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DEBT | 9 Months Ended
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Sep. 30, 2021
DEBT |
NOTE 11 - DEBT | NOTE 11 – DEBT A summary of the Company’s third-party debt during the nine months ended September 30, 2021 and the year ended December 31, 2020 is presented below:
September 30, 2021 |  | Loan Facility |  |  | Trade Facility |  |  | Third Party |  |  | COVID Loans |  |  | Total |
Beginning balance |  | $ | 3,302,100 |  |  | $ | 6,446,000 |  |  | $ | 12,631,284 |  |  | $ | 435,510 |  |  | $ | 22,814,594 |
Proceeds |  |  | - |  |  |  | - |  |  |  | 578,850 |  |  |  | - |  |  |  | 578,850 |
Payments |  |  | (266,271 | ) |  |  | - |  |  |  | (32,159 | ) |  |  | (1,935 | ) |  |  | (300,365 | )
Conversion of debt |  |  | (1,606,500 | ) |  |  | - |  |  |  | (3,010,000 | ) |  |  | - |  |  |  | (4,616,500 | )
Foreign currency translation |  |  | (132,705 | ) |  |  | (130,600 | ) |  |  | (33,172 | ) |  |  | (20,497 | ) |  |  | (316,974 | )
Subtotal |  |  | 1,296,624 |  |  |  | 6,315,400 |  |  |  | 10,134,803 |  |  |  | 412,778 |  |  |  | 18,159,605 |
Reclass of long-term portion of debt |  |  |  |  |  |  | (2,083,860 | ) |  |  | (936,986 | ) |  |  | - |  |  |  | (3,020,846 | )
Ending Balance |  | $ | 1,296,624 |  |  | $ | 4,231,540 |  |  | $ | 9,197,817 |  |  | $ | 424,470 |  |  | $ | 15,138,759 |
December 31, 2020 |  | Loan Facility |  |  | Bridge Loans |  |  | Trade Facility |  |  | Third Party |  |  | COVID Loans |  |  | Total |
Beginning balance |  | $ | 3,078,442 |  |  | $ | 191,287 |  |  | $ | 6,245,400 |  |  | $ | 2,514,595 |  |  | $ | - |  |  | $ | 12,029,724 |
Proceeds |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16,121,500 |  |  |  | 435,210 |  |  |  | 16,556,710 |
Payments |  |  | - |  |  |  | (191,287 | ) |  |  | - |  |  |  | (5,006,115 | ) |  |  | - |  |  |  | (5,230,725 | )
Conversion of debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (807,795 | ) |  |  |  |  |  |  | (807,795 | )
Debt extinguishment |  |  | (12,066 | ) |  |  | - |  |  |  | - |  |  |  | (192,205 | ) |  |  | - |  |  |  | (204,271 | )
Foreign currency translation |  |  | 269,047 |  |  |  | - |  |  |  | 200,600 |  |  |  | 1,304 |  |  |  | - |  |  |  | 470,951 |
Subtotal |  |  | 3,302,100 |  |  |  | - |  |  |  | 6,446,000 |  |  |  | 12,631,284 |  |  |  | 435,210 |  |  |  | 22,814,594 |
Reclass of long-term portion of debt |  |  | (2,843,475 | ) |  |  | - |  |  |  | (2,384,850 | ) |  |  | (5,543,557 | ) |  |  | - |  |  |  | (10,771,882 | )
Ending Balance |  | $ | 458,625 |  |  | $ | - |  |  | $ | 4,061,150 |  |  | $ | 7,087,727 |  |  | $ | 435,210 |  |  | $ | 12,042,712 |
Loan Facility Agreement On June 30, 2020, SkyPharm entered into a settlement agreement on an existing loan facility agreement with Synthesis Peer-to-Peer Income Fund, whereby the Company agreed to make certain payments to the creditor and the creditor will accept such payments as full discharge of outstanding debt. In accordance with the settlement agreement, interest will accrue from June 30, 2020 until repayment in full at a rate of 6% per annum for the first year and 5.25% per annum for the second year calculated on the balance outstanding from day to day during such period. Interest is due on the 10th day of each calendar month. If any amount of principal or interest is unpaid on its due date interest shall accrue from the due date until the date of its payment until the date of its payment in full at the rate of 7.25% per annum. The Company will make quarterly payments of €125,000 beginning May 6, 2021 with a final payment of €2,200,000 on May 6, 2022. The Company evaluated the settlement agreement for debt modification in accordance with ASC 470-50 and concluded that the debt qualified for debt extinguishment as the 10% cash flow test was met. As a result, the $3,828,630 of principal and accrued interest of $168,732, or an aggregate of $3,997,362 was written off and the new debt was recorded at fair value in the amount of $3,033,990. On August 4, 2021, the Company entered into an exchange agreement whereby the Company agreed to the following:
| · | Issue on August 4, 2021 321,300 shares of common stock to settle $1,606,500 (€1,350,000) of debt. The Company recorded a gain on settlement of $292,383 upon the issuance of the 321,300 shares
| · | Agreed to issue no more than 238,000 shares of common stock upon approval of the listing of the Company’s common stock to the Nasdaq to settle $1,190,000 (€1,000,000) of debt.
The Company evaluated the August 4, 2021 exchange agreement for debt modification in accordance with ASC 470-50 and concluded that the debt qualified for debt extinguishment because a substantial conversion feature was added to the debt terms. Upon extinguishment, the Company recorded a gain in the amount of $48,189 and recorded the new debt at fair value based on the present value of future cash flows using a discount rate of 11.66%. As of December 31, 2020, the Company has accrued interest expense of $33,021 and the principal balance of the debt is $3,302,100, of which $2,843,475 is classified as Notes payable – long term portion on the consolidated balance sheet. As of September 30, 2021, the Company has accrued interest of $22,518, repaid $266,271 of principal and the principal balance of the debt is $1,263,107, which is classified as Notes payable on the condensed, consolidated balance sheet. The debt is subject to acceleration in an Event of Default (as defined in the Notes). This agreement 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. Trade Facility Agreements On May 12, 2017, SkyPharm entered into a Trade Finance Facility Agreement (the “SkyPharm Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”) as amended on November 16, 2017 and May 16, 2018. On October 17, 2018, the Company entered into a further amended agreement with Synthesis whereby the current balance on the TFF as of October 1, 2018, which was €4,866,910 ($5,629,555) and related accrued interest of €453,094 ($524,094) would be split into two principal balances of Euro €2,000,000 and USD $4,000,000. Interest on the new balances commenced on October 1, 2018 at 6% per annum plus one-month Euribor, when it is positive, on the Euro balance and 6% per annum plus one-month Libor on the USD balance. The Company will repay the principal amounts of each balance beginning no later than August 31, 2018 in quarterly installments of €125,000 and US $150,000. The loan matures on August 31, 2021. The Company evaluated the amended agreement under ASC 470-50 and concluded that it did not meet the 10% cash flow test and recorded debt modification expense of $138,110. As of December 31, 2020, the Company had principal balances of €2,000,000 ($2,446,000), of which $2,384,850 is classified as Notes payable – long term portion on the consolidated balance sheet, and $4,000,000 under the agreements and the Company had accrued $402 and $16,185 respectively, in interest expense related to these agreements. As of September 30, 2021, the Company had principal balances of €2,000,000 ($2,315,400), of which $2,083,860 is classified as Notes payable – long term portion on the consolidated balance sheet, and $4,000,000 under the agreements and the Company had accrued $10,993 and $57,026 respectively, in interest expense related to these agreements. Third Party Debt 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 ($42,832) 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. As of December 31, 2020, the Company had an outstanding principal balance of €8,000 ($9,784) and accrued interest of €4,785 ($5,852). As of September 30, 2021, the Company had an outstanding principal balance of €8,000 ($9,262) and accrued interest of €6,192 ($7,168). Conversion of Prior Year Senior Promissory Notes In the years ending December 31, 2019 and 2020, the Company executed Senior Promissory Notes (the “Debt”) in an aggregate total of $3,010,000 to an unaffiliated third-party lender (the “Lender”). As of December 31, 2020, the Company had a principal balance of $3,010.00 on this Debt and the Company had accrued $527,604 in interest expense. As of February 5, 2021, The Company entered into an Amended and Restated Debt Exchange Agreement (the “Agreement”) with the “Lender that provided for the issuance by the Company of 781,819 shares of common stock (the “Exchange Shares”), at the rate of $3.85 per share, in exchange for an aggregate of $3,010,000 principal amount of existing loans made by the Lender to the Company. The market price at the time this Agreement was negotiated was $3.28 per share and the Company recorded a gain on debt extinguishment of $445,636. All accrued and unpaid interest, $563,613 as of September 30, 2021, as well as any unpaid fees, shall be paid in three (3) equal monthly installments following the closing of a planned Canadian public offering. Pursuant to this Agreement, Grigorios Siokas, the Company’s Chief Executive Officer and principal shareholder, will be released from all personal guarantees on the Debt. May 18, 2020 and July 3, 2020 Senior Promissory Notes May 18, 2020 Senior Promissory Note On May 18, 2020, the Company executed a Senior Promissory Note (the “May 18 Note”) in the principal amount of $2,000,000payable to an unaffiliated third-party lender. The May 18 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 18 Note matured on December 31, 2020. The note is not in default and the Company is currently in negotiations with the lender to extend the maturity date. The May 18 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 18 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of September 30, 2021 and December 31, 2020, the Company had a principal balance of $2,000,000 on this note. July 3, 2020 Senior Promissory Note On July 3, 2020, the Company executed a Senior Promissory Note (the “July 3 Note”) in the principal amount of $5,000,000payable to an unaffiliated third-party lender. The July 3 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The July 3 Note matures on June 30, 2022 unless in default. The July 3 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the July 3 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of September 30, 2021 and December 31, 2020, the Company had a principal balance of $5,000,000 on this note. As of September 30, 2021 and December 31, 2020, the Company has accrued an aggregate total of $151,427 in prepaid interest and $146,685 in accrued interest expense, respectively, related to these loans. August 4, 2020 Senior Promissory Note On August 4, 2020, the Company executed a Senior Promissory Note (the “August 4 Note”) in the principal amount of $3,000,000 payable to an unaffiliated third-party lender. The August 4 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The August 4 Note matured on December 31, 2020 unless in default. The note is not in default and the Company is in negotiations with the lender to extend the maturity date. The August 4 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the August 4 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. On October 29, 2020, the Company entered into a debt exchange agreement with the lender whereby the Company issued 259,741 shares of common stock at the rate of $3.85 per share in exchange for an aggregate of $1,000,000 principal amount of the existing loan. The fair market value of the Company’s common stock on the date of exchange was $3.11 per share and as such, the Company recorded a gain of $192,205. Interest will continue to accrue on the remaining debt and the converted amount until December 31, 2020. As of December 31, 2020, the Company had a principal balance of $2,000,000 on this note and prepaid interest of $8,514. As of September 30, 2021, the Company had a principal balance of $2,000,000 on this note and $129,072 in prepaid interest expense. The note is not in default and the Company is in negotiations with the lender to extend the maturity date. November 19, 2020 Debt Agreement On November 19, 2020, the Company entered into an agreement with a third-party lender in the principal amount of €500,000 ($611,500). The note matures on November 18, 2025 and bears an annual interest rate, based on a 360-day year, of 3.3% plus .6% plus 6-month Euribor when Euribor is positive. Pursuant to the terms of the agreement, there is a six-month grievance from the first deposit date, which was November 19, 2020, for principal repayment. The principal is to be repaid in 18 quarterly installments of €27,000 with the first payment due 9 months from the first deposit. As of December 31, 2020, the Company had no accrued interest and a principal balance of €500,000 ($611,500), of which $543,557 is classified as Notes payable – long term portion on the consolidated balance sheet. As of September 30, 2021, the Company repaid $32,158 of the principal, accrued interest of $5,642 and a principal balance of €472,222 ($546,692), of which $418,062 is classified as Notes payable – long term portion on the consolidated balance sheet. July 30, 2021 Debt Agreement On July 30, 2021, the Company entered into an agreement with a third-party lender in the principal amount of €500,000 ($578,850). The note matures on August 5, 2026 and bears an annual interest rate that applies to 60% of the principal of the note that is based on a 365-day year, of 5.84% plus 3-month Euribor when Euribor is positive. Pursuant to the terms of the agreement, there is a six-month grace period for principal repayment during which interest is accrued. The principal is to be repaid in 18 quarterly installments of €27,000 commencing three months from the end of the grace period. As of September 30, 2021, the Company has accrued interest of $3,167 and a principal balance of €500,000 ($578,850), of which $518,924 is classified as Notes payable – long term portion on the consolidated balance sheet. COVID-19 Government Loans On May 12, 2020, the Company was granted and on May 22, 2020 the Company received a €300,000 ($337,110) loan from the Greek government. The loan will be repaid in 40 equal monthly instalments beginning on January 1, 2022 and bears an interest rate of 0.94% per annum. As a condition to the loan, the company is required to retain the same number of employees until October 31, 2020. The balance as of September 30, 2021 was $347,310. On June 24, 2020,the Company received a loan £50,000 ($61,845) from the United Kingdom government. The loan has a six-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement. The Company may prepay this loan without penalty at any time. The Company repaid $1,935 of principal during the nine months ended September 30, 2021 and the balance as of September 30, 2021 was $65,468. Distribution and Equity Agreement As discussed in Note 3 above, the Company entered into a Distribution and Equity Acquisition Agreement with Marathon. The Company was appointed the exclusive distributor of the Products (as defined) initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. As consideration for its services, Company received: (a) a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services; and (b) received cash of CAD $2,000,000, subject to repayment in Common Shares of the Company if it fails to meet certain performance milestones. The Company is entitled to receive an additional CAD $2,750,000 upon the Company’s receipt of gross sales of CAD $6,500,000and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000. As discussed in Note 3, the Company attributed no value to the shares received in Marathon pursuant to (a) above. In relation to the CAD $2 million cash received noted in (b) above, the Company accounted for its obligation to issue a variable number of the Company’s Common Shares as Share-settled debt obligation in accordance with ASC 480 measured at fair value or the settlement amount of $1,554,590 (CAD $2 million). If settlement were to occur on December 31, 2019, the Company would be required to issue 337,949 common shares to settle its debt obligation. The Company could be obligated to potentially issue an unlimited number of common shares to settle its Share-settled debt obligation. If such events were to occur, the Company would be required to increase its authorized share capital and since increasing the authorized share capital is within the control of the Company, as our CEO controls greater than 50% of the outstanding common stock of the Company, the original classification of equity-classified financial None of the above loans were made by any related parties.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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