Emmaus Life Sciences, Inc. Quarterly report pursuant to Section 13 or 15(d)

NOTES PAYABLE (Tables)

3 Months Ended

Mar. 31, 2021

Notes payable consisted of the following at March 31, 2021 and December 31, 2020 (in thousands except for number of shares):

Year Issued	Interest Rate Range	Term of Notes	Conversion Price			Principal Outstanding March 31, 2021		Unamortized Discount March 31, 2021		Carrying Amount March 31, 2021		Shares Underlying March 31, 2021
Notes payable
2013	10%	Due on demand		—		$	903	$	—	$	903		—
2016	10%	Due on demand		—			20		—		20		—
2019	11%	Due on demand		—			2,065		—		2,065		—
2020	1%	2 years		—			798		—		798		—
2021	11%	Due on demand		—			919		—		919		—
						$	4,705	$	—	$	4,705		—
		Current				$	4,616	$	—	$	4,616		—
		Non-current				$	89	$	—	$	89		—
Notes payable - related parties
2020	12%	Due on demand		—		$	100	$	—	$	100		—
						$	100	$	—	$	100		—
		Current				$	100	$	—	$	100		—
Convertible notes payable
2020	12%	3 years	$	10.00	(b)		3,150		—		3,150		316,604
2021	2%	3 years	$	1.48	(a)		14,390		5,434		8,956		9,739,335
						$	17,540	$	5,434	$	12,106		10,055,939
		Non-current				$	17,540	$	5,434	$	12,106		10,055,939
		Total				$	22,345	$	5,434	$	16,911		10,055,939

Year Issued	Interest Rate Range	Term of Notes	Conversion Price			Principal Outstanding December 31, 2020		Unamortized Discount December 31, 2020		Carrying Amount December 31, 2020		Shares Underlying Notes December 31, 2020
Notes payable
2013	10%	Due on demand		—		$	969	$	—	$	969		—
2019	11%	Due on demand		—			2,899				2,899		—
2020	1%-11%	Due on demand - 2 years		—			942		—		942		—
						$	4,810	$	—	$	4,810	$	—
		Current				$	4,588	$	—	$	4,588		—
		Non-current				$	222	$	—	$	222		—
Notes payable - related parties
2016	10%	Due on demand		—		$	20	$	—	$	20		—
2019	10%	Due on demand		—			14		—		14		—
2020	12%	Due on demand		—			100		—		100		—
						$	134	$	—	$	134		—
		Current				$	134	$	—	$	134		—
Convertible debentures
2019	10%	18 months	$2.00-$9.52		(a)	$	7,200	$	1,720	$	5,480		3,630,000
						$	7,200	$	1,720	$	5,480		3,630,000
		Current				$	7,200	$	1,720	$	5,480		3,630,000
Convertible note payable
2018	10%	2 years	$	10.00	(b)	$	3,150	$	—	$	3,150		316,723
						$	3,150	$	—	$	3,150		316,723
		Current				$	3,150	$	—	$	3,150		316,723
		Total			`	$	15,294	$	1,720	$	13,574		3,946,723

(a)

The notes are convertible to Emmaus Life Sciences, Inc. shares.

(b)

The notes are convertible to EMI Holding, Inc. shares.

As of March 31, 2021, future contractual principal payments due on notes payable were as follows:

The fair value as of March 31, 2021, and December 31, 2020 was based upon following assumptions:

	March 31, 2021			December 31, 2020
Principal outstanding (South Korean won)	KRW 30 billion			KRW 30 billion
Stock price	KRW 5,020			KRW 6,060
Expected life (in years)		9.55			9.79
Selected yield		9.50	%		10.50	%
Expected volatility (Telcon common stock)		84.50	%		85.80	%
Risk-free interest rate (South Korea government bond)		2.02	%		1.72	%
Expected dividend yield		0.00	%		0.00	%
Conversion price	KRW 5,023			KRW 6,028

The following table sets forth the fair value of the conversion feature liability as of March 31, 2021(in thousands)

	Three Months Ended
Convertible promissory notes	March 31, 2021
Balance, beginning of period	$	—
Fair value at issuance date		5,555
Change in fair value included in the statement of comprehensive (income) loss		2,345
Balance, end of period	$	7,900

The fair value as of agreement date and the anti-dilution adjustment dates was based upon following assumptions:

	March 2, 2021 (Anti-dilution adjustment date)		February 28, 2020 (Anti-dilution adjustment date)			February 21, 2020 (Amendment date)
Exercise price	$	1.54	$	2.00		$	3.00
Common stock fair value	$	1.52	$	1.60		$	1.89
Volatility	101.00%-120.00%			93.00	%		92.00	%
Risk-free rate	0.21%-0.58%			0.86	%		1.29	%
Expected life (in years)	2.64-4.56			3.54			3.56

The fair value as of December 31, 2020 was based upon following assumptions:

	December 31, 2020
Stock price	$	1.23
Conversion price	$	2.00
Selected yield		10.48	%
Expected volatility (peer group)		95	%
Expected life (in years)		0.67
Expected dividend yield	—
Risk-free rate	Term structure

The following table sets forth the fair value of the conversion feature liabilities as of March 31, 2021 and December 31, 2020 (in thousands):

	Three Months Ended			Year Ended
Conversion feature liabilities — Amended and Restated 10% Senior Secured Convertible Debentures	March 31, 2021			December 31, 2020
Balance, beginning of period	$	7		$	1
Fair value at debt modification date		—			118
Change in fair value included in the statement of comprehensive (income) loss		(7	)		(112	)
Balance, end of period	$	—		$	7

The fair value as of March 31, 2021 and at issuance date was based upon following assumptions:


Convertible promissory notes	March 31, 2021			At issuance date
Stock price	$	1.71		$	1.41
Conversion price	$	1.48		$	1.48
Selected yield		20.50	%		20.29	%
Expected volatility		50	%		50	%
Time until maturity (in years)		2.91			3.00
Dividend yield	—			—
Risk-free rate		0.33	%		0.30	%