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DEBT

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

On November 16, 2015, the Company entered into a Loan Agreement with Panagiotis Drakopoulos, former Director and former Chief Executive Officer, pursuant to which the Company borrowed €40,000 ($43,624) as a note payable from Mr. Drakopoulos. The note bears an interest rate of 6% per annum and was due and payable in full on November 15, 2016. During the year ended December 31, 2017, the Company repaid €17,000 ($20,437) of principal and €2,060 ($2,477) of accrued interest. As of March 31, 2018, the Company has an outstanding principal balance of €23,000 ($27,651) and accrued interest of €2,049 ($2,463).

On January 18, 2018, the Company entered into a Loan Agreement with a third party, pursuant to which the Company borrowed €75,000 ($92,400). The note bears an interest rate of 6.5% per annum and has a maturity date of January 17, 2019. The note is secured by a personal guaranty of Grigorios Siokas. As of March 31, 2018, the Company has an outstanding principal balance of €75,000 ($92,400) and accrued interest of €975 ($1,201) related to this note.

On March 16, 2018, the Company entered into a Loan Agreement with a third party, pursuant to which the Company borrowed €1,500,000 ($1,848,000) as a note payable. The note bears an interest rate of 4.7% per annum and has a maturity date of March 18, 2019. As of March 31, 2018, the Company has an outstanding principal balance of €1,500,000 ($1,848,000) and accrued interest of €2,511 ($3,094) related to this note.

Loan Facility Agreement

On August 4, 2016, the Company’s wholly owned subsidiary SkyPharm entered into a Loan Facility Agreement, guaranteed by Grigorios Siokas, with Synthesis Peer-To Peer-Income Fund (the “Loan Facility” the “Lender”). The Loan Facility initially provided SkyPharm with a credit facility of up to $1,292,769 (€1,225,141). Any advance under the Loan Facility accrues interest at a rate of 10% per annum and requires quarterly interest payments commencing on September 30, 2016. The amounts owed under the Loan Facility shall be repayable upon the earlier of (i) three months following the demand of the Lender; or (ii) August 31, 2018. No prepayment is permitted pursuant to the terms of the Loan Facility. The Synthesis Facility Agreement as amended is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 10,000,000 shares of common stock of the Company owned by Mr. Siokas.

On September 13, 2016, Sky Pharm entered into a First Deed of Amendment with the Loan Facility increasing the maximum loan amount to $1,533,020 as a result of the Lender having advanced $240,251 (€227,629) to SkyPharm.

On March 23, 2017, SkyPharm entered into an Amended and Restated Loan Facility Agreement (the “A&R Loan Facility”), with the Loan Facility which increased the loan amount to an aggregate total of $2,664,960 (€2,216,736) as a result of the lender having advanced $174,000 (€164,898) in September 2016, $100,000 (€94,769) in October 2016, $250,000 (€236,922) in November 2016, $452,471 (€428,800) in December 2016, $155,516 (€129,360) in January 2017, $382,327 (€318,023) in July 2017 and $70,000 (€58,227) in December 2017. The A&R Loan Facility amends and restates certain provisions of the Loan Facility Agreement, dated as of August 4, 2016, by and among the same parties. Advances under the A&R Loan Facility continue to accrue interest at a rate of 10% per annum from the applicable date of each drawdown and require quarterly interest payments. The A&R Facility now permits prepayments at any time. The amounts owed under the A&R Loan Facility shall be repayable upon the earlier of (i) seventy five days following the demand of the Lender; or (ii) August 31, 2018. The A&R Loan Facility is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas (the “Pledged Shares”). The A&R Loan Facility was also amended to provide additional affirmative and negative covenants of Sky Pharm and the Guarantor during the term of loans remain outstanding, including, but not limited to, the consent of the Lender in connection with (i) the Company or any of its subsidiaries incurring any additional indebtedness; or (ii) in the event of any increase in the Company’s issued and outstanding shares of Common Stock, the Pledged Shares shall be increased to an amount equal to a minimum of ten percent (10%) of the issued and outstanding shares of the Company.

On April 18, 2018, the Company entered into an amendment that was effective as of January 1, 2018 (see Note 11), pursuant to which the maturity dates for all advances was extended to December 31, 2021. Additionally, the interest rate was amended such that the interest rate for all advances is 4% plus the 3-Month Libor rate. The Loan Facility also forgave €32,468 ($40,000) in fees related to the July 6, 2017 advance. As a result the Company reduced the unamortized portion of debt discount that related to those fees and recorded a gain on debt settlement of €19,763 ($24,287).

As of March 31, 2018, the outstanding balance under this note was $3,078,442 (€2,498,735) and accrued interest expense of $266,661 (€216,446) has been recorded.

The Company recorded a total of €155,060 ($191,034) in debt discounts related to this note in prior years. The debt discounts are being amortized over the term of the debt. As a result of the April 18, 2018 amendment, the Company reduced the unamortized debt discount of €20,237 ($24,932). The Company amortized a total of €92,661 ($114,158) and in prior years. Amortization of the debt discounts for the three months ended March 31, 2018 was €15,616 ($19,190).

Bridge Loans

On March 16, 2017 and March 20, 2017, SkyPharm entered into loan agreements with the Synthesis Peer-To Peer-Income Fund (the “Bridge Loans”). The Bridge Loans provided to SkyPharm loans of €41,590 ($50,000) and €100,000 ($120,220), respectively, during the year ended December 31, 2017. The Bridge Loans accrue interest at a rate of 10% per annum and were repayable on April 16, 2017 and April 20, 2017, respectively, together with all other amounts then accrued and unpaid. On April 16, 2017, the maturity dates were amended for no additional consideration or change in terms and conditions. The maturity dates of both loans were amended, and they matured on May 16, 2017 and May 20, 2017, respectively. Pursuant to the April 18, 2018 agreement and effective January 1, 2018, the Company reached an agreement with Synthesis Peer-To-Peer Income Fund such that the March 20, 2017 loan would have a fixed USD payoff amount of $106,542. As a result of this agreement the Company recorded a gain on settlement of debt of €16,667 ($20,482) related to the reduction of the USD payoff amount and an additional gain on settlement of debt of €3,950 ($4,854) related to interest that had accrued on the original amount of the loan. The Company has accrued interest expense of an aggregate total of €9,292 ($11,448) for both loans and the outstanding balances of these loans was €40,584 ($50,000) and €86,479 ($106,542), respectively, as of March 31, 2018.

On May 5, 2017, SkyPharm entered into a loan agreement with Synthesis Peer-To-Peer Income Fund for €28,901 ($34,745). The loan accrues interest at a rate of 10% per annum and matured on September 30, 2017. The Company has accrued interest expense of €2,274 ($2,802) and the outstanding balance on this loan was €28,202 ($34,745) as of March 31, 2018.

On April 18, 2018, the Company entered into an amendment (see Note 11) pursuant to which the maturity dates for all of the above Bridge Loan advances were extended to December 31, 2021 for no additional consideration. Additionally, the interest rate was amended such that, effective January 1, 2018, the interest rate for all advances is 4% plus the 3-Month Libor rate.

Trade Facility Agreements

On April 10, 2017, Decahedron entered into a Trade Finance Facility Agreement (the “Decahedron Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”). The Decahedron Facility provides the following material terms:

	·	The Lender will provide Decahedron a facility of up to €2,750,000 ($3,388,000) secured against Decahedron’s receivables from the sale of branded and generic pharmaceutical sales.

	·	The total facility will be calculated as 95% of the agreed upon value of Decahedron’s receivables.

	·	The term of the Decahedron Facility will be for 12 months.

	·	The obligations of Decahedron are guaranteed by the Company pursuant to a Cross Guarantee and Indemnity Agreement.

	·	The Lender has the right to make payments directly to Decahedron’s suppliers.

	·	The following fees should be paid in connection with the Decahedron Facility:

		o	2% of the maximum principal amount as an origination fee.

		o	A one percent (1%) monthly fee.

The current draw on the Decahedron Facility is $0.

On May 12, 2017, SkyPharm entered into a Trade Finance Facility Agreement (the “SkyPharm Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”). The SkyPharm Facility provides the following material terms:

	·	The Lender will provide SkyPharm a facility of up to €2,000,000 ($2,464,000) secured against SkyPharm’s receivables from the sale of branded and generic pharmaceutical sales. In the event that accounts receivable becomes uncollectible, the Company will be obligated to pay back the notes in full.

	·	The total facility will be calculated as 95% of the agreed upon value of Decahedron’s receivables.

	·	The term of the SkyPharm Facility will be for 12 months.

	·	The obligations of SkyPharm are guaranteed by the Company pursuant to a Cross Guarantee and Indemnity Agreement.

	·	The Lender has the right to make payments directly to SkyPharm’s suppliers.

	·	The following fees should be paid in connection with the SkyPharm Facility:

		o	2% of the maximum principal amount as an origination fee.

		o	A one percent (1%) monthly fee.

The current draw on the SkyPharm Facility is €5,866,910 ($7,228,033) and the Company has accrued €283,673 ($349,485) in monthly fees related to this agreement. The Company obtained consents from Synthesis Peer-to-Peer Income Fund in connection with obtaining the Lender. On November 16, 2017, SkyPharm signed an amended agreement with Synthesis Structured Commodity Trade Finance Limited that increased the maximum aggregate facility limit from €2,000,000 ($2,464,000) to €6,000,000 ($7,392,000). All other terms of the original agreement remain the same. During the three months ended March 31, 2018, the Company borrowed an additional €270,000 ($332,640) in funds. Om May 16, 2018, the Company entered into a Supplemental Deed of Amendment pursuant to which increased the maximum aggregate amount of the facility to €15,000,000 ($18,480,000) (See Note 12).

The Company has recorded a total debt discount of €104,338 ($128,545) in origination fees associated with these loans, which will be amortized over the term of the agreements. Amortization of debt discount for year ended December 31, 2017 was €61,295 ($69,269). Amortization of the debt discount for the three months ended March 31, 2018 was €29,348 ($36,066).

None of the above loans were made by any related parties.