Emmaus Life Sciences, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

NOTES PAYABLE (Tables)

NOTES PAYABLE (Tables)

12 Months Ended

Dec. 31, 2020

Notes payable consisted of the following at December 31, 2020 and 2019 (in thousands except for conversion price and shares):

Year Issued	Interest Rate Range	Term of Notes	Conversion Price		Principal Outstanding December 31, 2020		Discount Amount December 31, 2020		Carrying Amount December 31, 2020		Shares Underlying Notes December 31, 2020			Principal Outstanding December 31, 2019		Discount Amount December 31, 2019		Carrying Amount December 31, 2019		Shares Underlying Notes December 31, 2019
Notes payable
2013	10%	Due on demand		—	$	969	$	—	$	969		—		$	920	$	—	$	920		—
2019	11%	Due on demand		—		2,899		—		2,899		—			2,829		—		2,829		—
2020	11%	Due on demand		—		942		—		942		—			—		—		—		—
					$	4,810	$	—	$	4,810		—		$	3,749	$	—	$	3,749		—
		Current			$	4,588	$	—	$	4,588		—		$	3,749	$	—	$	3,749		—
		Non-current			$	222	$	—	$	222		—		$	—	$	—	$	—		—
Notes payable - related party
2016	10% - 11%	Due on demand		—	$	20	$	—	$	20		—		$	20		—	$	20		—
2018	11%	Due on demand		—		—		—		—		—			159		—		159		—
2019	10%	Due on demand		—		14		—		14		—			14		—		14		—
2020	12%	Due on demand		—		100		—		100		—			—		—		—		—
					$	134	$	—	$	134		—		$	193	$	—	$	193		—
		Current			$	134	$	—	$	134		—		$	193	$	—	$	193		—
Convertible debentures
2019	10%	18 months	$2.00-$9.52		$	7,200	$	1,720	$	5,480		3,630	(a)	$	10,200	$	3,185	$	7,015		1,080,415
					$	7,200	$	1,720	$	5,480		3,630		$	10,200	$	3,185	$	7,015		1,080,415
		Current			$	7,200	$	1,720	$	5,480				$	10,200	$	3,185	$	7,015		—
Convertible notes payable
2018	6% - 10%	Due on demand - 2 years	$	10.00		3,150	$	—		3,150		316,723	(b)		3,000		5		2,995		363,876
					$	3,150	$	—	$	3,150		316,723		$	3,000	$	5	$	2,995		363,876
		Non-current			$	3,150	$	—	$	3,150		—		$	—	$	—	$	—		—
		Grand Total			$	15,294	$	1,720	$	13,574	$	320,353		$	17,142	$	3,190	$	13,952	$	1,444,291

(a) The notes are convertible into Emmaus Life Sciences, Inc. shares.
(b) This note is convertible into EMI Holdings Inc. shares.

Schedule of future contractual principal payments of notes payable

As of December 31, 2020, future contractual principal payments due on notes payable were as follows (in thousands):

Year Ending	December 31, 2020
2021	$	11,922
2022		222
2023		3,150
Total	$	15,294

Schedule of fair value based upon assumptions

The fair values as of October 16, 2020 and December 31, 2020 were based upon following assumptions:

	December 31, 2020			At Issuance
Principal outstanding (South Korean won)	KRW 30 billion			KRW 30 billion
Stock price	KRW 6,060			KRW 7,210
Expected life (in years)		9.79			10.00
Selected yield		10.50	%		13.00	%
Expected volatility (Telcon common stock)		85.80	%		86.90	%
Risk-free interest rate (South Korea government bond)		1.72	%		1.50	%
Expected dividend yield		0.00	%		0.00	%
Conversion price	KRW 6,028			KRW 9,232

Senior Secured Convertible Debentures [Member]

Schedule of fair value of conversion feature liabilities

The following table presents the change in fair value of the warrants as of December 31, 2020 (in thousands):

Warrant liability—Wealth Threshold	December 31, 2020
Balance, beginning of period	$	—
Fair value at issuance date		1,425
Change in fair value included in the statement of comprehensive income (loss)		(437	)
Balance, end of period	$	988

Schedule of fair value based upon assumptions

The fair value of the warrant derivative liabilities was determined using the Black-Scholes Merton model and was based upon following assumptions:

	December 31, 2020			At Issuance
Exercise price	$	2.05		$	2.05
Stock price	$	1.68		$	1.23
Risk‑free interest rate		0.31	%		0.33	%
Expected volatility (peer group)		101.00	%		94.00	%
Expected life (in years)		4.46			5.00
Expected dividend yield	—			—
Number outstanding		1,250,000			1,250,000

Conversion Feature Liabilities [Member] | Senior Secured Convertible Debentures [Member]

Schedule of fair value based upon assumptions

The fair values as of December 31, 2020, the February 21, 2020 modification date and December 31, 2019 and as of the Merger date were based upon following assumptions:

	December 31, 2020			February 21, 2020 (Modification date)			December 31, 2019
Stock price	$	1.23		$ 1.89			$	1.97
Conversion price	$	2.00		$ 3.00			$	9.52
Selected yield		10.48	%		19.12	%		16.77	%
Expected volatility (peer group)		95.00	%		65.00	%		50.00	%
Expected life (in years)		0.67		1.16				0.81
Expected dividend yield	—			—			—
Risk-free rate	Term structure			Term structure			Term structure

Other Current Liabilities [Member] | Conversion Feature Liabilities [Member] | Senior Secured Convertible Debentures [Member]

Schedule of fair value of conversion feature liabilities

The following table sets forth the fair value of the conversion feature liabilities, which is included in the other current liabilities as of December 31, 2020 and 2019 (in thousands):

Conversion feature liabilities—Amended and Restated 10% Senior Secured Convertible Debentures	December 31, 2020			December 31, 2019
Balance, beginning of period	$	1		$	—
Fair value at issuance date		—			132
Fair value at modification date		118			—
Change in fair value		(112	)		(131	)
Balance, end of period	$	7		$	1