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DEBT
 9 Months Ended
Sep. 30, 2023
DEBT  
DEBT

NOTE 12 – DEBT

 

A roll forward of the Company’s third-party debt for the nine months ended September 30, 2023 is presented below:

 

September 30, 2023

 

Trade

Facility

 

 

Third

Party

 

 

COVID

Loans

 

 

Total

 

Beginning balance, December 31, 2022

 

$3,305,532

 

 

$1,505,078

 

 

$207,377

 

 

$5,017,987

 

Proceeds

 

 

-

 

 

 

1,034,798

 

 

 

-

 

 

 

1,034,798

 

Payments

 

 

(1,152,920 )

 

 

(315,670 )

 

 

(20,593 )

 

 

(1,489,183 )

Debt forgiveness

 

 

(306,637 )

 

 

-

 

 

 

-

 

 

 

(306,637 )

Foreign currency translation

 

 

(20,235)

 

 

(15,769 )

 

 

(1,007 )

 

 

(37,011)

Ending balance, September 30, 2023

 

 

1,825,740

 

 

 

2,208,437

 

 

 

185,777

 

 

 

4,219,954

 

Notes payable – long-term

 

 

(1,349,460 )

 

 

(1,652,562 )

 

 

(158,255 )

 

 

(3,160,277 )

Notes payable - short-term

 

$476,280

 

 

$555,875

 

 

$27,522

 

 

$1,059,677

 

Our outstanding debt as of September 30, 2023, is repayable as follows:

 

 

September 30, 

2023

 

2023

 

$1,059,977

 

2024

 

 

905,048

 

2025

 

 

1,412,743

 

2026

 

 

202,401

 

2027 and thereafter

 

 

640,085

 

Total debt

 

 

4,219,954

 

Less: Notes payable–- current portion

 

 

(1,059,677 )

Notes payable–- long term portion

 

$3,160,277

 

 

Loan Facility Agreement

 

On August 4, 2021, the Company entered into an exchange agreement for the existing loan facility agreement with Synthesis Peer-to-Peer Income Fund, whereby the Company agreed to the following:

 

 

·

Issue on August 4, 2021, 12,852 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 12,852 shares; and

 

 

 

 

·

Agreed to issue no more than 9,520 shares of common stock upon approval of the listing of the Company’s common stock on Nasdaq to settle $1,190,000 (€1,000,000) of debt. The Company issued these shares on February 28, 2022. Upon issuance of the 9,520 shares of common stock, the Company recorded a gain on extinguishment of debt in the amount of $216,580 determined using the fair value of the Company’s common stock at the commitment date of $102.25 per share.

 

The principal debt balance was paid in full during the year ended December 31, 2022. As of September 30, 2023 and December 31, 2022, the outstanding principal balance on the debt was $0, and it had accrued interest expense of $0 and $12,853, respectively.

 

Trade Facility Agreements

 

On May 12, 2017, SkyPharm entered into a Trade Finance Facility Agreement (the “TFF”) 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 ($2,316,000), (the "EURO Loan") and USD $4,000,000 (the "USD Loan"). Interest on both the EURO Loan and USD Loan commenced on October 1, 2018, at 6% per annum plus one-month Euribor (3.39% as of September 30, 2023), and 6% plus one-month LIBOR (5.18% as of date of September 30, 2023), respectively.

 

On December 30, 2020, the Company transferred the EURO Loan to a new third-party lender. The terms remained the same except interest accrues at 5.5% per annum plus one-month Euribor (3.39% as of September 30, 2023). The principal was scheduled to be repaid in a total of five quarterly installments beginning October 31, 2021 of €50,000 ($54,600) each with a final repayment of €1,800,000 ($1,965,600) Euro payable on October 31, 2022.

On March 3, 2022, the Company entered into a modification agreement to extend the maturity date to January 10, 2023 and payments under the USD Loan. During June 2022, the Company agreed with the Lender to postpone the repayment of an installment of $500,000 due on June 30, 2022 (based on the modification agreement signed on March 3, 2022) until January 2023. During September 2022, the Company entered into an agreement with the Lender to postpone the repayment of the outstanding balance on the USD Loan of $3,950,000, plus unpaid accrued interest until January 2023. The Company capitalized fees paid upon modification of €200,000 ($221,060) that are being amortized over the life of the loan. The Company incurred non-cash interest expense of $23,820 during the three-month period ended September 30, 2022 concerning the above capitalized fees.

 

During the year ended December 31, 2022, the Company repaid €175,000 ($191,100) of the EURO Loan and $2,593,363 of the USD Loan such that as of December 31, 2022, the Company had principal balances of €1,775,000 ($1,898,895) and $1,406,637 under the agreements, respectively. As of September 30, 2022, the Company had accrued $17,434 in interest expense related to these agreements. 

 

On December 21, 2022 the USD Loan was assigned to GIB Fund Solutions ICAV (the “Fund”). On January 31, 2023, the Company paid $1,100,000 to the Fund under a full and final settlement agreement for the USD Loan, recording a gain on extinguishment of debt of $306,637 relating to the waiver of the unpaid balance. Additionally, the Company repaid €50,000 ($52,920) of the EURO Loan during the nine-month period ended September 30, 2023. As of September 30, 2023 the Company had an outstanding principal balance of €1,725,000 ($1,825,740), of which $1,349,460 is classified as ''Notes payable - long term portion" on the condensed consolidated balance sheets. As of September 30, 2023, the Company had accrued $58,825 in interest expense related to these agreements.

 

On December 22, 2022, Skypharm signed an agreement for the extension of the payments and an increase in interest rate due under the EURO loan, that was extended to be repaid with a balloon payment now due on October 31, 2025. This extension was agreed upon in writing on December 22, 2022, with a retroactive modification date to October 31, 2022 (the original maturity date). 

 

Third Party Debt

 

On November 16, 2015, the Company entered into a Loan Agreement with Panagiotis Drakopoulos, the Company’s 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 bore an interest rate of 6% per annum and was due and payable in full on November 15, 2016. As of December 31, 2022, the Company had an outstanding principal balance of €8,000 ($8,558) and accrued interest of €6,797 ($7,271). During the nine-month period ended September 30, 2023, the Company repaid the entire outstanding balance of €8,000. Therefore, as of September 30, 2023, the outstanding principal balance was $0. Mr. Drakopoulos is not considered a related party since he is no longer employed by the Company and currently holds no equity position in the Company.

 

May 18, 2020, July 3, 2020, and August 4, 2020 Senior Promissory Notes

 

Modification of May 18, 2020, July 3, 2020, and August 4, 2020 Senior Promissory Notes

 

On February 23, 2022, the Company entered into modification agreements to extend the due dates of the May 18 Note, July 3 Note, and August 4 Note to June 30, 2023, totaling $9,000,000, in the aggregate. The Company paid restructuring fees totaling $506,087 upon modification. The Company determined the modification should be recorded as debt extinguishment in accordance with ASC 470 because the present value of the remaining cash flows under the terms of the new debt instrument is at least 10% different from the present value of the remaining cash flows under the terms of the original instrument. The Company recorded the new debt at fair value in the amount of $7,706,369 and a gain upon extinguishment in the amount of $787,544. During the year ended December 31, 2022, the Company repaid the aggregate principal balance of $7,000,000 and the aggregate accrued interest related to these notes in full. During the three- and nine-month period ended September 30, 2023, the Company recorded non-cash interest expense of $295,846 and $772,180, respectively, related to the amortization of debt issuance costs. 

June 23, 2020 Debt Agreement

 

On June 23, 2020, the Company’s subsidiary, Cosmofarm, entered into an agreement with the National Bank of Greece S.A. (the “Bank”) to borrow a maximum of €500,000 ($611,500). The note has a maturity date of sixty (60) months from the date of the first disbursement, which includes a grace period of nine months. The total amount of the initial proceeds was received in 3 equal monthly installments. The note is interest bearing from the date of receipt and is payable every three (3) months at an interest rate of 3.06% plus 3-month Euribor (3.6% as of September 30, 2023). The outstanding balance was €264,706 ($289,059) and €235,294 ($249,035) as of September 30, 2023 and December 31, 2022, respectively, of which $124,517 and $220,253 was classified as "Notes payable - long-term portion" respectively, on the accompanying condensed consolidated balance sheets. During the nine months ended September 30, 2023, the Company repaid €88,235 ($93,388) of the principal balance.

 

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% plus .6% plus 6-month Euribor when Euribor is positive (3.93% as of September 30, 2023). The principal is to be repaid in 18 quarterly installments of €27,778 ($30,333). During the year ended December 31, 2022, the Company repaid €111,111 ($118,867) of the principal and as of December 31, 2022, the Company had accrued interest of $8,069 related to this note and a principal balance of €333,333 ($356,600), of which $237,733 is classified as "Notes payable - long term portion" on the accompanying condensed consolidated balance sheets. During the nine months ended September 30, 2023, the Company repaid €83,333 ($88,200) of the principal and as of September 30, 2023, the Company has accrued interest of €6,108 ($6,464) related to this note and a principal balance of €250,000 ($264,600), of which $147,000 is classified as "Notes payable - long term portion" on the accompanying condensed consolidated balance sheets.

 

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 (3.93% as of September 30, 2023). Pursuant to the terms of the agreement, there is a nine-month grace period for principal repayment during which interest is accrued. The principal is to be repaid in 18 quarterly installments of €27,778 commencing three months from the end of the grace period. During the year ended December 31, 2022, the Company repaid €77,985 ($83,428) of the principal balance. As of December 31, 2022, the Company had accrued interest of €2,509 ($2,728) and a principal balance of €422,016 ($451,472), of which $336,788 is classified as notes payable – long term portion on the accompanying condensed consolidated balance sheet. During the nine months ended September 30, 2023, the Company repaid €78,429 ($83,009) of the principal. As of September 30, 2023, the Company has accrued interest of €7,982 ($8,449) and principal of €343,587 ($363,652), of which $247,186 is classified as "Notes payable - long term portion" on the accompanying condensed consolidated balance sheets.

 

June 9, 2022 Debt Agreement

 

On June 9, 2022 the Company entered into an agreement with a third-party lender in the principal amount of €320,000 ($335,008), the “Note”. The Note matures on June 16, 2027 and bears an annual interest rate of 3.89% plus an additional rate of 0.60%, plus the 3-month Euribor (3.6% as of September 30, 2023). Pursuant to the agreement, there is a twelve-month grace period for principal repayment during which interest is accrued. The principal is to be repaid in 17 equal quarterly installments of €18,824 commencing on June 30, 2023. During the nine months ended September 30, 2023, the Company repaid €40,000 ($42,336) of the principal. As of September 30, 2023 and December 31, 2022 the Company has accrued interest of €4,164 ($4,407) and €7,707 ($8,379), respectively, and an outstanding balance of €280,000 ($296,352), of which $216,661 and $281,924, respectively, is classified as "Notes payable - long term portion" on the accompanying condensed consolidated balance sheets.

 

August 29, 2022 Promissory Note

 

On August 29, 2022, the Company entered into a promissory note for the principal amount of $166,667. The Company received $150,000 in cash and recorded $16,667 as an original issue discount upon issuance. The promissory note matured on the earlier of (a) December 27, 2022, or (b) the date the Company completes a debt or equity financing of at least $1,000,000. The debt carried an annual interest rate of 12% which was due upon maturity. As of December 31, 2022, the Company had repaid the principal balance in full and had a balance of $5,041 in accrued interest related to this note. The Company repaid the outstanding interest during the nine-month period ended September 30, 2023 and thus the balance of both principal and interest as of September 30, 2023 is $0.

July 14, 2023 Debt Agreement

 

On July 14, 2023 the Company entered into an agreement with a third-party lender in the principal amount of €1,000,000 ($1,123,700), the “Note”. The Note matures on July 31, 2028 and bears an annual interest rate of 2.46% plus the 3-month Euribor (3.6% as of September 30, 2023). Pursuant to the agreement, there is a nine-month grace period for interest and principal repayment. The principal is to be repaid in 18 equal quarterly installments of €55,556 commencing on May 2, 2024. As of September 30, 2023 and December 31, 2022 the Company an outstanding balance of €977,000 ($1,034,798) and $0, of which $917,198 and $0, respectively, is classified as "Notes payable - long term portion" on the accompanying condensed consolidated balance sheets.

 

June 24, 2020 Debt Agreement

 

On June 24, 2020, the Company’s subsidiary, Decahedron, received a loan £50,000 ($68,310) from the United Kingdom government. The loan has a ten-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement, which was on July 10, 2020. The Company may prepay this loan without penalty at any time. As of December 31, 2022, the principal balance was £47,144 ($56,936). As of September 30, 2023, the principal balance was £42,430 ($51,824).

 

COVID-19 Loans

 

On May 12, 2020, the Company’s subsidiary, SkyPharm, was granted and on May 22, 2020 received a €300,000 ($366,900) loan from the Greek government. The loan will be repaid in 40 equal monthly installments beginning on July 29, 2022. As a condition to the loan, the Company was required to retain the same number of employees until October 31, 2020. As of December 31, 2022, the principal balance was $150,441. During the nine months ended September 30, 2023, the Company repaid €14,063 ($14,884) of the principal balance. The outstanding balance as of September 30, 2023 is €126,563 ($133,954).