11. SUBSEQUENT EVENTS

Completion of Merger

On July 17, 2019, the Company completed its business combination with EMI in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of January 4, 2019, among the Company, Merger Sub and EMI, as amended, pursuant to which Merger Sub merged with and into EMI, with EMI surviving as 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 merger under the acquisition method of accounting in accordance with accounting principles generally accepted in the United States. For accounting purposes, EMI is considered to have acquired the Company. 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 historical business, assets and liabilities, except for certain retained assets and liabilities, pursuant to the Amended and Restated Separation and Distribution Agreement, dated as of March 27, 2019, among the Company, Telemynd and MYnd Analytics, Inc., a California corporation and wholly owned subsidiary of the Company (the "Separation Agreement"). On July 15, 2019, the Company's board of directors (the "Board") declared a dividend (the "Dividend") with respect to the shares of 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 the Reverse Split described below. The Dividend, which together with the contribution and transfer of the Company's business, assets and liabilities described above, is referred to as the "Spin-Off," was paid on July 16, 2019.

On July 17, 2019, in connection with, and prior to the completion of, the Merger, the Company effected a 1-for-6 reverse split (the "Reverse Split") of its outstanding shares of common stock.

As a result of the Spin-Off and the Merger, the ongoing business of the Company is the EMI business, which is that of 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.

Pursuant to the Merger Agreement, the Company issued shares of common stock to EMI stockholders at an exchange ratio of 1.050457 shares of common stock, after giving effect to the Reverse Split, for each share of EMI common stock outstanding immediately prior to the Merger, including shares deemed outstanding immediately prior to the Merger upon the conversion of outstanding convertible promissory notes of EMI. The exchange ratio was determined through arms'-length negotiations between the Company and EMI. The Company also assumed the stock options outstanding under EMI's Amended and Restated 2011 Stock Incentive Plan and out, with such stock options henceforth representing the right to purchase a number of shares of common stock equal to the exchange ratio multiplied by the number of shares of EMI common stock previously purchasable under such options at an exercise price per share equal to the former exercise price thereunder divided by such exchange ratio. Upon the Merger, EMI's outstanding Amended and Restated 10% Senior Secured Debentures due October 21, 2020 and outstanding warrants to purchase EMI common stock generally became convertible and exercisable in accordance with their terms into a number of shares of the Company common stock equal to the exchange ratio multiplied by the number of shares of EMI common stock previously purchasable under the debentures and the warrants at a conversion or exercise price per share divided by such exchange ratio. The exercise price per share of warrants to purchase 1,464,000 former EMI shares was subject to further adjustment based upon the trading price of the Company shares following the Merger.

Immediately after the Merger, there were approximately 47,465,212 shares of common stock outstanding after the elimination of any fractional shares resulting from the Reverse Split and the Merger exchange ratio. Immediately after the Merger, the former EMI stockholders, option holders, debenture holders and warrant holders owned, or held rights to acquire, 94.1% of the fully-diluted common stock of the Company, with the Company's stockholders, option holders and warrant holders immediately prior to the Merger owning, or holding rights to acquire, 5.9% of the fully-diluted common stock.

The issuance of the shares of common stock to the former EMI stockholders was registered with the Securities and Exchange Commission (the "SEC") on the Company's Registration Statement on Form S-4, as amended.

Pursuant to an exchange agreement, dated as of June 12, 2019 (the "Exchange Agreement"), between the Company, Telemynd and John Pappajohn and Peter Unanue, each of whom was a director of the Company, and certain of affiliates of Mr. Pappajohn, all of whom held shares of preferred stock of the Company, immediately after the effective of the Merger each such share was exchanged for one share of Common Stock and one preferred share of Telemynd with substantially the same rights, benefits, designations and restrictions as the Company preferred stock.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

Prior to the completion of the Merger, the Company common stock was listed for trading on The NASDAQ Capital Market ("NASDAQ") under the symbol "MYND." In connection with the Merger, MYnd submitted an initial listing application for listing of the common stock upon the closing of the Merger; however, the application was not approved based upon the Company's failure to satisfy NASDAQ that it met NASDAQ's initial listing standard requiring a minimum stockholders' equity of at least $5 million.

In connection with the Merger, MYnd also submitted an initial listing application for listing of the Company warrants formerly listed under the ticker symbol "MYNDW"; however, the application was not approved because the warrants were not held by at least 400 Round Lot Holders on a post-Reverse Split basis as required by NASDAQ's initial listing standards.

The common stock traded on NASDAQ under the ticker symbol "MYND" on an ex-Dividend basis beginning on July 16, 2019 and on a post-Reverse Split adjusted basis on July 17, 2019. The common stock commenced trading on NASDAQ under the ticker symbol "EMMA" on July 18, 2019. The Common Stock has a new CUSIP number, 29137T 101. The Company warrants (the "Company Warrants") previously trading on NASDAQ through the close of business on July 17, 2019 under the ticker symbol "MYNDW" also traded on an ex-Dividend basis beginning on July 16, 2019 and on a post-Reverse Split adjusted basis on July 17, 2019. The Company Warrants will have a new CUSIP number, 29137T 119. The Company Warrants commenced trading on NASDAQ under the ticker symbol "EMMAW" on July 18, 2019.

In light of the failure to satisfy NASDAQ's initial listing standards as described above, on July 18, 2019, the Company received a notice of noncompliance (the "Notice") from the Listing Qualifications Staff of The Nasdaq Stock Market indicating that the Company was not compliant with the minimum stockholders' equity requirement under Nasdaq Listing Rule 5550(b)(1) (the "Minimum Stockholders' Equity Requirement") for continued listing of the Common Stock on The Nasdaq Capital Market and was not in compliance with the minimum Round Lot holder requirement for continued listing of the Company Warrants.

The Notice stated that the NASDAQ Staff has determined to delist the Common Stock and the Company Warrants. Unless the Company requests an appeal of this determination as described below, the Common Stock and the Company Warrants will be delisted from The NASDAQ Capital Market on July 30, 2019. The Notice indicated that the Company may appeal the Staff's determination before a NASDAQ appeals board by filing a request for an appeal by July 26, 2019. The Notice also indicated that, if the Company does not request an appeal, the Common Stock and the Company Warrants may be eligible to continue to be quoted on the OTC Market or in the "Pink Sheets." The Company timely filed an appeal of the Staff's determination which is scheduled to be heard on September 5, 2019 and intends to take actions necessary to satisfy the minimum stockholders' equity listing standard. There can be no assurance, however, that the appeal will be successful. If the appeal is unsuccessful, the delisting of the common stock and the Warrants would be likely to have a material adverse effect on the market for the Company's securities and any trading prices of the securities.

As previously disclosed, at the special meeting of stockholders held on July 9, 2019, the stockholders approved a reverse stock split amendment authorizing the Board, without further stockholder approval, to effect a reverse stock split of the common stock in a ratio in the range of between 1-for-2 to 1-for-10, inclusive. The final Reverse Split ratio of 1-for-6 was approved by the Board on July 16, 2019.

NASDAQ's initial listing standards require, among other things, that the listed shares have a $4.00 per share minimum bid price. The Reverse Split was intended to help to ensure that this standard was met as contemplated by the Merger Agreement.

As a result of the Reverse Split, each six outstanding shares of common stock immediately prior to the Reverse Split were automatically combined into one share of Common Stock. The number of outstanding shares of common stock immediately prior to the Merger was thereby reduced from approximately 13,883,143 to approximately 2,313,857. Each six shares of common stock underlying the Company Warrants were similarly combined into one share of Common Stock.  Except as otherwise indicated, share numbers in this Report do not give effect to the Reverse Split.

The vesting of all outstanding and unexercised options to purchase shares of common stock and restricted stock awards of the Company was accelerated in full immediately prior to the completion of the Merger, and all outstanding unexercised warrants to purchase shares of common stock otherwise remain in effect pursuant to their terms, subject to adjustment to account for the Reverse Split.

The Reverse Stock Split had no effect on the Company's authorized common stock, the par value of the common stock or the authorized preferred stock of the Company. No fractional shares were issued in connection with the Reverse Split. Stockholders who would have otherwise been entitled to receive a fractional share instead received a cash payment based on the average closing price of common stock as reported by NASDAQ over the 10-trading days ending on July 15, 2019. Immediately after the Reverse Split, each stockholder's percentage ownership interest in the Company and proportional voting power will remain unchanged, other than as a result of the elimination of fractional shares. The Reverse Split had no effect on the rights and privileges of the common stock.