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RELATED PARTY TRANSACTIONS | 3 Months Ended
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Mar. 31, 2023
RELATED PARTY TRANSACTIONS |
RELATED PARTY TRANSACTIONS | NOTE 9 – RELATED PARTY TRANSACTIONS Doc Pharma S.A. Prepaid expenses and other current assets – related party As of March 31, 2023, and December 31, 2022, the Company had a prepaid balance of $4,940,863 and $3,320,345 to Doc Pharma S.A. related to purchases of inventory. Accounts payable and accrued expenses - related party As of March 31, 2023, and December 31, 2022, the Company had an accounts payable balance of $8,882 and $201,991. Accounts receivable - related party Additionally, the Company had a receivable balance of $1,886,890 and $2,070,570 from Doc Pharma S.A as of March 31, 2023, and December 31, 2022, respectively. Sales and Purchases During the three months ended March 31, 2023 and 2022, the Company purchased a total of $450,911 and $687,382 of products from Doc Pharma S.A., respectively. During the three months ended March 31, 2023 and 2022 the Company had $627 and $383,688 revenue from Doc Pharma S.A., respectively. Other Agreements 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 three months ended March 31, 2023 and 2022, the Company has purchased €347,461 ($401,786) and €461,453 ($517,566), 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). 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. No additional licenses were purchased during the 3-month period ended March 31, 2023. The agreement will be terminated on December 31, 2025. Loans receivable - related party The balance of prepaid expenses 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 the 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. 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 March 31, 2023 and December 31, 2022, the loan had a current portion of €410,400 ($446,187) and €400,000 ($427,720) and a non-current portion of €3,589,600 ($3,902,613), and €3,600,000 ($3,851,280) respectively, which is classified as loans receivable – related party as of March 31, 2023. For the 3-month period ended March 31, 2023 and the Company has recorded interest income of €55,000 ($59,796) relating to this loan which had not been paid as of March 31, 2023. 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. Cana Holdings Laboratories Holding Limited Loans receivable - related party - long term On February 28, 2023 (Issue Date) the Company signed a Secured Promissory Note with Cana Laboratories Holding (Cyprus) Limited (the “Holder”), whereby the Holder borrowed the sum of €4,100,000 ($4,457,520) from the Company. Interest on the Principal Amount under this Note shall accrue at a rate equal to Five Percent (5%) plus 1 month LIBOR per annum (4.77% as of March 31, 2023). The maturity date (“Maturity Date”) of this Note shall be five (5) years from the Issue Date. The Principal Amount, as well as all accrued interest shall be due and payable on the Maturity Date. During the three months ended March 31, 2023, the Company recorded interest income of €34,015 ($36,497). Cana is considered a related party, since the Company has signed a binding letter of intent and an SPA for the acquisition of Cana. The acquisition is expected to be completed within 2023. Panagiotis Kozaris Prepaid expenses and other current assets - related party From time-to-time the Company 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 the 3-month period ended March 31, 2023 and March 31, 2022, the Company paid Panagiotis Kozaris an additional sum of $51,159 and $0 respectively for shares owned, however, no SPA for these funds has been executed as of March 31, 2023. The Company intends to execute a cumulative SPA for these amounts during 2023. The total balances owed of $194,215 and $143,056 are included in prepaid expenses and other current assets – related party, on the accompanying condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, respectively. 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 Accounts receivable - related party 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 3-month periods ended March 31, 2023 and 2022 the Company’s net sales to Pharmacy & More amounted to $118,987 and $113,621 respectively. As of March 31, 2023 and December 31, 2022 the Company’s outstanding receivable balance due from the pharmacy amounted to $867,866 (€798,258) and $760,025 (€710,436), respectively, and are included in accounts receivable - related party, on the accompanying condensed consolidated balance sheets. 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 activity as of and for the three and twelve month periods ended March 31, 2023 and December 31, 2022 is presented below:
|  | March 31, 2023 |  |  | December 31, 2022 |
Beginning balance |  | $ | 10,912 |  |  | $ | 464,264 |
Payments |  |  | - |  |  |  | (472,920 | )
Foreign currency translation |  |  | 177 |  |  |  | (19,568 | )
Ending balance |  | $ | 11,089 |  |  | $ | 10,912 |
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 bore an interest rate of 4.7% per annum, originally matured on March 18, 2019 pursuant to the original agreement which was extended to December 31, 2021, and again to December 31, 2023. During the year ended December 31, 2022, the Note was paid in full and as of March 31, 2023 the Company had an outstanding balance of $0. As of March 31, 2023 and December 31, 2022 the Company had accrued interest of €22,891 ($24,887) and €192,891 ($206,355) outstanding related to this loan, classified under accrued interest, in the Company’s condensed consolidated balance sheets. 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 March 31, 2023 and December 31, 2022, the Company had a principal balance of €10,200 ($11,089) and €10,200 ($10,912), respectively. Dimitrios Goulielmos is a current director and former CEO of the Company. The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the three months ended March 31, 2023, the Company recorded a loss of $177. Loans Payable – Related Party A summary of the Company’s related party loans payable during the three months ended March 31, 2023, and the year ended December 31, 2022 is presented below:
|  | March 31, 2023 |  |  | December 31, 2022 |
Beginning balance |  | $ | 12,821 |  |  | $ | 1,293,472 |
Proceeds |  |  | - |  |  |  | 3,635,756 |
Payments |  |  | - |  |  |  | (4,851,678 | )
Foreign currency translation |  |  | 208 |  |  |  | (64,729 | )
Ending balance |  | $ | 13,029 |  |  | $ | 12,821 |
Grigorios Siokas From time to time, Grigorios Siokas loans the Company funds in the form of non-interest bearing, no-term loans. As of December 31, 2022, the Company had an outstanding principal balance under these loans of $12,821 in loans payable to Grigorios Siokas. As of March 31, 2023 the Company had an outstanding principal balance of $13,029. The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the three months ended March 31, 2023 the Company recorded a loss of $208. 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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