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RELATED PARTY TRANSACTIONS | 12 Months Ended
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Dec. 31, 2022
RELATED PARTY TRANSACTIONS |
RELATED PARTY TRANSACTIONS | NOTE 9 – RELATED PARTY TRANSACTIONS Doc Pharma S.A. As of December 31, 2022, the Company has a prepaid balance of $3,320,345 and an accounts payable balance of $201,991 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $2,070,570. As of December 31, 2021, the Company has a prepaid balance of $3,263,241 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company had a receivable balance of $2,901,300 and an accounts payable balance of $565,756. During the years ended December 31, 2022 and 2021, the Company purchased a total of $1,755,103 and $3,084,805 of products from Doc Pharma S.A., respectively. During the years ended December 31, 2022 and 2021 the Company had $1,058,780 and $978,321 revenue from Doc Pharma S.A., respectively. On October 10, 2020, the Company entered into a contract manufacturer outsourcing (“CMO”) agreement with Doc Pharma whereby Doc Pharma is responsible for the development and manufacturing of pharmaceutical products and nutritional supplements according to the Company’s specifications based on strict pharmaceutical standards and good manufacturing practice (“GMP”) protocols as the National Organization for Medicines requires. The Company has the exclusive ownership rights for trading and distribution of its own branded nutritional supplements named “Sky Premium Life®”. The duration of the agreement is for 5 years however either party may terminate the agreement at any time giving six-months advance notice. Doc Pharma is exclusively responsible for supplying the raw materials and packaging required to manufacture the final product. However, they are not responsible for potential delays that may arise, concerning their import. Doc Pharma is obliged to store the raw and packaging materials. The delivery of raw and packaging materials should be purchased at least 30 and 25 days, respectively, before the delivery date of the final product. The Manufacturer solely delivers the finished product to the Company. There is a minimum order quantity (“MoQ”) of 1,000 pieces per product code. Both parties have agreed that the Company will deposit 60% of the total cost upon agreement and assignment and 40% of the total cost including VAT charge upon the delivery date. The prices are indicative and are subject to amendments if the cost of the raw material or the production cost change. For the years ended December 31, 2022 and 2021, the Company has purchased €1,653,911 ($1,742,282) and €1,699,507 ($2,010,517), respectively, in inventory related to this agreement. On May 17, 2021, Doc Pharma and the Company entered into a Research and Development “R&D” agreement whereby Doc Pharma will be responsible for the research, development, design, registration, copy rights and licenses of 250 nutritional supplements for the final products called Sky Premium Life®. These products will be sold in Greece and abroad. The total cost of this project will be €1,425,000 plus VAT and will be done over three phases as follows: Design & Development (€725,000); Control and Product Manufacturing (€250,000) and Clinical Study and Research (€450,000). In the year ended December 31, 2021, SkyPharm bought 67 licenses at value of €261,300 ($289,860) from Doc Pharma which was the 18.33% of the total cost. During the year ended December 31, 2022, SkyPharm bought another 14 licenses at a value of €293,200 ($313,665) from Doc Pharma which was the 20.57% of the total cost. SkyPharm has bought in total as of December 31, 2022, 81 licenses at value of €554,500 ($593,204) which is 38.91% of the total cost. The agreement will be terminated on December 31, 2025. The balance of prepaid expenses due to SkyPharm SA due Doc Pharma SA as of December 31, 2022, had increased to €7,103,706 ($7,599,545), which was mainly attributable to the prepayments SkyPharm SA made in accordance with the CMO agreement and the extensive orders and sales of the SPL products the Company expects to achieve within 2023, mainly through its Amazon channels in UK, Singapore, Canada and other countries. However, as the benefit from a significant portion of the prepaid balance would not have been realized within a 12-month period, the Company opted to secure a portion of the outstanding prepaid balance through a loan agreement. On January 1, 2023, SkyPharm S.A. (the “Lender”) entered into a loan agreement with Doc Pharma S.A. (the “Borrower”) for €4,000,000 ($4,279,200), all of which was financed through the outstanding prepaid balance. The duration of the loan will be for a 10-year period up to December 1, 2032 (“the Maturity date”). The loan will bear a fixed interest rate of 5.5% payable on a monthly basis and will be repayable in 120 equal instalments of €33,333.33 ($35,660). The loan may be prepaid anytime during its in full or partially based on the Company’s product requirements and other factors, without Doc Pharma incurring any prepayment penalty. As of December 31, 2022, the loan had a current portion of €400,000 ($427,920) and a non-current portion of €3,600,000 ($3,851,280), which was reclassified to Loans receivable – related party as of December 31, 2022. Doc Pharma S.A is considered a related party to the Company due to the fact that the CEO of Doc Pharma is the wife of Grigorios Siokas, the Company’s CEO and principal shareholder, who also served as a principal of Doc Pharma S.A. in the past. Panagiotis Kozaris From time-to-time purchases back shares that Panagiotis Kozaris owns and records them as treasury shares. The Company pays Panagiotis Kozaris in advance for the shares owned and obtains the shares upon execution of a cumulative stock-purchase agreement (“SPA”). During 2021 the Company prepaid a total of $376,901 to Panagiotis Kozaris and executed a cumulative SPA on December 29, 2021, upon which shares of treasury stock were obtained by the Company, reducing Panagiotis Kozaris’ prepaid expense balance to $0 as of December 31, 2021. During the year ended December 31, 2022 the Company paid Panagiotis Kozaris an additional sum of $143,056 for shares owned, however, no SPA for these funds has been executed as of December 31, 2022. The amount of $143,056 is included in Prepaid expenses and other current assets – related party, on the accompanying consolidated balance sheets as of December 31, 2022. The Company intends to execute a cumulative SPA for these amounts during Q2 2023. Panagiotis Kozaris is considered a related party due to the fact that he is a former General operational manager and current employee of Cosmofarm SA. Maria Kozari During 2021, the Company, through its subsidiary, Cosmofarm SA, commenced a partnership with a pharmacy called “Pharmacy & More”, owned by Maria Kozari. The transactions with the respective pharmacy were in Cosmofarm’s normal course of business, however, a more flexible credit policy was allowed as the pharmacy was new and needed to be established in the market. During the years ended December 31, 2022 and 2021 the Company’s net sales to Pharmacy & More amounted to $463,467 and $358,524 respectively. As of December 31, 2022 and 2021 the Company’s outstanding receivable balance due from the pharmacy amounted to $760,025 (€710,436) and $366,270 (€366,270), respectively, and are included in Accounts receivable - related party, on the accompanying consolidated balance sheets. The Company has recorded a cumulative bad debt allowance of $59,957 to the outstanding balance due from Pharmacy & More as of December 31, 2022, with the reserve for the period ended December 31, 2022 amounting to $48,230. The Company plans to acquire Pharmacy & More within fiscal year 2023, however the acquisition is conditional upon waiver of certain local legal restrictions. Upon acquisition, the Company intends to offset the outstanding receivable balance with the corresponding purchase price. Maria Kozari is considered a related party to the Company due to the fact that she is the daughter of Panagiotis Kozaris, a former Operational General Manager and current employee of Cosmofarm SA. Notes Payable – Related Party A summary of the Company’s related party notes payable during the years ended December 31, 2022 and 2021 is presented below:
|  | 2022 |  |  | 2021 |
Beginning Balance |  | $ | 464,264 |  |  | $ | 501,675 |
Payments |  |  | (472,920 | ) |  |  | - |
Foreign currency translation |  |  | 19,568 |  |  |  | (37,411 | )
Ending Balance |  | $ | 10,912 |  |  | $ | 464,264 |
Grigorios Siokas On December 20, 2018, the €1,500,000 ($1,718,400) note payable, originally borrowed pursuant to a Loan Agreement with a third-party lender, dated March 16, 2018, was transferred to Grigorios Siokas. The note bears an interest rate of 4.7% per annum, matured on March 18, 2019 pursuant to the original agreement and was extended until December 31, 2021. The note is not in default and the maturity date has been extended again until December 31, 2023. As of December 31, 2021 the Company had an outstanding balance of €400,000 ($452,720) and accrued interest of €177,313 ($200,683). The Company repaid the outstanding principal balance in full during the year ended December 31, 2022. As of December 31, 2022 the Company had accrued interest of €192,891 ($206,355) outstanding related to this loan. Grigorios Siokas is the Company’s CEO and principal shareholder. Dimitrios Goulielmos On November 21, 2014, the Company entered into an agreement with Dimitrios Goulielmos, as amended on November 4, 2016. Pursuant to the amendment, this loan has no maturity date and is non-interest bearing. As of December 31, 2021, the Company had a principal balance of €10,200 ($11,544). A principal balance of €10,200 ($10,912) remained as of December 31, 2022. Dimitrios Goulielmos is a former director and CEO of the Company. The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2022, and 2021, the Company recorded a foreign currency translation loss of $19,568 and a gain of $37,411, respectively. Loans Payable – Related Party A summary of the Company’s related party loans payable during the years ended December 31, 2022 and 2021 is presented below:
|  | 2022 |  |  | 2021 |
Beginning balance |  | $ | 1,293,472 |  |  | $ | 1,629,246 |
Proceeds |  |  | 3,635,756 |  |  |  | 6,377,156 |
Payments |  |  | (4,851,678 | ) |  |  | (133,552 | )
Conversion of debt |  |  | - |  |  |  | (6,000,000 | )
Settlement of lawsuit |  |  | - |  |  |  | (600,000 | )
Foreign currency translation |  |  | (64,729 | ) |  |  | 20,623 |
Ending balance |  | $ | 12,821 |  |  | $ | 1,293,472 |
Grigorios Siokas From time to time, Grigorios Siokas loans the Company funds in the form of non-interest bearing, no-term loans. On May 10, 2021, the Company entered into a Debt Exchange agreement (“May Debt Exchange”) related to a lawsuit from on or about July 25, 2019, whereby Mark Rubenstein, individually and as a shareholder of the Company, brought the action styled Rubenstein v. Siokas, et al., Case No. 1:19-cv-06976-KPF (S.D.N.Y.) against Grigorios Siokas for recovery of alleged profits earned under Section 16(b) of the Securities Exchange Act of 1934. Although recovery was sought only from Mr. Siokas, the Company was also named as a nominal defendant. Both the Company and Mr. Siokas vigorously defended the lawsuit. On or about September, 18, 2020, in an effort to avoid the uncertainty of litigation and further legal expense, Mr. Siokas agreed to settle the lawsuit by agreeing to reimburse the Company a total of $600,000, payable as a combination of: (1) Mr. Siokas reimbursing the Company for Plaintiff’s attorneys’ fees, in an amount subsequently determined by the Court to be $120,000 plus $4,137 of litigation costs to be paid in cash, and (2) Mr. Siokas relieving the Company of certain debt owed to him. Mr. Siokas and the Company strongly opposed Plaintiff’s motion for attorneys’ fees. Pursuant to the terms of the May Debt Exchange the Company forgave $600,000 of the existing loan payable and recorded the forgiveness to additional paid in capital. During the year ended December 31, 2021, the Company entered into various agreements (as defined in Note 7) with Mr. Siokas whereby the Company exchanged an aggregate total of $6,000,000 of debt into 40,000 shares of Common Stock at above market prices. During the year ended December 31, 2021, the Company borrowed additional proceeds of €1,803,000 ($2,040,635), €230,000 ($275,306) and $4,061,215 and repaid €118,000 ($133,552) of these loans. During the year ending December 31, 2021, the Company converted $2,250,000 of the July 20 Note at a conversion price of $150.00 and issued 15,000 shares of common stock. As of December 31, 2021, the Company had an outstanding balance under these notes and loans of $1,293,472. During the year ended December 31, 2022, the Company borrowed additional proceeds of €656,750 ($702,591), and $2,933,165 and repaid €1,688,800 ($1,806,678) and $3,045,000 of these loans. The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2022 and 2021, the Company recorded a gain of $64,729 and a loss of $20,623, respectively. Except as set forth above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons.

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