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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No.: 001-35527

 

EMMAUS LIFE SCIENCES, INC.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

 

87-0419387

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

21250 Hawthorne Boulevard, Suite 800, Torrance, California

 

90503

(Address of principal executive offices)

 

(Zip code)

 

(310) 214-0065

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The registrant had 63,865,571 shares of common stock, par value $0.001 per share, outstanding as of November 18, 2024.

 

 


 

EMMAUS LIFE SCIENCES, INC.

For the Quarterly Period Ended September 30, 2024

TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

Part I. Financial Information

 

 

 

 

Item 1.

Financial Statements (Unaudited)

1

 

 

 

 

(a) Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023

1

 

 

 

 

(b) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023

2

 

 

 

 

(c) Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three and nine months ended September 30, 2024 and 2023

3

 

 

 

 

(d) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023

5

 

 

 

 

(e) Notes to Condensed Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

 

 

 

Item 4.

Controls and Procedures

30

 

 

 

Part II Other Information

 

 

 

 

Item 1.

Legal Proceedings

32

 

 

 

Item 1A.

Risk Factors

32

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

 

 

 

Item 3.

Defaults Upon Senior Securities

32

 

 

 

Item 4.

Mine Safety Disclosures

32

 

 

 

Item 5.

Other Information

33

 

 

 

Item 6.

Exhibits

34

 

 

 

Signatures

35

 

 


 

Item 1. Financial Statements

 

EMMAUS LIFE SCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

As of

 

 

 

September 30, 2024

 

 

December 31, 2023

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,255

 

 

$

2,547

 

Accounts receivable, net

 

 

4,938

 

 

 

4,010

 

Due from factoring of accounts receivable

 

 

54

 

 

 

1,514

 

Inventories, net

 

 

1,610

 

 

 

1,711

 

Prepaid expenses and other current assets

 

 

1,347

 

 

 

1,727

 

Total current assets

 

 

9,204

 

 

 

11,509

 

Property and equipment, net

 

 

49

 

 

 

59

 

Right of use assets

 

 

1,719

 

 

 

2,337

 

Investment in convertible bond

 

 

16,059

 

 

 

20,978

 

Other assets

 

 

312

 

 

 

296

 

Total assets

 

$

27,343

 

 

$

35,179

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

18,707

 

 

$

16,951

 

Operating lease liabilities, current portion

 

 

2,329

 

 

 

1,639

 

Conversion feature derivative, notes payable

 

 

523

 

 

 

451

 

Other current liabilities

 

 

15,650

 

 

 

14,681

 

Warrant derivative liabilities

 

 

30

 

 

 

65

 

Notes payable, current portion, net of discount

 

 

7,915

 

 

 

8,215

 

Notes payable to related parties

 

 

2,772

 

 

 

3,122

 

Convertible notes payable, net of discount

 

 

16,205

 

 

 

16,383

 

Total current liabilities

 

 

64,131

 

 

 

61,507

 

Operating lease liabilities, less current portion

 

 

1,076

 

 

 

1,839

 

Other long-term liabilities

 

 

13,676

 

 

 

17,363

 

Notes payable to related parties, net of discount

 

 

2,241

 

 

 

2,226

 

Total liabilities

 

 

81,124

 

 

 

82,935

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

Preferred stock, par value $0.001 per share, 15,000,000 shares authorized, none issued or outstanding

 

 

 

 

 

 

Common stock, par value $0.001 per share, 250,000,000 shares authorized, 63,865,571 and 61,845,963 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

 

 

64

 

 

 

62

 

Additional paid-in capital

 

 

225,867

 

 

 

225,333

 

Net loan receivable from EJ Holdings

 

 

(16,869

)

 

 

(16,869

)

Accumulated other comprehensive loss

 

 

(2,016

)

 

 

(160

)

Accumulated deficit

 

 

(260,827

)

 

 

(256,122

)

Total stockholders’ deficit

 

 

(53,781

)

 

 

(47,756

)

Total liabilities & stockholders’ deficit

 

$

27,343

 

 

$

35,179

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

EMMAUS LIFE SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

REVENUES, NET

 

 

$

5,478

 

 

$

5,018

 

 

$

13,361

 

 

$

22,530

 

COST OF GOODS SOLD

 

 

 

394

 

 

 

214

 

 

 

892

 

 

 

1,151

 

GROSS PROFIT

 

 

 

5,084

 

 

 

4,804

 

 

 

12,469

 

 

 

21,379

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

 

146

 

 

 

414

 

 

 

520

 

 

 

1,023

 

Selling

 

 

 

1,318

 

 

 

1,497

 

 

 

4,886

 

 

 

6,345

 

General and administrative

 

 

 

2,799

 

 

 

2,869

 

 

 

8,400

 

 

 

11,826

 

  Total operating expenses

 

 

 

4,263

 

 

 

4,780

 

 

 

13,806

 

 

 

19,194

 

INCOME (LOSS) FROM OPERATIONS

 

 

 

821

 

 

 

24

 

 

 

(1,337

)

 

 

2,185

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

Loss on debt extinguishment

 

 

 

 

 

 

(647

)

 

 

 

 

 

(647

)

Change in fair value of warrant derivative liabilities

 

 

 

38

 

 

 

589

 

 

 

35

 

 

 

1,034

 

Change in fair value of conversion feature derivative, notes payable

 

 

 

2,277

 

 

 

3,069

 

 

 

(70

)

 

 

2,100

 

Realized loss on investment in convertible bond

 

 

 

 

 

 

 

 

 

(544

)

 

 

(297

)

Net loss on equity method investment

 

 

 

 

 

 

(381

)

 

 

 

 

 

(1,347

)

Gain on restructured debt

 

 

 

 

 

 

 

 

 

1,032

 

 

 

 

Foreign exchange loss

 

 

 

(117

)

 

 

(821

)

 

 

(11

)

 

 

(3,227

)

Interest and other income

 

 

 

145

 

 

 

181

 

 

 

427

 

 

 

514

 

Interest expense

 

 

 

(1,338

)

 

 

(1,909

)

 

 

(4,214

)

 

 

(5,204

)

  Total other income (expense)

 

 

 

1,005

 

 

 

81

 

 

 

(3,345

)

 

 

(7,074

)

INCOME (LOSS) BEFORE INCOME TAXES

 

 

 

1,826

 

 

 

105

 

 

 

(4,682

)

 

 

(4,889

)

Income tax provision (benefit)

 

 

 

(1

)

 

 

38

 

 

 

23

 

 

 

53

 

NET INCOME (LOSS)

 

 

 

1,827

 

 

 

67

 

 

 

(4,705

)

 

 

(4,942

)

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPONENTS OF OTHER COMPREHENSIVE INCOME (LOSS)

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on debt securities available for sale (net of tax)

 

 

 

1,397

 

 

 

(1,614

)

 

 

(2,064

)

 

 

(249

)

Reclassification adjustment for loss included in net loss

 

 

 

 

 

 

 

 

 

197

 

 

 

403

 

Foreign currency translation adjustment

 

 

 

(19

)

 

 

225

 

 

 

11

 

 

 

962

 

Other comprehensive income (loss)

 

 

 

1,378

 

 

 

(1,389

)

 

 

(1,856

)

 

 

1,116

 

COMPREHENSIVE INCOME (LOSS)

 

 

$

3,205

 

 

$

(1,322

)

 

$

(6,561

)

 

$

(3,826

)

NET INCOME (LOSS) PER COMMON SHARE - BASIC

 

 

$

0.03

 

 

$

0.00

 

 

$

(0.07

)

 

$

(0.09

)

NET LOSS PER COMMON SHARE - DILUTED

 

 

$

(0.01

)

 

$

(0.01

)

 

$

(0.07

)

 

$

(0.09

)

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING - BASIC

 

 

 

63,865,571

 

 

 

53,637,554

 

 

 

63,025,296

 

 

 

52,414,903

 

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING - DILUTED

 

 

 

162,726,685

 

 

 

138,375,065

 

 

 

63,025,296

 

 

 

52,414,903

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

EMMAUS LIFE SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(In thousands, except share and per share amounts)

(Unaudited)

 

 

Common stock

 

 

Additional paid-in

 

 

Loan receivable from

 

 

Accumulated other comprehensive

 

 

Accumulated

 

 

Total stockholders'

 

 

Shares

 

 

Amount

 

 

capital

 

 

EJ Holdings

 

 

loss

 

 

deficit

 

 

deficit

 

 Balance, January 1, 2024

 

61,845,963

 

 

$

62

 

 

$

225,333

 

 

$

(16,869

)

 

$

(160

)

 

$

(256,122

)

 

$

(47,756

)

Share-based compensation

 

 

 

 

 

 

 

170

 

 

 

 

 

 

 

 

 

 

 

 

170

 

Unrealized loss on debt securities available for sale (net of tax)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,728

)

 

 

 

 

 

(1,728

)

Foreign currency translation effect

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

18

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,348

)

 

 

(4,348

)

 Balance, March 31, 2024

 

61,845,963

 

 

 

62

 

 

 

225,503

 

 

 

(16,869

)

 

 

(1,870

)

 

 

(260,470

)

 

 

(53,644

)

Convertible notes converted to shares

 

2,019,608

 

 

 

2

 

 

 

307

 

 

 

 

 

 

 

 

 

 

 

 

309

 

Share-based compensation

 

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

 

 

 

29

 

Unrealized loss on debt securities available for sale (net of tax)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,733

)

 

 

 

 

 

(1,733

)

Reclassification adjustment for loss included in net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

197

 

 

 

 

 

 

197

 

Foreign currency translation effect

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 

 

 

 

 

 

12

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,184

)

 

 

(2,184

)

 Balance, June 30, 2024

 

63,865,571

 

 

 

64

 

 

 

225,839

 

 

 

(16,869

)

 

 

(3,394

)

 

 

(262,654

)

 

 

(57,014

)

Share-based compensation

 

 

 

 

 

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

28

 

Unrealized gain on debt securities available for sale (net of tax)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,397

 

 

 

 

 

 

1,397

 

Foreign currency translation effect

 

 

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,827

 

 

 

1,827

 

 Balance, September 30, 2024

 

63,865,571

 

 

$

64

 

 

$

225,867

 

 

$

(16,869

)

 

$

(2,016

)

 

$

(260,827

)

 

$

(53,781

)

 

3


 

 

 

Common stock

 

 

Additional paid-in

 

 

Loan receivable from

 

 

Accumulated other comprehensive

 

 

Accumulated

 

 

Total stockholders'

 

Shares

 

 

Amount

 

 

capital

 

 

EJ Holdings

 

 

loss

 

 

deficit

 

 

deficit

 

 Balance January 1, 2023

 

49,583,501

 

 

$

50

 

 

$

220,815

 

 

$

 

 

$

(2,619

)

 

$

(252,337

)

 

$

(34,091

)

Fair value of warrants including down-round protection adjustments

 

 

 

 

 

 

 

41

 

 

 

 

 

 

 

 

 

(41

)

 

 

 

Convertible note converted to shares

 

1,351,351

 

 

 

1

 

 

 

499

 

 

 

 

 

 

 

 

 

 

 

 

500

 

Share-based compensation

 

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

 

 

 

37

 

Unrealized loss on debt securities available for sale (net of tax)

 

 

 

 

 

 

 

 

 

 

 

 

 

(544

)

 

 

 

 

 

(544

)

Foreign currency translation effect

 

 

 

 

 

 

 

 

 

 

 

 

 

186

 

 

 

 

 

 

186

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,451

)

 

 

(3,451

)

 Balance, March 31, 2023

 

50,934,852

 

 

 

51

 

 

 

221,392

 

 

 

 

 

 

(2,977

)

 

 

(255,829

)

 

 

(37,363

)

Convertible notes converted to shares

 

2,702,702

 

 

 

3

 

 

 

997

 

 

 

 

 

 

 

 

 

 

 

 

1,000

 

Share-based compensation

 

 

 

 

 

 

 

26

 

 

 

 

 

 

 

 

 

 

 

 

26

 

Unrealized gain on debt securities available for sale (net of tax)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,909

 

 

 

 

 

 

1,909

 

Reclassification adjustment for loss included in net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

403

 

 

 

 

 

 

403

 

Foreign currency translation effect

 

 

 

 

 

 

 

 

 

 

 

 

 

551

 

 

 

 

 

 

551

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,558

)

 

 

(1,558

)

 Balance, June 30, 2023

 

53,637,554

 

 

 

54

 

 

 

222,415

 

 

 

 

 

 

(114

)

 

 

(257,387

)

 

 

(35,032

)

Share-based compensation

 

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

 

24

 

Unrealized loss on debt securities available for sale (net of tax)

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,614

)

 

 

 

 

 

(1,614

)

Foreign currency translation effect

 

 

 

 

 

 

 

 

 

 

 

 

 

225

 

 

 

 

 

 

225