Quarterly report pursuant to Section 13 or 15(d)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Sep. 30, 2021
Accounting Policies [Abstract]  
Organization and Nature of Operations

Organization and Nature of Operations

The Company is a commercial-stage biopharmaceutical company engaged in the discovery, development, marketing and sales of innovative treatments and therapies, primarily for rare and orphan diseases. On July 17, 2019, we completed a merger transaction with EMI Holding, Inc., formerly known as Emmaus Life Sciences, Inc. (“EMI”), into a subsidiary of the Company (the “Merger”), with EMI surviving the Merger as a wholly owned subsidiary. Immediately after completion of the Merger, we changed our name to “Emmaus Life Sciences, Inc.”

Principles of consolidation

Principles of consolidation—The consolidated financial statements include the accounts of Emmaus and its direct and indirect consolidated subsidiaries. All significant intercompany transactions have been eliminated.

The preparation of the consolidated financial statements requires the use of management estimates that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses for the reported period. Actual results could differ materially from those estimates.

Restricted cash

Restricted cash — Restricted cash as of September 30, 2020 includes proceeds received from the sale of 6,643,559 shares of Telcon RF Pharmaceutical, Inc., a Korean corporation (formerly, Telcon Inc. and herein “Telcon”) which were earmarked for the purchase of a Telcon convertible bond, described in Note 5. Reconciliation of cash, cash equivalent and restricted cash in the condensed consolidated statements of cash flows is as follows:

 

As of September 30,

 

 

2021

 

 

2020

 

Cash and cash equivalents

$

2,321

 

 

$

4,949

 

Restricted cash

 

 

 

 

25,680

 

Total cash, cash equivalents and restricted cash

$

2,321

 

 

$

30,629

 

Factoring accounts receivable

Factoring accounts receivable — Emmaus Medical, Inc., or Emmaus Medical, an indirect wholly owned subsidiary of Emmaus, entered into a purchase and sales agreement with Prestige Capital Finance, LLC or Prestige Capital, pursuant to which Emmaus Medical may offer and sell to Prestige Capital from time to time eligible accounts receivable in exchange for Prestige Capital’s down payment, or advance, to Emmaus Medical of 70% (subject to increase to 75%) of the face amount of the accounts receivable, subject to a $7.5 million cap on advances at any time. The balance of the face amount of the accounts receivable will be reserved by Prestige Capital and paid to Emmaus Medical, less discount fees of Prestige Capital ranging from 2.25% to 7.25% of the

face amount, as and when Prestige Capital collects the entire face amount of the accounts receivable. Emmaus Medical’s obligations to Prestige Capital under the purchase and sale agreement are secured by a security interest in the accounts receivable and all or substantially all other assets of Emmaus Medical. In connection with the purchase and sale agreement, Emmaus guarantees Emmaus Medical’s obligations under the purchase and sale agreement. At September 30, 2021, accounts receivable included approximately $472,000 of factoring accounts receivable and other current liabilities included approximately $9,000 related to factoring. For three and nine months ended September 30, 2021, the Company incurred approximately $106,000 and $181,000, respectively, of factoring fees.

Earnings (net loss) per share

Earnings (net loss) per share — In accordance with ASC 260, “Earnings per Share,” the basic earnings (net loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings (loss) per share is computed in a manner similar to basic earnings (net loss) per common share except that the denominator is increased to include the number of additional common shares issuable under securities exercisable for or convertible into common shares had been issued if the additional common shares would be dilutive. As of September 30, 2021 and September 30, 2020, the Company had outstanding potentially dilutive securities exercisable for or convertible into 23,276,594 shares and 19,276,395 shares, respectively, of the Company’s common stock. No potentially dilutive securities were included in the calculation of diluted earnings (net loss) per share since the potential dilutive securities were anti-dilutive for three and nine months ended September 30, 2021, and 2020.