Note 9 - Related Party Notes Payable

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Related Party Notes Payable [Text Block]

NOTE

9.

RELATED PARTY NOTES PAYABLE

On

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

no

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 Companypaid China Kington a

2%

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

one

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

$100

thousand pursuant to such consulting agreement. Debt issuance costs associated with the issuance of the Promissory Note of

$20

thousand is 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 determined that the changes in the terms of Promissory Note per the

June

amendment are accounted for as troubled debt restructurings in accordance with ASC

470,

Debt

. However, as future undiscounted cash flow is greater than the net carrying value of the original Promissory Note,

no

gain was recognized. 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

$222

thousand during the year ended

December 31, 2019.

The Promissory Note is presented as follows as of

December 31, 2019:

(in thousands)
Principal amount	$	1,000
Unamortized debt issuance costs		(2	)
Accrued interest		204
Total debt		1,202
Less: short-term		1,202
Long-term	$	—