10-Q

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


☐	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.

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.

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	)


	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