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, 2021

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

Year Issued	Interest Rate Range	Term of Notes	Conversion Price			Principal Outstanding December 31, 2021		Unamortized Discount December 31, 2021		Carrying Amount December 31, 2021		Shares Underlying December 31, 2021
Notes payable
2013	10%	Due on demand		—		$	869	$	—	$	869		—
2021	11%	Due on demand - 2 years		—			3,030		—		3,030		—
						$	3,899	$	—	$	3,899		—
		Current				$	2,399	$	—	$	2,399		—
		Non-current				$	1,500	$	—	$	1,500		—
Notes payable - related parties
2020	12%	Due on demand		—			100		—		100		—
2021	12%	Due on demand		—			700		—		700		—
						$	800	$	—	$	800		—
		Current				$	800	$	—	$	800		—
Convertible notes payable
2020	12%	3 years	$	10.00	(b)		3,150		—		3,150		316,756
2021	2%	3 years	$	1.48	(a)		14,490		4,332		10,158		9,856,343
						$	17,640	$	4,332	$	13,308		10,173,099
		Current				$	14,490	$	4,332	$	10,158		9,856,343
		Non-current				$	3,150	$	—	$	3,150		316,756
		Grand 'Total				$	22,339	$	4,332	$	18,007		10,173,099

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	12%	2 years	$	10.00	(b)	$	3,150	$	—	$	3,150		316,723
						$	3,150	$	—	$	3,150		316,723
		Current				$	3,150	$	—	$	3,150		316,723
		Grand 'Total				$	15,294	$	1,720	$	13,574		3,946,723

(a) The notes are convertible into Emmaus Life Sciences, Inc. shares. Beginning February 28, 2022, the holder is entitled to call for early redemption, only if the Company’s common stock is not approved for listing on the NYSE American, the Nasdaq Capital Market or other Trading Market (as defined in the agreement). As the Company's common stock is not approved for listing, the notes were classified as current.
(b) This note is convertible into EMI Holdings Inc. shares.

Schedule of future contractual principal payments of notes payable

As of December 31, 2021, future contractual principal payments due on notes payable were as follows (in thousands):

Year Ending	December 31, 2021
2022	$	17,689
2023		4,650
Total	$	22,339

Schedule of fair value based upon assumptions

The fair values as of December 31, 2021 and December 31, 2020 were based upon following assumptions:

	December 31, 2021			December 31, 2020
Principal outstanding (South Korean won)	KRW 30 billion			KRW 30 billion
Stock price	KRW 2,925			KRW 6,060
Expected life (in years)		8.79			9.79
Selected yield		10.50	%		10.50	%
Expected volatility (Telcon common stock)		81.31	%		85.80	%
Risk-free interest rate (South Korea government bond)		2.19	%		1.72	%
Expected dividend yield		0.00	%		0.00	%
Conversion price	KRW 2,847 (US$2.39)			KRW 6,028 (US$5.54)

Senior Secured Convertible Debentures [Member]

Schedule of fair value based upon assumptions

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

Conversion Feature Liabilities [Member] | Level 3 [Member]

Schedule of fair value of conversion feature liabilities

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

Convertible promissory notes	December 31, 2021
Balance, beginning of period	$	—
Fair value at issuance date		5,594
Change in fair value included in the statement of operations		1,913
Balance, end of period	$	7,507

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

Schedule of fair value based upon assumptions

The fair values 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)		95.00	%
Expected life (in years)		0.67
Expected dividend yield	—
Risk-free rate	Term structure

Conversion Feature Liabilities [Member] | Convertible Promissory Notes [Member]

Schedule of fair value based upon assumptions

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

Convertible promissory notes	December 31, 2021			Issuance Date
Stock price	$	1.67		$	1.41
Conversion price	$	1.48		$	1.48
Select yield		21.99	%		20.29	%
Expected volatility		50	%		50	%
Time until maturity (in years)		2.16			3.00
Dividend yield	—			—
Risk-free rate		0.77	%		0.30	%

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 as of December 31, 2021 and 2020 (in thousands):

Conversion feature liabilities—Amended and Restated 10% Senior Secured Convertible Debentures	December 31, 2021			December 31, 2020
Balance, beginning of period	$	7		$	1
Fair value at modification date		—			118
Change in fair value		(7	)		(112	)
Balance, end of period	$	—		$	7