Document:

Exhibit 10.27

 

September 30, 2011

 

Emmaus Life Sciences, Inc.

20725 S. Western Avenue

Ste. 136

Torrance, CA 90501

 

Attn: Dr. Yutaka Niihara, Chairman of the Board, Chief Executive Officer and President

 

Dear Dr. Niihara,

 

We are pleased to submit this amended and restated Letter of Intent (“LOI”) between AFH Holding & Advisory LLC and Emmaus Life Sciences, Inc. with respect to the transactions described below.  On May 3, 2011, pursuant to an Agreement and Plan of Merger dated April 21, 2011 by and among AFH Acquisition IV, a Delaware corporation (the “AFH Acquisition IV”), AFH Merger Sub, Inc., a wholly-owned subsidiary of AFH Acquisition IV, AFH Holding and Advisory, LLC (“AFH Advisory”) and Emmaus Medical, Inc., a Delaware corporation, (“Emmaus Medical”), Emmaus Medical merged with and into AFH Merger Sub with Emmaus Medical as the surviving entity (the “Merger”).  Subsequent to the Merger, AFH Acquisition IV changed its name to Emmaus Life Sciences, Inc., which is referred to herein as the “Company”.  References to AFH Acquisition IV and Emmaus Medical mean the respective entities as each existed prior to the Merger. This LOI is intended to replace and supersede the letters of intent between the parties dated November 10, 2010 and April 21, 2011, and this LOI is intended to be a binding agreement between the parties.

 

	
Item
    	
 
    	
Description
    
	
Business Combination  and Consideration:
    	
 
    	
(i)   Upon the consummation (the “Closing”) of the Merger, (ii) after giving   effect to the issuance of any securities by AFH Acquisition IV in connection   with the Merger (the “Business Combination Shares”), (iii) after   giving effect to the issuance of any securities by AFH Acquisition IV in   connection with the Private Financing (as defined herein) (the “Private   Financing Shares”) and (iv) after giving effect to the issuance of any   securities by the Company in connection with the Offering (as defined herein)   (the “Offering Shares”), the stockholders of AFH Acquisition IV   immediately prior to the Merger, Amir F. Heshmatpour and his relatives,   assignees and affiliates (“AFH Group”) own Ten Percent (10%) of the   issued and outstanding common shares of the Company (the “Advisor Shares”).   The Advisor Shares shall be issued as follows: (1) If the Advisor Shares   represent an amount greater than 10% of the interest in issued and   outstanding common stock post Offering, then AFH
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Group   will cause to be cancelled an amount of shares necessary to arrive at 10%   interest in issued and outstanding common stock post Offering. (2) If the   Advisor Shares represent an amount less than 10% of the interest in issued   and outstanding common stock post Offering, then the Company will cause to be   issued an amount of shares necessary to cause AFH Group to have ownership   equal to 10% of the interest in issued and outstanding common stock post   Offering.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Upon   the Closing of the Merger, each then-outstanding share of Emmaus Medical   common stock and each option, warrant and note exercisable for or convertible   into, as applicable, shares of Emmaus Medical common stock was exchanged for 29.48548924976   shares of AFH Acquisition IV common stock and options, warrants and notes   exercisable for or convertible into, as applicable, 29.48548924976 shares of   AFH Acquisition IV common stock.  Immediately   after the Closing of the Merger, the Company had 24,378,305 shares of common   stock (excluding 47,178 shares held by stockholders who exercised dissenters’   
    

 

 

	
 
    	
 
    	
rights),   no shares of preferred stock, options to purchase 23,590 shares of common   stock, warrants to purchase 302,918 shares of common stock and convertible   notes exercisable for 271,305 shares of common stock issued and outstanding.   Based on the above, prior to the Closing of the Merger, AFH Advisory canceled   an aggregate of 1,827,750 shares of Acquisition IV common stock pursuant to a   Share Cancellation Agreement dated May 3, 2011.  The aggregate shares held by the AFH Group   and the Private Financing Shares is 3,750,000 shares, which consists of   2,372,250 shares held by AFH Advisory, 272,000 shares held by Griffin Ventures,   500,000 shares held by Tim Brasel, 577,750 Private Financing Shares.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
The   Advisor Shares held by the AFH Group shall be decreased, at the rate of 1% of   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 agrees to   reduce the number of Advisor Shares by appropriate percentage. If the   Offering cannot be consummated to provide for minimum gross proceeds to the   Company of at least $5 million, and the Company exercises its right to   terminate the Offering, then all Advisor Shares shall be canceled.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
AFH   Advisory shall provide appropriate representations and warranties that it has   complied with all laws and regulations regarding receipt of compensation in   connection with the capital raising transactions contemplated in this LOI.
    
	
 
    	
 
    	
 
    
	
Private  Financing:
    	
 
    	
In   March 2011, Emmaus Medical completed a private placement of its shares of   common stock for gross proceeds of approximately $1.2 million (the “Private   Financing”).  The shares issued in   the Private Financing shall not be considered Advisor Shares.
    
	
 
    	
 
    	
 
    
	
Offering:
    	
 
    	
Following   the Closing, AFH Advisory shall assist the Company in conducting a sale of   the Offering Shares, through either a private or public financing, resulting   in gross proceeds in the amount of between $25 million and $50 million, at a   minimum estimated pre-money valuation of $90 million and a maximum estimated   pre-money valuation of $155 million, to be mutually agreed upon (the “Offering   Price”) and other terms and conditions to be based upon market conditions   (the “Offering”). Sunrise Securities is expected to act as underwriter   for the Offering. The Company also agrees to a 20% over allotment at AFH   Advisory and/or the underwriter’s discretion.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
If   the Offering cannot be consummated to provide for minimum gross proceeds to   the Company of at least $5 million, the Company shall have the right to   terminate the Offering at its sole and absolute discretion.
    
	
 
    	
 
    	
 
    
	
Listing Standards Contingency:
    	
 
    	
Upon   completion of the Offering, AFH Acquisition IV shall satisfy the Public   shareholders/Public float listing standards for original listing of the   Company’s securities on the NYSE, AMEX or NASDAQ.
    
	
 
    	
 
    	
 
    
	
Company Milestone Representations:
    	
 
    	
The   Company will use commercially reasonable efforts to achieve the following   Milestone (the “Milestones Targets”)  

 

(i)           NutreStore launch in Hong   Kong by the second quarter of 2012.  

 

(ii)        Taiwan   sales of AminoPure by first quarter 2011.  

 

(iii)       At   least 15 sites will be signed up for Phase III testing by end of the first   quarter of 2011.  

 

(iv)       Recruitment   for the study patients will be completed by the end of the first quarter of   2012.  

 
    

 

 

	
 
    	
 
    	
(v)        First   Phase III Trial will be completed by the end of the first quarter of 2013.    

 

(vi)       Sign   Licensing Agreement with CellSeed prior to Closing 

 

Failure   of the Company to meet any Milestone Targets shall not be deemed to   constitute a breach of this LOI.
    
	
 
    	
 
    	
 
    
	
Right to Future  Financings:
    	
 
    	
Subject   to and conditioned upon the completion of the Merger and Offering, AFH   Advisory shall have the exclusive rights to act as advisor to the Company on   all financings and mergers and acquisitions for a period of 2 years from   November 10, 2010 on commercially reasonable terms. The terms of each such   engagement shall be applicable industry standards. In addition, in the event   of any merger, stock purchase, asset purchase or similar transaction   occurring within one year of the closing of the Offering, AFH Advisory may   receive a warrant to purchase shares in an amount to increase the AFH Group’s   total holdings to 10% of the outstanding fully diluted equity of AFH   Acquisition IV only to the extent the Company issues securities in connection   with such merger, stock purchase, asset purchase or similar transaction.
    
	
 
    	
 
    	
 
    
	
Right to Approve Management
    	
 
    	
The   Company’s Chief Financial Officer shall be acceptable to AFH Advisory which   acceptance shall not be unreasonably withheld.
    
	
 
    	
 
    	
 
    
	
Management Agreements
    	
 
    	
Subject   to corporate governance and national exchange listing requirements, the   Company will enter into employment agreements with key employees and approve   a stock plan in connection with the Business Combination.
    
	
 
    	
 
    	
 
    
	
Right to Appoint Directors; Right to Approve Independent Directors
    	
 
    	
Prior   to the consummation of the Offering, AFH Advisory shall have a right to   appoint 2 members of the Company’s Board of Directors with up to a 9 member   Board of Directors. Prior to consummation of the Offering, AFH Advisory shall   also have a right to provide non-binding advice regarding the election of the   remaining independent members of the Company’s Board of Directors. 

 

Subject   to corporate governance, national exchange listing requirements and   shareholder voting standards, board members designated by AFH Advisory shall   remain on the board of the Company or any successor company, or entity for a   period of at least two (2) years post- Business Combination if the members so   decide and as may be approved by shareholders.
    
	
 
    	
 
    	
 
    
	
Right to Approve Professionals
    	
 
    	
AFH   Advisory shall have the right to reject the attorneys and auditors who will   be responsible for facilitating the Business Combination and preparing and   filing the Registration Statement (including any amendments thereto) in   connection with the Offering.
    
	
 
    	
 
    	
 
    
	
Due Diligence:
    	
 
    	
Prior   to the execution of the Merger agreement (the “Merger Agreement”), AFH   Advisory shall have the right to conduct a customary business, accounting,   financial and legal due diligence investigation of the business and   operations of the Company to its satisfaction, including receipt of a   favorable independent third party due diligence report (the “Third-Party   DD Report”). The fees for the Third Party DD Report shall not exceed   $15,000.  The Company shall have the   right to approve the third party preparing the Third- Party DD Report. The   Third-Party DD Report and all related work product, shall be Proprietary   Information of the Company, as defined in the Mutual Nondisclosure Agreement   dated as of October 11, 2010 between AFH Advisory and the Company.   Additionally, prior to the execution of the Business Combination Agreement,   the Company shall have the right to conduct a due diligence investigation of   the business and operations of AFH Acquisition IV.
    

 

 

	
Conditions to Closing:
    	
 
    	
(1) Immediately   after the Closing, AFH Acquisition IV will have approximately 40 million   shares of Common Stock issued and outstanding. 

 

(2) All   necessary consents of third parties will be obtained prior to Closing   including, without limitation, all required consents from any governmental   authorities. 

 

(3) To   the extent that a majority of the board of directors of AFH Acquisition IV   will be replaced after the Closing, a Schedule 14F-l Information Statement   shall have been filed with the United States Securities and Exchange   Commission (“SEC”) and mailed to the stockholders or AFH Acquisition   IV at least 10 days prior to Closing. 

 

(4) On   or prior to Closing, the Company shall have provided audited and/or   un-audited financial statements of the Company as may be required for the   Current Report on Form 8-K required to be filed with the SEC within four   business days after the Closing. 

 

(5) AFH   Acquisition IV shall be current and compliant in filing all periodic reports   under the Securities Exchange Act of 1934.
    
	
 
    	
 
    	
 
    
	
Registration Rights:
    	
 
    	
The   Advisor Shares and any pre-Merger shareholders of the Company who   beneficially own less than 10% of AFH Acquisition IV (excluding any Affiliates)   following the Closing shall be provided with normal and customary piggyback   registration rights.
    
	
 
    	
 
    	
 
    
	
Lock-Up Agreement
    	
 
    	
Unless   otherwise agreed by the investment bank who is engaged for the Offering,   shares owned by directors, officers and any 10% shareholder (and their   affiliates) will be locked-up until 12 months after the Registration   Statement associated with the Offering is declared effective.
    
	
 
    	
 
    	
 
    
	
Investor Relations  Firm
    	
 
    	
The   Company will use its best efforts to hire and maintain a reputable investor   relations firm acceptable to AFH Advisory within 30 days prior to the Closing   of the Business Combination, which acceptance shall not be unreasonably   withheld.
    
	
 
    	
 
    	
 
    
	
No Material Change  in Business:
    	
 
    	
From   and after the date of this LOI until the earliest to occur of:  (i) the termination of this LOI as provided   below or (ii) the execution of the Merger Agreement the Company will use   commercially reasonable efforts to maintain its business in accordance with   its customary practices and otherwise to conduct its business in the ordinary   course in the manner in which it has heretofore been conducted and to   preserve its business relationships with its customers and suppliers, to the   extent applicable.
    
	
 
    	
 
    	
 
    
	
Covenants of the Company and Management:
    	
 
    	
To   include normal and customary covenants (in respect of the Company and its   subsidiaries) in any firm commitment underwriting agreement regarding: 

 

· Limitation   on issue or sale of common stock and other securities convertible or   exchangeable into or exercisable for common stock (excluding securities   issued pursuant to any equity incentive plan).
    
	
 
    	
 
    	
 
    
	
Closing:
    	
 
    	
The   parties agree to use commercially reasonable efforts to consummate the   Closing of the Merger on or before the date that is 120 days after an audit   of the Company’s financial statements in accordance with U.S. GAAP for two   years and reviewed for 2010 is issued.
    
	
 
    	
 
    	
 
    
	
Exclusive Dealing:
    	
 
    	
From   the date of this LOI until the earlier of the date of (i) termination of this   LOI as provided below or (ii) the execution of the Merger Agreement, neither   the Company, nor any of its officers, employees, directors, managers,   stockholders, other equity holders, advisors, representatives or affiliates   will enter into or continue any negotiations or discussions with 
    

 

 

	
 
    	
 
    	
other   parties relating to any transaction similar to the Merger. AFH Advisory may   pursue any and all remedies in law or in equity in the event of a material   breach of this provision by the Company, including an action for specific   performance without the posting of any bond.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
In   the event of a material breach of this “Exclusive Dealing” Section by the   Company, in lieu of any damages or an action for specific performance, AFH   Advisory shall be entitled to liquidated damages of: (i) 5% of any securities   received by the Company or the Company’s shareholders upon consummation of   any merger, securities exchange or other business combination (a “Business   Combination”) or other similar transaction; or (ii) upon a sale of the   Company (or a sale of all or substantially all of its assets) 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. Other than such liquidated damages, the Company shall have no   further liability for breach of this Exclusive Dealing Section. 

 

The   Merger Agreement was executed on April 21, 2011.
    
	
 
    	
 
    	
 
    
	
Confidentiality:
    	
 
    	
Each   party agrees to keep confidential any information obtained by it from the   other party in connection with its investigators or otherwise in connection   with these transactions and, if such transactions are not consummated, to   return to the other party any documents and copies thereof received or   obtained by it in connection with the proposed transactions.  Further, except as and to the extent   required by law, without the prior written consent of the other party, AFH   Advisory and the Company shall not make any public comment, statement or   communication with respect to, or otherwise disclose or permit the disclosure   of the existence of discussions regarding, a possible transaction among the   parties or any of the terms, conditions or other aspects of the transaction   proposed in this LOI.  If a party is   required by law to make any such disclosure, it must first provide to the   other party the content of the proposed disclosure, the reasons that such   disclosure is required by law, and the time and place that the disclosure   will be made.
    
	
 
    	
 
    	
 
    
	
Shell Price and Transaction Expenses:
    	
 
    	
AFH   Advisory shall be entitled to the following from the Company: 

 

(i)   $500,000 (the “Shell Cost”) for the identification of AFH Acquisition   IV and providing consulting services related to coordinating the Merger,   assisting with the Offering and managing the interrelationship of legal and   accounting activities (the “Services”), and 

 

(ii)   reimbursement of advancement of expenses on behalf of the Company incurred in   connection with the Services, the Merger and the Offering, including, without   limitation, reasonable expenses of AFH Advisory, preparation of the   Third-Party DD Report (not to exceed $15,000), preparation and negotiation of   the Merger Agreement and any ancillary agreements, the Offering documents, as   well as fees of attorneys (including the attorneys’ fees incurred by AFH   Acquisition IV in connection with the Merger), financial advisors,  brokerage or finder’s fees and other fees   and expenses (collectively, all such costs and expenses, the “Transaction   Expenses”). 

 

All   Transaction Expenses will be approved by both AFH Advisory and the Company   prior to engagement or agreement to fee agreements. Such approval shall not   be unreasonably withheld. 

 

AFH   Advisory agrees to be paid the Shell Cost and Transaction Expenses at the   time of the closing of the Offering or, at AFH Advisory’s option, upon   consummation of any other financing undertaken by the Company following   consummation of the Merger. 

 

Instead   of receiving cash as payment for the Shell Cost and Transaction Expenses, AFH   Advisory may, in its sole discretion, convert such amount (or any portion   thereof) at the Closing of the Offering into additional shares of the common   stock of the Company at a valuation equal to 75% of the Offering Post Money   Value (the “Conversion Price”).
    

 

 

	
Payment of Shell Cost and Transaction Expenses upon Termination
    	
 
    	
If   Termination occurs as provided in clause (i) or (v) (termination occurs as a   result of breach by the Company), of the “Termination” section below, AFH   Advisory will receive reimbursement for Transaction Expenses actually   incurred to the date of such Termination. 

 

If   Termination occurs as provided in clauses (ii), (iii), (iv) or (v) (termination   occurs as a result of breach by AFH Advisory), of the “Termination” section   below, AFH Advisory will receive reimbursement for fifty percent (50%) of   Transaction Expenses actually incurred to the date of such Termination. 

 

If   the Offering cannot be consummated to provide for minimum gross proceeds to   the Company of at least $5 million, and the Company exercises its right to   terminate the Offering, then, to equitably allocate the risk of the inability   to consummate the Offering, the Company will pay to AFH Advisory (i) fifty   percent (50%) of the Shell Cost and (ii) fifty percent (50%) of the   Transaction Expenses actually incurred to the date the Company exercises its   right to terminate the Offering. AFH Advisory, in its discretion, has the   option to be reimbursed by the Company 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. 

 

Notwithstanding   the above, the Company will bear responsibility for all Auditor and Audit   costs even in the event of a Termination.
    
	
 
    	
 
    	
 
    
	
Warrants
    	
 
    	
If   the Offering is consummated, AFH Advisory shall also be entitled to receive   warrants (the “Warrants”). The Warrants will have a 5 year term, an   exercise price equal to the Conversion Price and a cashless exercise   provision.  The number of shares   underlying the Warrants will be calculated by dividing $788,893 by the   Conversion Price.
    
	
 
    	
 
    	
 
    
	
Termination:
    	
 
    	
After   the execution of this LOI by the parties, this LOI may be terminated upon:  (i) the mutual written agreement of AFH   Advisory and the Company, (ii) written election of either party if that party   or its counsel identifies any information, item or other matter in the course   of its due diligence investigation of the other party that it deems   unsatisfactory, provided that the other party shall be entitled to cure any   such item or other matter if such item or other matter is capable of being   cured within 30 days after written notice of such item or other matter from   the terminating party, (iii) written election of AFH Advisory or the Company   if the parties are unable to agree to a valuation, as set forth by an   investment bank mutually agreed to by AFH Advisory and the Company and   retained by the Company (the “Investment Bank”) within 45 days   following completion of satisfactory Due Diligence by the Investment Bank,   (iv) written election of the Company if AFH Advisory does not deliver firm   underwriting commitments for at least $10 million Offering on or prior to the   date provided for in the “Offering” section, or (v) upon written election of   either party upon a material breach of any material binding terms or   conditions of this LOI and failure to cure such breach within 30 days of   receipt of written notice by the terminating party. 

 

In   the event of termination of this LOI by AFH Advisory as a result of the   breach by the Company of the Exclusive Dealing provision or pursuant to   subsection (iv) of the Termination provision of this LOI, if the Company   enters into any transaction or a sale of all or substantially all of its   assets within twelve months of such termination, AFH Advisory shall be   entitled as liquidated damages to: (i) 50% of the percentage of the Advisor   Shares (i.e. 5%) 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.
    
	
 
    	
 
    	
 
    
	
Binding  Provisions:
    	
 
    	
The   provisions set forth in this LOI are intended to and do constitute a binding   and legally enforceable agreement.
    

 

 

	
Miscellaneous  Provisions:
    	
 
    	
(1)  Governing Law, Dispute Resolution, and   Jurisdiction.  This LOI shall be   governed by and construed in accordance with the laws of the State of   Delaware without giving effect to the conflicts of laws principles thereof.  All disputes, controversies or claims   arising out of or relating to this LOI shall be brought in Federal Court of   the Central District of Delaware or in a Superior Court located in Delaware.   The parties hereby irrevocably waive any objection to jurisdiction and venue   or any action instituted hereunder and shall not assert any defense based on   lack of jurisdiction or venue or based upon forum   non conveniens. The parties agree to submit to the in personam jurisdiction   of such courts.  The prevailing party   in any such dispute shall be entitled to recover from the other party its   reasonable attorneys’ fees, costs and expenses. 

 

(2)  Counterparts.  This LOI may be signed in two or more   counterparts, each of which shall constitute an original, and all of which   together shall constitute one and the same agreement.  The exchange of copies of this LOI and of   signature pages by facsimile transmission or by email transmission in   portable digital format, or similar format, shall constitute effective   execution and delivery of such instrument(s) as to the parties and may be   used in lieu of the original for all purposes.  Signatures of the parties transmitted by   facsimile or by email transmission in portable digital format, or similar   format, shall be deemed to be their original signatures.
    

 

If you agree to the foregoing, please return a signed copy of this LOI to the undersigned.

 

 

	
 
    	
 
    	
Very   truly yours,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
AFH HOLDING AND ADVISORY, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Amir Heshmatpour
    
	
 
    	
 
    	
 
    	
Amir F. Heshmatpour
    
	
 
    	
 
    	
 
    	
Managing Director
    
	
 
    	
 
    	
 
    
	
EMMAUS LIFE SCIENCES, INC.
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Yutaka Niihara
    	
 
    	
 
    
	
Dr.   Yutaka Niihara
    	
 
    	
 
    
	
Chief   Executive Officer and PresidentTyped by:
  Proofed by LEASE EXTENSION Date: November 4, 2013 RE: 20725 S. Western
  Avenue, #136,-Torrance, CA 90501 The undersigned hereby agree to extend that
  certain lease dated March 12. 2008 between EMMAUS MEDICAL INC. and 20655 S.
  WESTERN AVENUE, LLC for six (6) month(s) commencing December1, 2013 and
  ending May 31, 2014 at a monthly rent of $5675.00 payable in advance on the
  first day of each month. ALL OTHER TERMS AND CONDITIONS OF SAID LEASE WILL
  REMAIN IN FULL FORCE AND EFFECT AND ARE IN NO WAY AFFECTED BY THIS RENEWAL.
  LESSEE: EMMAUS MEDICAL, INC. LESSOR: 20655 S. WESTERN AVENUE, LLC BY: SURF
  MANAGEMENT;INC. BY: Steven P. Fechner, President DATE: 11/15/13 Please return
  to: Surf Management, Inc., P.O. Box 3217, Torrance, CA 90510 Phone 310/533-5900

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00230-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00230-of-00352.parquet"}]]