[10-Q] Emmaus Life Sciences, Inc. Quarterly Earnings Report
Emmaus Life Sciences filed its Q3 2025 10-Q, highlighting a sharp revenue decline and liquidity strain alongside a going concern warning. Q3 revenue was $3.38 million versus $5.48 million a year ago, and the company posted a net loss of $2.08 million versus net income of $1.83 million in Q3 2024. Operating profit of $0.70 million was outweighed by other expense of $2.19 million, driven mainly by interest expense of $1.93 million.
For the nine months, revenue was $8.60 million versus $13.36 million. Cash was $0.29 million with current liabilities of $64.17 million, and total liabilities of $80.24 million against assets of $20.76 million, resulting in a stockholders’ deficit of $59.49 million. Management states there is substantial doubt about continuing as a going concern without restructuring debt and raising additional financing. The company also recorded a $0.53 million realized loss year‑to‑date on its Telcon convertible bond.
- None.
- Going concern warning: management cites substantial doubt due to $64.17M current liabilities vs $0.29M cash and a $59.49M stockholders’ deficit.
Insights
Severe liquidity pressure with going concern warning.
Emmaus ended Q3 with
Management explicitly states “substantial doubt” about continuing as a going concern absent debt restructuring and new financing. Convertible and other notes are significant, including
Key items to track include any announced restructuring or financing in subsequent filings and changes in working capital metrics tied to operations and obligations.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
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.:
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
None |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
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 |
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Accelerated filer |
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Emerging growth company |
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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
EMMAUS LIFE SCIENCES, INC.
For the Quarterly Period Ended September 30, 2025
TABLE OF CONTENTS
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Part I. Financial Information |
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Item 1. |
Financial Statements (Unaudited) |
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(a) Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 |
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(b) Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2025 and 2024 |
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(c) Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three and nine months ended September 30, 2025 and 2024 |
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(d) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 |
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(e) Notes to Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
25 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
28 |
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Item 4. |
Controls and Procedures |
28 |
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Part II Other Information |
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Item 1. |
Legal Proceedings |
30 |
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Item 1A. |
Risk Factors |
30 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
30 |
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Item 3. |
Defaults Upon Senior Securities |
30 |
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Item 4. |
Mine Safety Disclosures |
30 |
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Item 5. |
Other Information |
30 |
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Item 6. |
Exhibits |
31 |
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Signatures |
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Item 1. Financial Statements
EMMAUS LIFE SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
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As of |
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September 30, 2025 |
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December 31, 2024 |
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ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right of use assets |
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Investment in convertible bond |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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CURRENT LIABILITIES |
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Accounts payable and accrued expenses |
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$ |
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$ |
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Operating lease liabilities, current portion |
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Conversion feature derivative, notes payable |
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— |
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Other current liabilities |
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Warrant derivative liabilities |
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Notes payable, current portion, net of discount |
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Notes payable to related parties |
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Convertible notes payable, net of discount |
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Total current liabilities |
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Operating lease liabilities, less current portion |
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Other long-term liabilities |
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Notes payable to related parties, net of discount |
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Total liabilities |
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Commitments and contingent liabilities (Note 11) |
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STOCKHOLDERS’ DEFICIT |
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Preferred stock, par value $ |
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— |
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Common stock, par value $ |
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Additional paid-in capital |
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Net loan receivable from EJ Holdings |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
EMMAUS LIFE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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REVENUES, NET |
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$ |
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$ |
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$ |
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$ |
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COST OF GOODS SOLD |
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GROSS PROFIT |
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OPERATING EXPENSES |
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Research and development |
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Selling |
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General and administrative |
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Total operating expenses |
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INCOME (LOSS) FROM OPERATIONS |
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OTHER INCOME (EXPENSE) |
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Loss on debt extinguishment |
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— |
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Change in fair value of warrant derivative liabilities |
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Change in fair value of conversion feature derivative, notes payable |
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— |
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Realized loss on investment in convertible bond |
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— |
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— |
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( |
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Gain on restructured debt |
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— |
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— |
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— |
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Gain on lease modification |
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— |
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— |
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— |
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Foreign exchange loss |
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( |
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Interest and other income (net) |
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Interest expense |
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Total other income (expense) |
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( |
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INCOME (LOSS) BEFORE INCOME TAXES |
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( |
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( |
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Income tax provision (benefit) |
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( |
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NET INCOME (LOSS) |
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COMPONENTS OF OTHER COMPREHENSIVE LOSS |
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Unrealized gain (loss) on debt securities available for sale (net of tax) |
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Reclassification adjustment for loss included in net income (loss) |
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Foreign currency translation adjustments |
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( |
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Other comprehensive income (loss) |
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( |
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( |
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COMPREHENSIVE INCOME (LOSS) |
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$ |
( |
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$ |
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$ |
( |
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$ |
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NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED |
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$ |
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$ |
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$ |
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$ |
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WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
EMMAUS LIFE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(In thousands, except share amounts)
(Unaudited)
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Common stock |
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Additional paid-in |
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Loan receivable from |
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Accumulated other comprehensive |
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Accumulated |
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Total stockholders' |
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Shares |
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Amount |
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capital |
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EJ Holdings |
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loss |
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deficit |
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deficit |
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Balance, January 1, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Unrealized gain on debt securities available for sale (net of tax) |
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— |
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— |
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— |
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— |
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Foreign currency translation effect |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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Balance, March 31, 2025 |
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Share-based compensation |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Unrealized gain on debt securities available for sale (net of tax) |
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— |
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— |
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— |
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— |
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— |
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Reclassification of realized loss on investment in convertible bond included in net loss |
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— |
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— |
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— |
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Foreign currency translation effect |
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— |
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— |
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— |
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( |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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Balance, June 30, 2025 |
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Share-based compensation |
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— |
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— |
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Unrealized gain on debt securities available for sale (net of tax) |
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— |
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— |
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— |
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— |
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( |
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Foreign currency translation effect |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance, September 30, 2025 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
( |
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3
EMMAUS LIFE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(In thousands, except share amounts)
(Unaudited)
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Common stock |
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Additional paid-in |
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Loan receivable from |
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Accumulated other comprehensive |
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Accumulated |
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Total stockholders' |
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Shares |
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Amount |
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capital |
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EJ Holdings |
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income (loss) |
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deficit |
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deficit |
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Balance, January 1, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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Unrealized loss on debt securities available for sale (net of tax) |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Foreign currency translation effect |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance, March 31, 2024 |
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( |
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( |
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( |
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Convertible notes converted to shares |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Unrealized loss on debt securities available for sale (net of tax) |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Reclassification of realized loss on investment in convertible bond included in net loss |
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— |
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— |
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— |
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— |
|
|
|
|
|
|
— |
|
|
|
|
||
Foreign currency translation effect |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|||
Share-based compensation |
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Unrealized gain on debt securities available for sale (net of tax) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Foreign currency translation effect |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balance, September 30, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
EMMAUS LIFE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash flows used in operating activities |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Inventory reserve |
|
|
|
|
|
|
||
Amortization of discount of notes payable and convertible notes payable |
|
|
|
|
|
|
||
Foreign exchange adjustments |
|
|
|
|
|
|
||
Tax benefit recognized on unrealized gain on debt securities |
|
|
( |
) |
|
|
— |
|
Realized loss on investment in convertible bond |
|
|
|
|
|
|
||
Loss on debt extinguishment |
|
|
|
|
|
— |
|
|
Gain on restructured debt |
|
|
— |
|
|
|
( |
) |
Loss on disposal of property and equipment |
|
|
— |
|
|
|
( |
) |
Loss on leased assets |
|
|
|
|
|
|
||
Gain on lease modification |
|
|
( |
) |
|
|
— |
|
Share-based compensation |
|
|
|
|
|
|
||
Change in fair value of warrant derivative liabilities |
|
|
|
|
|
( |
) |
|
Change in fair value of conversion feature derivative, notes payable |
|
|
( |
) |
|
|
|
|
Net changes in operating assets and liabilities |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Other non-current assets |
|
|
|
|
|
|
||
Accounts payable and accrued expenses |
|
|
|
|
|
|
||
Other current liabilities |
|
|
( |
) |
|
|
( |
) |
Other long-term liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash flows used in operating activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Proceeds from sale of convertible bond |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash flows provided by investing activities |
|
|
|
|
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Proceeds from notes payable issued |
|
|
|
|
|
|
||
Payments of notes payable |
|
|
( |
) |
|
|
( |
) |
Payments of notes payable, related party |
|
|
( |
) |
|
|
( |
) |
Payments of convertible notes |
|
|
( |
) |
|
|
( |
) |
Net cash flows used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash |
|
|
|
|
|
( |
) |
|
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of year |
|
|
|
|
|
|
||
Cash and cash equivalents, end of year |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES |
|
|
|
|
|
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
Income taxes paid |
|
$ |
|
|
$ |
|
||
NON-CASH INVESING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Conversion of convertible note payable and accrued interest to common stock |
|
$ |
— |
|
|
$ |
|
|
Equipment purchased but included in accounts payable |
|
$ |
|
|
$ |
— |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
EMMAUS LIFE SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated interim financial statements of Emmaus Life Sciences, Inc., (“Emmaus”) and its direct and indirect consolidated subsidiaries (collectively, “we,” “our,” “us” or the “Company”) 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. All significant intercompany transactions have been eliminated. The Company’s unaudited condensed consolidated interim financial statements contain adjustments, including normal recurring accruals necessary to fairly state the Company’s consolidated financial position, results of operations and cash flows. The condensed consolidated interim financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on April 14, 2025. The accompanying condensed consolidated balance sheet at December 31, 2024 has been derived from the audited consolidated balance sheet at December 31, 2024 contained in the Annual Report. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the full year or any future interim period.
Nature of Operations
The Company is a commercial-stage biopharmaceutical company engaged in the discovery, development, marketing and sales of innovative treatments and therapies, primarily for rare and orphan diseases. The Company’s only product, Endari® (prescription grade L-glutamine oral powder), is approved by the U.S. Food and Drug Administration, or FDA, and in certain jurisdictions in the Middle East North Africa, or MENA, region to reduce the acute complications of sickle cell disease (“SCD”) in adult and pediatric patients five years of age and older.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” in the Annual Report. There have been no material changes in these policies or their application.
Going concern— The accompanying unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. The Company incurred a net loss of $
Principles of consolidation—The consolidated financial statements include the accounts of the Company and EMI Holding, Inc. subsidiary and EMI Holding’s wholly‑owned subsidiary, Emmaus Medical Inc., and Emmaus Medical, Inc’s wholly‑owned subsidiaries. All significant intercompany transactions have been eliminated.
Estimates—Financial statements prepared in accordance with GAAP require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include those relating to revenue recognition on product sales, the variables used to calculate the valuation of investment in convertible bond, conversion features, stock options and warrants, and estimated accruals on an ongoing basis. The Company bases its estimates on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions or conditions. To the extent there are material differences between these estimates and actual results, the Company’s financial statements will be affected.
6
Revenue recognition— The Company realizes net revenues primarily from sales of Endari® to distributors and specialty pharmacy providers. Distributors resell Endari® to other pharmacy and specialty pharmacy providers, health care providers, hospitals, and clinics. In addition to agreements with these distributors, the Company has contractual arrangements with specialty pharmacy providers, in-office dispensing providers, physician group purchasing organizations, pharmacy benefits managers and government entities that provide for government-mandated or privately negotiated rebates, chargebacks and discounts with respect to the purchase of Endari®. These various discounts, rebates, and chargebacks are referred to as “variable consideration.” Revenue from product sales is recorded net of variable consideration.
Under ASC 606 Revenue from Contracts with Customers, the Company recognizes revenue when its customers obtain control of the Company's product, which typically occurs on delivery. Revenue is recognized in an amount that reflects the consideration that the Company expects to receive in exchange for the product, or transaction price. To determine revenue recognition for contracts with customers within the scope of ASC 606, the Company performs the following 5 steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the Company’s performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies the relevant performance obligations.
Revenue from product sales is recorded at the transaction price, net of estimates for variable consideration consisting of sales discounts, returns, government rebates, chargebacks and commercial discounts. Variable consideration is estimated using the expected-value amount method, which is the sum of probability-weighted amounts in a range of possible transaction prices. Actual variable consideration may differ from the Company's estimates. If actual results vary from the Company's estimates, the Company adjusts the variable consideration in the period such variances become known, which would affect net revenues in that period. The following are our significant categories of variable consideration:
Sales Discounts: The Company provides its customers prompt payment discounts and from time to time offers additional discounts for bulk orders that are recorded as a reduction of revenues in the period the revenues are recognized.
Product Returns: The Company offers distributors the right to return product purchased principally based upon (i) overstocks, (ii) inactive product or non-moving product due to market conditions, and (iii) expired products. Product return allowances are estimated and recorded at the time of sale.
Government Rebates: The Company is subject to discount obligations under state Medicaid programs and the Medicare Part D prescription drug coverage gap program. Management estimates Medicaid and Medicare Part D prescription drug coverage gap rebates based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the period in which the related revenues are recognized, resulting in a reduction of product revenues and the establishment of a current liability that is included as an accounts payable and accrued expenses in the consolidated balance sheets. The liability for these rebates consists primarily of estimates of claims expected to be received in future periods related to recognized revenues.
Chargebacks and Discounts: Chargebacks for fees and discounts represent the estimated obligations resulting from contractual commitments to sell products to certain specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities at prices lower than the list prices charged to distributors. The distributors charge the Company for the difference between what they pay for the products and the Company’s contracted selling price to these specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities. In addition, the Company has contractual agreements with pharmacy benefit managers who charge us for rebates and administrative fee in connection with the utilization of product. These reserves are established in the same period that the related revenues are recognized, resulting in a reduction of revenues. Chargeback amounts are generally determined at the time of resale of products by the distributors.
Accounts receivable— Accounts receivables are primarily attributable to product sales to distributors and other customers. Each reporting period, the Company evaluates the collectability of outstanding receivable balances and records an allowance for credit loss based on an estimate of current expected credit loss. The estimate is based on historical experience, customer creditworthiness, facts and circumstance specific to outstanding balances and payment terms. Provisions are made based upon a specific review of all significant outstanding invoices and the quality and age of those invoices. As of September 30, 2025 and December 31, 2024, the Company recorded
Inventories—Inventories consist of raw materials, finished goods and work-in-process and are valued on a first‑in, first‑out basis at the lesser of cost or net realizable value. Work‑in‑process inventories consist of L‑glutamine for the Company’s products that has not yet been packaged and labeled for sale. Inventories are stated at the lower of cost or net realizable value. The Company periodically reviews its inventory and provides for potential obsolescence based on its assessment of market conditions and anticipated demand. Substantially all raw materials purchase during the nine months ended September 30, 2025 and the year ended
7
December 31, 2024 were supplied, directly or indirectly by
Share‑based compensation—The Company recognizes compensation cost for share‑based compensation awards during the service term of the recipients of the share‑based awards. The fair value of share‑based compensation is calculated using the Black‑Scholes‑Merton pricing model. The Black‑Scholes‑Merton model requires subjective assumptions regarding future stock price volatility and expected time to exercise, which greatly affect the calculated values. The expected term of awards granted is calculated using the simplified method. The risk‑free rate selected to value any grant is based on the U.S. Treasury rate on the grant date that corresponds to the expected term of the award.
Investment in convertible bond – The Company has measured its investment in convertible bond at fair value. The convertible bond is classified as available for sale and the changes in fair value are reported in other comprehensive loss for each reporting period.
Financial instruments—Financial instruments included in the financial statements are comprised of cash and cash equivalents, investment in convertible bond, accounts receivable, warrant derivative liabilities, accounts payable, certain accrued liabilities, convertible notes payable, notes payable, conversion feature liabilities and other contingent liabilities.
Fair value measurements—The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in accordance with ASC 820. The Company measures fair value under a framework that provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows:
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.
Level 2: Inputs to the valuation methodology include:
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in inactive markets;
Inputs other than quoted prices that are observable for the asset or liability; and
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 inputs must be observable for substantially the full term of the asset or liability.
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The fair value measurement level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The carrying values of cash and cash equivalents, accounts receivables, other current assets, account payable and accrued expenses, and other current liabilities approximate fair value due to the short-term maturity of those instruments.
The investment in convertible bond, the convertible features on convertible debt instruments and certain outstanding warrants that contain price adjustment provision are remeasured at fair value on a recurring basis using Level 3 inputs. The level 3 inputs in the valuation and valuation methods used are discussed in Note 5, 7 and 8. There are no other assets or liabilities measured at fair value on a recurring basis.
Derivative liability—The Company evaluates its financial instruments including convertible notes to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815. The Company applies significant judgment to identify and evaluate terms and conditions in these contracts and agreements to determine whether embedded derivative exists. If all the requirements for bifurcation are met, embedded derivatives are separately measured from the host contract. Bifurcated embedded derivatives are initially recorded at fair value and then remeasure at each reporting period, with change in fair value recognized in the consolidated statements of operations. Bifurcated embedded derivative are classified as separate liability in the condensed consolidated balance sheets.
8
The Company's derivative liability related to the conversion feature embedded in the convertible promissory notes. See note 7 for further details.
Net income (loss) per share — The basic net income (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding. Dilutive net income (loss) per share is computed in a similar manner, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total anti-dilutive instrument |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment reporting—The Company operates and manages its business as a single reportable segment primarily for the marketing and sales of Endari®. In accordance with ASC 280, "Segment Reporting," the determination of a single business segment is consistent with the consolidated financial information regularly provided to the Company's chief operating decision maker ("CODM").
The Company's CODM is its Chief Executive Officer, who reviews and evaluates consolidated income or loss from operations for purposes of evaluating performance, making operating decisions, allocating resources, and planning and forecasting for future periods.
Recent Accounting Pronouncement —Management has considered all recent accounting pronouncements and determined that they will not have a material effect on the Company’s condensed consolidated financial statements except for the following:
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires entities to disclose disaggregated information about their effective tax rate reconciliation and income taxes paid. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact adopting the guidance.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disaggregated disclosures in the notes of the financial statements of certain categories of expenses that are included in expense line items on the face of the income statement. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company will evaluate the impact adopting the guidance will have on the Company's consolidated financial statements and disclosures.
9
NOTE 3 — REVENUES, NET
Revenues, net by category were as follows (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Endari® - US |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Endari® - International |
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues, net |
|
|
|
|
|
|
|
|
|
|
|
||||
The following table summarizes the revenue allowance and accrual activities for the nine months ended September 30, 2025 and September 30, 2024 (in thousands):
|
Trade Discounts, Allowances and Chargebacks |
|
|
Government Rebates and Other Incentives |
|
|
Returns |
|
|
Total |
|
||||
Balance as of January 1, 2025 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision related to sales in the current year |
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustments related to prior period sales |
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||
Credits and payments made |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of September 30, 2025 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance as of January 1, 2024 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Provision related to sales in the current year |
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustments related to prior period sales |
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Credits and payments made |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of September 30, 2024 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes revenues attributable to each of the customers that accounted for 10% or more of our net revenues in any of the periods shown:
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
Customer A |
|
% |
|
|
% |
|
|
% |
|
|
% |
|
||||
Customer B |
|
% |
|
|
% |
|
|
% |
|
|
% |
|
||||
Customer C |
|
% |
|
|
% |
|
|
% |
|
|
% |
|
||||
Customer D |
|
% |
|
|
% |
|
|
% |
|
|
% |
|
||||
Customer E |
< |
|
|
|
% |
|
< |
|
|
|
% |
|
||||
On June 15, 2017, the Company entered into a distributor agreement with Telcon RF Pharmaceutical, Inc., or Telcon, pursuant to which it granted Telcon exclusive rights to the Company’s prescription grade L-glutamine (“PGLG”) oral powder for the treatment of diverticulosis in South Korea, Japan and China in exchange for Telcon’s payment of a $
10
NOTE 4 — SELECTED FINANCIAL STATEMENT — ASSETS
Inventories consisted of the following (in thousands):
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Raw materials and components |
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
||
Inventory reserve |
|
( |
) |
|
|
( |
) |
Total inventories, net |
$ |
|
|
$ |
|
||
Prepaid expenses and other current assets consisted of the following (in thousands):
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Prepaid insurance |
$ |
|
|
$ |
|
||
Prepaid expenses |
|
|
|
|
|
||
Other current assets |
|
|
|
|
|
||
Total prepaid expenses and other current assets |
$ |
|
|
$ |
|
||
Property and equipment consisted of the following (in thousands):
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Equipment |
$ |
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
||
Less: accumulated depreciation |
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
$ |
|
|
$ |
|
||
For the three months ended September 30, 2025 and September 30, 2024, depreciation expense was approximately $
NOTE 5 — INVESTMENTS
Investment in convertible bond - On September 28, 2020, the Company entered into a convertible bond purchase agreement pursuant to which it purchased at face value a convertible bond of Telcon in the principal amount of approximately $
Concurrent with the purchase of the convertible bond, the Company entered into an agreement dated
The investment in convertible bond is classified as an available for sale security since management does not have intention to trade nor held until maturity, and measured at fair value on a recurring basis using Level 3 inputs, with any changes in the fair value
11
recorded in other comprehensive loss. The fair value and any changes in fair value in the convertible bond is determined using a binominal lattice model. The model produces an estimated fair value based on changes in the price of the underlying common stock over successive periods of time.
The revised API agreement with Telcon described in Note 6 provides for target annual revenue of more than $
In April 2024, Telcon offset KRW
In April 2025, Telcon offset KRW
The following table sets forth the fair value and changes in fair value of the investment in the Telcon convertible bond as of September 30, 2025 and December 31, 2024 (in thousands):
Investment in convertible bond |
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Balance, beginning of period |
|
$ |
|
|
$ |
|
||
Sales of convertible bond |
|
|
( |
) |
|
|
( |
) |
Net loss on investment on convertible bond |
|
|
( |
) |
|
|
( |
) |
Change in fair value included in the statement of other comprehensive loss (net of tax) |
|
|
|
|
|
( |
) |
|
Balance, end of period |
|
$ |
|
|
$ |
|
||
The fair values as of September 30, 2025 and December 31, 2024 were based upon following assumptions:
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Principal outstanding (South Korean won) |
|
KRW |
|
|
KRW |
|
||
Stock price |
|
KRW |
|
|
KRW |
|
||
Expected life (in years) |
|
|
|
|
|
|
||
Selected yield |
|
|
% |
|
|
% |
||
Expected volatility (Telcon common stock) |
|
|
% |
|
|
% |
||
Risk-free interest rate (South Korea government bond) |
|
|
% |
|
|
% |
||
Expected dividend yield |
|
|
|
|
|
|
||
Conversion price |
|
KRW |
|
|
KRW |
|
||
Equity method investment – During 2018, the Company and Japan Industrial Partners, Inc., or JIP, formed EJ Holdings, Inc., or EJ Holdings, to acquire, own and operate an amino acids manufacturing facility in Ube, Japan. In connection with the formation, the Company invested approximately $
EJ Holdings has had no substantial revenues since its inception, has depended on loans from the Company to acquire the Ube facility and fund its operations and will be dependent on loans or other financing unless and until its plant is activated and it can secure
12
customers for its products. There is no assurance that needed funding will be available from other sources. If EJ Holdings fails to obtain needed funding, it may need to seek to sell or otherwise dispose of the Ube plant.
On December 28, 2023, the Company sold and assigned its EJ Holdings shares at its original cost of JPY
13
NOTE 6 — SELECTED FINANCIAL STATEMENT - LIABILITIES
Accounts payable and accrued expenses consisted of the following at September 30, 2025 and December 31, 2024 (in thousands):
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Accounts payable: |
|
|
|
|
|
|
||
Clinical and regulatory expenses |
|
$ |
|
|
$ |
|
||
Professional fees |
|
|
|
|
|
|
||
Selling expenses |
|
|
|
|
|
|
||
Manufacturing costs |
|
|
|
|
|
|
||
Non-employee director compensation |
|
|
|
|
|
|
||
Other vendors |
|
|
|
|
|
|
||
Total accounts payable |
|
|
|
|
|
|
||
Accrued interest payable, related parties |
|
|
|
|
|
|
||
Accrued interest payable |
|
|
|
|
|
|
||
Accrued expenses: |
|
|
|
|
|
|
||
Payroll expenses |
|
|
|
|
|
|
||
Government rebates and other rebates |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
Total accrued expenses |
|
|
|
|
|
|
||
Total accounts payable and accrued expenses |
|
$ |
|
|
$ |
|
||
Other current liabilities consisted of the following at September 30, 2025 and December 31, 2024 (in thousands):
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Trade discount |
$ |
|
|
$ |
|
||
Unearned revenue (a) |
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
||
Total other current liabilities |
$ |
|
|
$ |
|
||
(a) Refer to Note 3 for information regarding to due to Telcon.
Other long-term liabilities consisted of the following at September 30, 2025 and December 31, 2024 (in thousands):
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Trade discount |
$ |
|
|
$ |
|
||
Other long-term liabilities |
|
|
|
|
|
||
Total other long-term liabilities |
$ |
|
|
$ |
|
||
On June 12, 2017, the Company entered into an API Supply Agreement with Telcon pursuant to which Telcon advanced to the Company approximately $
14
NOTE 7 — NOTES PAYABLE
Notes payable consisted of the following at September 30, 2025 and December 31, 2024 (in thousands except for number of underlying shares):
Year |
|
Interest Rate |
|
Term of Notes |
|
Conversion |
|
|
Principal |
|
|
Unamortized Discount September 30, 2025 |
|
|
Capitalized Accrued Interest September 30, 2025 |
|
|
Carrying |
|
|
Underlying Shares September 30, 2025 |
|
||||||
Notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
2013 |
|
|
|
|
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
||||
2022 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
2023 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
2024 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
2025 |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
||||
|
|
|
|
Current |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
||||
Notes payable - related parties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2020 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
2021 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
2022 |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||||
2023 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
||||
|
|
|
|
Current |
|
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
|||
|
|
|
|
Non-current |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
||||
Convertible notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2021 |
|
|
|
$ |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||||||
2023 |
|
|
|
$ |
|
(a) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||||||
2023 |
|
|
|
$ |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||||||
2024 |
|
|
|
$ |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
|
|
|||||
|
|
|
|
Current |
|
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
|
|
|||||
|
|
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
||||||
15
Year |
|
Interest Rate |
|
Term of Notes |
|
Conversion |
|
|
Principal Outstanding December 31, 2024 |
|
|
Unamortized |
|
|
Capitalized Accrued Interest |
|
|
Carrying |
|
|
Shares |
|
||||||
Notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
2013 |
|
|
|
|
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
||||
2022 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
2023 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
2024 |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
||||
|
|
|
|
Current |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
||||
Notes payable - related parties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2020 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
2021 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
2022 |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||||
2023 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||||
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
||||
|
|
|
|
Current |
|
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
|||
|
|
|
|
Non-current |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
|
— |
|
||||
Convertible notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
2021 |
|
|
|
$ |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||||||
2023 |
|
|
|
$ |
|
(a) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||||||
2023 |
|
|
|
$ |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||||||
2024 |
|
|
|
$ |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
|
|
|||||
|
|
|
|
Current |
|
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
|
|
|||||
|
|
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
||||||
The weighted-average stated annual interest rate of notes payable was
As of September 30, 2025, future contractual principal payments due on notes payable were as follows (in thousands):
Year Ending |
|
|
|
2025 (three months) |
$ |
|
|
2026 |
|
|
|
2027 |
|
|
|
Total |
$ |
|
|
On February 9, 2021, the Company entered into a securities purchase agreement in which the Company sold and issued to purchasers in a private placement pursuant to Rule 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D thereunder approximately $
Commencing one year from the original issue date, the convertible promissory notes became convertible at the option of the holder into shares of the Company’s common stock at an initial conversion price of $
16
the Company repaid $
In February and March 2024, the Company entered into Exchange Agreements (the "Exchange Notes") with certain convertible notes holders pursuant to which it agreed to issue total of $
The conversion feature of the original convertible promissory notes and the Exchange Notes is separately accounted for at fair value as a derivative liability under guidance in ASC 815 that is remeasured at fair value on a recurring basis using Level 3 inputs, with any changes in the fair value of the conversion feature liability recorded in the condensed consolidated statements of operations.
Convertible promissory notes |
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Balance, beginning of period |
|
$ |
|
|
$ |
|
||
Change in fair value included in the statements of operations |
|
|
( |
) |
|
|
( |
) |
Balance, end of period |
|
$ |
|
|
$ |
|
||
In September 2023, Smart Start Investments Limited, of which Wei Pei Zen, a director of the Company, is a director and
On March 5, 2024, the conversion feature of the convertible promissory note no longer met the scope exception in ASC 815-10-15-74 as the investors' Rule 144(d) holding period for the Company had ended and was separately accounted for at fair value as a derivative liability that is remeasured at fair value on a recurring basis using Level 3 inputs, with any changes in fair value of the conversion feature liability recorded in the condensed consolidated statements of operations. In September 2024, the convertible promissory note became due. As of September 30, 2025, the conversion rate exceeded stock price and, therefore, the fair value of conversion feature was determined to be
Beginning in February 2024, two related holders of demand promissory notes of the Company in the aggregate principal amount of approximately $
In March 2024, Smart Start Investments Limited, of which Wei Peu Zen, a director of the Company is a director and
17
In September 2024, Emmaus Medical entered into Sale of Future Receipts Agreement (the "September 2024 loan") with third party pursuant to which it sold and assigned $
In December 2024, Emmaus Medical entered into Sale of Future Receipts Agreement (the "December 2024 loan") with third party pursuant to which it sold and assigned $
In February 2025, the Company entered into an Agreement for the Purchase and Sales of Future Receipts (the "February 2025 loan") with a third party pursuant to which it sells $
In April 2025, the Company entered into an Agreement for the Purchase and Sales of Future Receipts with a third party pursuant to which it sells $
In June 2025, the Company entered into an Agreement for the Future Receivables Sale and Purchase Agreement (the "June 2025 loan") with a third party pursuant to which it sold and assigned $
In August 2025, the Company entered into an Agreement for the Purchase and Sale of Future Receipts with a third party pursuant to which it sold and assigned $
In September 2025, the Company entered into a Purchase of Future Receipts Agreement with a third party. It loaned principal amount of $
Except as otherwise indicated above, the net proceeds of the foregoing loans and other arrangements were used to augment the Company's working capital.
NOTE 8 — STOCKHOLDERS’ DEFICIT
Warrant issued for services — On January 12, 2023, the Company granted two consultants to the Company
18
$
The following table presents the assumptions used to value the warrants:
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Stock price |
|
$ |
|
|
$ |
|
||
Exercise price |
|
$ |
|
|
$ |
|
||
Expected term |
|
|
|
|
||||
Risk-free rate |
|
|
% |
|
|
% |
||
Dividend yield |
|
— |
|
|
— |
|
||
Volatility |
|
|
|
|
||||
A summary of outstanding warrants as of September 30, 2025 and December 31, 2024 is presented below:
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||
|
|
Number of |
|
|
Weighted‑ |
|
|
Number of |
|
|
Weighted‑ |
|
||||
Warrants outstanding, beginning of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Cancelled, forfeited or expired |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Warrants outstanding, end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Warrants exercisable end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
As of September 30, 2025, the weighted-average remaining contractual life of outstanding warrants was
Stock options— The Company's former 2011 Stock Incentive Plan permitted grants of incentive stock options to employees, including executive officers, and other share-based awards such as stock appreciation rights, restricted stock, stock units, stock bonus and unrestricted stock awards to employees, directors, and consultants for up to
The Company also had an Amended and Restated 2012 Omnibus Incentive Compensation Plan under which the Company could grant incentive stock options to selected employees including officers, non-employee consultants and non-employee directors. The Plan was terminated in September 2021. As of September 30, 2025 and December 31, 2024 stock options to purchase up to
On September 29, 2021, the Board of Directors of the Company adopted the Emmaus Life Sciences, Inc. 2021 Stock Incentive Plan upon the recommendation of the Compensation Committee of the Board. The 2021 Stock Incentive Plan was approved by stockholders on November 23, 2021. No more than
19
Management has valued stock options at their date of grant utilizing the Black-Scholes-Merton Option pricing model. The fair value of the underlying shares was determined by the market value of the Company's common stock. The expected volatility was adjusted using the historical volatility of the common stock and comparable publicly traded securities. The risk‑free interest rate is based on the implied yield available on U.S. Treasury issues with a term approximating the expected life of the options depending on the date of the grant and expected life of the respective options.
A summary of outstanding stock options as of September 30, 2025 and December 31, 2024 is presented below:
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||
|
|
Number of |
|
|
Weighted‑ |
|
|
Number of |
|
|
Weighted‑ |
|
||||
Options outstanding, beginning of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted or deemed granted |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercised |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
Cancelled, forfeited and expired |
|
|
( |
) |
|
$ |
|
|
|
( |
) |
|
$ |
|
||
Options outstanding, end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options exercisable, end of period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options available for future grant |
|
|
|
|
|
|
|
|
|
|
|
|
||||
During the three months ended September 30, 2025 and September 30, 2024 the Company recognized approximately $
NOTE 9 — INCOME TAX
The quarterly provision for or benefit from income taxes is computed based upon the estimated annual effective tax rate and the year-to-date pre-tax income (loss) and other comprehensive income (loss).
NOTE 10 — LEASES
Operating leases — The Company leases its office space under operating leases with unrelated entities.
Prior to November 2024, the Company leased
The lease expense during the three months ended September 30, 2025 and September 30, 2024, was approximately $
20
As of September 30, 2025, future minimum lease payments under the lease agreements were as follows (in thousands):
|
|
Amount |
|
|
2025 (three months) |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 and after |
|
|
|
|
Total lease payments |
|
|
|
|
Less: Interest |
|
|
|
|
Current portion |
|
|
|
|
Operating lease liabilities, less current portion |
|
$ |
|
|
As of September 30, 2025, the Company had an operating lease right-of-use asset of $
NOTE 11 — COMMITMENTS AND CONTINGENCIES
API Supply Agreement — On June 12, 2017, the Company entered into an API Supply Agreement (the “API Agreement”) with Telcon pursuant to which Telcon paid the Company approximately $
In December 2024, a lower court in Dubai, UAE, rendered a judgment against the Company’s Emmaus Medical, Inc. subsidiary in the amount of AED
21
NOTE 12 — RELATED PARTY TRANSACTIONS
The following table sets forth information relating to loans from related parties outstanding at any time during the nine months ended September 30, 2025 (in thousands):
Class |
Lender |
|
Interest |
|
Date of |
|
Term of Loan |
|
Principal Amount Outstanding at September 30, 2025 |
|
|
Highest |
|
|
Amount of |
|
|
Amount of |
|
||||
Promissory notes payable to related parties: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Willis Lee(2) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Soomi Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Soomi Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Wei Peu Zen(2) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Albert Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Willis Lee(2) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Albert Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Dr. Yutaka and Soomi Niihara(1) (3) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
|
Dr. Yutaka and Soomi Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
|
Dr. Yutaka and Soomi Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Dr. Yutaka and Soomi Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Wei Peu Zen(2) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
22
The following table sets forth information relating to loans from related parties outstanding at any time during the year ended December 31, 2024:
Class |
Lender |
|
Interest |
|
Date of |
|
Term of Loan |
|
Principal Amount Outstanding at December 31, 2024 |
|
|
Highest |
|
|
Amount of |
|
|
Amount of |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Willis Lee(2) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
|
Soomi Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Soomi Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Wei Peu Zen(2) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Albert Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||||
|
Willis Lee(2) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Albert Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Dr. Yutaka and Soomi Niihara(1) (3) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
|
Dr. Yutaka and Soomi Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
|
Dr. Yutaka and Soomi Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Hope International Hospice, Inc.(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Dr. Yutaka and Soomi Niihara(1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
|
Wei Peu Zen(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See Note 7 for more information on recent developments with respect to certain related-party loans.
See Notes 5, 6 and 11 for a discussion of the Company’s agreements with Telcon, which holds
NOTE 13 — SUBSEQUENT EVENTS
In October 2025, the Company entered into a Future Receivables Sale and Purchase Agreement with a third party pursuant to which it sold $
In October 2025, the Company entered into a Business Loan and Security Agreement with a third party pursuant to which the Company borrows principal amount of $
23
outstanding loans total principal and interest of approximately $
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In the following discussion, the terms, “we,” “us,” “our,” “Emmaus” or the “Company” refer to Emmaus Life Sciences, Inc. and its direct and indirect subsidiaries.
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 and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on April 14, 2025 (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 those set forth in the “Risk Factors” section of the Annual Report, 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 forward-looking statements made in this Form 10-Q are qualified by these cautionary statements. We undertake no duty to amend or update these statements beyond what is required by SEC reporting requirements.
Company Overview
We are a commercial-stage biopharmaceutical company engaged in the discovery, development, marketing and sale of innovative treatments and therapies, primarily for rare and orphan diseases. Our only product, Endari® (prescription-grade L-glutamine oral powder) is approved by the U.S. Food and Drug Administration, or FDA, to reduce the acute complications of sickle cell disease (“SCD”), in adult and pediatric patients five years of age and older. In April 2022, Endari® was approved by the Ministry of Health and Prevention in the United Arab Emirates, or U.A.E, in adults and pediatric patients five years of age and older. In November and December of 2022, we received marketing authorizations for Endari® in Qatar and Kuwait, respectively. In May 2023, we received approval for marketing of Endari to treat SCD from the Bahrain National Health Regulatory Authority. In July 2023, we received marketing approval for Endari® in Oman. Application for marketing authorization in the Kingdom of Saudi Arabia is pending. While the application is pending, the FDA approval of Endari® can be referenced to allow access to Endari® on a named-patient basis.
Endari® is sold in the U.S. primarily through our nonexclusive distributors. Endari® is reimbursable by the Centers for Medicare and Medicaid Services, and every state provides coverage for Endari® for outpatient prescriptions to all eligible Medicaid enrollees within their state Medicaid programs. Endari® is also reimbursable by many commercial payors. We have agreements in place with the nation’s leading distributors as well as physician group purchasing organizations and pharmacy benefits managers, making Endari® available at selected retail and specialty pharmacies nationwide.
As of September 30, 2025, our accumulated deficit was $268.1 million, and we had cash and cash equivalents of $0.3 million. Until we can generate sufficient net revenues from Endari® sales or enter into one or more strategic transactions, our future cash requirements are expected to be financed through loans from related parties, third-party loans, public or private equity or debt financings or possible corporate collaboration and licensing arrangements. We are unable to predict if or when we may generate increased net revenues or accomplish strategic transactions.
Results of Operations:
Three months ended September 30, 2025 and 2024
Net Revenues. Net revenues decreased by $2.1 million, or 38%, to $3.4 million for the three months ended September 30, 2025, compared to $5.5 million for the three months ended September 30, 2024 due to a decrease in U.S. sales, which management attributes to competition from a generic version of L-Glutamine oral powder introduced into U.S. market in mid-2024 as discussed below and a decrease of sales in the MENA region, which management attributes to the timing of sales in the region.
25
On July 15, 2024, ANI Pharmaceuticals, Inc., or ANI, announced the launch of its L-Glutamine Oral Powder, a generic version of Endari®, following final approval of its Abbreviated New Drug Application from the U.S. Food and Drug Administration. The introduction of ANI’s generic product or other generic versions of L-Glutamine oral powder has adversely affected Endari® sales and the reimbursement rates that Medicare, Medicaid and third-party payors are willing to pay for Endari®, which has had and could continue to have a material, adverse effect on our future sales and net revenues.
Cost of Goods Sold. Cost of goods sold decreased by $0.1million, or 37%, to $0.2 million for the three months ended September 30, 2025, compared to $0.4 million for the three months ended September 30, 2024. The decrease was primarily due to the decrease in sales discussed above.
Research and Development Expenses. Research and development expenses decreased by $0.1 million, or 66%, to $50,000 for the three months ended September 30, 2025, compared to $150,000 for the three months ended September 30, 2024. The decrease was primarily due to a decrease in payroll expenses from a reduction in headcount implemented in the third quarter of 2024.
Selling Expenses. Selling expenses decreased by $0.7 million, or 50%, to $0.7 million for the three months ended September 30, 2025, compared to $1.3 million for the three months ended September 30, 2024. The decrease was due to decreases of $0.4 million in consulting fee, $0.2 million in payroll expenses from a reduction in headcount in our U.S. sales force implemented in the third quarter of 2024, and $0.1 million in distribution fee.
General and Administrative Expenses. General and administrative expenses decreased by $1.1 million, or 38%, to $1.7 million for the three months ended September 30, 2025, compared to $2.8 million for the three months ended September 30, 2024. The decrease was due to decreases of $0.5 million in professional services, $0.4 million in payroll expenses attributable to the reduction in headcount and $0.2 million in rent expenses attributable to the modification of office lease completed in the second quarter of 2025.
Other Income(Expense). Total other expenses increased by $3.2 million, or 318%, to $2.2 million in other expense for the three months ended September 30, 2025, compared to $1.0 million in other income for the three months ended September 30, 2024. The increase was primarily due to a decrease of $2.3 million in change in fair value of conversion feature derivative and increases of $0.6 million in interest expense and $0.3 million in loss on debt extinguishment.
Net Income(Loss). Net loss was $2.1 million for three months ended September 30, 2025 and net income was $1.8 million for three months ended September 30, 2024. The increase in net loss was primarily due to a decrease in net revenue and an increase other expense, partially offset by a decrease in operating expenses,.
Nine months ended September 30, 2025 and 2024
Net Revenues. Net revenues decreased by $4.8 million, or 36%, to $8.6 million for the nine months ended September 30, 2025, compared to $13.4 million for the nine months ended September 30, 2024 due to competition from a generic version of L-Glutamine oral powder introduced into U.S. market in mid-2024 and a decrease of sales in the MENA region.
Cost of Goods Sold. Cost of goods sold decreased by $0.3 million, or 30%, to $0.6 million for the nine months ended September 30, 2025, compared to $0.9 million for the nine months ended September 30, 2024. The decrease was primarily due to the decrease in sales discussed above.
Research and Development Expenses. Research and development expenses decreased by $0.2 million, or 46%, to $0.3 million for the nine months ended September 30, 2025, compared to $0.5 million for the nine months ended September 30, 2024. The decrease was primarily due to a decrease in payroll expenses $0.2 million from a reduction in headcount.
Selling Expenses. Selling expenses decreased by $2.9 million, or 60%, to $2.0 million for the nine months ended September 30, 2025, compared to $4.9 million for the nine months ended September 30, 2024. The decrease was due to decreases of $1.2 million in payroll expense, $1.2 million in consulting fees, $0.2 million in travel expense, $0.2 million in distribution fee, and $0.1 million in marketing expense.
General and Administrative Expenses. General and administrative expenses decreased by $2.0 million, or 24%, to $6.4 million for the nine months ended September 30, 2025, compared to $8.4 million for the nine months ended September 30, 2024. The decrease was primarily due to decreases of $1.0 million in payroll expense including share-based compensation, $0.9 million in professional service fees, and $0.5 million in rent expense, partially offset by an increase of $0.5 million in legal settlement fee.
Other Expense. Total other expense increased by $1.5 million, or 46% to $4.9 million for the nine months ended September 30, 2025, compared to $3.3 million for the nine months ended September 30, 2024. The increase was due to increases of
26
$0.7 million in loss on debt extinguishment, and $0.7 million in interest expense, and a decrease of $1.0 million in gain on restructured debt, partially offset by an increase of $0.9 million in gain on lease modification.
Net Loss. Net loss was $5.5 million and $4.7 million for nine months ended September 30, 2025 and September 30, 2024, respectively.
Liquidity and Capital Resources
Based on our losses to date, current liabilities and anticipated future net revenues, operating expenses and debt repayment obligations, and cash and cash equivalents of $0.3 million as of September 30, 2025, we do not have sufficient operating capital for our business without raising additional capital. We realized a net loss of $5.5 million for the nine months ended September 30, 2025 and we may continue to incur net losses for the foreseeable future and until we can generate increased net revenues from Endari® sales. There is no assurance that we will be able to increase our Endari® sales or attain sustainable profitability, or that we will have sufficient capital resources to fund our operations until we are able to generate sufficient cash flow from operations or accomplish a strategic transaction.
Liquidity represents our ability to pay our liabilities when they become due, fund our business operations, meet our contractual obligations, including repayment of our existing indebtedness and the purchase of API under our supply arrangements with Telcon, and execute our business plan. Our primary sources of liquidity are our cash balances at the beginning of each period, sales of future receipts to third parties, proceeds from related-party loans and other financing activities. Our short-term and long-term cash requirements consist primarily of working capital requirements, general corporate needs, our contractual obligations to purchase API from Telcon and pay debt service under our outstanding notes payable.
As of September 30, 2025, we had outstanding $15.9 million principal amount of convertible promissory notes and $10.9 million principal amount of other notes payable reflected in our current liabilities. Our minimum lease payment obligations were $2.3 million, of which $0.3 million was payable within 12 months.
Our API supply agreement with Telcon provides for an annual API purchase target of $5 million and a target “profit” (i.e., gross margin) to Telcon of $2.5 million. To the extent these targets are not met, Telcon may be entitled to payment of the shortfall or to offset the shortfall against the Telcon convertible bond and proceeds thereof that are pledged as collateral to secure our obligations. With our consent, in April 2025, Telcon offset KRW3.1 billion, or approximately $2.1 million, against the principal amount of the Telcon convertible bond and we released KRW49 million, or approximately $34,000, in cash proceeds to Telcon in satisfaction the target shortfall for the year ended 2024.
Due to uncertainties regarding our ability to meet our current and future operating and capital expenses, there is substantial doubt about our ability to continue as a going concern for 12 months from the date that our condensed consolidated financial statements are issued, as referred to in the “Risk Factors” section of our Annual Report and Note 2 of the Notes to Condensed Consolidated Financial Statements included herein.
Cash flows for the nine months ended September 30, 2025 and September 30, 2024
Net cash used in operating activities
Net cash used in operating activities decreased by $0.4 million, or 16%, to $2.2 million for the nine months ended September 30, 2025 from $2.6 million for the nine months ended September 30, 2024. This decrease was primarily due to a decrease in loss from operations.
Net cash provided by investing activities
Net cash provided by investing activities decreased by $0.3 million, or 13%, to $2.2 million for the nine months ended September 30, 2025 compared to $2.5 million for the nine months ended September 30, 2024. The decrease was primarily due to a decrease of proceeds from sales of Telcon convertible bond.
Net cash used in financing activities
Net cash used in financing activities decreased by $0.1 million, or 8%, to $1.1 million for the nine months ended September 30, 2025 from $1.2 million for the nine months ended September 30, 2024. The decrease was due to a decrease of $1.4 million in proceeds from note payable issued, partially offset by an increase of $1.3 million in repayments of promissory notes and convertible notes.
27
Off-Balance-Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Estimates
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 accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of certain assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments, including but not limited to those relating revenue recognition on product sales, the variables used to calculate the valuation of investment in convertible bond, conversion feature, stock options and warrants. 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 nine months ended September 30, 2025.
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 (the “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 required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required 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 Accounting Officer, of the effectiveness of our DCP. Based on that evaluation, our Chief Executive Officer and Chief Accounting Officer concluded that the Company’s DCP were not effective due to the material weaknesses described below.
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 September 30, 2025 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Material Weaknesses
As previously reported, our management identified ongoing material weaknesses (the “Material Weaknesses”) in our internal control over financial reporting. The Material Weaknesses related to inadequate accounting treatment for complex accounting matters, inadequate financial closing process, segregation of duties, including access control over information technology, especially financial information, inadequate documentation of policies and procedures over risk assessments, internal control and significant account processes, and insufficient entity risk assessment processes.
Since identifying the Material Weaknesses, we took steps to remediate the Material Weaknesses, including:
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We implemented an integrated cloud-based enterprise resource planning system to manage our financial information and replace our outdated financial accounting systems and software. As a result of these actions, management has concluded that the certain material weaknesses identified in previous fiscal years have been remediated but that there continued to be material weaknesses in our internal control over financial reporting as of September 30, 2025. In particular, our finance and accounting department is not adequately staffed, which has sometimes resulted in not all policies and procedures being properly documented.
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Part II. Other Information
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
See “Risk Factors” section of the Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
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Item 6. Exhibits
(a) Exhibits
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Incorporated by Reference |
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Exhibit Number |
Exhibit Description |
Form |
File No. |
Exhibit |
Filing Date |
Filed/ |
10.1 |
Agreement for the Purchase and Sale of Future Receipts with Agile Capital |
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|
|
|
* |
10.2 |
Future Receivables Sale and Purchase Agreement with Velocity Capital Group |
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|
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*
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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 |
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|
|
|
* |
31.2 |
Certification of Chief Accounting Officer pursuant of 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 Chief Executive Officer and Chief Accounting Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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|
|
|
** |
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
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|
|
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Document |
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|
|
|
104 |
Cover Page formatted as Inline XBRL and contained in Exhibit 101 |
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|
|
|
|
* Filed herewith.
** 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.
31
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.
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Emmaus Life Sciences, Inc. |
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Dated: November 14, 2025 |
By: |
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/s/ Willis C. Lee |
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Name: |
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Willis C. Lee |
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Its: |
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Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
By: |
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/s/ Hiroko Huynh |
|
Name: |
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Hiroko Huynh |
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Its: |
|
Chief Accounting Officer (Principal Financial Officer) |
|
|
|
|
32
FAQ
What were EMMA’s Q3 2025 revenues and profit/loss?
How did Emmaus’s year-to-date 2025 results compare to 2024?
What liquidity position did EMMA report at quarter-end?
Did Emmaus issue a going concern warning?
What drove other expense in Q3 2025?
What was the stockholders’ deficit at September 30, 2025?
What happened with the Telcon convertible bond in 2025?
