NOTE

RELATED PARTY NOTES PAYABLE

February 27, 2019,

the Company issued a

$1.0

million promissory note payable to Pioneer Pharma (Hong Kong) Company Ltd. (“Pioneer Hong Kong”), which was amended on

June 25, 2019 (

the “Promissory Note”). The Promissory Note currently bears an interest payment of

$300

thousand (initially

$150

thousand) and is payable in full upon the Company’s next financing with Pioneer Hong Kong and in

event after

July 1, 2020 (

an extension per the

June

amendment from the initial maturity date of

July 27, 2019).

The transaction was facilitated by China Kington Asset Management Co. Ltd. (“China Kington”) which has a perfected security interest in all tangible and intangible assets of the Company. In connection with the Promissory Note, the Company

paid China Kington a

fee for brokering the transaction and entered into a consulting agreement with China Kington for a term of

one

year, which expired on

March 1, 2020.

Bob Wu, acting in a dual role as a member of the Company’s Board of Directors and as principal of China Kington, was paid

$100

thousand pursuant to such consulting agreement. Upon the expiration of the consulting agreement, the parties entered into a standard consulting agreement, in which

cash compensation will be paid. Debt issuance costs associated with the issuance of the Promissory Note of

$20

thousand was recognized and recorded as an offset to the related party notes payable in the consolidated balance sheet. The debt issuance cost is being amortized to interest expense using the effective interest rate method over the term of the Promissory Note, assuming that the Promissory Note will be fully paid on

July 1, 2020.

The Company established a new effective interest rate based on the carrying value of the original debt and the revised cash flows.

The interest expense recognized, including amortization of the issuance costs, was

$48

thousand and

$39

thousand during the

three

months ended

March 31, 2020

and

2019,

respectively.

The Promissory Note is presented as follows as of

March 31, 2020:

(in thousands)
Principal amount	$	1,000
Unamortized debt issuance costs		(1	)
Accrued interest		251
Total debt		1,250
Less: short-term		1,250
Long-term	$	—