Item 2.03 Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a Registrant.
(a) Direct Financial Obligation.
Between May 12, 2014
and June 11, 2014
, Emmaus Life Sciences, Inc.
"Company") issued $1.5 million
of notes ("Notes") convertible into shares of the
Company's common stock, par value $.001
per share ("Shares"). The Company
received proceeds from the Note issuances equal to the face amount of the issued
Notes. The Company may issue up to an additional $0.8 million
of Notes prior to
June 30, 2014
based on indications of interest that have been received by the
Company, but there can be no assurance that any additional Notes will be issued.
The Notes bear interest at a rate of ten percent (10%) per annum, mature two
years after the date of issuance and may be accelerated upon the occurrence of
customary events of default. The Notes are convertible into Shares starting one
year after issuance at a conversion price of $7.00
per Share. In addition, if
the Company completes a qualified public offering the principal amount of the
Notes will automatically convert into Shares at a conversion price equal to 80%
of the initial public offering price of the Shares in the qualified public
Each of the purchasers of units consisting of Shares and warrants to purchase
Shares (each, a "Unit Purchaser") pursuant to a Subscription Agreement, dated as
of September 11, 2013
(a "Subscription Agreement"), is entitled to participation
rights with respect to the issuance of the Notes pursuant to the terms of the
Subscription Agreement between the Company and such Unit Purchaser (the
"Participation Rights"). The Participation Rights entitle each Unit Purchaser
to purchase a percentage of the total Notes issued equal to such Unit
Purchaser's pro rata share of the outstanding Shares on a fully-diluted basis.
If any Unit Purchasers exercise their Participation Rights, the Company expects
to issue additional Notes in accordance with the terms of the Participation
Rights. There can be no assurance that any Unit Purchaser will exercise their
Participation Rights or that any Notes will be issued to any Unit Purchasers.
Item 8.01 Optional Disclosure of Other Events.
Between June 6, 2014
and June 10, 2014
, certain Unit Purchasers exercised their
existing warrants to purchase an aggregate of 1,095,466 Shares (the "Exercised
Warrants") for the cash exercise price of $3.50
per Share, resulting in the
Company receiving aggregate exercise proceeds of $3.8 million
. On June 10,
, the Company, based on an offer made to the Unit Purchasers in connection
with their exercises of the Exercised Warrants, issued an aggregate of 1,095,466
warrants ("Replacement Warrants"), with each Unit Purchaser receiving
Replacement Warrants to purchase the number of Shares purchased by such Unit
Purchaser pursuant to the Exercised Warrants. The Replacement Warrants expire
on September 11, 2018
, the expiration date of the Exercised Warrants, and have
terms that are generally the same as the Exercised Warrants.