RELATED PARTY CONSIDERATIONS
|6 Months Ended|
Jun. 30, 2020
|Related Party Transactions [Abstract]|
|RELATED PARTY CONSIDERATIONS||
Some of the officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities that become available. They may face a conflict in selecting between the Company and other business interests. We have not formulated a policy for the resolution of such conflicts.
On November 20, 2017, Dr. Dimitrov, former director of the Company, provided a notice to the Company stating that he was resigning from the Board, effective immediately. Dr. Dimitrov indicated that his resignation from the Board was based on the deteriorating relationship between the Company and Digital Diagnostics over the non-payment of fees owed by the Company pursuant to the licensing agreement between the Company and Digital Diagnostics (See Note 11). The Company paid $0 during the six months ended June 30, 2020 and 2019. There was no change during the six months ended June 30, 2020.
For the six months ended June 30, 2020 and 2019, $0 and $26,975, respectively, was recognized in Research and Development expenses for consulting provided by Dr. Dimitrov, respectively. As of June 30, 2020 and December 31, 2019, $575,000 was included in accounts payable for both periods to KD Innovation Ltd., an affiliated entity of Dr. Dimitrov. There was no change during the six months ended June 30, 2020.
On January 8, 2019, the Company entered into a Master Product Development and Supply Agreement with C2M (see Note 11). At June 30, 2020 and December 31, 2019, accounts payable to C2M related to purchase of finished products amounted to $8,342. During the six months ended June 30, 2020, the Company did not purchase any finished products from C2M. C2M is a majority stockholder of the Company. During the six months ended June 30, 2020, the Company recognized revenues from C2M of $315,800 from sales of flowers and recorded related cost of sales of $417,783. Additionally, accounts receivable from C2M as of June 30, 2020 amounted to $94,800.
From time to time, the Company’s subsidiary, EOW, receives advances from an affiliated company which is owned by three members of EOW for working capital purposes. The advances are non-interest bearing and are payable on demand. The Company advanced $127,500 during fiscal 2019 to these related parties which resulted in a receivable or due from related parties of $127,500 as of June 30, 2020 and December 31, 2019. These advances are short-term in nature, non-interest bearing and due on demand. The Company reclassed the $127,500 related party receivable to the stockholders’ equity section as of June 30, 2020.
As of June 30, 2020 and December 31, 2019, accounts receivable from a related party customer amounted to $12,860 and $18,860, respectively. The customer is an affiliated company which is substantially owned by a managing member of EOW.
On July 9, 2019, the Company entered into a Commercial Lease Agreement (the “Lease”) with Skybar Holdings, LLC, a Florida limited liability company. Pursuant to the Lease, the Company will rent the entire first floor (consisting of approximately 4,000 square feet) of a property located in Delray Beach, Florida (the “Premises”). The Company plans to develop the Premises to create a hemp-oriented health and wellness retail venue, including education, clothing and cosmetics, and explore franchise opportunities. The initial term of the Lease is 5 years commencing August 1, 2019, with two 5-year extension options. The Lease includes a right of first refusal in favor of the Company to lease any space that becomes available on the 2nd and 3rd floor of the Premises and a right of first refusal to purchase the Premises. Pursuant to the Lease, the Company will pay rent equal to $40,000 per month in advance in addition to all applicable Florida sales and/or federal taxes and security deposit of $40,000. Effective one year from the lease commencement date and each year thereafter, the rent shall increase at least three percent (3%) per year. The lessor of the Premises is a limited liability company owned or controlled by Vladislav (Bobby) Yampolsky, a member of the Board and the founder, manager and controlling member of C2M, the Company’s largest stockholder. During the second quarter of fiscal 2020, the Company has determined that the commercial lease with Skybar Holding, LLC is not in compliance with current laws or regulations in the City of Delray Beach and does not represent an enforceable contract and was void from the moment of execution. As a result, the Company has restated its prior year financial information to correct this accounting error (see Note 14). Additionally, on August 6, 2020, the Company submitted a written termination letter to Skybar Holdings, LLC.
As of June 30, 2020 and December 31, 2019, accounts payable from two affiliated companies and C2M totaled to $454,511 ($350,000, $96,169 and $8,342, respectively) for both periods.
From January 31, 2020 through June 30, 2020, the Company’s Interim Executive Chairman, Bobby Yampolsky, made a series of advances to the Company in the approximate total amount of $97,000 and has been included in due to related party as reflected in the accompanying unaudited condensed consolidated balance sheets. These advances are short-term in nature and non-interest bearing. On June 11, 2020, Mr. Yampolsky tendered his resignation as a member and interim chairman of the board of directors of the Company. Additionally, the Company agreed to pay $12,500 on June 11, 2020 and a monthly installment payment of approximately $7,084 beginning July 15, 2020 to June 15, 2021. On June 11, 2020, the Company paid $12,500 of these related party advances. The Company paid the first monthly installment in July 2020. As of June 30, 2020, due to related party amounted to $84,500.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef