Attached files
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 3)
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended April 30, 2011
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
Commission File No. 000-53072
EMMAUS LIFE SCIENCES, INC.
(Name of registrant in its charter)
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Delaware
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41-2254389
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(State or other jurisdiction of incorporation or formation)
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(I.R.S. employer identification number)
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20725 S Western Avenue
Suite 136
Torrance, CA 90501
(Address of principal executive offices)
Issuer’s telephone number: (310) 492-9898
AFH ACQUISITION IV, INC.
9595 Wilshire Blvd., Suite 700, Beverly Hills, CA 90212
(Former Name or Former Address, if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in rule 12b-2 of the Exchange Act.
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes x No
State the number of shares outstanding of each of the issuer’s classes of common equity, as of November 22, 2011: 24,381,667 shares of common stock.
AFH ACQUISITION IV, INC.
- INDEX -
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Page
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PART I – FINANCIAL INFORMATION:
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Item 1.
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Financial Statements
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1
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F-1
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F-2
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F-3
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F-4
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F-5 - F-9
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Item 2
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Management’s Discussion and Analysis or Plan of Operation.
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2-3 |
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Item 3
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Quantitative and qualitative Disclosures About Market Risk
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3 |
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Item 4
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Controls and Procedures.
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3 |
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PART II – OTHER INFORMATION
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4 | |
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Item 1
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4 | |
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Item 2
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Unregistered Sales of Equity Securities and Use of Proceeds.
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4 |
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Item 3
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Defaults Upon Senior Securities.
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4 |
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Item 4
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4 | |
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Item 5
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4 | |
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4
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5
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EXPLANATORY NOTE
AFH Acquisition IV, Inc, a Delaware corporation, is filing this Amendment No.3 to amend in its entirety its Form 10-Q for the period ended April 30, 2011 which was originally filed with the securities and exchange commission on May 13, 2011 (the “Original Filing”), the first amendment filed on July 5, 2011, and second on August 25, 2011 in order to (i) correct the term of “due from parent” as “prepaid expenses” on both the Balance Sheet and Note E (ii) update the name from Emmaus Holdings, Inc to Emmaus Life Sciences, Inc. and (iii) to revise Item 4 Controls and Procedures to state that managements evaluation determined controls were ineffective.
Except as described above, the disclosures in this Amendment No. 3 continue to describe conditions as of the date of the Original Filing, and the disclosures contained herein have not been updated to reflect events, results or developments that have occurred after the Original Filing, or to modify or update those disclosures affected by subsequent events. Among other things, the Company’s name change from “AFH Acquisition IV, Inc.” to “Emmaus Life Sciences, Inc.” subsequent to the filing of the Original Filing is not reflected in this Amendment No. 3, and forward-looking statements made in the Original Filing have not been revised to reflect events, results or developments that have occurred or facts that have become known to us after the date of the Original Filing, and such forward-looking statements should be read in their historical context. This Amendment No. 3 should be read in conjunction with the Company’s filings made with the SEC subsequent to the Original Filing, including any amendments to those filings.
New certifications of our principal executive and financial officer are included as exhibits to this amendment.
AFH ACQUISITION IV, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
BEVERLY HILLS, CA
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FINANCIAL REPORTS
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AT
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APRIL 30, 2011
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AFH ACQUISTION IV, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
TABLE OF CONTENTS
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AFH ACQUISITION IV, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
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||||||||
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BALANCE SHEETS AT APRIL 30, 2011 (UNAUDITED) AND OCTOBER 31, 2010
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||||||||
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(Unaudited)
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||||||||
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April 30,
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October 31,
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|||||||
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2011
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2010
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ASSETS
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||||||||
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Cash and Cash Equivalents
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260
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—
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Prepaid Expense
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1,137,874
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—
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Total Assets
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$
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1,138,134
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$
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—
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LIABILITIES AND STOCKHOLDER'S DEFICIT
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Liabilities
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Accrued Expenses
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$
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863
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$
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3,703
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Due to Parent
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—
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11,895
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Total Liabilities
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863
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15,598
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Stockholder's Deficit
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Preferred Stock: $.001 Par; 20,000,000 Shares Authorized,
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-0- Issued and Outstanding
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—
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—
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Common Stock: $.001 Par; 100,000,000 Shares Authorized;
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5,577,750 and 5,000,000 Issued and Outstanding at
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0
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April 30, 2011 and October 31, 2010, respectively
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5,578
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5,000
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Additional Paid-In-Capital
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1,174,922
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20,000
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Deficit Accumulated During Development Stage
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(43,229
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)
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(40,598
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)
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Total Stockholder's Deficit
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1,137,271
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(15,598
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)
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Total Liabilities and Stockholder's Deficit
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$
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1,138,134
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$
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—
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F-1
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AFH ACQUISITION IV, INC.
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(A DEVELOPMENT STAGE COMPANY)
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(A DELAWARE CORPORATION)
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Beverly Hills, CA
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DATE OF INCEPTION (SEPTEMBER 24, 2007) THROUGH APRIL 30, 2011 - UNAUDITED
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||||||||||||||||||||||||
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Deficit
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||||||||||||||||||||||||
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Accumulated
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||||||||||||||||||||||||
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Common Stock
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Additional
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Stock
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During
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Total
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||||||||||||||||||||
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Number
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Paid-In
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Subscription
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Development
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Stockholder's
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||||||||||||||||||||
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of Shares
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Value
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Capital
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Receivable
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Stage
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Deficit
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|||||||||||||||||||
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Balance - September 24, 2007
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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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$
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—
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$
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—
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|||||||||||||
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Common Stock Issued for Cash
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5,000,000
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5,000
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20,000
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(4,900
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)
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—
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20,100
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|||||||||||||||||
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Net Loss for the Period
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—
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—
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—
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—
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(21,853
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)
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(21,853
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)
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||||||||||||||||
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Balance - October 31, 2007
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5,000,000
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5,000
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20,000
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(4,900
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)
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(21,853
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)
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(1,753
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)
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Cash Received for Stock Subscriptions
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—
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—
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—
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4,900
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—
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4,900
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||||||||||||||||||
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Net Loss for the Period
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—
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—
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—
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—
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(7,600
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)
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(7,600
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)
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Balance - October 31, 2008
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5,000,000
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5,000
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20,000
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—
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(29,453
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)
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(4,453
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)
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Net Loss for the Period
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—
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—
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—
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—
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(7,317
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)
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(7,317
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)
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Balance - October 31, 2009
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5,000,000
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5,000
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20,000
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—
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(36,770
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)
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(11,770
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)
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||||||||||||||||
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Net Loss for the Period
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—
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—
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—
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—
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(3,828
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)
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(3,828
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)
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Balance - October 31, 2010
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5,000,000
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5,000
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20,000
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—
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(40,598
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)
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(15,598
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)
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||||||||||||||||
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Common Stock Issued for Cash
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577,750
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578
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1,154,922
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—
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—
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1,155,500
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||||||||||||||||||
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Net Loss for the Period
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—
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—
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—
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—
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(2,631
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)
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(2,631
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)
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||||||||||||||||
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Balance - April 30, 2011
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5,577,750
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$
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5,578
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$
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1,174,922
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$
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—
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$
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(43,229
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)
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$
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1,137,271
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||||||||||||
F-2
AFH ACQUSITION IV, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
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APRIL 30, 2011 AND 2010 AND FOR THE PERIOD FROM DATE OF INCEPTION
(SEPTEMBER 24, 2007) THROUGH APRIL 30, 2011 (UNAUDITED)
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||||||||||||||||||||
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Period From
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||||||||||||||||||||
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Date of Inception
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||||||||||||||||||||
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For the Three Months Ended
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For the Six Months Ended
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(September 24, 2007)
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||||||||||||||||||
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April 30,
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April 30,
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Through
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||||||||||||||||||
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2011
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2010
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2011
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2010
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April 30, 2011
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||||||||||||||||
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Revenues
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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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—
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$
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—
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||||||||||
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Expenses
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||||||||||||||||||||
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Consulting
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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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—
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$
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1,736
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Interest
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—
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—
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—
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—
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15
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Legal and Professional
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863
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1,244
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2,138
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2,031
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39,121
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|||||||||||||||
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Office Expenses
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93
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—
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93
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—
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795
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|||||||||||||||
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Organizational Costs
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—
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—
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—
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—
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962
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—
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Total Expenses
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$
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956
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$
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1,244
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$
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2,231
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$
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2,031
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$
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42,629
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||||||||||
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Net Loss for the Period Before Taxes
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$
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(956
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)
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$
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(1,244
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)
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$
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(2,231
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)
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$
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(2,031
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)
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$
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(42,629
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)
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|||||
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Franchise Tax
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400
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125
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400
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125
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600
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|||||||||||||||
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Net Loss for the Period After Taxes
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$
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(1,356
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)
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$
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(1,369
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)
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$
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(2,631
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)
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$
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(2,156
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)
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$
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(43,229
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)
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|||||
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Loss per Share - Basic and Diluted
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$
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(0.00
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)
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$
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(0.00
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)
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$
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(0.00
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)
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$
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(0.00
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)
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$
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(0.01
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)
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|||||
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Weighted Average Common Shares Outstanding
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5,077,899
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5,000,000
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5,038,304
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5,000,000
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5,005,276
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|||||||||||||||
F-3
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AFH ACQUSITION IV, INC.
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(A DEVELOPMENT STAGE COMPANY)
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(A DELAWARE CORPORATION)
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Beverly Hills, CA
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AND 2010 AND FOR THE PERIOD FROM DATE OF INCEPTION (SEPTEMBER 24, 2007)
THROUGH APRIL 30, 2011 (UNAUDITED)
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||||||||||||
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Period From
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||||||||||||
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Date of Inception
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||||||||||||
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For the Six Months Ended
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(September 24, 2007)
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|||||||||||
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April 30,
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Through
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|||||||||||
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2011
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2010
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April 30, 2011
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||||||||||
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Cash Flows from Operating Activities
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||||||||||||
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Net Loss for the Period
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$
|
(2,631
|
)
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$
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(2,156
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)
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$
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(43,229
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)
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|||
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Changes in Assets and Liabilities:
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||||||||||||
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Prepaid Expenses
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—
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—
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—
|
|||||||||
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Accrued Expenses
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(2,840
|
)
|
(3,749
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)
|
863
|
|||||||
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Net Cash Flows from Operating Activities
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(5,471
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)
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(5,905
|
)
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(42,366
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)
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||||||
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Net Cash Flows from Investing Activities
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—
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—
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—
|
|||||||||
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Cash Flows from Financing Activities
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||||||||||||
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Cash Advance by (Repayment to) Parent
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5,731
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5,905
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17,626
|
|||||||||
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Cash Proceeds from Stock Subscriptions
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—
|
—
|
4,900
|
|||||||||
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Cash Proceeds from Sale of Stock
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—
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—
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20,100
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|||||||||
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Net Cash Flows from Financing Activities
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5,731
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5,905
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42,626
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|||||||||
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Net Change in Cash and Cash Equivalents
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260
|
—
|
260
|
|||||||||
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Cash and Cash Equivalents - Beginning of Period
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—
|
—
|
—
|
|||||||||
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Cash and Cash Equivalents - End of Period
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$
|
260
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$
|
—
|
$
|
260
|
||||||
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Cash Paid During the Period for:
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||||||||||||
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Interest
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$
|
—
|
$
|
—
|
$
|
—
|
||||||
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Income Taxes
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$
|
—
|
$
|
—
|
$
|
—
|
||||||
|
Supplemental Disclosure of Cash Flow Information
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||||||||||||
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Proceeds Held by Parent
|
$
|
1,155,500
|
$
|
—
|
$
|
1,155,500
|
||||||
F-4
AFH ACQUISITION IV, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
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Note A -
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The Company
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Prior to May 3, 2011, AFH Acquisition IV, Inc. (the “Company”) was a development stage company that was incorporated under the laws of the State of Delaware on September 24, 2007. The Company was majority owned by AFH Holding & Advisory, LLC (the “Parent”). The financial statements presented represent only those transactions of the Company. On April 21, 2011, the Company entered into a merger agreement and plan of merger with Emmaus Medical, Inc. (“Emmaus”), which closed on May 3, 2011 (See Note G). Effective September 14, 2011, “Emmaus Holdings, Inc.” changed its name to “Emmaus Life Sciences, Inc.”
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The condensed financial statements of the Company included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the annual audited financial statements and the notes thereto included in the Company’s annual report on Form 10-K, and other reports filed with the SEC.
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The accompanying unaudited interim financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole. Certain information that is not required for interim financial reporting purposes has been omitted.
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Note B -
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Summary of Significant Accounting Policies
|
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Method of Accounting
|
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The Company maintains its books and prepares its financial statements on the accrual basis of accounting.
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- continued -
F-5
AFH ACQUISITION IV, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
NOTES TO FINANCIAL STATEMENTS
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Note B -
|
Summary of Significant Accounting Policies - continued
|
|
Development Stage
|
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The Company has operated as a development stage enterprise since its inception by devoting substantially all of its efforts to financial planning, raising capital, research and development, and developing markets for its services. The Company prepares its financial statements in accordance with the requirements of FASB ASC 915.
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Cash and Cash Equivalents
|
|
|
Cash and cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. The Company maintains cash and cash equivalents at financial institutions, which periodically may exceed federally insured amounts.
|
|
Loss Per Common Share
|
|
|
Loss per common share is computed in accordance with FASB ASC 260-10, by dividing income (loss) available to common stockholders by weighted average number of common shares outstanding for each period.
|
|
Use of Estimates
|
|
|
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results can differ from those estimates.
|
|
Organizational Costs
|
|
|
Organizational costs represent management, consulting, legal, accounting, and filing fees incurred to date in the formation of the company. Organizational costs are expensed as incurred in accordance with FASB ASC 720-15.
|
|
Income Taxes
|
|
|
The Company accounts for income taxes in accordance with FASB ASC 740-10, using the asset and liability approach, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of such assets and liabilities. This method utilizes enacted statutory tax rates in effect for the year in which the temporary differences are expected to reverse and gives immediate effect to changes in income tax rates upon enactment. Deferred tax assets are recognized, net of any valuation allowance, for temporary differences and net operating loss and tax credit carry forwards. Deferred income tax expense represents the change in net deferred assets and liability balances.
|
F-6
AFH ACQUISITION IV, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
NOTES TO FINANCIAL STATEMENTS
|
Note B -
|
Summary of Significant Accounting Policies - continued
|
|
Financial Instruments
|
|
The Company’s financial instruments consist of cash and Prepaid Expense. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying value, unless otherwise noted.
|
|
Recent Pronouncements
|
|
|
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position, or cash flow.
|
|
Note C -
|
Equity Securities
|
|
Holders of shares of common stock shall be entitled to cast one vote for each common share held at all stockholder’s meetings for all purposes, including the election of directors. The common stock does not have cumulative voting rights.
|
|
The preferred stock of the Company shall be issued by the Board of Directors of the Company in one or more classes or one or more series within any class and such classes or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations or restrictions as the Board of Directors of the Company may determine, from time to time.
|
|
No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock or any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.
|
|
Note D -
|
Going Concern
|
|
The Company’s financial statements have been presented on the basis that it is a justified going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reported recurring losses from operations. As a result, there is an accumulated deficit of $43,229 at April 30, 2011.
|
|
The Company’s continued existence is dependent upon its ability to raise capital or acquire a marketable company. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
|
F-7
AFH ACQUISITION IV, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
NOTES TO FINANCIAL STATEMENTS
|
Note E -
|
Prepaid Expenses
|
|
Represents prepayment to AFH Holding & Advisory, LLC, (our parent) for future consulting services. The consulting services are expected to include identifying potential merger candidates as well as facilitating the merger transaction on our behalf.
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Note F -
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Stock Transactions
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On April 19, 2011, the Company sold an aggregate of 577,750 shares of common stock at a per share purchase price of $2.00 per share for gross proceeds of approximately $1.2 million (the “Private Placement”). The shares of our common stock sold in the Private Placement were not registered under the Securities Act of 1933, as amended (the “Securities Act”). All proceeds from this stock sale were retained by AFH Holding & Advisory, LLC, the Parent, prior to the merger (see Note G).
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Note G -
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Subsequent Events
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Pursuant to an Agreement and Plan of Merger, dated April 21, 2011 (the “Merger Agreement”), by and among AFH Acquisition IV, Inc. (“AFH IV”), AFH Merger Sub, Inc. (“AFH Merger Sub”), AFH Holding & Advisory, LLC (“AFH Advisory”), and Emmaus Medical, Inc. (“Emmaus”), Emmaus merged with and into AFH Merger Sub with Emmaus continuing as the surviving entity (the “Merger”). Upon the closing of the Merger on May 3, 2011, AFH IV changed its name from “AFH Acquisition IV, Inc.” to “Emmaus Holdings, Inc.” Effective September 14, 2011, “Emmaus Holdings, Inc.” changed its name to “Emmaus Life Sciences, Inc.”
Emmaus agreed to pay AFH Advisory, our Parent, $500,000 (the “Shell Cost”) for the identification of AFH IV and providing consulting services related to coordination the Merger, assisting with an offering and managing the interrelationship of legal and accounting activities (the “Services”), and to reimburse AFH Advisory for advancement of expenses on behalf of Emmaus incurred in connection with the Services, the Merger and an offering, including, without limitation, reasonable expenses of AFH Advisory (the “Transaction Costs”).
AFH Advisory may be paid any outstanding Shell Cost and Transaction Costs from the proceeds of a public offering or upon the consummation of any other financing. Alternatively, AFH Advisory may, in its discretion, convert such amount (or any portion thereof) into common stock of the Company at a conversion price equal to 75% of the per share price in the public offering (the “Conversion Price”). Additionally, the Company agreed to issue warrants to purchase shares of its common stock to AFH Advisory upon the closing of a public offering. Such warrants will have a term of 5 years from the date of issuance and will have an exercise price equal to the Conversion Price. The number of shares underlying the warrants will be calculated by dividing the aggregate of the Shell Cost and the total Transaction Costs by the Conversion Price.
Shares of the Company held by AFH Advisory and certain others will be decreased, at the rate of 1% of the post-offering outstanding common shares, for each $1 million or fraction thereof that the gross proceeds to the Company from the offering are less than $10 million. In the event of such reduction, AFH Advisory will reduce the number of those shares by an appropriate percentage. If an offering cannot be consummated to provide for minimum gross proceeds to the Company of at least $5 million, the Company’s arrangement with AFH Advisory provides that the Company may terminate the offering at its sole and absolute discretion, and if the Company terminates the offering, all shares held by AFH Advisory and certain others will be canceled.
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F-8
AFH ACQUISITION IV, INC.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Beverly Hills, CA
NOTES TO FINANCIAL STATEMENTS
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If the Company’s arrangement with AFH Advisory is terminated based on mutual agreement of the parties or based on a breach by the Company, AFH Advisory will receive its Transaction Costs incurred as of the date of termination. If the arrangement with AFH Advisory is terminated (i) by either party (without being cured within 30 days) based on identification of information in the course of its due diligence investigation that it deems unsatisfactory, or if the parties are unable to agree to a valuation within 45 days following completion of satisfactory due diligence by an investment bank, or (ii) by the Company if a public offering cannot be consummated to provide for gross proceeds to the Company of at least $10 million or based on a breach by AFH Advisory that is not cured within 30 days, then AFH Advisory will receive reimbursement for 50% of Transaction Costs actually incurred to the date of such termination. If a public offering cannot be consummated with gross proceeds of at least $5 million, and the Company exercises its right to terminate the offering, then the Company will reimburse AFH Advisory an amount equal to 50% of the Shell Cost and 50% of the Transaction Costs incurred as of the date of termination, and AFH Advisory, in its discretion, has the option to be paid any outstanding amounts at the time of termination in cash or to convert such amounts (or any portion thereof) into common stock at a conversion price equal to 75% of the per share price of the shares of common stock sold in the Company’s most recently completed private offering of common stock. In the event of termination by the Company because a public offering cannot be consummated to provide for gross proceeds to the Company of at least $10 million, and if the Company enters into any transaction or a sale of all or substantially all of its assets within 12 months of such termination, AFH Advisory will be entitled to (i) 5% of its holdings (including holdings of certain others) of any securities received by the Company or the Company’s shareholders upon consummation of any business combination or other similar transaction; or (ii) cash or any other consideration it would have received as if it had a 5% ownership interest in the Company immediately prior to the closing of any such transaction.
The Company granted AFH Advisory exclusive rights to act as its advisor in connection with all financings and mergers and acquisitions until November 10, 2012 and the right to appoint two board members to the Company’s board of directors upon the closing of the Merger. In addition, in the event of any merger, stock purchase, asset purchase or similar transaction occurring within one year of the closing of the public offering, AFH Advisory may receive a warrant to purchase shares in an amount to increase AFH Advisory’s total holdings to 10% of the outstanding fully diluted equity of the Company but only to the extent the Company issues securities in connection with such merger, stock purchase, asset purchase or similar transaction
We further note that just prior to the closing of the Merger, AFH Advisory canceled an aggregate of 1,827,750 shares of our common stock.
Upon consummation of the Merger, (i) each outstanding share of Emmaus common stock was exchanged for 29.48548924976 shares of AFH IV common stock, (ii) each outstanding Emmaus option and warrant, which was exercisable for one share of Emmaus common stock, was exchanged for an option or warrant, as applicable, exercisable for 29.48548924976 shares of AFH IV common stock; and (iii) each outstanding convertible note of Emmaus, which was converted for one share of Emmaus common stock, was exchanged for a convertible note exercisable for 29.48548924976 shares of AFH IV common stock. As a result of the Merger, securityholders of Emmaus received 24,378,305 (excluding 47,178 shares held by stockholders who exercised dissenters’ rights) shares of AFH IV common stock, options to purchase 23,590 shares of common stock, warrants to purchase an aggregate of 302,918 shares of AFH IV common stock, and convertible notes to purchase an aggregate of 271,305 shares of AFH IV common stock.
For accounting purposes, the Merger transaction will be accounted for as a reverse merger. The transaction has been treated as a recapitalization of Emmaus Medical and its subsidiaries, with AFH Acquisition IV, Inc. (the legal acquirer of Emmaus Medical and its subsidiaries) considered the accounting acquiree and Emmaus Medical whose management took control of AFH Acquisition IV, Inc. (the legal acquiree of Emmaus Medical) considered the accounting acquirer. Pro forma disclosure giving effect to the Merger has been included in the Company’s Current Report on Form 8-K/A filed with the SEC.
The Company entered into employment agreements with Yutaka Niihara, M.D., MPH, its Chief Executive Officer, Willis C. Lee, its Chief Operating Officer, and Lan T. Tran, its Chief Administrative Officer on April 5, 2011 and with Yasushi Nagasaki, its Chief Financial Officer, on April 8, 2011 (collectively, the “Employment Agreements”). Each of the Employment Agreements has an initial 2-year term, unless terminated earlier. The Employment Agreements for Dr. Niihara, Mr. Lee and Ms. Tran automatically renew for additional one year periods unless the Company or the officer provides notice of non-renewal at least sixty (60) days prior to the expiration of the then current term.
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F-9
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Item 2.
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Management’s Discussion and Analysis or Plan of Operation.
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Plan of Operation
Prior to May 3, 2011, AFH Acquisition IV, Inc. (the “Company”), was a development stage company that was incorporated under the laws of the State of Delaware on September 24, 2007. The Company was majority owned by AFH Holding & Advisory, LLC (the “Parent”). The financial statements presented represent only those transactions of the Company. (See Note G).
Pursuant to an Agreement and Plan of Merger, dated April 21, 2011 (the “Merger Agreement”), by and among the Company, AFH Merger Sub, Inc. (“AFH Merger Sub”), AFH Holding & Advisory, LLC (“AFH Advisory”), and Emmaus Medical, Inc. (“Emmaus”), Emmaus merged with and into AFH Merger Sub with Emmaus continuing as the surviving entity (the “Merger”). Upon the closing of the Merger on May 3, 2011, the Company changed its name from “AFH Acquisition IV, Inc.” to “Emmaus Holdings, Inc.” Effective September 14, 2011, “Emmaus Holdings, Inc.” changed its name to “Emmaus Life Sciences, Inc.”
Upon consummation of the Merger, (i) each outstanding share of Emmaus common stock was exchanged for 29.48548924976 shares of AFH IV common stock, (ii) each outstanding Emmaus option and warrant, which was exercisable for one share of Emmaus common stock, was exchanged for an option or warrant, as applicable, exercisable for 29.48548924976 shares of AFH IV common stock; and (iii) each outstanding convertible note of Emmaus, which was converted for one share of Emmaus common stock, was exchanged for a convertible note exercisable for 29.48548924976 shares of AFH IV common stock. As a result of the Merger, securityholders of Emmaus received 24,378,305 (excluding 47,178 shares held by stockholders who exercised dissenters’ rights) shares of AFH IV common stock, options to purchase 23,590 shares of common stock , warrants to purchase an aggregate of 302,918 shares of AFH IV common stock, and convertible notes to purchase an aggregate of 271,305 shares of AFH IV common stock.
Emmaus is engaged in the discovery, development, and commercialization of innovative and cost-effective treatments and therapies, areas that may have traditionally been underserved by large pharmaceutical companies. Emmaus believes that there are attractive niche markets and financial opportunities for companies one that specializes in treatments for rare diseases. Over time, Emmaus plans to expand the business to include developing and marketing products to treat more common diseases. The primary focus of the business is the late-stage development of the amino acid L-glutamine as a prescription drug for the treatment of sickle cell disease (“SCD”). To a lesser extent, Emmaus is also engaged in the marketing and sale of NutreStore® [L-glutamine powder for oral solution] and promotion of Zorbtive® [somatropin (rDNA origin) for injection], as a treatment for short bowel syndrome (“SBS”) and the sale of L-glutamine as a nutritional supplement under the brand name AminoPure®. Since inception, Emmaus has generated minimal revenues from the sale and/or promotion of NutreStore®, Zorbtive® and AminoPure®.
Results of Operations
The Company has not conducted any active operations since inception, except for its efforts to locate suitable acquisition candidates. No revenue has been generated by the Company from September 24, 2007 (inception) to April 30, 2011. See the Company's Current Report on Form 8-K/A filed with the SEC for results of operations of Emmaus.
Expenses incurred since inception are primarily due to legal, accounting, and other professional service fees.
Liquidity and Capital Resources
At April 30, 2011, the Company had limited capital resources and has relied upon the issuance of common stock and additional capital contributions from shareholders to fund administrative expenses pending the acquisition of an operating company.
2
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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Item 3.
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Quantitative and qualitative Disclosures About Market Risk
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Not applicable.
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Item 4.
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Controls and Procedures.
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Evaluation of Disclosure Controls and Procedures
Our Principal Executive Officer and Principal Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of April 30, 2011. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were ineffective.
Changes in Internal Controls.
As of May 3, 2011, we completed a merger as disclosed in Note G of the financial statements. Upon completion of the Merger, the Company adopted the operating control system of Emmaus Medical, Inc., now Emmaus Life Sciences, Inc.
3
PART II – OTHER INFORMATION
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Item 1.
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None
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds.
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None
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Item 3.
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Defaults Upon Senior Securities.
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None
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Item 4.
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None
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Item 5.
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None
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Item 6.
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(a) Exhibits required by Item 601 of Regulation S-K.
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Exhibit
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Description
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4
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
Dated: November 22, 2011
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EMMAUS LIFE SCIENCES, INC.
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||||
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(Registrant)
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By:
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/s/ Yutaka Niihara
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Name:
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Yutaka Niihara M.D., MPH.
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Title:
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President and Chief Executive Officer and Duly Authorized Officer
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5