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)

9 Months Ended

Sep. 30, 2023

Notes payable consisted of the following at September 30, 2023 and December 31, 2022 (in thousands except for number of underlying shares):


Year Issued	Interest Rate Range	Term of Notes	Conversion Price			Principal Outstanding September 30, 2023		Unamortized Discount September 30, 2023		Carrying Amount September 30, 2023			Underlying Shares September 30, 2023
Notes payable
2013	10%	Due on demand		—		$	669	$	—	$	669			—
2022	10%-12%	Due on demand		—			1,268		—		1,268			—
2023	11%-60%	Due on demand - 56 weeks					6,835		128		6,707			—
						$	8,772	$	128	$	8,644			—
		Current				$	8,615	$	127	$	8,488			—
		Non-current				$	157	$	1	$	156			—
Notes payable - related parties
2020	12%	Due on demand		—			100		—		100			—
2021	12%	Due on demand		—			700		—		700			—
2022	6%-12%	Due on demand - 5 years		—			4,916		151		4,795	(c)		—
2023	10%	Due on demand					227		—		227
						$	5,943	$	151	$	5,822			—
		Current				$	2,422	$	—	$	2,422			—
		Non-current				$	3,521	$	151	$	3,400			—
Convertible notes payable
2021	2%	3 years	$	0.17	(b)		12,640		971		11,669			84,737,511
2023	13%	6 month	$	10.00	(a)		3,150		—		3,150			327,004
2023	10%	1 year	$	0.29			1,000		—		1,000			3,472,838
						$	16,790	$	971	$	15,819			88,537,353
		Current				$	16,790	$	971	$	15,819			88,537,353
Convertible notes payable - related parties
2023	10%	1 - 2 years	$	0.50			1,000		101		899			2,140,273
						$	1,000	$	101	$	899			2,140,273
		Current				$	1,000	$	101	$	899			2,140,273
		Total				$	32,505	$	1,351	$	31,184			90,677,626


Year Issued	Interest Rate Range	Term of Notes	Conversion Price			Principal Outstanding December 31, 2022		Unamortized Discount December 31, 2022		Carrying Amount December 31, 2022			Underlying Shares December 31, 2022
Notes payable
2013	10%	Due on demand		—		$	763	$	—	$	763			—
2021	11%	Due on demand - 2 years		—			2,843		—		2,843			—
2022	10% - 28%	Due on demand - 15 months		—			3,696		108	$	3,588
						$	7,302	$	108	$	7,194			—
		Current				$	6,919	$	105	$	6,814			—
		Non-current				$	383	$	3	$	380			—
Notes payable - related parties
2020	12%	Due on demand		—			100		—		100			—
2021	12%	Due on demand		—			700		—		700			—
2022	6%-12%	Due on demand - 5 years		—			5,026		175		4,913	(c)		—
						$	5,826	$	175	$	5,713			—
		Current				$	2,305	$	—	$	2,367			—
		Non-current				$	3,521	$	175	$	3,346			—
Convertible notes payable
2020	12%	3 years	$	10.00	(a)		3,150		—		3,150			326,655
2021	2%	3 years	$	0.37	(b)		14,140		2,635		11,505			41,318,094
						$	17,290	$	2,635	$	14,655			41,644,749
		Current				$	17,290	$	2,635	$	14,655			41,644,749
		Grand Total				$	30,418	$	2,918	$	27,562			41,644,749

(a)

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

(b)

The notes are convertible into shares of common stock of Emmaus Life Sciences, Inc. The note holders are entitled to call for redemption of the convertible notes payable at any time. Accordingly, the notes are classified as current liabilities.

(c)

Includes $30,000 and $63,000 of the fair value of embedded derivative as of September 30, 2023 and December 31, 2022, respectively.

Schedule of future contractual principal payments of notes payable

As of September 30, 2023, future contractual principal payments due on notes payable were as follows (in thousands):


Year Ending
2023 (three months)	$	24,784	(a)
2024		3,200
2025		2,200
2027		2,321
Total	$	32,505

(a)

Includes 12.6 million principal amount of convertible notes subject to redemption at any time at the election of the holders.

Schedule of Fair Value Based upon Assumptions

The fair value as of September 30, 2023 and December 31, 2022 was based upon following assumptions:


	September 30, 2023			December 31, 2022
Principal outstanding (South Korean won)	KRW 23.6 billion			KRW 26.5 billion
Stock price	KRW 790			KRW 1,015
Expected life (in years)		7.04			7.79
Selected yield		13.25	%		13.50	%
Expected volatility (Telcon common stock)		75.50	%		78.50	%
Risk-free interest rate (South Korea government bond)		3.96	%		3.74	%
Expected dividend yield		—			—
Conversion price	KRW818(US$0.60)			KRW1,068(US$0.85)

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

Schedule of Fair Value Based upon Assumptions

The fair value as of September 30, 2023 and December 31, 2022 was based upon following assumptions:


Convertible promissory notes	September 30, 2023			December 31, 2022
Stock price	$	0.13		$	0.26
Conversion price	$	0.17		$	0.37
Selected yield		28.15	%		27.50	%
Expected volatility		50	%		50	%
Time until maturity (in years)		0.41			1.16
Dividend yield	—			—
Risk-free rate		5.54	%		4.68	%

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

Schedule of Fair Value Based upon Assumptions

The fair value as of July 19, 2023 and September 30, 2023 was based upon following assumptions:


$1 million convertible promissory note	September 30, 2023			July 19, 2023
Stock price	$	0.13		$	0.25
Conversion price	$	0.50		$	0.50
Selected yield		21.49	%		20.61	%
Expected volatility		50	%		50	%
Time until maturity (in years)		1.30			1.50
Dividend yield	—			—
Risk-free rate		5.33	%		5.03	%

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 September 30, 2023 and December 31, 2022 (in thousands):


Convertible promissory notes	September 30, 2023			December 31, 2022
Balance, beginning of period	$	3,248		$	7,507
Change in fair value included in the statement of operations		(2,088	)		(4,259	)
Balance, end of period	$	1,160		$	3,248

Level 3 [Member] | Conversion Feature Liabilities [Member] | One Million Convertible Promissory Notes [Member]

Schedule of fair value of conversion feature liabilities

The following table sets forth the fair value of the conversion feature liability as of September 30, 2023 (in thousand):


$1 million convertible promissory note	September 30, 2023
Balance, beginning of period	$	—
Fair value as of July 19, 2023		103
Change in fair value included in the statement of operations		(12	)
Balance, end of period	$	91