EMMAUS LIFE SCIENCES, INC. (Form: 10-Q, Received: 06/06/2016 16:32:38)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No.: 000-53072

EMMAUS LIFE SCIENCES, INC.

(Exact name of Registrant as specified in its charter)

Delaware		41-2254389
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

21250 Hawthorne Boulevard, Suite 800, Torrance, California		90503
(Address of principal executive offices)		(Zip code)

(310) 214-0065

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The registrant had 28,565,344 shares of common stock, par value $0.001 per share, outstanding as of May 31, 2016.

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EMMAUS LIFE SCIENCES, INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2016

INDEX

				Page
Part I	Financial Information

	Item 1.	Financial Statements

		(a)	Consolidated Balance Sheets as of March 31, 2016 (Unaudited) and December 31, 2015	1

		(b)	Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2016 and 2015 (Unaudited)	2

		(c)	Consolidated Statement of Changes in Stockholders’ Deficit for the Three Months Ended March 31, 2016 (Unaudited)	3

		(d)	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015 (Unaudited)	4

		(e)	Notes to Consolidated Financial Statements as of and for the Three Months Ended March 31, 2016 (Unaudited)	5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		27

	Item 4.	Controls and Procedures		27

Part II	Other Information

	Item 1.	Legal Proceedings		28

	Item 1A.	Risk Factors		28

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		28

	Item 3.	Defaults Upon Senior Securities		28

	Item 4.	Mine Safety Disclosures		28

	Item 5.	Other Information		29

	Item 6.	Exhibits		29

Signatures

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Item 1. Financial Statements

EMMAUS LIFE SCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

	As of
	March 31, 2016			December 31, 2015
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	323,938		$	472,341
Accounts receivable	61,314			101,639
Inventories, net	302,030			219,163
Marketable securities, pledged to creditor	244,920			219,015
Prepaid expenses and other current assets	96,917			131,113
Total current assets	1,029,119			1,143,271

PROPERTY AND EQUIPMENT, Net	55,079			58,227

OTHER ASSETS
Deposits	260,727			275,500
Total other assets	260,727			275,500
Total Assets	$	1,344,925		$	1,467,998

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	3,943,670		$	3,780,494
Other current liability	67,589			88,331
Notes payable, net	4,780,349			4,656,749
Notes payable to related parties, net	2,961,838			2,766,304
Convertible notes payable, net	6,455,879			6,000,347
Convertible notes payable to related parties, net	254,000			298,000
Total current liabilities	18,463,325			17,590,225

LONG-TERM LIABILITIES
Deferred rent	59,555			59,886
Warrant derivative liabilities	8,726,000			7,863,000
Convertible notes payable, net	4,127,015			4,206,873
Convertible notes payable to related parties, net	320,000			320,000
Total long-term liabilities	13,232,570			12,449,759
Total Liabilities	31,695,895			30,039,984

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ DEFICIT
Preferred stock — par value $0.001 per share, 20,000,000 shares authorized, none issued and outstanding	—			—
Common stock — par value $0.001 per share, 100,000,000 shares authorized, 28,563,478 and 28,163,478 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively	28,563			28,163
Additional paid-in capital	59,143,596			56,508,984
Accumulated other comprehensive loss	(281,415		)	(318,324		)
Accumulated deficit	(89,241,714		)	(84,781,809		)
Total Stockholders’ Deficit	(30,350,970		)	(28,562,986		)
Total Liabilities & Stockholders’ Deficit	$	1,344,925		$	1,476,998

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

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EMMAUS LIFE SCIENCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

	Three Months Ended March 31,
	2016			2015
				(Note 1)
REVENUES, net	$	79,399		$	96,759

COST OF GOODS SOLD	28,066			49,990
GROSS PROFIT	51,333			46,769

OPERATING EXPENSES
Research and development	502,301			244,118
Selling	93,580			157,186
General and administrative	2,292,922			2,854,342
	2,888,803			3,255,646

LOSS FROM OPERATIONS	(2,837,470		)	(3,208,877		)

OTHER INCOME (EXPENSE)
Change in fair value of liability classified warrants	—			186,000
Change in fair value of warrant derivative liabilities	(863,000		)	382,000
Interest and other income (loss)	(25,833		)	43,538
Interest expense	(731,202		)	(644,497		)
	(1,620,035		)	(32,959		)

LOSS BEFORE INCOME TAXES	(4,457,505		)	(3,241,836		)
INCOME TAXES	2,400			2,200
NET LOSS	(4,459,905		)	(3,244,036		)

COMPONENTS OF OTHER COMPREHENSIVE INCOME (LOSS )
Unrealized holding gain (loss) on securities available-for-sale	25,905			(133,026		)
Unrealized foreign currency translation	11,004			915
	36,909			(132,111		)
COMPREHENSIVE LOSS	$	(4,422,996	)	$	(3,376,147	)
NET LOSS PER COMMON SHARE	$	(0.16	)	$	(0.11	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING	28,465,798			30,581,171

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

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EMMAUS LIFE SCIENCES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE PERIOD FROM DECEMBER 31, 2015 TO MARCH 31, 2016

(UNAUDITED)

	Common stock — par value $0.001 per share, 100,000,000 shares authorized			Additional		Accumulated Other
	Shares	Common Stock		Paid-in Capital		Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Deficit

Balance, December 31, 2015	28,163,478	$	28,163	$	56,508,984	$	(318,324	)	$	(84,781,809	)	$	(28,562,986	)
Stock issued for cash	400,000	400		1,799,599		—			—			1,799,999
Beneficial conversion feature relating to convertible and promissory notes payable	—	—		294,497		—			—			294,497
Share-based compensation	—	—		540,516		—			—			540,516
Unrealized loss on marketable securities, net of tax	—	—		—		25,905			—			25,905
Foreign currency translation effect	—	—		—		11,004			—			11,004
Net loss	—	—		—		—			(4,459,905		)	(4,459,905		)

Balance, March 31, 2016	28,563,478	$	28,563	$	59,143,596	$	(281,415	)	$	(89,241,714	)	$	(30,350,970	)

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

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EMMAUS LIFE SCIENCES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Three Months ended March 31,
	2016			2015
				(Note 1)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(4,459,905	)	$	(3,244,036	)
Adjustments to reconcile net loss to net cash flows used in operating activities
Depreciation and amortization	3,668			59,094
Interest expense accrued from discount of convertible notes	238,130			339,006
Foreign exchange adjustments on convertible notes and notes payable	142,760			14,523
Share-based compensation	540,516			1,280,790
Change in fair value of liability classified warrants	—			(186,000		)
Change in fair value of warrant derivative liabilities	863,000			(382,000		)
Net changes in operating assets and liabilities
Accounts receivable	43,136			27,918
Inventories	(78,021		)	(16,823		)
Prepaid expenses and other current assets	57,246			21,283
Deposits	16,859			9,196
Accounts payable and accrued expenses	338,171			803,645
Other current liability	(65,000		)	—
Deferred rent	(424		)	44,957
Net cash flows used in operating activities	(2,359,864		)	(1,228,447		)

CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of property and equipment	—			(1,467		)
Net cash flows used in investing activities	—			(1,467		)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable issued	400,000			698,783
Proceeds from convertible notes payable issued	279,950			200,000
Payments of notes payable	(228,000		)	—
Payments of convertible notes	(44,000		)	—
Proceeds from exercise of warrants	—			102,885
Proceeds from issuance of common stock	1,799,999			—
Net cash flows from financing activities	2,207,949			1,001,668
Effect of exchange rate changes on cash	3,512			287

Net decrease in cash and cash equivalents	(148,403		)	(227,959		)
Cash and cash equivalents, beginning of period	472,341			556,318
Cash and cash equivalents, end of period	$	323,938		$	328,359

SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES
Interest paid	$	146,727		$	62,240
Income taxes paid	$	2,400		$	2,200

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

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EMMAUS LIFE SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2016

(UNAUDITED)

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited consolidated interim financial statements of Emmaus Life Sciences, Inc. and subsidiaries (the “Company” or “Emmaus”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) on the basis that the Company will continue as a going concern. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated. The Company’s unaudited consolidated interim financial statements contain adjustments, including normal recurring accruals necessary to present fairly the Company’s consolidated financial position, results of operations, comprehensive income (loss) 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, successful and sufficient market acceptance of its products, and finally, achieving a profitable level of operations. The consolidated interim financial statements do not include any adjustments that might result from the outcome of these uncertainties. The accompanying consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, filed on May 20, 2016 (“Annual Report”). Interim results for the periods presented herein are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016.

The preparation of the consolidated financial statements requires the use of management estimates. Actual results could differ materially from those estimates.

Correction of immaterial errors — During the first quarter of 2016, management became aware of prior period accounting errors related to stock option accounting that were made in the previously filed SEC Form 10-Q for the quarter ended March 31, 2015. Specifically, the prior period accounting errors involving shared based payments instruments related to not appropriately accounting for stock option modifications and not re-measuring the fair value of stock options issued to non-employees from the issuance date until the services required under the arrangement has been completed. The adjustment to the consolidated statements of comprehensive loss for three months ended March 31, 2015 for the stock option accounting errors was a decrease in expense of $360,454.

Pursuant to the guidance of Staff Accounting Bulletin (“SAB”) No. 99, Materiality, the Company evaluated these errors individually as well as in the aggregate and concluded that the errors were not material to any of its prior period financial statements. Although the errors were immaterial to prior periods, the prior period financial statements were revised, in accordance with SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , due to the significance of the out-of-period correction.

A reconciliation of the effects of the adjustment to the previously reported consolidated balance sheet at March 31, 2015 follows:

	As Previously Reported		Adjustment		As Revised
	As of March 31, 2015
Additional paid in capital	53,216,812		290,720		53,507,532
Accumulated deficit	(75,037,152	)	(290,720	)	(75,327,872	)

A reconciliation of the effect of the adjustment to the previously reported consolidated statement of comprehensive loss for the three months ended March 31, 2015 follows:

	As Previously Reported		Adjustment		As Revised
	For Three Months Ended March 31, 2015
General and administrative	3,214,796		(360,454	)	2,854,342
Loss from operations	(3,569,331	)	360,454		(3,208,877	)
Loss before income taxes	(3,602,290	)	360,454		(3,241,836	)

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A reconciliation of the effect of the adjustments to the previously reported consolidated statement of cash flows for the three months ended March 31, 2015 follows:

	As Previously Reported		Adjustment		As Revised
	For Three Months Ended March 31, 2015
Net loss	(3,604,490	)	360,454		(3,244,036	)
Share-based compensation	1,641,244		(360,454	)	1,280,790

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Refer to the Company’s Annual Report for a summary of significant accounting policies. There have been no material changes to our significant accounting policies during the three months ended March 31, 2016. Below are disclosures of certain interim balances, transactions, and significant assumptions used in computing fair value as of and for the three months ended March 31, 2016 and comparative amounts from the prior fiscal periods:

Inventories — All of the raw material purchased during the three months ended March 31, 2016 and for the year ended December 31, 2015 was from one vendor. The below table presents inventory by category:

Inventory by category	March 31, 2016		December 31, 2015
Work-in-process	$	161,194	$	45,355
Finished goods	140,836		173,808
	$	302,030	$	219,163

Advertising cost — Advertising costs are expensed as incurred. Advertising costs for the three months ended March 31, 2016 and 2015 were $3,939 and $19,263, respectively.

Marketable securities — The Company’s marketable securities consist of 39,250 shares of CellSeed, Inc. (“CellSeed”) stock which are part of 147,100 shares acquired in January 2009 for 100,028,000 Japanese Yen (equivalent to $1,109,819), at 680 Yen per share. CellSeed’s IPO (Tokyo Stock Exchange symbol 7776) was completed on March 16, 2010. As of March 31, 2016 and December 31, 2015, the closing price per share for CellSeed was 701 Yen ($6.24) and 672 Yen ($5.58), respectively.

As of March 31, 2016, 39,250 shares of CellSeed stock are pledged to secure a $500,000 convertible note issued to Mitsubishi UFJ Capital III Limited Partnership that is due on demand and are classified as current assets, as marketable securities, pledged to creditor.

Prepaid expenses and other current assets — Prepaid expenses and other current assets consisted of the following at March 31, 2016 and December 31, 2015:

	March 31, 2016		December 31, 2015
Prepaid insurance	$	67,948	$	97,708
Other prepaid expenses and current assets	28,969		33,405
	$	96,917	$	131,113

Fair value measurements — The following table presents the activity for those items measured at fair value on a recurring basis using Level 3 inputs during the three months ended March 31, 2016 and the year ended December 31, 2015:

	Period ended
Liability Classified Warrants—Stock Purchase Warrants	March 31, 2016		December 31, 2015
Balance, beginning of period	$	—	$	3,206,000
Reclassification to warrant derivative liabilities	—		(2,545,000		)
Change in fair value included in the statements of comprehensive loss	—		(661,000		)
Balance, end of period	$	—	$	—

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	Period ended
Warrant Derivative Liabilities—Stock Purchase Warrants	March 31, 2016		December 31, 2015
Balance, beginning of period	$	7,863,000	$	6,520,000
Reclassification from liability classified warrants	—		2,545,000
Change in fair value included in the statements of comprehensive loss	863,000		(1,202,000		)
Balance, end of period	$	8,726,000	$	7,863,000

The value of the liability classified warrants, the value of warrant derivative liability and the change in fair value of the liability classified warrants and warrant derivative liability were determined using a Binomial Monte-Carlo Cliquet (aka “Ratchet”) Option Pricing Model. The model is similar to traditional Black-Scholes-type option pricing models, except that the exercise price resets at certain dates in the future. T he values as of March 31, 2016, December 31, 2015, December 31, 2014, December 31, 2013 and the initial value as of September 11, 2013 were calculated based on the following assumptions:

	March 31, 2016			December 31, 2015			Initial Value
Stock price	$	5.00		$	4.70		$	3.60
Risk-free interest rate	0.79		%	1.23		%	1.72		%
Expected volatility (peer group)	69.20		%	64.10		%	72.40		%
Expected life (in years)	2.45			2.70			5.00
Number outstanding	3,320,501			3,320,501			3,320,501
Balance, end of period:
Liability classified warrants	$	—		$	—		$	7,541,000
Warrant derivative liabilities	$	8,726,000		$	7,863,000		$	—

Debt and related party debt — The following table presents the effective interest rates on the original loan principal amount for loans originated in the respective periods that either had a beneficial conversion feature or an attached warrant:

Type of Loan	Term of Loan	Stated Annual Interest Rate		Original Loan Principal Amount		Conversion Rate	Beneficial Conversion Discount Amount		Warrants Issued with Notes	Exercise Price		Warrant FMV Discount Amount		Effective Interest Rate Including Discounts
2015 convertible notes payable	Due on demand ~ 2 years	10	%	4,051,022		$3.50~ $4.50	1,388,201		110,417	$	4.90	220,071		14% ~ 109%
2016 convertible notes payable	Due on demand ~ 2 years	10	%	1,028,959		$3.60~ $4.50	294,497		—	—		—		14% ~ 49%
Total				$	5,079,981		$	1,682,698	110,417			$	220,071

Related party notes are disclosed as separate line items in the Company’s balance sheet presentation.

Net loss per share — As of March 31, 2016 and 2015, potentially dilutive securities exercisable or convertible into 11,837,427 and 12,838,502 shares of the Company’s common stock were outstanding, respectively. As the Company reported a net loss, none of the potentially dilutive securities were included in the calculation of diluted loss per share since their effect would be anti-dilutive for all periods presented.

Recent accounting pronouncements — In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments applicable to the Company in this Update (1) supersede the guidance to classify equity securities, except equity method securities, with readily determinable fair values into trading or available-for-sale categories and require equity securities to be measured at fair value with changes in the fair value recognized through net income, (2) allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment, (3) require assessment for impairment of equity investments without readily determinable fair values qualitatively at each reporting period, (4) eliminate the requirement to disclose the methods and significant assumptions used in calculating the fair value of financial instruments required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (5) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (6) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements, (7) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this Update are effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those years. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of the Update. The impact of the adoption of the amendments in this Update will depend on the amount of equity securities and financial instruments subject to the amendments in this Update held by the Company at the time of adoption.

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In February 2016, the FASB issued ASU No. 2016-02, Leases. The amendments in this Update require a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term for all leases with terms greater than twelve months. For leases less than twelve months, an entity is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The amendments in this Update are effective for the Company for fiscal years beginning after December 15, 2018, including interim periods within those years, with early adoption permitted. The Company is currently in the process of evaluating the impact of adoption of the amendments in this Update on the Company’s consolidated financial position and results of operations; however, adoption of the amendments in this Update are expected to be material for most entities who have a material lease with a term of greater than twelve months.

In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this Update simplify the accounting for share-based payment award transactions including: income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This Update is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. Early adoption is permitted. The Company is currently in the process of evaluating this new Update.

NOTE 3 — PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at:

	March 31, 2016			December 31, 2015
Equipment	$	165,196		$	164,931
Leasehold improvements	31,123			30,579
Furniture and fixtures	74,868			74,682
Sub total	271,187			270,192
Less: accumulated depreciation	(216,108		)	(211,965		)
Total	$	55,079		$	58,227

During the three months ended March 31, 2016 and 2015, depreciation expense was $3,668 and $5,523, respectively.

NOTE 4 — INTANGIBLE ASSETS

Intangible assets, related to license fees and patent filing costs associated with NutreStore® L-glutamine powder for oral solution as a treatment for short bowel syndrome (“SBS”) consisted of the following at:

	March 31, 2016			December 31, 2015
License fees and patent filing costs	$	500,000		$	2,000,000
Less: accumulated amortization	(500,000		)	(1,321,429		)
Less: intangible asset impairment	—			(678,571		)
Total	$	—		$	—

During the three months ended March 31, 2016 and 2015, amortization expense was $0 and $53,571, respectively.

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NOTE 5 — ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following at:

	March 31, 2016		December 31, 2015
Accounts payable
Clinical and regulatory expenses	$	145,003	$	322,193
Legal expenses	209,196		242,384
Other vendors	1,116,151		959,333
Total accounts payable	1,470,350		1,523,910
Accrued interest payable, related parties	126,214		176,940
Accrued interest payable	1,853,934		1,586,472
Accrued expenses	201,506		201,506
Deferred salary	291,666		291,666
Total accounts payable and accrued expenses	$	3,943,670	$	3,780,494

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NOTE 6 — NOTES PAYABLE

Notes payable consisted of the following at March 31, 2016 and December 31, 2015:

Year Issued	Interest Rate Range	Term of Notes	Conversion Price	Principal Outstanding March 31, 2016		Discount Amount March 31, 2016		Carrying Amount March 31, 2016		Shares Underlying Notes March 31, 2016	Principal Outstanding December 31, 2015		Discount Amount December 31, 2015		Carrying Amount December 31, 2015		Shares Underlying Notes December 31, 2015
Notes payable
2013	10%	Due on demand	—	$	890,000	$	—	$	890,000	—	$	830,000	$	—	$	830,000	—
2014	11%	Due on demand ~ 2 years	—	613,614		—		613,614		—	1,446,950		—		1,446,950		—
2015	11%	Due on demand ~ 2 years	—	2,443,400		—		2,443,400		—	2,379,799		—		2,379,799		—
2016	11%	Due on demand	—	833,335		—		833,335		—	—		—		—		—
				$	4,780,349	$	—	$	4,780,349	—	$	4,656,749	$	—	$	4,656,749	—

		Current		$	4,780,349	$	—	$	4,780,349	—	$	4,656,749	$	—	$	4,656,749	—
		Non-current		$	—	$	—	$	—	—	$	—	$	—	$	—	—
Notes payable - related party
2012	8% ~ 10%	Due on demand	—	$	626,730	$	—	$	626,730	—	$	626,730	$	—	$	626,730	—
2013	8%	Due on demand	—	50,000		—		50,000		—	50,000		—		50,000		—
2014	11%	Due on demand ~ 2 years	—	—		—		—		—	240,308		—		240,308		—
2015	10% ~ 11%	Due on demand ~ 2 years	—	1,621,265		—		1,621,265		—	1,849,266		—		1,849,266		—
2016	11%	Due on demand ~ 2 years	—	663,843				663,843		—	—		—		—		—
				$	2,961,838	$	—	$	2,961,838	—	$	2,766,304	$	—	$	2,766,304	—
		Current		$	2,961,838	$	—	$	2,961,838	—	$	2,766,304	$	—	$	2,766,304	—
		Non-current		$	—	$	—	$	—	—	$	—	$	—	$	—	—
Convertible notes payable
2010	6%	5 years	$3.05	$	2,000	$	—	$	2,000	656	$	2,000	$	—	$	2,000	656
2011	10%	5 years	$3.05	500,000		—		500,000		165,173	500,000		—		500,000		163,809
2013	10%	2 years	$3.60	200,257		—		200,257		71,446	525,257		—		525,257		185,553
2014	10%	Due on demand ~ 2 years	$3.05~$7.00	4,403,470		236,542		4,166,928		1,151,351	4,378,563		353,700		4,024,863		1,120,470
2015	10%	Due on demand ~ 2 years	$3.50~$7.00	5,384,340		420,490		4,963,850		1,462,149	5,681,166		526,066		5,155,100		1,517,996
2016	10%	Due on demand ~ 2 years	$3.60~$4.50	1,028,959		279,100		749,859		272,872	—		—		—		—
				$	11,519,026	$	936,132	$	10,582,894	3,123,647	$	11,086,986	$	879,766	$	10,207,220	2,988,484

		Current		$	6,913,862	$	457,983	$	6,455,879	1,915,803	$	6,358,698	$	358,351	$	6,000,347	1,762,849
		Non-current		$	4,605,164	$	478,149	$	4,127,015	1,207,844	$	4,728,288	$	521,415	$	4,206,873	1,225,635
Convertible notes payable - related party
2012	10%	Due on demand	$3.30	$	254,000	$	—	$	254,000	88,733	$	298,000	$	—	$	298,000	108,505
2015	10%	2 years	$4.50	320,000		—		320,000		74,127	320,000		—		320,000		72,354
				$	574,000	$	—	$	574,000	162,860	$	618,000	$	—	$	618,000	180,859

		Current		$	254,000	$	—	$	254,000	88,733	$	298,000	$	—	$	298,000	108,505
		Non-current		$	320,000	$	—	$	320,000	74,127	$	320,000	$	—	$	320,000	72,354
		Grand Total		$	19,835,213	$	936,132	$	18,899,081	3,286,507	$	19,128,039	$	879,766	$	18,248,273	3,169,343

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The average stated interest rate of notes payable as of March 31, 2016 and December 31, 2015 was 10%. The average effective interest rate of notes payable for each of the three-month period ended March 31, 2016 and the year ended December 31, 2015 was 23% and 23%, respectively, after giving effect to discounts relating to beneficial conversion features and the fair value of warrants issued in connection with these notes. The notes payable and convertible notes payable do not have restrictive financial covenants or acceleration clauses associated with a material adverse change event. The holders of the convertible notes have the option to convert their notes into the Company’s common stock at the stated conversion price during the term of their convertible notes. Conversion prices on these convertible notes payable range from $3.05 to $3.60 per share. Certain notes with a $4.50 or a $7.00 stated conversion price in the second year of their two year term are subject to automatic conversion into shares of our common stock at a conversion price equal to 80% of the initial public offering price at the time of a qualified public offering. All due on demand notes are treated as current liabilities.

Contractual principal payments due on notes payable are as follows:

Year Ending	at March 31, 2016
2016	$	13,973,596
2017	5,239,167
2018	622,450
Total	$	19,835,213

The Company estimated the total fair value of any beneficial conversion feature and accompanying warrants in allocating the debt proceeds. The proceeds allocated to the beneficial conversion feature were determined by taking the estimated fair value of shares issuable under the convertible notes less the fair value of the number of shares that would be issued if the conversion rate equaled the fair value of the Company’s common stock as of the date of issuance (see Note 2). The fair value of the warrants issued in conjunction with notes was determined using the Black Scholes Merton option pricing model with the following inputs for the periods ended:

	March 31, 2016			December 31, 2015
Stock price	$	—		$	4.50
Exercise price	$	—		$	4.90
Term	—			5 years
Risk-free interest rate	—		%	1.57		%
Expected dividend yield	—			—
Expected volatility	—		%	67.3		%

In situations where the debt included both a beneficial conversion feature and a warrant, the proceeds were allocated to the warrants and beneficial conversion feature based on their respective pro-rata fair values.

NOTE 7 — STOCKHOLDERS’ DEFICIT

Private placement — On September 11, 2013, the Company issued an aggregate of 3,020,501 units at a price of $2.50 per unit (the “Private Placement”). Each unit consisted of one share of common stock and one common stock warrant for the purchase of an additional share of common stock. The aggregate purchase price for the units was $7,551,253. In addition, 300,000 warrants for the purchase of a share of common stock were issued to a broker under the same terms as the Private Placement transaction (the “Broker Warrants”).

The warrants issued in the Private Placement and the Broker Warrants entitle the holders thereof to purchase, at any time on or prior to September 11, 2018, shares of common stock of the Company at an exercise price of $3.50 per share. The warrants contain non-standard anti-dilution protection and, consequently, are being accounted for as liabilities, were originally recorded at fair value, and are adjusted to fair market value each reporting period. Because the shares of common stock underlying the Private Placement warrants and Broker Warrants were not effectively registered for resale by September 11, 2014, the warrant holders have an option to exercise the warrants using a cashless exercise feature. The shares have not been registered for resale as of March 31, 2016. The availability to warrant holders of the cashless exercise feature as of September 11, 2014 caused the then-outstanding 2,225,036 Private Placement warrants and Broker Warrants with fair value of $7,068,000 to be reclassified from liability classified warrants to warrant derivative liabilities and to continue to be remeasured at fair value each reporting period.

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On June 10, 2014, certain warrant holders exercised 1,095,465 warrants issued in the Private Placement for the exercise price of $3.50 per share, resulting in the Company receiving aggregate exercise proceeds of $3.8 million and issuing 1,095,465 shares of common stock. Prior to exercise, these Private Placement warrants were accounted for at fair value as liability classified warrants. As of June 10, 2014, immediately prior to exercise, the carrying value of these Private Placement warrants was reduced to their fair value immediately prior to exercise of $1.8 million, representing their intrinsic value, with this adjusted carrying value of $1.8 million being transferred to additional paid-in capital. Also on June 10, 2014, based on an offer made to holders of Private Placement warrants in connection with such exercises, the Company issued an aggregate of 1,095,465 replacement warrants to holders exercising Private Placement warrants, which replacement warrants have terms that are generally the same as the exercised warrants, including an expiration date of September 11, 2018 and an exercise price of $3.50 per share. The replacement warrants are treated for accounting purposes as liability classified warrants, and their issuance gave rise to a $3.5 million warrant exercise inducement expense based on their fair value as of issuance as determined using a Binomial Monte-Carlo Cliquet (aka Ratchet) Option Pricing Model. Because the shares of common stock underlying the replacement warrants were not effectively registered for resale by June 10, 2015, the warrant holders have an option to exercise the warrants using a cashless exercise feature. The shares have not been registered for resale as of March 31, 2016. The availability to warrant holders of the cashless exercise feature as of June 10, 2015 caused the then-outstanding 1,095,465 replacement warrants with fair value of $2,545,000 to be reclassified from liability classified warrants to warrant derivative liabilities and to continue to be remeasured at fair value each reporting period.

As of March 31, 2016, the fair value of these Private Placement warrants, replacement warrants, and Broker Warrants was $8,726,000 (see Note 2). For further details regarding registration rights associated with the Private Placement warrants, replacement warrants and Broker Warrants, see the Registration Rights section below in this footnote.

A summary of outstanding warrants as of March 31, 2016 and December 31, 2015 is presented below.

	Three months ended March 31, 2016	Year ended December 31, 2015
Warrants outstanding, beginning of period	3,530,918	5,101,450
Granted	—	110,417
Exercised	—	(148,256	)
Cancelled, forfeited or expired	—	(1,532,693	)
Warrants outstanding, end of period	3,530,918	3,530,918

A summary of outstanding warrants by year issued and exercise price as of March 31, 2016 is presented below.

		Outstanding				Exercisable
Exercise Price		Number of Warrants Issued	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Total	Weighted Average Exercise Price
Balance 2013
	$3.30	50,000	2.08	$	3.30	50,000	$	3.30
	$3.50	2,225,036	2.45	$	3.50	2,225,036	$	3.50
	2013 total	2,275,036				2,275,036

During 2014
	$3.50	1,145,465	2.48	$	3.50	1,145,465	$	3.50
	2014 total	1,145,465				1,145,465

During 2015
	$4.90	110,417	3.93	$	4.90	110,417	$	4.90
	Total	3,530,918				3,530,918

Stock options — During the three months ended March 31, 2016, the Company’s Board of Directors granted 300,000 options to its independent directors. These options will equally vest one-third on each of the first three anniversaries of the grant date, have an exercise price of $4.70 per share and are exercisable through 2026. During the year ended December 31, 2015, no options were granted by the Company’s Board of Directors. As of March 31, 2016, there were 5,020,001 options outstanding under the Emmaus Life Sciences, Inc. 2011 Stock Incentive Plan.

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A summary of outstanding options as of March 31, 2016 is presented below.

	March 31, 2016				December 31, 2015
	Number of Options		Weighted- Average Exercise Price		Number of Options		Weighted- Average Exercise Price
Options outstanding, beginning of period	4,753,335		$	3.60	5,669,000		$	3.68
Granted or deemed issued	300,000		$	4.70	—		$	—
Exercised	—		—		(2,000	)	$	3.60
Cancelled, forfeited and expired	(33,334	)	$	5.10	(913,665	)	$	4.05
Options outstanding, end of period	5,020,001		$	3.85	4,753,335		$	3.60
Options exercisable, end of period	4,628,112		$	3.59	4,379,335		$	3.60
Options available for future grant, end of period	3,979,999				4,246,665

No options were issued during the three months ended March 31, 2015.

During the three months ended March 31, 2016 and 2015, the Company recognized $0.5 million and $1.3 million, respectively, of share-based compensation cost arising from stock options. As of March 31, 2016, there was $0.9 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the 2011 Stock Incentive Plan. That cost is expected to be recognized over the weighted average remaining period of 2.4 years.

Registration rights — Pursuant to the Subscription Agreements relating to the Private Placement and certain warrants, as well as pursuant to the replacement of certain warrants by the Company on June 10, 2014, the Company agreed to use its commercially reasonable best efforts to have on file with the SEC, by September 11, 2014 and at the Company’s sole expense, a registration statement to permit the public resale of 4,115,966 shares of the Company’s common stock and 3,320,501 shares of common stock underlying warrants (collectively, the “Registrable Securities”). In the event such registration statement includes securities to be offered and sold by the Company in a fully underwritten primary public offering pursuant to an effective registration under the Securities Act, and the Company is advised in good faith by any managing underwriter of securities being offered pursuant to such registration statement that the number of Registrable Securities proposed to be sold in such offering is greater than the number of such securities which can be included in such offering without materially adversely affecting such offering, the Company will include in such registration the following securities in the following order of priority: (i) any securities the Company proposes to sell, and (ii) the Registrable Securities, with any reductions in the number of Registrable Securities actually included in such registration to be allocated on a pro rata basis among the holders thereof. The registration rights described above apply until all Registrable Securities have been sold pursuant to Rule 144 under the Securities Act or may be sold without registration in reliance on Rule 144 under the Securities Act without limitation as to volume and without the requirement of any notice filing.

If the shares of common stock underlying these warrants to purchase 3,320,501 shares are not registered for resale at the time of exercise, and the registration rights described above then apply with respect to the holder of such warrants, such holder may exercise such warrants on a cashless basis. In such a cashless exercise of all the shares covered by the warrant, the warrant holder would receive a number of shares equal to the quotient of (i) the difference between the fair market value of the common stock, as defined, and the $3.50 exercise price, as adjusted, multiplied by the number of shares exercisable under the warrant, divided by (ii) the fair market value of the common stock, as defined. As of March 31, 2016, based on a fair market value of a share of the Company’s common stock of $5.00 and 3,320,501 warrants issued and outstanding and eligible for cashless exercise, the maximum number of shares the Company would be required to issue, if the warrant holders elected to exercise the cashless exercise feature with respect to all then eligible warrants, is 996,150 shares. If the fair market value of a share of the Company’s common stock were to increase by $1.00 from $5.00 to $6.00, the maximum number of shares the Company would be required to issue, if the warrant holders elected to exercise the cashless exercise feature with respect to all then eligible warrants, would increase to 1,383,542 shares as of March 31, 2016.

The Company has not yet filed a registration statement with respect to the resale of the Registrable Securities because doing so is not feasible prior to the completion by the Company of its initial public offering. As previously reported, the Company has filed a draft registration statement with the SEC with respect to its proposed initial public offering. The Company believes that it has used commercially reasonable efforts to pursue an initial public offering and, accordingly, considers itself to be in compliance with its registration rights obligations notwithstanding that it has not filed a registration statement with respect to the resale of the Registrable Securities and the deadline for doing so has passed without extension.

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NOTE 8 — COMMITMENTS AND CONTINGENCIES

Distribution contract — Cardinal Health Specialty Pharmacy Services has been contracted to distribute NutreStore to other wholesale distributors and some independent pharmacies since April 2008. For these services, the Company pays a monthly commercialization management fee of $5,000.

Operating leases — The Company leases its office space under operating leases with unrelated entities. The rent expense during the three months ended March 31, 2016 and 2015 amounted to $144,364 and $118,192, respectively.

Future minimum lease payments under the agreements are as follows as of March 31, 2016:

Year	Amount
2016 (nine months)	$	415,702
2017	525,023
2018	491,240
2019	123,875
	$	1,555,840

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NOTE 9 — RELATED PARTY TRANSACTIONS

On March 18, 2016, the Company issued 22,222 shares of common stock to Yutaka & Soomi Niihara, the Company’s Chairman and Chief Executive Officer for $99,999 or $4.50 per share price.

The following table sets forth information relating to the Company’s loans from related persons outstanding as of March 31, 2016.

Class	Lender	Interest Rate		Date of Loan	Term of Loan	Principal Amount Outstanding at March 31, 2016		Highest Principal Outstanding		Amount of Principal Repaid		Amount of Interest Paid		Conversion Rate		Shares Underlying Notes March 31, 2016
Current, Promissory note payable to related parties:
	Hope Hospice (1)	8	%	1/17/2012	Due on demand	$	200,000	$	200,000	$	—	$	8,000	$	—	—
	Hope Hospice (1)	8	%	6/14/2012	Due on demand	200,000		200,000		—		4,000		—		—
	Hope Hospice (1)	8	%	6/21/2012	Due on demand	100,000		100,000		—		2,000		—		—
	Yutaka Niihara (2)(4)	10	%	12/5/2012	Due on demand	126,730		1,213,700		1,086,970				—		—
	Hope Hospice (1)	8	%	2/11/2013	Due on demand	50,000		50,000		—		2,000		—		—
	Hope Hospice (1)	10	%	1/7/2015	2 years (3)	100,000		100,000		—		—		—		—
	James Lee (5)	10	%	1/26/2015	2 years (3)	50,000		50,000		—		—		—		—
	Hope Hospice (1)	10	%	1/29/2015	2 years (3)	—		30,000		30,000		2,770		—		—
	Lan T. Tran (2)	10	%	2/9/2015	2 years (3)	10,000		10,000		—		—		—		—
	Charles Stark (2)	10	%	2/10/2015	2 years (3)	10,000		10,000		—		—		—		—
	IRA Service Trust Co. FBO Peter B. Ludlum (2)	10	%	2/20/2015	2 years (3)	10,000		10,000		—		—		—		—
	Cuc T. Tran (5)	11	%	3/5/2015	1 year	13,161		13,161		—		—		—		—
	Yutaka Niihara (2)(4)	10	%	4/7/2015	2 years (3)	302,000		500,000		198,000		15,603		—		—
	Yutaka Niihara (2)(4)	10	%	5/21/2015	Due on demand	826,105		826,105		—		47,822		—		—
	Masaharu & Emiko Osato (4)	11	%	12/29/2015	Due on demand	300,000		300,000		—		—		—		—
	Lan Tran (2)	11	%	2/10/2016	2 years (3)	130,510		130,510		—		—		—		—
	Hideki & Eiko Uehara (5)	11	%	2/15/2016	Due on demand	133,333		133,333		—		—		—		—
	Masaharu & Emiko Osato (4)	11	%	2/25/2016	Due on demand	400,000		400,000		—		—		—		—
					Sub total	$	2,961,838	$	4,276,809	$	1,314,970	$	82,195	$	—	—

Current, Convertible notes payable to related parties:
	Yasushi Nagasaki (2)	10	%	6/29/2012	Due on demand	$	254,000	$	388,800	$	134,800	$	27,824	$	3.30	88,733
					Sub total	$	254,000	$	388,800	$	134,800	$	27,824	—		88,733

Non-Current, Convertible notes payable to related parties:
	Yutaka Niihara (2)(4)	10	%	9/29/2015	2 years	$	100,000	$	100,000	$	—	$	—	$	4.50	23,348
	Charles & Kimxa Stark (2)	10	%	10/1/2015	2 years	20,000		20,000		—		—		4.50		4,667
	Yutaka & Soomi Niihara (2)(4)	10	%	11/16/2015	2 years	200,000		200,000		—		—		4.50		46,112
					Sub total	$	320,000	$	320,000	$	—	$	—	$	—	74,127

					Total	$	3,535,838	$	4,985,609	$	1,449,770	$	110,019	$	—	162,860

(1) Dr. Niihara, a director and officer of the Company, is also the CEO of Hope Hospice.

(2) Officer

(3) Due on Demand

(4) Director

(5) Family of Officer/Director

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The following table sets forth information relating to the Company’s loans from related persons outstanding as of December 31, 2015.

Class	Lender	Annual Interest Rate		Date of Loan	Term of Loan	Principal Amount Outstanding at December 31, 2015		Highest Principal Outstanding		Amount of Principal Repaid		Amount of Interest Paid		Conversion Rate		Shares Underlying Notes at December 31, 2015
Current, Notes payable to related parties:
	Hope Hospice(1)	8	%	1/17/2012	Due on demand	$	200,000	$	200,000	$	—	$	8,000	$	—	—
	Hope Hospice(1)	8	%	6/14/2012	Due on demand	200,000		200,000		—		8,000		—		—
	Hope Hospice(1)	8	%	6/21/2012	Due on demand	100,000		100,000		—		4,000		—		—
	Yutaka Niihara(2)(4)	10	%	12/5/2012	Due on demand	126,730		1,213,700		1,086,970		56,722		—		—
	Hope Hospice(1)	8	%	2/11/2013	Due on demand	50,000		50,000		—		2,000		—		—
	Lan T. Tran(2)	11	%	2/10/2014	2 years(3)	106,976		106,976		—		—		—		—
	Hideki & Eiko Uehara(5)	11	%	2/15/2014	2 years	133,333		133,333		—		—		—		—
	Hope Hospice(1)	10	%	1/7/2015	2 years(3)	100,000		100,000		—		—		—		—
	James Lee(5)	10	%	1/26/2015	2 years(3)	50,000		50,000		—		—		—		—
	Hope Hospice(1)	10	%	1/29/2015	2 years(3)	30,000		30,000		—		—		—		—
	Yutaka Niihara(2)(4)	10	%	1/29/2015	Due on demand	—		20,000		20,000		773
	Lan T. Tran(2)	10	%	2/9/2015	2 years(3)	10,000		10,000		—		—		—		—
	Charles Stark(2)	10	%	2/10/2015	2 years(3)	10,000		10,000		—		—		—		—
	IRA Service Trust Co. FBO Peter B. Ludlum(2)	10	%	2/20/2015	2 years(3)	10,000		10,000		—		—		—		—
	Cuc T. Tran(5)	11	%	3/5/2015	1 year	13,161		13,161		—		—		—		—
	Yutaka Niihara(2)(4)	10	%	4/7/2015	2 years(3)	500,000		500,000		—		—		—		—
	Yutaka Niihara(2)(4)	10	%	5/21/2015	Due on demand	826,105		826,105		—		—		—		—
	Masaharu & Emiko Osato(4)	11	%	12/29/2015	Due on demand	300,000		300,000		—		—		—		—
					Sub total	$	2,766,304	$	3,873,275	$	1,106,970	$	79,495	$	—	—
Current, Convertible notes payable to related parties:
	Yasushi Nagasaki(2)	10	%	6/29/2012	Due on demand	$	298,000	$	388,800	$	90,800	$	—	$	3.30	108,505
					Sub total	$	298,000	$	388,800	$	90,800	$	—	$	—	108,505
Non-Current, convertible notes payable to related parties:
	Yutaka Niihara(2)(4)	10	%	9/29/2015	2 years	$	100,000	$	100,000	$	—	$	—	$	4.50	22,794
	Charles & Kimxa Stark(2)	10	%	10/1/2015	2 years	20,000		20,000						4.50		4,556
	Yutaka & Soomi Niihara(2)(4)	10	%	11/16/2015	2 years	200,000		200,000						4.50		45,004
					Sub total	320,000		320,000		$	—	$	—	$	—	72,354
					Total	$	3,384,304	$	4,582,075	$	1,197,770	$	—	$	—	180,859

(1) Dr. Niihara, a director and officer of the Company, is also the CEO of Hope Hospice.

(2) Officer

(3) Due on Demand

(4) Director

(5) Family of Officer/Director

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NOTE 10 — GEOGRAPHIC INFORMATION

For the three months ended March 31, 2016 and 2015, the Company earned revenue from countries outside of the United States as outlined in the table below:

Country	Revenues for the three months ended March 31, 2016		% of total revenue for the three months ended March 31, 2016		Revenues for the three months ended March 31, 2015		% of total revenue for the three months ended March 31, 2015
Japan	$	51,074	64	%	$	42,743	44	%
Taiwan	25,211		32	%	42,613		44	%

The Company did not have any significant currency translation or foreign transaction adjustments during the three months ended March 31, 2016 and 2015.

NOTE 11 — SUBSEQUENT EVENTS

Subsequent to March 31, 2016, the Company issued the following:

Notes issued after March 31, 2016	Loan Principal Outstanding		Annual Interest Rate		Term of Notes	Conversion Price
Convertible notes (1)	$	210,160	10.00	%	2 years	$	4.50
Promissory notes	550,000		11.00	%	Due on demand - 6 months	—
Promissory notes — related party	409,700		10.00	%	2 years (Due on demand)	—
	$	1,169,860

(1) Includes mandatory conversion at the time of an initial public offering at a conversion price equal to 80% of the initial public offering price.

In April and May of 2016, the Company entered into secured loan agreements, pursuant to which it borrowed an aggregate amount of $1,295,000 at a fixed interest rate of 10% per annum. These loans will mature on the earlier of the closing of a new debt financing (subject to certain exceptions, including refinancings of the Company’s outstanding convertible notes) or May 1, 2017. These loans are secured by all personal property of the Company and are personally guaranteed by Dr. Niihara and secured by certain of his real property. Furthermore, the loan agreements contain certain negative covenants including restrictions on the Company’s ability to (1) acquire material assets outside of the ordinary course of business, (2) sell, lease, license transfer or dispose of its personal property outside of the ordinary course of business, (3) pay or declare dividends, (4) make investments in or loans to other persons, (5) redeem or repurchase its stock, (6) make deposits or investments unless they are subject to a deposit control account, (7) incur additional indebtedness other than permitted debt, (8) make payments on subordinated obligations, (9) undergo a merger, change in control or sale of a substantial portion of its assets, or (10) use loan proceeds to make payments to its affiliates.

In connection with these loans, the Company also issued its lender warrants for the purchase of 62,500 shares of the Company’s common stock at an exercise price of $4.50 per share. In addition, if these loans remain outstanding for at least 30 days during the 90-day periods ending June 30, 2016, September 30, 2016 and December 31, 2016, the Company will be obligated to issue the lender additional warrants for the purchase of 37,500, 18,750 and 18,750 shares of its common stock, respectively, for an exercise price of the lowest of the fair market value of our common stock as of the start or end of such 90-day period or the lowest public sale price of our common stock during the quarter ended on the applicable measurement date. These warrants may be exercised through a cashless feature.

Secured Loans after March 31, 2016	Principal Amounts		Annual Interest Rate		Term of Loans
Secured loans	$	1,295,000	10	%	Earlier of closing of new debt financing or May 1, 2017
Total	$	1,295,000

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On May 1, 2016, U.S. Patent No. 5,693,671, entitled “L-glutamine Therapy for SCD and Thalassemia” issued on December 2, 1997 to Niihara et al., (the “SCD Patent”) expired and subsequently, the license agreement pursuant to which the Company was permitted utilize the SCD Patent to develop a treatment approach for SCD and thalassemia using L-glutamine has terminated. Since the SCD Patent is expired, competitors with more resources than the Company may develop similar products which may subject its product to greater competition than the Company expects and reduces its ability to generate revenue from its product candidate, possibly materially. These circumstances may also impair the Company’s ability to obtain license partners or other international commercialization opportunities on terms acceptable to the Company, if at all.

Although the SCD patent is expired, the Company will continue to seek market exclusivity protection for the SCD treatment by way of its orphan designation which, if the product is approved, will grant the Company seven years market exclusivity. In addition, under the Title I of the Drug Price Competition and Patent Term Resolution Act or the Hatch/Waxman Act, the Company may be eligible for three-year period market exclusivity if approved by the FDA. The FDA may not agree that the Company’s product is entitled to data exclusivity under the Hatch/Waxman Act and, if granted, data exclusivity protection under the Hatch/Waxman Act will expire three years after its product is approved.

With the termination of the license agreement, the Company will no longer be bound by the terms of the agreement which include but are not limited to paying royalties. The royalties were equal to 4.5% of net sales of Licensed Products in the United States until lifetime royalty payments made to the licensor total $100,000, at which time the royalty rate will decrease to 2.5% of net sales of the Licensed Products.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

With respect to the following discussion, the terms, “we,” “us,” “our” or the “Company” refer to Emmaus Life Sciences, Inc., and its wholly-owned subsidiary Emmaus Medical, Inc., a Delaware corporation which we refer to as Emmaus Medical, and Emmaus Medical’s wholly-owned subsidiaries, Newfield Nutrition Corporation, a Delaware corporation which we refer to as Newfield Nutrition; Emmaus Medical Japan, Inc., a Japanese corporation which we refer to as EM Japan, and Emmaus Medical Europe Ltd., a U.K. corporation which we refer to as EM Europe.

Forward-Looking Statements

This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2015 and 2014 and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on May 20, 2016 (the “Annual Report”).

This Quarterly Report contains forward-looking statements that involve substantial risks and uncertainties. All statements other than historical facts contained in this report, including statements regarding our future financial position, capital expenditures, cash flows, business strategy and plans and objectives of management for future operations are forward-looking statements. The words “anticipate,” “believe,” “expect,” “plan,” “intend,” “seek,” “estimate,” “project,” “could,” “may” and similar expressions are intended to identify forward-looking statements. These statements include, among others, information regarding future operations, future capital expenditures, and future net cash flow. Such statements reflect our management’s current views with respect to future events and financial performance and involve risks and uncertainties, including, without limitation, our ability to raise additional capital to fund our operations, obtaining U.S. Food and Drug Administration (“FDA”) and other regulatory authorization to market our drug and biological products, successful completion of our clinical trials, our ability to achieve regulatory authorization to market our pharmaceutical grade L-glutamine treatment for sickle cell disease (“SCD”), our ability to commercialize our pharmaceutical grade L-glutamine treatment for SCD; our reliance on third party manufacturers for our drug products, market acceptance of our products, our dependence on licenses for certain of our products, our reliance on the expected growth in demand for our products, exposure to product liability and defect claims, development of a public trading market for our securities, and various other matters, many of which are beyond our control.

Should one or more of these risks or uncertainties occur, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated or otherwise indicated. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and accordingly there can be no assurances made with respect to the actual results or developments.

Company Overview

We are a biopharmaceutical company engaged in the discovery, development and commercialization of innovative treatments and therapies primarily for rare and orphan diseases. We are initially focusing our product development efforts on SCD, a genetic disorder and a significant unmet medical need. Our lead product candidate is an oral pharmaceutical grade L-glutamine treatment that demonstrated positive clinical results in our completed Phase 3 clinical trial for sickle cell anemia and sickle ß0-thalassemia, two of the most common forms of SCD.

We are in the process of preparing a new drug application (“NDA”) for submission to the FDA, with respect to this product candidate. If the FDA accepts our submission and approves this NDA, we will be authorized to market in the United States our pharmaceutical grade L-glutamine treatment for SCD patients who are at least five years old.

We plan to market our L-glutamine treatment in the United States, if approved, by either strategic partnership or by building our own targeted sales force of approximately 30 sales representatives. We intend to utilize strategic partnerships to market our treatment in the rest of the world. L-glutamine for the treatment of SCD has received Fast Track designation from the FDA as well as Orphan Drug designation from both the FDA and the European Commission (“EC”).

We have extensive experience in the field of SCD, including the development, outsourced manufacturing and conduct of clinical trials of our prescription grade L-glutamine product candidate for the treatment of SCD. Yutaka Niihara, M.D., MPH, is a leading hematologist in the field of SCD. Dr. Niihara is licensed to practice medicine in both the United States and Japan and has been actively engaged in SCD research and the care of patients with SCD for over 20 years, primarily at the University of California Los Angeles and the Los Angeles Biomedical Research Institute (“LA BioMed”) a nonprofit biomedical research institute at Harbor UCLA Medical Center.

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To a lesser extent, we are also engaged in the marketing and sale of NutreStore L-glutamine powder for oral solution, which has received FDA approval, as a treatment for short bowel syndrome (“SBS”) in patients receiving specialized nutritional support when used in conjunction with a recombinant human growth hormone that is approved for this indication. Our indirect wholly owned subsidiary, Newfield Nutrition , sells L-glutamine as a nutritional supplement under the brand name AminoPure through retail stores in multiple states and via importers and distributors in Japan, Taiwan and South Korea. Since inception, we have generated minimal revenues from the sale and promotion of NutreStore and AminoPure.

In May 2006, we formed Newfield Nutrition, a wholly-owned subsidiary of Emmaus Medical, that distributes L-glutamine as a nutritional supplement under the brand name AminoPure.

In October 2010, we formed EM Japan, a wholly-owned subsidiary of Emmaus Medical, that markets and sells AminoPure in Japan and other countries in Asia. EM Japan also manages our distributors in Japan and may also import other medical products and drugs in the future.

In November 2011, we formed EM Europe, a wholly-owned subsidiary of Emmaus Medical, whose primary focus is expanding our business in Europe.

Our corporate structure is illustrated as follows:

Emmaus Medical, LLC was organized on December 20, 2000. In October 2003, Emmaus Medical, LLC undertook a reorganization and merged with Emmaus Medical, which was originally incorporated in September 2003.

Pursuant to an Agreement and Plan of Merger dated April 21, 2011, which we refer to as the Merger Agreement, by and among us, AFH Merger Sub, Inc., our wholly-owned subsidiary, which we refer to as AFH Merger Sub, AFH Advisory and Emmaus Medical, Emmaus Medical merged with and into AFH Merger Sub on May 3, 2011 with Emmaus Medical continuing as the surviving entity, which we refer to as the Merger. Upon the closing of the Merger, we changed our name from “AFH Acquisition IV, Inc.” to “Emmaus Holdings, Inc.” Subsequently, on September 14, 2011, we changed our name from “Emmaus Holdings, Inc.” to “Emmaus Life Sciences, Inc.”

Our future capital requirements are substantial and may increase beyond our current expectations depending on many factors, including, but not limited to: the duration and results of the clinical trials for our various products candidates going forward; unexpected delays or developments when seeking regulatory approvals; the time and cost in preparing, filing, prosecuting, maintaining and enforcing patent claims; current and future unexpected developments encountered in implementing our business development and commercialization strategies; the outcome of litigation in which we are currently engaged or may become engaged in the future; and further arrangements, if any, with collaborators. Until we can generate a sufficient amount of product revenue, future cash requirements are expected to be financed through registered or unregistered equity offerings, debt financings or corporate collaboration and licensing arrangements. As of March 31, 2016, our accumulated deficit was $89.2 million and we had cash and cash equivalents of $0.3 million. Since inception we have had minimal revenues and have been required to rely on funding from sales of equity securities and borrowings from officers and stockholders. Currently, we estimate we will need approximately $1.4 million to submit a NDA to the FDA for our pharmaceutical grade L-glutamine treatment for SCD. We expect the NDA will be submitted in mid-2016.

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We also own a minority interest of less than 1% in CellSeed, Inc., a Japanese company listed on the Tokyo Stock Exchange, which is engaged in research and development of regenerative medicine products and the manufacture and sale of temperature-responsive cell culture equipment. In collaboration with CellSeed, we are engaged in research and development of cell sheet engineering regenerative medicine products.

Financial Overview

Revenue

Since our inception in 2000, we have had limited revenue from the sale of NutreStore, an FDA approved prescription drug to treat SBS and AminoPure, a nutritional supplement. We have funded operations principally through the private placement of equity securities and debt financings. Our operations to date have been primarily limited to staffing, licensing and promoting products for SBS, outsourcing distribution and sales activities, developing and sponsoring clinical trials of our pharmaceutical grade L-glutamine treatment for SCD, manufacturing products and maintaining and improving our patent portfolio.

Currently, we generate revenue through the sale of NutreStore L-glutamine powder for oral solution as a treatment for SBS as well as AminoPure, a nutritional supplement. Pursuant to the exclusive sublicense agreement for US Patent No. 5,288,703, we are required to pay an annual royalty equal to 10% of adjusted gross sales of NutreStore to CATO Holding Company (“CATO”). Management expects that any revenues generated from the sale of NutreStore and AminoPure will fluctuate from quarter to quarter based on the timing of orders and the amount of product sold.

Cost of Goods Sold

Cost of goods sold includes the raw materials, packaging, shipping and distribution costs of NutreStore and AminoPure.

Research and Development Expenses

Research and development costs consist of expenditures for new products and technologies, which primarily involve fees paid to the contract research organization (“CRO”), that conducts the clinical trials of our product candidates, payroll-related expenses, study site payments, consultant fees, and activities related to regulatory filings, manufacturing development costs and other related supplies. The costs of later stage clinical studies, such as Phase 2 and 3 trials, are generally higher than those of earlier stages of development, such as preclinical studies and Phase 1 trials. This is primarily due to the increased size, expanded scope, patient related healthcare and regulatory compliance costs, and generally longer duration of later stage clinical studies.

The most significant clinical trial expenditures in prior years have been related to the CRO costs and the payments to study sites. The contract with the CRO is based on time and material expended, whereas the study site agreements are based on per patient costs as well as other pass-through costs, including, but not limited to, start-up costs and institutional review board fees. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones.

Future research and development expenses will depend on any new product candidates or technologies that we may introduce into our research and development pipeline. In addition, we cannot forecast with any degree of certainty which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree, if any, such arrangements would affect our development plans and capital requirements. We currently estimate that we will need an additional $1.4 million to submit a NDA to the FDA for our pharmaceutical grade L-glutamine treatment for SCD. We expect the NDA will be submitted in the summer of 2016.

At this time, due to the inherently unpredictable nature of the process for developing drugs, biologics and cell-based therapies and the interpretation of the regulatory requirements, we are unable to estimate with any degree of certainty the amount of costs which will be incurred in obtaining FDA approval of our pharmaceutical grade L-glutamine treatment for SCD and the continued development of our other preclinical and clinical programs. Clinical development timelines, the probability of success and development costs can differ materially from expectations and can vary widely. These and other risks and uncertainties relating to product development are described in the Annual Report under the headings “Risk Factors—Risks Related to Development of our Product Candidates,” “Risk Factors—Risks Related to our Reliance on Third Parties,” and “Risk Factors—Risks Related to Regulatory Approval of our Product Candidates and Other Legal Compliance Matters.”

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We estimate that the cost to us to develop in the United States corneal cell sheet products based on Cultured Autologous Oral Mucosal Epithelial Cell-Sheets (“CAOMECS”) technology will be approximately $3.0 million. This estimate includes the anticipated cost of obtaining FDA approval for the corneal cell sheets and assumes that we will need the FDA to approve a Biologic License Application (“BLA”) for the corneal cell sheets, rather than a NDA. We estimate that we will need another $2.4 million to commercialize any approved products based on corneal cell sheet technology.

In addition, we estimate that we will need $2.5 million for research related to other cell sheet applications and to build a current Good Manufacturing Practices (“cGMP”) laboratory to establish the infrastructure and production capabilities related to regenerative medicine products. At this time, we do not plan to incur any research and development costs for our NutreStore and AminoPure products.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs, including share-based compensation, for personnel in executive, finance, business development, information technology, marketing and legal functions. Other general and administrative expenses include facility costs, patent filing costs and professional fees and expenses for legal, consulting, auditing and tax services. Inflation has not had a material impact on our general and administrative expenses over the past two years.

Environmental Expenses

The cost of compliance with environmental laws has not been material over the past two years and any such costs are included in general and administrative costs.

Inventories

Inventories consist of finished goods and work-in-process and are valued on a first-in, first-out basis and at the lower of cost or market value. All of the raw material purchased during the three months ended March 31, 2016 and 2015 were from one vendor.

Results of Operations

Three months ended March 31, 2016 and 2015

Net Losses . Net losses increased by $1.2 million, or 37%, to $4.4 million from $3.2 million for the three months ended March 31, 2016 and 2015, respectively. The increase in losses is primarily a result of increased other expenses, partially offset by decreased operating expenses, in each case as discussed below. As of March 31, 2016, we had an accumulated deficit of approximately $89.2 million. Losses, partially offset by revenue from commercialized products, will continue as we advance our sickle cell treatment toward potential regulatory approval and commercialization. As a result, we anticipate that we will continue to incur net losses and be unprofitable for the foreseeable future. There can be no assurance that we will ever operate at a profit, even if all of our products are commercialized.

Revenues, Net . Net revenues decreased by $17,000, or 18%, to $79,000 from $96,000 for the three months ended March 31, 2016 and 2015. Combined revenues from our AminoPure® L-glutamine nutritional supplement product and our NutreStore® L-glutamine powder for oral solution for treatment of SBS decreased during these periods. The decrease is primarily due to decreased sales volume of our AminoPure® L-glutamine nutritional supplement product in both US and international markets.

Cost of Goods Sold . Cost of goods sold decreased by $22,000, or 44%, to $28,000 from $50,000 for the three months ended March 31, 2016 and 2015. Cost of goods sold includes costs for raw material, packaging, testing, shipping and costs related to scrapped inventory. All of the raw material purchased during the three months ended March 31, 2016 and 2015 was from one vendor. Cost of sales decreased due to decreased sales associated with our AminoPure® L-glutamine nutritional supplement product and our NutreStore® L-glutamine powder for oral solution for treatment of SBS during these periods. The decrease in the cost of goods sold in 2016 can be attributed to the increase in international sales, which has a higher gross profit margin.

Research and Development Expenses . Research and development expenses increased by $0.3 million, or 106%, to $0.5 million from $0.2 million for the three months ended March 31, 2016 and 2015. This increase was primarily due to an increase in our preparation of NDA submission activities. We expect our research and development costs to increase in the rest of 2016 to support our NDA post-submission activities, work on marketing approvals outside the US and potentially future clinical trial activity.

Selling Expenses . Selling expenses decreased by $63,000, or 40%, to $94,000 from $157,000 for the three months ended March 31, 2016 and 2015 due primarily to a decrease in advertising. Selling expenses includes the costs for distribution, promotion, travel, tradeshows and exhibits related to NutreStore® and AminoPure® as well as the marketing expense for our pharmaceutical grade L-glutamine treatment for SCD.

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General and Administrative Expenses. General and administrative expenses decreased $0.6 million, or 20%, to $2.3 million from $2.9 million for the three months ended March 31, 2016 and 2015. General and administrative expenses include share-based compensation expenses, professional fees, office rent, and payroll expenses. This decrease was primarily due to a decrease of $0.7 million for share-based compensation due to expiration of the service period for certain options in prior periods partially offset by an increase of $0.2 million for professional fees and office rent expenses.

Other Income and Expense . Total other expense increased by $1.6 million, or 4,815%, to $1.6 million expense for the three months ended March 31, 2016, compared to $33,000 expense for the three months ended March 31, 2015, primarily due to a negative change in fair value of warrant derivative liabilities of $1.2 million, a negative change in fair value of liability classified warrants of $0.2 million, an increase in interest costs of $0.1 million as a result of increased debt and an increase of $0.1 million in foreign exchange loss.

We anticipate that our operating expenses will increase for, among others, the following reasons:

· as a result of future debt repayments, increased payroll, expanded infrastructure and higher consulting, legal, accounting and investor relations costs, and director and officer insurance premiums associated with being a public company;

· to support research and development activities, which we expect to expand as development of our product candidate(s) continues and we approach submission of an NDA for pharmaceutical grade L-glutamine treatment for SCD; and

· to build a sales and marketing team before we receive regulatory approval of a product candidate in anticipation of commercial launch.

Liquidity and Capital Resources

Based on our losses to date, anticipated future revenue and operating expenses, debt repayment obligations and cash and cash equivalents balance of $0.3 million as of March 31, 2016, we do not have sufficient operating capital for our business without raising additional capital. We incurred losses of $4.5 million for the three months ended March 31, 2016 and $3.2 million for the three months ended March 31, 2015. We had an accumulated deficit at March 31, 2016 of $89.2 million. We anticipate that we will continue to incur net losses for the foreseeable future as we incur expenses for submission of the NDA, the commercialization of our pharmaceutical grade L-glutamine treatment of SCD, research costs for the corneal cell sheets using CAOMECS technology and the expansion of corporate infrastructure, including costs associated with being a public reporting company and potentially additional expenses that may be associated with an initial public offering. We have previously relied on unregistered equity offerings, debt financings and loans, including loans from related parties. As part of this effort, we have received various loans from officers, stockholders and other investors as discussed below. As of March 31, 2016, we had outstanding notes payable in an aggregate principal amount of $19.8 million, consisting of $7.7 million of non-convertible promissory notes and $12.1 million of convertible notes. Of the $19.8 million aggregate principal amount of notes outstanding as of March 31, 2016, approximately $14.5 million is either due on demand or will become due and payable within the next twelve months. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategies, including the commercialization of our pharmaceutical grade L-glutamine treatment for SCD and the development in the United States of CAOMECS-based cell sheet technology.

We have had recurring operating losses, have a significant amount of notes payable and other obligations due within the next year and projected operating losses including the expected costs relating to the commercialization of our pharmaceutical grade L-glutamine treatment for SCD that exceed both the existing cash balances and cash expected to be generated from operations for at least the next year. In order to meet our expected obligations, management intends to raise additional funds through equity and debt financings and partnership agreements. In addition, we may seek to raise additional funds through collaborations with other companies or financing from other sources. As previously reported, we have filed a draft registration statement with the SEC with respect to an initial public offering. Additional funding may not be available in amounts or on terms which are acceptable to us, if at all. Due to the uncertainty of our ability to meet our current operating and capital expenses, there is substantial doubt about our ability to continue as a going concern. Furthermore, our ability to raise capital may be negatively impacted by our current shareholder litigation, or by any adverse aspects of a settlement or judgment related to such litigation.

In addition, we currently estimate that we will need an additional $1.4 million to submit a NDA to the FDA for our pharmaceutical grade L-glutamine treatment for SCD. Our cash burn rate for the first three months ending March 31, 2016 was approximately $0.8 million per month.

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As discussed in our Annual Report under the heading “Risk Factors—Risks Related to Development of our Product Candidates,” if the FDA does not accept for filing our NDA for our pharmaceutical grade L-glutamine treatment or does not approve our NDA based on a single Phase 3 clinical trial, in each case unless we conduct a second Phase 3 clinical trial or confirmatory study, the potential approval of our product candidate will be delayed. Under these circumstances, we will incur additional costs to seek to convince the FDA that a confirmatory study is unnecessary for filing or approval, or to design and conduct a second Phase 3 clinical trial or confirmatory study, or both. If we conduct a second Phase 3 clinical trial or confirmatory study prior to the approval of our NDA, it is possible that the results of that trial will be less favorable than the results of our completed Phase 3 trial and further delay or complicate the approval process. The incurrence of additional costs may require us to raise additional capital, and any delay in obtaining approval of our product candidate will reduce the period during which we can market and sell our product with patent protection and may affect our ability to obtain other protections against competition.

Our cash flow from operations is not adequate and our future capital requirements will be substantial and may increase beyond our current expectations depending on many factors including, but not limited to: the number, duration and results of the clinical trials for our various product candidates going forward; unexpected delays or developments in seeking regulatory approvals; the time and cost in preparing, filing, prosecuting, maintaining and enforcing patent claims; other unexpected developments encountered in implementing our business and commercialization strategies; the outcome of and expenses incurred during existing and any future litigation; and further arrangements, if any, with collaborators. We will rely, in part, on sales of AminoPure for revenues, which we expect will increase due to the expected growth in its export volume as we have added additional distributors and expanded retail markets outside of the United States. Revenues from NutreStore currently are not significant and we are unsure whether sales of NutreStore will increase. Until we can generate a sufficient amount of product revenue, future cash needs are expected to be financed through registered or unregistered equity offerings, debt financings, loans, including loans from related parties, or other sources, such as strategic partnership agreements and corporate collaboration and licensing arrangements. Until we can generate a sufficient amount of product revenue, there can be no assurance of the availability of such capital on terms acceptable to us (or at all).

For the three months ended March 31, 2016 and during the year ended December 31, 2015, we borrowed $0.7 million and $7.3 million, respectively, pursuant to convertible notes and non-convertible promissory notes, of which $0.4 million and $2.2 million, respectively, have been issued to related parties. As of March 31, 2016 and December 31, 2015, the aggregate principal amounts outstanding under convertible notes and non-convertible promissory notes totaled $19.8 million and $19.1 million, respectively. The convertible notes and non-convertible promissory notes bear interest at rates ranging from 6.0% to 11% and are unsecured, except for a 2011 convertible note in the principal amount of $0.5 million. The net proceeds of the loans were used for working capital.

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The table below lists our outstanding notes payable as of March 31, 2016 and December 31, 2015 and the material terms of our outstanding borrowings:

Year Issued	Interest Rate range	Term of Notes	Conversion Price	Principal Outstanding March 31, 2016		Discount Amount March 31, 2016		Carrying Amount March 31, 2016		Shares Underlying Notes March 31, 2016		Principal Outstanding December 31, 2015		Discount Amount December 31, 2015		Carrying Amount December 31, 2015		Shares Underlying Notes December 31, 2015
Notes payable
2013	10%	Due on demand	—	$	890,000	$	—	$	890,000	—		$	830,000	$	—	$	830,000	—
2014	11%	Due on demand ~ 2 years	—	613,614		—		613,614		—		1,446,950		—		1,446,950		—
2015	11%	Due on demand ~ 2 years	—	2,443,400		—		2,443,400		—		2,379,799		—		2,379,799		—
2016	11%	Due on demand	—	833,335		—		833,335		—		—		—		—		—
				$	4,780,349	$	—	$	4,780,349	$	—	$	4,656,749	$	—	$	4,656,749	—
		Current		$	4,780,349	$	—	$	4,780,349	—		$	4,656,749	$	—	$	4,656,749	—
		Non-current		$	—	$	—	$	—	—		$	—	$	—	$	—	—
Notes payable - related party
2012	8% ~ 10%	Due on demand	—	$	626,730	$	—	$	626,730	—		$	626,730	$	—	$	626,730	—
2013	8%	Due on demand	—	50,000		—		50,000		—		50,000		—		50,000		—
2014	11%	Due on demand ~ 2 years	—	—		—		—		—		240,308		—		240,308		—
2015	10% ~ 11%	Due on demand ~ 2 years	—	1,621,265		—		1,621,265		—		1,849,266		—		1,849,266		—
2016	11%	Due on demand ~ 2 years	—	663,843				663,843		—		—		—		—		—
				$	2,961,838	$	—	$	2,961,838	—		$	2,766,304	$	—	$	2,766,304	—
		Current		$	2,961,838	$	—	$	2,961,838	—		$	2,766,304	$	—	$	2,766,304	—
		Non-current		$	—	$	—	$	—	—		$	—	$	—	$	—	—
Convertible notes payable
2010	6%	5 years	$ 3.05	$	2,000	$	—	$	2,000	656		$	2,000	$	—	$	2,000	656
2011	10%	5 years	$ 3.05	500,000		—		500,000		165,173		500,000		—		500,000		163,809
2013	10%	2 years	$ 3.60	200,257		—		200,257		71,446		525,257		—		525,257		185,553
2014	10%	Due on demand ~ 2 years	$ 3.05 ~$7.00	4,403,470		236,542		4,166,928		1,151,351		4,378,563		353,700		4,024,863		1,120,470
2015	10%	Due on demand ~ 2 years	$ 3.50 ~$7.00	5,384,340		420,490		4,963,850		1,462,149		5,681,166		526,066		5,155,100		1,517,996
2016	10%	Due on demand ~ 2 years	$ 3.60~$4.50	1,028,959		279,100		749,859		272,872		—		—		—		—
				$	11,519,026	$	936,132	$	10,582,894	3,123,647		$	11,086,986	$	879,766	$	10,207,220	2,988,484
		Current		$	6,913,862	$	457,983	$	6,455,879	1,915,803		$	6,358,698	$	358,351	$	6,000,347	1,762,849
		Non-current		$	4,605,164	$	478,149	$	4,127,015	1,207,844		$	4,728,288	$	521,415	$	4,206,873	1,225,635
Convertible notes payable - related party
2012	10%	Due on demand	$ 3.30	$	254,000	$	—	$	254,000	88,733		$	298,000	$	—	$	298,000	108,505
2015	10%	2 years	$ 4.50	320,000		—		320,000		74,127		320,000		—		320,000		72,354
				$	574,000	$	—	$	574,000	162,860		$	618,000	$	—	$	618,000	180,859
		Current		$	254,000	$	—	$	254,000	88,733		$	298,000	$	—	$	298,000	108,505
		Non-current		$	320,000	$	—	$	320,000	74,127		$	320,000	$	—	$	320,000	72,354
		Grand Total		$	19,835,213	$	936,132	$	18,899,081	3,286,507		$	19,128,039	$	879,766	$	18,248,273	3,169,343

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Subsequent to March 31, 2016, the Company issued the following:

Notes issued after March 31, 2016	Loan Principal Outstanding		Annual Interest Rate		Term of Notes	Conversion Price
Convertible notes (1)	$	210,160	10.00	%	2 years	$	4.50
Promissory notes	$	550,000	11.00	%	Due on demand - 6 months	—
Promissory notes — related party	159,700		11.00	%	2 years (Due on demand)	—
	$	919,860

(1) Includes mandatory conversion at the time of an initial public offering at a conversion price equal to 80% of the initial public offering price.

In April and May of 2016, we entered into secured loan agreements, pursuant to which we borrowed in the aggregate amount of $1,295,000 at a fixed interest rate of 10% per annum. These loans will mature on the earlier of the closing of a new debt financing (subject to certain exceptions, including refinancings of our outstanding convertible notes) or May 1, 2017. These loans are secured by all of our personal property and are personally guaranteed by Dr. Niihara and secured by certain of his real property. Furthermore, the loan agreements contain certain negative covenants that may hinder our ability to raise additional capital or might otherwise affect our liquidity, including restrictions on our ability to (1) acquire material assets outside of the ordinary course of business, (2) sell, lease, license transfer or dispose of our personal property outside of the ordinary course of business, (3) pay or declare dividends, (4) make investments in or loans to other persons, (5) redeem or repurchase our stock, (6) make deposits or investments unless they are subject to a deposit control account, (7) incur additional indebtedness other than permitted debt, (8) make payments on subordinated obligations, (9) undergo a merger, change in control or sale of a substantial portion of our assets, or (10) use loan proceeds to make payments to our affiliates. If we are unable to repay these loans when they become due, or if we otherwise suffer an event of default under the loan agreements, the lender may have the right to foreclose on their collateral, which could have a material and adverse effect on our business, financial condition, liquidity and operations.

In connection with these loans, we also issued the lender warrants for the purchase of 62,500 shares of our common stock at an exercise price of $4.50 per share. In addition, if these loans remain outstanding for at least 30 days during the 90-day periods ending June 30, 2016, September 30, 2016 and December 31, 2016, we will be obligated to issue the lender additional warrants for the purchase of 37,500, 18,750 and 18,750 shares of our common stock, respectively, for an exercise price of the lowest of the fair market value of our common stock as of the start or end of such 90-day period or the lowest public sale price of our common stock during the quarter ended on the applicable measurement date. As these loans have been outstanding for more than 30 days during the 90-day period ending June 30, 2016, we will be obligated to issue the lender an additional warrant for the purchase of 37,500 shares of our common stock on the terms set forth above. These warrants may be exercised through a cashless feature.

Secured Loans after September 30, 2015	Principal Amounts		Annual Interest Rate		Term of Loans
Secured loans	$	1,295,000	10	%	Earlier of closing of new debt financing or May 1, 2017
Total	$	1,295,000

Cash flows for the three months ended March 31, 2016 and March 31, 2015

Net cash used in operating activities

Net cash flows used in operating activities increased by $1.1 million, or 92%, to $2.3 million from $1.2 million for the three months ended March 31, 2016 and 2015, respectively. This increase was primarily due to a $1.2 million increase in net loss and an increase of working capital of $0.6 million, partially offset by a $0.7 million decrease in the non-cash adjustments to net income. The decrease in non-cash adjustments to net income was primarily attributable to the following: $1.4 million for the change in the fair value of liability classified warrants and warrant derivative liabilities and $0.1 million for a foreign exchange adjustment on notes payable, partially offset by a $0.7 million decrease in share-based compensation, the impact of a decrease of $0.1 million in interest expense accrued from discount of convertible notes and a $0.1 million decrease in depreciation and amortization expense.

Net cash used in investing activities

Net cash flows used in investing activities de creased by $1,467, to $0.0 from $1,467 for the three months ended March 31, 2016 and 2015, respectively. The decrease was due to absence of purchase of property and equipment in the three months ended March 31, 2016.

Net cash from financing activities

Net cash flows from financing activities in creased by $1.2 million, or 120%, to $2.2 million from $1.0 million for the three months ended March 31, 2016 and 2015, respectively, as a result of an $1.8 million increase in proceeds of issuance of common stocks, partially offset by a $0.2 million decrease in proceeds from issuance of convertible and non-convertible promissory notes, a $0.3 million increase in repayment of convertible and non-convertible promissory notes and a $0.1 million decrease in proceeds from exercise of warrants.

Off-Balance-Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements.

Critical Accounting Policies

Management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP, on the basis that the Company will continue as a going concern. 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, successful and sufficient market acceptance of its products, and finally, achieving a profitable level of operations. The consolidated

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interim financial statements do not include any adjustments that might result from the outcome of these uncertainties. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the present circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.

Refer to “Critical Accounting Policies” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report for our critical accounting policies. There have been no material changes in any of our critical accounting policies during the three months ended March 31, 2016.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required for a smaller reporting company.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon this evaluation and due to the material weakness in our internal control over financial reporting as of December 31, 2015 described below, our Chief Executive Officer and Interim Chief Financial Officer concluded that the Company’s disclosure controls and procedures are not effective. Our management is working at remediating the material weakness in our internal controls over financial reporting. However, we have not yet completed a full annual accounting cycle since December 31, 2015 to fully validate the remediation of the material weakness in our internal controls and the effectiveness of the Company’s disclosure controls and procedures.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2016 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Material Weakness and Plan of Remediation

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses would permit information required to be disclosed by the Company in the reports that it files or submits to not be recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

We conducted an evaluation pursuant to Rule 13a-15 of the Exchange Act of the effectiveness of the design and operation of our internal control over financial reporting as of December 31, 2015. This evaluation was conducted under the supervision of our management, including our Chief Executive Officer, Chief Business Officer, Sr. Vice President of Finance, and the Interim Chief Financial Officer. Based on that evaluation, we have concluded that our internal control over financial reporting was not effective as of December 31, 2015 principally due to the continuance of a material weakness in our internal control over financial reporting, initially identified in our evaluations of the effectiveness of our internal control over financial reporting as of December 31, 2014 and 2013, with respect to the application of generally accepted accounting principles (GAAP) in the United States of America on certain complex transactions as well as maintaining effective controls over the completeness and accuracy of financial reporting for complex or unusual transactions . Further, as of mid-August 2015 through December 2015 we did not have a sufficient number of independent directors to constitute audit committee.

Our management and Board of Directors are committed to the remediation of the material weakness, as well as the continued improvement of our overall system of internal control over financial reporting. We are in the process of implementing measures to remediate the underlying causes of the control deficiency that gave rise to the material weakness, which primarily include engaging additional and supplemental internal and external resources with the technical expertise in US GAAP as well as to implement new policies and procedures to provide more effective controls to track, process, analyze, and consolidate the financial data and reports.

We believe these measures will remediate the control deficiencies that gave rise to a material weakness. As we continue to evaluate and work to remediate these control deficiencies, we may determine that additional remedial measures are required.

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Part II. Other Information

Item 1. Legal Proceedings

Please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on May 20, 2016 (the “Annual Report”), for a prior discussion of our legal proceedings.

Item 1A. Risk Factors

There have been no material changes from the risk factors disclosed in the “Risk Factors” section of the Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 1, 2016, the Company issued a convertible note to a third party in the principal amount of $80,000, which bears interest at 10% per annum and matures on the two-year anniversary date of the note. If the Company completes a qualified public offering, the principal amount of the note will automatically convert into shares of the Company’s common stock at a conversion price equal to 80% of the initial public offering price in the qualified public offering. At or after the first anniversary of the loan date, the holder of the note may convert some or all of the unpaid principal amount thereof, including unpaid accrued interest, into shares of the Company’s common stock at a conversion price of $4.50 per share.

On January 6, 2016, the Company issued a convertible note to a third party in the principal amount of $99,950, which bears interest at 10% per annum and mature on the two-year anniversary date of the note. If the Company completes a qualified public offering, the principal amount of the note will automatically convert into shares of the Company’s common stock at a conversion price equal to 80% of the initial public offering price in the qualified public offering. At or after the first anniversary of the loan date, the holder of the note may convert some or all of the unpaid principal amount thereof, including unpaid accrued interest, into shares of the Company’s common stock at a conversion price of $4.50 per share.

On January 7, 2016, the Company issued 377,778 shares of common stock to Korea Bio Medical Science Institute, at a price of $4.50 per share for an aggregate price of $1,700,000.

On February 5, 2016, the Company issued a convertible note to a third party in the principal amount of $100,000, which bears interest at 10% per annum and mature on the two-year anniversary date of the note. If the Company completes a qualified public offering, the principal amount of the note will automatically convert into shares of the Company’s common stock at a conversion price equal to 80% of the initial public offering price in the qualified public offering. At or after the first anniversary of the loan date, the holder of the note may convert some or all of the unpaid principal amount thereof, including unpaid accrued interest, into shares of the Company’s common stock at a conversion price of $4.50 per share.

On February 21, 2016, the Company refinanced a convertible note payable to a third party in the original principal amount of $100,800 with a new convertible note in the principal amount of $110,880 which bears interest at 10% per annum. The note has a one year term. The principal amount plus any unpaid accrued interest due under the convertible note is convertible into shares of the Company’s common stock at $3.60 per share at any time during the term of this note upon election of the holder.

On March 2, 2016, the Company refinanced a convertible note payable a third party in the original principal amount of $196,026 with a new convertible note in the principal amount of $215,629 which bears interest at 10% per annum. The term of this note is due on demand up to one year from the date of issuance. The principal amount and any unpaid interest due under the note are convertible into shares of the Company’s common stock at $3.60 per share at any time during the term of this note upon election of the holder.

On March 15, 2016, the Company refinanced a convertible note payable to a third party in the original principal amount of $125,000 with a new convertible note in the principal amount of $162,500 which bears interest at 10% per annum. The term of this note is two year from the date of issuance. The principal amount and any unpaid interest due under the note are convertible into shares of the Company’s common stock at $3.60 per share at any time during the term of this note upon election of the holder.

On March 18, 2016, the Company issued 22,222 shares of common stock to Yutaka & Soomi Niihara, the Company’s Chairman and Chief Executive Officer, at a price of $4.50 per share for an aggregate price of $99,999.

On March 19, 2016, the Company refinanced a convertible note payable to a third party in the original principal amount of $200,000 with a new convertible note in the principal amount of $260,000 which bears interest at 10% per annum. The term of this note is two year from the date of issuance. The principal amount and any unpaid interest due under the note are convertible into shares of the Company’s common stock at $3.60 per share.

Except as explicitly noted above, all such securities were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act or, in the case of refinancings, upon the exemption from registration provided by Section 3(a)(9) of the Securities Act. These securities qualified for exemption under Section 4(a)(2) of the Securities Act because the issuance of securities by the Company did not involve a “public offering.” The issuance was not a public offering based upon the following factors: (i) a limited number of securities were issued to a limited number of offerees; (ii) there was no public solicitation; (iii) each offeree was an “accredited investor” as such term is defined by Rule 501 under the Securities Act; and (iv) the investment intent of the offerees. No underwriters were used in connection with such sales of unregistered securities.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits

Exhibit Number		Description of Document

4.1		Form of Convertible Promissory Note issued by the registrant to the persons indicated in Schedule A attached to the Form of Convertible Promissory Note.

4.2		Convertible Promissory Note dated February 21, 2016 issued by the registrant to Sun Moo & Hyon Sil Lee.

4.3		Convertible Promissory Note dated March 2, 2016 issued by the registrant to J.R. Dowey.

4.4		Form of Convertible Promissory Note issued by the registrant to the persons indicated in Schedule A attached to the Form of Convertible Promissory Note.

10.1		Promissory Note dated February 25, 2016 by the registrant to Masaharu & Emiko Osato.

10.2		Form of Promissory Note issued by the registrant to the persons indicated in Schedule A attached to the Form of Promissory Note.

10.3		Termination Agreement dated March 14, 2016 by and among the registrant, Yutaka Niihara and T. R. Winston & Company, LLC (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 18, 2016).

31.1		Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

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EMMAUS LIFE SCIENCES, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Emmaus Life Sciences, Inc.


Dated: June 6, 2016	By:	/s/ Yutaka Niihara
	Name:	Yutaka Niihara, M.D., MPH
	Its:	Chief Executive Officer (principal executive officer and duly authorized officer)


	By:	/s/ Steve Lee
	Name:	Steve Lee
	Its:	Interim Chief Financial Officer
		(principal financial and accounting officer)

Exhibit 4.1

THIS CONVERTIBLE PROMISSORY NOTE AND THE SECURITIES INTO WHICH IT MAY BE CONVERTED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). NO SALE OR DISPOSITION MAY BE AFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN APPLICABLE EXEMPTION THEREFROM.

EMMAUS LIFE SCIENCES , INC.

Convertible Promissory Note

Principal Amount:		Loan Date:

Currency:	U.S. Dollars	Term:	Two Years

Interest Rate:	10%	Loan Due Date:

Interest Payment Period: Interest is accrued and paid upon Loan Due Date

Lender:

FOR VALUE RECEIVED, Emmaus Life Sciences, Inc., a Delaware corporation, located at 21250 Hawthorne Blvd., Suite 800, Torrance, CA 90503 (“Borrower”) hereby promises to pay to the order of Lender the sum of the Principal Amount in the stated Currency, together with any accrued interest at the stated Interest Rate, under the following terms and conditions of this Convertible Promissory Note (“Note”).

1. Terms of Repayment (Balloon Payment) : The entire unpaid Principal Amount and any accrued interest shall become immediately due and payable upon the stated Loan Due Date. Simple interest at the stated Interest Rate will accrue on the outstanding Principal Amount commencing on the Loan Date of this Note and the Borrower shall make payments of interest only as per the stated Interest Payment Period.

2. Prepayment : This Note may be prepaid in whole or in part at any time after six months from the Loan Date without premium or penalty upon ten days advance written notice by Borrower to Lender. In the event such notice provides for prepayment on a date at or after the first anniversary of the Loan Date, Lender shall be permitted to exercise its conversion rights, if any, pursuant to Section 4(c) hereof at any time or from time to time prior to the expiration of such ten-day period. All prepayments shall first be applied to interest, and then to principal payments.

3. Place of Payment: All payments due under this Note shall be sent to the Lender’s address, as noted in Attachment 1 hereto, or at such other place as the Lender or subsequently assigned holder (“Holder”) of this Note may designate in writing in the future.

4. Conversion:

(a) Mandatory Conversion : Upon the first closing of the sale of shares of common stock of the Borrower (“Common Stock”) in a Qualifying Public Offering (as hereinafter defined), (i) the entire outstanding Principal Amount of this Note shall automatically be converted into a number of shares of Common Stock determined by dividing (x) the outstanding Principal Amount of this Note by (y) an amount equal to the product obtained by multiplying (A) the Qualifying Public Offering Price Per Share and (B) 0.80. Within thirty days of such closing, all accrued and unpaid interest on the Note will be paid to the Holder in cash. “Qualifying Public Offering” means a firm commitment public offering of shares of Common Stock pursuant to an effective registration statement under the Securities Act of 1933, as amended, which results in aggregate cash proceeds to the Borrower of not less than $20,000,000; provided that in connection therewith the Common Stock is listed for trading on a national securities exchange; and provided further that the quoted market price per share of the Common Stock is at least $5.00 at the time of such listing. “Qualifying Public Offering Price Per Share” means the initial public offering price per share of Common Stock in such Qualifying Public Offering.

The Borrower shall notify the holder of this Note at least seven (7) calendar days prior to the initial closing of a Qualifying Public Offering. At the time of the initial closing of such Qualifying Public Offering, the holder of this Note shall deliver this Note to the Borrower and, as soon as reasonably practicable thereafter, the Borrower shall issue and deliver to the holder of this Note a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of this Note, and provision shall be made for any fraction of a share as provided in Section 4(b) below. At the time of the initial closing of the Qualifying Public Offering, and provided that the Borrower has complied fully with all of its obligations under this Section 4(a), the holder of this Note shall not have any further rights under this Note (including the right to receive payment of principal or interest hereunder) other than those rights set forth in this Section 4.

Lender agrees, if requested by the managing underwriter of such Qualifying Public Offering, to enter into an agreement not to sell or transfer any shares of Common Stock of the Company (excluding shares acquired in or following the Qualifying Public Offering), for a period of up to 180 days, plus such additional necessary to comply with applicable regulatory requirements, following the Qualifying Public Offering (provided all directors and officers of the Borrower agree to the same restrictions).

(b) Fractional Shares : No fractional shares or scrip shall be issued upon conversion of this Note. The number of full shares of Common Stock issuable upon conversion of this Note shall be computed on the basis of the aggregate value of outstanding principal of and, as applicable in accordance with the terms of this Section 4, accrued interest on this Note so surrendered. The value of any fractional shares of Common Stock shall be paid in cash.

(c) Conversion at the Election of the Holder : At or after the first anniversary of the Loan Date, Lender may by giving written Notice of Conversion to the Borrower in the form attached hereto as Exhibit A, elect to convert some or all of the unpaid Principal Amount, including up to all the interest accrued and unpaid thereon, into a number of shares of Common Stock determined by dividing (x) the outstanding Principal Amount of this Note by (y) the Conversion Price Per Share. As used in this Section 4(c), “Conversion Price Per Share” means

$4.50 per share of Common Stock (subject to appropriate adjustment in the event of any stock splits, stock dividends, recapitalizations and similar transactions with respect to the capital stock of Borrower). Within two weeks following receipt of such Notice of Conversion, Borrower shall deliver to Lender one or more original stock certificates representing the full number of shares of Common Stock issuable upon such conversion, and provision shall be made for any fraction of a share as provided in Section 4(b) above. Upon such conversion, and provided that the Borrower has complied fully with all of its obligations under this Section 4(c), the holder of this Note shall not have any further rights under this Note (including the right to receive payment of principal or interest hereunder) other than those rights set forth in this Section 4.

5 . Default: In the event of default, the Borrower agrees to pay all costs and expenses incurred by the Lender, including all reasonable attorney fees as permitted by law for the collection of this Note upon default.

6 . Acceleration of Debt: If the Borrower (i) fails to make any payment due under the terms of this Note or seeks relief under the U.S. Bankruptcy Code, (ii) fails to deliver shares to the Lender by the deadline set forth in Section 4 hereof, (iii) suffers an involuntary petition in bankruptcy or receivership that is not vacated within thirty (30) days, (iv) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official or such appointment is not discharged or stayed within 30 days, (v) makes a general assignment for the benefit of its creditors or (vi) admits in writing that it is generally unable to pay its debts as they become due, the entire balance of this Note and any interest accrued thereon shall be immediately due and payable to the holder of this Note.

7 . Modification: No modification or waiver of any of the terms of this Note shall be allowed unless by written agreement signed by the Borrower and the Lender. No waiver of any breach or default hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature.

8. Complete Note: This Note is the complete and exclusive statement of agreement of the Borrower and Lender with respect to matters in this Note. This Note replaces and supersedes all prior written or oral agreements or statements by and among the Borrower and Lender with respect to the matters covered by it. No representation, statement, condition or warranty not contained in this Note is binding on either the Borrower or Lender. Each Holder of this Note, by its acceptance hereof, agrees to be bound by, and shall be entitled to the benefits of, the terms set forth herein.

9 . Transfer of the Note:

(a) Subject to Section 9(b) hereof, t his Note may be transferred, in whole or in part, at any time or from time to time, by the Lender. The Borrower hereby agrees to remain bound by the terms of this Note subsequent to any such transfer, and agrees that the terms of this Note may be fully enforced by any subsequent holder of this Note. If this Note is to be transferred, the Lender shall surrender this Note to the Borrower, together with such additional documentation as the Lender may reasonably request, whereupon the Borrower will forthwith issue and deliver upon the order of the Lender a new Note registered as the Lender may request, representing the outstanding Principal Amount being transferred by the Lender and, if less then the entire outstanding Principal

Amount is being transferred, a new Note to the Lender representing the outstanding Principal Amount not being transferred. The person in whose name this Note or any new Note issued in replacement hereof shall be registered shall be deemed and treated as the owner and holder thereof, and the Borrower shall not be affected by any notice or knowledge to the contrary except as provided in this Section 9(a). This Note may not be transferred by the Borrower, by operation of law or otherwise, without the prior written consent of the Lender.

(b) Lender acknowledges and agrees that this Note has been acquired for investment and has not been registered under the securities laws of the United States of America or any state thereof. Accordingly, notwithstanding Section 9(a), neither this Note nor any interest thereon may be offered for sale, sold or transferred in the absence of registration under applicable federal and state securities laws or an opinion of counsel of the Holder reasonably satisfactory to the Borrower that such registration is not required.

10. Lost, Stolen or Mutilated Note: Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Lender to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Lender a new Note representing the outstanding Principal Amount and accrued and unpaid interest thereon.

11 . Remedies: The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Lender’s right to pursue actual and consequential damages for any failure by the Borrower to comply with the terms of this Note.

12 . Severability of Provisions : If any portion of this Note is deemed unenforceable, all other provisions of this Note shall remain in full force and effect.

13 . Reservation of Shares : The Borrower shall at all times at and after the first anniversary of the Loan Date and, as applicable, at the time of closing of Qualifying Public Offering reserve and keep available, free from preemptive rights, out of its authorized and unissued Common Stock the full number of shares of Common Stock then issuable upon the conversion in full of this Note.

14 . Choice of Law: All terms and conditions of this Note shall be interpreted under the laws of California, U.S.A., without regard to conflict of law principles.

Signed Under Penalty of Perjury, this day of ,

Emmaus Life Sciences, Inc.



By:

ATTACHMENT 1

Lender’s Name:

Lender’s Address:

EXHIBIT A

NOTICE OF CONVERSION

(To be executed by the Lender in order to convert the Note)

TO: Emmaus Life Sciences, Inc.

The undersigned hereby irrevocably elects to convert $ of the principal amount of the Note issued to the Lender by Emmaus Life Sciences, Inc. (the “Company”) into shares of Common Stock of the Company according to the conditions stated therein, as of the Conversion Date written below.

Conversion Date:

Applicable Conversion Price:

Signature:

Name:

Address:

Amount to be converted:		$

Amount of Note unconverted:		$

Number of shares of Common Stock to be issued:

Please issue the shares of Common Stock in the following name and to the following address:

Address:

Address:

Phone Number:

[INFORMATION FOR PURPOSES OF FILING WITH THE SECURITIES AND EXCHANGE COMMISSION]

SCHEDULE A

NOTEHOLDERS

Lender	Annual Interest Rate		Date of loan	Term of Loan	Loan Due Date	Principal Loan Amount		Interest Payment Period	Conversion Price
Wai Man NG	10.0	%	01/01/2016	2 years	01/01/2018	$	80,000	Paid upon loan due date	$	4.50
Sui Jie and Xin Chen	10.0	%	01/06/2016	2 years	01/06/2018	$	99,950	Paid upon loan due date	$	4.50
Shuk Yung Wong	10.0	%	02/05/2016	2 years	02/05/2018	$	100,000	Paid upon loan due date	$	4.50

Exhibit 4.2

EMMAUS LIFE SCIENCES , INC.

Convertible Promissory Note

(Interest)

(1 Year)

Principal Amount: $110,880

Loan Date: 2/21/2016

FOR VALUE RECEIVED, Emmaus Life Sciences, Inc., a Delaware corporation (“Borrower”), located at 21250 Hawthorne Blvd., Suite 800, Torrance, CA 90503 agrees to pay to Sun Moo & Hyon Sil Lee U.S. Dollars (“Principal Amount”), together with accrued interest thereon at the rate of ten percent (10%) per annum, under the following terms and conditions of this Convertible Promissory Note (“Note”).

1. Terms of Repayment (Balloon Payment) : From the Loan Date and continuing thereafter until the one (1) year anniversary date of the Loan Date, the interest shall accrue at ten percent (10%) simple interest of the Principal Amount. Lender shall have the right to convert the loan amount plus the accrued interest into shares of common stock of Borrower at the conversion price of $3.60 (as adjusted for stock splits, stock dividends, recapitalizations and similar transactions) during the term of this Note. The entire unpaid principal and accrued interest shall become immediately due and payable upon the anniversary of the Loan Date.

2. Prepayment : This Note may be prepaid in whole or in part at any time without premium or penalty upon ten days advance written notice by Borrower to Lender, provided that Lender shall be permitted to exercise its conversion rights pursuant to Section 4 hereof at any time or from time to time prior to the expiration of such ten-day period. All prepayments shall first be applied to interest, and then to principal payments.

3. Place of Payment: All payments due under this Note shall be sent to the Lender’s address, as noted in Attachment 1 hereto, or at such other place as the holder of this Note may designate in writing in the future.

4. Conversion Option: At any time during the term of this Note, Lender shall by giving written Notice of Conversion to the Borrower in the form attached hereto as Exhibit A, have the right to convert some or all of the Principal Amount, including up to all the interest accrued and unpaid thereon, into shares of Common Stock of Borrower (the “Shares”) at the initial conversion price of $3.60 per share (as adjusted for stock splits, stock dividends, recapitalizations and similar transactions). Within two weeks following each conversion of this Note, Borrower shall deliver to

Lender one or more original stock certificates representing the shares of common stock issued upon such conversion.

7 . Modification: No modification or waiver of any of the terms of this Note shall be allowed unless by written agreement signed by the parties. No waiver of any breach or default hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature.

8 . Transfer of the Note: This Note may be transferred, in whole or in part, at any time or from time to time, by the Lender. The Borrower hereby waives any notice of the transfer of this Note by the Lender or by any subsequent holder of this Note, agrees to remain bound by the terms of this Note subsequent to any transfer, and agrees that the terms of this Note may be fully enforced by any subsequent holder of this Note. If this Note is to be transferred, the Lender shall surrender this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Lender a new Note registered as the Lender may request, representing the outstanding Principal Amount being transferred by the Lender and, if less then the entire outstanding Principal Amount is being transferred, a new Note to the Lender representing the outstanding Principal Amount not being transferred. This Note may not be transferred by the Borrower, by operation of law or otherwise, without the prior written consent of the Lender.

9 . Lost, Stolen or Mutilated Note : Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Lender to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Lender a new Note representing the outstanding Principal Amount and accrued and unpaid interest thereon.

10 . Remedies: The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Lender’s right to pursue actual and consequential damages for any failure by the Borrower to comply with the terms of this Note.

11 .Severability of Provisions : If any portion of this Note is deemed unenforceable, all other provisions of this Note shall remain in full force and effect.

12 . Insufficient Authorized Shares : The Borrower shall take all reasonable best action necessary to increase the Borrower’s authorized shares of common stock to an amount sufficient to allow Borrower to reserve the Required Reserve Amount for the Note.

13 . Choice of Law: All terms and conditions of this Note shall be interpreted under the laws of California, U.S.A., without regard to conflict of law principles.

Signed Under Penalty of Perjury, this 24th day of February , 2016

Emmaus Life Sciences, Inc.


By: Yutaka Niihara, M.D., CEO

ATTACHMENT 1

Lender’s Name: Sun Moo Lee & Hyon Sil Lee

Lender’s Address:

Principal Amount: USD110,880

Annual Interest at 10%

Per Annum on Principal Amount: $11,088

Maturity Date: 02/20/2017

EXHIBIT A

NOTICE OF CONVERSION

(To be executed by the Lender in order to convert the Note)

TO: Emmaus Life Sciences, Inc.

Conversion Date:

Applicable Conversion Price:

Signature:

Name:

Address:

Amount to be converted:		$

Amount of Note unconverted:		$

Number of shares of Common Stock to be issued:

Please issue the shares of Common Stock in the following name and to the following address:

Address:

Address:

Phone Number:

Exhibit 4.3

EMMAUS LIFE SCIENCES , INC.

Convertible Promissory Note

Principal Amount:	$215,628.90	Loan Date:	03/02/2016

Currency:	US Dollar	Term:	On Demand Up to 1 Year

Interest Rate:	10%	Loan Due Date:	03/01/2017

Interest Payment Period: Interest will be paid annually

Conversion Price per Share: $3.60

Lender: J. R. Downey

FOR VALUE RECEIVED, Emmaus Life Sciences, Inc., a Delaware corporation, located at 21250 Hawthorne Blvd., Suite 800, Torrance, CA 90503 (“Borrower”) agrees to pay to Lender the sum of the Principal Amount in the stated Currency, together with any accrued interest at the stated Interest Rate, under the following terms and conditions of this Convertible Promissory Note (“Note”).

1. Terms of Repayment (Balloon Payment) and Conversion : The entire unpaid Principal Amount and any accrued interest shall become immediately due and payable upon the stated Loan Due Date. Simple interest at the stated Interest Rate will accrue on the outstanding Principal Amount commencing on the Loan Date of this Note and the Borrower shall make payments of interest only as per the stated Interest Payment Period.

At any time during the term of this Note, Lender shall by giving written Notice of Conversion to the Borrower in the form attached hereto as Exhibit A, have the right to convert some or all of the unpaid Principal Amount, including up to all the interest accrued and unpaid thereon, into shares of Common Stock of Borrower (the “Shares”) at the stated Conversion Price Per Share (subject to appropriate adjustment in the event of any stock splits, stock dividends, recapitalizations and similar transactions with respect to the capital stock of Borrower). Within two weeks following each conversion of this Note, Borrower shall deliver to Lender one or more original stock certificates representing the shares of common stock issued upon such conversion.

2. Prepayment : This Note may be prepaid in whole or in part at any time after six months from the Loan Date without premium or penalty upon ten days advance written notice by Borrower to Lender, provided that Lender shall be permitted to exercise its conversion rights pursuant to Section 1 hereof at any time or from time to time prior to the expiration of such ten-day period. All prepayments shall first be applied to interest, and then to principal payments.

3. Place of Payment: All payments due under this Note shall be sent to the Lender’s address, as noted in Attachment 1 hereto, or at such other place as the Lender or subsequently assigned holder of this Note may designate in writing in the future.

4 . Default: In the event of default, the Borrower agrees to pay all costs and expenses incurred by the Lender, including all reasonable attorney fees as permitted by law for the collection of this Note upon default.

5. Acceleration of Debt: If the Borrower (i) fails to make any payment due under the terms of this Note or seeks relief under the U.S. Bankruptcy Code, (ii) fails to deliver shares to the Lender by the deadline set forth in Section 4 hereof, (iii) suffers an involuntary petition in bankruptcy or receivership that is not vacated within thirty (30) days, (iv) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official or such appointment is not discharged or stayed within 30 days, (v) makes a general assignment for the benefit of its creditors or (vi) admits in writing that it is generally unable to pay its debts as they become due, the entire balance of this Note and any interest accrued thereon shall be immediately due and payable to the holder of this Note.

6. Modification: No modification or waiver of any of the terms of this Note shall be allowed unless by written agreement signed by the parties. No waiver of any breach or default hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature.

7. Complete Note: This Note is the complete and exclusive statement of agreement of the parties with respect to matters in this Note. This Note replaces and supersedes all prior written or oral agreements or statements by and among the parties with respect to the matters covered by it. No representation, statement, condition or warranty not contained in this Note is binding on the parties.

8. Transfer of the Note: This Note may be transferred, in whole or in part, at any time or from time to time, by the Lender. The Borrower hereby waives any notice of the transfer of this Note by the Lender or by any subsequent holder of this Note, agrees to remain bound by the terms of this Note subsequent to any transfer, and agrees that the terms of this Note may be fully enforced by any subsequent holder of this Note. If this Note is to be transferred, the Lender shall surrender this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Lender a new Note registered as the Lender may request, representing the outstanding Principal Amount being transferred by the Lender and, if less then the entire outstanding Principal Amount is being transferred, a new Note to the Lender representing the outstanding Principal Amount not being transferred. This Note may not be transferred by the Borrower, by operation of law or otherwise, without the prior written consent of the Lender.

9. Lost, Stolen or Mutilated Note: Upon receipt by the Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Lender to the Borrower in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Borrower shall execute and deliver to the Lender a new Note representing the outstanding Principal Amount and accrued and unpaid interest thereon.

11 . Severability of Provisions : If any portion of this Note is deemed unenforceable, all other provisions of this Note shall remain in full force and effect.

13 . Choice of Law: All terms and conditions of this Note shall be interpreted under the laws of California, U.S.A., without regard to conflict of law principles.

Signed Under Penalty of Perjury, this 2nd day of March , 2016

Emmaus Life Sciences, Inc.



By: Yutaka Niihara, MD, CEO

ATTACHMENT 1

Lender’s Name: J.R. Downey

Lender’s Address:

EXHIBIT A

NOTICE OF CONVERSION

(To be executed by the Lender in order to convert the Note)

TO: Emmaus Life Sciences, Inc.

Conversion Date:

Applicable Conversion Price:

Signature:

Name:

Address:

Amount to be converted:		$

Amount of Note unconverted:		$

Number of shares of Common Stock to be issued:

Please issue the shares of Common Stock in the following name and to the following address:

Address:

Address:

Phone Number:

Exhibit 4.4

EMMAUS LIFE SCIENCES , INC.

Convertible Promissory Note

(Interest)

(2 Years)

Principal Amount: $

Loan Date:

FOR VALUE RECEIVED, Emmaus Life Sciences, Inc., a Delaware corporation (“Borrower”), located at 21250 Hawthorne Blvd., Suite 800, Torrance, CA 90503 agrees to pay to (together with each of its transferees and assigns, “Lender”), the sum of $ U.S. Dollars (“Principal Amount”), together with accrued interest thereon at the rate of ten percent (10%) per annum, under the following terms and conditions of this Convertible Promissory Note (“Note”).

1. Terms of Repayment (Balloon Payment) : From the Loan Date and continuing thereafter until the two (2) year anniversary date of the Loan Date, the interest shall accrue at ten percent (10%) simple interest of the Principal Amount. Lender shall have the right to convert the loan amount plus the accrued interest into shares of common stock of Borrower at the conversion price of $3.60 (as adjusted for stock splits, stock dividends, recapitalizations and similar transactions) during the term of this Note. The entire unpaid principal and accrued interest shall become immediately due and payable upon the 2 year anniversary of the Loan Date.

11 .Severability of Provisions : If any portion of this Note is deemed unenforceable, all other provisions of this Note shall remain in full force and effect.

13 . Choice of Law: All terms and conditions of this Note shall be interpreted under the laws

of California, U.S.A., without regard to conflict of law principles.

Signed Under Penalty of Perjury, this day of ,

Emmaus Life Sciences, Inc.


By: Yutaka Niihara, MD, CEO

ATTACHMENT 1

Lender’s Name:

Lender’s Address:

Principal Amount: USD

Annual Interest at 10%

Per Annum on Principal Amount: $

Maturity Date

EXHIBIT A

NOTICE OF CONVERSION

(To be executed by the Lender in order to convert the Note)

TO: Emmaus Life Sciences, Inc.

Conversion Date:

Applicable Conversion Price:

Signature:

Name:

Address:

Amount to be converted:		$

Amount of Note unconverted:		$

Number of shares of Common Stock to be issued:

Please issue the shares of Common Stock in the following name and to the following address:

Address:

Address:

Phone Number:

[INFORMATION FOR PURPOSES OF FILING WITH THE SECURITIES AND EXCHANGE COMMISSION]

SCHEDULE A

NOTEHOLDERS

Lender	Annual Interest Rate		Date of loan	Term of Loan	Loan Due Date	Principal Loan Amount		Interest Payment Period	Conversion Price
Wan Luen Pak Eric & Ho Shun Mei Grace	10.0	%	03/15/2016	2 years	03/15/2018	$	162,500	Paid upon loan due date	$	3.60
Wong Shuk Ching Judy	10.0	%	03/19/2016	2 years	03/19/2018	$	260,000	Paid upon loan due date	$	3.60

Exhibit 10.1

EMMAUS LIFE SCIENCES , INC.

Promissory Note

Principal Amount:	US$400,000	Loan Date:	02/25/2016

Currency:	US dollars	Term:	Two years

Interest Rate:	11.0% per year	Loan Due Date:	Due on demand

Interest Payment Period: Interest is payable annually

Lender: Masaharu & Emiko Osato

2. Prepayment : This Note may be prepaid in whole or in part at any time after six months of the Loan Date without premium or penalty. All prepayments shall first be applied to interest, and then to principal payments.

3. Place of Payment: All payments due under this Note shall be sent to the Lender’s address, as noted in Attachment 1 hereto, or at such other place as the Lender or subsequently assigned holder of this Note may designate in writing in the future.

5. Additional Guarantor: Lender understands and acknowledges that Emmaus Life Sciences, Inc. is the borrower of this Note. However, for added security to lender, this note is guaranteed by Yutaka Niihara, President and CEO.

6. Acceleration of Debt: If the Borrower (i) fails to make any payment due under the terms of this Note or seeks relief under the U.S. Bankruptcy Code, (ii) fails to deliver shares to the Lender by the deadline set forth in Section 4 hereof, (iii) suffers an involuntary petition in

bankruptcy or receivership that is not vacated within thirty (30) days, (iv) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official or such appointment is not discharged or stayed within 30 days, (v) makes a general assignment for the benefit of its creditors or (vi) admits in writing that it is generally unable to pay its debts as they become due, the entire balance of this Note and any interest accrued thereon shall be immediately due and payable to the holder of this Note.

7. Modification: No modification or waiver of any of the terms of this Note shall be allowed unless by written agreement signed by the parties. No waiver of any breach or default hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature.

8. Complete Note: This Note is the complete and exclusive statement of agreement of the parties with respect to matters in this Note. This Note replaces and supersedes all prior written or oral agreements or statements by and among the parties with respect to the matters covered by it. No representation, statement, condition or warranty not contained in this Note is binding on the parties.

9. Transfer of the Note: This Note may be transferred, in whole or in part, at any time or from time to time, by the Lender. The Borrower hereby waives any notice of the transfer of this Note by the Lender or by any subsequent holder of this Note, agrees to remain bound by the terms of this Note subsequent to any transfer, and agrees that the terms of this Note may be fully enforced by any subsequent holder of this Note. If this Note is to be transferred, the Lender shall surrender this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Lender a new Note registered as the Lender may request, representing the outstanding Principal Amount being transferred by the Lender and, if less then the entire outstanding Principal Amount is being transferred, a new Note to the Lender representing the outstanding Principal Amount not being transferred. This Note may not be transferred by the Borrower, by operation of law or otherwise, without the prior written consent of the Lender.

12 . Severability of Provisions : If any portion of this Note is deemed unenforceable, all other provisions of this Note shall remain in full force and effect.

13 . Insufficient Authorized Shares : The Borrower shall take all reasonable best action necessary to increase the Borrower’s authorized shares of common stock to an amount sufficient to allow Borrower to reserve the Required Reserve Amount for the Note.

14 . Choice of Law: All terms and conditions of this Note shall be interpreted under the laws of California, U.S.A., without regard to conflict of law principles.

Signed Under Penalty of Perjury, this 25th day of February , 2016

Emmaus Life Sciences, Inc.


By: Yutaka Niihara, MD, CEO

ATTACHMENT 1

Lender’s Name: Masaharu & Emiko Osato

Lender’s Address:

Exhibit 10.2

EMMAUS LIFE SCIENCES , INC.

Promissory Note

Principal Amount:	Loan Date:

Currency:	Term:

Interest Rate:	Loan Due Date:

Interest Payment Period:

Lender:

3. Place of Payment: All payments due under this Note shall be sent to the Lender’s address, as noted in Attachment 1 hereto, or at such other place as the Lender or subsequently assigned holder of this Note may designate in writing in the future.

5 . Acceleration of Debt: If the Borrower (i) fails to make any payment due under the terms of this Note or seeks relief under the U.S. Bankruptcy Code, (ii) fails to deliver shares to the Lender by the deadline set forth in Section 4 hereof, (iii) suffers an involuntary petition in bankruptcy or receivership that is not vacated within thirty (30) days, (iv) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official or such appointment is not discharged or stayed within 30 days, (v) makes a general assignment for the benefit of its

creditors or (vi) admits in writing that it is generally unable to pay its debts as they become due, the entire balance of this Note and any interest accrued thereon shall be immediately due and payable to the holder of this Note.

6 . Modification: No modification or waiver of any of the terms of this Note shall be allowed unless by written agreement signed by the parties. No waiver of any breach or default hereunder shall be deemed a waiver of any subsequent breach or default of the same or similar nature.

11 . Severability of Provisions : If any portion of this Note is deemed unenforceable, all other provisions of this Note shall remain in full force and effect.

13 . Choice of Law: All terms and conditions of this Note shall be interpreted under the laws

of California, U.S.A., without regard to conflict of law principles.

Signed Under Penalty of Perjury, this day of ,

Emmaus Life Sciences, Inc.


By: Yutaka Niihara, MD, CEO

ATTACHMENT 1

Lender’s Name:

Lender’s Address:

[INFORMATION FOR PURPOSES OF FILING WITH THE SECURITIES AND EXCHANGE COMMISSION]

SCHEDULE A

NOTEHOLDERS

Lender

Annual
Interest
Rate

Date of
loan

Term of
Loan

Loan Due
Date

Principal Loan
Amount

Interest Payment
Period

Conversion
Price

Lan Tran

11.0

02/10/2016

2 years (1)

02/10/2018

130,510

Annually

N/A

Hideki & Eiko Uehara

11.0

02/15/2016

Due on demand

133,333

Quarterly

N/A

Shigeru Matsuda

11.0

02/15/2016

Due on demand

833,335

Quarterly

N/A

(1) Due on demand up to 2 years

Exhibit 31.1

Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Yutaka Niihara, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Emmaus Life Sciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 6, 2016

/s/ Yutaka Niihara
Yutaka Niihara, M.D., MPH
Chief Executive Officer
(Principal Executive Officer)

Exhibit 31.2

Certification of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Steve Lee, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Emmaus Life Sciences, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 6, 2016

/s/ Steve Lee
Steve Lee
Interim Chief Financial Officer
(Principal Financial Officer)

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Emmaus Life Sciences, Inc. (the “Company”) on Form 10-Q for the quarter ending March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the date indicated below, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Yutaka Niihara
Yutaka Niihara, M.D., MPH
Chief Executive Officer
(Principal Executive Officer)
June 6, 2016


/s/ Steve Lee
Steve Lee
Interim Chief Financial Officer
(Principal Financial and Accounting Officer)
June 6, 2016