at $12.00 per share. The over-allotment exercise is expected to result in estimated net proceeds to the Company of $3,440,400, after deducting $264,600 of underwriting discounts and commissions and an estimated $75,000 of additional offering costs.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board issued an accounting standard update to require reclassification adjustments from other comprehensive income to be presented either in the financial statements or in the notes to the financial statements. This accounting standard became effective for the Company beginning in the first quarter of 2013, and its adoption did not have any impact on the Company’s financial statements.