Explanatory Note
On September 17, 2018, Emmaus Life Sciences, Inc. ( “we,” “us,” “our,” “Emmaus” or the “company”) filed with the Securities and Exchange Commission a report onForm 8-K, referred to herein as the original report, relating to our entry into a securities purchase agreement pursuant to which we 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 10% senior secured debentures and common stock purchase warrants to purchase shares of our common stock. This amended report amends in certain respects the original report as described below. This amended report should be read in conjunction with the original report.
| Item 1.01 | Entry into a Material Definitive Agreement |
On October 1, 2018, we entered into a second amendment to securities purchase agreement to increase the amount of our securities to be sold and issued to the purchasers to $12.2 million principal amount of debentures and warrants to purchase an aggregate of up to 1,220,000 shares of our common stock for an aggregate purchase price of $12.2 million. The closing of the transactions under the securities purchase agreement is expected to occur in or about the week of October 8, 2018, subject to the satisfaction of customary closing conditions. At the closing, we will enter into a security agreement by which we will grant to the purchasers a security interest in substantially all of our assets, except for certain pledged marketable securities.
The debentures will bear interest at the rate of 10% per annum, payable monthly commencing November 1, 2018, and will mature on the18-month anniversary of the closing date. We will be obliged to redeem $1,000,000 principal amount of the debentures monthly, commencing in May 2019, and to redeem the debentures in full upon a “subsequent financing” by us of at least of $20 million, subject to certain exceptions. The debentures also will be redeemable at our option, and we may prepay the principal amount of the debentures, at any time without premium or penalty. Any outstanding principal balance of the debentures will be due on maturity date, subject to acceleration in specified events. At the closing, Emmaus Medical, Inc. and Newfield Nutrition Corporation, two of our subsidiaries, will enter into a subsidiary guarantee by which they will guarantee our obligations to the debenture holders.
The common stock purchase warrants will be exercisable for five years from the closing date beginning six months after the closing date at an initial exercise price of $11.30 per share, which will be subject to reduction upon the date we become a listed company or our common stock becomes quoted on a trading market based upon the public offering price or “VWAP” of our common stock. The exercise price also will be subject to adjustment in certain other customary circumstances.
T.R. Winston & Company, LLC acted as placement agent in connection with the transactions contemplated by the securities purchase agreement pursuant to an amended and restated fee agreement with us dated October 1, 2018. In the fee agreement, we have agreed to pay T.R. Winston at the closing a cash fee equal to 5% of the gross proceeds received from the purchasers, to grant to T.R. Winston common stock purchase warrants to purchase up to 120,000 shares of our common stock on the same terms as the common stock purchase warrants sold to the purchasers and to reimburse T.R. Winston for certain legal fees and expenses incurred in connection with the transactions contemplated by the securities purchase agreement.
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