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

Quarterly report pursuant to Section 13 or 15(d)

NOTES PAYABLE (Tables)

NOTES PAYABLE (Tables)

3 Months Ended

Mar. 31, 2022

Notes payable consisted of the following at March 31, 2022 and December 31, 2021 (in thousands except for number of shares):

Year Issued	Interest Rate Range	Term of Notes	Conversion Price			Principal Outstanding March 31, 2022		Unamortized Discount March 31, 2022		Carrying Amount March 31, 2022		Underlying Shares March 31, 2022
Notes payable
2013	10%	Due on demand		—		$	821	$	—	$	821		—
2021	11%	Due on demand - 2 years		—			2,945		—		2,945		—
2022	10%	Due on demand		—			20		—		20		—
						$	3,786	$	—	$	3,786		—
		Current				$	2,286	$	—	$	2,286		—
		Non-current				$	1,500	$	—	$	1,500		—
Notes payable - related parties
2020	12%	Due on demand		—		$	100		—		100		—
2021	12%	Due on demand		—			700		—		700		—
2022	10-12%	Due on demand		—			2,036		—		2,036		—
						$	2,836	$	—	$	2,836		—
		Current				$	2,836	$	—	$	2,836		—
Convertible notes payable
2020	12%	3 years	$	10.00	(b)		3,150		—		3,150		319,804
2021	2%	3 years	$	1.48	(a)		14,490		3,921		10,569		9,806,850
						$	17,640	$	3,921	$	13,719		10,126,654
		Current				$	14,490	$	3,921	$	10,569		9,806,850
		Non-current				$	3,150	$	—	$	3,150		319,804
		Total				$	24,262	$	3,921	$	20,341		10,126,654

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		Underlying Shares Notes 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 note 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
		Total				$	22,339	$	4,332	$	18,007		10,173,099

(a)

The notes are convertible into Emmaus Life Sciences, Inc. shares. Beginning February 28, 2022, the note holders became entitled to call for early redemption of the convertible notes payable, because the Company common stock was not approved for listing on the NYSE American, the Nasdaq Capital Market or other Trading Market (as defined in the agreement). Accordingly, the notes were classified as current.

(b)

This note is convertible into shares of EMI Holding, Inc., a wholly owned subsidiary of Emmaus.

Schedule of future contractual principal payments of notes payable

As of March 31, 2022, future contractual principal payments due on notes payable were as follows (in thousands):

Year Ending
2022		19,612	(a)
2023		4,650
Total	$	24,262

(a)

Includes $14.5 million principal amount of convertible notes is which, the holders are entitled to call for early redemption.

Schedule of Fair Value Based upon Assumptions

The fair value as of March 31, 2022 and December 31, 2021 was based upon following assumptions:

	March 31, 2022			December 31, 2021
Principal outstanding (South Korean won)	KRW 26.5 billion			KRW 30 billion
Stock price	KRW2,410			KRW2,925
Expected life (in years)		8.55			8.79
Selected yield		11.00	%		10.50	%
Expected volatility (Telcon common stock)		80.43	%		81.31	%
Risk-free interest rate (South Korea government bond)		2.94	%		2.19	%
Expected dividend yield		—			—
Conversion price	KRW2,140 (US$1.82)			KRW2,847 (US$2.39)

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

Schedule of Fair Value Based upon Assumptions

The fair values as of March 31, 2022, and December 31, 2021 were based upon following assumptions:

Convertible promissory notes	March 31, 2022			December 31, 2021
Stock price	$	1.00		$	1.67
Conversion price	$	1.48		$	1.48
Selected yield		23.42	%		21.99	%
Expected volatility		50	%		50	%
Time until maturity (in years)		1.91			2.16
Dividend yield	—			—
Risk-free rate		2.22	%		0.77	%

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

Schedule of fair value of conversion feature liabilities

The following table sets forth the fair value of the conversion feature liability as of March 31, 2022, and December 31, 2021 (in thousands)

Convertible promissory notes	March 31, 2022			December 31, 2021
Balance beginning of period	$	7,507		$	—
Fair value at issuance date		—			5,594
Change in fair value included in the statement of operations		(3,080	)		1,913
Balance end of period	$	4,427		$	7,507