What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-15 compared with 2022-05-13 · 224 added, 179 removed, 404 unchanged (50% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

March 31, 2022 (Unaudited)

June 30, 2022

December 31, 2021

17 unchanged sentences

Warrant derivative liabilities

Notes payable, current portion

Notes payable, current portion, net of discount

Notes payable to related parties

7 unchanged sentences

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, shares 49,311,864 shares issued and outstanding as of March 31, 2022 and December 31, 2021

Preferred stock, par value $ 0.001 per share, 15,000,000 shares authorized, no ne issued or outstanding

Common stock, par value $ 0.001 per share, 250,000,000 shares authorized, 49,558,501 and 49,311,864 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Accumulated deficit

3 unchanged sentences

EMMAUS LIFE SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

REVENUES, NET

4 unchanged sentences

Total operating expenses

LOSS FROM OPERATIONS

INCOME (LOSS) FROM OPERATIONS

OTHER INCOME (EXPENSE)

Loss on debt extinguishment, net

Loss on debt extinguishment

Change in fair value of warrant derivative liabilities

Change in fair value of conversion feature derivative, notes payable

Realized loss on investment on convertible bond

Realized loss on investment in convertible bond

Net loss on equity method investment

3 unchanged sentences

Total other income (expense)

LOSS BEFORE INCOME TAXES

INCOME (LOSS) BEFORE INCOME TAXES

INCOME TAXES (BENEFIT)

NET INCOME (LOSS)

COMPONENTS OF OTHER COMPREHENSIVE INCOME (LOSS)

2 unchanged sentences

Foreign currency translation adjustments

Other comprehensive income

COMPREHENSIVE LOSS

NET LOSS PER COMMON SHARE - BASIC AND DILUTED

Other comprehensive income (loss)

COMPREHENSIVE INCOME (LOSS)

EARNINGS (NET LOSS) PER COMMON SHARE - BASIC AND DILUTED

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING

6 unchanged sentences

Total stockholders'

Balance January 1, 2022

income (loss)

Balance at January 1,2022

Share-based compensation

Unrealized loss on debt securities available for sale (net of tax)

Unrealized gain on debt securities available for sale (net of tax)

Reclassification adjustment for loss included in net income

1 unchanged sentence

Balance, March 31, 2022

Reclassification of warrants from liability to equity

Fair value of warrants including down-round protection adjustments

Common stock issued for services

Share-based compensation

Unrealized loss on debt securities available for sale (net of tax)

Foreign currency translation effect

Balance, June 30, 2022

Additional paid-in

1 unchanged sentence

Total stockholders'

Balance January 1, 2021

income (loss)

Balance at January 1,2021

Fair value of warrants including down-round protection adjustments

1 unchanged sentence

Share-based compensation

Unrealized loss on debt securities available for sale (net of tax)

Unrealized gain on debt securities available for sale (net of tax)

Foreign currency translation effect

Balance, March 31, 2021

Share-based compensation

Unrealized gain on debt securities available for sale (net of tax)

Foreign currency translation effect

Balance, June 30, 2021

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

2 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

5 unchanged sentences

Tax benefit recognized on unrealized gain on debt securities

Realized loss on investment on convertible bond

Net loss on equity method investment

Net loss on debt extinguishment

Gain on disposal of property and equipment

Net gain on investment in marketable securities

Loss on equity method investment

Loss on debt extinguishment

Loss on disposal of property and equipment

Loss on leased assets

Share-based compensation

1 unchanged sentence

Change in fair value of warrant derivative liabilities

Change in fair value of conversion feature derivative, note payable

Change in fair value of conversion feature derivative, notes payable

Net changes in operating assets and liabilities

11 unchanged sentences

Loan to equity method investee

Net cash flows provided by (used in) investing activities

Net cash flows used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from notes payable issued

Proceeds from convertible notes payable issued

Proceeds from notes payable issued, net of issuance cost and discount

Proceeds from convertible notes payable issued, net of issuance cost and discount

Payments of notes payable

2 unchanged sentences

Effect of exchange rate changes on cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

3 unchanged sentences

Income taxes paid

NON-CASH INVESTMENT AND FINANCING ACTIVITIES

NON-CASH INVESING AND FINANCING ACTIVITIES

Debt discount due to conversion features derivative

Debt discount due to deferred financing cost

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

5 unchanged sentences

The Company’s unaudited condensed consolidated interim financial statements contain adjustments, including normal recurring accruals necessary to fairly state the Company’s consolidated financial position, results of operations and cash flows.

Due to the uncertainty of the Company’s ability to meet its current operating and capital expenses, there is substantial doubt about the Company’s ability to continue as a going concern, as the continuation and expansion of its business is dependent upon obtaining further financing, market acceptance of Endari® , and achieving a profitable level of revenues.

Due to the uncertainty of the Company’s ability to meet its current liabilities and operating expenses, there is substantial doubt about the Company’s ability to continue as a going concern, as the continuation and any expansion of its business is dependent upon obtaining further financing, market acceptance of Endari® , and achieving a profitable level of revenues.

The consolidated interim financial statements do not include any adjustments that might result from the outcome of these uncertainties.

The condensed consolidated interim financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022.

The accompanying condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated balance sheet at December 31, 2021 contained in the Annual Report.

The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results to be expected for the full year or any future interim period.

The results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of the results to be expected for the full year or any future interim period.

Nature of Operations

6 unchanged sentences

Going concern — The accompanying consolidated financial statements have been prepared on the basis that the Company will continue as a going concern.

The Company incurred a net loss of $ 1.5 million for the three months ended March 31, 2022, and had a working capital deficit of $ 28.1 million.

The Company incurred a net loss of $ 10.4 million for the six months ended June 30, 2022 and had a working capital deficit of $ 39.5 million.

Management expects that the Company’s current liabilities, operating losses and expected capital needs, including the expected costs relating to the commercialization of Endari® in the Middle East North Africa region and elsewhere, will exceed its existing cash balances and cash expected to be generated from operations for the foreseeable future.

In order to meet the Company’s current liabilities and future obligations, the Company will need to raise additional funds through related-party loans, equity and debt financings or licensing or other strategic agreements.

The Company has no understanding or arrangement for any additional financing, and there can be no assurance that the Company will be able to complete any additional equity or debt financings on favorable terms, or at all, or enter into licensing or other strategic arrangements.

In order to meet the Company’s current liabilities and future obligations, the Company will need to restructure or refinance its existing indebtedness and raise additional funds through related-party loans, equity or debt financings or licensing or other strategic agreements.

The Company is in discussions with the holders of its outstanding convertible promissory notes and certain other creditors to restructure or refinance the convertible promissory notes and other current liabilities, but has no understanding or agreement to do so and has no understanding or arrangement for any additional financing.

There can be no assurance that the Company will be able to restructure or refinance its existing indebtedness or other current liabilities or complete any additional equity or debt financings on favorable terms, or at all, or enter into licensing or other strategic arrangements.

The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Management has considered all recent accounting pronouncements and has determined that there are no recent accounting pronouncements that are expected to have a material effect on the Company’s condensed consolidated financial statements.

Factoring accounts receivable — Emmaus Medical, Inc., or Emmaus Medical, an indirect wholly owned subsidiary of Emmaus, is party to 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 75 % of the face amount of the accounts receivable, subject to a $ 7.5 million cap on advances at any time.

Management has considered all recent accounting pronouncements will not have a material effect on the Company’s condensed consolidated financial statements.

Factoring accounts receivables — Emmaus Medical, Inc., or Emmaus Medical, an indirect wholly owned subsidiary of Emmaus, is party to 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 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 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 has guarantee d Emmaus Medical’s obligations under the purchase and sale agreement.

At March 3 1 , 202 2 , accounts receivable included no factoring accounts receivable and there were no liabilities related to factoring reflected in other current liabilities .

For three month s ended March 3 1 , 202 2 and March 31, 2021 , the Company incurred approximately $ 53,000 , and $ 31,000 , respectively, of factoring fees.

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 has guaranteed Emmaus Medical’s obligations under the purchase and sale agreement.

At June 30, 2022, accounts receivable included $ 402 , 0 00 of factoring accounts receivable and there were $ 14,000 liabilities related to factoring reflected in other current liabilities.

For three and six months ended June 30, 2022, the Company incurred approximately $ 101,000 , and $ 154,000 , respectively, of factoring fees.

Net loss per share — In accordance with Accounting Standard Codification (“ASC”) 260, “Earnings per Share, ” the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding.

Diluted net loss per share is computed in a manner similar to basic 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 March 31, 2022 and March 31, 2021, the Company had outstanding potentially dilutive securities exercisable for or convertible into 23,261,199 shares and 24,515,738 shares, respectively, of common stock.

No potentially dilutive securities were included in the calculation of diluted net loss per share since the potential dilutive securities were anti-dilutive for each of the three months ended March 31, 2022 and 2021.

NOTE 3 — REVENUES, NET

Revenues, net disaggregated by category, were as follows (in thousands):

Three Months Ended March 31,

Diluted net loss per share is computed in a manner similar to basic net loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

As of June 30, 2022 and June 30, 2021, the Company had outstanding potentially dilutive securities exercisable for or convertible into 52,523,286 shares and 23,326,667 shares, respectively, of the Company’s common stock.

No potentially dilutive securities were included in the calculation of diluted net loss per share since the potential dilutive securities were anti-dilutive for period ended June 30, 2021 and June 30, 2022.

NOTE 3 — REVENUES

Revenues disaggregated by category were as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Revenues, net

The following table summarizes the revenue allowance and accrual activities for the three months ended March 31, 2022 and March 31, 2021 (in thousands):

The following table summarizes the revenue allowance and accrual activities for the six months ended June 30, 2022 and June 30, 2021 (in thousands):

Trade Discounts, Allowances and Chargebacks

4 unchanged sentences

Credit and payments made

Balance as of March 31, 2022

Balance as of June 30, 2022

Balance as of December 31, 2020

2 unchanged sentences

Credit and payments made

Balance as of March 31, 2021

The following table summarizes net revenues attributable to each of our customers that accounted for 10% or more of net revenues (as a percentage of net revenues) during the periods presented:

Three Months Ended March 31,

The Company is party to a distributor agreement with Telcon Pharmaceutical RF, Inc., or Telcon pursuant to which the Company granted Telcon exclusive rights to the Company’s prescription grade L-glutamine (“PGLG”) oral powder for the treatment of diverticulosis in South Korea, Japan and China in exchange for Telcon’s payment of $ 10 million in upfront fees and agreement to purchase from the Company specified minimum quantities of the PGLG.

Balance as of June 30, 2021

The following table summarizes revenues attributable to each of our customers that accounted for 10% or more of our total revenues (as a percentage of net revenues):

Three Months Ended June 30,

Six Months Ended June 30,

of diverticulosis in South Korea, Japan and China in exchange for Telcon’s payment of a $ 10 million upfront fee and agreement to purchase from the Company specified minimum quantities of the PGLG .

In a related license agreement with Telcon, the Company agreed to use commercially reasonable best efforts to obtain product registration in these territories within three years of obtaining FDA marketing authorization for PGLG in this indication.

Telcon has the right to terminate the distributor agreement in certain circumstances for failure to obtain such product registrations, in which event the Company would be obliged to return to Telcon the $ 10 million upfront fees.

The upfront fees are included in other long-term liabilities as unearned revenue as of both March 31, 2022 and December 31, 2021.

Refer to Notes 6 and 11 for additional details.

Telcon has the right to terminate the distributor agreement in certain circumstances specified in the distributor agreement for failure to obtain such product registrations, in which event the Company would be obliged to return to Telcon the $ 10 million upfront fee.

The fee is included in other long-term liabilities as unearned revenue as of June 30, 202 2 and December 31, 20 2 1 .

Refer to Note 6 and 11 and for additional transaction details.

NOTE 4 — SELECTED FINANCIAL STATEMENT — ASSETS

Inventories consisted of the following (in thousands):

March 31, 2022

June 30, 2022

December 31, 2021

3 unchanged sentences

Inventory reserve

Total inventories, net

Prepaid expenses and other current assets consisted of the following (in thousands):

March 31, 2022

June 30, 2022

December 31, 2021

2 unchanged sentences

Other current assets

Total prepaid expenses and other current assets

Property and equipment consisted of the following (in thousands):

March 31, 2022

June 30, 2022

December 31, 2021

4 unchanged sentences

accumulated depreciation

Property and equipment, net

During each of the three months ended March 31, 2022 and 2021, depreciation expenses were approximately $ 11,000 .

Total property and equipment, net

During the three months ended June 30, 2022 and 2021, depreciation expense was approximately $ 10,000 and $ 12,000 , respectively.

During the six months ended June 30, 2022 and 2021, depreciation expense was approximately $ 21,000 and $ 23,000 , respectively.

NOTE 5 — INVESTMENTS

Investment in convertible bond - On September 28, 2020, the Company entered into a convertible bond purchase agreement pursuant to which it purchased at face value a convertible bond of Telcon in the principal amount of approximately $ 26.1 million which matures on October 16, 2030 and bears interest at the rate of 2.1 % a year, payable quarterly.

Beginning October 16, 2021, the Company became entitled on a quarterly basis to call for early redemption of all or any portion of the principal amount of the convertible bond.

1 unchanged sentence

The initial conversion price is subject to downward adjustment monthly based on the volume-weighted average market price of Telcon shares as reported on Korean Securities Dealers Automated Quotations Market and in the event of the issuance of Telcon shares or share equivalents at a price below the market price of Telcon shares or upon a merger or similar reorganization of Telcon or a stock split, reverse stock split, stock dividend or similar event.

The conversion price as of March 31, 2022 is set forth in the “Investment in convertible bond” table below.

The convertible bond and any proceeds therefrom, including proceeds from any exercise of the early redemption right described above or

the call option described below, are pledged as collateral to secure the Company’s obligations under the revised API Supply Agreement with T elcon described in Note 6 and Note 1 1 .

The conversion price as of June 30, 2022 is set forth in the “Investment in convertible bond” table below.

The convertible bond and any proceeds therefrom, including proceeds from any exercise of the early redemption right described above or the call option described below, are pledged as collateral to secure the Company’s obligations under the API Supply Agreement and revised API Agreement with Telcon described in Note 6 and Note 11.

Concurrent with the purchase of the convertible bond, the Company entered into an agreement dated September 28, 2020 with Telcon pursuant to which Telcon or its designee is entitled to repurchase, at par, up to 50 % in principal amount of the convertible bond at any time and from time to time commencing October 16, 2021 and prior to maturity.

4 unchanged sentences

In February 2022, the Company and Telcon agreed to settle a “target shortfall” under the revised API agreement with Telcon for the years ended 2020 and 2021 by exchanging KRW 3.5 billion, or approximately US$ 2.9 million, principal amount and accrued and unpaid interest of the Telcon convertible bond and KRW 400 million, or approximately US$ 310,000 , in cash proceeds of the convertible bond.

As a result, the Company realized net loss on investment convertible bond of $ 126,000 and other income of $ 41,000 , which are reflected in the statement of operations.

As a result, the Company realized a net loss on investment convertible bond of $ 126,000 and other income of $ 41,000 as reflected in the statement of operations.

See Notes 6 and 11 for additional information on the “target shortfall.”

The following table sets forth the fair value and changes in fair value of the investment in the Telcon convertible bond as of March 31, 2022 and December 31, 2021 (in thousands):

The following table sets forth the fair value and changes in fair value of the investment in the Telcon convertible bond as of June 30, 2022 and December 31, 2021 (in thousands):

Investment in convertible bond

March 31, 2022

June 30, 2022

December 31, 2021

4 unchanged sentences

Balance, end of period

The fair value as of March 31, 2022 and December 31, 2021 was based upon following assumptions:

March 31, 2022

The fair value as of June 30, 2022 and December 31, 2021 was based upon following assumptions:

June 30, 2022

December 31, 2021

17 unchanged sentences

The parties also contemplated that t he Ube facility would eventually supply the Company with the facility’s output of amino acids and that the operation of the facility would be principally for the Company’s benefit and, as such, that major decisions affecting EJ Holdings and the Ube facility would be made by EJ Holdings’ board of directors, a majority of which are representatives of JIP, in consultation with the Company.

During the three months ended March 31, 2022 , the Company made an additional $ 1.7 million of loans to EJ Holdings.

As of March 31, 2022 , and December 31, 2021 , the loans receivable from EJ Holdings were approximately $ 22.2 million and $ 22.6 million, respectively , as reflected in equity method investment on the consolidated balance sheets .

During the six months ended June 30, 2022, the Company made an additional $ 3.3 million of loans to EJ Holdings.

As of June 30, 2022, and December 31, 2021, the loans receivable from EJ Holdings were approximately $ 22.1 million and $ 22.6 million, respectively, as reflected in equity method investment on the consolidated balance sheets .

EJ Holdings is engaged in retrofitting the Ube facility in order to seek regulatory approvals for the manufacture of PGLG in accordance with cGMP.

EJ Holdings has had no substantial revenues since its inception, has depended on loans from the Company to acquire the Ube facility and fund its operations and will continue to be dependent on loans from the Company or other financing unless and until the Ube facility is activated and EJ Holdings can secure customers for its products.

unless and until the Ube facility is activated and EJ Holdings can secure customers for its products.

There is no assurance the Company will be able to continue to provide loan financing to support EJ Holdings’ activities at the Ube facility.

The Company has determined that EJ Holdings is a variable interest entity, or VIE, based upon the loan financing provided by the Company to acquire the Ube facility and fund EJ Holdings’ activities, which are principally for the Company’s benefit.

JIP, however, owns 60 % of EJ Holdings and is entitled to designate a majority of EJ Holdings’ board of directors and, its Chief Executive Officer and outside auditors, and, as such, controls the management, business, and operations of EJ Holdings.

JIP, however, owns 60 % of EJ Holdings and is entitled to designate a majority of the directors of EJ Holdings and its Chief Executive Officer and outside auditors, and, as such, controls the management, business, and operations of EJ Holdings.

Accordingly, the Company accounts for its variable interest in EJ Holdings under the equity method.

The Company’s share of the losses reported by EJ Holdings are classified as net losses on equity method investment.

The Company’s share of the loss reported by EJ Holdings are classified as net loss on equity method investment.

The investment is evaluated for impairment and if facts and circumstances indicate that the carrying value may not be recoverable, an impairment charge would be recorded.

The following table sets forth certain financial information of EJ Holdings for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

The following table sets forth certain financial information of EJ Holdings for the three and six months ended June 30, 2022 and 2021 (in thousands):

Three months ended June 30,

Six months ended June 30,

REVENUES, NET

NOTE 6 — SELECTED FINANCIAL STATEMENT - LIABILITIES

Accounts payable and accrued expenses consisted of the following at March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022

Accounts payable and accrued expenses consisted of the following at June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

December 31, 2021

4 unchanged sentences

Manufacturing costs

Board member compensation

Non-employee board member compensation

Other vendors

8 unchanged sentences

Total accounts payable and accrued expenses

Other current liabilities consisted of the following at March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022

Other current liabilities consisted of the following at June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

December 31, 2021

2 unchanged sentences

Total other current liabilities

Other long-term liabilities consisted of the following at March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022

Other long-term liabilities consisted of the following at June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

December 31, 2021

5 unchanged sentences

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”).

The Company purchased $ 200,000 and $ 2.0 million of PGLG from Telcon in the three months ended March 31, 2022 , and March 31, 2021, respectively, of which $ 200,000 and $ 378,000 were reflected in accounts payable as of March 31, 2022 and December 31, 2021, 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 our obligations.

See Note 5 for information regarding a settlement in the three months ended March 31, 2022 of the target shortfall for 2020 and 2021.

The Company purchased $ 245,000 of PGLG from Telcon in the six months ended June 30, 2022 and purchased none of PGLG in the six months ended June 30, 2021 of which $ 248,000 and $ 378,000 were reflected in accounts payable as of June 30, 2022 and December 31, 2021, 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 he revised API Agreement.

See Note 5 for information regarding the settlement in the six months ended June 30, 2022 of the target shortfall for 2021 and 2020 .

NOTE 7 — NOTES PAYABLE

Notes payable consisted of the following at March 31, 2022 and December 31, 2021 (in thousands except for number of shares):

Notes payable consisted of the following at June 30, 2022 and December 31, 2021 (in thousands except for number of underlying shares) excluding the revolving line of credit agreement with related party discussed below:

Interest Rate

Term of Notes

Outstanding March 31, 2022

Unamortized Discount March 31, 2022

Amount March 31, 2022

Underlying Shares

March 31, 2022

Outstanding June 30, 2022

Unamortized Discount June 30, 2022

Amount June 30, 2022

Underlying Shares June 30, 2022

Notes payable

1 unchanged sentence

Due on demand - 2 years

Due on demand

Due on demand - 10 month

Notes payable - related parties

5 unchanged sentences

Term of Notes

Underlying Shares

December 31, 2021

5 unchanged sentences

Due on demand

Convertible note payable

Convertible notes payable

The notes are convertible into Emmaus Life Sciences, Inc.

Beginning February 28, 2022, the note holders became entitled to call for early redemption of the convertible notes payable, because the Company common stock was not approved for listing on the NYSE American, the Nasdaq Capital Market or other Trading Market (as defined in the agreement).

Accordingly, the notes were classified as current.

This note is convertible into shares of EMI Holding, Inc., a wholly owned subsidiary of Emmaus.

The weighted-average stated annual interest rate on notes payable was 6 % as of both March 31, 2022 and December 31, 2021.

The weighted-average effective annual interest rate of notes payable as of both March 31, 2022 and December 31, 2021 was 15 %, after giving effect to discounts relating to conversion features, warrants and deferred financing costs relating to the notes.

As of March 31, 2022, future contractual principal payments due on notes payable were as follows (in thousands):

Includes $ 14.5 million principal amount of convertible notes is which, the holders are entitled to call for early redemption.

Accordingly, the notes are classified as current liabilities .

This note is convertible into shares of EMI Holding, Inc., a wholly owned subsidiary of Emmaus Life Sciences, Inc .

The weighted-average stated annual interest rate of notes payable was 12 % and 6 % as of June 30, 2022 and December 31, 2021, respectively.

The weighted-average effective annual interest rate of notes payable as of June 30, 2022 and December 31, 2021 was 22 % and 15 %, respectively, after giving effect to discounts relating to conversion features, warrants and deferred financing costs relating to the notes.

As of June 30, 2022, future contractual principal payments due on notes payable were as follows (in thousands):

2022 (six months)

Includes $ 14.5 million principal amount of convertible notes, the holders are entitled to call for early redemption.

The Company is party to a revolving line of credit agreement with Yutaka Niihara, M.D., M.P.H., the Company’s Chairman and Chief Executive Officer.

4 unchanged sentences

Niihara a “tax gross-up” intended to make him whole for federal and state income and employment taxes payable by him with respect to interest and tax gross-up paid to him in the previous year.

As of March 31, 2022 and December 31, 2021, the outstanding balance of $ 400,000 was reflected in revolving line of credit, related party on the condensed consolidated balance sheets.

With the tax-gross up, the effective interest rate on the outstanding balance as of March 31, 2022, was 10.4 %.

As of June 30, 2022 and December 31, 2021, the outstanding principal balance under the agreement of $ 400,000 was reflected in revolving line of credit from related party on the condensed consolidated balance sheets.

With the tax-gross up, the effective interest rate on the outstanding balance as of June 30, 2022, was 10.4 %.

The revolving line of credit agreement will expire on November 22, 2022 .

Refer to Note 12 for more related party information.

Refer to Note 12 for more information on related party transactions.

On February 9, 2021, the Company entered into a securities purchase agreement pursuant to which the Company agreed to sell and issue to the purchasers thereunder in a private placement pursuant to Rule 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D thereunder a total of up to $ 17 million in principal amount of convertible promissory notes of the Company for a purchase price equal to the principal amount thereof.

The Company sold and issued approximately $ 14.5 million of the convertible promissory notes.

Commencing one year from the original issue date, the convertible promissory notes will be convertible at the option of the holder into shares of the Company’s common stock at an initial conversion price of $ 1.48 per share, which equaled the “Average VWAP” (as defined) of the Company’s common stock on the effective date.

The initial conversion price will be adjusted as of the end of each three-month period following the original issue date, commencing May 31, 2021, to equal the Average VWAP as of the end of such three-month period if such Average VWAP is less than the then-conversion price.

Commencing one year from the original issue date, the convertible promissory notes became convertible at the option of the holder into shares of the Company’s common stock at an initial conversion price of $ 1.48 per share, which equaled the “Average VWAP” (as defined) of the Company’s common stock on the effective date.

The initial conversion price is subject to adjustment as of the end of each three-month period commencing May 31, 2021, to equal the Average VWAP as of the end of such three-month period if such Average VWAP is less than the then-conversion price.

There is no floor on the conversion price.

The conversion price will be subject to further adjustment in the event of a stock split, reverse stock split or certain other events specified in the convertible promissory notes.

The convertible promissory notes bear interest at the rate of 2 % per year payable semi-annually on the last business day of August and January of each year and will mature on the 3rd anniversary of the original issue date, unless earlier converted or prepaid.

The convertible promissory notes became redeemable in whole or in part at the election of the holders on or after February 28, 2022.

As of June 30, 2022, the conversion price was $ 0.37 per share.

The convertible promissory notes bear interest at the stated rate of 2 % per year ( 10 % in the event of a default), payable semi-annually on the last business day of August and January of each year, and will mature on the 3rd anniversary of the original issue date, unless earlier converted or prepaid.

The convertible promissory notes are redeemable in whole or in part at the election of the holders.

The Company is entitled to prepay up to 50 % of the principal amount of the convertible promissory notes at any time on or before February 28, 2023 for a prepayment amount equal to the principal amount being prepaid, accrued and unpaid interest thereon and a prepayment premium equal to 50 % of such principal amount.

1 unchanged sentence

The conversion feature of the convertible promissory notes is separately accounted for at fair value as a derivative liability under guidance in ASC 815 that is remeasured at fair value on a recurring basis using Level 3 inputs, with any changes in the fair value of the conversion feature liability recorded in the condensed consolidated statements of operations.

The following table sets forth the fair value of the conversion feature liability as of March 31, 2022, and December 31, 2021 (in thousands) :

The following table sets forth the fair value of the conversion feature liability as of June 30, 2022 and December 31, 2021 (in thousands) :

Convertible promissory notes

March 31, 2022

June 30, 2022

December 31, 2021

3 unchanged sentences

Balance, end of period

The fair value and any change in fair value of the conversion feature liability are determined using a convertible bond lattice model.

The fair value and any change in fair value of conversion feature liability are determined using a binominal lattice model.

The model produces an estimated fair value based on changes in the price of the underlying common stock.

The fair values as of March 31, 2022, and December 31, 2021 were based upon following assumptions:

The fair value as of June 30, 2022 and December 31, 2021was based upon following assumptions:

Convertible promissory notes

March 31, 2022

June 30, 2022

December 31, 2021

5 unchanged sentences

Risk-free rate

In June 2022, we entered into a Business Loan and Security Agreement and Addenda with a third-party lender pursuant to which the lender loaned to us $ 1,800,000 , which we refer to as the “loan amount,” of which we received net proceeds of approximately $ 1,666,000 after deduction of the lender’s origination fee but without deduction for other transaction expenses.

The loan amount, together with interest of $ 738,000 , is payable in over the 40-week loan term in weekly installments of $ 31,725 for the first eight weeks and $ 71,381 for the remaining 32 weeks.

The loan amount and interest may be prepaid by us at any time within 90 days from the disbursement date for a repayment amount of $ 2,250,000 , less all prior payments on the loan, unless an event of default has occurred under the Business Loan and Security Agreement.

Repayment of the loan is secured by a security interest in all or substantially all our assets and all assets of our U.S.

subsidiaries and is personally guaranteed by Yutaka Niihara, M.D., M.P.H., our Chairman and Chief Executive Officer and principal stockholder, and his wife and Hope Hospice International, Inc., which is wholly owned by Dr.

Niihara and his wife.

The personal guarantee is secured by a deed of trust on certain real property of Dr.

Niihara and his wife.

The Business Loan and Security Agreement contains representations and warranties of the parties and restrictive covenants against incurring additional indebtedness, subject to certain exceptions, granting liens or security interests in our or our subsidiaries assets, and similar matters.

In the event of a breach of our representations and warranties or the restrictive covenants or other covenants, the lender would be entitled to accelerate the repayment of the loan and, in certain events, require us to pay an additional fee equal to 10 % of the loan amount, or $ 180,000 .

NOTE 8 — STOCKHOLDERS’ DEFICIT

1 unchanged sentence

The GPB Note was repaid in February 2018 .

In connection with the issuance of GPB Note, the Company issued to GPB a warrant (the “GPB Warrant”) to purchase up to 240,764 of common stock at an exercise price of $ 10.80 per share, with customary adjustments for stock splits, stock dividends and

other recapitalization events.

The GPB Warrant became exercisable six months after issuance and has a term of five years from the initial exercise date.

The GPB Warrant is separately recognized under ASC 815-40 at fair value as a liability.

The warrant liability is remeasured at fair value on a recurring basis using Level 3 inputs and any change in the fair value of the liability is recorded in the condensed consolidated statements of operations.

The following table presents the change in fair value of the GPB Warrant as of March 31, 2022 and December 31, 2021 (in thousands):

The following table presents the change in fair value of the GPB Warrant as of June 30, 2022 and December 31, 2021 (in thousands):

Warrant Liability—GPB

March 31, 2022

June 30, 2022

December 31, 2021

3 unchanged sentences

The fair value of the warrant derivative liability was determined using the Black-Scholes Merton model.

The fair values as of March 31, 2022, and December 31, 2021 were based on upon following assumptions:

March 31, 2022

The fair value as of June 30, 2022, and December 31, 2021 was based upon the following assumptions:

June 30, 2022

December 31, 2021

6 unchanged sentences

Extension of a Convertible Promissory Note - On June 15, 2020, the holder of a convertible promissory note in the principal amount of $ 3,150,000 agreed to an extension of the maturity date of the convertible promissory note to June 15, 2023 in exchange for an increase in the interest rate on the note from 11 % to 12 %.

In conjunction with the extension, the Company issued to the note holder five-year warrants to purchase a total of up to 1,250,000 shares of the Company common stock at an exercise price of $ 2.05 a share.

Under ASC 815-40, the warrants are recognized at fair value as a liability.

The warrant liability is remeasured at fair value on a recurring basis using Level 3 input and any changes in the fair value of liability is recorded in the condensed consolidated statements of operations.

The following table presents the fair values and changes in fair value of the warrants as of March 31, 2022 and December 31, 2021 (in thousands):

In conjunction with the extension, the Company issued to the note holder a five-year warrant to purchase up to 1,250,000 shares ( 500,000 shares if the related convertible promissory note was repaid by June 15, 2022) of the Company common stock at an exercise price of $ 2.05 a share.

Under ASC 815-40, the warrant is recognized at fair value as a liability.

The warrant liability is remeasured at fair value on a recurring basis using Level 3 input and any change in the fair value of liability is recorded in earnings.

Since the loan was no t repaid before June 15, 2022, the warrant was reclassified as equity.

The following table presents the fair value and the change in fair value of the warrants as of June 15, 2022 and December 31, 2020 (in thousands):

Warrant liability—Convertible Promissory Note

March 31, 2022

June 15, 2022

December 31, 2021

1 unchanged sentence

Change in fair value included in the statement of operations

Reclassification to equity

Balance, end of period

The fair values of the warrant derivative liability were determined using the Black-Scholes Merton model based upon following assumptions:

March 31, 2022

The fair value of the warrant derivative liability was determined using the Black-Scholes Merton model based upon following assumptions:

June 15, 2022

December 31, 2021

5 unchanged sentences

Number outstanding

A summary of outstanding warrants as of March 31, 2022 and December 31, 2021 is presented below:

March 31, 2022

A summary of outstanding warrants as of June 30, 2022 and December 31, 2021 is presented below:

June 30, 2022

December 31, 2021

2 unchanged sentences

Warrants outstanding, end of period

A summary of all outstanding warrants by year issued and exercise price as of March 31, 2022 is presented below:

Year issued and Exercise Price

Weighted-Average

Prior to January 1, 2021

At March 31, 2022

Warrnts exercisable end of period

As of June 30, 2022, the weighted-average remaining contractual life of outstanding warrants was 2.1 years.

Stock options —The Company’s former Amended and Restated 2011 Stock Incentive Plan expired on May 3, 2021, and no further awards may be made under the 2011 Plan.

The expiration of the 2011 Plan did not affect outstanding stock options thereunder.

The expiration of the 2011 Plan did not affect outstanding stock awards thereunder.

The Company also previously maintained an Amended and Restated 2012 Omnibus Incentive Compensation Plan, which was terminated in September 2021 in connection with the adoption of the 2021 Stock Incentive Plan described below.

4 unchanged sentences

The number of shares available for Awards, as well as the terms of outstanding awards, is subject to adjustment as provided in the Stock Incentive Plan for stock splits, stock dividends, reverse stock splits, recapitalizations and other similar events.

As of March 31, 2022, no awards were outstanding under the 2021 Stock Incentive Plan.

A summary of the Company’s stock option activity for three months ended March 31, 2022 and for the year ended December 31, 2021 is presented below.

March 31, 2022

As of June 30, 2022 and December 31, 2021, no awards were outstanding under the 2021 Stock Incentive Plan.

A summary of outstanding stock options as of June 30, 2022 and December 31, 2021 is presented below.

June 30, 2022

December 31, 2021

5 unchanged sentences

Options available for future grant

During the three months ended March 31, 2022, and 2021, the Company recognized $ 5,000 and $ 182,000 , respectively, of share-based compensation expense.

As of March 31, 2022, there was approximately $ 16,000 of total unrecognized compensation expense related to unvested share-based compensation awards outstanding under the former Amended and Restated 2011 Stock Incentive Plan.

That expense is expected to be recognized over the weighted-average remaining vesting period of 1.1 years.

During the three months ended June 30, 2022 and June 30, 2021, the Company recognized $ 5,000 and $ 274,000 , respectively of share-based compensation expense.

During the six months ended June 30, 2022 and June 30, 2021 the Company recognized $ 10,000 and $ 450,000 , respectively, of share-based compensation expense.

As of June 30, 2022, there was approximately

$ 11,000 of unrecognized share-based compensation expense related to unvested stock option s which is expected to be recognized over the weighted-average remaining vesting period of 1.0 year .

Collaborative Research and Development Agreement with Kainos Medicine, Inc — On February 26, 2021, the Company entered into a collaborative research and development agreement with Kainos Medicine, Inc.

(“Kainos”) to lead the preclinical development of Kainos’ patented IRAK4 inhibitor (“KM10544”) as an anti-cancer drug and further advance Kainos’s research and development activit ies .

T he companies also entered into a letter of intent regarding possible future joint development of small molecule therapeutics and other pharmaceutical assets.

Pursuant to the collaborative research and development agreement, the Company paid and issued to Kainos $ 500,000 in cash and 324,675 shares of common stock of the Company equivalent to $ 500,000 in additional consideration, which amounts were recorded as research and development expenses in the statement of operations and comprehensive income (loss) for each of the periods ended March 31, 2021 and December 31, 2021.

(“Kainos”) to lead the preclinical development of Kainos’ patented IRAK4 inhibitor (“KM10544”) as an anti-cancer drug and further advance Kainos’s research and development activities.

The companies also entered into a letter of intent regarding possible future joint development of small molecule therapeutics and other pharmaceutical assets.

The Company, in turn, was granted rights of first negotiation and first refusal for an exclusive license regarding the development and commercialization of products based on the intellectual property resulting from the agreement.

2 unchanged sentences

In consideration of the license, the Company paid Kainos a six-figure upfront fee in cash and agreed to make additional cash payments upon the achievement of specified milestones totaling in the mid-eight figures and pay a single-digit percentage royalty based on net sales of the licensed products and a similar percentage of any sublicensing consideration.

During the three months ended March 31, 2021, the Company incurred $ 1.0 million of research and development expenses related to the Kainos collaboration and license agreement.

The Company incurred no such expenses in the three months ended March 31, 2022.

During the six months ended June 30, 2021, the Company incurred $ 1.0 million of research and development expenses related to the Kainos collaboration and license agreement.

The Company incurred no such expenses in the six months ended June 30, 2022.

Amended and Restated Warrants – The Company evaluated its outstanding amended and restated warrants to purchase up to 4,038,200 shares of common stock under ASC 815-40 and concluded that the warrants should be accounted for equity.

In June 2022, the exercise price of outstanding amended and restated warrants was reduced to $ 0.446 per share pursuant to the anti-dilution adjustment provisions of the warrants triggered by the Company’s issuance of restricted shares of common stock for professional relations and consulting services discussed below.

The warrants were valued using the Black-Scholes Merton model and the $ 446,000 change in fair value was recorded as additional paid-in capital and accumulated loss.

Stock issued for services – In June 2022, the Company issued 246,637 shares of restricted share of common stock, with an estimated fair value of $ 110,000 for professional relations and consulting services to be rendered over the six-month period beginning July 1, 2022.

The value of the shares issued in connection with this agreement was recorded in prepaid expenses and other current assets in the condensed consolidated balance sheet as of June 30, 2022 and will be amortized over the six-month period.

NOTE 9 — INCOME TAX

The quarterly provision for or benefit from income taxes is computed based upon the estimated annual effective tax rate and the year-to-date pre-tax income (loss) and other comprehensive income.

For the three months ended March 31, 2022 and 2021, the Company recorded an income tax benefit of $ 103,000 and a provision for state income tax of $ 18,000 , respectively.

For the three and six months ended June 30, 2022, the Company recorded an income tax provision of $ 182,000 and $ 79,000 , respectively.

For three and six month ended June 30, 2021, the Company recorded an income tax benefit of $ 192,000 and $ 174,000 , respectively.

The Company did no t record a provision for federal income tax due to its net operating loss carryforwards.

The Company established a full valuation allowance against its federal and state deferred tax asset and there was unrecognized tax benefit as of March 31, 2022 or March 31, 2021 .

The Company established a full valuation allowance against its federal and state deferred tax asset and there was no unrecognized tax benefit as of June 30, 2022 or June 30, 2021.

NOTE 10 — LEASES

1 unchanged sentence

The Company leases 21,293 square feet of office space for our headquarters in Torrance, California, at a base rental of $ 80,886 per month, which lease will expire on September 30, 2026 .

The Company also leases an additional 1,850 square feet office space in New York, New York, at a base rent of $ 8,908 , which lease will expire on January 31, 2023 .

In addition, the Company leases 1,322 square feet of office space in Tokyo, Japan, which lease will expire on September 30, 2022 and 1,163 square feet of office space in Dubai, United Arab Emirates, which lease will expire on June 19, 2023 .

The rent expense during the three months ended March 31, 2022 and 2021 was $ 303,000 and $ 301,000 , respectively.

Future minimum lease payments were as follows as of March 31, 2022 (in thousands):

2022 (nine months)

2026 and thereafter

In addition, the Company leases 1,163 square feet of office space in Dubai, United Arb Emirates, which lease will expire on June 19, 2023 .During six month ended June 30, 2020, the Company terminated leases of office space in New York, New York and Tokyo, Japan.

Upon termination of New York lease, the Company recognized $ 31,000 of loss on leased assets.

The rent expense during the three months ended June 30, 202 2 and 202 1 was approximately $ 294,000 and $ 288,000 , respectively, and during the six months ended June 30, 2022 and June 30 , 2021 was approximately $ 597,000 and $ 589,000 , respectively.

Future minimum lease payments under the lease agreements were as follows as of June 30, 2022 (in thousands):

2022 (six months)

Total lease payments

Less imputed interest

Present value of lease liabilities

As of March 31, 2022 , the Company had an operating lease right-of-use asset of $ 3.3 million and lease liability of $ 3.8 million.

The weighted average remaining term of the Company’s leases as of March 31, 2022 was 4.4 years and the weighted-average discount rate was 12.0 %.

As of June 30, 2022, the Company had an operating lease right-of-use asset of $ 3.1 million and lease liability of $ 3.6 million reflected on the condensed consolidated balance sheet.

The weighted average remaining term of the Company’s leases as of June 30, 2022 was 4.2 years and the weighted-average discount rate was 12.9 %.

NOTE 11 — COMMITMENTS AND CONTINGENCIES

API Supply Agreement — On June 12, 2017, the Company entered into an API Supply Agreement (the “API Agreement”) with Telcon pursuant to which Telcon paid the Company approximately $ 31.8 million in consideration of the right to supply 25 % of the Company’s requirements for bulk containers of PGLG for a fifteen-year term.

API Supply Agreement — On June 12, 2017, the Company entered into an API Supply Agreement (the “API Supply Agreement”) with Telcon pursuant to which Telcon paid the Company approximately $ 31.8 million in consideration of the right to supply 25 % of the Company’s requirements for bulk containers of PGLG for a fifteen-year term.

The amount was recorded as deferred trade discount.

1 unchanged sentence

The revised API Agreement is effective for a term of five years and will renew automatically for ten successive one-year renewal periods, except as either party may determine.

In the revised API agreement, the Company has agreed to purchase a cumulative total of $ 47.0 million of PGLG over the term of the agreement.

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 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 our obligations.

In September 2018, the Company entered into an agreement with Ajinomoto and Telcon to facilitate Telcon’s purchase of PGLG from Ajinomoto for resale to the Company under the revised API agreement.

The PGLG raw material purchased from Telcon is recorded in inventory at net realizable value and the excess purchase price is recorded against deferred trade discount.

In the revised API agreement, the Company has agreed to purchase a cumulative total of $ 47.0 million, over the term of the agreement.

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.

In September 2018, the Company entered into an agreement with Ajinomoto Health and Nutrition North America, Inc.

(“Ajinomoto”), the producer of the PGLG, and Telcon to facilitate Telcon’s purchase of PGLG from Ajinomoto for resale to the Company under the revised API Agreement.

The PGLG raw material purchased from Telcon is recorded in inventory at net realized value and the excess purchase price is recorded against deferred trade discount.

Refer to Notes 5 and 6 for more information.

NOTE 12 — RELATED PARTY TRANSACTIONS

The following table sets forth information relating to loans from related parties outstanding on or at any time during the three months ended March 31, 2022 (in thousands):

Principal Amount Outstanding at March 31, 2022

The following table sets forth information relating to loans from related parties outstanding on or at any time during the six months ended June 30, 2022 (in thousands):

Principal Amount Outstanding at June 30, 2022

Current, Promissory note payable to related parties:

27 unchanged sentences

Due on Demand

Willis Lee (2)

Due on Demand

Hope International Hospice, Inc.

Due on Demand

Revolving line of credit agreement

15 unchanged sentences

Due on Demand

Niihara, the Chairman of the Board and Chief Executive Officer of Emmaus, is also a director and the Chief Executive Officer of Hope International Hospice, Inc.

Soomi Niihara is Dr.

Niihara’s wife.

Current officer or director.

Niihara, a Director and the Chairman, and Chief Executive Officer of the Company, is also a director and the Chief Executive Officer of Hope International Hospice, Inc.

Osato, a director of Emmaus, and his wife are the sole owner of Osato Medical Clinic.

See Note 7 for a discussion of the Company’s revolving line of credit agreement with Dr.

S ee Notes 6 and 11 for a discussion of the Company’s agreements with Telcon, which holds 4,147,491 shares of the Emmaus common stock, or approximately 8.4 % of the common stock outstanding as of March 31, 2022 and, as such, may be deemed to be an affiliate of the Company.

As of March 31, 2022, the Company held a Telcon convertible bond in the principal amount of approximately $ 23.5 million as discussed in Note 5 .

(4) The rate varies with changes in the prime rate and does not give effect to the “tax gross-up” described in Note 7.

S ee Note 7 for a discussion of the Company’s revolving line of credit agreement with Dr.

Niihara and Note 13 for information regarding a recent related party loan.

Notes 6 and 11 for a discussion of the Company’s agreements with Telcon, which holds 4,147,491 shares of the Emmaus common stock, or approximately 8.4 % of the common stock outstanding as of June 30, 2022.

As of June 30, 2022, the Company held a Telcon convertible bond in the principal amount of approximately $ 20.6 million as discussed in Note 5.

NOTE 13 — SUBSEQUENT EVENTS

Subsequent to March 31, 2022, the Company received $ 1.2 million of proceeds from loans from related and unrelated parties to augment its working capital .

Subsequent to June 30, 2022, the Company received $ 1.0 million of proceeds from loans from related and unrelated parties to augment its working capital.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements