EMMAUS LIFE SCIENCES, INC. (Form: 10-Q, Received: 05/15/2018 15:57:02)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2018

☐	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 ☒ No ☐

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 ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The registrant had 34,918,822 shares of common stock, par value $0.001 per share, outstanding as of May 11, 2018.

EMMAUS LIFE SCIENCES, INC.

FORM 10-Q

For the Quarterly Period Ended March 31, 2018

INDEX

		Page
Part I Financial Information

Item 1.	Financial Statements	3

	(a)Consolidated Balance Sheets as of March 31, 2018 (Unaudited) and December 31, 2017	3

	(b)Consolidated Statements of Comprehensive Loss for the Three Months ended March 31, 2018 and 2017 (Unaudited)	4

	(c)Consolidated Statements of Changes in Stockholders’ Equity for the Three Months ended March 31, 2018 (Unaudited)	5

	(d)Consolidated Statements of Cash Flows for the Three Months ended March 31, 2018 and 2017 (Unaudited)	6

	(e)Notes to Consolidated Financial Statements as of and for the Three Months ended March 31, 2018 (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

Part II Other Information

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	35

Signatures		36

Item 1. Financial Statements

EMMAUS LIFE SCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

	As of
	March 31, 2018			December 31, 2017
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	5,113,233		$	15,836,063
Restricted cash		—			6,720,000
Accounts receivable		684,927			26,814
Inventories, net		1,008,440			625,299
Investment in marketable securities		104,875,712			99,836,397
Marketable securities, pledged to creditor		657,045			160,925
Prepaid expenses and other current assets		226,998			290,371
Total current assets		112,566,355			123,495,869
PROPERTY AND EQUIPMENT, NET		110,502			105,302
OTHER ASSETS
Long-term investment at cost		565,202			65,520
Intangibles, net		63,840			67,200
Deposits		195,818			111,581
Total other assets		824,860			244,301
Total assets	$	113,501,717		$	123,845,472
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	4,979,176		$	5,695,310
Deferred revenue		595,626			—
Deferred rent		—			30,078
Other current liabilities		51,107			10,109
Warrant derivative liabilities		19,491,000			26,377,000
Notes payable, net		4,506,635			7,871,143
Notes payable to related parties, net		2,044,973			2,036,261
Convertible notes payable, net		9,008,600			7,025,002
Convertible notes payable to related parties, net		400,000			400,000
Total current liabilities		41,077,117			49,444,903
LONG-TERM LIABILITIES
Deferred rent		—			10,821
Other long-term liabilities		41,841,500			36,852,290
Warrant derivative liabilities		1,742,000			1,882,000
Conversion option liabilities		—			1,289,000
Convertible notes payable, net		17,325,208			20,075,780
Total long-term liabilities		60,908,708			60,109,891
Total liabilities		101,985,825			109,554,794
STOCKHOLDERS’ EQUITY
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, 34,910,506 shares and 34,885,506 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively		34,911			34,886
Additional paid-in capital		117,734,424			113,111,745
Accumulated other comprehensive income (loss)		(72,144	)		41,275,785
Treasury stock, at cost — 700,000 shares and 0 shares at March 31, 2018 and December 31, 2017, respectively		(1,314,000	)		—
Accumulated deficit		(104,867,299	)		(140,131,738	)
Total stockholders’ equity		11,515,892			14,290,678
Total liabilities & stockholders’ equity	$	113,501,717		$	123,845,472

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

EMMAUS LIFE SCIENCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

	Three months ended March 31,
	2018			2017
REVENUES, NET		781,314			107,477
COST OF GOODS SOLD		134,679			48,260
GROSS PROFIT		646,635			59,217
OPERATING EXPENSES
Research and development		411,401			755,728
Selling		870,139			101,661
General and administrative		3,806,583			2,799,040
Total operating expenses		5,088,123			3,656,429
LOSS FROM OPERATIONS		(4,441,488	)		(3,597,212	)
OTHER INCOME (EXPENSE)
Loss on debt extinguishment		(3,244,769	)		—
Change in fair value of warrant derivative liabilities		840,000			(1,228,000	)
Change in fair value of embedded conversion option		466,000			—
Unrealized gain on investment in marketable securities		5,535,435			—
Interest and other income (loss)		45,552			(13,231	)
Interest expense		(5,298,021	)		(1,653,891	)
Total other expense		(1,655,803	)		(2,895,122	)
LOSS BEFORE INCOME TAXES		(6,097,291	)		(6,492,334	)
INCOME TAXES (BENEFIT)		—			2,400
NET LOSS		(6,097,291	)		(6,494,734	)
COMPONENTS OF OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain on investment in marketable securities		—			48,970
Unrealized gain (loss) in foreign translation		13,801			(11,607	)
Other comprehensive income		13,801			37,363
COMPREHENSIVE LOSS	$	(6,083,490	)	$	(6,457,371	)
NET LOSS PER COMMON SHARE	$	(0.17	)	$	(0.19	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		34,891,450			34,706,419

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

EMMAUS LIFE SCIENCES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2018

(UNAUDITED)

	Common stock – par value $0.001 per share, 100,000,000						Accumulated Other
	shares authorized				Additional		Comprehensive			Treasury Stock,			Accumulated
	Shares		Common Stock		Paid-In Capital		Income (Loss)			at cost			Deficit			Total
Balance, December 31, 2017		34,885,506	$	34,886	$	113,111,745	$	41,275,785		$	—		$	(140,131,738	)	$	14,290,678
Cumulative effect adjustment on adoption of ASU 2016-01		—		—		—		(41,361,730	)		—			41,361,730			—
Beneficial conversion feature relating to convertible notes		—		—		3,637,746		—			—			—			3,637,746
Stock issued for cash		25,000		25		274,975		—			—			—			275,000
Repurchase of common stock		—		—		—		—			(1,314,000	)		—			(1,314,000	)
Share-based compensation		—		—		709,958		—			—			—			709,958
Foreign currency translation effect		—		—		—		13,801			—			—			13,801
Net loss		—		—		—		—			—			(6,097,291	)		(6,097,291	)
Balance, March 31, 2018		34,910,506	$	34,911	$	117,734,424	$	(72,144	)	$	(1,314,000	)	$	(104,867,299	)	$	11,515,892

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

EMMAUS LIFE SCIENCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three months ended March 31,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(6,097,291	)	$	(6,494,734	)
Adjustments to reconcile net loss to net cash flows from operating activities
Depreciation and amortization		13,055			5,308
Cost of scrapped inventory written off		7,896			—
Amortization of discount of convertible notes		4,192,140			1,191,650
Foreign exchange adjustments on convertible notes and notes payable		135,180			103,908
Loss on debt extinguishment		3,244,769			—
Share-based compensation		709,958			1,028,350
Change in fair value of warrant derivative liabilities		(840,000	)		1,228,000
Change in fair value of embedded conversion option		(466,000	)		—
Unrealized gain on investment in marketable securities		(5,535,435	)		—
Net changes in operating assets and liabilities
Accounts receivable		(657,614	)		(12,093	)
Inventories		(387,605	)		(91,970	)
Prepaid expenses and other current assets		94,056			51,633
Deposits		(83,500	)		3,475
Accounts payable and accrued expenses		(539,266	)		937,338
Deferred revenue		595,626			—
Deferred rent		(40,898	)		(4,016	)
Other current liabilities		39,790			4,019,339
Other long-term liabilities		5,000,000			—
Net cash flows provided by (used in) operating activities		(615,139	)		1,966,188
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(14,712	)		(40,424	)
Purchase of marketable securities and investment at cost		(469,052	)		—
Net cash flows used in investing activities		(483,764	)		(40,424	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock and warrants		(7,500,000	)		—
Proceeds from convertible notes payable issued, net of issuance cost and discount		14,394,700			200,000
Payments of notes payable		(3,500,000	)		—
Payments of convertible notes		(20,000,000	)		—
Proceeds from issuance of common stock		275,000			98,800
Net cash flows provided by (used in) financing activities		(16,330,300	)		298,800
Effect of exchange rate changes on cash		(13,627	)		2,969
Net increase (decrease) in cash, cash equivalents and restricted cash		(17,442,830	)		2,227,533
Cash, cash equivalents and restricted cash, beginning of period		22,556,063			1,317,340
Cash, cash equivalents and restricted cash, end of period	$	5,113,233		$	3,544,873
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES
Interest paid	$	371,165		$	69,859
Income taxes paid	$	—		$	2,400

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

EMMAUS LIFE SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2018

(UNAUDITED)

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited consolidated interim financial statements of Emmaus Life Sciences, Inc. and subsidiaries (collectively, 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 consolidated 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 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, 2017, filed with the Securities and Exchange Commission (“SEC”) on April 16, 2018 (the “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, 2018.

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

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Refer to the Annual Report for a summary of significant accounting policies. There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2018. 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, 2018 and comparative amounts from the prior fiscal periods:

Inventories — All of the raw material purchased during the three months ended March 31, 2018 and for the year ended December 31, 2017 were purchased from one vendor. The below table presents inventory by category:

Inventories by category	March 31, 2018			December 31, 2017
Raw materials and components	$	106,486		$	—
Work-in-process		506,475			124,801
Finished goods		451,281			504,365
Inventory reserve		(55,802	)		(3,867	)
Total	$	1,008,440		$	625,299

Advertising cost — Advertising costs are expensed as incurred. Advertising costs for the three months ended March 31, 2018 and 2017 were $24,401 and $8,391, respectively.

Marketable securities — The Company’s marketable securities consist of four securities; (a) 39,250 shares of capital stock of CellSeed, Inc. (“CellSeed”) which are part of 147,100 shares acquired in January 2009 for ¥100,028,000 Japanese Yen (JPY) (equivalent to $1.1 million USD), at ¥680 JPY per share; (b) 849,744 shares of capital stock of KPM Tech Co., Ltd. (“KPM”) which were acquired in October 2016 for ₩14,318,186,400 South Korean Won (KRW) (equivalent to $13 million USD) at ₩16,850 KRW per share; (c) 271,950 shares of capital stock of Hanil Vacuum Co., Ltd. (“Hanil”) which were acquired in October 2016 for ₩1,101,397,500 KRW (equivalent to $1 million USD) at ₩4,050 KRW per share; and (d) 6,643,559 shares of capital stock of Telcon, Inc. (“Telcon”) which were acquired in July 2017 for ₩36,001,446,221 KRW (equivalent to $31.8 million USD) at ₩5,419 KRW per share.

As of March 31, 2018 and December 31, 201 7 , the closing price per share for CellSeed on the Tokyo Stock Exchange was ¥1,780 ($16.74 USD) and ¥462 JPY ($ 4.10 USD), respectively, the closing price per share for KPM on the Korean Securities Dealers Automated Quotations (“KOSDAQ”) was ₩ 2,050 ($1.93 USD) and ₩ 1,625 KRW ($1.52 USD) after 1-for-5 reverse stock split effected on June 28, 2017, respectively, the closing price per share for Hanil on KOSDAQ was ₩ 2,370 ($2.23 USD) and ₩ 2,830 KRW ($2.65 USD), respectively , and the closing price per share for Telcon on KOSDAQ was ₩ 15,350 ($14.46 USD) and ₩ 14,900 KRW ($13.95 USD) , respec tively .

As of March 31, 2018 and December 31, 2017, 39,250 shares of CellSeed common stock were pledged to secure a $300,000 convertible note of the Company issued to Mitsubishi UFJ Capital III Limited Partnership that is due on demand and were 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, 2018 and December 31, 2017:

	March 31,		December 31,
	2018		2017
Prepaid insurance	$	68,391	$	132,387
Other prepaid expenses and current assets		158,607		157,984
	$	226,998	$	290,371

Other long-term liabilities —Other long-term liabilities consisted of the following at March 31, 2018 and December 31, 2017:

	At
	March 31, 2018		December 31, 2017
Trade discount	$	31,841,500	$	31,841,500
Unearned revenue		10,000,000		5,000,000
Other long-term liabilities		—		10,790
Total other long-term liabilities	$	41,841,500	$	36,852,290

The Company has entered into an API Supply Agreement (the “API Agreement”) with Telcon pursuant to which Telcon advanced to the Company approximately ₩36.0 billion KRW (approximately $31.8 million USD) as a trade discount to supply 25% of the Company’s requirements for bulk containers of pharmaceutical grade L-glutamine (“PGLG”) for a term of five years, with 10 one-year renewal terms . The agreement will automatically renew unless terminated by either party in writing. The agreement does not include yearly purchase commitments or margin guarantees. The advance trade discount shall be applied against purchases made by the Company from Telcon over the life of the agreement.

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, 2018 and the year ended December 31, 2017:

	Three months ended			Year ended
Warrant Derivative Liabilities—Stock Purchase Warrants	March 31, 2018			December 31, 2017
Balance, beginning of period	$	26,377,000		$	10,600,000
Repurchased		(6,186,000	)		—
Change in fair value included in the statement of comprehensive loss		(700,000	)		15,777,000
Balance, end of period	$	19,491,000		$	26,377,000

The value of the liability classified warrants, the value of warrant derivative liabilities and the change in fair value of the liability classified warrants and warrant derivative liabilities 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. The values as of March 31, 2018, December 31, 2017 and the initial value as of September 11, 2013 were calculated based on the following assumptions:

	March 31, 2018			December 31, 2017			December 31, 2016			December 31, 2015			December 31, 2014			December 31, 2013			Initial Value
Stock price	$	11.20		$	11.40		$	6.00		$	4.70		$	4.90		$	3.60		$	3.60
Risk‑free interest rate		2.06	%		1.62	%		1.09	%		1.23	%		1.38	%		1.75	%		1.72	%
Expected volatility (peer group)		57.10	%		55.80	%		68.30	%		64.10	%		71.50	%		63.20	%		72.40	%
Expected life (in years)		0.45			0.70			1.70			2.70			3.70			4.70			5.00
Expected dividend yield	—			—			—			—			—			—			—
Number outstanding		2,520,501			3,320,501			3,320,501			3,320,501			3,320,501			3,320,501			3,320,501
Balance, end of period:
Liability classified warrants	$	—		$	—		$	—		$	—		$	3,206,000		$	6,517,000		$	7,541,000
Warrant derivative liabilities	$	19,491,000		$	26,377,000		$	10,600,000		$	7,863,000		$	6,520,000		$	—		$	—

The following table presents warrants issued in conjunction with Purchase Agreement with GPB measured at fair value as of March 31, 2018:

	Three months ended March 31, 2018						Year ended December 31, 2017
Liability Instrument—GPB	Warrants			Embedded Conversion Option			Warrants		Embedded Conversion Option
Balance, beginning of period	$	1,882,000		$	1,289,000		$	—	$	—
Fair value at issuance date		—			—			1,882,000		1,289,000
Change in fair value included in the statement of comprehensive income (loss)		(140,000	)		(466,000	)		—		—
Extinguished upon debt repayment		—			(823,000	)		—		—
Balance, end of period	$	1,742,000		$	—		$	1,882,000	$	1,289,000

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

Type of Loan	Term of Loan	Stated Annual Interest	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
2017 convertible notes payable	Due on demand - 3 years	10% - 13.5%	$	36,113,296	$3.50 - $10.31	$	11,678,725		240,764	$	10.80	$	1,882,000	10% - 110%
2018 convertible notes payable	Due on demand - 2 years	10%		16,511,998	$3.50 - $10.00		3,637,746		—		—		—	22% - 110%
			$	52,625,294		$	15,316,471		240,764			$	1,882,000

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

Net loss per share — As of March 31, 2018 and 2017, respectively, potentially dilutive securities exercisable or convertible into 17,122,176 and 15,554,439 shares of Company common stock were outstanding. No potentially dilutive securities were included in the calculation of diluted loss per share since their effect would be anti-dilutive for all periods presented.

Rece nt accounting pronouncements —In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 v alue 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 calcul ating 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 i nstruments 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. This Update was ef fective beginning January 1, 2018 and the Company is now recognizing any changes in the fair value of certain equity investments in net income as prescribed by the new standard rather than in other comprehensive income. We recognized a cumulative effect ad justment to increase the opening balance of retained earnings as of January 1, 2018 by $ 41.4 million , net of $12.3 million income tax benefit . Refer to Note 4 for additional disclosures required by this ASU.

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 April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”). The amendments in ASU 2016-10 clarify identification of performance obligations and licensing implementation. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606: For public companies, this Update is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The Company adopted the new revenue standard as of January 1, 2018 using the modified retrospective transition method. The adoption of ASC 606 did not have a material impact on the measurement nor on the recognition of revenue of contracts for which all revenue had not been recognized as of January 1, 2018, therefore no cumulative adjustment has been made to the opening balance of accumulated deficit at the beginning of 2018. The comparative information has not been restated and continues to be reported under the accounting standards in effect for the period presented.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 provides guidance on the following eight specific cash flow classification issues: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. Current GAAP does not include specific guidance on these eight cash flow classification issues. ASU 2016-15 was effective for the Company beginning January 1, 2018 and was adopted using retrospective transition method for all periods presented. The adoption of ASU 2016-15 did not have a material impact on the Company's consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation — Stock Compensation (Topic 718) : Scope of Modification Accounting (“ASU 2017-09”). ASU 2017-09 provides clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation — Stock Compensation, to a change to the terms or c onditions of a share-based payment award. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted. The new guidance w as effective for the Company in the first quarter of fiscal year 2018. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). ASU 2018-02 allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The ASU also requires certain disclosures about stranded tax effects. ASU 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. ASU 2018-02 should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company is currently assessing the impact the adoption of ASU 2018-02 will have on its consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2018-03”). The amendments in this Update (1) clarify that an entity measuring an equity security using the measurement alternative may change its measurement approach to a fair value method in accordance with Topic 820, Fair Value Measurement , through an irrevocable election that would apply to that security and all identical or similar investments of the same issuer, (2) clarify that the adjustments made under the measurement alternative are intended to reflect the fair value of the security as of the date that the observable transaction for a similar security took place, (3) clarify that remeasuring the entire value of forward contracts and purchased options is required when observable transactions occur on the underlying equity securities, (4) clarify that when the fair value option is elected for a financial liability, the guidance in paragraph 825-10- 45-5 should be applied, regardless of whether the fair value option was elected under either Subtopic 815-15, Derivatives and Hedging— Embedded Derivatives , or 825- 10, Financial Instruments— Overall , (5) clarify that for financial liabilities for which the fair value option is elected, the amount of change in fair value that relates to the instrument specific credit risk should first be measured in the currency of denomination when presented separately from the total change in fair value of the financial liability, and then both components of the change in the fair value of the liability should be remeasured into the functional currency of the reporting entity using end-of-period spot rates, (6) clarify that the prospective transition approach for equity securities without a readily determinable fair value in the amendments in ASU 2016-01 is meant only for instances in which the measurement alternative is applied. For public business entities, ASU 2018-03 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Public business entities with fiscal years beginning between December 15, 2017, and June 15, 2018, are not required to adopt these amendments until the interim period beginning after June 15, 2018, and public business entities with fiscal years beginning between June 15, 2018, and December 15, 2018, are not required to adopt these amendments before adopting the amendments in ASU 2016-01. 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.

NOTE 3 — PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at:

	March 31, 2018			December 31, 2017
Equipment	$	237,449		$	225,615
Leasehold improvements		64,394			61,054
Furniture and fixtures		74,090			74,090
Sub total		375,933			360,759
Less: accumulated depreciation		(265,431	)		(255,457	)
Total	$	110,502		$	105,302

During the three months ended March 31, 2018 and 2017, depreciation expense was $13,055 and $5,308, respectively.

NOTE 4 — INVESTMENTS

Equity Securities— Effective January 1, 2018, we adopted ASU 2016-01 which requires us to measure all equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in earnings. We use quoted market prices to determine the fair value of equity securities with readily determinable fair values. For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Management assesses each of these investments on an individual basis. Additionally, on a quarterly basis, management is required to make a qualitative assessment of whether the investment is impaired. During the three months ended March 31, 2018, the Company did not recognize any fair value adjustments for equity securities without readily determinable fair values. We recognized a cumulative effect adjustment of $41.4 million, net of $12.3 million income tax benefit, to increase the opening balance of retained earnings with an offset to accumulated other comprehensive income as of January 1, 2018, in connection with the adoption of ASU 2016-01.

For fiscal periods beginning prior to January 1, 2018, marketable equity securities not accounted for under the equity method were classified as available-for-sale. There were no marketable equity securities classified as trading. For equity securities classified as available-for-sale, realized gains and losses were included in net loss. Unrealized gains and losses on equity securities classified as available-for-sale were recognized in accumulated other comprehensive income (loss), net of deferred taxes. In addition, the Company had equity securities without readily determinable fair values that were recorded at cost. For these cost method investments, we recorded dividend income, if any, when applicable dividends were declared. Cost method investments were reported as other investments in our consolidated balance sheets, and dividend income from cost method investments was reported in other income (loss) net in our consolidated statements of comprehensive loss. We reviewed all of our cost method investments quarterly to determine if impairment indicators were present; however, we were not required to determine the fair value of these investments unless impairment indicators existed. When impairment indicators did exist, we generally used discounted cash flow analyses to determine the fair value. We estimated that the fair values of our cost method investments approximated their carrying values as of December 31, 2017. Our cost method investments had a carrying value of $65,520 as of December 31, 2017.

As of March 31, 2018, the carrying values of our equity securities were included in the following line items in our consolidated balance sheets:

	At March 31, 2018
	Fair Value with Changes Recognized in Income		Measurement Alternative - No Readily Determinable Fair Value
Marketable securities	$	105,532,757	$	—
Other investments		—		565,202
Total equity securities	$	105,532,757	$	565,202

The calculation of net unrealized gains and losses for the period that relate to equity securities still held at March 31, 2018 is as follows:

	Three Months Ended March 31, 2018
Net gains (losses) recognized during the period related to equity securities	$	5,535,435
Less: Net gains (losses) recognized during the period related to equity securities sold during the period		—
Unrealized gains (losses) recognized during the period related to equity securities still held at the end of the period	$	5,535,435

As of December 31, 2017, equity securities consisted of the following:

			Gross Unrealized					Estimated
	Cost		Gains		Losses			Fair Value
Trading securities	$	—	$	—	$	—		$	—
Available-for-sale securities		46,209,017		60,812,231		(6,958,406	)		100,062,842
Total equity securities	$	46,209,017	$	60,812,231	$	(6,958,406	)	$	100,062,842

As of December 31, 2017, the Company had investments classified as available-for-sale in which our cost basis exceeded the fair value of our investment. Management assessed each of the investment in marketable securities that were in a gross unrealized los s position on an individual basis to determine if the decline in fair value was other than temporary. Management's assessment as to the nature of a decline in fair value is based on, among other things, the length of time and the extent to which the market value has been less than our cost basis; the financial condition and near-term prospects of the issuer; and our intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value. As a result of these assessments, management determined that the decline in fair value of these investments was not other than temporary and did not record any impairment charges.

As of December 31, 2017, the fair values of our equity securities were included in the following line items in our consolidated balance sheets:

	Trading Securities		Available-for-sale securities
Marketable securities	$	—	$	99,997,322
Long-term investment at cost		—		65,520
Total equity securities	$	—	$	100,062,842

There were no sale of available-for-sale equity securities during the three months ended March 31, 2018.

NOTE 5 — ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following at:

	March 31, 2018		December 31, 2017
Accounts payable:
Regulatory fees	$	—	$	715,999
Clinical and regulatory expenses		174,497		116,736
Commercialization consulting fees		12,321		30,000
Manufacturing cost		122,247		217,155
Legal expenses		68,703		87,701
Consulting fees		523,176		147,038
Accounting fees		86,799		67,293
Selling expenses		341,801		35,383
Investor relations and public relations expenses		36,812		45,526
Board member compensation		75,000		11,200
Other vendors		348,864		125,605
Total accounts payable		1,790,220		1,599,636
Accrued interest payable, related parties		346,901		318,120
Accrued interest payable		2,002,487		1,449,154
Accrued expenses:
Wages and payroll taxes payable		118,453		1,711,541
Deferred salary		291,667		291,667
Paid vacation payable		241,071		186,978
Other accrued expenses		188,377		138,214
Total accrued expenses		839,568		2,328,400
Total accounts payable and accrued expenses	$	4,979,176	$	5,695,310

NOTE 6 — NOTES PAYABLE

Notes payable consisted of the following at March 31, 2018 and December 31, 2017:

Year Issued	Interest Rate Range	Term of Notes	Conversion Price		Principal Outstanding March 31, 2018		Discount Amount March 31, 2018		Carrying Amount March 31, 2018		Shares Underlying Notes March 31, 2018		Principal Outstanding December 31, 2017		Discount Amount December 31, 2017		Carrying Amount December 31, 2017		Shares Underlying Notes December 31, 2017
Notes payable
2013	10%	Due on demand		—	$	940,500	$	—	$	940,500		—	$	887,600	$	—	$	887,600		—
2015	10%	Due on demand		—		10,000		—		10,000		—		—		—		—		—
2016	10% - 11%	Due on demand		—		843,335		—		843,335		—		833,335		—		833,335		—
2017	11%	Due on demand		—		2,712,800		—		2,712,800		—		6,150,208		—		6,150,208		—
					$	4,506,635	$	—	$	4,506,635		—	$	7,871,143	$	—	$	7,871,143		—

		Current			$	4,506,635	$	—	$	4,506,635		—	$	7,871,143	$	—	$	7,871,143		—
		Non-current			$	—	$	—	$	—		—	$	—	$	—	$	—		—
Notes payable - related party
2015	11%	Due on demand		—		300,000		—		300,000		—		310,000		—		310,000		—
2016	10% - 11%	Due on demand		—		670,000		—		670,000		—		810,510		—		810,510		—
2017	10%	Due on demand		—		915,751		—		915,751		—		915,751		—		915,751		—
2018	11%	Due on demand		—		159,222		—		159,222		—		—		—		—		—
					$	2,044,973	$	—	$	2,044,973		—	$	2,036,261	$	—	$	2,036,261		—

		Current			$	2,044,973	$	—	$	2,044,973		—	$	2,036,261	$	—	$	2,036,261		—
		Non-current			$	—	$	—	$	—		—	$	—	$	—	$	—		—
Convertible notes payable
2011	10%	5 years	$	3.05	$	300,000	$	—	$	300,000		98,285	$	300,000	$	—	$	300,000		98,285
2014	10%	Due on demand - 2 years	$3.05 - $3.60			512,600		—		512,600		178,285		486,878		—		486,878		168,766
2016	10%	Due on demand - 2 years	$3.50 - $4.50			922,829		38,957		883,872		265,463		1,516,329		83,298		1,433,031		441,048
2017	10%	Due on demand - 2 years	$3.50 - $10.00			15,202,887		3,587,673		11,615,214		3,219,371		36,113,296		11,232,423		24,880,873		5,357,488
2018	10%	Due on demand - 2 years	$3.50 - $10.00			16,511,998		3,489,876		13,022,122		1,965,523		—
					$	33,450,314	$	7,116,506	$	26,333,808		5,726,927	$	38,416,503	$	11,315,721	$	27,100,782		6,065,587

		Current			$	12,550,522	$	3,541,922	$	9,008,600		3,393,245	$	12,860,912	$	5,835,910	$	7,025,002		3,449,984
		Non-current			$	20,899,792	$	3,574,584	$	17,325,208		2,615,603	$	25,555,591	$	5,479,811	$	20,075,780		2,615,603
Convertible notes payable - related party
2012	10%	Due on demand	$	3.30	$	200,000	$	—	$	200,000		69,616	$	200,000	$	—	$	200,000		68,122
2015	10%	2 years	$	4.50		200,000		—		200,000		55,001		200,000		—		200,000		53,905
					$	400,000	$	—	$	400,000		124,617	$	400,000	$	—	$	400,000		122,027

		Current			$	400,000	$	—	$	400,000		122,027	$	400,000	$	—	$	400,000		122,027
		Non-current			$	—	$	—	$	—		—	$	—	$	—	$	—		—
		Grand Total			$	40,401,922	$	7,116,506	$	33,285,416		5,851,544	$	48,723,907	$	11,315,721	$	37,408,186		6,187,614

The weighted average stated interest rate of notes payable as of March 31, 2018 and December 31, 2017 was 10% and 11%, respectively. The weighted average effective interest rates of notes payable for the three-month period ended March 31, 2018 and the year ended December 31, 2017 were 37% and 24% 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 Company 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 $10.00 per share. Certain notes with a $4.50 or a $10.00 stated conversion price in the second year of their two-year term are subject to automatic conversion into shares of Company common stock at a conversion price equal to 80% of the initial public offering price at the time of a qualified public offering. All notes due on demand are treated as current liabilities.

Contractual principal payments due on notes payable are as follows:

Year Ending	Amount
2018	$	19,174,057
2019		5,883,665
2020		15,344,200
Total	$	40,401,922

The Company estimated the total fair value of any beneficial conversion feature and accompanying warrants in allocating the note 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 Company 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 December 31, 2017. The Company did not issue any warrants in conjunction with notes in the three months ended March 31, 2018.

	2018		2017
Stock price		—	$	11.40
Exercise price		—	$	10.80
Term		—	5 years
Risk‑free interest rate		—		2.20	%
Expected dividend yield		—		—
Expected volatility		—		70.0	%

In situations where the notes 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, 2018. 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. 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 e xercising 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, 2018. 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, 2018, the aggregate fair value of the Private Placement warrants, replacement warrants and the Broker Warrants was $19,491,000 (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, 2018 and December 31, 2017 is presented below:

	Three months ended			Year ended
	March 31, 2018			December 31, 2017
Warrants outstanding, beginning of period		5,265,432			5,024,668
Granted		—			240,764
Exercised	—			—
Cancelled, forfeited and expired		(800,000	)	—
Warrants outstanding, end of period		4,465,432			5,265,432

A summary of outstanding warrants by year issued and exercise price as of March 31, 2018 is presented below:

			Outstanding						Exercisable
Year issued and Exercise Price			Number of Warrants Issued		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Total		Weighted Average Exercise Price
At December 31, 2013
	$	3.30		50,000		0.08	$	3.30		50,000	$	3.30
	$	3.50		1,822,693		0.45	$	3.50		1,822,693	$	3.50
	2013 total			1,872,693						1,872,693
At December 31, 2014
	$	3.50		747,808		0.49	$	3.50		747,808	$	3.50
	2014 Total			747,808						747,808
At December 31, 2015
	$	4.90		110,417		1.93	$	4.90		110,417	$	4.90
	2015 Total			110,417						110,417

	$	4.50		118,750		3.25	$	4.50		118,750	$	4.50
	$	4.70		75,000		3.09	$	4.70		75,000	$	4.70
	$	5.00		1,300,000		3.11	$	5.00		1,300,000	$	5.00
	2016 Total			1,493,750						1,493,750
At December 31, 2017
	$	10.80		240,764		5.25	$	10.80		240,764	$	10.80
At March 31, 2018	Total			4,465,432						4,465,432

Stock options — During the three months ended March 31, 2018 , the Company granted 30,000 options to its direct ors. During the year ended December 31, 2017 , 50,000 options were granted by the Company’s Board of Directors to a consultant. These options vested immediately, have an exercise price of $11.40 per share and are exercisable through 2027. As of March 31, 20 1 8 , there were 6,805,200 options outstanding under the Company’s 2011 Stock Incentive Plan.

Summaries of outstanding options as of March 31, 2018 and December 31, 2017 are presented below.

	March 31, 2018				December 31, 2017
	Number of Options		Weighted‑ Average Exercise Price		Number of Options			Weighted‑ Average Exercise Price
Options outstanding, beginning of period		6,775,200	$	4.12		6,955,200		$	4.10
Granted or deemed issued		30,000	$	11.40		50,000		$	11.40
Exercised		—	$	—		(11,895	)	$	4.19
Cancelled, forfeited and expired		—	$	—		(218,105	)	$	4.98
Options outstanding, end of period		6,805,200	$	4.15		6,775,200		$	4.12
Options exercisable at end of year		5,840,456	$	3.99		5,604,439		$	3.95
Options available for future grant		2,194,800				2,224,800

During the three months ended March 31, 2018 and 2017, the Company recognized $0.7 million and $1.0 million, respectively, of share-based compensation expense arising from stock options. As of March 31, 2018, there was $6.8 million of total unrecognized compensation expense related to unvested share-based compensation arrangements granted under the Company’s 2011 Stock Incentive Plan. That expense is expected to be recognized over the weighted-average remaining period of 1.2 years.

Registration rights — Pursuant to the Purchase Warrant relating to the GPB Debt Holdings II, LLC issued by the Company on December 29, 2017, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which the Company has agreed to file a registration statement with the Securities and Exchange Commission (the “Commission”) relating to the offer and sale by GPB of the Company Shares underlying the Warrants. The Company is required to file a registration statement within one hundred eighty (180) days of closing of a public listing of the Company’s Common Stock for trading on any national securities exchange (excluding any over-the-counter market), whether through a direct listing application or merger transaction. The Company is required to have the registration statement become effective on the earlier of (A) the date that is two-hundred and forty (240) days following the later to occur of (i) the date of closing of the public listing or (ii) or in the event the registration statement receives a “full review” by the Commission, the date that is 300 days following the date of closing of the public listing, or (B) the date which is within three (3) business days after the date on which the Commission informs the Company (i) that the Commission will not review the registration statement or (ii) that the Company may request the acceleration of the effectiveness of the registration statement. If the Company does not effect such registration within that period of time, it will be required to pay GPB for liquidated damages an amount of cash equal to 2% of the product of (i) the number of Registrable Securities and (ii) the Closing Sale Price or Closing Bid Price as of the trading day immediately prior to the Event Date, such payments to be made on the Event Date and every thirty (30) day anniversary thereafter with a maximum penalty of 12% until the applicable Event is cured; provided, however, that in the event the Commission does not permit all of the Registrable Securities to be included in the Registration Statement because of its application of Rule 415, liquidated damages shall only be payable by the Company based on the portion of the Holder’s initial investment in the Securities that corresponds to the number of such Holder’s Registrable Securities permitted to be registered by the Commission in such Registration Statement pursuant to Rule 415.

Pursuant to the Subscription Agreements relating to the Private Placement and certain warrants, as well as the replacement warrants issued 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 Company 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 of 1933, as amended (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, a nd 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 re ceive 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, 2018 , based on a fair market value of a share of Company common stock of $ 11.20 and 2,5 20,501 warrants issued and outstanding and eligible for cashless exercise after cancellation of 800,000 of such warrants as of March 29, 2018 , 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 1,732,844 shares. If the fair market value of a share of Company common stock were to increase by $1.00 from $ 11.20 to $ 12.20 , the maximum number of shares the Company would be required to issue, if the warrant holders elected to exercise the cashless exercise feature with re spect to all then eligible warrants, would increase to 1,797,406 shares as of March 31, 2018 .

The Company has not yet filed a registration statement with respect to the resale of the Registrable Securities. The Company believes that it has used commercially reasonable efforts to file a registration statement with respect to the resale of Registrable Securities.

Korean Private Placement — On September 12, 2016, the Company entered into Letter of Agreement with KPM and Hanil, both Korean-based public companies whose shares are listed on KOSDAQ, a trading board of Korea Exchange in South Korea. In the Letter of Agreement, the parties agreed that KPM and Hanil would purchase by September 30, 2016 $17 million and $3 million, respectively, of shares of the Company’s common stock at a price of $4.50 per share. In exchange, the Company agreed to invest $13 million and $1 million in future capital increases by KPM and Hanil, respectively, at prices based upon the trading prices of KPM and Hanil shares on KOSDAQ. In connection with the Letter of Agreement, KPM and Hanil entered into the Company’s standard form subscription agreement with respect to their purchase of shares which contains customary representations and warranties of the parties.

On September 29, 2016, KPM and Hanil purchased from the Company 3,777,778 shares and 666,667 shares, respectively, of common stock at a price of $4.50 a share for $17 million and $3 million, respectively, or a total of $20 million. The Company recognized $720,000 as a reduction to its additional paid-in-capital for fees and commissions payable by the Company in connection with the transaction.

Pursuant to the terms of the Letter of Agreement dated September 12, 2016, the Company invested $13 million and $1 million in capital increases by KPM and Hanil, respectively, at $15.32 and $3.68, respectively, per capital share.

Pursuant to the terms of a subscription agreement dated as of September 11, 2013 among the Company and certain purchasers of shares of the Company’s common stock and warrants to purchase shares of our common stock, the purchasers are entitled to participation rights with respect to the sale of shares or placement of debt. To the extent the purchasers exercise their participation rights, the Company may be obliged to sell to them a specified number of shares of our common stock at the price per share and other terms set forth in the Letter of Agreement. There can be no assurance that any purchaser will exercise its participation rights or that any shares of the Company’s common stock will be issued to any purchaser.

NOTE 8 — COMMITMENTS AND CONTINGENCIES

Distribution contract —The Company selected AmerisourceBergen for its integrated commercialization solution to support Endari sales, US Bioservices as the Specialty Pharmacy, ASD Healthcare for Specialty Distribution and ICS for Third-Party Logistics.

Cardinal Health Specialty Pharmacy Services has been contracted to distribute NutreStore to other wholesale distributors and some independent pharmacies since April 2008.

On August 29, 2017, the Company signed a distributor agreement, effective as of August 23, 2017, with Megapharm Ltd., an Israeli Corporation (“Megapharm”), under which the Company granted Megapharm the exclusive rights to distribute Endari™ (L-glutamine oral powder) in Israel and in the Palestinian Authority, or the territories.

The term of the distributor agreement is for seven years from the product registration approval in the territories, unless earlier terminated as provided therein, and will renew automatically for successive one-year terms unless terminated by either party by written notice to the other party no less than 60 days prior to the date the term would renew.

In the distributor agreement, Megapharm agrees to use its reasonable best efforts to actively and diligently promote the sale of Endari in the territories and to maintain a competent and experienced sales force to serve each of the territories. Megapharm also agrees in the distributor agreement to purchase from the Company specified annual minimum quantities of Endari during each of the

first five years of the term. The distributor agreement contains customary representations and warranties of the parties and customary mutual indemnification provisions.

Operating leases — The Company leases its office space under operating leases with unrelated entities. The Company has opened its New York office in February 2018 to support a sales team focused on commercial sales for Endari.

The rent expense during the three months ended March 31, 2018 and 2017 amounted to $124,286 and $151,312, respectively.

Future minimum lease payments under the agreements are as follows as of March 31, 2018:

Year	Amount
2018 (nine months)	$	238,673
2019		687,032
2020		611,012
2021		626,545
2022		646,047
Thereafter		777,344
Total	$	3,586,653

Management Control Acquisition Agreement — As previously reported in its Form 8-K filed on June 19, 2017 and Form 10-Q filed on August 17, 2017, that on June 12, 2017, the Company entered into a Management Control Acquisition Agreement (the “MCAA”) with Telcon Holdings, Inc. (“Telcon Holdings”), a Korean corporation, and Telcon (“Telcon”), a Korean-based public company whose shares are listed on KOSDAQ, a trading board of Korea Exchange in South Korea. In accordance with the MCAA, the Company invested ₩36.0 billion KRW (approximately $31.8 million USD) to purchase 6,643,559 shares of Telcon’s common stock shares at a purchase price of ₩5,419 KRW (approximately $4.79 USD) per share. Upon consummation of the MCAA, the Company became Telcon’s largest shareholder owning approximately 10.3% of Telcon’s outstanding common stock shares and received representation on its board of directors.

Subsequent to entering into the MCAA, the Company held discussions with Telcon Holdings and Telcon to re-negotiate and clarify certain of the terms in the MCAA. On September 29, 2017, the Company executed a revised agreement with Telcon Holdings and Telcon which called for the Company’s representatives on Telcon’s board of directors to resign effective as of September 29, 2017 and granted the voting rights of the Company’s shares of Telcon’s common stock to Telcon Holdings to change the composition of the board of directors of Telcon. In addition, the revised agreement contains a provision for Telcon Holdings or any persons designated by Telcon Holdings to lend to the Company a bridge loan for $3.5 million. The Company has repaid the loan in full along with any interest accrued at 5% per annum immediately upon receipt of the $10 million due by December 31, 2017 under the distribution agreements for diverticulosis treatment for the geographical regions of Korea, Japan, China, and Australia. The loan was collateralized by a $5 million security interest in the amount due to the Company for the aforementioned distribution agreements as well as by shares of Telcon and KPM held by the Company pledged as additional security interest for the loan.

API Supply Agreement — The Company had previously reported in its Form 8-K filed on June 19, 2017, that on June 12, 2017, the Company entered into an API Supply Agreement (the “API Agreement”) with Telcon pursuant to which Telcon paid the Company approximately ₩36 billion KRW (approximately $31.8 million USD) in consideration of the right to supply 25% of the Company’s requirements for bulk containers of PGLG for a fifteen-year term. Due to unforeseen circumstances, the Company and Telcon held new discussions to re-negotiate certain terms of the API Agreement. The Company and Telcon made significant changes to critical terms of the API Agreement, which resulted in the Company and Telcon signing a Raw Material Supply Agreement (“Revised API Agreement”) on July 12, 2017. The Revised API Agreement is effective for a term of five years with 10 one-year renewal periods for a maximum of 15 years and the agreement will automatically renew unless terminated by either party in writing. The Revised API Agreement does not include yearly purchase commitments or margin guarantees, but revises the API Agreement such that a unit price is established for 940,000 kilograms of PGLG at $50 USD per kilogram for a total of $47 million over the 15 years. The Revised API Supply Agreement is silent on yearly purchase commitments and margin guarantees on purchases of $5 million and $2.5 million, respectively.

NOTE 9 — RELATED PARTY TRANSACTIONS

The following table sets forth information relating to our loans from related persons outstanding as of the date hereof or at any time during the three months ended March 31, 2018.

Class	Lender	Interest Rate	Date of Loan	Term of Loan	Principal Amount Outstanding at March 31, 2018		Highest Principal Outstanding		Amount of Principal Repaid or Converted into Stock		Amount of Interest Paid		Conversion Rate		Shares Underlying Notes March 31, 2018
Current, Promissory note payable to related parties:
	Masaharu & Emiko Osato (3)	11%	12/29/2015	Due on Demand		300,000		300,000		—		—		—		—
	Masaharu & Emiko Osato (3)	11%	2/25/2016	Due on Demand		400,000		400,000		—		—		—		—
	Lan T. Tran (2)	10%	4/29/2016	Due on Demand		20,000		20,000		—		—		—		—
	Hope Hospice (1)	10%	6/3/2016	Due on Demand		250,000		250,000		—		—		—		—
	Lan T. Tran (2)	10%	2/9/2017	Due on Demand		12,000		12,000		—		—		—		—
	Yutaka Niihara (2)(3)	10%	9/14/2017	Due on Demand		903,751		903,751		—		—		—		—
	Lan T. Tran (2)	10%	2/10/2018	Due on Demand		159,222		159,222		—		—		—		—
				Subtotal	$	2,044,973	$	3,571,078	$	794,339	$	129,470

Current, Convertible notes payable to related parties:
	Yasushi Nagasaki (2)	10%	6/29/2012	Due on Demand	$	200,000	$	388,800	$	188,800	$	57,886	$	3.30		69,616
	Yutaka & Soomi Niihara (2)(3)	10%	11/16/2015	2 years		200,000		200,000	—		—		$	4.50		55,001
				Subtotal	$	400,000	$	608,800	$	208,800	$	62,291				124,617
				Total	$	2,444,973	$	4,179,878	$	1,003,139	$	191,761				124,617

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

(2)

Officer.

(3)

Director.

(4)	Family of Officer/Director.

The following table sets forth information relating to our loans from related persons outstanding as of the date hereof or at any time during the year ended December 31, 2017 .

Class	Lender	Interest Rate	Date of Loan	Term of Loan	Principal Amount Outstanding at December 31, 2017		Highest Principal Outstanding		Amount of Principal Repaid or Converted into Stock		Amount of Interest Paid		Conversion Rate		Shares Underlying Notes December 31, 2017
Current, Promissory note payable to related parties:
	Hope Hospice (1)	8%	1/17/2012	Due on Demand	$	—	$	200,000	$	200,000	$	7,331		—		—
	Hope Hospice (1)	8%	6/14/2012	Due on Demand		—		200,000		200,000		14,762		—		—
	Hope Hospice (1)	8%	6/21/2012	Due on Demand		—		100,000		100,000		7,249		—		—
	Hope Hospice (1)	8%	2/11/2013	Due on Demand		—		50,000		50,000		1,559		—		—
	Hope Hospice (1)	10%	1/7/2015	Due on Demand		—		100,000		100,000		28,630		—		—
	IRA Service Trust Co. FBO Peter B. Ludlum (2)	10%	2/20/2015	Due on Demand		10,000		10,000		—		—		—		—
	Masaharu & Emiko Osato (3)	11%	12/29/2015	Due on Demand		300,000		300,000		—		—		—		—
	Yutaka Niihara (2)(3)	10%	5/21/2015	Due on Demand		—		826,105		94,339		61,829		—		—
	Lan T. Tran (2)	11%	2/10/2016	Due on Demand		130,510		130,510		—		—		—		—
	Masaharu & Emiko Osato (3)	11%	2/25/2016	Due on Demand		400,000		400,000		—		—		—		—
	Hope Hospice (1)	10%	4/4/2016	Due on Demand		—		50,000		50,000		8,110		—		—
	Lan T. Tran (2)	10%	4/29/2016	Due on Demand		20,000		20,000		—		—		—		—
	IRA Service Trust Co. FBO Peter B. Ludlum (2)	10%	5/5/2016	Due on Demand		10,000		10,000		—		—		—		—
	Hope Hospice (1)	10%	6/3/2016	Due on Demand		250,000		250,000		—		—		—		—
	Lan T. Tran (2)	10%	2/9/2017	Due on Demand		12,000		12,000		—		—		—		—
	Yutaka Niihara (2)(3)	10%	9/14/2017	Due on Demand		903,751		903,751		—		—		—		—
				Subtotal	$	2,036,261	$	3,562,366	$	794,339	$	129,470			—

Current, Convertible notes payable to related parties:
	Yasushi Nagasaki (2)	10%	6/29/2012	Due on Demand	$	200,000	$	388,800	$	188,800	$	57,886	$	3.30		68,122
	Charles & Kimxa Stark (2)	10%	10/1/2015	2 years	—			20,000		20,000		4,405	$	4.50	—
	Yutaka & Soomi Niihara (2)(3)	10%	11/16/2015	2 years		200,000		200,000	—		—		$	4.50		53,905
				Subtotal	$	400,000	$	608,800	$	208,800	$	62,291				122,027

				Total	$	2,436,261	$	4,171,166	$	1,003,139	$	191,761				122,027

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

(2)

Officer

(3)

Director

(4)	Family of Officer/Director

NOTE 10 — GEOGRAPHIC INFORMATION

For the three months ended March 31, 2018 and 2017, the Company earned revenue from countries as outlined in the table below:

Country	Revenue for the three months ended March 31, 2018		% of total revenue for the three months ended March 31, 2018			Revenue for the three months ended March 31, 2017		% of total revenue for the three months ended March 31, 2017
United States	$	675,046		86	%	$	14,619		13	%
Japan		43,005		6	%		28,558		27	%
Taiwan		26,100		3	%		64,300		60	%
France		37,162		5	%		—		—	%

The Company did not have any significant currency translation or foreign transaction adjustments during the three months ended March 31, 2018 or 2017.

NOTE 11 — SUBSEQUENT EVENTS

Subsequent to March 31, 2018, the Company issued the following:

Notes Issued after March 31, 2018

Principal

Amounts

Annual

Interest

Rate

Term of Notes

Conversion

Price

Convertible note

250,000

10%

2 Years

10.00

Subsequent to March 31, 2018, the Company issued the following shares upon cashless exercise by a warrant holder:

Common Shares Issued after March 31, 2018

Amounts

Number of

Shares Issued

Common shares

—

8,316

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, Emmaus Life Sciences Korea, a Korean corporation which we refer to as ELSK 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 year ended December 31, 2017 and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on April 16, 2018 (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 the 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 commercialize Endari™ (pharmaceutical grade L-glutamine oral powder), 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.

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 currently focusing on sickle cell disease (“SCD”), a genetic disorder and a significant unmet medical need. Our lead product Endari 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.

In the Phase 3, double-blind, placebo-controlled, parallel-group, multi-center clinical trial which enrolled a total of 230 adult and pediatric patients as young as five years of age, at 31 sites in the United States, Endari was administered up to 30 grams per day and demonstrated a 25% decrease in the median frequency of sickle cell crises and 33% decrease in the median number of hospitalizations, as compared to placebo. Based on an analysis, utilizing pre-specified statistical methods, the difference between groups was statistically significant; p=0.0052 and p=0.0045, respectively. Other clinically relevant endpoints showed similar results such as a 66% lower incidence of acute chest syndrome (p=0.0028), 41% less cumulative days in hospital (p=0.022) and 56% delay in onset of the first sickle cell crisis (p=0.0152). The safety data collected demonstrated a safety profile similar to that of placebo.

Endari was approved for marketing by the FDA on July 7, 2017. Endari represents the first treatment for pediatric patients with SCD, and the first new treatment in nearly 20 years for adult patients.

Endari has received Orphan Drug designation from both the FDA and the European Commission (“EC”). We intend to market Endari in the U.S. by building our own targeted sales force and to utilize strategic partnerships to market Endari in any foreign jurisdictions in which we are able to obtain marketing approval.

We have extensive experience in the field of SCD, including the development, outsourced manufacturing and conduct of clinical trials of Endari . Our Chairman of the Board and Chief Executive Officer, Yutaka Niihara, M.D., M.P.H., 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 resea rch 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 at Harbor-UCLA Medical Center (“ LA BioMed”), a nonprofit biomedical research institute.

To a lesser extent, we are also engaged in the 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 in the United 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.

In December 2016, we formed Emmaus Life Sciences Korea (“ELSK”), a wholly owned subsidiary of Emmaus Medical, whose primary focus is expanding our business in Korea.

Our corporate structure is illustrated below:

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 Medic al 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 Hol dings, 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: our success in commercializing Endari in the U.S. or elsewhere; the duration and results of the clinical trials for our other product candidates; 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 any future litigation; 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 public or private equity offerings, debt financings or corporate collaboration and licensing arrangements. As of March 31, 2018, our accumulated deficit was $104.9 million and we had cash and cash equivalents of $5.1 million. Since inception we have had minimal revenues and have been required to rely on funding from sales of equity securities and debt financings and loans, including loans from related parties. Because of the numerous risks and uncertainties associated with pharmaceutical development, we are unable to predict if or when we will become profitable through the sales of Endari.

Financial Overview

Revenue

Since January 2018, we started generating revenue through the sale of Endari as a treatment for SCD. We also generate revenue from NutreStore L-glutamine powder for oral solution as a treatment for SBS as well as AminoPure, a nutritional supplement. We currently recognize revenue for Endari based upon the script data reports by US Bioservices to patients as we do not have sufficient historical information to reliably estimate returns.

Cost of Goods Sold

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

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 regulatory approval of Endari outside of the U.S. 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 uncertaint ies 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.”

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 raw material, 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, 2018 and 2017 was from one vendor.

Results of Operations

Three months ended March 31, 2018 and 2017

Net Losses . Net losses increased by $0.4 million, or 6%, to $6.1 million from $6.5 million for the three months ended March 31, 2018 and 2017, respectively. The increase in net losses is primarily a result of a $1.2 million decrease in other expenses and a $1.4 million increase in operating expenses as discussed below. As of March 31, 2018, we had an accumulated deficit of approximately $104.9 million. Losses will continue as we transition from developmental stage to our next phase as a commercial organization. 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 increased by $0.7 million, or 627%, to $0.8 million from $0.1 million for the three months ended March 31, 2018 and 2017. We recognized revenues from Endari for $0.7 million during the first quarter, whereas revenues from our AminoPure L-glutamine nutritional supplement product and our NutreStore L-glutamine powder for oral solution for treatment of SBS stayed relatively at the same level during these periods. At March 31, 2018, we have deferred revenue of $0.6 million, which represents Endari shipped to US Bioservices, our Specialty Pharmacy and ASD Healthcare, Specialty Distributor, but not yet shipped to patients through prescriptions, net of prompt payment discounts and rebates. We expect Endari revenue and prescriptions shipped to patients to increase in 2018 as we continue the commercialization of Endari with contract sales force by Publicis Healthcare Solutions, Inc.

Cost of Goods Sold . Cost of goods sold increased by $87,000, or 179%, to $135,000 from $48,000 for the three months ended March 31, 2018 and 2017. 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, 2018 and 2017 was from one vendor. Cost of goods sold increased due to the launch of Endari sales during the first quarter of 2018.

Research and Development Expenses . Research and development expenses decreased by $0.4 million, or 46%, to $0.4 million from $0.8 million for the three months ended March 31, 2018 and 2017. This decrease was primarily due to a decrease in regulatory consulting expenses as less work was required after FDA meetings in May 2017 . We expect our research and development costs to increase in the rest of 2018 to support our post‑approval commitment, work on marketing approvals outside the U.S. and potentially future clinical trial activity.

Selling Expenses . Selling expenses increased by $0.8 million, or 756%, to $0.9 million from $0.1 million for the three months ended March 31, 2018 and 2017. Selling expenses include the distribution fees, sales force fees, promotion, travel, marketing and branding expenses for Endari. Also included is the costs for distribution, promotion, travel, tradeshows and exhibits related to NutreStore and AminoPure. The increase was primarily related to Endari as we launched the product during the current reporting period. We anticipate that our selling expenses will increase in the rest 2018 as our contract sales force will be in full effect and promote the sales of Endari.

General and Administrative Expenses. General and administrative expenses increased by $ 1.0 million, or 36% , to $ 3.8 million from $ 2.8 million for the three months ended March 31, 2018 and 2017 . General and administrative expenses include share-based compensation expenses, professional fees, office rent and payroll expenses. This increase was primarily due to an incr ease of $0.7 million of profession fees, an increase of $0.2 million in salaries expenses, an increase of $0.1 million each in taxes and license fees, medication donation expense and product testing expenses, partially offset by a decrease of $0.5 million in share-based compensation expense.

Other Income and Expense . Total other expense decreased by $1.2 million, or 43%, to $1.7 million for the three months ended March 31, 2018, compared to $2.9 million in other expense for the three months ended March 31, 2017. The decrease was primarily due to an increase in unrealized gain on investment in marketable securities of $5.5 million and a negative change in the fair value of the warrant derivative liabilities and embedded conversion option of $2.5 million, partially offset by a $3.6 million increase in interest costs as a result of increased debt and a $3.2 million loss on debt extinguishment upon early repayment of debt to GPB.

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

•

to reinforce sales and marketing team to commercialize Endari in the U.S.;

•

as a result of 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; and

•

to support research and development activities, which we expect to expand as undertake to obtain marketing approval for Endari outside the U.S. and as development of our product candidates continues.

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 $5.1 million as of March 31, 2018, we do not have sufficient operating capital for our business without raising additional capital. We had an accumulated deficit at March 31, 2018 of $104.9 million. We anticipate that we will continue to incur net losses for the foreseeable future as we incur expenses for the commercialization of Endari, research costs for corneal cell sheets using Cultured Autologous Oral Mucosal Epithelial Cell Sheet (“CAOMECS”) technology and the expansion of corporate infrastructure, including costs associated with being a public reporting company. We have previously relied on private 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, 2018, we had outstanding notes payable in an aggregate principal amount of $40.4 million, consisting of $6.5 million of non-convertible promissory notes and $33.9 million of convertible notes. Of the $40.4 million aggregate principal amount of notes outstanding as of March 31, 2018, approximately $19.5 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 Endari and the development in the United States of CAOMECS-based cell sheet technology.

As described in Note 2 to our consolidated financial statements, 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 Endari that exceed both the existing cash balances and cash expected to be generated from operations for at least the rest of the 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, the Company has 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.

In addition, our current cash burn rate for the first three months ending March 31, 2018 is approximately $0.2 million per month.

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 existing and any future litigation; and further arrangements, if any, with collaborators. Revenues from AminoPure and NutreStore products are currently not significant and we are unsure whether sales of these products will increase or sales of Endari will grow as expected. Until we can generate a sufficient amount of product revenue, future cash needs are expected to be financed through public or private 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 assu rance of the availability of such capital on terms acceptable to us (or at all).

For the three months ended March 31, 2018 and during the year ended December 31, 2017, we borrowed varying amounts pursuant to convertible notes and non-convertible promissory notes, the majority of which have been issued to our officers and stockholders. As of March 31, 2018 and December 31, 2017, the aggregate principal amounts outstanding under convertible notes and non-convertible promissory notes totaled $33.9 million and $6.5 million, respectively. The convertible notes and non-convertible promissory notes bear interest at rates ranging from 10% to 11% and, except for the 2011 convertible note listed below in the principal amount of $0.3 million, are unsecured. The net proceeds of the loans were used for working capital purposes.

The table below lists our outstanding notes payable as of March 31, 2018 and December 31, 2017 and the material terms of our outstanding borrowings:

Year Issued	Interest Rate Range	Term of Notes	Conversion Price		Principal Outstanding March 31, 2018		Discount Amount March 31, 2018		Carrying Amount March 31, 2018		Shares Underlying Notes March 31, 2018		Principal Outstanding December 31, 2017		Discount Amount December 31, 2017		Carrying Amount December 31, 2017		Shares Underlying Notes December 31, 2017
Notes payable
2013	10%	Due on demand		—	$	940,500	$	—	$	940,500		—	$	887,600	$	—	$	887,600		—
2015	10%	Due on demand		—		10,000		—		10,000		—		—		—		—		—
2016	10% - 11%	Due on demand		—		843,335		—		843,335		—		833,335		—		833,335		—
2017	11%	Due on demand		—		2,712,800		—		2,712,800		—		6,150,208		—		6,150,208		—
					$	4,506,635	$	—	$	4,506,635		—	$	7,871,143	$	—	$	7,871,143		—

		Current			$	4,506,635	$	—	$	4,506,635		—	$	7,871,143	$	—	$	7,871,143		—
		Non-current			$	—	$	—	$	—		—	$	—	$	—	$	—		—
Notes payable - related party
2015	11%	Due on demand		—		300,000		—		300,000		—		310,000		—		310,000		—
2016	10% - 11%	Due on demand		—		670,000		—		670,000		—		810,510		—		810,510		—
2017	10%	Due on demand		—		915,751		—		915,751		—		915,751		—		915,751		—
2018	11%	Due on demand		—		159,222		—		159,222		—		—		—		—		—
					$	2,044,973	$	—	$	2,044,973		—	$	2,036,261	$	—	$	2,036,261		—

		Current			$	2,044,973	$	—	$	2,044,973		—	$	2,036,261	$	—	$	2,036,261		—
		Non-current			$	—	$	—	$	—		—	$	—	$	—	$	—		—
Convertible notes payable
2011	10%	5 years	$	3.05	$	300,000	$	—	$	300,000		98,285	$	300,000	$	—	$	300,000		98,285
2014	10%	Due on demand - 2 years	$3.05 - $3.60			512,600		—		512,600		178,285		486,878		—		486,878		168,766
2016	10%	Due on demand - 2 years	$3.50 - $4.50			922,829		38,957		883,872		265,463		1,516,329		83,298		1,433,031		441,048
2017	10%	Due on demand - 2 years	$3.50 - $10.00			15,202,887		3,587,673		11,615,214		3,219,371		36,113,296		11,232,423		24,880,873		5,357,488
2018	10%	Due on demand - 2 years	$3.50 - $10.00			16,511,998		3,489,876		13,022,122		1,965,523		—
					$	33,450,314	$	7,116,506	$	26,333,808		5,726,927	$	38,416,503	$	11,315,721	$	27,100,782		6,065,587

		Current			$	12,550,522	$	3,541,922	$	9,008,600		3,393,245	$	12,860,912	$	5,835,910	$	7,025,002		3,449,984
		Non-current			$	20,899,792	$	3,574,584	$	17,325,208		2,615,603	$	25,555,591	$	5,479,811	$	20,075,780		2,615,603
Convertible notes payable - related party
2012	10%	Due on demand	$	3.30	$	200,000	$	—	$	200,000		69,616	$	200,000	$	—	$	200,000		68,122
2015	10%	2 years	$	4.50		200,000		—		200,000		55,001		200,000		—		200,000		53,905
					$	400,000	$	—	$	400,000		124,617	$	400,000	$	—	$	400,000		122,027

		Current			$	400,000	$	—	$	400,000		122,027	$	400,000	$	—	$	400,000		122,027
		Non-current			$	—	$	—	$	—		—	$	—	$	—	$	—		—
		Grand Total			$	40,401,922	$	7,116,506	$	33,285,416		5,851,544	$	48,723,907	$	11,315,721	$	37,408,186		6,187,614

Cash flows for the three months ended March 31, 2018 and March 31, 2017

Net cash used in operating activities

Net cash flows provided by (used in) operating activities increased by $2.6 million, or 131%, to negative net cash flow of $0.6 million from positive net cash flow of $2.0 million for the three months ended March 31, 2018 and 2017, respectively. This increase was primarily due to a $0.4 million decrease in net loss partially offset by a $1.5 million decrease of working capital, a $2.1 million decrease in the non-cash adjustments to net loss. The decrease in non-cash adjustments to net loss was primarily attributable to the following: a $5.5 million increase in unrealized gain on investment in marketable securities, a $2.5 million decrease for the change in the fair value of warrant derivative liabilities and embedded conversion option and a $0.3 million decrease in share-based compensation, partially offset by a $3.2 million increase for loss on debt extinguishment, a $3.0 million increase in amortization of discount of convertible notes.

Net cash used in investing activities

Net cash flows used in investing activities increased by $440,000, or 1,097%, to $480,000 from $40,000 for the three months ended March 31, 2018 and 2017, respectively. Net cash used in investing activities includes purchase of marketable securities and investment at cost as well as purchase of property and equipment.

Net cash from financing activities

Net cash flows from financing activities decreased by $16.6 million, or 5,565%, to negative cash flow of $16.3 million from $0.3 million for the three months ended March 31, 2018 and 2017, respectively, as a result of a $23.5 million increase in repayment of convertible and non-convertible promissory notes and a $7.5 million increase in repurchase of common stocks and warrants, offset by a $0.2 million increase in proceeds of issuance of common stock and a $14.2 million increase in proceeds from issuance of convertible and non-convertible promissory notes.

Off-Balance-Sheet Arrangements

We have no 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 U.S. generally accepted accounting principles (“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 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 the 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, 2018.

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 (“DCP”) 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. DCP include, without limitation, controls and procedures designed to ensure that information requir ed 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 disclosures .

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 Chief Financial Officer, of the effectiveness of our DCP (as defined in Rule 13a-15(e) of the Exchange Act). Based upon this evaluation and due to the material weaknesses in our internal control over financial reporting as of December 31, 2017 described below, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s DCP are not effective. Our management is working at remediating the material weaknesses in our internal controls over financial reporting. However, we have not yet completed a full annual accounting cycle since December 31, 2017 to fully validate the remediation of the material weaknesses in our internal controls and the effectiveness of the Company’s DCP.

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, 2018 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 DCP as of December 31, 2017. This evaluation was conducted under the supervision (and with the participation) of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our DCP were not effective as of December 31, 2017, because of the continuance of a material weakness (the “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 GAAP on certain complex transactions, as well as maintaining effective controls over the completeness and accuracy of financial reporting for complex or unusual transactions and internal communication of significant transactions.

We committed to remediating the control deficiencies that constituted the Material Weaknesses by implementing changes to our internal control over financial reporting. In 2017, we implemented measures designed to remediate the underlying causes of the control deficiencies that gave rise to the Material Weaknesses, including, without limitation:

•

engaging a third-party accounting consulting firm to assist us in the review of our application of GAAP on complex debt financing transactions;

•

use of GAAP Disclosure and SEC Reporting Checklist;

•

increased the amount of external continuing professional training and academic education on accounting subjects for accounting staff including management staff to receive professional certification as a CPA or CMA;

•

enhanced the level of the precision of review controls related to our financial close and reporting; and

•

engaging supplemental internal and external resources.

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 DCP. We are in the process of implementing measures to remediate the underlying causes of the control deficiencies that gave rise to the material weaknesses, which primarily include engaging additional and supplemental internal and external resources with the technical expertise in 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, once implemented, will remediate the control deficiencies that gave rise to the material weaknesses. As we continue to evaluate and work to remediate these control deficiencies, we may determine that additional remedial measures are required.

Part II. Other Information

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

Please refer to the risk factors disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on April 16, 2018 (the “Annual Report”).

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

On January 15, 2018, the Company issued a convertible note to a third party in the principal amount of $5,000,000 that bears interest at 10% per annum and matures on the two-year anniversary date of the note. The principal amount plus any unpaid accrued interest due under the convertible note is convertible into shares of the Company’s common stock at $10.00 per share at any time during the term of the note upon the election of the holder.

On February 1, 2018, the Company issued a convertible note to a third party in the principal amount of $4,037,000 that bears interest at 10% per annum and matures on the two-year anniversary date of the note. The principal amount plus any unpaid accrued interest due under the convertible note is convertible into shares of the Company’s common stock at $10.00 per share at any time during the term of the note upon the election of the holder.

On February 2, 2018, the Company refinanced a convertible note to a third party in the original principal amount of $171,000 with a new convertible note in the principal amount of $193,909 that bears interest at 10% per annum and matures on the one-year anniversary date of the note. The principal amount plus any unpaid accrued interest due under the convertible note is convertible into shares of Company common stock at $4.50 per share.

On February 21, 2018, the Company refinanced a convertible note payable to a third party in the original principal amount of $121,968 with a new convertible note in the principal amount of $134,165 that 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 the note upon election of the holder.

On February 23, 2018, the Company refinanced a convertible note to a third party in the original principal amount of $551,250 with a new convertible note in the principal amount of $578,813 that bears interest at 10% per annum and matures in six months with an option on the part of the holder to renew for up to 18 months. The principal amount plus any unpaid accrued interest due under the convertible note is convertible into shares of Company common stock at $3.50 per share.

On February 26, 2018, the Company issued a convertible note to a third party in the principal amount of $87,200 that bears interest at 10% per annum and matures on the two-year anniversary date of the note. The principal amount plus any unpaid accrued interest due under the convertible note is convertible into shares of the Company’s common stock at $10.00 per share at any time during the term of the note upon the election of the holder.

On March 2, 2018, the Company refinanced a convertible note payable a third party in the original principal amount of $237,192 with a new convertible note in the principal amount of $260,911 that bears interest at 10% per annum. The 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 the note upon election of the holder.

On March 5, 2018, the Company issued a convertible note to a third party in the principal amount of $150,000 that bears interest at 10% per annum and matures on the two-year anniversary date of the note. The principal amount plus any unpaid accrued interest due under the convertible note is convertible into shares of the Company’s common stock at $10.00 per share at any time during the term of the note upon the election of the holder.

On March 9, 2018, the Company issued a convertible note to a third party in the principal amount of $100,000 that bears interest at 10% per annum and matures on the two-year anniversary date of the note. The principal amount plus any unpaid accrued interest due under the convertible note is convertible into shares of the Company’s common stock at $10.00 per share at any time during the term of the note upon the election of the holder.

On March 15, 2018, the Company refinanced a convertible note payable to a third party in the original principal amount of $162,500 with a new convertible note in the principal amount of $195,000 that 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 sh ares 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 16, 2018, the Company issued a convertible note to a third party in the principal amount of $100,000 that bears interest at 10% per annum and matures on the two-year anniversary date of the note. The principal amount plus any unpaid accrued interest due under the convertible note is convertible into shares of the Company’s common stock at $10.00 per share at any time during the term of the note upon the election of the holder.

On March 19, 2018, the Company refinanced a convertible note payable to a third party in the original principal amount of $260,000 with a new convertible note in the principal amount of $312,000 that 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.

On March 21, 2018, the Company issued a convertible note to a third party in the principal amount of $5,363,000 that bears interest at 10% per annum and matures on the two-year anniversary date of the note. The principal amount plus any unpaid accrued interest due under the convertible note is convertible into shares of the Company’s common stock at $10.00 per share at any time during the term of the note upon the election of the holder.

All of the securities noted above were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), or Regulation D under the Securities Act or, in the case of refinancings and conversions, 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 or Regulation D because the issuances did not involve a “public offering.” The issuances were not a public offering based upon the following factors: (i) a limited number of securities were issued to a limited number of investors; (ii) there was no public solicitation; (iii) each investor was an “accredited investor” as such term is defined by Rule 501 under the Securities Act; and (iv) the investment intent of the investors. No broker-dealers were used in connection with such sales of unregistered securities.

The following table sets forth information with respect to the Company’s purchase of shares of the Company common stock during the three-month period ended March 31, 2018:

ISSUER PURCHASES OF EQUITY SECURITIES

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1 - 31, 2018		—		—		—		—
February 1 - 28, 2018		—		—		—		—
March 1 - 31, 2018	700,000(1)		$	5.00		—	N/A

(1)

The shares were purchased on March 29, 2018 from a single stockholder in a privately negotiated transaction. In connection with the repurchase, the Company also purchased from the stockholder warrants to purchase a total of 800,000 shares of the Company common stock. The total purchase price was $7.5 million.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits

Exhibit Number		Description of Document

4.1		Convertible Promissory Note dated January 15, 2018 issued by the registrant to Wealth Threshold Limited.

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

4.3		Convertible Promissory Note dated February 21, 2018 issued by the registrant to Sun Moo and Hyon Sil Lee.

4.4		Convertible Promissory Note dated February 23, 2018 issued by the registrant to The Shitabata Family Trust.

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

4.6		Convertible Promissory Note dated March 2, 2017 issued by the registrant to J.R. Downey.

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

4.8		Convertible Promissory Note dated February 2, 2018 issued by the registrant to Hiromi Saito.

10.1		Promissory Note dated February 10, 2018 issued by the registrant to Lan T. Tran.

10.2		Master Services Agreement, effective as of January 25, 2018, between the Company and Publicis Healthcare Solutions, Inc.

10.3		Securities Repurchase Agreement entered into on March 29, 2018 between the Company and Sarissa Capital Offshore Master Fund LP (incorporated by reference to Exhibit 10.1 to Form 8-K filed with the SEC on April 4, 2018).

10.4		Office Lease, dated February 22, 2018, by and between Emmaus Life Sciences, Inc. and VNO 100 West 33 ^rd Street LLC.

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.

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: May 15, 2018	By:	/s/ Yutaka Niihara
	Name:	Yutaka Niihara, M.D., M.P.H.
	Its:	Chief Executive Officer
		(principal executive officer and duly authorized officer)

	By:	/s/ Willis C. Lee
	Name:	Willis C. Lee
	Its:	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:

$5,000,000

Loan Date:

January 15, 2018

Currency:

U.S. Dollars

Term:

Two Years

Interest Rate:

10%

Loan Due Date:

January 15, 2020

Interest Payment Period:

Interest is accrued on a daily basis and paid every six months

Lender:

Wealth Threshold Limited

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.

2. Prepayment: This Note may not be prepaid.

3. Place of Payment: All payments including unpaid Principal Amount and any accrued interest due under this Note shall be made by wire transfer of funds to the account of Lender, 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) Conversion at the Election of the Holder : 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, plus up to all the interest accrued and unpaid thereon, into a number of shares of Common Stock determined by dividing (x) the unpaid Principal Amount plus accrued interest, if any, inserted in the conversion notice by (y) the Conversion Price Per Share. As used in this Section 4(a), “Conversion Price Per Share” means $10.00 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) below. Upon such conversion, 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 in relation only to such part of the Principal Amount which has been converted. For the avoidance of doubt, the Lender may issue any number of Notice of Conversion to the Borrower during the term of this Promissory Note.

(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 such part of the 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 by the Borrower to the Lender.

5. Default: In the event of default, which includes but not limited to failure to repay the outstanding Principal Amount and all accrued interest on maturity, failure to effect conversion after receipt of a Notice of Conversion and failure to pay accrued interest when due, the default interest rate of 17% per annum shall apply to such part of the Principal Amount which remains outstanding as at the date when the default first occurs and such default interest rate shall apply for so long as the default remains not remedied, and 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, this Note may be transferred with the Borrower’s approval, 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 Borrower 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 in terms which are similar to this Note for the Principal Amount and the loan duration. 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. 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.

14. 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 (“Guarantor”), M.D., CEO, who also agrees not to transfer his beneficial shares of [11,914,198] common stock of Emmaus Life Sciences, Inc. to another party without Lender’s consent. Without prejudice to the generality above, if the Borrower defaults in fulfilling any payment obligations under this Note, the Lender may claim against the Guarantor without having to make any claim against the Borrower first.

15. Future Funding Needs: Borrower agrees to consult with Lender for all future funding needs based on equity and convertible equity and agrees to grant the Lender the right of first refusal for any future equity or convertible equity offers. Borrower agrees that future equity or convertible equity offer shall not be lower than $10 share price. Borrower agrees to notify Lender within 3 business days for granting any outstanding stock options of 2,244,800 stock options, issue of warrants and the entering into of any arrangement/contracts for issuing potentially dilutive securities. For illusion purpose, based on the existing share structure and taking into account of potentially dilutive securities in issue as per Attachment 2,

Wealth Threshold Limited will hold C = A/B

A: 500,000 common stock upon conversion

B: 53,336,385 common stock as per Attachment 2

C: 0.9374%

Ongoing usual business transactions such as refinancing existing convertible notes and issuing stock options are excluded.

16. Board Rights: If Lender’s aggregate convertible note investment amount reaches $20 million or more, Borrower shall grant Lender one seat to the Borrower’s Board of Directors.

17. Information Rights: Borrower shall provide quarterly report such as 10-Q, the quarterly filings with SEC, to Lender on timely basis. Borrower shall respond to the Lender’s written request for information in reasonable time.

Signed Under Penalty of Perjury, this 11th day of January, 2018

Emmaus Life Sciences, Inc.

/s/Yutaka Niihara __________________________

By:

GUARANTOR

/s/Yutaka Niihara__________________________

By: Yutaka Niihara, MD

Acknowledged and accepted by Lender

/s/Wealth Threshold Limited________________

By:

ATTACHMENT 1

Details of Lender’s bank account:


Name of Beneficiary:	Wealth Threshold Limited
Address of Beneficiary:
Name of Beneficiary Bank:
Address of Beneficiary Bank:

Account Number:
SWIFT Code:

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:
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 4.2

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 on a daily basis and paid every six months

Lender:

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.

2. Prepayment: This Note may not be prepaid.

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:

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) below. Upon such conversion, and provided that the Borrower has complied fully with al l 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 in relat ion only to such part of the Principal Amount which has been converted. For the avoidance of doubt, the Lender may issue any number of Notice of Conversion to the Borrower during the term of this Promissory Note.

9. Transfer of the Note:

(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 a ny 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.

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. 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.

defaults in fulfilling any payment obligations under this Note, the Lender may claim against the Guarantor without having to make any claim against the Borrower first.

16. Board Rights: If Lender’s aggregate convertible note investment amount reaches $20 million or more, Borrower shall grant Lender one seat to the Borrower’s Board of Directors.

17. Information Rights: Borrower shall provide quarterly report such as 10-Q, the quarterly filings with SEC, to Lender on timely basis Borrower shall respond to the Lender’s written request for information in reasonable time.

Signed Under Penalty of Perjury, this _______ day of _____, ______

Emmaus Life Sciences, Inc.

_______________________________________

By:

GUARANTOR

By: Yutaka Niihara, MD

Acknowledged and accepted by Lender

_______________________________________

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.

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:
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

Profit Preview Int'l

Group, Ltd.

10.0%

02/01/2018

2 years

02/01/2020

4,037,000

Payable every six months

10.00

Profit Preview Int'l

Group, Ltd

10.0%

03/21/2018

2 years

03/21/2020

5,363,000

Payable every six months

10.00

Exhibit 4.3

EMMAUS LIFE SCIENCES, INC.

Convertible Promissory Note

(Interest)

(1 Year)

Principal Amount: $ 134,164.80 Loan Date: 2/21/2018

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.

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.

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 23 ^rd day of February , 2018

Emmaus Life Sciences, Inc.

/s/Willis C. Lee______________________

By: Willis C. Lee, COO

Acknowledged and received by:

/s/Sun Moo Lee ________________________ /s/Hyon Sil Lee _____________________

By: Lenders

ATTACHMENT 1


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

Lender’s Address:

Principal Amount: USD 134,164.80

Annual Interest at 10%

Per Annum on Principal Amount: $ 13,416.48

Maturity Date: 02/20/2019

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:
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

(6 Months)

Principal Amount:	$578,812.50	Loan Date:	02/23/2018
Currency:	US Dollar	Term:	6 Months
Interest Rate:	10%	Loan Due Date:	08/23/2018

Interest Payment Period:

Interest is accrued and paid on Loan Due Date

Conversion Price per Share:

$3.50

Lender:

The Shitabata Family Trust

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. Lender has an option to renew this Note with the same term, up to a total of two years. Simple interest at the stated Interest Rate will accrue on the outstanding Principal Amount commencing on the Loan Date of this Note.

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 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.

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.

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.

14. 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, M.D., CEO.

Signed Under Penalty of Perjury, this _ 23rd ___ day of _ February ____, _ 2018 _____

Emmaus Life Sciences, Inc.

/s/Yutaka Niihara __________________________

By:

/s/Yutaka Niihara ___________________________
By: Yutaka Niihara, M.D., MPH, Chairman and CEO

/s/ The Shitabata Family Trust _________________

By: Lender

ATTACHMENT 1

Lender’s Name: The Shitabata Family Trust

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:

Exhibit 4.5

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 on a daily basis and paid upon conversion or loan maturity

Lender: ____________________________

2. Prepayment : This Note may not be prepaid.

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:

this Section 4(a), “Conversion Price Per Share” means $10.00 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) below. Upon such conversion, 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 in relation only to such part of the Principal Amount which has been converted . For the avoidance of doubt, t he Lender may issue any number of Notice of Conversion to the Borrower during the term of this Promissory Note.

9. Transfer of the 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. 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:

Acknowledged and received by:

_______________________________________

By: Lender(s)

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.

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
JMG Capital Management LLC 401K PSP	10.0%	02/26/2018	2 years	02/26/2020	$	87,200	Paid upon loan due date	$	10.00
Anthony Chiu and Michelle Chiu	10.0%	03/05/2018	2 years	03/05/2020	$	150,000	Paid upon loan due date	$	10.00
David K and Yuen Kwan Cheung	10.0%	03/09/2018	2 years	03/09/2020	$	100,000	Paid upon loan due date	$	10.00
Tong Kam Ho & Lee Tsz Ting Brenda	10.0%	03/16/2018	2 years	03/16/2020	$	100,000	Paid upon loan due date	$	10.00

Exhibit 4.6

EMMAUS LIFE SCIENCES, INC.

Convertible Promissory Note

Principal Amount:				$260,910.97			Loan Date:		03/02/2018

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

Interest Rate:			10%				Loan Due Date:			03/01/2019

Interest Payment Period:					Interest will be paid annually

Conversion Price per Share:						$3.60

Lender:	J. R. Downey

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.

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.

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.

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 _ 2nd ___ day of _ March ____, _ 2018 _____

Emmaus Life Sciences, Inc.

/s/Yutaka Niihara ________________________

By: Yutaka Niihara, MD, CEO

/s/J.R. Downey__________________________

By: Investor

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 4.7

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.

LEGAL_CN # 5493344.15493344.2

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

LEGAL_CN # 5493344.2

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:

____________________________________

By: Investor

LEGAL_CN # 5493344.2

ATTACHMENT 1

Lender’s Name:

Lender’s Address:

Principal Amount:

Annual Interest at 10%

Per Annum on Principal Amount:

Maturity Date:

LEGAL_CN # 5493344.2

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:

LEGAL_CN # 5493344.2

[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%

03/15/2018

2 years

03/15/2020

195,000

Paid upon loan due date

3.60

Wong Shuk Ching Judy

10.0%

03/19/2018

2 years

03/19/2020

312,000

Paid upon loan due date

3.60

LEGAL_CN # 5493344.2

Exhibit 4.8

EMMAUS LIFE SCIENCES, INC.

Convertible Promissory Note

Principal Amount:	US$193,909.32	Loan Date:	02/02/2018

Currency:	U.S. Dollars	Term:	One Year

Interest Rate:	10%	Loan Due Date:	02/02/2019

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

Lender:	Hiromi Saito

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. All prepayments shall first be applied to interest, and then to principal payments.

4. Conversion:

(a) Mandatory Conversion : Upon the listing of shares of common stock of the Borrower (“Common Stock”) on the OTC market or trading on a national securities exchange (the “Qualification”), (i) the entire outstanding Principal Amount of this Note shall automatically be converted into the number of shares of Common Stock determined by dividing (x) the outstanding Principal Amount of this Note by a fixed share price of $4.50 (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 thirty days of such closing, all accrued and unpaid interest on the Note , if any, will be paid to the Holder in cash.

The Borrower shall notify the holder of this Note at least seven (7) calendar days following the Qualification. Thereafter, 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 Qualification, 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.

(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 : If the mandatory conversion is not executed, by 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.

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.

9. Transfer of the Note:

(a) Subject to Section 9(b) hereof, this 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.

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. 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	February, 2018

Emmaus Life Sciences, Inc.

/s/Yutaka Niihara___________________________

By: Yutaka Niihara, MD, MPH, Chairman and CEO

Acknowledged and accepted by Lender

/s/Hiromi Saito_____________________________

By: Hiromi Saito

ATTACHMENT 1

Lender’s Name: Hiromi Saito

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:

Exhibit 10.1

EMMAUS LIFE SCIENCES, INC.

Promissory Note

Principal Amount:	$159,222.52		Loan Date:	02/10/2018

Currency:	US Dollar		Term:	On Demand up to 2 Years

Interest Rate:	11.0%		Loan Due Date:	02/10/2020

Interest Payment Period:		Annually

Lender:	Lan T. Tran

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.

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 .

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.

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 10th day of February , 2018

Emmaus Life Sciences, Inc.

/s/Willis C. Lee _________

By: Willis C. Lee, COO

/s/Lan T. Tran__________

By: Lender

ATTACHMENT 1

Lender’s Name: Lan T. Tran

Lender’s Address:

Exhibit 10.2

MASTER SERVICES AGREEMENT

THIS MASTER SERVICES AGREEMENT (the “ Agreement ”), effective as of January 25, 2018 (the “ Effective Date ”), is by and between Emmaus Medical, Inc. with its principal place of business at 21250 Hawthorne Blvd - Suite 800, Torrance, CA 90503 (“ Client ”) and Publicis Healthcare Solutions, Inc. , with its principal place of business at 1000 Floral Vale Boulevard, Yardley, PA 19067 (“ Company ”). Client and Company are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.

WHEREAS , Company is a services provider offering field, contact center, recruiting and other related services in the pharmaceutical industry; and

WHEREAS, Client is a biopharmaceutical company engaged in the discovery, development and commercialization of innovative treatments and therapies primarily for rare and orphan disease ; and

WHEREAS , Client wishes to engage Company to provide the services as further described herein.

NOW, THEREFORE , in consideration of the premises and the mutual promises contained herein, and intending to be legally bound, the Parties hereto agree as follows:

ARTICLE I

AGREEMENT FRAMEWORK AND STRUCTURE

1.1 Purpose of the Agreement . The purpose of this Agreement is to establish an ongoing services arrangement between Client and Company for the provision of certain services in relation to Client’s Product(s), as further described herein and in Statements of Work issued between the parties from time to time, a form of which is attached as Exhibit A (each an “SOW”). Services may include, but may not be limited to, recruiting services, call center services, field services and other enhanced services as may be provided by Company from time to time (collectively the “Services”).

1.2 Execution of Statements of Work . Company shall provide Services only in accordance with an executed SOW, the terms of which shall include, at a minimum, a description of the Services to be provided, the anticipated period of performance, fees, payment terms and any other applicable terms and conditions as agreed to by the Parties.

ARTICLE II

SERVICES

2.1 Scope of Services . During the Term, Company may provide to Client, in accordance with the terms of an executed SOW, the following Services:

(a)

Direct Recruiting Services, as more fully described in Exhibit B; and

(b)

Contract Sales Organization Services, as more fully described in Exhibit C;

(c)

Capability development services, and

(d)

Ancillary services as may be negotiated between the Parties from time to time.

2.2 Services Exhibits . Exhibit B and C are hereby incorporated into and made a part of this Agreement for all purposes. Company’s performance of any Services shall be in accordance with the terms established in the applicable Exhibit and relevant SOW, all of which shall be governed by the terms and conditions set forth herein.

2.3 Use of Subcontractors or Third Party Vendors . Company may, from time to time engage Subcontractors or Third Party Vendors to perform certain functions which are integral and/or ancillary to the Services. In all such cases, the following shall apply.

2.3.1 Subcontractors . Client agrees that Company may engage Subcontractors to provide Services to Client. The term “Subcontractor” shall mean any third party engaged by Company in connection with the Services to perform work integral to the Services which would customarily be performed solely and directly by Company. Company hereby assumes responsibility for the performance of such Subcontractors as if work performed by Subcontractor were performed by Company. Company shall ensure that Subcontractors comply with the terms and conditions of this Agreement in all material respects.

2.3.2 Third Party Vendors . Client agrees that Company may engage Third Party Vendors from time to time, to be approved by Client in advance. The term “Third Party Vendor” shall mean a supplier of goods and/or services which are ancillary to or supplement the Services to be performed by Company hereunder and which Company engages on Client’s behalf but does not otherwise exercise any direct authority or control. Company shall use reasonable efforts to ensure Third Party Vendors comply with the terms and conditions of this Agreement in all material respects, provided, however, Company makes no representations or warranties with respect to such Third Party Vendors and neither Company nor Client shall be liable for the performance of the same. Company shall notify Client in advance of any costs associated with the engagement of Third Party Vendors and no such costs shall be incurred without Client’s advance written approval. Execution of an SOW shall constitute written approval for purposes of this Section 2.3.2.

ARTICLE III

RESPECTIVE OBLIGATIONS OF THE PARTIES

3.1	Obligations of Company .

3.1.1 Company shall perform the Services in accordance with all applicable laws and regulations, including without limitation, those governing the marketing of prescription drugs applicable to its obligations hereunder, including but not limited to those pertaining to fraud and abuse, anti-kickback, physician self-referrals, off label promotion, interactions with healthcare professionals (“Applicable Laws”) and Client’s codes of conduct, as provided in writing to Company.

3.1.2 Company shall perform such Services in accordance with the terms of an applicable SOW, prevailing industry professional and technical standards applicable thereto and shall employ personnel qualified with the technical skills, training, and experience needed to perform such Services.

3.1.3 Company shall not finalize or implement any Service(s) identified in an SOW until it receives written approval from Client.

3.1.4 Company shall promptly notify Client, by telephone and subsequently in written form, of any events that occur or may occur that materially interrupt or affect the performance of the Services or the completion of the Services in accordance with the time frame set forth in the SOW; provided, however, that except as otherwise set forth in Section 13.1 and for delays caused by Client or its third party designee, Company shall remain liable for performance of the Services as set forth in the SOW unless agreed otherwise in writing by Client.

3.2	Obligations of Client.

3.2.1 Client shall timely provide Company with all necessary information and materials which are required in order for Company to perform the Services, as specifically enumerated in an SOW or otherwise agreed upon in writing by the parties.

3.2.2 Client shall provide Company with reasonable access to its employees and/or facilities as necessary in order for Company to provide the Services.

3.2.3 Client shall provide timely approval prior to Company’s performance of any Services, such approval not to be unreasonably withheld or delayed. Company shall not be responsible for any Services delays that result from Client’s delay in providing approvals as contemplated herein.

3.2.4 Client shall promptly notify Company, by telephone and subsequently in written form, of any events that occur or may occur that materially interrupt or affect the performance of the Services or the completion of the Services in accordance with the time frame set forth in the SOW.

3.2.5 Client shall be responsible for the truth, accuracy, and completeness of information concerning its organization, products, services, competitors or its industry that Client furnishes to Company for use in providing the Services.

3.2.6 To the extent Client engages Company to perform Direct Recruiting Services, any individuals who are recruited by Company but hired by Client shall be deemed employees of Client (each, only once actually hired by Client, a “Client Resource”). Client shall be responsible for the management, oversight and control of such Client Resource(s), which shall include, without limitation, all responsibilities and obligations related to payment of compensation, benefits, taxes and other obligations

which are ordinarily understood to flow between employer and employee. Company is hereby released from all liability resulting from the acts or omissions of any such Client Resource occurring after such individual has been employed by Client.

ARTICLE IV

FEES AND INVOICING TERMS

4.1 Client shall pay Company the Fees for Services as set forth in an applicable SOW. Company shall submit invoices to Client in accordance with the payment schedule set forth in each applicable SOW, referencing the appropriate purchase order number (if applicable). Client shall pay all invoices within thirty (30) days from the invoice date. In addition to all other remedies Company may have, all past due payments will be subject to a late charge of 1½ % per month or such lower rate as is permitted by applicable law.

4.2 Should Client dispute any portion of an invoice, Client shall pay all undisputed amounts and provide Company written notice of the dispute within thirty (30) days of the original invoice date. The parties shall negotiate in good faith to resolve the dispute within sixty (60) days after Company’s receipt of notice thereof. Once resolved, if necessary, Company will issue a corrected invoice to Client and Client shall pay such corrected invoice within thirty (30) days of receipt of the corrected invoice.

ARTICLE V

CHANGES AND MODIFICATIONS

5.1 No changes or modifications to this Agreement shall be valid or enforceable unless agreed to in a written amendment, executed by both Parties.

5.2 Client and Company may amend certain obligations related to the Services by written addendum to an SOW. In the event any change or modification to the Services results in an increase or decrease in Fees, Company and Client shall negotiate such Fee adjustments promptly and in good faith.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

6.1 Company represents and warrants to Client that Company (i) has the power and authority to enter into and perform its obligations under this Agreement; (ii) it is subject to no restrictions that would prevent its ability to perform its obligations under this Agreement; (iii) it possesses the skills, expertise and resources required to perform the Services in a professional manner, consistent with industry standards and in compliance with all Applicable Laws and regulations; (iv) to the best of its knowledge, no officers, directors, employees or subcontractors directly performing Services hereunder is listed by any US Federal agency as being suspended, debarred, excluded or otherwise ineligible to participate in Federal procurement or non-procurement programs; and (v) shall comply with all Applicable Laws and regulations in relation to the Services provided and performing its obligations under this Agreement.

6.2 Client represents and warrants to Company that Client: (i) has the power and authority to enter into and perform its obligations under this Agreement; and (ii) is subject to no restrictions that would impair its ability to perform its obligations under this Agreement; and (iii) shall comply with all Applicable Laws in relation to the Services provided and performing its obligations under this Agreement.

ARTICLE VII

INDEMNIFICATION

7.1 Company shall indemnify, defend, and hold Client, its affiliates, agents, directors, officers, and employees (collectively, the “Client Indemnitees”) harmless from and against any and all loss, liability, claim, damage, and expense, injury or alleged injury to third parties including reasonable attorney and litigation fees (collectively, “Losses”) that Client may incur resulting from any third party claim, suit or proceeding made or brought against Client relating to the performance of its obligations hereunder and arising from Company’s (i) gross negligence or willful misconduct, and/or (ii) breach of its representations and warranties under this Agreement; provided, however, that Company shall not be obligated to indemnify Client for any Losses arising under sub-sections (i) and (ii) to the extent that such Losses result from (a) the breach of this Agreement or any SOW by Client or the gross negligence or willful misconduct of any of the Client Indemnitees; (b) a matter or matters which the Company has advised Client in writing of certain risks and Client has elected to proceed notwithstanding Company’s advice; or (c) any action or inaction by a Client Resource, including without limitation employment related matters; or (d) any actions or failures to act by Third Party Vendors. Client shall give Company prompt written notice of any indemnifiable claim hereunder; provided that Company’s obligation to indemnify shall not be excused by any delay in providing such notice unless such delay materially prejudices the defense of such claim. Company’s obligation to indemnify Client shall survive the expiration or termination of this Agreement.

7.2 Client shall indemnify, defend, and hold Company, its affiliates agents, directors, officers, and employers (collectively, the “Company Indemnitees”) harmless from and against any and all Losses Company may incur resulting from any third party claim, suit or proceeding made or brought against Company relating to the performance of its obligations hereunder and arising from: (i) Client’s gross negligence or willful misconduct, and/or (ii) a breach of its representations and warranties under this Agreement; (iii) product or other information, data or materials submitted by or on behalf of Client to Company Indemnitee, including without limitation any information, data or materials provided to Company by a third-party provider; (iv) the manufacture, sale, distribution or use of any of Client’s products or services (including, but not limited to, product liability claims, personal injury, death and claims that such manufacture, sale and/or distribution violates the rights of any third parties or that the advertising, publicity or promotion of Client’s products or services encourages or induces the violation of the rights of any third parties); (v) risks that the Company has brought to Client’s attention in writing and Client has elected in writing to proceed notwithstanding such risks; and (vi) any actions or inactions of Client Resources, including without limitation employment related matters; provided,

however, that Client shall not be obligated to indemnify Company for any Losses arising under sub-sections (i)-(v) to the extent that such Losses result from the gross negligence or willful misconduct of the Company Indemnitees. Client’s obligations under this section include payment for all expenses (including reasonable attorney’s fees and expenses) incurred by a Company Indemnitee in connection with responding to any subpoena, discovery demand or other directive having the force of law or governmental inquiry, served upon the Company Indemnitee or any of its affiliates that relates to Client, its business or its industry that arises out of any litigation, proceedings or investigations involving Client. Company shall give Client prompt written notice of any indemnifiable claim hereunder ; provided that Client’s obligation to indemnify shall not be excused by any delay in providing such notice unless such delay materially prejudices the defense of such claim . Client’s obligation to indemnify the Company Indemnitees shall survive the expiration or termination of this Agreement .

7.3 For the purposes of this Article VII, the indemnifying party shall have the right to control the defense and settlement (upon terms reasonably acceptable to the indemnitee) of any and all claims, suits or administrative proceedings to which these indemnities relate. The indemnified party shall cooperate fully in the defense of any and all such claims, suits or administrative proceedings.

7.4 NO PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, LOSS OF PROFIT, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES OF ANY KIND WHATSOEVER.

7.5 COMPANY’S LIABILITY FOR DIRECT DAMAGES SHALL BE LIMITED AS FOLLOWS: (i) CSO SERVICES: TWO TIMES (2X) TWELVE (12) MONTHS OF PROGRAM MANAGEMENT AND GENERAL & ADMINISTRATIVE FEES PAID BY CLIENT (EXCLUDING PASS THROUGH COSTS AND EXPENSES) UNDER THE APPLICABLE SOW FROM WHICH THE CLAIM AT ISSUE ARISES; (ii) DIRECT RECRUITING & CAPABILITY DEVELOPMENT SERVICES: 10% OF FEES PAID BY CLIENT UNDER THE APPLICABLE SOW FROM WHICH THE CLAIM AT ISSUE ARISES. THE FOREGOING LIMITATIONS OF LIABILITY IN THIS SECTION 7.5 SHALL NOT APPLY IN CASE OF ANY THIRD PARTY INDEMNITY CLAIMS PURSUANT TO SECTION 7.1.

ARTICLE VIII

CONFIDENTIALITY

8.1 Each party (the “Receiving Party”) shall keep in strict confidence all proprietary and confidential information (the “Confidential Information”) supplied to it by the other party (the “Disclosing Party”) and shall not disclose such Confidential Information to any third party except with the prior written approval of the Disclosing Party. The Receiving Party will not disclose any Confidential Information except to its employees, agents and affiliates on a need-to-know basis and under the same obligations of confidentiality as contained in this Agreement, and will not use any Confidential Information except for to perform its obligations hereunder. The Receiving Party agrees that any Confidential

Information disclosed to it by the Disclosing Party will remain the sole and exclusive property of the Disclosing Party and will be returned or destroyed at the request of the Disclosing Party, but in any event not later than thirty (30) days from the date of such request or on termination of this Agreement. Notwithstanding the foregoing provision, each party may retain one copy of Confidential Information in its confidential files solely for archival purposes and any Confidential Information automatically stored as part of its electronic back-up procedures, provided such Confidential Information cannot be accessed in the ordinary course of business.

8.2 The confidentiality obligation does not apply to any Confidential Information that the Receiving Party can establish by its contemporaneous written records:

(a) was publicly known, or otherwise known by the Receiving Party, prior to disclosure by the Disclosing Party;

(b) became publicly known after disclosure by the Disclosing Party without fault of the Receiving Party;

(c) was received by the Receiving Party from a third party not reasonably known to be under obligations of confidentiality with respect to the disclosure of such information; or

(d) was independently developed by the Receiving Party without the use of any Confidential Information.

8.3 In the event that the Receiving Party or anyone to whom it transmits the Confidential Information pursuant to this Agreement becomes legally required in any proceeding to disclose any of the Disclosing Party’s Confidential Information, the Receiving Party shall, to the extent permitted by law and practicable, provide the Disclosing Party with prompt notice so that the Disclosing Party may either seek a protective order or other appropriate remedy and/or waive in writing compliance with the provisions of this Agreement and the Receiving Party will cooperate with the Disclosing Party in connection with seeking any such relief. In the event that such protective order or other similar remedy is not obtained, the Receiving Party shall furnish only that portion of the Confidential Information that it is required to furnish under applicable law, as determined by counsel for the Receiving Party. The obligations of this Article VIII shall survive termination of the Agreement for a period of five (5) years.

ARTICLE IX

OWNERSHIP; INTELLECTUAL PROPERTY

9.1 Company shall make available to Client all data, information, reports, results, and writings produced on Client’s behalf and as described in an SOW (“Work Product”) upon creation. Upon payment in full for Services rendered, Company shall assign all right, title, and interest in and to Work Product which will be the sole and exclusive property of Client. Company will promptly disclose to Client any Work Product arising hereunder. Any Work

Product resulting from the Services will be deemed “works for hire” to the extent permitted by U.S. copyright law.

9.2 Notwithstanding anything to the contrary, in no event shall Client have any title or right to, and Company shall be the sole and exclusive owner of, any proprietary business information, methods, processes, techniques, procedures or software, including, without limitation documentation, .fla files, object code, protected libraries, source code and development tools used, created or developed by Company either independently or in concert with any third party prior to, during or after Company’s performance of Services hereunder; databases of information and specialized database applications, software applications, computer programming and/or coding developed by or for Company (other than any confidential, proprietary information, programs, databases or applications specifically provided by Client to Company or developed by Company which incorporates Client’s Confidential Information under a SOW, in either case for use by Company in the performance of services hereunder) (“Company Materials”); provided , however , that Company shall grant and hereby grants to Client, its successors, and assigns, the royalty-free, worldwide, paid-up, nonexclusive right and license, to the extent required by Client to use, execute, reproduce, display, and perform Company Materials which are embedded in or made an essential part of any Work Product to allow Client to exercise its full rights in such Work Product, solely as contemplated herein and in the applicable SOW.

ARTICLE X

TAXES

Any sales or use taxes or other taxes, fees, duties or levies (other than taxes on Company’s or an affiliate’s income and/or any personal property taxes) assessed in any state as a result of the Services covered by this Agreement shall be the sole responsibility of Client and Client shall indemnify and hold Company harmless for any failure of Client to pay any such taxes.

ARTICLE XI

INSURANCE

11.1 Company shall obtain and maintain during the term of this Agreement and for two (2) years thereafter, at its sole expense, insurance policies in the following minimum amounts:

Commercial General Liability Insurance

Occurrence form including premises - operations coverage, products - completed operations coverage, coverage for independent Contractors, personal injury coverage and blanket contractual liability.

Limits of Liability

General Aggregate	$2,000,000
Products - Completed Ops Aggregate	$2,000,000
Personal & Adv. Injury Aggregate	$2,000,000
Each Occurrence Limit	$1,000,000

Worker’s Compensation

Limits of Liability

Worker’s Compensation		Statutory
Employer’s Liability
	Each Accident	$500,000
	Policy Limit - Disease	$500,000
	Each Employee - Disease	$500,000

Coverage shall include all states in which operations are conducted.

Umbrella Insurance

Limits of Liability

Annual Aggregate	$1,000,000
Per Occurrence Limit	$1,000,000

Automobile Liability Policy

Limits of Liability

$1,000,000

11.2 In the event Company provides Services, as described herein or in any SOW, for any approved and marketed pharmaceutical products of Client, Client agrees to maintain full product liability insurance in respect of claims by third parties for death or personal injury arising out of the use of any such products, in an amount which shall be customary and accepted in the U.S. pharmaceutical industry.

11.3 During the term of this Agreement and for two (2) years thereafter, Company and Client shall not permit the required insurance coverage(s) to be reduced, expired, or canceled without reasonable written notice to the other party. Upon request, each party shall provide a Certificate of Insurance to the other party.

ARTICLE XII

TERM AND TERMINATION

12.1 This Agreement shall commence on the Effective Date and shall continue for a term of three (3) years.

12.2 Except as otherwise agreed in an SOW, either Client or Company shall have the right to terminate this Agreement or any SOW to which it is a party, at any time, without cause, upon ninety (90) days written notice to the other party (the “Termination Notice”). Unless otherwise expressly provided herein, any termination of this Agreement or a SOW hereunder shall be effective as of the last day of the applicable notice period or cure period (the “Termination Effective Date”). Notwithstanding the foregoing, Client, upon reasonable advance notice, reserves the right at any time to modify, cancel or stop individual Services under an SOW without terminating such SOW and, in such event, Company and Client shall work together to amend the SOW and Company will promptly take all reasonable steps necessary to carry out Client’s instructions as agreed to by the parties in such amendment. In

the case of any cancelled Services, Client shall pay Company for all Services agreed to, work performed and expenses incurred by Company or a third party in carrying out Client’s revised instructions, as well as for all pre-approved, non-cancelable commitments incurred by Company prior to the Termination Effective Date. In addition, Client shall pay for any termination fees or other penalties agreed to in an executed SOW, attached hereto.

12.3 In the event Company or Client becomes insolvent, makes an assignment for the benefit of creditors, files a petition for bankruptcy, is the subject of a petition in bankruptcy which is not dismissed within ninety (90) days from the filing thereof, becomes the subject of any receivership proceeding or admits in writing its inability to pay its debts generally as they become due, the other party may immediately terminate this Agreement by written notice of termination to the other party.

12.4 In the event either party breaches a material obligation hereunder (the “Breaching Party”), the other party (the “Non-Breaching Party”) may give the Breaching Party notice specifying in reasonable detail the breach and requesting that the breach be cured (the “Cure Notice”). If the Breaching Party fails to cure the specified breach within thirty (30) days after receipt of the Cure Notice, the Non-Breaching Party shall have the right to terminate this Agreement for cause effective upon notice to the Breaching Party (the “Termination for Cause Notice”). The Non-Breaching Party’s right to terminate this Agreement under this paragraph shall automatically expire if the Breaching Party has cured the breach prior to receipt of the Termination Notice as evidenced by written agreement by the Non-Breaching Party that the breach has been cured. The Non-Breaching Party’s right to terminate shall be in addition to any other rights and remedies it may have hereunder in law or in equity.

ARTICLE XIII

MISCELLANEOUS PROVISIONS

13.1 Force Majeure . Each Party shall be excused from the performance of its obligations (other than payment obligations) under this Agreement in the event such performance is prevented by conditions arising out of an event of Force Majeure. For purposes of this Agreement, a Force Majeure event shall mean conditions beyond the reasonable control of the party asserting existence of such conditions including acts of God, acts of nature, regulation or law of any government, war, civil commotion, terrorists, or similar events which are entirely outside of a party’s control. Each Party shall use reasonable efforts to notify the other Party as promptly as practicable under the circumstances if it anticipates any delay in performance accordingly and shall resume its obligations promptly upon cessation of the Force Majeure event at issue. Each party shall have the right to terminate this Agreement without penalty should any Force Majeure event continue, uninterrupted, for a period of sixty (60) days or more.

13.2 Notices . Any notice required or permitted to be given under this Agreement to any party shall be given by sending such notice, in writing, by certified mail, nationally recognized overnight courier or personally delivered to the addresses set forth below:

If to Client:

Emmaus Medical, Inc.

21250 Hawthorne Blvd., Suite 800

Torrance, CA 90503

Attn: Chief Financial Officer

If to Company:

Publicis Healthcare Solutions, Inc .

Attn: Chief Financial Officer

1000 Floral Vale Blvd., Ste. 400

Yardley, PA 19067

A copy of notices sent to Company shall be sent to:

Re:Sources USA, a Publicis Groupe Company

1 Penn Plaza, 5th Floor

New York, New York, 10119

Attention: Claudia N. Wernick, Assistant Deputy General Counsel

Fax: 646-839-2553

13.3 Assignment . Neither party shall assign this Agreement except with the prior written consent of the other party; provided, however, that any assignment resulting from a merger, sale of substantially all of the assets or an internal reorganization of Company shall not constitute an “assignment” for purposes of this Agreement if substantially all of the Company Personnel directly providing services to Client hereunder prior to such reorganization will continue to provide such services to Client after such reorganization. Client shall have the full right and authority to assign this Agreement without the consent of Company to any Client affiliate or to any entity that acquires substantially all of the equity or assets of Client; provided, however, that Client shall provide Company at least thirty (30) days’ prior written notice thereof.

13.4 Independent Contractor . Except with regard to the purchase of materials and services on Client’s behalf as authorized under an SOW, Company and Client are independent contractors with all the attendant rights and liabilities and, Company is not an agent of or employee of Client.

13.5 Non-Solicitation . Unless otherwise agreed by the Parties in an SOW, during the Term of this Agreement and for a period of one (1) year thereafter, neither Party shall directly or indirectly, hire or solicit for employment the employees of the other party who have performed Services under an applicable SOW without first obtaining the other Party’s written consent. Nothing in this Section 13.5 shall prevent a Party from hiring an employee of the other Party where such individual (i) contacted a party on his/her own initiative without direct or indirect solicitation or encouragement from the hiring party or (ii) otherwise responds to an independent employment advertisement to the general public.

13.6 Entire Agreement . This Agreement and the exhibits incorporated herein by reference constitute the entire agreement between the parties relating to the subject matter hereof and supersede all previous understandings and agreements. In the event of any inconsistency between the terms of this Agreement and any SOW, the terms of this Agreement shall control.

13.7 Modification . This Agreement may not be modified orally and no modification or any claimed waiver of any of the provisions hereof shall be binding unless in writing and signed by both parties hereto. An e-mail message shall not be deemed a writing for purposes of amending this Agreement.

13.8 Severability . If any part of this Agreement shall be determined to be invalid or unenforceable by a court of competent jurisdiction or by any other legally constituted body having jurisdiction to make such determination, the remainder of this Agreement shall remain in full force and effect, provided that the part of the Agreement thus invalidated or declared unenforceable is not essential to the intended purposes of this Agreement.

13.9 Waiver . No waiver of any provision or any breach of this Agreement shall constitute a waiver of any other provision or any other or further breach, and no such waiver shall be effective unless made in writing and signed by the party making such waiver.

13.10 Binding Effect . The terms of this Agreement shall be binding upon and inure to the benefit of Company, Client, and their respective successors and assigns.

13.11 Governing Law . The terms of this Agreement shall be construed and interpreted under the laws of the State of Delaware.

13.12 Dispute Resolution : In the event any dispute arises regarding the meaning or interpretation of this Agreement, the parties shall first attempt to resolve such dispute informally within fifteen (15) business days using internal escalation procedures. In the event informal resolution is not achieved within the stated time period, the parties shall have the right to (1) extend the time period for informal resolution upon mutual agreement or (2) submit such dispute to be finally settled by an arbitration panel comprising of one arbitrator appointed by Client, one arbitrator appointed by Company and a chair who shall be appointed by the other two arbitrators. Any such arbitration proceeding shall be conducted in accordance with the arbitration rules of the American Arbitration Association and shall be held in Delaware (unless otherwise agreed by the parties). The arbitration award shall be final and non-appealable and such award may be entered in any court having jurisdiction.

13.13 Equitable Remedies : Each of the parties agrees that it would be impossible or inadequate to measure and calculate a Non-Breaching party’s damages from any breach of the covenants or obligations set forth in Article VIII of this Agreement (Confidentiality). Accordingly, each Party agrees that if it breaches any of such covenants, the Non-Breaching party will be entitled to seek, in addition to any other rights or remedies available to the Non-Breaching party at law or in equity, an injunction restraining any breach or threatened breach

and to specific performance of any such provision of Article VIII. Each party agrees that no bond or other security shall be required in obtaining such equitable relief.

13.14 Survival : The terms contained in Articles IV, VII, VIII, IX, XI and XIII, and any other obligations which are expressly intended to survive shall survive the expiration or termination of this Agreement.

13.15 Authorization : Each of the parties to this Agreement warrants that it is permitted to enter into this Agreement and that the terms of this Agreement are not inconsistent with other contractual obligations that it has.

13.16 Counterparts; Facsimile Signatures : This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which taken together shall be deemed one and the same instrument. In the execution of this Agreement and delivery of signatures, facsimile or digitally scanned signatures will be treated in all respects as having the same effect as original signatures.

[signature page follows]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement, through their duly appointed and authorized officers and representatives, to be executed in duplicate as of the day and year first written above.

Emmaus Medical, Inc.						Publicis Healthcare Solutions, Inc.


By: /s/ Lan Tran						By:/s/ Mohan Ganesan

Print Name: Lan Tran						Print Name: Mohan Ganesan

Title: CAO & Co-President						Title: CFO

Date: 01/30/2018						Date: 01/29/2018

		Publicis Healthcare Solutions, Inc.


		By:/s/ Andrew Adams

		Print Name: Andrew Adams

		Title: President

		Date: 01/29/2018

Exhibit A

Form of Statement of Work

project: _______________________________

This Statement of Work #X (this “SOW#X”), effective _________ (the “SOW Effective Date”), is made and entered into pursuant to that certain Master Services Agreement dated _______, 2017 (the “Agreement”) by and between Emmaus Medical, Inc., a corporation with offices at 21250 Hawthorne Blvd - Suite 800, Torrance, CA 90503 (“Client”) and _________________, a division of Publicis Healthcare Solutions, Inc., a New Jersey corporation with offices at 1000 Floral Vale Boulevard, Suite 400, Yardley, PA 19067 (“Company”).

1.	Services. Company will render in the services set forth in the attached Schedule I: Scope of Services (“Services”). Any additional work required beyond the Services set forth Schedule I must be agreed to in writing by Client and Company.

Term and Termination. Services will commence upon the SOW Effective Date and all Services, deliverables and payments properly due hereunder will be completed by ____________ and this SOW will terminate on such date; provided, however, that either Client or Company may extend and/or terminate this SOW in accordance with the Agreement.

3.	Client Program Lead .

Client’s Program Lead for this SOW#X is:

Name:

Address:

Email:

4.	Compensation and Invoicing .

In consideration for the Services, Client agrees to pay Company the Fees set forth in Schedule II: Project Fees & Payment Schedule attached hereto. The total dollar amount payable by Client to Company under this SOW for all Fees and expenses shall not exceed the amount of ____________________________________ ($XXX,XXX USD). The Fees and expenses specified in this SOW represent the total fees and pass through expenses to be paid by Client for the Services contemplated herein. Any changes to Fees and/or expenses shall be agreed upon by the parties in a signed writing.

All Invoices shall be sent electronically via email to:

Mark Diamond

mdiamond@emmauslifeaciences.com

With a copy sent electronically via email to the Client Program Lead

ACCEPTED AND AGREED:

Emmaus Medical, Inc.					Publicis Healthcare Solutions, Inc.

By:					By:

Name:					Name:

Title:					Title:

Exhibit B

Direct Recruiting Services

The following definitions shall apply to this Exhibit B:

“Client Resource” shall mean an individual identified in the course of the Direct Recruiting Services who is engaged as an employee of Client.

“ Company Resource” shall mean an individual identified in the course of the Direct Recruiting Services who is engaged as an employee of Company.

“Direct Recruiting Services ” shall mean services to be performed by Company on Client’s behalf for purposes of identifying and hiring Client Resources or Company Resources.

“Program Management Services” shall mean project oversight to be provided by Company as outlined within each SOW.

II.

This Exhibit B describes a summary of Direct Recruiting Services only and does not guarantee that any or all of the services will be provided by Company, nor is Client obligated to engage Company for the same. Prior to the provision of any such services, the Parties will finalize an SOW which shall include, at a minimum, a full description of services as well as fees and expenses associated with each requested service. The terms of this Exhibit B shall apply to Direct Recruiting Services only.

Recruitment :

Recruitment Services may include the following:

Assist the Client with developing job description profiles, as requested and approved by Client;

ii.

Source, screen, and telephone interview qualified candidates;

iii.

Build, expand and/or backfill teams as requested by Client;

iv.

Communicate with candidates throughout the recruiting cycle;

Work collaboratively with Client hiring manager and talent acquisition from posting to offer;

vi.

Post the position identified above to job boards, as approved by Client;

Work with Client to review any confidentiality, non-solicitation and/or non-compete agreements for each candidate, if any;

vii.

Prepare offer letters for successful candidates, as requested and approved by Client;

viii.

Comply with any and all municipal, state and federal laws, rules and regulations applicable to the performance of the Services and ensure that all candidates are referred in accordance with their individual

job related qualifications, without regard to race, religion, sex, age, national origin, disability or any other protected status;

ix.

Provide coordination and scheduling of any candidates moving forward to face-to-face interviews with the Client hiring managers. Manage the disposition of candidates that were not selected, per the Standard Operating Procedure (“SOP”) process provided by Client.

Program Management Services :

Program Management Services delivered by Company may include:

Provision of a project manager/Client liaison who may:

Act as main point of contact with Client HR, Recruiting and Sales Leadership;

Field questions, identify challenges, propose solutions, updates, etc.;

Develop and present initial Client questionnaire to ensure Company has a viable plan in place to address the Client needs;

Screen and track referrals from Client employees and provide updates to Client employees on referral status. Note - all referrals must apply to the position before Company will screen ;

Provide standard reporting and create/update custom reports, as mutually agreed by Company and Client;

Identify and propose solutions to anticipated program needs and/or challenges.

ii.

Recruiter selection and management:

Company may regularly provide to the Client a report(s) containing the recruiting activities, at a frequency to be agreed upon in the applicable SOW. This report will be customized based on the opening types, etc.;

Company may assist Client in developing a plan for hiring events to be conducted.

Program Personnel :

i. Recruiter : The recruiter has the primary responsibility of interacting with candidates and conveying the “value proposition” on the opportunity. A recruiter works in partnership with the sourcers and the researchers (as described below) providing direction and feedback on the candidates to be submitted for consideration. A Recruiter is responsible for ensuring candidates are applying into Company’s Applicant Tracking System (ATS). The recruiter will also partner with Client hiring manager and communicate on an as needed basis to recruit the right candidate for each given opening.

ii. Sourcer/Admin: A sourcer/admin works in partnership with the recruiter and will work to scrub networked databases for profile candidates. Examples of these data bases would include LinkedIn, CareerBuilder, Monster, MedReps, and The Ladders. A sourcer will drive candidates to apply online, additionally they may send a short email to assess interest, they may engage in a brief phone

conversation to assess interest and drive application. A sourcer may also contact candidates via phone, email, text, Facebook or LinkedIn to assess interest and also to network other leads. The sourcer then forwards viable candidates to the recruiter.

Company Personnel : While providing Services, Company Personnel may work off-site at Company’s location, at other locations as necessary to perform the Services or, at Client’s request, on-site at Client’s location (at Client cost).

Client Obligations :

i. Provide Company with a point of contact list for all stages and tiers of recruitment;

ii. Provide Company, in writing and no later than at time of execution of this Agreement, with approval of minimum job requirements, to be included within agreed upon SOW for each position to be recruited;

iii. Provide Company with approved ad, territories, phone interview guide, outline of interview process expectations and any other tools that Client expects Company to use during the recruiting process;

iv. Provide Company, in writing, any changes that occur with the aforementioned timeline and territories;

v. If Company will be using Client’s ATS ( preferred process ); Client will provide training on Client’s applicant tracking system. If Company will be using Company’s ATS, both parties will mutually agree upon needs and additional fees, if applicable;

vi. Provide Company with reasonable access to all Client employees and personnel whose cooperation is required in order to achieve successful provision of Services;

vii. Provide Company, in writing, with Client value proposition .

Placement Fee:

Company will be entitled to a Placement Fee as described in the Fees and Payment Schedule reflected under an applicable SOW for each candidate who is hired by Client as a result of Company’s services hereunder. Additional fees may apply in the event of any voluntary withdrawal of a candidate.

Client will provide Company with a monthly activity report to include all open positions and filled positions with candidate name, territory name, and start date. This report will be used for monthly billing verification by the Company.

Additional Recruiting Services and Fees:

( 1 ) Advertisement Services : Client may request, from time to time, additional services, which may include, without limitation, use of third party job-boards, such as CareerBuilder, MedReps, Medzilla, or LinkedIn. In the event Client wishes to add these additional services, the parties shall work together in good faith to agree upon terms and fees accordingly.

(2) Enhanced Recruiting Services : Company, through services to be provided by a Third Party Vendor, may offer Enhanced Recruiting Services, which may include, without limitation, customized interview surveys and other written or oral solutions which are designed to enhance the recruiting and interviewing process and maximize efficiency. In the event Client wishes to exercise its option to obtain such Enhanced Recruiting Services, Client and Company shall separately negotiate in good faith scope and associated fees based on Client’s specified requirements.

H. Client Resources . Client acknowledges and agrees that Client Resources are not, and are not intended to be, considered or treated as, employees of Company or any of its affiliates, and that such Client Resources are not, and are not intended to be, eligible to participate in any benefit programs or in any “Employee Benefit Plans” of Company. All matters of compensation, benefits and other terms of employment for any such Client Resource shall be solely a matter between Client and such individual. Client shall be solely responsible and liable for the payment of all compensation and benefits under any such employee benefit plan for Client Resources.

Exhibit C

Contract Sales Organization Services

The following definitions shall apply to this Exhibit C:

“ Call ” or “ Called ” shall mean a face-to-face or telephonic interaction between Company Personnel and a Target, or his/her staff members, during which the Company Personnel delivers Client-specified information regarding the Products, and may offer Product Promotional Materials in accordance with applicable industry laws, regulations and guidance, with this Agreement and any related SOWs.

“ Company Personnel ” means Company provided employees, subcontractors, agents or consultants that are qualified to perform the Services as required for fulfillment of its obligations under this agreement. Detailed job descriptions will be provided within the applicable Statements of Work. For the avoidance of doubt, candidates sourced to Client under any direct recruiting Services will not be considered Personnel of Company.

“ Products ” means Client’s pharmaceutical products as stated in the applicable SOW.

“ Product Promotional Materials ” means any Client pre-approved materials that can be read and/or provided to Targets during a Call.

“ Program ” means a program of Calling on Targets to be conducted by the Company Personnel with respect to Client’s Product(s) pursuant to this Agreement.

“ Target " means healthcare professionals and his/her staff members, and others that have been specifically identified by Client, including business names and phone numbers, to be Called upon.

II.

This Exhibit C describes a summary of Contract Sales Organization Services only and does not guarantee that any or all of the services will be provided by Company, nor is Client obligated to engage Company for the same. Prior to the provision of any such services, the Parties will finalize an SOW which shall include, at a minimum, a full description of services as well as fees and expenses associated with each requested service. The terms of this Exhibit C shall apply to Contract Sales Organization Services only.

Summary :

i. With respect to each Program, Company shall engage in the Calling of Targets as provided in accordance with the applicable SOW as well as the agreed upon business rules prior to starting the Program.

ii. During the term of each Program, the parties shall be responsible for the following respective duties and obligations to the extent applicable in connection with each Program:

iii. Company will maintain the number of Personnel as provided in the applicable SOW, whose activities shall be to provide the Services for the Product(s) for that Program.

iv. Client shall make available to Company, at Client's expense, a Client Program Lead to assist and consult with Company's Program Lead regarding any questions pertaining to the Services and/or the Calling of Targets; and such Client Program Lead shall consult with such Client marketing and other personnel as needed to reply to Company’s inquiry.

Product Promotional Materials :

i. Client shall have sole responsibility for the content of all Product Promotional Materials, and all copyright and other intellectual property rights in the Product Promotional Materials shall remain vested in Client. Company shall not develop or create any promotional materials or literature in connection with the Programs or the Products.

ii. In connection with this Program, Company shall utilize only Product Promotional Materials provided by Client during the Calls. Company shall immediately cease the use of any Product Promotional Materials when instructed to do so in writing by Client. Company shall use the Product Promotional Materials only for the purposes of this Agreement. Company Personnel shall make no claims, statements or representations regarding Products other than those expressly stated in the approved Product Promotional Materials authorized by Client.

iii. Company shall neither add, delete nor modify any claims, including, but not limited to, efficacy or safety claims nor make any changes (including, but not limited to, underlining or adding notes) in the Product Promotional Materials or any Product literature. Company shall perform the Calls and other Services for the Products in accordance with all Applicable Laws and professional guidelines, including, but not limited to, any applicable provisions of the Federal Food, Drug and Cosmetic Act, the American Medical Association Gifts to Physicians from Industry Guidelines, the Prescription Drug Marketing Act (PDMA), and the Medicare-Medicaid Anti-Fraud and Abuse Amendments. Company covenants that it shall carefully monitor the activities of the Company Personnel to ensure compliance with all such laws and guidelines applicable to its obligations hereunder.

iv. If applicable, Client shall provide Product Promotional Materials to Company with respect to each Program, at Client's expense, in sufficient quantities as required for the Program. The shipment and storage of such Product Promotional Services shall be at Client's expense.

Personnel :

i. As the employer of the Personnel, Company shall have responsibility for their direction and control. Company agrees that the Personnel will cooperate

fully with Client and its management in their monitoring of the Program. Company shall have sole responsibility for disciplinary procedures or corrective actions regarding the Personnel. Company shall be responsible for initiating and implementing all actions regarding hiring, promotion, discipline, discharge, compensation, processing of grievances and monitoring of the professional appearance, demeanor and conduct of Project team. Accordingly, Client shall not issue or provide any disciplinary documents, notices or memoranda directly to a Company resource.

ii. Company shall provide management and supervisory Personnel to coordinate and support the activities of the Personnel as Company determines to be appropriate to accomplish Company's responsibilities under each Program. The number and type of Company management and supervisory Personnel may be further defined in the applicable SOW.

iii. If, at any time during the course of the Services, Client determines that any performance of the Services by the Company Personnel does not meet the mutually agreed upon responsibilities set forth herein or in the applicable SOW, Client may request Company to remove such Company Personnel from the Program and replace such individual. Company shall promptly remove any Personnel upon Client's request or as required by Company’s own policies or any applicable federal or state laws or regulations, provided that the request for removal is not based on sex, race, creed, color, national origin, or any other protected status or in violation of any law. Client’s requested removal of Personnel from a Program is subject to Company’s internal practices and procedures and applicable legal requirements. Subject to the limitations set forth in this paragraph, Company shall promptly replace such Personnel with a replacement Personnel qualified to perform the Services in accordance with the terms stated herein and in the applicable SOW.

iv. Client acknowledges and agrees that no Company Personnel are, nor are they intended to be, considered or treated as, employees of Client or any of its affiliates, and that such Company Personnel are not, and are not intended to be, eligible to participate in any benefit programs or in any “Employee Benefit Plans”. All matters of compensation, benefits and other terms of employment for any such Company Personnel shall be solely a matter between Company and such individual. Company shall be solely responsible and liable for the payment of all compensation and benefits under any such employee benefit plan for Company Personnel.

Program Design and Implementation :

i. Company and Client will jointly collaborate on the design of a strategy, which may include, but is not limited to, Program governance, meeting frequency, escalation procedures, issue resolution and roles and responsibilities of the respective parties.

ii. Company and Client will define key metrics for the Program along with any target goals. Each metric description may include the frequency of the

report, source of the data (Company/Client SFA System (as applicable) or time reporting) and the data delivery method or other specifications agreed to by the parties in an SOW.

Compliance :

i. Client requires that Company Personnel comply with all industry regulations, laws and guidance, including federal healthcare program and FDA requirements, as well as Client’s policies, procedures and training provided by or on behalf of Client.

ii. Client’s Compliance Dept. will provide relevant compliance training content and will have the right to attend training sessions and provide live training if it so chooses. Company Personnel will receive testing and certification on all policies and procedures required by Client. Company and/or Client will also provide any required training should any relevant and/or new policies and procedures be implemented.

Adverse Event Reporting (if applicable) :

i. As relates to adverse events, Company shall report any actual or suspected violations of laws, regulations, guidance, FDA requirements and/or Client policies and procedures to Client’s Compliance Department within one (1) business day of receiving information relating to the event.

ii. In addition to Client’s requisite adverse event reporting SOP, Company shall notify Client within one (1) business day of receiving information that relates, refers or pertains to the following (in association with any Client products):

•

An adverse event or experience in humans associated with any Products;

•

A technical complaint regarding any Product;

•

A report of any other problem involving any Product (e.g., contamination, discoloration, improper labeling, adulteration);

•

The initiation or threat of any claim, lawsuit or other proceeding against Client, Company or any Company Personnel which relates in any way to the Services provided herein; and/or

•

A report of noncompliance with the Adverse Event Reporting process that requires Client’s immediate attention/knowledge.

iii. Client will be responsible for supplying Company with its Pharmacovigilance reporting process/procedure for adverse event reporting. Company will be responsible for ensuring all Company Personnel are trained regarding the expectation that they comply with Client’s Pharmacovigilance and Adverse Event policies, procedures and business rules.

Exhibit 10.4

CONSENT TO SUBLEASE

VNO 100 West 33rd Street LLC , having an address c/o Vornado Office Management LLC, 888 Seventh Avenue, New York, New York 10019 (“ Landlord ”), hereby consents to the subletting by RAPLH LAUREN CORPORATION, having an address at 625 Madison Avenue, New York, NY 10022 (“ Tenant ”), to EMMAUS LIFE SCIENCES, INC., having an address at 21250 Hawthorne Blvd. Suite 800, Torrance CA 90503 (“ Subtenant ”), pursuant to a certain sublease, dated as of January 30, 2018 (the “ Sublease ”), a copy of which is annexed hereto as Exhibit “A” , of certain space (the “ Sublease Space ”), as more particularly described in the Sublease, which Sublease Space is Suite 915 located on the premises (the “ Premises ”) presently leased and demised by Landlord to Tenant pursuant to a certain lease, dated as of September 19 ^th , 2005 (as amended, the “ Lease ”). Such consent is subject to, and in reliance upon, the representations, warranties, covenants, terms and conditions contained herein. All capitalized terms contained herein shall have the meaning ascribed to them in the Lease unless otherwise indicated herein.

1. Sublease Subordinate to Lease . The Sublease shall be subject and subordinate at all times to the Lease and to all of the provisions, covenants, agreements, terms and conditions of the Lease and this Consent, and Subtenant shall not do or permit anything to be done in connection with its use and occupancy of the Sublease Space which would violate any of the provisions, covenants, agreements, terms and conditions contained in the Lease. Any breach or violation of any provision of the Lease or of this Consent by Subtenant shall be deemed to be and shall constitute a default by Tenant in fulfilling such provision of the Lease.

2. Representations and Warranties . Tenant and Subtenant each represents and warrants to Landlord that no rent or other consideration is being paid or is payable to Tenant by Subtenant for the right to use or occupy the Sublease Space or for the use, sale or rental of Tenant’s fixtures, leasehold improvements, equipment, furniture or other personal property in excess of the Rental applicable to the Sublease Space currently being paid by Tenant to Landlord pursuant to the terms of the Lease. Tenant agrees that if the rent or other consideration which is being paid or is payable to Tenant by Subtenant exceeds the Rental applicable to the Sublease Space, Tenant shall comply with Article 22 of the Lease and Tenant shall pay to Landlord fifty percent (50%) of such excess in accordance with, and subject to, the provisions of the Lease. Tenant and Subtenant each represents and warrants that the Sublease is the complete, true and correct agreement between the parties.

3. Amendment of Sublease, Waiver . Tenant and Subtenant agree that they shall not change, modify, amend, cancel or terminate the Sublease or enter into any additional agreements relating to or affecting the use or occupancy of the Sublease Space , or the use, sale or rental of Tenant’s fixtures, leasehold improvements, equipment, furniture or other personal property, without first obtaining Landlord’s prior written consent thereto. Neither this Consent, the Sublease, the Lease, nor any acceptance of rent or other consideration from Subtenant by Landlord or agent of Landlord shall operate to (i) waive, modify, impair, release or in any manner affect the liability of Tenant under the Lease, (ii) waive any breach or violation of any provision of the Lease or any rights of Landlord against any person, firm, association, corporation or other entity liable or responsible for the performance of any of the provisions, covenants, agreements, terms or conditions contained in the Lease, or (iii) enlarge or increase the obligations of Landlord or the rights of Tenant or diminish the obligations of Tenant under the Lease or otherwise; and all provisions, covenants, agreements, terms and conditions of the Lease are hereby

declared by Tenant to be in full force and effect. N o assignment of the Lease or Sublease or further subletting of all or any part of the Premises or the Sublease Space shall be made by Tenant or Subtenant without the prior written approval of Landlord pursuant to, and in accordance with, the provisions of the Lease.

4. Ratification of Sublease . Nothing contained herein shall be construed as a consent to, or approval of, or ratification by Landlord of any of the particular provisions of the Sublease (except as may be expressly provided herein) or as a representation or warranty by Landlord. Landlord has not, and shall not, review any of the provisions of the Sublease and shall not be bound or estopped in any way by the provisions of the Sublease. Tenant and Subtenant acknowledge that Landlord is consenting to the Sublease as an accommodation to Tenant and Subtenant, and that consent by Landlord herein is strictly limited to a subletting by Tenant to Subtenant. By executing and delivering this Consent, Landlord shall not be deemed to have modified or waived any of the obligations of Tenant under the Lease.

5. Remedies for Default. In the event of any default by Tenant or Subtenant in the full performance and observance of any of their respective obligations hereunder or in the event any representation or warranty of Tenant or Subtenant made herein shall prove to be false or misleading in any material respect, such event may, at the option of Landlord, be deemed a default under the Lease, and Landlord shall have the right to pursue all of the rights, powers and remedies provided for in the Lease, at law, in equity, by statute or otherwise with respect to such default.

6. Use . The Sublease Space and each part thereof shall be used by Subtenant strictly in accordance with the provisions of the Lease and for no other purpose.

7. Termination; Attornment .

(A) If at any time prior to the expiration date of the Sublease, the term of the Lease with respect to the Sublease Space shall terminate or be terminated for any reason whatsoever, the Sublease and the term thereof shall terminate on the day of such termination and Subtenant, at its sole cost and expense, shall (i) quit and surrender the Sublease Space to Landlord in such condition as required under the Lease, (ii) remove from the Sublease Space and the building which the Premises is a part of (the “ Building ”) all of the personal property and all other property and effects of Subtenant and all persons claiming through or under Subtenant, and (iii) repair all damage to the Sublease Space and the Building occasioned by such removal to the Building standard condition existing immediately prior to such damage. Except as otherwise provided in the Lease, Landlord shall have the right to retain any property and personal effects which shall remain in the Sublease Space or the Building, on the termination date of the Sublease, without any obligation or liability to Tenant or Subtenant, and to retain any net proceeds realized from the sale thereof, without waiving Landlord’s rights with respect to any default by Subtenant under the provisions of this Paragraph 7(A). If Subtenant shall fail to vacate and surrender the Sublease Space in accordance with the provisions of this Paragraph 7(A), Landlord shall be entitled to all of the rights and remedies which are available to a landlord against a tenant holding over after the expiration of a term, and any such holding over shall be deemed to be a default under the Lease. Subtenant expressly waives for itself and for any person claiming through or under Subtenant, any rights which Subtenant or any such person may have under the provisions of Section 2201 of the New York Civil Practice Law and Rules and of any successor law of like import then in force, in connection with any holdover summary proceedings which Landlord may institute to enforce the foregoing. The obligations of Subtenant under

this Paragraph 7(A) shall survive the expiration or earlier termination of the terms of the Lease or Sublease.

(B) Landlord shall have the right to elect, upon written notice to Tenant and Subtenant, on, or before, or within five (5) days after, the date of termination of the term of the Lease with respect to the Sublease Space, and without any additional or further agreement of any kind on the part of the Tenant or Subtenant, to require Subtenant to attorn to Landlord and to continue the Sublease with the same force and effect as if Landlord, as lessor, and Subtenant, as lessee, had entered into a lease as of such effective date, for a term equal to the then unexpired term of the Sublease and containing the same provisions as those contained in the Sublease. In the event of such election by Landlord, (i) Subtenant agrees to so attorn to Landlord, and Landlord and Subtenant shall have the same rights, obligations, and remedies as Tenant and Subtenant had, respectively, under the Sublease prior to such effective date and the Sublease shall be deemed to be a direct lease between Landlord and Subtenant, except that in no event shall Landlord be (a) liable for any act or omission by Tenant, (b) subject to any counterclaims, offsets or defenses which Subtenant had or might have against Tenant, (c) bound by any rent or additional rent or other payment paid by Subtenant to Tenant in advance for a period in excess of thirty (30) days, (d) bound by any covenant to undertake or complete any work to the Sublease Space or any part thereof, (e) bound by any previous modifications of the Sublease made without Landlord’s prior written request, or (f) bound by any obligation to make any payment to Subtenant; (ii) Tenant shall deliver to Landlord any security deposit which Tenant is then holding under the Sublease; and (iii) Subtenant shall reimburse Landlord for any costs that may be incurred by Landlord in connection with such attornment, including, without limitation, reasonable legal fees and disbursements incurred in connection with any such attornment. The provisions of this Paragraph 7(B) shall apply notwithstanding that, as a matter of law, the Sublease shall terminate upon the expiration, termination or surrender of the Lease and shall be self-operative upon any such election by Landlord to require attornment. Subtenant, upon demand by Landlord, shall execute and deliver such instrument or instruments as Landlord may reasonably request to evidence and confirm the provisions of this Paragraph 7(B). If Landlord elects to exercise its option under this Paragraph 7(B), then the provisions of Paragraph 7(A) shall be of no force or effect.

8. Indemnity . (A) Subtenant hereby indemnifies and holds harmless Landlord from and against (a) all claims of whatever nature against Landlord arising from any act, omission or negligence of Subtenant, its contractors, licensees, agents, servants, employees or occupants, (b) all claims against Landlord arising from any accident, injury or damage whatsoever caused to any person or to the property of any person and occurring during the term in the Sublease Space, (c) all claims against Landlord arising from any accident, injury or damage occurring outside of the Sublease Space but anywhere within or about the Building, where such accident, injury or damage results or is claimed to have resulted from an act, omission or negligence of Subtenant or Subtenant’s licensees, agents, servants, employees or occupants, (d) any breach, violation or non-performance of any covenant, condition or agreement in the Sublease set forth and contained on the part of Subtenant to be fulfilled, kept, observed and performed, and (e) any cost, liability or responsibility for the payment of any sales tax with respect to any installations, furniture, furnishings, fixtures or other improvements located, installed or constructed in the Sublease Space, or the filing of any tax return in connection therewith (although Landlord agrees to execute any such return if required by law) regardless of whether such tax is imposed upon Landlord, Tenant or Subtenant.

(B) Tenant shall indemnify and save Landlord harmless from and against any liability or expense a rising from the use or occupation of the Premises by Tenant, Subtenant or anyone else on the Premises with Tenant’s permission or from any breach of the Lease, except in the

event such liability or expense results from the negligence or willful misconduct of Landlord, its agents or employees.

(C) The foregoing indemnities and hold harmless agreements shall include indemnity from and against any and all liability, fines, suits, demands, costs and expenses of any kind or nature (including, without limitation, reasonable attorneys’ fees and disbursements) incurred in or in connection with any such claim or proceeding brought thereon, and the defense thereof. Neither Tenant nor Subtenant shall be liable to Landlord under these indemnities to the extent of any insurance proceeds collectible under policies owned by (or otherwise insuring) Landlord with respect to such damage or injury provided that nothing contained herein shall be deemed a release of Tenant or Subtenant of any liability it would otherwise have to Landlord by reason of such damage or injury in absence of this indemnity. In case any action or proceeding is brought against Landlord by reason of any such claim, Subtenant, upon written notice from Landlord, shall, at Tenant’s or Subtenant’s sole cost and expense, as the case may be, resist or defend such action or proceeding using counsel approved by Landlord, which approval shall not be unreasonably withheld or delayed. Counsel for the insurers of Subtenant shall hereby be deemed approved for purposes of this Paragraph 8. The provisions of this paragraph shall survive the expiration or earlier termination of the term of the Sublease and this Consent. The indemnity and any rights granted to Landlord pursuant to this paragraph shall be in addition to, and not in limitation of, any of Landlord’s rights under the Lease.

9. Conflict . If there shall be any conflict or inconsistency between the terms, covenants and conditions of this Consent or the Lease and the terms, covenants and conditions of the Sublease, then the terms, covenants and conditions of this Consent or the Lease, as the case may be, shall prevail. In the event that there shall be any conflict or inconsistency between this Consent and the Lease, such conflict or inconsistency shall be determined in favor of Landlord.

10. Notices . Any bills, statements, notices, demands, requests, consents or other communications given or required to be given under this Consent shall be effective only if rendered or given in writing and (i) delivered personally (against a signed receipt), (ii) sent by mail (registered or certified, return receipt requested), or (iii) sent by a nationally recognized overnight courier; delivered to the respective party at the address hereinabove set forth or at such other address for such purpose by notice in accordance with the provisions hereof; or, if addressed to Tenant or Subtenant, at the Building. Any such bills, statements, notices, demands, requests, consents or other communications shall be deemed to have been rendered or given (x) on the date delivered, if delivered personally, or (y) three (3) business days after the date mailed, if mailed, or (z) on the first (1 ^st ) business day after the date sent by a nationally recognized overnight courier, if sent by a nationally recognized overnight courier.

11. Entire Agreement . This Consent contains the entire agreement of the parties with respect to the matters contained herein and may not be modified or amended except by written instrument signed by the parties sought to be bound. Tenant and Subtenant each acknowledges and represents that, other than this Consent, the Lease and the Sublease, there are no other agreements, oral or otherwise, or representations or warranties of any kind or nature referring or relating to, or in connection with, the Lease and the Sublease or the use and occupancy of the Premises, the Sublease Space or any other portion of the Building.

12. Governing Law . This Consent shall for all purposes be construed in accordance with, and governed by, the laws of the State of New York.

13. Brokerage . Tenant and Subtenant each represents and warrants to Landlord that it has not dealt with any broker in connection with the Sublease or this Consent other than Miyad Realty and Savills Studley (collectively, th e “Broker”) and that no broker negotiated the Sublease or is entitled to any commission in connection therewith other than the Broker, and the execution and delivery of this Consent by Landlord shall be conclusive evidence that Landlord has relied upon the foregoing representation and warranty of Tenant and Subtenant. Tenant shall indemnify and hold Landlord harmless from and against any and all claims for commission, fee or other compensation by any person who shall claim to have dealt with Tenant in conn ection with the Sublease or this Consent, including, without limitation, the Broker, and for any and all costs incurred by Landlord in connection with such claims, including, without limitation, reasonable attorneys’ fees and disbursements. Tenant shall, at its sole cost and expense, defend any such claim with counsel approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed, and Tenant shall settle any such claim at its sole cost and expense. Subtenant shall indemnif y and hold Landlord harmless from and against any and all claims for commission, fee or other compensation by any person who shall claim to have dealt with Subtenant in connection with the Sublease and this Consent other than the Broker, and for any and al l costs incurred by Landlord in connection with such claims, including, without limitation, reasonable attorneys’ fees and disbursements. Subtenant shall, at its sole cost and expense, defend any such claim with counsel approved by Landlord, which approva l shall not be unreasonably withheld, conditioned or delayed, and Subtenant shall settle any such claim at its sole cost and expense. The provisions of this Paragraph 13 shall survive the earlier termination or expiration of the Lease, Sublease or this Co nsent.

14. Miscellaneous .

(A) Each right and remedy of Landlord provided for in this Consent or in the Lease shall be cumulative and shall be in addition to every other right and remedy provided for herein and therein or now or hereafter existing at law, i n equity, by statute or otherwise, and the exercise by Landlord of any one or more of the rights or remedies so provided for or existing shall not preclude the simultaneous or subsequent exercise by Landlord of any or all other rights or remedies so provided for or so existing.

(B) Neither the members, managers, partners, shareholders, directors, officers or principals, direct and indirect, of Landlord (such direct or indirect members, managers, partners, shareholders, directors, officers, or principals being referred to herein collectively as the “ Parties ”) shall be liable for the performance of the obligations of Landlord under this Consent, nor shall the Parties be liable for the performance of the obligations of Landlord under the Sublease pursuant to any attornment by Subtenant to Landlord. Tenant and Subtenant, as the case may be, shall look solely to Landlord to enforce the obligations of Landlord hereunder and thereunder and shall not seek any damages against any of the Parties. The liability of Landlord for the obligations of Landlord under this Consent and/or the Sublease pursuant to any attornment shall be limited to the interest of Landlord in the Building and the land on which the Building is constructed (the “ Real Property ”), and Tenant and Subtenant shall not look to any other property or assets of Landlord or the property or assets of any of the Parties in seeking either to enforce the obligations of Landlord under the Sublease pursuant to any such attornment or to satisfy a judgment for the failure to perform such obligations. If, subsequent to an attornment by Subtenant to Landlord, Landlord shall sell, convey, assign or transfer (or any subsequent landlord shall sell, convey, assign or transfer) its interest in the Building or the Real Property, as the case may be, Landlord shall be and hereby is entirely freed and relieved of all covenants and obligations of Landlord hereunder, and under the Sublease pursuant to any attornment, from and after the date of such sale, conveyance, assignment or transfer.

(C) The terms and provisions of this Consent shall bind and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that no violation of the provisions of Paragraph 3 hereof shall operate to vest any rights in any successor or assignee of Tenant or Subtenant.

(D) If any one or more of the provisions contained in this Consent shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining p rovisions contained herein shall not in any way be affected or impaired thereby.

(E) The captions contained in this Consent are for convenience only and shall in no way define, limit or extend the scope or intent of this Consent, nor shall such captions af fect the construction hereof.

(F) This Consent may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.

(G) Landlord, Tenant and Subtenant each represents and warrants to the other that each has full right, power and authority to enter into this Consent and that the person or persons executing this Consent on behalf of Landlord, Tenant or Subtenant, as the case may be, are duly authorized to do so.

(H) It is expressly un derstood and agreed that this Consent shall not create or constitute, nor shall it be deemed to create or constitute, any landlord-tenant relationship, or occupancy or license agreement between Landlord and Subtenant.

(I) This Consent is offered for signa ture by Tenant and Subtenant and it is understood that this Consent shall not be binding upon Landlord unless and until (i) a fully executed counterpart of the Sublease shall be delivered to Landlord by both Tenant and Subtenant, and (ii) Landlord shall have executed and delivered a copy of this Consent to both Tenant and Subtenant.

(J) Unless otherwise expressly provided in the Lease, Tenant shall pay to Landlord within thirty (30) days after the demand by Landlord for any reasonable costs, including, with out limitation, reasonable attorneys’ fees and disbursements, incurred by Landlord in connection with the Sublease and this Consent.

(K) Notwithstanding anything to the contrary contained in the Sublease, Subtenant shall obtain such insurance in such form and such amounts as Tenant is required to maintain pursuant to Article 13 of the Lease and Subtenant hereby agrees to name the Landlord Indemnitees as additional insureds on such insurance as required by Article 27 of the Lease and to provide Landlord with evidence thereof prior to the commencement of the Sublease term.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE TO FOLLOW]

IN WITNESS WHEREOF, Landlord, Tenant and Subtenant have respectively executed this Consent as of the 23 day of February , 2018.

VNO 100 West 33rd Street LLC , Landlord

By:	Vornado Shenandoah Holdings II LLC, as managing member

	By:	Vornado Realty L.P., its member (or manager – both are correct)

		By:	Vornado Realty Trust, its general partner

By:	/s/ David R. Greenbaum

	David R. Greenbaum

	President – New York Division

____________________________________

RALPH LAUREN CORPORATION, Tenant

By: /s/ Jane Nielsen

Name: Jane Nielsen

Title: Chief Financial Officer

____________________________________

EMMAUS LIFE SCIENCES, INC., Subtenant

By: /s/Yutaka Niihara

Name: Yutaka Niihara

Title: Chief Executive Officer

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 s tatements 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 condit ion, 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 def ined 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 d isclosure 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 reliabili ty 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 ov er 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 re gistrant’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 financia l reporting.

Date: May 15, 2018

/s/ Yutaka Niihara
Yutaka Niihara, M.D., M.P.H.
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, Willis C. Lee, 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, resu lts 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 E xchange 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 fin ancial 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 rep ort 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 financ ial 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 regi strant’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 reporti ng.

Date: May 15, 2018

/s/ Willis C. Lee
Willis C. Lee
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, 2018, 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., M.P.H.
Chief Executive Officer
(Principal Executive Officer)
May 15, 2018

/s/ Willis C. Lee
Willis C. Lee
Chief Financial Officer
(Principal Financial and Accounting Officer)
May 15, 2018