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

Annual report pursuant to Section 13 and 15(d)

SELECTED FINANCIAL STATEMENT LIABILITIES

SELECTED FINANCIAL STATEMENT LIABILITIES

12 Months Ended

Dec. 31, 2023

Payables and Accruals [Abstract]

SELECTED FINANCIAL STATEMENT LIABILITIES

NOTE 6—SELECTED FINANCIAL STATEMENT LIABILITIES

Accounts payable and accrued expenses as of December 31, 2023 and 2022 consisted of the following (in thousands):


	December 31, 2023		December 31, 2022
Accounts payable:
Clinical and regulatory expenses	$	696	$	361
Professional fees		721		626
Selling expenses		1,498		1,363
Manufacturing costs		914		650
Non-employee director compensation		766		484
Other vendors		1,292		301
Total accounts payable		5,887		3,785
Accrued interest payable, related parties		542		144
Accrued interest payable		3,122		2,381
Accrued expenses:
Payroll expenses		1,270		1,263
Government rebates and other rebates		5,881		5,536
Due to customers		844		—
Other accrued expenses		179		440
Total accrued expenses		8,174		7,239
Total accounts payable and accrued expenses	$	17,725		13,549

Other current liabilities consisted of the following (in thousands):


	As of December 31
	2023		2022
Trade discount	$	3,000	$	1,200
Unearned revenue (a)		10,000		10,000
Other current liabilities		1,681		1,717
Total other current liabilities	$	14,681	$	12,917

(a) Refer Note 3 for information regarding to the unearned revenue.

Other long-term liabilities consisted of the following (in thousands):


	As of December 31
	2023		2022
Trade discount	$	17,324	$	21,682
Other long-term liabilities		39		32
Total other long-term liabilities	$	17,363	$	21,714

On June 12, 2017, the Company entered into an API Supply Agreement with Telcon pursuant to which Telcon advanced to the Company approximately $31.8 million as an advance trade discount in consideration of the Company’s agreement to purchase from Telcon the Company’s estimated annual target for bulk containers of PGLG. On July 12, 2017, the Company entered into a raw material supply agreement with Telcon which revised certain items of the API Supply Agreement (the “revised API agreement”). As of December 31, 2023 and 2022, the total trade discounts were $20.3 million and $22.9 million, respectively. The Company purchased $0.8 million and $0.6 million of PGLG from Telcon during years ended December 31, 2023, and 2022, respectively, of which $754,000 and $644,000 were reflected in accounts payable and accrued expenses as of December 31, 2023 and 2022, respectively. The revised API agreement provided for an annual API purchase target of $5 million and a target “profit” (i.e., gross margin) to Telcon of $2.5 million. To the extent these targets are not met, which management refers to as a “target shortfall,” Telcon may be entitled to payment of the target shortfall or to settle the target shortfall by exchange of principal and interest on the Telcon convertible bond and proceeds thereof that are pledged as a collateral to secure the Company’s obligations under the API Supply Agreement and the revised API Agreement. See Note 5 for information regarding the settlement in the year ended December 31, 2023 and 2022 of the target shortfall.