Emmaus Life Sciences, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

STOCKHOLDERS' EQUITY (Tables)

STOCKHOLDERS' EQUITY (Tables)

12 Months Ended

Sep. 30, 2018

Schedule of stock-based compensation expense

Stock-based compensation expense is generally recognized over the employees’ or service provider’s requisite service period, generally the vesting period of the award. Stock-based compensation expense included in the accompanying statements of operations for the years ended September 30, 2018 and 2017 is as follows:

	September 30,
	2018				2017
	Stock-based compensation Expense non- Restricted Shares		Stock-based compensation Expense Restricted Shares		Stock-based compensation Expense non- Restricted Shares		Stock-based compensation Expense Restricted Shares
Research	$	—	$	—	$	10,900	$	—
Product development	20,000		16,400		360,600		—
Sales and marketing	3,400		—		175,300		—
General and administrative	1,034,800		513,700		647,200		892,000
Total	$	1,058,200	$	530,100	$	1,194,000	$	892,000

Schedule of unrecognized stock-based compensation expense

The following table sets forth the Company’s unrecognized stock-based compensation expense, net of estimated forfeitures, by type of award and the weighted-average period over which that expense is expected to be recognized:

	September 30
	2018			2017
Type of Award:	Unrecognized Expense,		Weighted average Recognition Period (in years)	Unrecognized Expense		Weighted average Recognition Period (in years)
Stock Options	$	126,509	0.96	$	860,915	3.54
Restricted Stock	$	59,028	0.55	$	205,858	1.00
Total	$	185,537	0.83	$	1,066,773	3.05

Schedule of stock option activity

A summary of stock option activity is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Intrinsic Value
Outstanding at September 30, 2016	223,120		$	50.98	6.63	$	819,137
Granted	334,000		4.85		—	—
Exercised	—		—		—	—
Forfeited	(3,037	)	1,335.06		—	—
Outstanding at September 30, 2017	554,083		$	16.14	6.63	$	7,425
Granted	468,000		2.01		—	—
Exercised	(35,000	)	1.55		—	—
Forfeited or expired	(183,146	)	8.19		—	—
Outstanding at September 30, 2018	803,937		$	10.13	8.75	$	7,500

Schedule of options outstanding

Following is a summary of the status of options outstanding at September 30, 2018:

Exercise Price ($)		Number of Shares	Expiration Date	Weighted Average Exercise Price ($)
2012 Omnibus Incentive Compensation Plan
$1.55		250,000	4/2028	1.55
1.99		50,000	4/2028	1.99
2.35		10,000	6/2028	2.35
2.98		10,000	5/2028	2.98
3.60		54,000	09/2027	3.60
3.74		5,000	12/2027	3.74
3.88		20,000	11/2027	3.88
3.96		35,000	11/2027	3.96
4.10		5,000	08/2027	4.10
4.16		50,000	08/2027	4.16
4.33		75,000	07/2027	4.33
5.10		7,750	04/2026	5.10
5.90		18,000	03/2027	5.90
6.00		174,000	09/2026	6.00
9.44		22,307	12/2022 – 01/2023	9.44
11.00		6,250	08/2025	11.00
50.00		9,518	03/2023 – 01/2025	50.00
52.00		625	07/2024	52.00
$600.00		42	03/2022	600.00
Sub-Total		802,492	Weighted Average	$	4.39
2006 Stock Incentive Plan
$	2,400.00	144	03/2019 – 07/2020	$	2,400.00
2,820.00		51	03/2021	2,820.00
$	3,300.00	1,250	03/2020	$	3,300.00
Sub-Total		1,445	Weighted Average	$	3,193.37
Total		803,937	Weighted Average	$	10.13

Schedule of status of restricted shares outstanding

Following is a summary of the status of restricted shares outstanding at September 30, 2018:

			Weighted
			Average
			Grant
	Number of		Date Fair
		Shares	Value		Amount
Outstanding at September 30, 2016		143,750	$	6.13	$	881,250
Granted		79,000		3.83		302,650
Forfeited		—		—		—
Outstanding at September 30, 2017		222,750	$	5.31	$	1,183,900
Granted		183,814		2.62		480,862
Forfeited		—		—		—
Outstanding at September 30, 2018		406,564	$	4.09	$	1,664,762

Schedule of black-scholes option-pricing model assumption

The range of Black-Scholes option-pricing model assumption inputs for all the valuation dates are in the table below:

	September 30, 2017 through
	to September 30, 2018
	Low			High
Annual dividend yield		—	%		—	%
Expected life (years)		5			5
Risk-free interest rate		1.14	%		2.94	%
Expected volatility		194.36	%		210.39	%

	September 30, 2016 through
	to September 30, 2017
	Low			High
Annual dividend yield		—	%		—	%
Expected life (years)		5			5
Risk-free interest rate		1.14	%		1.93	%
Expected volatility		196.77	%		234.54	%

Schedule of warrant activity

The warrant activity for the years ending September 30, 2018 and 2017, is described as follows:

	Number of Shares			Weighted Average Exercise Price
Outstanding at September 30, 2016	7,160		$	50.41
Granted	4,561,861		5.27
Exercised	—		—
Expired	(1,349	)	185.61
Forfeited	—		—
Outstanding at September 30, 2017	4,567,672		$	5.30
Granted	1,509,458		2.24
Exercised	—		—
Expired/ Forfeited	(1,256	)	48.07
Outstanding at September 30, 2018	6,075,874		$	4.53

Schedule of the status of warrants outstanding

Following is a summary of the status of warrants outstanding at September 30, 2018:

Exercise Price	Number of Shares			Expiration Date	Weighted Average Exercise Price
2.00	459,458	(1	)	9/21/2028	2.00
2.34	1,050,000	(2	)	03/2023	2.34
5.25	2,539,061	(3	)	07/2022	5.25
5.25	1,675,000	(4	)	07/2022	5.25
5.25	213,800	(5	)	07/2022	5.25
6.04	134,000	(6	)	07/2022	6.04
10.00	4,000			06/2021	10.00
55.00	555			06/2018 – 03/2019	55.00
Total	6,075,874				$	4.53

(1)

On September 21, 2018, the Company entered into definitive agreements with George C. Carpenter IV, President and Chief Executive Officer, Robin L. Smith, Chairman, as well as John Pappajohn, and Peter Unanue, each a director of the Company, and entities affiliated with Michal Votruba, a member of the Board of Directors of MYnd Analytics and Director of Life Sciences for the European-based RSJ-Gradus fund, relating to a private placement of an aggregate of 459,458 units for $1.85 per unit, with each unit consisting of one share of Common Stock and one Common Stock Purchase Warrant to purchase one share of Common Stock for $2.00 per share. The closing price per share of the Common Stock on the Nasdaq Stock Market on September 20, 2018 was $1.72 per share.

(2)

On March 29, 2018, the Company sold an aggregate of 1,050,000 units for $2.00 per Unit each consisting of one share of newly-designated Series A Preferred Stock, and one warrant for $2.34 per share in a private placement to three affiliates of the Company, for gross proceeds of $2.1 million. The private placement closed on March 29, 2018. The closing price per share of the Common Stock on the Nasdaq Stock Market on March 29, 2018 was $1.19 per share.

(3)

On July 13, 2017, the Company declared a special dividend of warrants to purchase shares of the Company’s common stock to record holders of Common Stock as of such date. Warrants to purchase 2,539,061 shares of Common Stock were distributed pro rata to all holders of common stock on the record date. These warrants will be exercisable (in accordance with their terms) to purchase one share of common stock, at an exercise price of $5.25 per share. The warrants will become exercisable commencing not less than 12 months following their July 27, 2017 distribution date and will expire five years thereafter.

(4)

On July 19, 2017, the Company issued 1,675,000 shares of Common Stock and accompanying Warrants to purchase up to 1,675,000 shares of Common Stock in connection with an underwritten public offering.

(5)

On August 23, 2017, the Company issued 213,800 common stock warrants to underwriters as part of the overallotment attributed to the July 2017 underwritten public offering.

(6)

As part of the underwritten public offering on July 19, 2017, the Company issued 134,000 common stock warrants to the underwriters as part of the services performed by them in connection with the underwritten public offering.