emma-10q_20190930.htm

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.

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 48,471,446 shares of common stock, par value $0.001 per share, outstanding as of November 11, 2019.

This Quarterly Report is filed by Emmaus Life Sciences, Inc. (“Emmaus,” “we,” “us,” “our,” or the “Company”), formerly known as MYnd Analytics, Inc. As of and for the period ending June 30, 2019, the Company was a predictive analytics company that had developed a decision support tool to help physicians reduce trial and error treatment in mental health and provide more personalized care to patients. As reported in its Current Report on Form 8-K filed with the SEC on July 22, 2019 and as discussed in more detail in this Quarterly Report, on July 17, 2019, the Company completed its merger transaction with EMI Holding, Inc., formerly known as Emmaus Life Sciences, Inc. (“EMI”), pursuant to which EMI became a wholly-owned subsidiary of the Company (the “Merger”). On July 17, 2019, immediately after completion of the Merger, the Company changed its name to “Emmaus Life Sciences, Inc.”

The Merger was treated as a reverse recapitalization with EMI being deemed the acquiring company for accounting purposes under the acquisition method of accounting in accordance with accounting principles generally accepted in the United States. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

In connection with and prior to the Merger, the Company contributed and transferred to Telemynd, Inc. (“Telemynd”), a newly formed, wholly owned subsidiary of the Company, all or substantially all of the Company’s business, assets and liabilities. On July 15, 2019, the board of directors of the Company declared a dividend with respect to the shares of the Company common stock outstanding at the close of business on that day of one share of the Telemynd common stock held by the Company for each outstanding share of the Company common stock after giving effect to a 1-for-6 reverse stock split of the Company’s common stock effected by the Company on July 17, 2019. The dividend, which together with the contribution and transfer of the Company’s historical business, assets and liabilities described above, is referred to as the “Spin-Off.” Prior to the Spin-Off, Telemynd engaged in no business or operations.

As a result of the Spin-Off and the Merger, since July 17, 2019 the Company has operated through EMI and its direct and indirect subsidiaries and the ongoing business of the Company is the EMI business. EMI is a commercial-stage biopharmaceutical company focused on the development, marketing and sale of innovative treatments and therapies, including those in the rare and orphan disease categories. For more information, please visit www.emmausmedical.com. The information contained on, or accessible through, our website is not incorporated by reference into this Quarterly Report and should not be considered a part of this Quarterly Report.

On August 14, 2019, the Company filed an amendment on Form 8-K/A to its Current Report on Form 8-K relating to the completion of the Merger and the Spin-Off which includes financial statements of EMI as of and for the three months and six months ended June 30, 2019 and certain pro forma financial information. This Quarterly Report should be read in conjunction with the information in the Form 8-K/A.

	As of
	September 30, 2019			December 31, 2018
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ($12,220 and $13,175 attributable to the VIE)	$	13,546		$	17,080
Accounts receivable, net		1,900			1,351
Inventories, net		7,491			4,705
Investment in marketable securities		27,643			49,343
Marketable securities, pledged to creditor		—			238
Prepaid expenses and other current assets ($610 and $273 attributable to the VIE)		1,194			743
Total current assets		51,774			73,460
PROPERTY AND EQUIPMENT, NET		163			152
OTHER ASSETS
Long-term investment at cost		—			538
Intangibles, net		44			54
Right of use assets		4,118			—
Deposits and other assets		383			352
Total other assets		4,545			944
Total assets	$	56,482		$	74,556
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses ($148 and $0 attributable to the VIE)	$	10,706		$	9,122
Deferred rent		—			19
Operating lease liabilities		844			—
Other current liabilities		5,412			5,181
Embedded conversion option liabilities		264			—
Notes payable, net		3,886			6,394
Notes payable to related party, net		193			468
Convertible debentures		11,000			—
Convertible notes payable, net		2,928			11,253
Convertible notes payable to related parties, net		—			5,089
Total current liabilities		35,233			37,526
LONG-TERM LIABILITIES
Deferred rent		—			268
Operating lease liabilities		3,714			—
Other long-term liabilities		34,556			36,222
Warrant derivative liabilities		—			1,399
Embedded conversion option liabilities		29			—
Notes payable, net		—			1,021
Convertible debentures		1,200			—
Convertible notes payable, net		—			5,485
Convertible notes payable to related parties, net		—			8,529
Total long-term liabilities		39,499			52,924
Total liabilities		74,732			90,450
STOCKHOLDERS’ DEFICIT
Preferred stock — par value $0.001 per share, 15,000,000 shares authorized, none issued and outstanding		—			—
Common stock — par value $0.001 per share, 250,000,000 shares authorized, 47,671,446 shares and 37,341,393 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		47			37
Additional paid-in capital		199,395			140,903
Accumulated other comprehensive income (loss)		(51	)		(69	)
Accumulated deficit		(216,916	)		(156,668	)
Total stockholders’ equity (deficit)		(17,525	)		(15,797	)
Noncontrolling interest		(725	)		(97	)
Total liabilities & stockholders’ equity (deficit)	$	56,482		$	74,556

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
REVENUES, NET	$	6,084		$	4,882		$	17,260			8,235
COST OF GOODS SOLD		178			141			573			497
GROSS PROFIT		5,906			4,741			16,687			7,738
OPERATING EXPENSES
Research and development		725			466			1,778			1,273
Selling		1,789			1,224			5,177			3,663
General and administrative		6,991			5,182			14,523			12,130
Total operating expenses		9,505			6,872			21,478			17,066
LOSS FROM OPERATIONS		(3,599	)		(2,131	)		(4,791	)		(9,328	)
OTHER INCOME (EXPENSE)
Other income		—			738			—			738
Loss on debt extinguishment		(6,427	)		—			(6,427	)		(3,245	)
Impairment loss on long-term investment		—			—			(524	)		—
Change in fair value of warrant derivative liabilities		424			19,456			623			20,351
Change in fair value of embedded conversion option		342			—			342			466
Net loss on investment in marketable securities		(5,248	)		2,023			(21,718	)		(31,627	)
Transaction cost		(309	)		—			(309	)		—
Notes conversion expense		(3,906	)		—			(3,906	)		—
Interest and other income (loss)		(17	)		8			146			43
Interest expense		(7,318	)		(5,525	)		(22,757	)		(16,269	)
Total other income (expense)		(22,459	)		16,700			(54,530	)		(29,543	)
INCOME (LOSS) BEFORE INCOME TAXES		(26,058	)		14,569			(59,321	)		(38,871	)
INCOME TAXES		25			—			242			2
NET INCOME (LOSS) INCLUDING NONCONTROLLING INTEREST		(26,083	)		14,569			(59,563	)		(38,873	)
Net (income) loss attributable to noncontrolling interest		(54	)		—			620			—
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY		(26,137	)		14,569			(58,943	)		(38,873	)

COMPONENTS OF OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments		11			(5	)		10			11
Other comprehensive income (loss)		11			(5	)		10			11
COMPREHENSIVE INCOME (LOSS)		(26,072	)		14,564			(59,553	)		(38,862	)
Amounts attributable to noncontrolling interest:
Net (income) loss attributable to noncontrolling interest		(54	)		—			620			—
Foreign currency translation adjustments		(6	)		—			8			—
Comprehensive (income) loss attributable to noncontrolling interest		(60	)		—			628			—
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY	$	(26,132	)	$	14,564		$	(58,925	)	$	(38,862	)
NET INCOME (LOSS) PER COMMON SHARE - BASIC	$	(0.60	)	$	0.40		$	(1.49	)	$	(1.06	)
NET INCOME (LOSS) PER COMMON SHARE - DILUTIVE	$	(0.60	)	$	(0.13	)	$	(1.49	)	$	(1.58	)
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING		46,020,507			36,719,892			40,474,847			36,644,377

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

	Common Stock
	Shares		Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Emmaus Stockholders' Equity / (Deficit)			Non-controlling Interest			Total Equity / (Deficit)
Balance at January 1, 2019		37,341,393	$	37	$	140,903		$	(69	)	$	(156,668	)	$	(15,797	)	$	(97	)	$	(15,894	)
Cumulative effect adjustment on adoption of ASC 842		—		—		—			—			(29	)		(29	)		—			(29	)
Beneficial conversion feature relating to convertible notes payable		—		—		2,039			—			—			2,039			—			2,039
Exercise of warrants		525		—		5			—			—			5			—			5
Common stock issued for cash (net of issuance cost)		322,920		—		2,530			—			—			2,530						2,530
Conversion of notes payable to common stock		85,410		—		329			—			—			329			—			329
Share-based compensation		—		—		536			—			—			536			—			536
Exercise of stock options		175		—		1			—			—			1			—			1
Foreign currency translation effect		—		—		—			7			—			7			1			8
Net income (loss)		—		—		—			—			(14,167	)		(14,167	)		14			(14,153	)
Balance, March 31, 2019		37,750,423	$	37	$	146,343		$	(62	)	$	(170,864	)	$	(24,546	)	$	(82	)	$	(24,628	)
Beneficial conversion feature relating to convertible notes payable		—		—		5,391			—			—			5,391			—			5,391
Exercise of warrants		53,032		—		181			—			—			181			—			181
Common stock issued for cash (net of issuance cost)		76,755		—		730			—			—			730			—			730
Share-based compensation		—		—		438			—			—			438			—			438
Foreign currency translation effect		—		—		—			6			—			6			(15	)		(9	)
Net income (loss)		—		—		—			—			(18,639	)		(18,639	)		(688	)		(19,327	)
Balance, June 30, 2019		37,880,210	$	37	$	153,083		$	(56	)	$	(189,503	)	$	(36,439	)	$	(785	)	$	(37,224	)
Common stock issued for cash (net of issuance cost)		477,338		1		2,949			—			—			2,950			—			2,950
Conversion of convertible notes payable and notes payable to common stock		6,983,350		7		35,502			—			—			35,509			—			35,509
Notes conversion expense		—		—		3,906			—			—			3,906			—			3,906
Reclassification of warrant liability to equity		—		—		776			—			—			776			—			776
Common stock issued in merger		2,330,548		2		(1,644	)		—			—			(1,642	)		—			(1,642	)
Share-based compensation		—		—		129			—			—			129			—			129
Fair value of replacement equity awards		—		—		2,438			—			—			2,438			—			2,438
Fair value of placement agent warrant including down-round protection adjustments		—		—		2,256			—			(1,276	)		980			—			980
Foreign currency translation effect		—		—		—			5			—			5			6			11
Net income (loss)		—		—		—			—			(26,137	)		(26,137	)		54			(26,083	)
Balance, September 30, 2019		47,671,446	$	47	$	199,395		$	(51	)	$	(216,916	)	$	(17,525	)	$	(725	)	$	(18,250	)

	Common Stock
	Shares		Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Treasury Stock, at Cost			Accumulated Deficit			Total Emmaus Stockholders' Equity / (Deficit)			Non-controlling Interest		Total Equity / (Deficit)
Balance at January 1, 2018		36,634,856	$	37	$	113,110	$	41,276		$	—		$	(140,132	)	$	14,291		$	—	$	14,291
Cumulative effect adjustment on adoption of ASU 2016-01		—		—		—		(41,362	)		—			41,362			—			—		—
Beneficial conversion feature relating to convertible notes payable		—		—		3,638		—			—			—			3,638			—		3,638
Common stock issued for cash		26,254		—		275		—			—			—			275			—		275
Repurchase of stock		—		—		—		—			(1,314	)		—			(1,314	)		—		(1,314	)
Share-based compensation		—		—		710		—			—			—			710			—		710
Foreign currency translation effect		—		—		—

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)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	EMMA	OTCQB
Common Stock Purchase Warrants	EMMAW	OTC Pink

		Page
Part I. Financial Information

Item 1.	Financial Statements	4

	(a)Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018	4

	(b)Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	5

	(c)Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	6

	(d)Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (Unaudited)	8

	(e)Notes to Consolidated Financial Statements as of and for the nine months ended September 30, 2019 (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	34

Part II Other Information

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Mine Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	37

Signatures		39


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


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

Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐