UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2022

 

OR

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from ___________ to ___________

 

Commission file number: 000-54436

 

COSMOS HOLDINGS INC.

(Exact name of registrant as specified in its charter)

 

Nevada

27-0611758

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

141 West Jackson Blvd, Suite 4236

Chicago, Illinois

60604

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number: (312) 536-3102

 

N/A

(Former name, former address and former three months, if changed since last report)

 

Title of Each Class

 

Trading Symbol

 

Name of Each Exchange

On Which Registered

Common Stock, $.001 par value

 

COSM

 

The Nasdaq Capital Market

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

(Do not check if a smaller reporting company)

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Applicable only to Corporate Issuers:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of May 17, 2022, there were 19,106,625 shares issued and 18,719,201 shares outstanding of the registrant’s common stock.

 

 

 

 

COSMOS HOLDINGS INC.

 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited).

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

35

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

43

Item 4.

Controls and Procedures.

43

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

45

 

 

 

 

 

Item 1A

Risk Factors

 

45

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

45

Item 3.

Defaults Upon Senior Securities.

45

Item 4.

Mine Safety Disclosures.

45

Item 5.

Other Information.

45

Item 6.

Exhibits.

46

 

SIGNATURES

47

 

 
2

Table of Contents

    

 COSMOS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

 (Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$1,010,427

 

 

$286,487

 

Accounts receivable, net

 

 

26,094,450

 

 

 

26,858,114

 

Accounts receivable - related party

 

 

2,844,572

 

 

 

2,901,300

 

Marketable securities

 

 

12,551

 

 

 

11,468

 

Inventory

 

 

4,007,977

 

 

 

3,147,276

 

Loans receivable

 

 

375,195

 

 

 

377,590

 

Prepaid expenses and other current assets

 

 

1,944,720

 

 

 

2,987,687

 

Prepaid expenses and other current assets - related party

 

 

4,368,794

 

 

 

3,263,241

 

Operating lease right-of-use asset

 

 

775,545

 

 

 

834,468

 

Financing lease right-of-use asset

 

 

192,822

 

 

 

211,099

 

 

 

 

 

 

 

 

 

 

TOTAL CURRENT ASSETS

 

 

41,627,053

 

 

 

40,878,730

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,777,889

 

 

 

1,888,052

 

Goodwill and intangible assets, net

 

 

464,630

 

 

 

485,767

 

Loans receivable - long term portion

 

 

4,227,268

 

 

 

4,410,689

 

Other assets

 

 

909,581

 

 

 

915,250

 

Deferred tax assets

 

 

767,267

 

 

 

850,774

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$49,773,688

 

 

$49,429,262

 

 

 

 

 

 

 

 

 

 

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$11,781,189

 

 

$12,126,626

 

Accounts payable and accrued expenses - related party

 

 

220,887

 

 

 

599,125

 

Accrued interest

 

 

1,033,866

 

 

 

1,019,889

 

Lines of credit

 

 

4,362,327

 

 

 

4,743,557

 

Convertible notes payable, net of unamortized discount of $191,085 and $258,938, respectively

 

 

448,915

 

 

 

381,062

 

Derivative liability - convertible note

 

 

30,664

 

 

 

45,665

 

Notes payable

 

 

6,143,075

 

 

 

5,462,504

 

Notes payable - related party

 

 

455,035

 

 

 

464,264

 

Loans payable

 

 

1,000,000

 

 

 

1,000,000

 

Loans payable - related party

 

 

1,703,881

 

 

 

1,293,472

 

Taxes payable

 

 

1,192,178

 

 

 

1,324,722

 

Operating lease liability, current portion

 

 

158,359

 

 

 

138,450

 

Financing lease liability, current portion

 

 

71,861

 

 

 

73,078

 

Other current liabilities

 

 

1,193,683

 

 

 

1,255,824

 

 

 

 

 

 

 

 

 

 

TOTAL CURRENT LIABILITIES

 

 

29,795,920

 

 

 

29,928,238

 

 

 

 

 

 

 

 

 

 

Share settled debt obligation

 

 

1,554,590

 

 

 

1,554,590

 

Lines of credit - long-term portion

 

 

185,872

 

 

 

366,171

 

Notes payable - long term portion

 

 

6,885,806

 

 

 

12,356,384

 

Operating lease liability, net of current portion

 

 

617,183

 

 

 

696,015

 

Financing lease liability, net of current portion

 

 

131,016

 

 

 

148,401

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

39,170,387

 

 

 

45,049,799

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (see Note 14)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

MEZZANINE EQUITY

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 100,000,000 shares authorized:

 

 

 

 

 

 

 

 

Series A preferred stock, stated value $1,000 per share, 6,000,000 shares authorized; 6,000 and 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021; liquidation preference of $6,000,000 and $0, respectively

 

 

5,452,300

 

 

 

-

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000,000 shares authorized; 18,611,980 and 17,544,509 shares issued and 18,224,556 and 17,157,085 outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

18,611

 

 

 

17,544

 

Additional paid-in capital

 

 

40,648,106

 

 

 

39,675,753

 

Treasury stock, 387,424 and 387,424 shares as of March 31, 2022 and December 31, 2021

 

 

(816,707 )

 

 

(816,707 )

Accumulated deficit

 

 

(34,142,159 )

 

 

(34,345,506 )

Accumulated other comprehensive loss

 

 

(556,850 )

 

 

(151,621 )

 

 

 

 

 

 

 

 

 

TOTAL STOCKHOLDERS' EQUITY

 

 

5,151,001

 

 

 

4,379,463

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

 

$49,773,688

 

 

$49,429,262

 

     

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
3

Table of Contents

 

COSMOS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

     

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

REVENUE

 

$13,071,800

 

 

$11,619,076

 

 

 

 

 

 

 

 

 

 

COST OF GOODS SOLD

 

 

11,179,868

 

 

 

10,617,741

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

1,891,932

 

 

 

1,001,335

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

868,639

 

 

 

1,688,712

 

Salaries and wages

 

 

521,471

 

 

 

531,556

 

Sales and marketing expenses

 

 

146,949

 

 

 

405,092

 

Depreciation and amortization expense

 

 

112,622

 

 

 

107,073

 

TOTAL OPERATING EXPENSES

 

 

1,649,681

 

 

 

2,732,433

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

 

242,251

 

 

 

(1,731,098)

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

Other expense, net

 

 

(54,812)

 

 

(178,211)

Interest expense

 

 

(584,176)

 

 

(731,826)

Interest income

 

 

64,827

 

 

 

-

 

Non-cash interest expense

 

 

(260,527)

 

 

(50,109)

Gain on equity investments, net

 

 

1,678

 

 

 

440

 

Gain on extinguishment of debt

 

 

1,004,124

 

 

 

445,636

 

Change in fair value of derivative liability

 

 

15,001

 

 

 

61,373

 

Foreign currency transaction, net

 

 

(159,352)

 

 

(306,020)

TOTAL OTHER INCOME (EXPENSE), NET

 

 

26,763

 

 

 

(758,717)

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

269,014

 

 

 

(2,489,815)

 

 

 

 

 

 

 

 

 

BENEFIT FROM (PROVISION FOR) INCOME TAXES

 

 

(65,667)

 

 

315,912

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

 

203,347

 

 

 

(2,173,903)

 

 

 

 

 

 

 

 

 

Deemed dividend on warrants

 

 

(5,788,493)

 

 

-

 

 

 

 

 

 

 

 

 

 

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

 

 

(5,585,146)

 

 

(2,173,903)

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

Foreign currency translation adjustment, net

 

 

(405,229)

 

 

(473,578)

 

 

 

 

 

 

 

 

 

TOTAL COMPREHENSIVE LOSS

 

$(5,990,375)

 

$(2,647,481)

 

 

 

 

 

 

 

 

 

BASIC NET LOSS PER SHARE

 

$(0.31 )

 

$(0.14)

DILUTED NET LOSS PER SHARE

 

$(0.31 )

 

$(0.14)

 

 

 

 

 

 

 

 

 

Basic

 

 

17,755,516

 

 

 

15,034,219

 

Diluted

 

 

17,755,516

 

 

 

15,034,219

 

  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
4

Table of Contents

 

COSMOS HOLDINGS, INC.     

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) AND MEZZANINE EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

Treasury Stock

 

 

 

 

 

Other

 

 

Total

 

 

 

No. of Shares

 

 

Value

 

 

No. of Shares

 

 

Value

 

 

Paid-in Capital

 

 

No. of Shares

 

 

Value

 

 

Accumulated
Deficit

 

 

Comprehensive Income (Loss)

 

 

Stockholders' Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

 

-

 

 

$-

 

 

 

13,485,128

 

 

$13,484

 

 

$14,333,285

 

 

 

(415,328)

 

$(611,854)

 

$(18,750,824)

 

$854,896

 

 

$(4,161,013)
Foreign currency translation adjustment, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(473,578)

 

 

(473,578)
Sale of treasury stock to third party

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

249,350

 

 

 

65,000

 

 

 

650

 

 

 

-

 

 

 

-

 

 

 

250,000

 

Restricted stock issued to a consultant

 

 

-

 

 

 

-

 

 

 

1,800,000

 

 

 

1,800

 

 

 

1,187,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,189,450

 

Conversion of notes payable into shares of common stock

 

 

-

 

 

 

-

 

 

 

781,819

 

 

 

782

 

 

 

2,563,582

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,564,364

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2,173,903)

 

 

-

 

 

 

(2,173,903)
Balance at March 31, 2021

 

 

-

 

 

$-

 

 

 

16,066,947

 

 

$16,066

 

 

$18,333,867

 

 

 

(350,328)

 

$(611,204)

 

$(20,924,727)

 

$381,318

 

 

$(2,804,680)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Preferred Stock 

 

 

Common Stock

 

 

Additional

 

 

Treasury Stock 

 

 

 

 

 

Other

 

 

Total

 

 

 

No. of Shares

 

 

Value

 

 

No. of Shares

 

 

Value

 

 

Paid-in Capital

 

 

No. of Shares

 

 

Value

 

 

Accumulated
Deficit

 

 

Comprehensive Loss

 

 

Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2022

 

 

-

 

 

$-

 

 

 

17,544,509

 

 

$17,544

 

 

$39,675,753

 

 

 

(387,424)

 

$(816,707)

 

$(34,345,506)

 

$(151,621)

 

$4,379,463

 

Foreign currency translation adjustment, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(405,229)

 

 

(405,229)

Issuance of Series A preferred stock, net of issuance costs of $547,700

 

 

6,000

 

 

 

5,452,300

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Conversion of notes payable into shares of common stock

 

 

-

 

 

 

-

 

 

 

238,000

 

 

 

238

 

 

 

973,182

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

973,420

 

Cashless exercise of warrants

 

 

-

 

 

 

-

 

 

 

829,471

 

 

 

829

 

 

 

(829)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

203,347

 

 

 

-

 

 

 

203,347

 

Balance at March 31, 2022

 

 

6,000

 

 

$5,452,300

 

 

 

18,611,980

 

 

$18,611

 

 

$40,648,106

 

 

$(387,424)

 

$(816,707)

 

$(34,142,159)

 

$(556,850)

 

$5,151,001

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 
5

Table of Contents

 

COSMOS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$203,347

 

 

$(2,173,903 )

Adjustments to Reconcile Net Income (Loss) to Net Cash Used In Operating Activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

93,042

 

 

 

80,318

 

Amortization of right-of-use assets

 

 

19,580

 

 

 

26,755

 

Amortization of debt discounts and accretion of debt

 

 

260,527

 

 

 

50,109

 

Lease expense

 

 

54,124

 

 

 

64,543

 

Interest on finance leases

 

 

3,507

 

 

 

4,453

 

Stock-based compensation

 

 

-

 

 

 

1,189,450

 

Deferred income taxes

 

 

62,594

 

 

 

(329,586 )

Gain on extinguishment of debt

 

 

(1,004,124 )

 

 

(445,636 )

Change in fair value of the derivative liability

 

 

(15,001 )

 

 

(61,373 )

(Gain) loss on change in fair value of equity investments

 

 

(1,678 )

 

 

440

 

Changes in Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

226,934

 

 

 

729,802

 

Accounts receivable - related party

 

 

(10,967 )

 

 

197,334

 

Inventory

 

 

(934,400 )

 

 

(246,664 )

Prepaid expenses and other assets

 

 

141,119

 

 

 

(1,088,881 )

Prepaid expenses and other current assets - related party

 

 

(1,183,403 )

 

 

(196,436 )

Other assets

 

 

-

 

 

 

157,915

 

Accounts payable and accrued expenses

 

 

300,913

 

 

 

847,525

 

Accounts payable and accrued expenses - related party

 

 

(370,694 )

 

 

25,996

 

Accrued interest

 

 

20,356

 

 

 

438,149

 

Lease liabilities

 

 

(54,241 )

 

 

(36,772 )

Taxes payable

 

 

(107,462 )

 

 

-

 

Other current liabilities

 

 

(23,438 )

 

 

122,081

 

Other liabilities

 

 

(17,911 )

 

 

(20,958 )

NET CASH USED IN OPERATING ACTIVITIES

 

 

(2,337,276 )

 

 

(665,339 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from loan receivable

 

 

91,661

 

 

 

-

 

Purchase of property and equipment

 

 

(4,438 )

 

 

(2,310 )

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

 

 

87,223

 

 

 

(2,310 )

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Payment of convertible note payable

 

 

-

 

 

 

(180,000 )

Proceeds from convertible note payable

 

 

-

 

 

 

100,000

 

Payment of note payable

 

 

(2,263,471 )

 

 

-

 

Payment of related party loan

 

 

(22,432 )

 

 

(65,761 )

Proceeds from related party loan

 

 

460,034

 

 

 

398,457

 

Payment of lines of credit

 

 

(6,244,162 )

 

 

(6,219,899 )

Proceeds from lines of credit

 

 

5,779,114

 

 

 

6,123,067

 

Proceeds from issuance of Series A Preferred Stock

 

 

5,452,300

 

 

 

-

 

Payments of finance lease liability

 

 

(22,622 )

 

 

(25,746 )

Financing fees

 

 

(224,320 )

 

 

-

 

Proceeds from sale of treasury stock

 

 

-

 

 

 

250,000

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

2,914,441

 

 

 

380,118

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

 

59,552

 

 

 

90,943

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH

 

 

723,940

 

 

 

(196,588 )

 

 

 

 

 

 

 

 

 

CASH AT BEGINNING OF PERIOD

 

 

286,487

 

 

 

628,395

 

CASH AT END OF PERIOD

 

$1,010,427

 

 

$431,807

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period:

 

 

 

 

 

 

 

 

Interest

 

$281,889

 

 

$208,565

 

Income tax

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of notes payable to common stock

 

$973,420

 

 

$2,564,364

 

Deemed dividend on warrants upon issuance of Series A preferred stock

 

$

5,788,493

 

 

$

-

 

                                                                                                                                                                                                                                                                                                            

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

                                                                                        

 
6

Table of Contents

  

COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

NOTE 1 – BASIS OF PRESENTATION

 

The terms “COSM,” “we,” “the Company,” and “us” as used in this report refer to Cosmos Holdings, Inc. The accompanying unaudited condensed consolidated balance sheet as of March 31, 2022 and unaudited condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2022 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management of COSM, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or any other period. These unaudited consolidated financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (“Form 10-K”). The accompanying condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited financial statements filed in our Form 10-K and is included for comparison purposes in the accompanying balance sheet.

 

NOTE 2 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN

 

The Company is a publicly traded international pharmaceutical company with extensive and established distribution network across the EU through its subsidiaries, Decahedron (UK), SkyPharm (Greece) and Cosmofarm (Greece). We are a diversified and vertically integrated broad line pharmaceutical company with our own proprietary line of branded nutraceuticals.

  

The Company was incorporated in the State of Nevada under the name Prime Estates and Developments, Inc. on July 21, 2009, and on November 14, 2013, we changed our name to Cosmos Holdings, Inc. Through its acquisition of Amplerissimo Ltd, on September 27, 2013, the Company changed its principal activities into trading of products, providing representation, and provision of consulting services to various sectors. On August 1, 2014, the Company formed SkyPharm S.A., a Greek Company (“SkyPharm”), a subsidiary that focuses on the trading, sourcing and export of nutraceutical products. In February 2017, the Company acquired Decahedron Ltd., a UK Company (“Decahedron”) which is a fully licensed wholesaler of pharmaceutical products, and its primary activity is the distribution, import and export of pharmaceuticals.

 

On November 21, 2017, the Company effected a one-for-ten (1:10) reverse stock split whereby the Company decreased, by a ratio of one-for-ten (1:10) the number of issued and outstanding shares of common stock. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, and warrants including all share and per-share data, for all amounts and periods presented in the consolidated financial statements.

 

On December 19, 2018, the Company completed the purchase of all of the capital stock of Cosmofarm Ltd., a pharmaceutical wholesaler based in Athens, Greece.

 

Going Concern

 

The Company’s condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplates the continuation of the Company as a going concern. For the three months ended March 31, 2022, the Company had revenue of $13,071,800, net income of $203,347 and net cash used in operations of $2,337,276. Additionally, as of March 31, 2022, the Company had working capital of $11,831,133, an accumulated deficit of $34,142,159, and stockholders’ equity of $5,151,001. It is management’s opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the date of this filing.

 

The Company has undergone strategic review processes to help find a definitive solution to the Company’s accumulated deficit constraints. Options under consideration in the strategic review process include, but are not limited to, securing new debt, exchange debt to equity, restructuring current debt facilities from short term to long term and taking the proper actions for new fund raising.

 

 
7

Table of Contents

 

COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

The condensed consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.

 

The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund its operations. If the Company is unable to obtain adequate capital, it could be forced to curtail development of operations.

 

In order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations, the Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include raising additional capital through increased sales of product and by equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described herein and eventually secure other sources of financing and attain profitable operations.

 

Summary of Significant Accounting Policies

 

Basis of Financial Statement Presentation

 

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

 

Principles of Consolidation

 

Our condensed consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries, SkyPharm S.A., Decahedron Ltd. and Cosmofarm Ltd. All significant intercompany balances and transactions have been eliminated.

 

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

The Effects of COVID-19

 

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of March 31, 2022, and December 31, 2021, there were no cash equivalents.

 

 
8

Table of Contents

 

COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

The Company maintains bank accounts in the United States denominated in U.S. Dollars and in Greece and in Bulgaria all of them denominated in Euros. The Company also maintains bank accounts in the United Kingdom, denominated in Euros and Great Britain Pounds (British Pounds Sterling).

 

Reclassifications to Prior Period Financial Statements and Adjustments

 

Certain reclassifications have been made in the Company’s financial statements of the prior period to conform to the current year presentation. As of December 31, 2021, $7,393 in accumulated depreciation has been reclassified from property and equipment to accumulated amortization of goodwill and intangible assets and $4,772 was reclassified from prepaid expenses and other current assets to marketable securities on the unaudited condensed consolidated balance sheet. For the three months ended March 31, 2021, $531,556 was reclassified from general and administrative expenses to salaries and wages on the unaudited condensed consolidated statements of operations and comprehensive income. Additionally, for the three months ended March 31, 2021, $1,333 was reclassified from customer deposits to other current liabilities on the unaudited condensed consolidated statement of cash flows. These reclassifications have no impact on previously reported net income.

  

Account Receivable, net

 

Accounts receivable are stated at their net realizable value. The allowance for doubtful accounts against gross accounts receivable reflects the best estimate of probable losses inherent in the receivables’ portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. At March 31, 2022 and December 31, 2021, the Company’s allowance for doubtful accounts was $1,668,893 and $1,702,743, respectively.

 

Tax Receivable

 

The Company pays Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of its business in most of the countries in which it operates related to the procurement of merchandise and/or services it acquires and/or on sales and taxable income. The Company also collects VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services it sells. If the output VAT exceeds the input VAT, this creates a VAT payable to the government. If the input VAT exceeds the output VAT, this creates a VAT receivable from the government. The VAT tax return is filed on a monthly basis offsetting the payables against the receivables. In observance of EU regulations for intra-EU cross-border sales, our subsidiaries in Greece, SkyPharm and Cosmofarm, do not charge VAT for sales to wholesale drug distributors registered in other European Union member states. The net VAT receivable is recorded in prepaid expense and other current assets on the condensed consolidated balance sheets. As of March 31, 2022 and December 31, 2021, the Company had a VAT net payable balance of $376,656 and $400,616 respectively, recorded in the condensed consolidated balance sheet as accounts payable and accrued expenses.

 

Inventory

 

Inventory is stated at the lower-of-cost or net realizable value using the weighted average method. Inventory consists primarily of finished goods and packaging materials, i.e., packaged pharmaceutical products and the wrappers and containers they are sold in. A periodic inventory system is maintained by 100% count. Inventory is replaced periodically to maintain the optimum stock on hand available for immediate shipment.

 

The Company writes down inventories to net realizable value based on physical condition, expiration date, current market conditions, as well as forecasted demand. The Company’s inventories are not highly susceptible to obsolescence. Many of the Company’s inventory items are eligible for return to our suppliers when pre-agreed product requirements, including, but not limited to, physical condition and expiration date, are not met.

 

 
9

Table of Contents

 

COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

Property and Equipment, net

 

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated on a straight-line basis over the useful lives (except for leasehold improvements which are depreciated over the lesser of the lease term or the useful life) of the assets as follows:

 

 

 

 

Estimated Useful Life

Leasehold improvements and technical works

 

Lesser of lease term or 40 years

Vehicles

6 years

Machinery

20 years

Furniture, fixtures and equipment

 

5–10 years

 

Computers and software

 

3-5 years

 

Depreciation expense was $84,884 and $71,471 for the three months ended March 31, 2022 and 2021, respectively.

 

Impairment of Long-Lived Assets

 

In accordance with ASC 360-10, Long-lived Assets, property and equipment and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.

 

Goodwill and Intangibles, net

 

The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.

 

On December 19, 2018, as a result of the acquisition of Cosmofarm, the Company recorded $49,697 of goodwill.

 

 
10

Table of Contents

 

COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

Intangible assets with definite useful lives are recorded on the basis of cost and are amortized on a straight-line basis over their estimated useful lives. The Company uses a useful life of 5 years for its pharmaceuticals and nutraceuticals products license. The Company evaluates the remaining useful life of intangible assets annually to determine whether events and circumstances warrant a revision to the remaining amortization period. If the estimate of the intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized prospectively over that revised remaining useful life. As of March 31, 2022, no revision to the remaining amortization period of the intangible assets was made.

 

Amortization expense was $8,158 and $8,158 for the three months ended March 31, 2022 and 2021, respectively.

 

Equity Method Investment

 

For those investments in common stock or in-substance common stock in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, the investment is accounted for under the equity method. The Company will record its share in the earnings of the investee and will include it within the condensed consolidated statement of operations. The Company assesses its investment for other-than-temporary impairment when events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable and recognizes an impairment loss to adjust the investment to its then current fair value.

 

Investments in Equity Securities

 

Investments in equity securities are accounted for at fair value with changes in fair value recognized in net income (loss). Equity securities are classified as short-term or long-term based on the nature of the securities and their availability to meet current operating requirements. Equity securities that are readily available for use in current operations are reported as a component of current assets in the accompanying consolidated balance sheets. Equity securities that are not considered available for use in current operations would be reported as a component of long-term assets in the accompanying consolidated balance sheets. For equity securities with no readily determinable fair value, the Company elects a measurement alternative to fair value. Under this alternative, the Company measures the investments at cost, less any impairment, and adjusted for changes resulting from observable price changes in transactions for identical or similar investments of the investee. The election to use the measurement alternative is made for each eligible investment.

 

As of March 31, 2022, investments consisted of 3,000,000 shares, which traded at a closing price of $0 per share or a value of $0 of ICC International Cannabis Corp and 16,666 shares which traded at a closing price of $0.41 per share or value of $6,822 of National Bank of Greece. Additionally, the Company has $5,729 in equity securities of Pancreta Bank, which are revalued annually. See Note 3, for additional investments in equity securities.

 

Fair Value Measurement

 

The Company applies ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements.

 

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

 
11

Table of Contents

 

COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

The following tables presents assets that are measured and recognized at fair value as of March 31, 2022 and December 31, 2021, on a recurring basis:

 

 

 

March 31, 2022

 

 

Total

Carrying

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Value

 

Marketable securities – ICC International Cannabis Corp.

 

$-

 

 

$-

 

 

 

-

 

 

$-

 

Marketable securities – National Bank of Greece

 

 

6,822

 

 

 

-

 

 

 

-

 

 

 

6,822

 

Equity securities – Pancreta Bank

 

 

-

 

 

 

5,729

 

 

 

-

 

 

 

5,729

 

 

 

$6,822

 

 

$5,729

 

 

 

 

 

 

$12,551

 

 

 

 

December 31, 2021

 

 

Total

Carrying

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Value

 

Marketable securities – ICC International Cannabis Corp.

 

$-

 

 

$-

 

 

 

-

 

 

$-

 

Marketable securities – National Bank of Greece

 

 

6,696

 

 

 

-

 

 

 

-

 

 

 

6,696

 

Equity securities – Pancreta Bank

 

 

-

 

 

 

4,772

 

 

 

-

 

 

 

4,772

 

 

 

$6,696

 

 

$4,772

 

 

 

 

 

 

$11,468

 

 

In addition, FASB ASC 825-10-25, Fair Value Option, (“ASC 825-10-25”), expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.

 

Derivative Instruments

 

Derivative financial instruments are recorded in the accompanying condensed consolidated balance sheets at fair value in accordance with ASC 815. When the Company enters into a financial instrument such as a debt or equity agreement (the “host contract”), the Company assesses whether the economic characteristics of any embedded features are clearly and closely related to the primary economic characteristics of the remainder of the host contract. When it is determined that (i) an embedded feature possesses economic characteristics that are not clearly and closely related to the primary economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would meet the definition of a financial derivative instrument, then the embedded feature is bifurcated from the host contract and accounted for as a derivative instrument. The estimated fair value of the derivative feature is recorded in the accompanying consolidated balance sheets separately from the carrying value of the host contract. Subsequent changes in the estimated fair value of derivatives are recorded as a gain or loss in the Company’s consolidated statements of operations.

 

Customer Advances

 

The Company receives prepayments from certain customers for pharmaceutical products prior to those customers taking possession of the Company’s products. The Company records these receipts as customer advances until it has met all the criteria for recognition of revenue including passing control of the products to its customer, at such point, the Company will reduce the customer advances balance and credit the Company’s revenues.

 

 
12

Table of Contents

 

COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

Revenue Recognition

 

In accordance with ASC 606, Revenue from Contracts with Customers, the Company uses a five-step model for recognizing revenue by applying the following steps: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the performance obligations are satisfied by transferring the promised goods to the customer. Once these steps are met, revenue is recognized upon transfer of the product to the customer.

 

Stock-based Compensation

 

The Company records stock-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”) and Staff Accounting Bulletin No. 107 (“SAB 107”) regarding its interpretation of ASC 718. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite service period. The Company values any employee or non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.

 

The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASU 2018-07, “Compensation-Stock Compensation-Improvements to Nonemployee Share-Based Payment Accounting.”

 

Foreign Currency Translation and Transactions

 

Assets and liabilities of all foreign operations are translated at year-end rates of exchange, and amounts included in the accompanying condensed statements of operations and comprehensive income (loss) are translated at the average rates of exchange for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholders’ deficit until the entity is sold or substantially liquidated.

 

Gains or losses from foreign currency transactions (transactions denominated in a currency other than the entity’s local currency) are included in comprehensive income (loss).

 

Income Taxes

 

The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes ASC 740. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as net operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

The Company is liable for income taxes in Greece and the United Kingdom The corporate income tax rate is 22% in Greece and 19% in United Kingdom. Losses may also be subject to limitation under certain rules regarding change of ownership.

 

We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Our review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets. At March 31, 2022 the Company has maintained a valuation allowance against all net deferred tax assets in each jurisdiction in which it is subject to income tax.

 

 
13

Table of Contents

 

COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

The Company uses a “more likely than not” criterion for recognizing the income tax benefit of uncertain tax positions and establishing measurement criteria for income tax benefits. The Company has evaluated the impact of these positions and due to the fact that the Company undergoes an annual certified audit each year in lieu of an audit by the Greek tax authorities, the Company has not taken any tax positions that warrant accrual under ASC-740-10.

 

Retirement and Termination Benefits

 

Under Greek labor law, employees are entitled to lump-sum compensation in the event of termination or retirement. The amount depends on the employee’s work experience and renumeration as of the day of termination or retirement. If an employee remains with the company until full-benefit retirement, the employee is entitled to a lump-sum equal to 40% of the compensation to be received if the employee were to be dismissed on the same day. The Company periodically reviews the uncertainties and judgments related to the application of the relevant labor law regulations to determine retirement and termination benefits obligations of its Greek subsidiaries. The Company has evaluated the impact of these regulations and has identified a potential retirement and termination benefits liability.

 

Basic and Diluted Net Loss per Common Share

 

Basic income per share is calculated by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per share is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method. In accordance with ASC 260, Earnings Per Share, the following table reconciles basic shares outstanding to fully diluted shares outstanding.

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

Weighted average number of common shares outstanding-Basic

 

 

17,755,516

 

 

 

15,034,219

 

Potentially dilutive common stock equivalents

 

 

-

 

 

 

-

 

Weighted average number of common and equivalent shares outstanding - Diluted

 

 

17,755,516

 

 

 

15,034,219

 

 

Common stock equivalents are included in the diluted income per share calculation only when option exercise prices are lower than the average market price of the common shares for the period presented.

 

Recent Accounting Pronouncements

 

On October 2021, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. The new guidance creates an exception to the general recognition and measurement principles of ASC 805, Business Combinations. The new guidance should be applied prospectively and is effective for all public business entities for fiscal years beginning after December 15, 2022 and include interim periods. The guidance is effective for all other entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects of the adoption of ASU No. 2021-08 on its consolidated financial statements.

 

 
14

Table of Contents

 

COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

In May 2021, the FASB issued ASU 2021-04—Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effects of the adoption of ASU No. 2021-04 on its consolidated financial statements.

 

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.

 

NOTE 3 – MARKETABLE SECURITIES

 

Distribution and Equity Agreement

 

On March 19, 2018, the Company entered into a Distribution and Equity Acquisition Agreement (the “Distribution and Equity Acquisition Agreement”) with Marathon Global Inc. (“Marathon”), a company incorporated in the Province of Ontario, Canada. Marathon was formed to be a global supplier of cannabis, cannabidiol (CBD) and/or any cannabis extract products, extracts, ancillaries and derivatives (collectively, the “Products”). The Company was appointed the exclusive distributor of the Products initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. The Company has no present intention to distribute any Products under this Agreement in the United States or otherwise participate in cannabis operations in the United States. The Company intends to await further clarification from the U.S. Government on cannabis regulation prior to determining whether to enter the domestic market.

 

The Distribution and Equity Acquisition Agreement is to remain in effect indefinitely unless Marathon fails to provide Market Competitive (as defined) product pricing and Marathon has not become profitable within five (5) years of the agreement. The transaction closed on May 22, 2018 after the due diligence period, following which the 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 $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000. The Company was also given the right to nominate one director to the Marathon board of directors.

 

Since Marathon was a newly formed entity with no assets and no activity, the Company attributed no value to the 5 million shares in Marathon which was received as consideration for the distribution services. As described below, the Company exchanged the Marathon shares in May and July 2018.

 

Share Exchange Agreements

 

On May 17, 2018, the Company entered into a Share Exchange Agreement (the “SEA”) with Marathon, ICC International Cannabis Corp (“ICC”) formerly known as Kaneh Bosm Biotechnology Inc. (“KBB”) and certain other sellers of Marathon capital stock. Under the SEA, the Company transferred 2.5 million shares in Marathon to ICC, a corporation incorporated under the laws of the Province of British Columbia and a public reporting issuer on the Canadian Securities Exchange, in exchange for 5 million shares of ICC. The Company accounted for the exchange at fair value and recognized a gain on exchange of its investment in Marathon of $1,953,000 in the year ended December 31, 2018.

 

On July 16, 2018, the Company completed a Share Exchange Agreement (the “New SEA”) with Marathon, ICC, and certain other sellers of Marathon capital stock whereby the Company transferred its remaining one-half interest (2.5 million shares) in Marathon to KBB for an additional 5 million shares of ICC. The Company accounted for the exchange at fair value and recognized a gain on exchange of its investment in Marathon of $2,092,200 in the year ended December 31, 2018. The ten million shares of ICC owned by the Company constituted approximately 7% of the 141,219,108 shares of capital stock of KBB then issued and outstanding. The Company does not have the ability to exercise significant influence over ICC.

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

The Company determined the fair value of both exchanges based on an actively quoted stock price of ICC received in exchange for the Marathon shares. The Company continues to fair value its investment in ICC with changes recognized in earnings each period and was recorded as an unrealized gain on exchange of investment during the six months ended March 31, 2022 of $0. The value of the investments as of March 31, 2022 and December 31, 2021, was $0 and $0, respectively.

 

Since no value was attributed to the 33 1/3% equity ownership interest in Marathon received as consideration for the distribution services, the Company would receive variable consideration in future for its services under the Distribution and Equity Acquisition Agreement, if certain milestones are achieved. Refer to Note 12 for the accounting associated with the cash of CAD $2 million received upfront. Variable consideration to be received in the future upon achieving the gross sales milestones described above, is constrained as the Company estimates that it is probable that a significant reversal of revenue could occur. In assessing the constraint, the Company considered its limited experience with the Products, new geographic markets and similar transactions, which affect the Company’s ability to estimate the likelihood of a probable revenue reversal. Therefore, no revenue has been recognized for the period ended March 31, 2022. The Company will continue to reassess variable consideration at each reporting period and update the transaction price when it becomes probable that a significant revenue reversal would not occur.

 

As of March 31, 2022, in addition to the 3,000,000 ICC shares valued at $0, as noted above, marketable securities also consisted of the following: 16,666 shares which traded at a closing price of $0.41 per share or value of $6,822 of National Bank of Greece. Additionally, the Company has $5,729 in equity securities of Pancreta Bank, which are revalued annually. The Company recorded a net unrealized gain on the fair value of these investments of $1,678 during the three months ended March 31, 2022.

 

CosmoFarmacy LP

 

In September 2019, the Company entered into an agreement with an unaffiliated third party to incorporate CosmoFarmacy L.P. for the purpose of providing strategic management consulting services and the retail trade of pharmaceutical products, and OTC to pharmacies. CosmoFarmacy was incorporated with a 30-year term through May 31, 2049. The unaffiliated third party is the general partner (the “GP”) of the limited partnership and is responsible for management and decision-making associated with CosmoFarmacy. The initial share capital was set to EUR 150,000 which was later increased to EUR 500,000. The GP contributed the pharmacy license (the “License”) valued at EUR 350,000 (30-year term) to operate the business of CosmoFarmacy in exchange for a 70% equity ownership. The Company is a limited partner and contributed cash of EUR 150,000 for the remaining 30% equity ownership. CosmoFarmacy is not publicly traded and the Company’s investment has been recorded using the equity method of accounting. The value of the investment as of March 31, 2022 and December 31, 2021 was $166,395 and $169,770, respectively, and is included in “Other assets” in the accompanying condensed consolidated balance sheet.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment consists of the following:

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Leasehold improvements

 

$508,920

 

 

$519,278

 

Vehicles

 

 

94,735

 

 

 

96,657

 

Furniture, fixtures and equipment

 

 

2,027,470

 

 

 

2,065,100

 

Computers and software

 

 

140,452

 

 

 

141,490

 

 

 

 

2,771,577

 

 

 

2,822,525

 

Less: Accumulated depreciation and amortization

 

 

(993,688 )

 

 

(934,473 )

Total

 

$1,777,889

 

 

$1,888,052

 

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

 

NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

 

Intangible assets consist of the following at:

 

 

 

March 31,

2022

 

 

December 31,

2021

 

License

 

$339,860

 

 

$345,739

 

Trade name / mark

 

 

36,997

 

 

 

36,997

 

Customer base

 

 

176,793

 

 

 

176,793

 

 

 

 

553,650

 

 

 

559,529

 

Less: Accumulated amortization

 

 

(138,717 )

 

 

(123,459 )

Subtotal

 

 

414,933

 

 

 

436,070

 

Goodwill

 

 

49,697

 

 

 

49,697

 

Total

 

$464,630

 

 

$485,767

 

 

NOTE 6 – LOAN RECEIVABLE

 

On October 30, 2021, the Company entered into an agreement for a ten-year loan with a third-party to memorialize €4,284,521 ($4,849,221) in prepayments the Company had made. Interest is calculated at a rate of 5.5% per annum on a 360-day basis. Under the terms of the agreement, the Company is to receive 120 equal payments over the term of the loan. As of December 31, 2021, the Company had a short-term receivable balance of $377,590 and a long-term receivable balance of $4,410,689 under this loan. During the three months ended March 31, 2022, the Company received €81,696 ($90,626) in principal payments such that as of March 31, 2022, the Company had a short-term receivable balance of $375,195 and a long-term receivable balance of $4,227,268 under this loan.

 

NOTE 7 – INCOME TAXES

 

The Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company had no U.S. taxable income for the three months ended March 31, 2022 and 2021.

 

The Company’s Greece subsidiaries are governed by the income tax laws of Greece. The corporate tax rate in Greece is 22% on income reported in the statutory financial statements after appropriate tax adjustments.

 

The Company’s United Kingdom subsidiaries are governed by the income tax laws of the United Kingdom. The corporate tax rate in the United Kingdom is 19% on income reported in the statutory financial statements after appropriate tax adjustments.

 

As of March, 31 2022 and 2021, the Company’s effective tax rate differs from the U.S. federal statutory tax rate primarily due to a valuation allowance recorded against net deferred tax assets in in the United States.

 

We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Our review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets. As of March 31, 2022 and December 31, 2021, the Company has maintained a valuation allowance against all net deferred tax assets in the United States only. Foreign valuation allowances were reversed on December 31, 2020.

 

For the three months ended March 31, 2022 and 2021, the Company has recorded a tax benefit (expense) in any jurisdiction where it is subject to income tax, in the amount of ($65,667) and $315,912, respectively, on the condensed consolidated statement of operations and comprehensive income (loss).

  

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

NOTE 8 – CAPITAL STRUCTURE

 

Preferred Stock

 

The Company is authorized to issue 100 million shares of preferred stock, of which 6,000,000 are designated as Series A convertible preferred stock. The preferred stock has liquidation preference over the common stock and are non-voting. As of March 31, 2022 and December 31, 2021, 6,000 and 0, respectively, preferred shares have been issued.

 

On and effective October 4, 2021, the Company amended and restated its articles of incorporation (the Amended and Restated Articles”) and filed a certificate of designation (the “COD”) for its Series A Preferred Stock (the “Series A Preferred Stock”) with the State of Nevada.

 

The Amended and Restated Articles allow the Company’s Board of Directors the authority to authorize the issuance of preferred stock from time to time in one or more classes or series by resolution.

 

The Series A Preferred Stock is convertible into the Company’s Common Stock as determined by dividing the number of shares of Series A Preferred Stock to be converted by the lower of (i) $4.00 or (ii) 80% of the average volume weighted average price for the Company’s Common Stock for the five (5) days prior to the date of Uplisting, subject to a floor of $3.00 (the “Conversion Price”).

 

The holders of the Series A Preferred Stock are not entitled to dividends or to receive distributions in the event of liquidation, dissolution or winding up of the Company, either voluntary or involuntary.

 

On February 28, 2022, the Company entered into a securities purchase agreement, or the Purchase Agreement, with certain investors and an insider for a private placement of the Company’s securities (the “Private Placement”).

 

The Private Placement consisted of the sale of 6,000 shares of the Company’s Series A Convertible Preferred Stock, or the Series A Shares, at a price of $1.000 per share, and 2,000,000 warrants to purchase shares of common stock, or the Warrants, for aggregate gross proceeds of approximately $6 million. The Warrants are exercisable to purchase shares of common stock at $3.30 per share, or 110% of the Series A Shares initial conversion price and will expire five and one-half years following the initial exercise date of the Warrants. The Company determined that the 2,000,000 warrants are additional value being distributed to the preferred stockholders and presented the warrants’ fair value of $5,788,493 as a deemed dividend in the unaudited condensed consolidated statements of operations and comprehensive income (loss). The warrants were valued using the Black-Scholes option pricing model with the following terms: a) exercise price of $3.30, b) common stock fair value of $3.42, c) volatility of 118%, d) discount rate of $1.71%, and e) dividend rate of 0%.

 

The closing of the Private Placement occurred on February 28, 2022. As a condition to the closing of the sale, the Company’s common stock received conditional approval for listing and trading on the Nasdaq Capital Market and commenced trading on February 28, 2022, under the trading symbol, COSM. Concurrent with the issuance of the Series A Shares, the Company executed a registration rights agreement (the “Registration Rights Agreement”) to register the resale of the shares of common stock issuable upon conversion of the Series A Shares and the shares of common stock issuable upon exercise of the warrants issued in connection with the Series A Shares. The Company is required to file its initial registration statement within 45 days following February 28, 2022. The Effectiveness Date is required to be 60 days after February 28, 2022, or 75 days following the SEC’s full review, and any additional registration statements that may be required are to be filed within 20 days following the date required by the SEC. If the Company fails to timely file its initial registration statement, or any additional registration statement, or otherwise comply with the requirements of the Registration Rights Agreement, the Company shall pay each holder 2% of the subscription amount in cash until cured, with an additional penalty of 18% if the cash payment is not made within seven days of the cash payable date.

 

The Series A Shares rank senior to all of the Company’s Common Stock and any other equity securities that the Company may issue in the future with respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding up. While the Series A Shares are outstanding, the Company may not amend, alter or change adversely the powers, preferences or rights given to the Series A Shares, create, or authorize the creation of, any additional class or series of capital stock of the Company (or any security convertible into or exercisable for any class or series of capital stock of the Company), including any class or series of capital stock of the Company that ranks superior to or in parity with the Series A Shares, alter, amend, modify, or repeal its Articles of Incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series A Shares, increase or decrease the number of authorized shares of Series A Shares, any agreement, commitment or transaction that would result in a Change of Control, any sale or disposition of any material assets outside of the ordinary course of business of the Company, any material change in the principal business of the Company, including the entry into any new line of business or exit of any current line of business, and circumvent a right or preference of the Series A Shares. Any holder of the Series A Shares shall have the right by written election to the Company to convert all or any portion of the outstanding Series A Preferred Shares. Immediately upon effectiveness of a registration statement registering for resale all of the Registrable Securities (as defined in the Registration Rights Agreement), all outstanding Series A Preferred Shares shall automatically convert into Common Stock, subject to certain beneficial ownership limitations.

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

 

Mezzanine Equity

 

The Series A Shares are recorded as mezzanine equity in accordance with ASC 480 at its initial net carrying value in the amount of $5,452,300. The Series A Shares are recorded as mezzanine equity in accordance with ASC 480 because the Company may be obligated to issue a variable number of shares at a fixed price known at inception and there is no maximum number of shares that could potentially be issued upon conversion. In this instance, cash settlement would be presumed and the Series A Shares are classified as mezzanine equity in accordance with ASC 480-10-S99. Immediately upon effectiveness of the registration statement registering for resale of all the common stock issuable under the Series A Shares, all outstanding Series A Shares shall automatically convert into common stock.

 

Common Stock

 

The Company is authorized to issue 300 million shares of common stock. As of March 31, 2022 and December 31, 2021, the Company had 18,611,980 and 17,544,509 shares of our common stock issued, respectively, and 18,224,556 and 17,157,085 shares outstanding, respectively.

 

Consulting Agreement

 

The Company entered into a Consulting Agreement (the “Agreement”) effective as of February 5, 2021, with a non-affiliated consultant (the “Consultant”). The Company engaged the Consultant to perform consulting services relating to Company management, debt structure, business plans and business development in connection with any capitalization transactions involving the Company and any newly created or existing entities. The Agreement is for a term of nine (9) months with an initial term of ninety (90) days (the “Initial Term”). The Agreement is terminable by the Company for any reason upon written notice at any time after the Initial Term.

 

The Company agreed to pay Consultant and its assignees an aggregate of 1,800,000 restricted shares of Common Stock, earned at the rate of 200,000 shares per month, which shall be issued and fully paid for in consideration of the Consultant’s considerable expertise and experience and its commitment to work for the Company. However, in the event the Agreement is terminated for any reason after the Initial Term, the shares are subject to a claw back for any months remaining after the Termination Date. The shares were valued on the date of the agreement at $3.28 per share or $5,904,000, which was be amortized over the term of the agreement. As of March 31, 2022 and 2021, the Company has expensed $0 and $1,189,451 under the agreement.

 

Debt Exchange Agreements

 

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 (See Note 11). 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 during the three months ended March 31, 2021. As of March 31, 2021, the Company recorded $2,564,363 as an equity increase related to the extinguishment of debt.

 

Debt Conversions

 

During the three months ended March 31, 2022, the Company issued 238,000 shares of common stock upon the conversion of $1,190,000 of notes payable. The Company recorded $973,420 as a capital contribution and an increase in equity related to the conversion of the $1,190,000 reduced by $216,580 recorded as a gain upon extinguishment of debt upon modification. The $216,580 gain upon extinguishment was determined using the fair value of the Company of $4.09 per share at the extinguishment commitment date.

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

Exercise of Warrants

 

During the three months ended March 31, 2022, the Company issued 829,471 shares of common stock upon the cashless exercise of 2,748,797 warrant shares.

 

Potentially Dilutive Securities

 

No options warrants or other potentially dilutive securities other than those disclosed above have been issued as of March 31, 2022.

 

NOTE 9 – RELATED PARTY TRANSACTIONS

 

Doc Pharma S.A.

 

As of March 31, 2022, the Company has a prepaid balance of $4,368,794 and an accounts payable balance of $220,518, resulting in a net prepaid balance of $4,148,276 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $2,844,572. 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 three months ended March 31, 2022 and 2021, the Company purchased a total of $687,382 and $589,261 of products from Doc Pharma S.A., respectively. During the three months ended March 31, 2022 and 2021 the Company had $383,688 and $290,598, in revenue from Doc Pharma S.A., respectively.

 

On October 10, 2020, the Company entered into a contract manufacturer outsourcing “CMO” agreement with DocPharma 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. As of March 31, 2022, the Company has purchased € 461,453 ($517,566) 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. The agreement will be terminated on December 31, 2025.

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 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.

 

Notes Payable – Related Party

 

A summary of the Company’s related party notes payable as of March 31, 2022 and December 31, 2021 is presented below:

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

 

 

 

 

 

Beginning balance

 

$464,264

 

 

$501,675

 

Foreign currency translation

 

 

(9,229 )

 

 

(37,411 )

Ending balance

 

$455,035

 

 

$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). As of March 31, 2022, the Company has an outstanding balance of €400,000 ($443,720) and accrued interest of €181,948 ($201,835).

 

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 ($11,315) remained as of March 31, 2022.

 

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, 2022, the Company recorded a gain of $9,229.

 

Loans Payable – Related Party

 

A summary of the Company’s related party loans payable during the three months ended March 31, 2022, and the year ended December 31, 2021 is presented below:

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

 

 

 

 

 

Beginning balance

 

$1,293,472

 

 

$1,629,246

 

Proceeds

 

 

456,085

 

 

 

6,377,156

 

Payments

 

 

(22,186 )

 

 

(133,552 )

Conversion of debt

 

 

-

 

 

 

(6,000,000 )

Settlement of lawsuit

 

 

-

 

 

 

(600,000 )

Foreign currency translation

 

 

(23,490 )

 

 

20,623

 

Ending balance

 

$1,703,881

 

 

$1,293,472

 

 

 
21

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

 

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, 2021, the Company had an outstanding principal balance under these loans of $1,293,472 in loans payable to Grigorios Siokas.

 

During the three months ended March 31, 2022, the Company borrowed additional proceeds of €321,000 ($356,085), and $100,000 and repaid €20,000 ($22,186) of these loans.

 

The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the three months ended March 31, 2022 the Company recorded a gain of $23,490.

 

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.

 

NOTE 10 – LINES OF CREDIT

 

A summary of the Company’s lines of credit as of March 31, 2022 and December 31, 2021 is presented below:

 

 

 

March 31,

2022

 

 

December 31,

2021

 

National

 

$2,887,143

 

 

$3,265,236

 

Alpha

 

 

927,008

 

 

 

947,333

 

Pancreta

 

 

417,671

 

 

 

489,985

 

National – COVID

 

 

316,377

 

 

 

407,174

 

Subtotal

 

 

4,548,199

 

 

 

5,109,728

 

Reclassification of National-COVID – Long-term

 

 

(185,872 )

 

 

(366,171 )

Ending balance

 

$4,362,327

 

 

$4,743,557

 

 

The line of credit with National Bank of Greece is renewed annually with current interest rates of 6.00%, 4.35% (“COSME 2” facility) and 4.35% (plus the 6-month Euribor plus any contributions currently in force by law on certain lines of credit), (“COSME 1” facility).

 

The maximum borrowing allowed for the 6% line of credit was $3,300,168 and $2,489,960 as of March 31, 2022 and December 31, 2021, respectively. The outstanding balance of the facility was $1,833,394 and $2,185,413, as of March 31, 2022 and December 31, 2021, respectively.

 

The maximum borrowing allowed for the 4.35% lines of credit, was $1,109,300 and $1,131,800 as of March 31, 2022 and December 31, 2021, respectively. The outstanding balance of the facilities was $1,053,749 and $1,079,823 as of March 31, 2022 and December 31, 2021, respectively. 

 

The line of credit with Alpha Bank of Greece is renewed annually with a current interest rate of 6.00%. The maximum borrowing allowed was $1,109,300 and $1,131,800 as of March 31, 2022 and December 31, 2021, respectively. The outstanding balance of the facility was $927,008 and $947,333, as of March 31, 2022 and December 31, 2021, respectively.

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

 

The Company entered into a line of credit with Pancreta Bank on February 23, 2021. The line of credit is renewed annually with a current interest rate of 6.10%. The maximum borrowing allowed as of March 31, 2022 and December 31, 2021 was $554,650 and $565,900, respectively. The outstanding balance of the facility as of March 31, 2022 and December 31, 2021, was $417,671 and $489,985, respectively.

 

Interest expense for the three months ended March 31, 2022 and 2021, was $17,175 and $16,501, respectively.

 

Under the agreements, the Company is required to maintain certain financial ratios and covenants. These lines of credit were assumed in the Company’s acquisition of Cosmofarm. As of March 31, 2022 and December 31, 2021, the Company was in compliance with these ratios and covenants.

 

The above lines of credit are guaranteed and backed by customer receivable checks and they are not considered to be a direct debt obligation for the Company. They are a type of factoring, where the postponed customer checks are assigned by the Company to the bank, in order to be financed at a pre-agreed rate.

 

COVID-19 Government Funding

 

Interest expense for three months ended March 31, 2022 and 2021 was $413 and $0, respectively.

 

NOTE 11 – CONVERTIBLE DEBT

 

A summary of the Company’s convertible debt at March 31, 2022 and December 31, 2021 is presented below:

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

 

 

 

 

 

Beginning balance convertible notes

 

$640,000

 

 

$1,447,000

 

New notes

 

 

-

 

 

 

625,000

 

Payments

 

 

-

 

 

 

(907,000 )

Conversion to common stock

 

 

-

 

 

 

(525,000 )

Subtotal notes

 

 

640,000

 

 

 

640,000

 

Debt discount at year end

 

 

(191,085 )

 

 

(258,938 )

Convertible note payable, net of discount

 

$448,915

 

 

$381,062

 

 

All of the convertible debt is classified as short-term within the consolidated balance sheet as it all matures and will be paid back within fiscal year 2022.

 

December 21, 2020 Securities Purchase Agreement

 

On December 21, 2020 (the “Issue Date”), Cosmos Holdings, Inc. (“Cosmos”, the “Borrower” or the “Company”) entered into a convertible promissory note with Platinum Point Capital, LLC (the “Holder”, “Lender” or “Platinum”) pursuant to a Securities Purchase Agreement (the “SPA”).

 

 
23

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

 

The Company issued the $540,000 Note in exchange for $500,000 in cash and included a $40,000 Original Issue Discount (“OID”) and paid $3,000 in financing costs. The principal amount together with interest at the rate of eight percent (8.0%) per annum, compounded annually (the “Interest Rate”), will be paid to the Lenders on or before the Maturity Date (December 31, 2021 or as defined below). Accrued interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. In the event that on or before the Maturity Date, the Note either (i) had not been converted or have not been otherwise satisfied in full or (ii) an Event of Default (as defined in the SPA) occurs, then the applicable rate of interest on the outstanding amount of the Note since inception shall be the Interest Rate plus eighteen percent (18.0%), the Default Interest. Unless previously converted, the principal and accrued interest on the Note is due and payable in cash (USD) upon the earlier of (i) December 31, 2021, (ii) a Change of Control (as defined in the SPA) or (iii), an Event of Default (collectively, the “Maturity Date”).

 

During the year ended December 31, 2021, the Company converted an aggregate total of $525,000 in principal and $25,144 in accrued interest and fees into 213,382 shares of the Company’s common stock at an average price per share of $2.58. Upon conversion, the 213,382 shares were issued at a fair value of $959,024 which was recorded as equity. Accordingly, upon conversion, the Company reduced its outstanding debt by $550,144, reduced its derivative liability by $284,169, and recorded a loss on extinguishment of $124,711. As of March 31, 2022 and December 31, 2021, the Company had a principal balance of $15,000 each period and had accrued approximately $7,000 in interest expense each period.

 

The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature and a derivative liability which is accounted for separately. The Company determined a beneficial conversion feature and derivative liability exists because The Company measured the beneficial conversion feature’s intrinsic value on December 16, 2020, and determined that the embedded derivative was valued at $456,570 which was recorded as a debt discount, and together with the original issue discount and transaction expenses of $43,000, in the aggregate of $499,570, is being amortized over the life of the loan. As of March 31, 2022 and December 31, 2021 and $568,826 and $494,973, respectively, of the debt discount has been amortized. As of March 31, 2022 and December 31, 2021, the fair value of the derivative liability was $3,949 and $5,822, respectively. For the three months ended March 31, 2022 and 2021, the Company record a gain on the change in fair value of the derivative of $1,873 and $44,215, respectively.

 

January 7, 2021 Subscription Agreement

 

On January 7, 2021 (the “Issue Date”), the Company entered into a subscription agreement with an unaffiliated third party, whereby the Company issued for a purchase price of $100,000 in principal amount, a convertible promissory note. The note bears an interest rate of 8% per annum and matures on the earlier of (i) consummation of the Company listing its common shares on the NEO Stock Exchange or (ii) October 31, 2021.

 

Upon the consummation of a NEO listing, the total principal and accrued interest outstanding on the note will convert into shares of the Company’s common stock at a 25% discount to the prices of the common shares sold in the financing to be conducted in conjunction with the NEO listing. In the event that a NEO listing is not consummated on or before October 31, 2021, the note holder will have the option, in part or in full, to have the note repaid with interest, or convert the note into Company common stock at a 25% discount to the 30-day volume-weighted average price of the Common Shares on the most senior stock exchange in North American on which the common shares are trading prior to conversion.

 

The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature and a derivative liability which is accounted for separately. The Company measured the beneficial conversion feature’s intrinsic value on January 7, 2021, and determined that the embedded derivative was valued at $62,619 which was recorded as a debt discount and additional paid-in capital, and is being amortized over the life of the loan. As of March 31, 2022 and December 31, 2021, $62,619 of the debt discount has been amortized. As of March 31, 2022 and December 31, 2021, the fair value of the derivative liability was $26,716 and $39,843, respectively. For the three months ended March 31, 2022, the Company recorded a gain of $13,127 from the change in fair value of derivative liability as other income in the consolidated statements of operations and comprehensive income (loss).

 

Convertible Promissory Note and Securities Purchase Agreement

 

On September 17, 2021 (the “Issue Date”), the Company entered into a convertible promissory note and securities purchase agreement with an unaffiliated third party.

 

Convertible Promissory Note

 

The Company issued the convertible promissory note for a purchase price of $525,000 in principal amount for cash proceeds of $500,000. The note was issued with an original issue discount (“OID”) of $25,000, bears an interest rate of 10% per annum and matures on the earlier of (i) the consummation of the Company listing its common shares on the Nasdaq Stock Market or (ii) September 17, 2022.

 

Upon the consummation of a Nasdaq listing, the total principal and accrued interest outstanding on the note will convert into shares of the Company’s common stock at a 30% discount to the prices of the common shares sold in the financing to be conducted in conjunction with the Nasdaq listing, subject to a conversion floor of $3.00. The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature which is accounted for separately. The Company measured the beneficial conversion feature’s intrinsic value on September 17, 2021, at $294,000 which, together with the OID of $25,000 was recorded as a debt discount and is being amortized over the life of the loan. For the year ended December 31, 2021, $60,063 of the debt discount has been amortized. As of December 31, 2021, the Company had accrued a principal balance of $525,000, had accrued $15,166 in interest expense, and had remaining debt discount of $258,937 which resulted in a net convertible note payable of $266,063.

 

For the three months ended March 31, 2022, $127,916 of the debt discount has been amortized. As of March 31, 2022, the Company had accrued a principal balance of $525,000, had accrued $28,291 in interest expense, and had remaining debt discount of $191,084 which resulted in a net convertible note payable of $333,916.

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

 

 Derivative Liabilities

 

The table below provides a summary of the changes in fair value, including net transfers in and/or out of all financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2022:

 

 

 

Amount

 

Balance on January 1, 2022

 

$45,665

 

Issuances to debt discount

 

 

-

 

Reduction of derivative related to conversions

 

 

-

 

Change in fair value of derivative liabilities

 

 

(15,001 )

Balance on March 31, 2022

 

$30,664

 

 

The fair value of the derivative conversion features and warrant liabilities as of March 31, 2022 and December 31, 2021 were calculated using a Monte-Carlo option model valued with the following assumptions:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Dividend yield

 

 

0%

 

 

0%

Expected volatility

 

 

87.9%

 

106.8%-107.3

%

Risk free interest rate

 

 

1.40%

 

0.41%-0.44

%

Contractual terms (in years)

 

 

.50

 

 

.50 – .52

 

 

NOTE 12 – DEBT

 

A summary of the Company’s third-party debt as of March 31, 2022 and December 31, 2021 presented below:

 

March 31, 2022

 

Loan

Facility

 

 

Trade

Facility

 

 

Third

Party

 

 

COVID

Loans

 

 

Total

 

Beginning balance

 

$1,299,784

 

 

$6,207,010

 

 

$10,077,977

 

 

$234,117

 

 

$17,818,888

 

Proceeds

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Payments

 

 

(124,242 )

 

 

(107,894 )

 

 

(2,030,814 )

 

 

 

 

 

 

(2,262,950 )

Conversion of debt

 

 

(1,190,000 )

 

 

-

 

 

 

 

 

 

 

-

 

 

 

(1,190,000 )

Recapitalized upon debt modification

 

 

-

 

 

 

(198,040 )

 

 

(1,204,356 )

 

 

-

 

 

 

(1,402,396 )

Accretion of debt

 

 

78,445

 

 

 

-

 

 

 

 

 

 

 

-

 

 

 

78,445

 

Foreign currency translation

 

 

54,861

 

 

 

(41,505 )

 

 

(21,433 )

 

 

(5,029 )

 

 

(13,106 )

Subtotal

 

 

118,848

 

 

 

5,859,571

 

 

 

6,821,374

 

 

 

229,088

 

 

 

13,028,881

 

Notes payable - long-term

 

 

-

 

 

 

-

 

 

 

(6,664,025 )

 

 

(221,781 )

 

 

(6,885,806 )

Notes payable - short-term

 

$118,848

 

 

$5,859,571

 

 

$157,349

 

 

$7,307

 

 

$6,143,075

 

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

December 31, 2021

 

Loan

Facility

 

 

Trade

Facility

 

 

Third

Party

 

 

COVID

Loans

 

 

Total

 

Beginning balance

 

$3,302,100

 

 

$6,446,000

 

 

$12,631,284

 

 

$435,210

 

 

$22,814,594

 

Proceeds

 

 

-

 

 

 

-

 

 

 

565,900

 

 

 

-

 

 

 

565,900

 

Payments

 

 

(141,475 )

 

 

(57,835 )

 

 

(62,878 )

 

 

(3,233 )

 

 

(265,421 )

Conversion of debt

 

 

(1,606,500 )

 

 

-

 

 

 

(3,010,000 )

 

 

-

 

 

 

(4,616,500 )

Recapitalized upon debt modification

 

 

(86,670 )

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(86,670 )

Debt forgiveness

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(169,770 )

 

 

(169,770 )

Foreign currency translation

 

 

(167,671 )

 

 

(181,155 )

 

 

(46,329 )

 

 

(28,090 )

 

 

(423,245 )

Subtotal

 

 

1,299,784

 

 

 

6,207,010

 

 

 

10,077,977

 

 

 

234,117

 

 

 

17,818,888

 

Notes payable - long-term

 

 

-

 

 

 

(2,450,000 )

 

 

(9,854,906 )

 

 

(51,478 )

 

 

(12,356,384 )

Notes payable - short-term

 

$1,299,784

 

 

$3,757,010

 

 

$223,071

 

 

$182,639

 

 

$5,462,504

 

 

Our outstanding debt as of March 31, 2022 is repayable as follows:

 

 

March 31, 2022

 

2022

 

$4,116,483

 

2023

 

 

9,699,419

 

2024

 

 

253,694

 

2025

 

 

227,261

 

2026 and thereafter

 

 

140,923

 

Total debt

 

 

14,437,780

 

Less: fair value adjustments to assumed debt obligations

 

 

(1,408,899 )

Less: notes payable - current portion

 

 

(6,143,075 )

Notes payable - long term portion

 

$6,885,806

 

 

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, 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 issued these shares on February 28, 2022. Upon issuance of the 238,000 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 $4.09 per share.

 

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 loss upon extinguishment in the amount of $6,642 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 March 31, 2022 and December 31, 2021, the Company has accrued interest expense of $16,849 and $4,414, respectively, and the principal balance of the debt is $118,848 and $1,299,784, respectively, which is classified as Notes payable on the unaudited condensed consolidated balance sheet.

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

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 USD $4,000,000 loan matured on August 31, 2021. On March 3rd 2022, the Company entered into an extension to the facility agreement. Based on the updated repayment terms, the facility’s final repayment date was extended to January 2023.

 

On December 30, 2020, the Company transferred the Euro €2,000,000 loan to a new third-party lender. The terms remained the same except interest will now accrue at 5.5% per annum plus Euribor. The principal is to be repaid in a total of five quarterly installments beginning October 31, 2021 of 50,000 Euro each with a final repayment of 1,800,000 Euro payable on the earlier of 24 months after December 30, 2020 or October 31, 2022.

 

During the year ended December 31, 2021, the Company repaid $56,508 of the €2,000,000 balance such that as of December 31, 2021, the Company had principal balances of €1,950,000 ($2,207,010) and $4,000,000 under the agreements, of which $2,450,000 is classified as notes payable-long term on the consolidated balance sheet and the Company had accrued $10,466 in interest expense related to these agreements. 

 

On March 3, 2022, the Company entered into a modification agreement to extend the maturity date to January 10, 2023 and payments under the $4,000,000 loan. The loan was considered a modification under ASC 470-50 because the change in the present value of cash flows is less than 10%. The Company capitalized fees paid upon modification of $200,000 that are being amortized over the life of the loan. During the three months ended March 31, 2022, the Company repaid $55,465 of the €1,950,000 balance and $50,059 of the $4,000,000 balance such that as of March 31, 2022, the Company had principal balances of €1,900,000 ($2,107,670) and $3,751,901 under the agreements which are recorded as short term. As of March 31, 2022, the Company had accrued $81,813 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, 2021, the Company had an outstanding principal balance of €8,000 ($9,054) and accrued interest of €6,318 ($7,151). As of March 31,2022, the Company had an outstanding principal balance of €8,000 ($8,874) and accrued interest of €6,439 ($7,143).

 

May 18, 2020, July 3, 2020, and August 4, 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 $2,000,000 payable 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.

 

 
27

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COSMOS HOLDINGS, INC.

 Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

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 December 31, 2021 the Company had a principal balance of $2,000,000 on this note, which is classified as Notes payable – long term portion on the consolidated balance sheet.

 

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 $5,000,000 payable 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.

 

The Company used the proceeds from the July 3 Note to repay the principal outstanding on the May 5 Note ($2,000,000), the May 8 Note ($2,000,000), and the February Note ($1,000,000). As of December 31, 2021, the Company had a principal balance of $5,000,000 on this note, which is classified as Notes payable – long term portion on the consolidated balance sheet.

 

As of December 31, 2021, the Company had accrued an aggregate total of $210,574 in interest expense 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.

 

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 continued 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 December 31, 2021, the Company had a principal balance of $2,000,000 on this note, which is classified as Notes payable – long term portion on the consolidated balance sheet, and $60,166 in accrued interest expense.

 

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 of $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 three months ended March 31, 2022, the Company made principal payments in the amount of $2,000,000 and recorded non-cash interest expense in the amount of $89,275 for the accretion of debt. As of March 31, 2022, the Company had a principal balance of $5,795,644 in relation to the May 18 Note, July 3 Note, and August 4 Note, in the aggregate. As of March 31, 2022, the Company has accrued an aggregate total of $443,341 of accrued interest on these notes, in the aggregate.

 

 
28

Table of Contents

 

COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

 

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. During the year ended December 31, 2021, the Company repaid €55,556 ($62,878) of the principal and as of December 31, 2021, the Company has accrued interest of $5,642 related to this note and a principal balance of €444,444 ($503,022), of which $377,270 is classified as Notes payable – long term portion on the consolidated balance sheet. During the three months ended March 31, 2022, the Company repaid €27,778 ($30,814) of the principal and as of March 31, 2022, the Company has accrued interest of $4,815 related to this note and a principal balance of €416,667 ($462,208), of which $429,582 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 December 31, 2021, the Company has accrued interest of $3,100 and a principal balance of €500,000 ($565,900), of which $477,637 is classified as Notes payable – long term portion on the consolidated balance sheet. As of March 31, 2022, the Company has accrued interest of $3,042 and a principal balance of €500,000 ($554,650), of which $438,799 is classified as Notes payable – long term portion on the accompanying condensed consolidated balance sheet.

 

COVID-19 Government Loans

 

On May 12, 2020, the Company’s subsidiary, SkyPharm, was granted and on May 22, 2020 the Company received a €300,000 ($366,900) loan from the Greek government. The loan will be repaid in 40 equal monthly installments beginning on January 1, 2022 and bears an interest rate of 0.94% per annum. As a condition to the loan, the Company was required to retain the same number of employees until October 31, 2020. During the year ended December 31, 2021, the Company received a waiver of 50% forgiveness of the loan and recorded $177,450 as other income. As of December 31, 2021 the principal balance was $169,770. As of March 31, 2022, the principal balance was $166,395.

 

On June 24, 2020, the Company received a loan £50,000 ($68,310) 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 £2,335 ($3,233) of principal during the year ended December 31, 2021, and the balance as of December 31, 2021 was £47,665 ($64,347). As of March 31, 2022, the principal balance was £47,665 ($62,693).

 

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 $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000.

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

 

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 635,829 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.

 

NOTE 13 – LEASES

 

The Company has various lease agreements with terms up to 10 years, comprising leases of office space, cars leases for the distribution of pharmaceutical products, equipment hires, etc. Some leases include options to purchase, terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

 

The assets and liabilities from operating and finance leases are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.

 

The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate, which is determined using the interest rate of our long-term debt on the date of inception.

 

Operating Leases

 

The Company’s weighted-average remaining lease term relating to its operating leases is 6.47 years, with a weighted-average discount rate of 6.74%.

 

The Company incurred lease expense for its operating leases of $54,124 and $65,577 which was included in “General and administrative expenses,” for the three months ended March 31, 2022 and 2021, respectively.

 

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of March 31, 2022.

 

Maturity of Lease Liability

 

 

 

Remainder of 2022

 

$154,095

 

2023

 

 

177,914

 

2024

 

 

108,485

 

2025

 

 

108,485

 

Thereafter

 

 

408,810

 

Total undiscounted operating lease payments

 

$957,789

 

Less: Imputed interest

 

 

(182,247)

Present value of operating lease liabilities

 

 

775,542

 

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

 

Finance leases

 

The Company’s weighted-average remaining lease term relating to its finance leases is 2.93 years, with a weighted-average discount rate of 6.74%.

 

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s finance leases as of March 31, 2022.

 

Maturity of Lease Liability

 

 

 

Remainder of 2022

 

$62,941

 

2023

 

 

73,387

 

2024

 

 

56,654

 

2025

 

 

26,870

 

Thereafter

 

 

3,694

 

Total undiscounted finance lease payments

 

$223,546

 

Less: Imputed interest

 

 

(20,669)

Present value of finance lease liabilities

 

$202,877

 

 

The Company incurred interest expense on its finance leases of $3,507 which was included in “Interest expense,” for the three months ended March 31, 2022. The Company incurred amortization expense on its finance leases of $19,580 which was included in “Depreciation and amortization expense,” for the three months ended March 31, 2022. The total cash used for the Company’s finance leases for the three months ended March 31, 2022 amounted to $22,358.

 

NOTE 14 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

From time to time, the Company may be involved in litigation relating to claims arising out of the Company’s operations in the normal course of business. As of March 31, 2022, the following litigations were pending. None of the below is expected to have a material financial or operational impact.

 

Solgar Inc. is suing SkyPharm SA for product homogeneity regarding the nutraceutical line "Sky Premium Life". As a result, Solgar requested the prohibition for SkyPharm to manufacture, import and sell, market or in any way possess and distribute, including Internet sales and advertise in any way in the Greek market of "Sky Premium Life" due to homogeneity with Solgar's products. Lawsuit with data no 4545/2021 of the company "Solgar Inc." against SkyPharm before the Court of First Instance of Thessaloniki, according to which Solgar Inc. requests to prohibit SkyPharm SA's use of the nutraceutical line "Sky Premium Life" packages as its characteristics are similar to Solgar Inc.’s and is also seeking the withdrawal of existing ones from the market. Solgar Inc. has further requested to be awarded compensation for non-pecuniary damage amounting to 20,000€ (financial obligation). The case was heard on January 28, 2022 and the Company is awaiting a decision. The lawyer assesses that the outcome of the trial's decision will be positive for SkyPharm SA.

 

Compilation and submission of a memorandum against the National Medicines Agency with no. 127351/16.12.2021 document. On July 22, 2015, the National Medicines Agency approved the license of wholesale sale of pharmaceutical products of the pharmaceutical company under the name SkyPharm SA with set validity at five years and an expiration date of July 22, 2022. Subsequently, SkyPharm SA on June 15, 2020, legally and timely submitted the application for renewal of the wholesale license of pharmaceutical products to the National Medicines Agency even though the period under review is characterized by the Covid - 19 pandemic The National Medicines Agency did not respond, therefore the Company asked from the lawyer to immediately ask for the decision of the renewal. Two months after the filing of no. 3459 / 15.01.2021 letter of the attorney and almost nine months after the no. 627615.06.2020 company application for the renewal and the National Medicines Agency replied by rejecting the renewal request on March 9, 2021 (ref. 62769 / 20-25.02.2021). In addition, document No. 127351-16.12.2021 of EOF to SkyPharm states that after an inspection of EOF at the premises of the company "Doc Pharma", SkyPharm did not have a wholesale license in force in violation of article 106 par. 1b and par. 1c of the ministerial decision D.YG3a / GP.32221 / 29-4-2019 and issued invoices dated February 26, 2021 and March 8, 2021). The National Medicines Agency has not yet replied to the renewal request.

  

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

Order for payment by the court which derived from a fine related to tax audit that concerns financial year 2014. The ruling with no. 483/16.12.2020 was against Cosmofarm SA. The defendant appealed against the decision by the ruling with no.11541/09.03.2021.This appeal was dismissed due to inactive passage of 120 days. Because of this inactive passage, Cosmofarm appealed against Greek tax authorities, no.6704/29.11.2021. There was an obligation of additional tax and fines imposition of 91,652.27€ that Cosmfarm has already paid and claim back through the appeal (financial claim). The trial is pending. The lawyer assesses that they cannot assume the final outcome of this case.

   

Advisory Agreements

 

On July 1, 2021, the Company entered into a two-year advisory agreement with a third party (the “Consultant”) for advisory and consulting services related to the Company’s intention to become listed on NASDAQ. Peter Goldstein, a then director of the Company is a principal of the Consultant. As consideration for services rendered, the Company will pay the consultant $4,000 a month until the Company commences trading on NASDAQ. Upon NASDAQ listing, the Company shall pay $10,000 per month, with $4,000 per month paid on a monthly basis and $6,000 per month accrued until such time as the Company raises an aggregate of $10,000,000. In addition, the consultant will receive a $100,000 bonus upon NASDAQ listing and when the Company has raised an aggregate of $10,000,000. Finally, the Company has agreed that the Consultant shall receive a total of 250,000 shares of the Company’s common stock, 50,000 of such shares that have been previously issued pursuant to previous agreements and 200,000 shares to be issued when the Company commences trading on NASDAQ. 

 

On July 7, 2021, the Company entered into an agreement with a non-exclusive financial advisor and placement agent. The term of the agreement is a minimum of 45 days and will continue until 5 business days following the date in which a party receives written notice from the other party of termination. As consideration for services rendered, the Company shall pay: a) a cash fee equal to 10% of the gross proceeds of any securities sold in the offering payable at closing of the offering from the gross proceeds of the offering; b) 1% of the gross proceeds of any securities sold in the offering payable at closing of the offering from the gross proceeds of the offering for unaccountable expenses; c) warrants to purchase shares of the Company’s common stock equal to 10% of the number of shares issued in the offering or to be issued thereafter upon conversion of any convertible securities issued in the offering. These warrants will have a 5-year term and an exercise price equal to the price per share of common stock sold in the offering or conversion or exercise price into common stock of any convertible security sold and will have the same provisions, terms, conditions, rights and preferences as the securities sold in the offering; d) a cash fee equal to 10% of the exercise price of all securities constituting warrants, options or other rights to purchase securities sold in the offering payable only upon exercise. 

 

On July 7, 2021, the Company entered into a 6-month agreement with a non-exclusive agent, advisor or underwriter in any offering of securities of the Company. At the closing of any offering the Company will compensate the agent: a) a cash fee or as an underwritten offering an underwriter discount equal to 7% of the aggregate gross proceeds raised in each offering. For all investors referred directly to the Company by the agent, a cash fee or as an underwritten offering an underwriter discount equal to 5% of the aggregate gross proceeds invested by such investors. b) the Company shall issue to the agent or its designees at each closing, warrants to purchase shares of the Company’s common stock equal to 5% of the aggregate number of shares of common stock placed in each offering. c) out of the proceeds of each closing, the Company also agreed to pay the agent up to $35,000 for non-accountable expenses (up to $50,000 for a public offering) along with up to $50,000 for fees and expenses of legal counsel and other out-of-pocket expenses (increase to up to $100,000 for public offerings) plus additional miscellaneous costs. The agent would also have the right of first refusal from the date of the agreement until the 12-month anniversary following consummation of any offerings for total proceeds of at least $3 million raised by investors introduced by the agent.

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

NOTE 15 – STOCK OPTIONS AND WARRANTS

 

As of March 31, 2022, there were 0 options outstanding and exercisable.

 

A summary of the Company’s option activity during the three months ended March 31, 2022 is presented below:

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

Options

 

Shares

 

 

Price

 

 

Term

 

 

Value

 

Balance outstanding, January 1, 2022

 

 

37,000

 

 

$1.32

 

 

 

0.01

 

 

$75,850

 

Granted

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Expired

 

 

(37,000 )

 

 

-

 

 

 

-

 

 

 

-

 

Balance outstanding, March 31, 2022

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable, March 31, 2022

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

As of March 31, 2022, there were 2,949,411 warrants outstanding and 2,949,411 warrants exercisable with expiration dates from May 2023 through August 2027.

 

A summary of the Company’s warrant activity during the three months ended March 31, 2022 is presented below:

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

 

Aggregate

 

 

 

Number of

 

 

Exercise

 

 

Contractual

 

 

Intrinsic

 

Warrants

 

Shares

 

 

Price

 

 

Term

 

 

Value

 

Balance outstanding, January 1, 2022

 

 

3,698,238

 

 

$2.02

 

 

 

2.03

 

 

$4,992,621

 

Granted

 

 

2,000,000

 

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercised

 

 

(2,748,797 )

 

 

-

 

 

 

-

 

 

 

-

 

Expired

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Balance outstanding, March 31, 2022

 

 

2,949,441

 

 

$2.89

 

 

 

4.24

 

 

$113,933

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable, March 31, 2022

 

 

2,949,411

 

 

$2.89

 

 

 

4.24

 

 

$113,933

 

 

NOTE 16 – DISAGGREGATION OF REVENUE

 

ASC 606-10-50-5 requires that entities disclose disaggregated revenue information in categories (such as type of good or service, geography, market, type of contract, etc.). ASC 606-10-55-89 explains that the extent to which an entity’s revenue is disaggregated depends on the facts and circumstances that pertain to the entity’s contracts with customers and that some entities may need to use more than one type of category to meet the objective for disaggregating revenue.

 

The Company disaggregates revenue by country to depict the nature and economic characteristics affecting revenue.

 

 
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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022 

  

The following table presents our revenue disaggregated by country for the three months ended:

 

 

 

March 31,

 

 

March 31,

 

Country

 

2022

 

 

2021

 

Germany

 

 

-

 

 

 

13,613

 

Greece

 

 

13,009,038

 

 

 

11,453,496

 

Italy

 

 

-

 

 

 

15,727

 

Denmark

 

 

-

 

 

 

54,686

 

Cyprus

 

 

-

 

 

 

14,723

 

UK

 

 

51,426

 

 

 

66,831

 

Croatia

 

 

11,336

 

 

 

-

 

Total

 

$13,071,800

 

 

$11,619,076

 

 

NOTE 17 – SUBSEQUENT EVENTS

 

Conversion of Principal and Accrued Interest

 

On May 1, 2022 the Company issued 39,339 shares of common stock to convert $26,515 principal and accrued interest in accordance with a convertible promissory note issued to Platinum Point Capital LLC. Following the conversion, the outstanding balance of the above Note is $0.

 

Departure and Appointment of Board Members

 

Effective April 28, 2022, Peter Goldstein resigned from the Board of Directors (the “Board”) the Company and from the Board’s audit committee. Mr. Goldstein’s resignation did not result from any disagreement concerning any matter relating to the Company’s operations, policies or practices.

  

On April 28, 2022, the Board appointed Dr. Anastasios Aslidis to the Board of Directors and as a member of the Board’s audit committee.

 

Exercise of Warrants

 

On April 27, 2022, the Company issued 455,316 shares of common stock upon the cashless exercise of 739,374 warrant shares.

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Available Information

 

The following discussion should be read in conjunction with our interim Condensed Consolidated Financial Statements and the related notes and other financial information appearing elsewhere in this report as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K for the year ended December 31, 2021 (“Form 10-K”) and this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022.

 

Forward-Looking Statements

 

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.

 

We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.

 

Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

 

Overview

 

Summary

 

Cosmos Holdings, Inc. was formed as a Nevada incorporation on July 07, 2009, under the name of Prime Estates & Developments Inc. Effective September 27, 2013, we acquired 100% ownership of Amplerissimo Ltd., a private company whose principal activities included providing consulting services to various industries. On November 14, 2013, we changed our name to Cosmos Holdings, Inc. and changed our focus and business strategy to the healthcare and pharmaceutical industry. The Company, through Amplerissimo Ltd, formed SkyPharm S.A. on August 1, 2014, a Greek corporation which focuses on the trading of nutraceutical products. On February 10, 2017, we acquired 100% ownership of Decahedron Ltd., a United Kingdom company, which is a fully licensed wholesaler of pharmaceutical products, and its primary activity is the trading, distribution, import and export of pharmaceuticals and nutraceuticals. In addition, on December 19, 2018, the Company acquired 100% ownership of Cosmofarm Ltd, a Greek company which is a pharmaceutical wholesaler and networks with over 1,500 pharmacies.

 

Cosmos Holdings Inc is an international pharmaceutical company with a proprietary line of nutraceuticals and distributor of branded and generic pharmaceuticals, nutraceuticals, OTC medications and medical devices. The Company uses a differentiated operating model based on a lean, nimble and decentralized structure, with an emphasis on acquisitions of established companies and our ability to maintain better pharmaceutical assets than others. This operating model and the execution of its corporate strategy are designed to enable the Company to achieve sustainable growth and create added value for our shareholders. In particular, the Company aims to enhance its pharmaceutical and over-the-counter product lines by acquiring or licensing rights to additional products and regularly evaluate selective company acquisition opportunities. The Company, through its subsidiaries, is operating within the pharmaceutical industry and in order to compete successfully in the healthcare industry, must demonstrate that its products offer medical benefits as well as cost advantages. Currently, most of the products that the Company is trading, compete with other products already on the market in the same therapeutic category, and are subject to potential competition from new products that competitors may introduce in the future.

 

 
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The Company continues to rapidly expand its distribution network worldwide and open new markets for its proprietary line of branded pharmaceuticals, nutraceuticals, and nutraceuticals through its distribution channels and ecommerce marketplace. The Company uses its extensive network with direct access to Europe’s primary sales channels for pharmaceuticals and nutraceuticals, which includes over 160 pharmaceutical wholesale distributors in Europe’s largest markets, over 40,000 pharmacies in Europe and 1,500 pharmacies in Greece. The Company achieves stable supply of pharmaceuticals from Doc Pharma which enhances its ability to scale its expansion. It receives full priority in the production of nutraceuticals and volumes. Its full production in Greece ensures a decisive production cost advantage whilst it secures additional discounts by leveraging its purchasing scale.

 Revenue sources

 

The Company operates in the wholesale distribution of branded pharmaceutical products, over the counter (“OTC”) products, medical devices, vitamins and a variety of nutraceuticals, including its proprietary label.

      

Import/Export of Branded pharmaceuticals 

 

We conduct wholesale import and export of branded pharmaceutical products throughout Europe by our subsidiaries. We source licensed pharmaceuticals from wholesalers at a lower cost, primarily in Greece and the U.K. and sell to other European wholesalers. Our capital efficient business model is based on infrastructure, efficiency and scale. 

 

Full-line Wholesale

 

We conduct direct distribution and sales of pharmaceuticals, medical devices, branded pharmaceuticals and OTC products. Our distribution network exceeds over 1,500 pharmacies in Greece. We have created an upgraded and high-end distribution center in Greece due to our Robotic systems and integrated automations (“ROWA” robotics). 

 

Nutraceutical

 

We have created and developed our own proprietary branded nutraceutical products, named “Sky Premium Life®” which was launched in 2018. We have a full portfolio of fast moving and specialty formulas with at least 75 product codes including vitamins, minerals and other herbal extracts. We expect to reach the number of 150 product codes by the end of 2022. Our nutraceutical products are manufactured exclusively by Doc Pharma, a related party of the Company. Our nutraceutical products have penetrated several markets within 2021 through digital channels such as Amazon and Tmall. 

 

We focus on nutraceutical products because we foresee it as a relatively under-penetrated market throughout Europe with potential of high growth opportunities due to its large market size and margin contribution as the demand for nutraceutical products is increasing globally.

 

 
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Branded pharmaceuticals

 

We are engaged in the promotion, distribution and sale of branded pharmaceutical products throughout Europe. Through a related company , we have the distribution rights to over 70 fast-moving pharmaceutical products. There is a significant growth on opportunities through product additions and geographic expansion

 

Regulations and Licenses

 

Our subsidiary, Decahedron, was granted the license for the wholesale of medicinal products for human use in February 2021 pursuant to the regulation of 18 of The Human Medicines Regulations 2012 (SI 2012/1916). It fulfills the guidelines of the Wholesale Distribution Authorisation (Human). Finally, our subsidiary, Cosmofarm S.A., was granted the license for the wholesale of pharmaceutical products for human use on February 2019 pursuant to the EU directive of (2013/C 343/01). It fulfils the Guidelines of the Good Distribution Practices of medical products for human use. All licenses were granted based on inspections and are valid unless current inspections occur which will revise their status.

    

Risks

 

Supply chain disruption is a growing concern for the European pharmaceutical industry as it increasingly looks to cut costs by relying on ‘emerging markets’, where standards can be lower in terms of compliance, ethics and health and safety.

 

Hikes in the price of medicine and their impact on the sustainability of the healthcare systems are garnering more and more attention. European regulators are willing to play their part in safeguarding continued access to safe and effective medicines. Regulators can speed up the approval of branded pharmaceuticals and biosimilars to boost competition and drive down prices.

 

Cuts in healthcare spending keep occurring since the financial crises of the late of 2000s. Europe’s slow recovery has been uneven, with austerity and economic uncertainty, especially in the EU’s poorer member states, such as Greece.

 

The Effects of COVID-19 on Our 2021 Operations

 

The World Health Organization (“WHO”) declared the coronavirus outbreak a pandemic on March 11, 2020. Since the outbreak in China in December 2019, COVID-19 has expanded its impact to Europe, where all of our operations reside as well as our employees, suppliers and customers. To date, our operations have been adversely affected by the following COVID-19 risks:

 

Adverse Risks

 

 

o

 Drug shortages due to ban of exports

 

 

 

 

o

Problems/restrictions in supply chain

 

 

 

 

o

Logistics delays o Restrictions on employees’ ability to work o Liquidity issues (AR/AP) – payment delays and new government regulations for freezing payment terms

 

 

 

 

o

National or EU long lasting recession

 

 
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Subsequent to year-end, management has identified opportunities as listed below, that could balance, at least in part, the adverse effects of COVID-19 during the fiscal year-end 2020 and 2021. However, there can be no assurance that this will occur prior to a vaccine and treatment becoming effective.

 

 

 

Opportunities

      

Management’s Expectations Regarding COVID-19

 

Management believes that there could be a positive long-term outcome from COVID-19, which could result in an increase in sales of OTC branded products, nutraceuticals, antibacterial products, gloves, oximeters, thermometers and medical masks. However, there is no guarantee of such results. Therefore, we will increase R&D as we are aiming to innovate and create new products in order to help combat against COVID-19. We have adapted our strategy in response to COVID-19 and will continue to do so, since we are expecting the impact of COVID-19 to continue for the next 12 months.

 

What Effect Will COVID-19 Have on the Company’s Disclosure Controls

 

Management does not believe COVID-19 will have a significant effect on our disclosure controls as there have been no changes to date. Our operations have continued at a normal pace, at least 95% of our staff continue to work on site and those staff who are working remotely have no impact on our disclosure controls. 

 

Results of Operations

 

Three Months Period Ended March 31, 2022 and 2021

 

Revenue

 

The Company had revenue of $13,071,800 and $11,619,076 (an increase of 12.5%) for the three months ended March 31, 2022 and 2021, respectively. The increase in the 3-month period is mainly due to the organic growth attributed to our subsidiary, Cosmofarm, which continued the expansion and sales programs at the local level, and to the significantly higher sales volume of SkyPharm, due to the increased demand for its own branded nutritional supplements named (“Sky Premium Life®”), which resulted in achieving $524,000 more in sales compared to Q1 2021 (an increase of 49.29%). The Company had a net income of $203,347 on revenue of $13,071,800 versus a net loss of $2,173,903 on revenue of $11,619,076 for the three months ended March 31, 2022 and 2021, respectively.

 

Cost of Goods Sold

 

The Company had costs of goods sold of $11,179,868 versus $10,617,741 (an increase of 5.29%) for the three months ended March 31, 2022 and 2021, respectively. The increase in the 3-month is primarily due to the increase in revenue. However, the costs of goods sold were increased by just 5.29% compared to a revenue increase of 12.5%, due to the higher dependence of the Company on the nutraceuticals’ revenue stream, which historically achieves higher margins than the wholesale one.

 

 
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Our future revenue growth is expected to continue to be affected by various factors such as industry growth trends, including drug utilization, the introduction of new innovative brand therapies, the likely increase in the number of branded pharmaceutical products that will be available over the next few years’ price increases and price deflation, general economic conditions, including the effects of the current conflict in the Ukraine, the coronavirus in the member states of European Union, competition within the industry, customer consolidation, changes in pharmaceutical manufacturer pricing and distribution policies and practices, increased downward pressure on government and other third party reimbursement rates to our customers, and changes in government rules and regulations.

   

Gross Profit

 

The Company had gross profit of $1,891,932 versus $1,001,335 (an increase of 88.94%) for the three months ended March 31, 2022 and 2021, respectively. The increase in gross profit for the 3-month period is attributable to the revenue increase in conjunction with the higher gross profit margins achieved due to the significant increase in nutraceuticals revenue stream.

 

Operating Expenses

 

The Company had general and administrative costs of $868,639 and $1,688,712, salaries and wages expenses of $521,471 and $531,556, sales and marketing expenses of $146,949 and $405,092 and depreciation and amortization expense of $112,622 and $107,073 for a net operating income of $242,251 and loss of $1,731,098 (an increase of 114%) for the three months ended March 31, 2022 and 2021 respectively. The decrease in operating expenses is primarily attributed to the stock-based compensation related to a consulting agreement entered into in February 2021 and included in the general and administrative expenses for the period ended March 31, 2021, as well as the significant decrease in sales and marketing expenses of approximately 64%.

 

Other Income (Expense)

 

The Company’s other income (expense) was primarily comprised of interest expense related to notes payable and convertible notes payable $584,176 versus $731,826, non-cash interest expense related to the amortization of debt discount of $260,527 versus $50,109, a gain on extinguishment of debt of $1,004,124 due to a debt extension that took place on March 3rd, 2022 versus a gain of $445,636, a change in fair value of derivative liability of $15,001 versus $61,373 due to agreements on convertible debentures, interest income of $64,827 versus $0 and a foreign currency loss of $159,352 versus a gain of $306,020 for the three months ended March 31, 2022 and 2021, respectively. Also, The Company’s other expense was $54,812 versus other expense of $178,211 for the three months ended March 31, 2022 and 2021, respectively.

 

Unrealized Foreign Currency losses

 

The Company had an unrealized foreign currency loss of $405,229 versus a loss of $473,578 and a net comprehensive loss of $5,990,375 versus loss of $2,647,481 for the three months ended March 31, 2022 and 2021, respectively.

 

 
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Liquidity and Capital Resources

 

As of March 31, 2022, the Company had working capital of $11,831,133 compared to $10,950,492 as of December 31, 2021.

 

The Company had cash of $1,010,427 versus $286,487 as of March 31, 2022 and December 2021, respectively. The Company had net cash used in operating activities of $2,337,276 and $665,339 for the three months ended March 31, 2022 and 2021, respectively. The Company has devoted substantially all of its cash resources to expand through organic business growth and has incurred significant general and administrative expenses in order to enable the financing and growth of its business and operations.

 

The Company had net cash provided by investing activities of $94,550 and net cash used in investing activities of $2,310 during the three months ended March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022 the net cash provided by investing activities was mainly attributable to the proceeds from the loan receivable from a third party.

 

The Company had net cash provided by financing activities of $2,914,441 versus $380,118 during the three months ended March 31, 2022 and 2021, respectively. The net cash increase in the 3-month period ended om March 31, 2022 is mainly attributable to the net proceeds of $5,452,300 of the preferred stock offering on February 28, 2022 less the payments made for the loans and notes payable.

 

For the period ended March 31, 2022, the Company also received proceeds from lines of credit of $5,779,114 and payments of lines of credit of $6,244,162, for a net decrease on the line of credit of $465,048.

 

We anticipate using cash in our bank account as of March 31, 2022, cash generated from debt or equity financing, from investing activities or from management loans, to the extent that funds are available to do so to conduct our business in the upcoming year. Management is not obligated to provide these or any other funds. If we fail to meet these requirements, we may lose the qualification for quotation and our securities would no longer trade on the over-the-counter markets. Further, as a consequence we would fail to satisfy our reporting obligations with the Securities and Exchange Commission (“SEC”), and investors would then own stock in a company that does not provide the disclosure available in quarterly and annual reports filed with the SEC and investors may have increased difficulty in selling their stock as we will be non-reporting.

 

Plan of Operation in the Next Twelve Months

 

Specifically, our plan of operations for the next 12 months is as follows:

  

We assess the foreseeable development of the Company as being positive. Over the medium term we expect to further expand our market shares. However, during the course of further organizational optimization there may be associated extraordinary additional costs.

 

Our plan for our own branded nutraceuticals is to enlarge our portfolio up to 150 SKUs by the end of 2022 including more basic line formulas to cover more customer needs of any age, advanced formulations, formulas based on herbs and further clinical studies with R&D for further products. Our plan for geographic expansion in distributing and market penetration in EU, Asia, USA, and Canada is based on exclusive distributors, wholesalers, ecommerce, development of franchising model, alliances and acquisitions of nutraceutical companies.

 

 
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In addition, our plan for branded pharmaceuticals is geographic expansion across the world, especially in EU and UK, as well as in third countries with fast registration and developed markets with liberalized OTC policies for online pharmacies and supermarkets. We also intend to enhance our exclusive distribution rights with a growing basis of cooperating partners whilst purchasing generics’, biosimilar drugs and OTC licenses. We also intend to enhance our product expectance by registered copyrights and trademarks in all OTC drugs. In addition, it remains committed to strategic research and development across each business unit with a particular focus on assets with inherently lower risk Our plan for our full line wholesale is to expand in the Greek territory, enlarge our customer portfolio and integrate of established sales network of pharmacies through the use of B2B and B2C ecommerce platforms and exclusive distributors. We are also aiming in increasing the exports of branded pharmaceuticals as we focus on higher profit margins categories (OTC and VMS), deliver 3PL services to pharma companies, put in force loyalty programs, provide added value services to pharmacies and emergency deliveries to VIP customers. The Company will evaluate and, where appropriate, execute on opportunities to expand its network of pharmacies and products in areas that it believes will offer above average growth characteristics and attractive margins.

    

The Company is growing its business through organic growth, market penetration, geographic expansion and acquisitions which would add value to its business and its Shareholders. The Company is also committed to pursuing various forms of business development; this can include trading, alliances, joint ventures and dispositions. Moreover, it hopes to continue to build on its portfolio of pharmaceutical products and expand its OTC and nutraceutical product portfolio. Thus, the Company is developing a sound sales distribution network specializing in its own branded nutraceutical products.

 

The Company’s main objective is expanding the business operations of its subsidiaries by concentrating its efforts on becoming an international pharmaceutical Company. The Company views its business development activity as an enabler of its strategies, and it seeks to generate earnings growth and enhance shareholder value by pursuing a disciplined, strategic, and financial approach to evaluating business development opportunities. Under these principles the Company assesses businesses and assets as part of its regular, ongoing portfolio review process and continues to consider trading development activities for its businesses. The Company’s objective is the optimization of operating expenses across all entities without compromising the quality of the Company’s services and products.

 

Changes in the behavior and spending patterns of purchasers of pharmaceutical and healthcare products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of doctor visits, and foregoing healthcare insurance coverage, may impact the Company’s business.

  

The pharmaceutical sector offers a large growth potential within the European pharmaceutical market, if service, price and quality are strictly directed towards the customer requirements. The Company will continue to encounter competition in the market by product, service, reliability, and a high level of quality. On the procurement side, the Company can access a wide range of supply possibilities. To minimize business risks, the Company diversifies its sources of supply all over Europe. It secures its high-quality demands through careful supplier qualification and selection, as well as active suppliers’ system management.

  

While the Company intends to pursue these milestones, there may be circumstances where for valid business reasons or due to factors beyond the control of the Company (e.g., the COVID-19 pandemic), a reallocation of efforts may be necessary or advisable. Although the Company does not currently anticipate that the COVID-19 pandemic will cause material delays in the timelines or estimates set out above, due to the evolving nature of COVID-19 and its impacts, these timelines and estimates may require adjustment in the future.

   

The Company intends to spend the funds available to it in working capital, inventories, intangible assets, acquisitions, R&D, sales and marketing expenses. Due to the uncertain nature of the industry in which the Company will operate, projects may be frequently reviewed and reassessed. Accordingly, while it is currently intended by management that the available funds will be expended as set forth above, actual expenditures may in fact differ from these amounts and allocations.

 

 
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Off Balance Sheet Arrangements

  

As of March 31, 2022, there were no off-balance sheet arrangements.

     

Critical Accounting Policies

 

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” under the Management’s Discussion and Analysis section. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

 

Revenue Recognition: The Company adopted Topic 606 Revenue from Contracts with Customers on January 1, 2018. As a result, it has changed its accounting policy for revenue recognition as detailed above.

 

Foreign Currency. Assets and liabilities of all foreign operations are translated at year-end rates of exchange, and the statements of operations are translated at the average rates of exchange for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholders’ equity until the entity is sold or substantially liquidated. Gains or losses from foreign currency transactions (transactions denominated in a currency other than the entity’s local currency) are included in net (loss) earnings.

 

Income Taxes. The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes, ASC 740. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

The Company is liable for income taxes in Greece and the United Kingdom. The corporate income tax rate is 22% in Greece (tax losses are carried forward for five years effective January 1, 2013) and 19% in United Kingdom. Losses may also be subject to limitation under certain rules regarding change of ownership.

     

We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Our review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets.

 

We recognize the impact of an uncertain tax position in our financial statements if, in management’s judgment, the position is not more-likely-then-not sustainable upon audit based on the position’s technical merits. This involves the identification of potential uncertain tax positions, the evaluation of applicable tax laws and an assessment of whether a liability for an uncertain tax position is necessary. We operate and are subject to audit in multiple taxing jurisdictions.

 

We record interest and penalties related to income taxes as a component of interest and other expense, respectively.

 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740 “Accounting for Income Taxes” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in this financial statement because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

 

The Company has net operating loss carry-forwards in our parent, Cosmos Holdings Inc., which are applicable to future taxable income in the United States (if any). Additionally, the Company has income tax liabilities in the United Kingdom. The income tax assets and liabilities are not able to be netted. We therefore reserve the income tax assets applicable to the United States but recognize the income tax liabilities in Greece and the United Kingdom. Losses may also be subject to limitation under certain rules regarding change of ownership.

 

 
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Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable. A smaller reporting company is not required to provide the information required by this Item.

    

Item 4. Controls and Procedures. 

 

Disclosure Controls and Procedures

 

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

 

Evaluation of Disclosure Controls and Procedures

 

The Company’s management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were partially effective. The Management is committed to remediate the material weaknesses identified in the Form 10K, which include lack of segregation of duties and lack of internal controls structure review. As part of this commitment, the Management has hired additional individuals in the finance team in order to assign responsibilities on key processes, examine and improve operating practices, perform extensive financial control and financial risk management processes, as well as to define and develop new policies and controls in order to improve the accuracy of the disclosures. In addition, the Internal Auditors of the Company are in the process of developing further procedures to ensure the effectiveness of internal controls and the accuracy and completeness of financial reporting. The Company will evaluate the controls and procedures on a quarterly basis and judge what weaknesses to be remediated based on materiality and circumstances.

 

Changes in Internal Controls Over Financial Reporting

 

During the most recently completed fiscal year, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect it. 

. Our Audit Committee is in process of evaluating our existing controls and procedures, whilst communicating with the Management on quarterly basis.

 

Audit Committee

 

We have a separately-designated standing audit committee, which is appointed by the Board of Directors of Cosmos Holdings Inc. On April 28, 2022, Dr Anastasios Aslidis was elected to serve the Board of Directors and was appointed as a member of the Audit Committee, replacing Mr Peter Goldstein, who submitted his resignation on the same date. Our three independent directors, Anastasios Aslidis, John Hoidas and Demetrios Demetriades serve on the Audit Committee. Primary function of the committee is to assist the Board of Directors in overseeing (1) the financial reporting and accounting processes of the Company, and (2) the financial statements audits of the Company. The Committee also prepares a written report to be included in the annual proxy statement of the Company pursuant to the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). In furtherance of these purposes, the Committee shall maintain direct communication among the Company’s independent auditors and the Board of Directors. The independent auditors and any other registered public accounting firm engaged in preparing or issuing an audit report or performing other audit review or attest services for the Company shall report directly to the Committee and are ultimately accountable to the Committee and the Board of Directors.

 

 
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Table of Contents

 

In discharging its oversight role, the Committee is authorized to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company. The Committee shall have the sole authority to retain at the Company’s expense outside legal, accounting or other advisors to advise the Committee and to receive appropriate funding, as determined by the Committee, from the Company for the payment of the compensation of such advisors and for the payment of ordinary administrative expenses of the Committee that are necessary to carry out its duties. The Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditors to attend a meeting of the Committee or to meet with any member of, or advisors to, the Committee. The Committee may also meet with the Company’s investment bankers or financial analysts who follow the Company.

 

The Committee shall meet no less frequently than four times per year, with additional meetings as circumstances warrant. The Committee shall also meet periodically with management, the internal auditors, if any, and the independent auditors in separate executive sessions. The Committee shall record the minutes of all such meetings and shall submit the minutes of its meetings to, or discuss the matters deliberated at each meeting with, the Board of Directors. The Company’s chief financial or accounting officer shall function as the management liaison officer to the Committee.

 

 
44

Table of Contents

     

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

There have been no changes since the filing of the Company’s Form 10-K for the year ended December 31, 2021.

 

Item 1A. Risk Factors

 

Not applicable.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None. Previously reported on Form 8-K.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

 
45

Table of Contents

     

Item 6. Exhibits.

 

(a) Exhibits.

 

Exhibit No.

Document Description

 

31.1*

 

Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

31.2*

 

Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1*

Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2*

Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS

XBRL Instance Document**

 

101.SCH

XBRL Taxonomy Extension Schema Document**

 

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document**

 

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document**

 

101.LAB

XBRL Taxonomy Extension Label Linkbase Document**

 

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document**

_____________

*

This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 

**

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 
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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Cosmos Holdings Inc.

 

Date: May 17, 2022

By:

/s/ Grigorios Siokas

Grigorios Siokas

 

Chief Executive Officer

 

(Principal Executive Officer)

 

Date: May 17, 2022

By:

/s/ Georgios Terzis

 

Georgios Terzis

 

 

Chief Financial Officer

 

 

(Principal Financial Officer,

And Principal Accounting

Officer)

 

 

 
47

Table of Contents

     

EXHIBIT INDEX

 

Exhibit No.

Document Description

 

 

 

31.1*

 

Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

31.2*

 

Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1*

 

Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

32.2*

Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

101.INS

XBRL Instance Document**

 

101.SCH

XBRL Taxonomy Extension Schema Document**

 

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document**

 

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document**

 

101.LAB

XBRL Taxonomy Extension Label Linkbase Document**

 

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document**

 

Exhibit 101

Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.**

___________

*

This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

 

**

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

 

48

 

EXHIBIT 31.1

 

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Grigorios Siokas, the Chief Executive Officer of Cosmos Holdings, Inc., certify that:

 

1.

I have reviewed this report on Form 10-Q of Cosmos Holdings Inc. for the quarter ended March 31, 2022;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Cosmos Holdings Inc.

 

 

 

 

 

Date: May 17, 2022

By:

/s/ Grigorios Siokas

 

 

 

Grigorios Siokas, Chief Executive Officer

 

 

 

(Principal Executive Officer)

 

 

 EXHIBIT 31.2

   

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Georgios Terzis, the Chief Financial Officer of Cosmos Holdings, Inc., certify that:

 

1.

I have reviewed this report on Form 10-Q of Cosmos Holdings Inc., for the quarter ended March 31, 2022;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Cosmos Holdings Inc.

 

 

 

 

 

Date: May 17, 2022

By:

/s/ Georgios Terzis

 

 

 

Georgios Terzis, Chief Financial Officer

 

 

 

(Chief Financial Officer)

 

 

EXHIBIT 32.1

   

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned hereby certifies that the Quarterly Report on Form 10-Q for the period ended March 31, 2022 of Cosmos Holdings Inc. (the “Company”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Cosmos Holdings Inc.

 

 

 

 

 

Date: May 17, 2022

By:

/s/ Grigorios Siokas

 

 

 

Grigorios Siokas

 

 

 

Principal Executive Officer

 

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Cosmos Holdings Inc. and will be retained by Cosmos Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

 EXHIBIT 32.2

   

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned hereby certifies that the Quarterly Report on Form 10-Q for the period ended March 31, 2022 of Cosmos Holdings Inc. (the “Company”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Cosmos Holdings Inc.

 

 

 

 

 

Date: May 17, 2022

By:

/s/ Georgios Terzis

 

 

 

Georgios Terzis

 

 

 

Principal Financial Officer and Principal Accounting Officer

 

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Cosmos Holdings Inc. and will be retained by Cosmos Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request.