Item 1.01
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Entry into a Material Definitive Agreement
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Merger Agreement
On January 4, 2019, MYnd Analytics, Inc., a Delaware corporation
(the “Company” or “MYnd”), entered into an Agreement and Plan of Merger (the “Merger Agreement”)
by and among the Company, the Company’s wholly owned subsidiary, Athena Merger Subsidiary, Inc., a Delaware corporation (“Merger
Sub”), and Emmaus Life Sciences, Inc., a Delaware corporation (“Emmaus”). Under the terms of the Merger Agreement,
pending stockholder approval of the transaction, Merger Sub will merge with and into Emmaus with Emmaus surviving the merger and
becoming a wholly-owned subsidiary of MYnd (the “Merger”). Subject to the terms of the Merger Agreement, at the effective
time of the Merger, Emmaus stockholders will receive a number of newly issued shares of MYnd common stock determined using the
exchange ratio described below in exchange for their shares of Emmaus stock. Following the Merger, stockholders of Emmaus will
become the majority owners of MYnd.
The exchange ratio will be determined prior to closing and will
cause the MYnd securityholders (including holders of options and warrants) prior to the effective time to collectively own 5.9%
of the combined company on a fully diluted basis and Emmaus securityholders (including holders of options, warrants and convertible
notes) prior to the effective time to collectively own 94.1% of the combined company on a fully diluted basis. The exchange ratio
will reflect any dilution that may result from securities sold by MYnd or Emmaus prior to the closing of the Merger and any changes
to the number of outstanding convertible securities of each company. The Merger Agreement provides that if Emmaus converts certain
debt obligations into equity within six months of the completion of the Merger, Emmaus will issue additional shares (equal to 5.9%
of the shares issued in connection with the debt conversion to third parties) to an existing subsidiary of MYnd which is expected
to be spun-off to stockholders of MYnd prior to the effective time of the merger, as described below.
The combined company, led by Emmaus’ management team,
is expected to be named “Emmaus Life Sciences, Inc.” Prior to the closing of the Merger, MYnd will seek shareholder
approval to conduct a reverse split of its outstanding shares if necessary to satisfy listing requirements of the Nasdaq Capital
Market (the “NasdaqCM”). The combined company is expected to trade on the NasdaqCM under a new ticker symbol. At the
closing, the combined company’s board of directors is expected to consist of one member from MYnd and up to six members from
Emmaus. The Merger has been unanimously approved by the Board of Directors of each company. The transaction is expected to close
in the first half of 2019, subject to approvals by the stockholders of MYnd and Emmaus, and other closing conditions, including
but not limited to the approval of the continued listing of the combined company’s common stock on the NasdaqCM, conversion
of MYnd’s preferred stock into common stock, satisfaction of certain cash and debt conversion conditions and consummation
of the MYnd spin-off described below.
The parties to the Merger Agreement have made representations
and warranties to each other as of specific dates for the purpose of allocating risk and not for the purpose of establishing facts.
Accordingly, the representations and warranties should not be relied on as characterizations of the actual state of facts.
The
Merger Agreement contains certain termination rights for each of MYnd and Emmaus, and further provides that, upon certain terminations
of the Merger Agreement, MYnd may be required to pay Emmaus a termination fee of $750,000 and Emmaus may be required to pay MYnd
a termination fee of $750,000; provided that if the termination results from the failure to obtain the approval of the continued
listing of the combined company’s common stock on the NasdaqCM, this fee payable by Emmaus will be $1,600,000. In connection
with the termination of the Merger Agreement upon certain circumstances, either party also may be required to pay the other party’s
third party expenses up to $600,000. The termination of the Merger Agreement will not relieve any party thereto from any liability
or damages resulting from or arising out of any fraud or willful or intentional breach of any representation, warranty, covenant,
obligation or other provision contained in the Merger Agreement.
The foregoing summary of the Merger Agreement and the transactions
contemplated thereunder and any other agreements to be entered into by the parties is qualified in its entirety by reference to
the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and incorporated herein by reference. You are urged
to read the Merger Agreement in its entirety.
Spin-Off
Prior
to the closing of the Merger, the Company currently intends, subject to obtaining any required regulatory approvals and the completion
of certain tax analyses, to transfer all of its businesses, assets and liabilities not assumed by Emmaus to its existing wholly-owned
subsidiary, MYnd Analytics, Inc., a California corporation (“MYnd California”), pursuant to the terms of a Separation
Agreement (the “Separation Agreement”) entered into on January 4, 2019 by the Company and MYnd California. The Company
intends to distribute all shares of MYnd California held by it to the Company’s stockholders of record as of a future record
date to be determined for said distribution. The Separation Agreement includes the terms of the proposed spin-off and the distribution
to the Company’s stockholders and includes representations and warranties, covenants and conditions, which will impact the
terms of the proposed spin-off and distribution. The proposed spin-off will be subject to conditions and regulatory approvals
not entirely under the control of MYnd and the terms of the proposed spin-off, if and when completed, are subject to change.
The foregoing summary of the Separation Agreement and the transactions
contemplated thereunder and any other agreements to be entered into by the parties is qualified in its entirety by reference to
the full text of the Separation Agreement, which is attached hereto as Exhibit 10.1 and incorporated herein by reference. You are
urged to read the Separation Agreement in its entirety.
Voting Agreements
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Concurrently and in connection with the execution of the Merger
Agreement, Emmaus’ directors and executive officers, who beneficially own approximately 30% of the outstanding shares of
Emmaus common stock, entered into a voting agreement in favor of MYnd (the “Emmaus Voting Agreements”), pursuant to
which such Emmaus stockholders will agree (solely in their capacities as Emmaus stockholders) to vote their shares of Emmaus common
stock in favor of the adoption of the Merger Agreement and against any amendment of Emmaus’ certificate of incorporation
or bylaws or any other proposal or transaction involving Emmaus, the effect of which amendment or other proposal or transaction
is to delay, impair, prevent or nullify the Merger or the transactions contemplated by the Merger Agreement or change in any manner
the voting rights of any capital stock of Emmaus.
Concurrently and in connection with the execution of the Merger
Agreement, the directors and executive officers and certain of MYnd’s stockholders, who beneficially own approximately 33%
of the outstanding shares of MYnd voting stock, entered into a voting agreement in favor of Emmaus (the “MYnd Voting Agreements”
and with the Emmaus Voting Agreements, the “Voting Agreements”), pursuant to which such MYnd stockholders will agree
(solely in their capacities as MYnd stockholders) to vote their shares of MYnd voting stock in favor of the adoption of the Merger
Agreement and against any amendment of MYnd’s certificate of incorporation or bylaws or any other proposal or transaction
involving MYnd, the effect of which amendment or other proposal or transaction is to delay, impair, prevent or nullify the Merger
or the transactions contemplated by the Merger Agreement or change in any manner the voting rights of any capital stock of MYnd.
The Voting Agreements shall automatically terminate in the event
of the termination of the Merger Agreement for any reason. The signatories thereto may not sell or transfer their shares other
than under specified circumstances pursuant to the Voting Agreements.
The foregoing description of each of the Emmaus Voting Agreements
and MYnd Voting Agreements does not purport to be complete and is qualified in its entirety by reference to the forms of Voting
Agreements, which are filed as Exhibits 10.2 and 10.3 and incorporated herein by reference.
Lock-Up Agreements
Concurrently and in connection with the execution of the Merger
Agreement, the directors and executive officers of Emmaus also entered into post-closing lock-up agreements with MYnd (the “Emmaus
Lock-up Agreements”). Pursuant to the Emmaus Lock-up Agreements, each such stockholder will be subject to lock-up restrictions
on the sale of MYnd common stock acquired in the Merger. Such restrictions will begin at the Effective Time and end 120 days after
the Effective Time.
Concurrently and in connection with the execution of the Merger
Agreement, the directors and executive officers of MYnd who entered in the MYnd Voting Agreement also entered into post-closing
lock-up agreements (the “MYnd Lock-up Agreements”). Pursuant to the MYnd Lock-up Agreements, each such stockholder
will be subject to lock-up restrictions on the sale of MYnd common stock owned by them. Such restrictions will begin at the Effective
Time and end 90 days after the Effective Time.
The foregoing description of each of the Emmaus Lock-Up Agreements
and MYnd Lock-Up Agreements does not purport to be complete and is qualified in its entirety by reference to the forms of Lock-Up
Agreements, which are filed as Exhibits 10.4 and 10.5 and incorporated herein by reference.