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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 12/16/22 Cosmos Holdings Inc. 10-K/A 12/31/21 91:9.1M Discount Edgar/FA |
Document/Exhibit Description Pages Size
1: 10-K/A Amendment to Annual Report HTML 1.55M
2: EX-21 List of Subsidiaries HTML 23K
3: EX-31.1 Certification -- §302 - SOA'02 HTML 27K
4: EX-31.2 Certification -- §302 - SOA'02 HTML 28K
5: EX-32.1 Certification -- §906 - SOA'02 HTML 23K
6: EX-32.2 Certification -- §906 - SOA'02 HTML 23K
12: R1 Cover HTML 88K
13: R2 Condensed Consolidated Balance Sheets HTML 169K
14: R3 Condensed Consolidated Balance Sheets HTML 46K
(Parenthetical)
15: R4 Condensed Consolidated Statements of Operations HTML 130K
and Comprehensive Income (Loss) (Unaudited)
16: R5 Consolidated Statements of Changes in HTML 80K
Stockholders' Equity (Deficit) and Mezzanine
Equity
17: R6 Condensed Consolidated Statements of Cash Flows HTML 167K
(Unaudited)
18: R7 Organization, Nature of Business and Going Concern HTML 115K
19: R8 Marketable Securities HTML 34K
20: R9 Property and Equipment HTML 34K
21: R10 Goodwill and Intangible Assets HTML 34K
22: R11 Loan Receivable HTML 25K
23: R12 Capital Structure HTML 43K
24: R13 Income Taxes HTML 86K
25: R14 Related Party Transactions HTML 53K
26: R15 Lines of Credit HTML 38K
27: R16 Convertible Debt HTML 70K
28: R17 Debt HTML 119K
29: R18 Leases HTML 40K
30: R19 Commitments and Contingencies HTML 31K
31: R20 Earnings Per Share HTML 39K
32: R21 Stock Options and Warrants HTML 94K
33: R22 Disaggregation of Revenue HTML 41K
34: R23 Subsequent Events HTML 28K
35: R24 Organization, Nature of Business and Going Concern HTML 163K
(Policies)
36: R25 Organization, Nature of Business and Going Concern HTML 69K
(Tables)
37: R26 Property and Equipment (Tables) HTML 33K
38: R27 Goodwill and Intangible Assets (Tables) HTML 34K
39: R28 Income Taxes (Tables) HTML 82K
40: R29 Related Party Transactions (Tables) HTML 40K
41: R30 Lines of Credit (Tables) HTML 33K
42: R31 Convertible Debt (Tables) HTML 45K
43: R32 Debt (Tables) HTML 84K
44: R33 Leases (Tables) HTML 35K
45: R34 Earnings Per Share (Tables) HTML 39K
46: R35 Stock Options and Warrants (Tables) HTML 91K
47: R36 Disaggregation of Revenue (Tables) HTML 40K
48: R37 Organization, Nature of Business and Going Concern HTML 29K
(Details)
49: R38 Organization, Nature of Business and Going Concern HTML 37K
(Details 1)
50: R39 Organization Nature of Business (Details 2) HTML 39K
51: R40 Organization, Nature of Business and Going Concern HTML 29K
(Details 3)
52: R41 Organization, Nature of Business and Going Concern HTML 29K
(Details 4)
53: R42 Organization, Nature of Business and Going Concern HTML 135K
(Details Narrative)
54: R43 Marketable Securities (Details Narrative) HTML 94K
55: R44 Property Plant and Equipment (Details) HTML 36K
56: R45 Goodwill and Intangible Assets (Details) HTML 39K
57: R46 Loan Receivable (Details Narrative) HTML 36K
58: R47 Capital Structure (Details Narrative) HTML 163K
59: R48 Income Taxes (Details) HTML 27K
60: R49 Income Taxes (Details 1) HTML 45K
61: R50 Income Taxes (Details 2) HTML 45K
62: R51 Income Taxes (Details 3) HTML 61K
63: R52 Income Taxes (Details Narrative) HTML 35K
64: R53 Related Party Transactions (Details) HTML 30K
65: R54 Related Party Transactions (Details 1) HTML 36K
66: R55 Related Party Transactions (Details Narrative) HTML 88K
67: R56 Lines of Credit (Details) HTML 34K
68: R57 Lines of Credit (Details Narrative) HTML 49K
69: R58 Convertible Debt (Details) HTML 35K
70: R59 Convertible Debt (Details 1) HTML 32K
71: R60 Convertible Debt (Details 2) HTML 34K
72: R61 Convertible Debt (Details Narrative) HTML 203K
73: R62 Debt (Details) HTML 70K
74: R63 Debt (Details 1) HTML 47K
75: R64 Debt (Details Narrative) HTML 278K
76: R65 Leases (Details) HTML 39K
77: R66 Leases (Details 1) HTML 39K
78: R67 Leases (Details Narrative) HTML 38K
79: R68 Commitments and Contingencies (Details Narrative) HTML 34K
80: R69 Earnings Per Share (Details) HTML 43K
81: R70 Earnings Per Share (Details 1) HTML 29K
82: R71 Stock Options and Warrants (Details) HTML 51K
83: R72 Stock Options and Warrants (Details 1) HTML 54K
84: R73 Stock Options and Warrants (Details Narrative) HTML 49K
85: R74 Disaggregation of Revenue (Details) HTML 51K
86: R75 Subsequent Events (Details Narrative) HTML 47K
89: XML IDEA XML File -- Filing Summary XML 167K
87: XML XBRL Instance -- cosm_10ka_htm XML 2.37M
88: EXCEL IDEA Workbook of Financial Reports XLSX 225K
9: EX-101.CAL XBRL Calculations -- cosm-20211231_cal XML 150K
11: EX-101.DEF XBRL Definitions -- cosm-20211231_def XML 949K
8: EX-101.LAB XBRL Labels -- cosm-20211231_lab XML 1.56M
10: EX-101.PRE XBRL Presentations -- cosm-20211231_pre XML 1.29M
7: EX-101.SCH XBRL Schema -- cosm-20211231 XSD 341K
90: JSON XBRL Instance as JSON Data -- MetaLinks 507± 685K
91: ZIP XBRL Zipped Folder -- 0001477932-22-009347-xbrl Zip 335K
| Page | (sequential) | (alphabetic) | ↑Top | ||
|---|---|---|---|---|---|
| 1 | 1st Page – Filing Submission | ||||
| " | Table of Contents | ||||
| " | Item 8 | ||||
| " | Financial Statements and Supplementary Data | ||||
| " | Item 9A | ||||
| " | Controls and Procedures | ||||
| " | Part Iv | ||||
| " | Item 15 | ||||
| " | Exhibits and Financial Statements Schedules | ||||
| " | Item 16 | ||||
| " | Form 10-K Summary | ||||
| " | Signatures | ||||
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM i 10-K/A
i ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended i December 31, 2021
i ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from __________ to __________
Commission file number: i 000-54436
i COSMOS HOLDINGS INC. |
(Exact name of registrant as specified in its charter) |
i Nevada |
| i 27-0611758 |
(State or other jurisdiction of Company or organization) |
| (I.R.S. Employer Identification No.) |
| ||
i 141 West Jackson Blvd, i Suite 4236, i Chicago, i IL. |
| i 60604 |
(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number: ( i 312) i 536-3102
Securities registered under Section 12(b) of the Exchange Act:
Title of each class |
| Name of each exchange on which registered |
i Common Stock, par value $0.001 | The Nasdaq Capital Market |
Securities registered under Section 12(g) of the Exchange Act:
Title of each class |
| Name of each exchange on which registered |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ i No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ i No ☒
Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities 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. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 | ☐ |
i Non-accelerated Filer | ☐ | Smaller reporting company | i ☒ |
(Do not check if a smaller reporting company) | Emerging growth company | i ☐ | |
If an emerging growth company, indicate by checkmark 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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter $ i 42,371,783 as of June 30, 2021.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: i 17,544,524 as of April 15, 2022.
Explanatory Paragraph
i
This Amendment No. 1 to Form 10-K/A of Cosmos Holdings Inc., for the year ended December 31, 2021, is being filed in response to the Staff’s Comment Letter dated November 29, 2022. This Amendment solely includes Item 8 – Financial Statements and Supplementary Data, which has not been revised; Item 9A – Controls and Procedures, which has been revised to state a conclusive statement that controls were not effective as of December 31, 2021; and Part IV, which has been updated.
PART I | ||||||
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| F-1 | ||||
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| 3 | ||||
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| 5 | ||||
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| 13 | |||||
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| 14 | |||||
2 |
| Table of Contents |
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Cosmos Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cosmos Holdings, Inc. and its subsidiaries (collectively the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity (deficit), and cash flows, for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses and cash used in operations that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
| F-1 |
| Table of Contents |
Inventory Valuation — Refer to Note 1 to the Financial Statements
Critical Audit Matter Description
The Company computes inventory using the weighted average method and consists primarily of finished goods and packaging materials, i.e., packaged pharmaceutical products and the wrappers and containers they are sold in. The Company assesses inventory at each reporting date in order to assert that it valued at the lower-of-cost or net realizable value; and the estimation of excess, expired or obsolete inventory. Most of the Company’s inventory provisions are based on the Company’s inventory levels and forecasted demand as well as physical condition, expiration date and current market conditions. Most of the Company’s inventory items are eligible for return to suppliers when pre-agreed product requirements, including, but not limited to, physical condition and expiration date, are not met.
Significant judgment is exercised by the Company to determine inventory carrying value adjustments, specifically the provisions for excess or obsolete inventories, and includes the following:
| · | Developing assumptions such as forecasts of future sales quantities and the selling prices, which are sensitive to the competitiveness of product offerings, customer requirements, and product life cycles. |
Given these factors and assumptions are forward-looking and could be affected by future economic and market conditions, the related audit effort to evaluate management’s inventory valuation adjustments was extensive and required a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our principal audit procedures related to the Company’s inventory valuation methodology included the following:
| · | We selected a sample of inventory items and performed the following procedures: |
| o | Tested the mathematical accuracy of Company’s inventory schedule by comparing the quantities and carrying value of on-hand inventories to related unit sales, both historical and forecasted. |
| o | Assessed and tested the reasonableness of the significant assumptions (e.g., sales and marketing forecast and usage). |
| o | Inquired with operations team and evaluated the adequacy of management’s adjustments to sales forecasts by analyzing potential changes in line with product life cycles and/or identified alternative customer uses. |
| o | Assessed whether there were any potential sources of contrary information, including historical forecast accuracy or history of significant revisions to previously recorded inventory valuation adjustments, and performed sensitivity analyses over significant assumptions to evaluate the changes in inventory valuation that would result from changes in the assumptions. |
We have served as the Company’s auditor since 2019.
| /s/ Armanino LLP |
| |
| i San Francisco, California |
(PCAOB ID 000 i 32)
| F-2 |
| Table of Contents |
COSMOS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
|
| 2021 |
|
| 2020 |
| ||
|
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| ||
ASSETS |
|
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| ||
|
|
|
|
|
|
| ||
CURRENT ASSETS: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | i 286,487 |
|
| $ | i 628,395 |
|
Accounts receivable, net |
|
| i 26,858,114 |
|
|
| i 23,440,650 |
|
Accounts receivable - related party |
|
| i 2,901,300 |
|
|
| i 3,468,564 |
|
Marketable securities |
|
| i 6,696 |
|
|
| i 222,792 |
|
Inventory |
|
| i 3,147,276 |
|
|
| i 3,292,557 |
|
Loans receivable |
|
| i 377,590 |
|
|
| i - |
|
Prepaid expenses and other current assets |
|
| i 2,992,459 |
|
|
| i 5,148,441 |
|
Prepaid expenses and other current assets - related party |
|
| i 3,263,241 |
|
|
| i 3,468,653 |
|
Operating lease right-of-use asset |
|
| i 834,468 |
|
|
| i 833,763 |
|
Financing lease right-of-use asset |
|
| i 211,099 |
|
|
| i 269,131 |
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS |
|
| i 40,878,730 |
|
|
| i 40,772,946 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| i 1,880,659 |
|
|
| i 1,757,213 |
|
Goodwill and intangible assets, net |
|
| i 493,160 |
|
|
| i 230,506 |
|
Loans receivable - long term portion |
|
| i 4,410,689 |
|
|
| i - |
|
Other assets |
|
| i 915,250 |
|
|
| i 905,318 |
|
Deferred tax assets |
|
| i 850,774 |
|
|
| i 178,430 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
| $ | i 49,429,262 |
|
| $ | i 43,844,413 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
| $ | i 12,126,626 |
|
| $ | i 11,973,981 |
|
Accounts payable and accrued expenses - related party |
|
| i 599,125 |
|
|
| i 1,733 |
|
Accrued interest |
|
| i 1,019,889 |
|
|
| i 742,374 |
|
Lines of credit |
|
| i 4,743,557 |
|
|
| i 4,573,815 |
|
Convertible notes payable, net of unamortized discount of $ i 258,938 and $ i 494,973, respectively |
|
| i 381,062 |
|
|
| i 952,027 |
|
Derivative liability - convertible note |
|
| i 45,665 |
|
|
| i 460,728 |
|
Notes payable |
|
| i 5,462,504 |
|
|
| i 12,042,712 |
|
Notes payable - related party |
|
| i 464,264 |
|
|
| i 501,675 |
|
Loans payable |
|
| i 1,000,000 |
|
|
| i - |
|
Loans payable - related party |
|
| i 1,293,472 |
|
|
| i 1,629,246 |
|
Taxes payable |
|
| i 1,324,722 |
|
|
| i 760,446 |
|
Operating lease liability, current portion |
|
| i 138,450 |
|
|
| i 200,204 |
|
Financing lease liability, current portion |
|
| i 73,078 |
|
|
| i 89,926 |
|
Other current liabilities |
|
| i 1,255,824 |
|
|
| i 361,340 |
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES |
|
| i 29,928,238 |
|
|
| i 34,290,207 |
|
|
|
|
|
|
|
|
|
|
Share settled debt obligation |
|
| i 1,554,590 |
|
|
| i 1,554,590 |
|
Lines of credit - long-term portion |
|
| i 366,171 |
|
|
| i 502,869 |
|
Notes payable - long term portion |
|
| i 12,356,384 |
|
|
| i 10,771,882 |
|
Operating lease liability, net of current portion |
|
| i 696,015 |
|
|
| i 590,538 |
|
Financing lease liability, net of current portion |
|
| i 148,401 |
|
|
| i 188,172 |
|
Other liabilities |
|
| i - |
|
|
| i 107,168 |
|
TOTAL LIABILITIES |
|
| i 45,049,799 |
|
|
| i 48,005,426 |
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (see Note 13) |
|
| i - |
|
|
| i - |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT): |
|
|
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|
|
Preferred stock, $ i 0.001 par value; i 100,000,000 shares authorized; i 0 shares issued and outstanding as of December 31, 2021 and 2020 |
|
| i - |
|
|
| i - |
|
Common stock, $ i 0.001 par value; i 300,000,000 shares authorized; i 17,544,509 and i 13,485,128 shares issued and i 17,157,085 and i 13,069,800 outstanding as of December 31, 2021 and 2020, respectively |
|
| i 17,544 |
|
|
| i 13,484 |
|
Additional paid-in capital |
|
| i 39,675,753 |
|
|
| i 14,333,285 |
|
Treasury stock, i 387,424 and i 415,328 shares as of December 31, 2021 and 2020, respectively |
|
| ( i 816,707 | ) |
|
| ( i 611,854 | ) |
Accumulated deficit |
|
| ( i 34,345,506 | ) |
|
| ( i 18,750,824 | ) |
Accumulated other comprehensive (loss) income |
|
| ( i 151,621 | ) |
|
| i 854,896 |
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) |
|
| i 4,379,463 |
|
|
| ( i 4,161,013 | ) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
| $ | i 49,429,262 |
|
| $ | i 43,844,413 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
COSMOS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
|
| Years Ended December 31, |
| |||||
|
| 2021 |
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| 2020 |
| ||
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|
|
|
| ||
REVENUE |
| $ | i 56,239,667 |
|
| $ | i 55,406,337 |
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD |
|
| i 47,909,180 |
|
|
| i 47,345,957 |
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
| i 8,330,487 |
|
|
| i 8,060,380 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
General and administrative expenses |
|
| i 9,208,701 |
|
|
| i 2,102,869 |
|
Salaries and wages |
|
| i 2,472,953 |
|
|
| i 2,082,453 |
|
Sales and marketing expenses |
|
| i 732,545 |
|
|
| i 763,170 |
|
Depreciation and amortization expense |
|
| i 449,692 |
|
|
| i 397,595 |
|
TOTAL OPERATING EXPENSES |
|
| i 12,863,891 |
|
|
| i 5,346,087 |
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS |
|
| ( i 4,533,404 | ) |
|
| i 2,714,293 |
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
Other income (expense), net |
|
| ( i 88,882 | ) |
|
| i 4,571 |
|
Interest expense |
|
| ( i 2,823,842 | ) |
|
| ( i 2,761,004 | ) |
Interest income |
|
| i 46,316 |
|
|
| i 65,865 |
|
Non-cash interest expense |
|
| ( i 757,021 | ) |
|
| ( i 34,106 | ) |
Gain (loss) on equity investments, net |
|
| i 2,541 |
|
|
| ( i 34,443 | ) |
Gain on extinguishment of debt |
|
| i 606,667 |
|
|
| i 942,029 |
|
Change in fair value of derivative liability |
|
| i 193,513 |
|
|
| ( i 4,158 | ) |
Foreign currency transaction, net |
|
| ( i 493,527 | ) |
|
| i 305,274 |
|
TOTAL OTHER EXPENSE, NET |
|
| ( i 3,314,235 | ) |
|
| ( i 1,515,972 | ) |
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
| ( i 7,847,639 | ) |
|
| i 1,198,321 |
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAXES |
|
| ( i 114,010 | ) |
|
| ( i 377,535 | ) |
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
| ( i 7,961,649 | ) |
|
| i 820,786 |
|
|
|
|
|
|
|
|
|
|
Deemed dividend on warrants |
|
| ( i 7,633,033 | ) |
|
| i - |
|
|
|
|
|
|
|
|
|
|
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS |
|
| ( i 15,594,682 | ) |
|
| i 820,786 |
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME(LOSS) |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net |
|
| ( i 1,006,517 | ) |
|
| i 871,235 |
|
|
|
|
|
|
|
|
|
|
TOTAL COMPREHENSIVE INCOME (LOSS) |
| $ | ( i 16,601,199 | ) |
| $ | i 1,692,021 |
|
|
|
|
|
|
|
|
|
|
BASIC NET INCOME (LOSS) PER SHARE |
| $ | ( i 0.95 | ) |
| $ | i 0.06 |
|
DILUTED NET INCOME (LOSS) PER SHARE |
| $ | ( i 0.95 | ) |
| $ | i 0.06 |
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
Basic |
|
| i 16,423,335 |
|
|
| i 13,270,097 |
|
Diluted |
|
| i 16,423,335 |
|
|
| i 13,307,794 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
COSMOS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
|
| Common Stock |
|
| Additional Paid-in |
|
| Treasury Stock |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
| Total Stockholders' Equity |
| ||||||||||||||
|
| No. of Shares |
|
| Amount |
|
| Capital |
|
| No. of Shares |
|
| Amount |
|
| Deficit |
|
| Income (Loss) |
|
| (Deficit) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at January 1, 2020 |
|
| i 13,225,387 |
|
| $ | i 13,225 |
|
| $ | i 13,525,749 |
|
|
| ( i 365,328 | ) |
| $ | ( i 411,854 | ) |
| $ | ( i 19,571,610 | ) |
| $ | ( i 16,339 | ) |
| $ | ( i 6,460,829 | ) |
Foreign currency translation adjustment, net |
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| i 871,235 |
|
|
| i 871,235 |
|
Conversion of note payable into shares of common stock |
|
| i 259,741 |
|
|
| i 259 |
|
|
| i 807,536 |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| i - |
|
|
| i 807,795 |
|
Purchase of treasury stock from third party |
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| ( i 50,000 | ) |
|
| ( i 200,000 | ) |
|
| i - |
|
|
| i - |
|
|
| ( i 200,000 | ) |
Net income |
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i 820,786 |
|
|
| i - |
|
|
| i 820,786 |
|
Balance at December 31, 2020 |
|
| i 13,485,128 |
|
|
| i 13,484 |
|
|
| i 14,333,285 |
|
|
| ( i 415,328 | ) |
|
| ( i 611,854 | ) |
|
| ( i 18,750,824 | ) |
|
| i 854,896 |
|
|
| ( i 4,161,013 | ) |
Foreign currency translation adjustment, net |
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| ( i 1,006,517 | ) |
|
| ( i 1,006,517 | ) |
Conversions of convertible note payable |
|
| i 213,382 |
|
|
| i 214 |
|
|
| i 958,811 |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| i - |
|
|
| i 959,025 |
|
Conversion of notes payable into shares of common stock |
|
| i 1,103,119 |
|
|
| i 1,103 |
|
|
| i 3,877,377 |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| i - |
|
|
| i 3,878,480 |
|
Conversion of related party debt |
|
| i 1,000,000 |
|
|
| i 1,000 |
|
|
| i 5,999,000 |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| i - |
|
|
| i 6,000,000 |
|
Beneficial conversion feature discount related to convertible notes payable |
|
| - |
|
|
| i - |
|
|
| i 294,000 |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| i - |
|
|
| i 294,000 |
|
Forgiveness of related party debt |
|
| - |
|
|
| i - |
|
|
| i 600,000 |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| i - |
|
|
| i 600,000 |
|
Restricted stock issued to a consultant |
|
| i 1,800,000 |
|
|
| i 1,800 |
|
|
| i 5,902,200 |
|
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| i - |
|
|
| i 5,904,000 |
|
Sale of treasury stock to third party |
|
| - |
|
|
| i - |
|
|
| i 249,350 |
|
|
| i 65,000 |
|
|
| i 650 |
|
|
| i - |
|
|
| i - |
|
|
| i 250,000 |
|
Cancellation of treasury shares |
|
| ( i 57,120 | ) |
|
| ( i 57 | ) |
|
| ( i 171,303 | ) |
|
| i 57,120 |
|
|
| i 171,360 |
|
|
| i - |
|
|
| i - |
|
|
| i - |
|
Purchase of treasury stock from third party |
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| ( i 94,216 | ) |
|
| ( i 376,863 | ) |
|
|
|
|
|
|
|
|
|
| ( i 376,863 | ) |
Deemed dividend on warrants |
|
| - |
|
|
| i - |
|
|
| i 7,633,033 |
|
|
| - |
|
|
| i - |
|
|
| ( i 7,633,033 | ) |
|
| i - |
|
|
| - |
|
Net loss |
|
| - |
|
|
| i - |
|
|
| i - |
|
|
| - |
|
|
| i - |
|
|
| ( i 7,961,649 | ) |
|
| i - |
|
|
| ( i 7,961,649 | ) |
Balance at December 31, 2021 |
|
| i 17,544,509 |
|
| $ | i 17,544 |
|
| $ | i 39,675,753 |
|
|
| ( i 387,424 | ) |
| $ | ( i 816,707 | ) |
| $ | ( i 34,345,506 | ) |
| $ | ( i 151,621 | ) |
| $ | i 4,379,463 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
COSMOS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Years Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | ( i 7,961,649 | ) |
| $ | i 820,786 |
|
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
| i 352,422 |
|
|
| i 274,062 |
|
Amortization of right-of-use assets |
|
| i 97,270 |
|
|
| i 123,533 |
|
Amortization of debt discounts and accretion of debt |
|
| i 757,021 |
|
|
| i 34,105 |
|
Bad debt expense |
|
| i 1,087,339 |
|
|
| i 96,237 |
|
Write-off of investment |
|
| i 211,047 |
|
|
| i - |
|
Lease expense |
|
| i 260,663 |
|
|
| i 188,400 |
|
Interest on finance leases |
|
| i 11,576 |
|
|
| i 13,759 |
|
Stock-based compensation |
|
| i 5,904,000 |
|
|
| i - |
|
Deferred income taxes |
|
| ( i 714,108 | ) |
|
| ( i 178,430 | ) |
Gain on extinguishment of debt |
|
| ( i 606,667 | ) |
|
| ( i 942,029 | ) |
Change in fair value of the derivative liability |
|
| ( i 193,513 | ) |
|
| i 4,158 |
|
(Gain) loss on change in fair value of equity investments |
|
| ( i 2,541 | ) |
|
| i 34,443 |
|
Changes in Assets and Liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| ( i 6,256,072 | ) |
|
| ( i 14,514,183 | ) |
Accounts receivable - related party |
|
| i 463,504 |
|
|
| ( i 1,299,818 | ) |
Inventory |
|
| ( i 89,582 | ) |
|
| i 393,154 |
|
Prepaid expenses and other current assets |
|
| ( i 3,109,941 | ) |
|
| ( i 3,332,839 | ) |
Prepaid expenses and other current assets - related party |
|
| ( i 55,657 | ) |
|
| i 2,800,862 |
|
Loan receivable |
|
| ( i 2,663,676 | ) |
|
| i - |
|
Other assets |
|
| i 23,294 |
|
|
| ( i 131,700 | ) |
Accounts payable and accrued expenses |
|
| i 3,199,770 |
|
| i 3,448,613 |
| |
Accounts payable and accrued expenses - related party |
|
| i 624,349 |
|
|
| ( i 240,189 | ) |
Accrued interest |
|
| i 292,392 |
|
|
| i 654,297 |
|
Lease liabilities |
|
| ( i 231,900 | ) |
|
| ( i 217,210 | ) |
Taxes payable |
|
| i 622,047 |
|
|
| i 584,507 |
|
Other current liabilities |
|
| i 1,005,685 |
|
|
| ( i 56,776 | ) |
Other liabilities |
|
| ( i 124,247 | ) |
|
| ( i 59,460 | ) |
NET CASH USED IN OPERATING ACTIVITIES |
|
| ( i 7,097,174 | ) |
|
| ( i 11,501,718 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from loan receivable |
|
| i 63,699 |
|
|
| i - |
|
Purchase of property and equipment |
|
| ( i 581,398 | ) |
|
| ( i 117,744 | ) |
Purchase of licenses |
|
| ( i 309,118 | ) |
|
| i - |
|
NET CASH USED IN INVESTING ACTIVITIES |
|
| ( i 826,817 | ) |
|
| ( i 117,744 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Payment of convertible note payable |
|
| ( i 907,000 | ) |
|
| ( i 593,000 | ) |
Proceeds from convertible note payable |
|
| i 600,000 |
|
|
| i 497,000 |
|
Payment of related party note payable |
|
| i - |
|
|
| ( i 996,136 | ) |
Payment of note payable |
|
| ( i 512,561 | ) |
|
| ( i 5,230,725 | ) |
Proceeds from note payable |
|
| i 591,500 |
|
|
| i 16,556,710 |
|
Payment of related party loan |
|
| ( i 139,594 | ) |
|
| ( i 149,695 | ) |
Proceeds from related party loan |
|
| i 7,424,164 |
|
|
| i 721,723 |
|
Payment of lines of credit |
|
| ( i 24,006,784 | ) |
|
| ( i 18,428,823 | ) |
Proceeds from lines of credit |
|
| i 24,437,020 |
|
|
| i 20,369,291 |
|
Payments of finance lease liability |
|
| ( i 92,105 | ) |
|
| ( i 85,804 | ) |
Purchase of treasury stock |
|
| ( i 376,863 | ) |
|
| ( i 200,000 | ) |
Proceeds from sale of treasury stock |
|
| i 250,000 |
|
|
| i - |
|
NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
| i 7,267,777 |
|
|
| i 12,460,541 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
| i 314,306 |
|
|
| ( i 251,221 | ) |
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH |
|
| ( i 341,908 | ) |
|
| i 589,858 |
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF YEAR |
|
| i 628,395 |
|
|
| i 38,537 |
|
CASH AT END OF YEAR |
| $ | i 286,487 |
|
| $ | i 628,395 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period: |
|
|
|
|
|
|
|
|
Interest |
| $ | i 2,059,305 |
|
| $ | i 955,376 |
|
Income tax |
| $ | i - |
|
| $ | i 14,127 |
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation of treasury shares |
| $ | i 171,360 |
|
| $ | i - |
|
Discounts related to beneficial conversion features of convertible debentures |
| $ | i 294,000 |
|
| $ | i - |
|
Conversion of convertible notes payable to common stock |
| $ | i 649,711 |
|
| $ | i - |
|
Conversion of notes payable to common stock |
| $ | i 3,878,480 |
|
| $ | i 807,795 |
|
Conversion of loans payable related party to common stock |
| $ | i 6,600,000 |
|
| $ | i - |
|
Conversion of derivative liability to additional paid-in capital |
| $ | i 284,169 |
|
| $ | i - |
|
Deemed dividend on warrants upon conversion of convertible debt |
| $ | i 7,633,033 |
|
| $ | i - |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
i
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Cosmos Holdings Inc. (“us”, “we”, or the “Company”) is an international pharmaceutical company publicly traded 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 distribution of pharmaceutical 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, i 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
i
The Company’s 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 year ended December 31, 2021, the Company had revenue of $ i 56,239,667, net loss of $ i 7,961,649 and net cash used in operations of $ i 7,097,174. Additionally, as of December 31, 2021, the Company had working capital of $ i 10,950,492, an accumulated deficit of $ i 34,345,506, and stockholders’ equity of $ i 4,379,463. 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.
The 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.
/
| F-7 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Summary of Significant Accounting Policies
Our 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.
Basis of Financial Statement Presentation
i
The accompanying consolidated financial statements have been prepared in accordance with principles generally accepted in the United States of America.
Principles of Consolidation
i
Our 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
i
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles 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
i
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 Annual Report on Form 10-K. 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.
Foreign Currency Translation and Other Comprehensive Income (Loss)
i
The functional currency of the Company’s subsidiaries is the Euro and British Pound. For financial reporting purposes, both the Euro (“EUR”) and British Pound (“GBP”) have been translated into United States dollars ($) and/or (“USD”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss)”. Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive loss as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of EUR or GBP to USD after the balance sheet date.
Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included in the consolidated results of operations as incurred.
As of December 31, 2021 and 2020, the exchange rates used to translate amounts in Euros into USD and British Pounds into USD for the purposes of preparing the consolidated financial statements were as follows:
i
|
| 2021 |
|
| 2020 |
| ||
Exchange rate on balance sheet dates |
|
|
|
|
|
| ||
EUR: USD exchange rate |
|
| i 1.1318 |
|
|
| i 1.2230 |
|
GBP: USD exchange rate |
|
| i 1.3500 |
|
|
| i 1.3662 |
|
|
|
|
|
|
|
|
|
|
Average exchange rate for the period |
|
|
|
|
|
|
|
|
EUR: USD exchange rate |
|
| i 1.1830 |
|
|
| i 1.1410 |
|
GBP: USD exchange rate |
|
| i 1.3764 |
|
|
| i 1.2829 |
|
| F-8 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Cash and Cash Equivalents
i
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 December 31, 2021 and December 31, 2020, there were no cash equivalents.
The Company maintains bank accounts in the United States denominated in U.S. Dollars and in Greece and in Bulgaria all of which are denominated in Euros. Additionally, the Company maintains a bank account in the United Kingdom denominated in British Pounds. As of December 31, 2021, the amounts in these accounts were $ i 144,489, $ i 101,589 and $ i 4,061. As of December 31, 2020, the amounts in these accounts were $ i 448,659, $ i 134,935 and $ i 1,651. Additionally, as of December 31, 2021 and 2020, the Company had cash on hand in the amount of $ i 25,773 and $ i 31,604, respectively.
/
Reclassifications to Prior Period Financial Statements and Adjustments
i
Certain reclassifications have been made in the Company’s financial statements of the prior period to conform to the current year presentation. $ i 22,340 in customer deposits as of December 31, 2020, has been reclassified to other current liabilities and $ i 502,869 was reclassified from lines of credit to lines of credit – long-term portion on the consolidated balance sheet. For the year ending December 31, 2020, $ i 2,082,453 was reclassified from general and administrative expenses to salaries and wages on the consolidated statements of operations and comprehensive income. For the year ended December 31, 2020, $ i 230,505 was reclassified from customer deposits to other current liabilities and $ i 96,237 in bad debt expenses was reclassified from accounts receivable on the consolidated statement of cash flows. These reclassifications have no impact on previously reported net income.
/
Accounts Receivable, net
i
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 December 31, 2021 and 2020, the Company’s allowance for doubtful accounts was $ i 1,702,743 and $ i 715,845, respectively.
/
Tax Receivables
i
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 consolidated balance sheets. As of December 31, 2021 and 2020, the Company had a VAT net payable balance of $ i 400,616 and $ i 159,198 respectively, recorded in the consolidated balance sheet as accounts payable and accrued expenses.
/
Inventory
i
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 i 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.
/
| F-9 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Property and Equipment, net
i
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:
i
| Estimated Useful Life | |||
Leasehold improvements and technical works |
| i Lesser of lease term or 40 years | ||
Vehicles |
| i 6 years | ||
Machinery |
| i 20 years | ||
Furniture, fixtures and equipment |
| i 5– i 10 years |
| |
Computers and software |
| i 3- i 5 years | ||
Depreciation expense was $ i 319,337 and $ i 240,886 for the years ended December 31, 2021 and 2020, respectively.
/
Impairment of Long-Lived Assets
i
In accordance with ASC 360-10, long-lived assets, which include 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. For the years ended December 31, 2021 and 2020, the Company had no impairment of long-lived assets.
Goodwill and Intangibles, net
i
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.
| F-10 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
On December 19, 2018, as a result of the acquisition of Cosmofarm, the Company recorded $ i 49,697 of goodwill.
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 i 5 years for an import/export 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 December 31, 2021, no revision to the remaining amortization period of the intangible assets was made.
Amortization expense was $ i 33,085 and $ i 33,176 for the years ended December 31, 2021 and 2020, respectively.
Equity Method Investment
i
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 records its share in the earnings of the investee and is included in “Equity earnings of affiliate” in the 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
i
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 December 31, 2021, investments consisted of i 3,000,000 shares, which traded at a closing price of $ i 0 per share or a value of $ i 0 of ICC International Cannabis Corp., i 16,666 shares which traded at a closing price of $ i 0.40 per share or value of $ i 6,696 of National Bank of Greece. Additionally, the Company has $ i 4,416 in equity securities of Pancreta bank, which are not publicly traded and recorded at cost. As of December 31, 2020, investments consisted of i 3,000,000 shares, which traded at a closing price of $ i 0 per share or a value of $ i 0 of ICC International Cannabis Corp., i 40,000 shares which traded at a closing price of $ i 5.45 per share, or value of $ i 218,183 of Diversa S.A. and i 16,666 shares which traded at a closing price of $ i 0.28 per share or value of $ i 4,609 of National Bank of Greece. Additionally, the Company had $ i 4,772 in equity securities of Pancreta bank, which are not publicly traded and recorded at cost. See Note 2, for additional investments in equity securities.
/
Fair Value Measurement
i
The Company applies FASB 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.
| F-11 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
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.
The following table presents assets that are measured and recognized at fair value as of December 31, 2021 and 2020, on a recurring basis:
|
|
|
| Total Carrying |
| |||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Marketable securities – ICC International Cannabis Corp. |
| $ | i - |
|
|
| i - |
|
|
| i - |
|
| $ | i - |
|
Marketable securities – Diversa S.A. |
|
| i - |
|
|
| i - |
|
|
| i - |
|
|
| i - |
|
Marketable securities – National Bank of Greece |
|
| i 6,696 |
|
|
| i - |
|
|
| i - |
|
|
| i 6,696 |
|
|
| $ | i 6,696 |
|
|
|
|
|
|
|
|
|
| $ | i 6,696 |
|
|
|
|
| Total Carrying |
| |||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Marketable securities – ICC International Cannabis Corp. |
| $ | i - |
|
|
| i - |
|
|
| i - |
|
| $ | i - |
|
Marketable securities – Diversa S.A. |
|
| i 218,183 |
|
|
| i - |
|
|
| i - |
|
|
| i 218,183 |
|
Marketable securities – National Bank of Greece |
|
| i 4,609 |
|
|
| i - |
|
|
| i - |
|
|
| i 4,609 |
|
|
| $ | i 222,792 |
|
|
|
|
|
|
|
|
|
| $ | i 222,792 |
|
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
i
Derivative financial instruments are recorded in the accompanying 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.
| F-12 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Customer Advances
i
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.
Revenue Recognition
i
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 delivery of the product.
Stock-based Compensation
i
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 Translations and Transactions
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 earnings.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash investments and accounts receivable.
The following tables show the number of the Company’s clients which contributed 10% or more of revenue and accounts receivable, respectively:
| F-13 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
|
| Year Ended December 31, |
|
| Year Ended |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Number of 10% clients |
|
| i 1 |
|
|
| i 1 |
|
Percentage of total revenue |
|
| i 15.33 | % |
|
| i 14.82 | % |
Percentage of total AR |
|
| i 35.08 | % |
|
| i 14.65 | % |
Income Taxes
i
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 i 22% in Greece and i 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 December 31, 2021 and 2020, the Company has maintained a valuation allowance against all net deferred tax assets in each jurisdiction in which it is subject to income tax.
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
i
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. i 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 judgements 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. The amount of the liability as of December 31, 2021 and December 31, 2020, was $ i 0 and $ i 107,167, respectively, and has been recorded as a long-term liability within the consolidated balance sheets.
/
Basic and Diluted Net Income (Loss) per Common Share
i
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.
| F-14 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
|
| Years Ended December 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Weighted average number of common shares outstanding Basic |
|
| i 16,423,335 |
|
|
| i 13,270,097 |
|
Potentially dilutive common stock equivalents |
|
| - |
|
|
| i 37,698 |
|
Weighted average number of common and equivalent shares outstanding – Diluted |
|
| i 16,423,335 |
|
|
| i 13,307,795 |
|
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
i
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.
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.
i
NOTE 2 –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.
| F-15 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
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 ( i 5) years of the agreement. The transaction closed on May 22, 2018, after the due diligence period, following which the Company received: (a) i 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 $ i 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 $ i 2,750,000 upon the Company’s receipt of gross sales of CAD $ i 6,500,000 and an additional CAD $ i 2,750,000 upon receipt of gross sales of CAD $ i 13,000,000. The Company was also given the right to nominate one director to the Marathon board of directors.
Marathon is an entity with no assets and no activity, the Company attributed no value to the i 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 i 2.5 million shares in Marathon to ICC, a Company incorporated under the laws of the Province of British Columbia and a public reporting issuer on the Canadian Securities Exchange, in exchange for i 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 $ i 1,953,000 included in “Gains on exchange of equity investments” in the consolidated statements of operations.
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 ( i 2.5 million shares) in Marathon to KBB for an additional i 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 $ i 2,092,200 in the year ended December 31, 2018. i 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.
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 year ended December 31, 2021 of $ i 0. The value of the investments as of December 31, 2021 and December 31, 2020, was $ i 0 and $ i 0, respectively.
i 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 11 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 years ended December 31, 2021 and 2020. 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 December 31, 2020, in addition to the i 3,000,000 ICC shares valued at $ i 0, as noted above, marketable securities also consisted of the following: i 40,000 shares which traded at a closing price of $ i 5.45 per share, or value of $ i 218,183 of Diversa S.A. and i 16,666 shares which traded at a closing price of $ i 0.28 per share or value of $ i 4,609 of National Bank of Greece. The Company recorded a net unrealized loss on the fair value of these investments of $ i 2,246 during the year ended December 31, 2020.
| F-16 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
As of December 31, 2021, in addition to the i 3,000,000 ICC shares valued at $ i 0, as noted above, marketable securities also consisted of the following: i 16,666 shares, which traded at a closing price of $ i 0.40 per share or value of $ i 6,696, of National Bank of Greece. The Company recorded a net unrealized gain on the fair value of these investments of $ i 2,541 during the year ended December 31, 2021 and a realized loss of $ i 211,047 related to the write off of the Diversa S.A. shares that were delisted.
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 i 150,000 which was later increased to EUR i 500,000. The GP contributed the pharmacy license (the “License”) valued at EUR i 350,000 ( i 30-year term) to operate the business of CosmoFarmacy in exchange for a i 70% equity ownership. The Company is a limited partner and contributed cash of EUR i 150,000 for the remaining i 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 December 31, 2021 and 2020, was $ i 169,770 and $ i 183,450, respectively, and is included in “Other assets” on the Company’s consolidated balance sheet.
i
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following at December 31,:
i
|
| 2021 |
|
| 2020 |
| ||
Leasehold improvements |
| $ | i 519,278 |
|
| $ | i 560,711 |
|
Vehicles |
|
| i 96,657 |
|
|
| i 105,057 |
|
Furniture, fixtures and equipment |
|
| i 2,065,100 |
|
|
| i 1,632,654 |
|
Computers and software |
|
| i 141,490 |
|
|
| i 149,005 |
|
|
|
| i 2,822,525 |
|
|
| i 2,447,427 |
|
Less: Accumulated depreciation and amortization |
|
| ( i 941,866 | ) |
|
| ( i 690,214 | ) |
Total |
| $ | i 1,880,659 |
|
| $ | i 1,757,213 |
|
i
NOTE 4 – GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible, net assets consist of the following at December 31,:
i
|
| 2021 |
|
| 2020 |
| ||
License |
| $ | i 345,739 |
|
| $ | i 50,000 |
|
Trade name /mark |
|
| i 36,997 |
|
|
| i 36,997 |
|
Customer base |
|
| i 176,793 |
|
|
| i 176,793 |
|
|
|
| i 559,529 |
|
|
| i 263,790 |
|
Less: Accumulated amortization |
|
| ( i 116,066 | ) |
|
| ( i 82,981 | ) |
Subtotal |
|
| i 443,463 |
|
|
| i 180,809 |
|
Goodwill |
|
| i 49,697 |
|
|
| i 49,697 |
|
Total |
| $ | i 493,160 |
|
| $ | i 230,506 |
|
| F-17 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
i
NOTE 5 – 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 ($ i 4,849,221) in prepayments the Company had made. Interest is calculated at a rate of i 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. During the year ended December 31, 2021, the Company received €53,845 ($ i 60,942) in principal payments. As of December 31, 2021, the Company has a short-term receivable balance of $ i 377,590 and a long-term receivable balance of $ i 4,410,689 under this loan.
/i
NOTE 6 – CAPITAL STRUCTURE
Preferred Stock
The Company is authorized to issue 100 million shares of preferred stock, which have liquidation preference over the common stock and are non-voting. As of December 31, 2021, and 2020, no 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 multiplying 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.
Common Stock
The Company is authorized to issue i 300 million shares of common stock. As of December 31, 2021 and 2020, the Company had i 17,544,509 and i 13,485,128 shares of our common stock issued, respectively, and i 17,157,085 and i 13,069,800 shares outstanding, respectively.
Sale of Treasury Shares
On February 5, 2021, the Company entered into a Stock Purchase Agreement (the “February SPA”) with an unaffiliated third-party. The February SPA provides for the Company’s to sell i 65,000 shares of the Company’s common stock held in treasury at $ i 3.85 per share or a total of $ i 250,000.
/
| F-18 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Cancellation of Treasury Shares
On September 15, 2021, the Company cancelled i 57,120 shares of common stock valued at $ i 171,360 that were held in Treasury.
Purchase of Treasury Shares
On July 31, 2020, the Company entered into a Stock Purchase Agreement (the “July SPA”) with a shareholder. The July SPA provides for the Company’s purchase of i 10,000 shares of the Company’s common stock at $ i 4.00 per share or an aggregate of $ i 40,000. During the year ended December 31, 2020, the Company made $ i 40,000 in payments.
On August 31, 2020, the Company entered into two Stock Purchase Agreements (the “August SPAs”) with a shareholder. The August SPAs provide for the Company’s purchase of an aggregate total of i 10,000 shares of the Company’s common stock at $ i 4.00 per share or an aggregate of $ i 40,000. During the year ended December 31, 2020, the Company made $ i 40,000 in payments.
On September 30, 2020, the Company entered into a Stock Purchase Agreement (the “September SPA”) with a shareholder. The September SPA provides for the Company’s purchase of i 10,000 shares of the Company’s common stock at $ i 4.00 per share or an aggregate of $ i 40,000. During the year ended December 31, 2020, the Company made $ i 40,000 in payments.
On October 31, 2020, the Company entered into a Stock Purchase Agreement (the “October SPA”) with a shareholder. The October SPA provides for the Company’s purchase of i 10,000 shares of the Company’s common stock at $ i 4.00 per share or an aggregate of $ i 40,000. During the year ended December 31, 2020, the Company made $ i 40,000 in payments.
On November 30, 2020, the Company entered into a Stock Purchase Agreement (the “November SPA”) with a shareholder. The November SPA provides for the Company’s purchase of i 10,000 shares of the Company’s common stock at $ i 4.00 per share or an aggregate of $ i 40,000. During the year ended December 31, 2020, the Company made $ i 40,000 in payments.
On December 29, 2021, the Company entered into a Stock Purchase Agreement (the “December SPA”) with a shareholder. The December SPA provides for the Company’s purchase of i 94,216 shares of the Company’s common stock at $ i 4.00 per share or an aggregate of $ i 376,863.
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 i 1,800,000 restricted shares of Common Stock, earned at the rate of i 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 $ i 3.28 per share or $5,904,000, which was be amortized over the term of the agreement. As of December 31, 2021, the Company has recorded $ i 5,904,000 in stock-based compensation for the i 1,800,000 shares earned.
| F-19 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
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 i 781,819 shares of common stock (the “Exchange Shares”), at the rate of $ i 3.85 per share, in exchange for an aggregate of $ i 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 $ i 3.28 per share and the Company recorded a gain on debt extinguishment of $ i 445,636 during the year ended December 31, 2021. As of December 31, 2021, the Company recorded $ i 2,564,363 as an equity increase related to the extinguishment of debt.
On June 23, 2021, the Company entered into a Debt Exchange Agreement (the “June Debt Exchange Agreement”) to exchange various loans with Greg Siokas (See Note 8), in the aggregate principal amount of $ i 3,000,000 (the “Debt”). The Company agreed to issue the Lender shares of common stock of the Company at an exchange rate of $ i 6.00 per share (the “Exchange Shares”) in exchange for the principal amount of Debt of $ i 3,000,000 or i 500,000 shares of common stock. On June 23, 2021, the fair value of the Company’s shares of common stock was $ i 5.00 per share. For the year ended December 31, 2021, the Company recorded $ i 3,000,000 as an increase in equity in accordance with ASC 850-10-20 due to the related party relationship and ASC 470-50-40-2, which provides guidance on extinguishments of related party debt. Accordingly, extinguishment transactions between related entities are in essence capital transaction, and no gain is recorded in the consolidated statements of operations for the difference between the fair value of $5.00 per share and the exchange rate of $ i 6.00 per share.
On July 13, 2021, the Company entered into a Debt Exchange Agreement (the “July 13 Agreement”) with Grigorios Siokas, the Company’s Chief Executive Officer (See Note 8). The July 13 Agreement provided for the issuance by the Company of 166,667 shares of common stock, at the rate of $6.00 per share, or an aggregate of $1,000,000, in exchange for $1,000,000 of existing loans by Mr. Siokas to the Company. On July 13, 2021, the fair value of the Company’s shares of common stock was $4.03 per share. For the year ended December 31, 2021, the Company recorded $1,000,000 as an increase in equity in accordance with ASC 850-10-20 due to the related party relationship and ASC 470-50-40-2, which provides guidance on extinguishments of related party debt. Accordingly, extinguishment transactions between related entities are in essence capital transaction, and no gain is recorded in the consolidated statements of operations for the difference between the fair value of $4.03 per share and the exchange rate of $6.00 per share.
On July 19, 2021, the Company entered into a Debt Exchange Agreement (the “July 19 Agreement”) with Grigorios Siokas, the Company’s Chief Executive Officer (See Note 8). The July 19 Agreement provided for the issuance by the Company of i 208,333 shares of common stock, at the rate of $6.00 per share, or an aggregate of $ i 1,250,000, in exchange for $1,250,000 of existing loans by Mr. Siokas to the Company. On July 19, 2021, the fair value of the Company’s shares of common stock was $ i 4.30 per share. For the year ended December 31, 2021, the Company recorded $ i 1,250,000 as an increase in equity in accordance with ASC 850-10-20 due to the related party relationship and ASC 470-50-40-2 which provides guidance on extinguishments of related party debt. Accordingly, extinguishment transactions between related entities are in essence capital transaction, and no gain is recorded in the consolidated statements of operations for the difference between the fair value of $4.30 per share and the exchange rate of $6.00 per share.
On August 4, 2021, the Company entered into a Debt Exchange Agreement (the “August 4 Agreement”) with a senior institutional lender (the “Lender”), SkyPharm S.A., a wholly-owned Greek subsidiary of the Company, and Grigorios Siokas, the Company’s Chief Executive Officer, as Guarantor. The parties to the Agreement had entered into a senior loan, as amended, as of June 30, 2020 (the “Loan”) pursuant to which the Loan had been reduced to EUR 2,700,000 ($3,302,100) (the “Debt”). The August 4 Agreement provides for the issuance by the Company of 321,300 shares of common stock (the “Exchange Shares”), at the rate of $5.00 per share, in exchange for the repayment of $ i 1,606,500 (€1,350,000) principal amount effective upon the closing of the Agreement and 238,000 shares at an exchange rate of $ i 5.00 per share, or at market value if the price is above $ i 5.00 per share, upon listing of the Company’s common stock on Nasdaq in exchange for €1,000,000 of the Debt. On August 4, 2021, the fair value of the Company’s shares of common stock was $4.09 per share. For the year ending December 31, 2021, the Company recorded a gain on the settlement of debt in the amount of $292,383 in the consolidated statements of operations for the difference between the fair value of $ i 4.09 per share and the exchange rate of $5.00 per share. As of December 31, 2021, the Company recorded $ i 1,314,117 as an increase in equity related to the extinguishment of debt.
| F-20 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
On December 8, 2021, the Company entered into a Debt Exchange Agreement (the “December 8 Agreement”) with the Company’s Chief Executive Officer (See Note 8). The December 8 Agreement provided for the issuance by the Company of 125,000 shares of common stock, at the rate of $6.00 per share, or an aggregate of $750,000, in exchange for $750,000 of existing loans by Mr. Siokas to the Company. On December 8, 2021, the fair value of the Company’s shares of common stock was $3.44 per share. For the year ended December 31, 2021, the Company recorded $750,000 as a capital contribution and an increase in equity in accordance with ASC 850-10-20 due to the related party relationship and ASC 470-50-40-2 which provides guidance on extinguishments of related party debt. Accordingly, extinguishment transactions between related entities are in essence capital transaction, and no gain is recorded in the consolidated statements of operations for the difference between the fair value of $3.44 per share and the exchange rate of $6.00 per share.
Debt Conversions
During the year ended December 31, 2021, the Company issued i 213,382 shares of common stock to convert $ i 550,144 of principal and accrued interest in accordance with a convertible promissory note issued to Platinum (as defined in Note 10). The Company recorded $ i 959,025 as a capital contribution and an increase in equity related to the conversion of $ i 550,144 of debt, $ i 284,169 for the reduction of the derivative liability recorded as additional paid-in capital, and $ i 124,711 recorded as a loss on debt extinguishment.
Potentially Dilutive Securities
No options warrants or other potentially dilutive securities other than those disclosed above have been issued as of December 31, 2021.
i
NOTE 7 – INCOME TAXES
The Company provides for income taxes using an asset and liability approach under which deferred income taxes are provided for based upon enacted tax laws and rates applicable to periods in which the taxes become payable.
The domestic and foreign components of income (loss) before (benefit) provision for income taxes were as follows:
i
|
| 12/31/2021 |
|
| 12/31/2020 |
| ||
Domestic |
| $ | ( i 8,365,297 | ) |
| $ | ( i 2,901,276 | ) |
Foreign |
|
| i 517,659 |
|
|
| i 4,099,597 |
|
|
| $ | ( i 7,847,638 | ) |
| $ | i 1,198,321 |
|
The components of the (benefit) provision for income taxes are as follows:
|
| 12/31/2021 |
|
| 12/31/2020 |
| ||
Current tax provision |
|
|
|
|
|
| ||
Federal |
| $ | i - |
|
| $ | i - |
|
State |
|
| i - |
|
|
| i - |
|
Foreign |
|
| i 802,364 |
|
|
| i 555,965 |
|
Total current tax provision |
| $ | i 802,364 |
|
| $ | i 555,965 |
|
|
|
|
|
|
|
|
|
|
Deferred tax provision |
|
|
|
|
|
|
|
|
Domestic |
| $ | i - |
|
| $ | i - |
|
State |
|
| i - |
|
|
| i - |
|
Foreign |
|
| ( i 688,354 | ) |
|
| ( i 178,430 | ) |
Total deferred tax provision |
| $ | ( i 688,354 | ) |
| $ | ( i 178,430 | ) |
|
|
|
|
|
|
|
|
|
Total current provision |
| $ | i 114,010 |
|
| $ | i 377,535 |
|
| F-21 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2021 and 2020 is as follows:
i
|
|
| 12/31/2021 |
|
| 12/31/2020 |
| ||
US |
|
|
|
|
|
|
| ||
Income (loss) before income taxes |
|
| $ | ( i 7,847,639 | ) |
| $ | i 1,198,321 |
|
Taxes under statutory US tax rates |
|
| $ | ( i 1,648,004 | ) |
| $ | i 251,647 |
|
Increase (decrease) in taxes resulting from: |
|
|
|
|
|
|
|
|
|
Increase in valuation allowance |
|
| $ | i 3,001,899 |
|
| $ | i 216,518 |
|
Foreign tax rate differential |
|
| $ | ( i 24,977 | ) |
| $ | ( i 55,540 | ) |
Permanent differences |
|
| $ | ( i 734,428 | ) |
| $ | ( i 218,216 | ) |
US tax on foreign income |
|
| $ | i 493,028 |
|
| $ | i 604,419 |
|
| 163(j) catch up |
|
| ( i 76,888 | ) |
|
| i - |
| |
Prior period adjustments |
|
| $ | i 52,034 |
|
| $ | ( i 97,829 | ) |
State taxes |
|
| $ | ( i 948,654 | ) |
| $ | ( i 323,464 | ) |
Income tax expense |
|
| $ | i 114,010 |
|
| $ | i 377,535 |
|
Companies subject to the Global Intangible Low-Taxed Income provision (GILTI) have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for outside basis temporary differences expected to reverse as GILTI. We have elected to account for GILTI as a period cost.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consist of the following:
i
|
| 12/31/2021 |
|
| 12/31/2020 |
| ||
Net operating loss carryforward |
| $ | i 4,515,900 |
|
| $ | i 1,494,424 |
|
Capital loss carryforward |
|
| i 801,744 |
|
|
| i 801,744 |
|
Section 163(j) carryforward |
|
| i - |
|
|
| i - |
|
Nonqualified stock options |
|
| i 96,104 |
|
|
| i 170,297 |
|
Foreign exchange |
|
| i 13,438 |
|
|
| i - |
|
Allowance for doubtful accounts |
|
| i 374,604 |
|
|
| i - |
|
Accrued expenses |
|
| i 528,895 |
|
|
| i 7,389 |
|
Mark to market adjustment in securities |
|
| i 358,761 |
|
|
| i 357,829 |
|
Lease liability |
|
| i 253,620 |
|
|
| i 247,797 |
|
Gain on extinguishment of debt |
|
| i - |
|
|
| i 179,958 |
|
Depreciation |
|
| ( i 6,765 | ) |
|
| i 4,226 |
|
Total deferred tax assets |
|
| i 6,936,211 |
|
|
| i 3,263,664 |
|
|
|
|
|
|
|
|
|
|
Intangibles |
|
| ( i 8,139 | ) |
|
| ( i 10,729 | ) |
Inventory |
|
| ( i 14,728 | ) |
|
| i - |
|
Right of use asset |
|
| ( i 243,207 | ) |
|
| ( i 253,818 | ) |
Goodwill |
|
| ( i 10,979 | ) |
|
| ( i 14,473 | ) |
Total deferred tax liabilities |
|
| ( i 277,053 | ) |
|
| ( i 279,020 | ) |
Valuation allowance |
|
| ( i 5,808,384 | ) |
|
| ( i 2,806,214 | ) |
Net deferred tax assets (liabilities) |
| $ | i 850,774 |
|
| $ | i 178,430 |
|
| F-22 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
At December 31, 2021, the Company had U.S. net operating loss ("NOL") carryforwards of approximately $ i 12,513,177 that may be offset against future taxable income, i subject to limitation under IRC Section 382. Of the $12.5 million Federal NOL carryforwards, $2.5 million are pre-2018 and begin to expire in i 2031. The remaining balance of $10 million, are limited to utilization of 80% of taxable income but do not have an expiration. / At December 31, 2021, the Company had fully utilized all the Greek NOL carryforwards and has an NOL of $ i 546,683 in the UK. A valuation allowance exists for the U.S. operations, but not for the non-U.S. operations, based on a more likely than not criterion and in consideration of all available positive and negative evidence.
ASC 740 requires that the tax benefit of net operating losses ("NOLs"), temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's history of domestic operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance, on our U.S. net domestic deferred tax assets. In 2020, foreign (Greece and United Kingdom) valuation allowances were released, aggregating $ i 200,000. Management considered all available evidence to when evaluating the realizability of foreign deferred tax assets by jurisdiction and concluded primarily based upon a strong earnings history that these deferred tax assets were more-likely-than-not realizable.
The Company applied the "more-likely-than-not" recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in no unrecognized tax benefits as of December 31, 2021 and December 31, 2020, respectively. We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense.
The Company files income tax returns in Illinois, United States, and in foreign jurisdictions including Greece, and United Kingdom. As of December 31, 2021, all domestic tax years are open to tax authority examination due the availability of net operating loss deductions, 2010 through 2021. In Greece, the statute of limitations is open for five years, 2016 through 2021. In United Kingdom, the statute of limitations is open for four years, 2017 through 2021. Currently, there are no ongoing tax authority income tax examinations.
As of December 31, 2021, the Company had $ i 1.7 million of undistributed earnings and profits for which no deferred tax liabilities have been recorded, since the Company intends to indefinitely reinvest such earnings to fund the international operations and certain obligations of the subsidiary. Should the above undistributed earnings be distributed in the form of dividends or otherwise, the distributions would result in $ i 350.3 thousand of tax expense.
i
NOTE 8 – RELATED PARTY TRANSACTIONS
On the date of our inception, we issued 2 million shares of our common stock to our then three officers and directors which were recorded at no value (offsetting increases and decreases in common stock and additional paid-in capital).
Doc Pharma S.A.
As of December 31, 2021, the Company has a prepaid balance of $ i 3,263,241 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $ i 2,901,300 and an accounts payable balance of $ i 565,756. As of December 31, 2020, the Company has a prepaid balance of $ i 3,468,653 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company had a receivable balance of $ i 3,468,564.
During the years ended December 31, 2021 and 2020, the Company purchased a total of $ i 3,084,805 and $ i 5,983,809 of products from Doc Pharma S.A., respectively. During the years ended December 31, 2021 and 2020 the Company had $ i 978,321 and $ i 2,843,260 revenue from Doc Pharma S.A., respectively.
/
| F-23 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
On October 10, 2020, the Company entered into a contract manufacturer outsourcing (“CMO”) agreement with Doc Pharma whereby Doc Pharma is responsible for the development and manufacturing of pharmaceutical products and nutritional supplements according to the Company’s specifications based on strict pharmaceutical standards and Good Manufacturing Practice (“GMP”) protocols, as the National Organization for Medicines requires. The Company has the exclusive ownership rights for trading and distribution of its own branded nutritional supplements named “Sky Premium Life®”. The duration of the agreement is for i 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 i 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 December 31, 2021, the Company has purchased €1,699,507 ($ i 2,010,517) 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 is 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: i 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 ($295,739) from Doc Pharma which was the 18.33% of the total cost. The agreement will be terminated on December 31, 2025.
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 during the years ended December 31, 2021 and 2020 is presented below:
i
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Beginning Balance |
| $ | i 501,675 |
|
| $ | i 1,375,532 |
|
Payments |
|
| i - |
|
|
| ( i 996,136 | ) |
Foreign currency translation |
|
| ( i 37,411 | ) |
|
| i 122,279 |
|
Ending Balance |
| $ | i 464,264 |
|
| $ | i 501,675 |
|
On December 20, 2018, the €1,500,000 ($ i 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 i 4.7% per annum and matured on i March 18, 2019, pursuant to the original agreement. The note is not in default and the maturity date has been extended until December 31, 2021. As of December 31, 2020, the note had an outstanding principal balance of €400,000 ($ i 489,200) and accrued interest of €158,287 ($ i 193,585). As of December 31, 2021, the Company has an outstanding balance of €400,000 ($ i 452,720) and accrued interest of €177,313 ($ i 200,683).
| F-24 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
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, 2020, the Company had a principal balance of €10,200 ($ i 12,475). A principal balance of €10,200 ($ i 11,544) remained as of December 31, 2021.
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 years ended December 31, 2021, and 2020, the Company recorded a foreign currency translation gain of $ i 37,411 and a loss of $ i 122,279, respectively.
Loans Payable – Related Party
A summary of the Company’s related party loans payable during the years ended December 31, 2021 and 2020 is presented below:
i
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Beginning balance |
| $ | i 1,629,246 |
|
| $ | i 1,026,264 |
|
Proceeds |
|
| i 6,377,156 |
|
|
| i 725,563 |
|
Payments |
|
| ( i 133,552 | ) |
|
| ( i 149,695 | ) |
Conversion of debt |
|
| ( i 6,000,000 | ) |
|
| - |
|
Settlement of lawsuit |
|
| ( i 600,000 | ) |
|
| - |
|
Foreign currency translation |
|
| i 20,623 |
|
|
| i 27,114 |
|
Ending balance |
| $ | i 1,293,472 |
|
| $ | i 1,629,246 |
|
From time to time, Grigorios Siokas loans the Company funds in the form of non-interest bearing, no-term loans. As of December 31, 2020, the Company had an outstanding principal balance under these loans of $ i 1,629,246 in loans payable to Grigorios Siokas.
On May 10, 2021, the Company entered into a Debt Exchange agreement (“May Debt Exchange”) related to a lawsuit from on or about July 25, 2019, whereby Mark Rubenstein, individually and as a shareholder of the Company, brought the action styled Rubenstein v. Siokas, et al., Case No. 1:19-cv-06976-KPF (S.D.N.Y.) against Grigorios Siokas for recovery of alleged profits earned under Section 16(b) of the Securities Exchange Act of 1934. Although recovery was sought only from Mr. Siokas, the Company was also named as a nominal defendant. Both the Company and Mr. Siokas vigorously defended the lawsuit. On or about September, 18, 2020, in an effort to avoid the uncertainty of litigation and further legal expense, Mr. Siokas agreed to settle the lawsuit by agreeing to reimburse the Company a total of $ i 600,000, payable as a combination of: (1) Mr. Siokas reimbursing the Company for Plaintiff’s attorneys’ fees, in an amount subsequently determined by the Court to be $ i 120,000 plus $ i 4,137 of litigation costs to be paid in cash, and (2) Mr. Siokas relieving the Company of certain debt owed to him. Mr. Siokas and the Company strongly opposed Plaintiff’s motion for attorneys’ fees. Pursuant to the terms of the May Debt Exchange the Company forgave $600,000 of the existing loan payable and recorded the forgiveness to additional paid in capital.
| F-25 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
During the year ended December 31, 2021, the Company entered into various agreements (as defined in Note 6) with i Mr. Siokas whereby the Company exchanged an aggregate total of $6,000,000 of debt into 1,000,000 shares of Common Stock at above market prices.
During the year ended December 31, 2021, the Company borrowed additional proceeds of €1,803,000 ($ i 2,040,635), €230,000 ($ i 275,306) and $4,061,215 and repaid €118,000 ($ i 133,552) of these loans. During the year ending December 31, 2021, the Company converted $ i 2,250,000 of the July 20 Note at a conversion price of $ i 6.00 and issued i 375,000 shares of common stock. As of December 31, 2021, the Company had an outstanding balance under these notes and loans of $ i 1,293,472.
The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2021 and 2020, the Company recorded a loss of $ i 20,623 and $ i 27,114, respectively.
Except as set forth above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons.
i
NOTE 9 – LINES OF CREDIT
A summary of the Company’s lines of credit as of December 31, 2021, and 2020 is presented below:
i
|
| 2021 |
|
| 2020 |
| ||
National |
| $ | i 3,265,236 |
|
| $ | i 3,540,550 |
|
Alpha |
|
| i 947,333 |
|
|
| i 1,106,894 |
|
Pancreta |
|
| i 489,985 |
|
|
| - |
|
National – COVID |
|
| i 407,174 |
|
|
| i 429,240 |
|
Subtotal |
|
| i 5,109,728 |
|
|
| i 5,076,684 |
|
Reclassification of National-COVID – Long-term |
|
| ( i 366,171 | ) |
|
| ( i 502,869 | ) |
Ending balance |
| $ | i 4,743,557 |
|
| $ | i 4,573,815 |
|
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 i 6% line of credit was $ i 2,489,960 and $ i 2,690,600 as of December 31, 2021 and 2020, respectively. The outstanding balance of the facility was $ i 2,185,413 and $ i 2,411,182, as of December 31, 2021 and 2020, respectively.
The maximum borrowing allowed for the i 4.35% lines of credit, was $ i 1,131,800 and $ i 1,223,000 as of December 31, 2021 and 2020, respectively. The outstanding balance of the facilities was $ i 1,079,823 and $ i 1,129,368 as of December 31, 2021 and 2020, respectively.
The line of credit with Alpha Bank of Greece is renewed annually with a current interest rate of i 6.00%. The maximum borrowing allowed was $ i 1,131,800 and $ i 1,123,000 as of December 31, 2021 and 2020, respectively. The outstanding balance of the facility was $ i 947,333 and $ i 1,106,894, as of December 31, 2021 and 2020, respectively.
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 i 6.10%. The maximum borrowing allowed as of December 31, 2021 was $ i 565,900. The outstanding balance of the facility as of December 31, 2021, was $ i 489,985.
Interest expense for the year ended December 31, 2021 and 2020, was $ i 283,415 and $ i 270,655, respectively.
/
| F-26 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
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 the years ended December 31, 2021 and 2020, 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
On June 23, 2020, the Company’s subsidiary, Cosmofarm, entered into an agreement with the “National Bank of Greece SA” (the “Bank”) to borrow a maximum of €500,000 ($ i 611,500) under a proposed plan which will operate the same as the line of credit above. The proposed plan has a maturity date of sixty (60) months from the date of the first disbursement, which includes a grace period of nine months. The total amount of the initial proceeds was paid in 3 equal monthly installments. The line of credit is interest bearing from the date of receipt and is payable every three (3) months at an interest rate of i 2.7%. The outstanding balance was €359,758 ($ i 407,174) and €350,973 ($ i 429,240) at December 31, 2021 and 2020, respectively of which $ i 366,171 is classified as Lines of credit - long-term portion on the consolidated balance sheet.
Interest expense for the years ended December 31, 2021 and 2020 was $ i 1,753 and $ i 3,910, respectively.
i
NOTE 10 – CONVERTIBLE DEBT
A summary of the Company’s convertible debt during the years ended December 31, 2021 and 2020 is presented below:
i
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Beginning balance convertible notes |
| $ | i 1,447,000 |
|
| $ | i 1,500,000 |
|
New notes |
|
| i 625,000 |
|
|
| i 540,000 |
|
Payments |
|
| ( i 907,000 | ) |
|
| ( i 593,000 | ) |
Conversion to common stock |
|
| ( i 525,000 | ) |
|
| i - |
|
Subtotal notes |
|
| i 640,000 |
|
|
| i 1,447,000 |
|
Debt discount at year end |
|
| ( i 258,938 | ) |
|
| ( i 494,973 | ) |
Convertible note payable, net of discount |
| $ | i 381,062 |
|
| $ | i 952,027 |
|
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.
Securities Purchase Agreement executed on May 15, 2019
On May 15, 2019, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Buyer”). Upon the closing of this financing, on May 17, 2019, the Company issued a Senior Convertible Note (the “May 2019 Note”) to the Buyer in the principal amount of $ i 1,500,000.
The May 2019 Note provided that the Company will repay the principal amount of the May 2019 Note on or before March 15, 2020.
On March 23, 2020, the Company entered into a Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”).
/
| F-27 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): (September 16, 2020 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date”), (b) during the Forbearance Period waive the prepayment premium to any Company Optional Redemption, and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to September 16, 2020. The Scheduled Required Prepayments are $ i 100,000 upon signing the Agreement and five (5) monthly payments thereafter aggregating $ i 200,000 with all amounts outstanding under the Note due on September 16, 2020. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers and directors and advisors of the Company) or factoring and purchase order indebtedness, the Company shall affect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments.
On September 23, 2020, the Company entered into a Second Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”). The Note was due to be paid in full on or before September 16, 2020 and was not paid (the “Existing Default”). i The Note provides that upon an Event of Default, the Buyer may, among other things, require the Company to redeem all or a portion of the Note at a redemption premium of 120%, multiplied by the product of the conversion rate ($6.00 per share) and the then current market price.
The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): June 16, 2021 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) i the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date), (b) during the Forbearance Period (as defined) waive the prepayment premium to any Company Optional Redemption (which will result in the 120% redemption premium effectively replaced with 100%), and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to June 16, 2021. The Scheduled Required Prepayments are $ i 63,000 upon signing the Agreement and eight (8) monthly payments thereafter aggregating $ i 480,000 with the remaining $ i 607,000 outstanding under the Note due on June 16, 2021. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers, directors and 10% or greater shareholders of the Company) or factoring and purchase order indebtedness, the Company shall affect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments.
On June 18, 2021, the Company modified the terms of its outstanding debt by entering into a Third Forbearance Agreement (the “Third Agreement”) whereby the Company agreed to make certain payments to the creditor and the creditor will accept such payments as full discharge of the outstanding debt. The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): November 16, 2021 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date), (b) during the Forbearance Period (as defined) waive the prepayment premium to any Company Optional Redemption (which will result in the 120% redemption premium effectively replaced with 100%), and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to November 16, 2021. i The Scheduled Required Prepayments are $62,000 upon the first scheduled required prepayment and five (5) payments thereafter aggregating $287,000 with the remainder outstanding under the Note due on November 16, 2021. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers, directors and i 10% or greater shareholders of the Company) or factoring and purchase order indebtedness, the Company shall effect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments. The Company performed an analysis to determine if at least a 10% difference between the present value of the new loan’s cash flows and the present value of the old loan’s remaining cash flows and determined that yes there is more than a 10% difference. The Company will experience a cash flow increase of approximately 15% due to the modification; therefore, the cash flow is considered substantially different, and the Company has applied extinguishment accounting.
The May 2019 Note is convertible at any time by the Holder into i 250,000 shares of common stock, par value $ i 0.001 per share at the rate of $ i 6.00 per share, subject to adjustment (the “Conversion Price”). i Upon an Event of Default (regardless of whether such event has been cured), the Buyer may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the then Volume-Weighted Average Price (as defined, the “VWAP”). The Company considered the need for the conversion feature to be bifurcated under ASC 815 and determined that it does not meet the requirements. Additionally, the Company determined the effective conversion rate under ASC 470-20 and determined that the instrument is out of the money and no beneficial conversion feature was recorded.
The May 2019 Note is senior in right of payment to all other existing and future indebtedness of the Company except Permitted Senior Indebtedness (as defined in the May 2019 Note), including $ i 12 million of senior secured indebtedness of the Company and its subsidiaries under an existing senior loan agreement, plus defined amounts of purchase money indebtedness in connection with bona fide acquisitions.
| F-28 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
The May i 2019 Note includes customary Events of Default and provides that the Buyer may require the Company to redeem (regardless of whether the Event of Default has been cured) all or a portion of the Note at a redemption premium equal to the greater of: (i) the product of the redemption premium of one hundred twenty-five (125%) percent, multiplied by the conversion amount, and (ii) the product of the conversion rate ($6.00 per share) multiplied by the product of 125% multiplied by the then current market price. The Buyer may also require redemption of the May 2019 Note upon a Change of Control (as defined) at a premium of one hundred twenty-five (125%) percent. The Company has the right to redeem the May 2019 Note at any time, in whole or in part, in cash at a price equal to 120% of the then outstanding conversion amount.
Conversion of the May 2019 Note is subject to a blocker provision which prevents any holder from converting the May 2019 Note into shares of common stock if its beneficial ownership of the i common stock would exceed 9.99% of the Company’s issued and outstanding common stock.
During the year ended December 31, 2020, the Company repaid $ i 593,000 such that as of December 31, 2020, the Company had a principal balance $ i 907,000 on the May 2019 Note and the Company had accrued $ i 15,420 in interest expense. During the year ended December 31, 2021, the Company repaid all outstanding principal and accrued interest on the May 2019 Note.
i Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission for this transaction equal to six (6%) percent of the total gross proceeds of the offering. This 6% fee or $90,000 was recorded as debt discount along with the $30,000 in legal fees associated with the May 2019 Note. These fees will be amortized over the term of the note. $ i 29,509 was amortized during the year ended December 31, 2020 resulting in the full amortization of the fees.
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”).
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”).
On July 14, 2021, August 16, 2021 and December 21, 2021 the Company converted an aggregate total of $ i 525,000 in principal and $ i 25,144 in accrued interest and fees into i 213,382 shares of the Company’s common stock at an average price per share of $ i 2.58. As of December 31, 2021, the Company had a principal balance of $ i 15,000 and had accrued $ i 6,568 in interest expense. Upon conversion, the i 213,382 shares were issued at a fair value of $ i 959,024 which was recorded as equity. Accordingly, upon conversion, the Company reduced its outstanding debt by $ i 550,144, reduced its derivative liability by $ i 284,169, and recorded a loss on extinguishment of $ i 124,711.
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 $ i 456,570 which was recorded as a debt discount, and together with the original issue discount and transaction expenses of $ i 43,000, in the aggregate of $ i 499,570, is being amortized over the life of the loan. For the years ended December 31, 2021 and 2020, $ i 494,973 and $ i 4,597, respectively, of the debt discount has been amortized. As of December 31, 2021 and 2020, the fair value of the derivative liability was $ i 5,822 and $ i 460,728, respectively. The Company recorded a decrease in the derivative of $ i 284,169 related to the conversions, which was recorded to additional paid-in capital. For the year ended December 31, 2021, the Company recorded a gain of $ i 170,737 and for the year ended December 31, 2020 the Company recorded a loss of $ i 4,158 from the change in fair value of derivative liability as other income in the consolidated statements of operations and comprehensive income (loss).
| F-29 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
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 $ i 100,000 in principal amount, a convertible promissory note. The note bears an interest rate of i 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. As of September 30, 2021, the Company had a principal balance of $ i 100,000 and had accrued $ i 5,736 in interest expense.
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 $ i 62,619 which was recorded as a debt discount and additional paid-in capital, and is being amortized over the life of the loan. For the year ended December 31, 2021, $ i 62,619 of the debt discount has been amortized. As of December 31, 2021, the fair value of the derivative liability was $ i 39,843 and for the year ended December 31, 2021, the Company recorded a gain of $ i 22,776 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 $ i 525,000 in principal amount for cash proceeds of $ i 500,000. The note was issued with an original issue discount (“OID”) of $ i 25,000, bears an interest rate of i 10% per annum and matures on the earlier of (i) the consummation of the Company listing its common shares on the Nasdaq Stock Exchange 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 i 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 $ i 294,000 which, together with the OID of $ i 25,000 was recorded as a debt discount and is being amortized over the life of the loan. For year ended December 31, 2021, $ i 60,063 of the debt discount has been amortized. As of December 31, 2021, the Company had accrued a principal balance of $ i 525,000, had accrued $ i 15,166 in interest expense, and had remaining debt discount of $ i 258,937 which resulted in a net convertible note payable of $ i 266,063.
| F-30 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Securities Purchase Agreement
On September 17, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with the third party whereby the Company agree to issue i 5,000,000 shares of Series A Preferred Stock at a purchase price of $ i 1.00 per share or $ i 5,000,000 in the aggregate, and a Warrant (the “Warrant”) to purchase 100% of the number of shares of the Company’s Common Stock issuable upon conversion of the Series A Preferred Stock. i The Series A Preferred Stock will be convertible into the Company’s Common Stock as determined by multiplying 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 per share. The shares of common stock issuable upon conversion of Series A Preferred Stock and exercise of the Warrants are subject to a Registration Right Agreement. The Warrant has an exercise price equal to 110% of the Conversion Price of the Series A Preferred Stock and expires five ( i 5) years from the date of issuance.
The SPA is subject to certain conditions to close. As of December 31, 2021 and the date of this filing, the conditions to close had not been met, the funds have not been transferred, the preferred shares and the warrant was not issued. The SPA automatically terminated on 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 years ended December 31, 2021 and 2020:
|
| Amount |
| |
Balance on January 1, 2020 |
| $ | i - |
|
Issuances to debt discount |
|
| i 456,570 |
|
Change in fair value of derivative liabilities |
|
| i 4,158 |
|
Balance on December 31, 2020 |
|
| i 460,728 |
|
Issuances to debt discount |
|
| i 62,619 |
|
Reduction of derivative related to conversions |
|
| ( i 284,169 | ) |
Change in fair value of derivative liabilities |
|
| ( i 193,513 | ) |
Balance on December 31, 2021 |
| $ | i 45,665 |
|
The fair value of the derivative conversion features and warrant liabilities as of December 31, 2021 and 2020 were calculated using a Monte-Carlo option model valued with the following assumptions:
|
| December 31, |
|
|
| |||
|
| 2021 |
|
| 2020 |
| ||
Dividend yield |
|
| i 0 | % |
|
| i 0 | % |
Expected volatility |
| i 106.8%- i 107.3 | % |
| i 140.4%- i 142.5 | % | ||
Risk free interest rate |
| i 0.41%- i 0.44 | % |
| i 0.11%- i 0.12 | % | ||
Contractual terms (in years) |
| i .50 - i .52 |
|
| i 1.00 – i 1.04 |
| ||
i
NOTE 11 – DEBT
A summary of the Company’s third-party debt during the years ended December 31, 2021 and 2020 is presented below:
i
| Loan Facility |
|
| Trade Facility |
|
| Third Party |
|
| COVID Loans |
|
| Total |
| ||||||
Beginning balance |
| $ | i 3,302,100 |
|
| $ | i 6,446,000 |
|
| $ | i 12,631,284 |
|
| $ | i 435,210 |
|
| $ | i 22,814,594 |
|
Proceeds |
|
| - |
|
|
| - |
|
|
| i 565,900 |
|
|
| - |
|
|
| i 565,900 |
|
Payments |
|
| ( i 141,475 | ) |
|
| ( i 57,835 | ) |
|
| ( i 62,878 | ) |
|
| ( i 3,233 | ) |
|
| ( i 265,421 | ) |
Conversion of debt |
|
| ( i 1,606,500 | ) |
|
| - |
|
|
| ( i 3,010,000 | ) |
|
| - |
|
|
| ( i 4,616,500 | ) |
Recapitalized upon debt modification |
|
| ( i 86,670 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| ( i 86,670 | ) |
Debt forgiveness |
|
| - |
|
|
| - |
|
|
| - |
|
|
| ( i 169,770 | ) |
|
| ( i 169,770 | ) |
Foreign currency translation |
|
| ( i 167,671 | ) |
|
| ( i 181,155 | ) |
|
| ( i 46,329 | ) |
|
| ( i 28,090 | ) |
|
| ( i 423,245 | ) |
Subtotal |
|
| i 1,299,784 |
|
|
| i 6,207,010 |
|
|
| i 10,077,977 |
|
|
| i 234,117 |
|
|
| i 17,818,888 |
|
Notes payable - long-term |
|
| - |
|
|
| ( i 2,450,000 | ) |
|
| ( i 9,854,906 | ) |
|
| ( i 51,478 | ) |
|
| ( i 12,356,384 | ) |
Notes payable - short-term |
| $ | i 1,299,784 |
|
| $ | i 3,757,010 |
|
| $ | i 223,071 |
|
| $ | i 182,639 |
|
| $ | i 5,462,504 |
|
| F-31 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
| Loan Facility |
|
| Bridge Loans |
|
| Trade Facility |
|
| Third Party |
|
| COVID Loans |
|
| Total |
| |||||||
Beginning balance |
| $ | i 3,078,442 |
|
| $ | i 191,287 |
|
| $ | i 6,245,400 |
|
| $ | i 2,514,595 |
|
| $ | - |
|
| $ | i 12,029,724 |
|
Proceeds |
|
| - |
|
|
| - |
|
|
| - |
|
|
| i 16,121,500 |
|
|
| 435,210 |
|
|
| i 16,556,710 |
|
Payments |
|
| - |
|
|
| ( i 191,287 | ) |
|
| - |
|
|
| ( i 5,006,115 | ) |
|
| - |
|
|
| ( i 5,230,725 | ) |
Conversion of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( i 807,795 | ) |
|
|
|
|
|
| ( i 807,795 | ) |
Debt extinguishment |
|
| ( i 12,066 | ) |
|
| - |
|
|
| - |
|
|
| (192,205 | ) |
|
| - |
|
|
| ( i 204,271 | ) |
Foreign currency translation |
|
| i 269,047 |
|
|
| - |
|
|
| i 200,600 |
|
|
| i 1,304 |
|
|
| - |
|
|
| i 470,951 |
|
Subtotal |
|
| 3,302,100 |
|
|
| - |
|
|
| 6,446,000 |
|
|
| 12,631,284 |
|
|
| i 435,210 |
|
|
| 22,814,594 |
|
Notes payable - long-term |
|
| ( i 2,843,475 | ) |
|
| - |
|
|
| ( i 2,384,850 | ) |
|
| ( i 5,543,557 | ) |
|
| - |
|
|
| ( i 10,771,882 | ) |
Notes payable - short-term |
| $ | i 458,625 |
|
| $ | - |
|
| $ | i 4,061,150 |
|
| $ | i 7,087,727 |
|
| $ | i 435,210 |
|
| $ | i 12,042,712 |
|
Our outstanding debt as of December 31, 2021 is repayable as follows: | ||||
|
|
| ||
2022 |
| $ | i 5,549,174 |
|
2023 |
|
| i 11,709,951 |
|
2024 |
|
| i 264,255 |
|
2025 |
|
| i 268,724 |
|
2026 and thereafter |
|
| i 113,454 |
|
Total debt |
|
| i 17,905,558 |
|
Less: fair value adjustments to assumed debt obligations |
|
| ( i 86,670 | ) |
Less: notes payable - current portion |
|
| ( i 5,462,504 | ) |
Notes payable - long term portion |
| $ | i 12,356,384 |
|
Loan Facility Agreement
On June 30, 2020, SkyPharm entered into a settlement agreement on an existing loan facility agreement with Synthesis Peer-to-Peer Income Fund, whereby SkyPharm agreed to make certain payments to the creditor and the creditor will accept such payments as full discharge of outstanding debt. In accordance with the settlement agreement, interest will accrue from June 30, 2020, until repayment in full at a rate of 6% per annum for the first year and 5.25% per annum for the second year calculated on the balance outstanding from day to day during such period. Interest is due on the 10th day of each calendar month. If any amount of principal or interest is unpaid on its due date interest shall accrue from the due date until the date of its payment until the date of its payment in full at the rate of 7.25% per annum. i The Company will make quarterly payments of €125,000 beginning May 6, 2021, with a final payment of €2,200,000 on May 6, 2022. The Company evaluated the settlement agreement for debt modification in accordance with ASC 470-50 and concluded that the debt qualified for debt extinguishment as the 10% cash flow test was met. As a result, the $3,772,446 of principal and accrued interest was written off and the new debt was recorded at fair value as of June 30, 2020 in the amount of $3,033,990. For the year ended December 31, 2020, the Company recorded a gain on extinguishment of debt in the amount of $ i 749,824, of which $ i 12,066 related to the principal of the loans and the balance related to the accrued interest. As of December 31, 2020, the Company has accrued interest expense of $ i 33,021 and the principal balance of the debt is $ i 3,302,100, of which $ i 2,843,475 is classified as Notes payable – long term portion on the consolidated balance sheet.
| F-32 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
On August 4, 2021, the Company entered into an exchange agreement whereby the Company agreed to the following:
| · | Issue on August 4, 2021, i 321,300 shares of common stock to settle $1,606,500 (€1,350,000) of debt. The Company recorded a gain on settlement of $ i 292,383 upon the issuance of the 321,300 shares |
|
|
|
| · | Agreed to issue no more than i 238,000 shares of common stock upon approval of the listing of the Company’s common stock to the Nasdaq to settle $ i 1,190,000 (€1,000,000) of debt. The Company issued these shares subsequent to December 31, 2021 (see Note 17) |
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 $ i 6,642 and recorded the new debt at fair value based on the present value of future cash flows using a discount rate of i 11.66%. As of December 31, 2021, the Company has accrued interest expense of $ i 4,414 and the principal balance of the debt is $ i 1,299,784, which is classified as Notes payable on the consolidated balance sheet.
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 i 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 ($ i 5,629,555) and related accrued interest of €453,094 ($ i 524,094) would be split into two principal balances of Euro € i 2,000,000 and USD $ i 4,000,000. Interest on the new balances commenced on October 1, 2018, at i 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 $4,000,000 loan matured on i August 31, 2021. On March 3rd 2022, the Company entered into an extension to the facility agreement (See Note 17). Based on the updated repayment terms, the facility’s final repayment date was extended to i January 2023.
On December 30, 2020, the Company transferred the Euro € i 2,000,000 loan to a new third-party lender. The terms remained the same except interest will now accrue at i 5.5% per annum plus Euribor. The principal is to be repaid in a total of five i quarterly installments beginning October 31, 2021 of i 50,000 Euro each with a final repayment of i 1,800,000 Euro payable on the earlier of 24 months after December 30, 2020 or October 31, 2022.
As of December 31, 2020, the Company had principal balances of €2,000,000 ($ i 2,446,000), of which $ i 2,384,850 is classified as Notes payable – long term portion on the consolidated balance sheet, and $ i 4,000,000 under the agreements and the Company had accrued $ i 402 and $ i 16,185 respectively, in interest expense related to these agreements. During the year ended December 31, 2021, the Company repaid $ i 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 $ i 4,000,000 under the agreements, of which $ i 2,450,000 is classified as notes payable-long term on the consolidated balance sheet and the Company had accrued $ i 10,466 and $ i 104,220 respectively, in interest expense related to these agreements.
| F-33 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
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 ($ i 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. During the year ended December 31, 2020, the Company repaid €5,000 ($ i 5,862) of this loan. As of December 31, 2020, the Company had an outstanding principal balance of €8,000 ($ i 9,784) and accrued interest of €4,785 ($ i 5,852). As of December 31, 2021, the Company had an outstanding principal balance of €8,000 ($ i 9,054) and accrued interest of €6,318 ($ i 7,151).
Conversion of Senior Promissory Notes
In the year ending December 31, 2019, the Company executed Senior Promissory Notes (the “Debt”) in an aggregate total of $ i 2,500,000 to an unaffiliated third-party lender (the “Lender”). In the year ended December 31, 2020, the Company executed additional Senior Promissory Notes to an unaffiliated third-party lender in an aggregate principal total of $ i 510,000. As of December 31, 2020, the Company had an aggregate principal balance of $ i 3,010,000 on this Debt and the Company had accrued $ i 527,604 in interest expense. On 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 i Company of i 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. The market price at the time this Agreement was negotiated was $ i 3.28 per share / and the Company recorded a gain on debt extinguishment of $ i 445,636.
All accrued and unpaid interest, $ i 563,613 as of December 31, 2021, as well as any unpaid fees, shall be paid in three (3) equal monthly installments following the closing of a planned Canadian public offering. Pursuant to this Agreement, Grigorios Siokas, the Company’s Chief Executive Officer and principal shareholder, will be released from all personal guarantees on the Debt.
February 25, 2020 Senior Promissory Note
On February 25, 2020, the Company executed a Senior Promissory Note (the “February Note”) in the principal amount of $ i 1,000,000 payable to an unaffiliated third-party lender. The February Note bears interest at the rate of eighteen ( i 18%) percent per annum, paid quarterly in arrears. The February Note matured on i April 30, 2020.
The February Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the February Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the February Note. The Company was not in default at that time. The Company also repaid all accrued interest related to the February Note.
May 5, 2020 Senior Promissory Note
On May 5, 2020, the Company executed a Senior Promissory Note (the “May 5 Note”) in the principal amount of $ i 2,000,000 payable to an unaffiliated third-party lender who had previously loaned the Company $ i 1,000,000. i The May 5 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 5 Note matured on December 31, 2020.
The May 5 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 5 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the May 5 Note. The Company also repaid the accrued interest related to this note.
| F-34 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
May 8, 2020 Senior Promissory Note
On May 8, 2020, the Company executed a Senior Promissory Note (the “May 8 Note”) in the principal amount of $ i 2,000,000 payable to an unaffiliated third-party lender who had previously loaned the Company $ i 3,000,000. i The May 8 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 8 Note matured on June 8, 2020.
The May 8 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 8 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the May 8 Note. The Company also repaid the accrued interest related to this note.
May 18, 2020 and July 3, 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 $ i 2,000,000 payable to an unaffiliated third-party lender. i 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. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023 (See Note 17).
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 and 2020, 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 $ i 5,000,000 payable to an unaffiliated third-party lender. The July 3 Note bears interest at the rate of eighteen ( i 18%) percent per annum, paid quarterly in arrears. The July 3 Note matures on i June 30, 2022 unless in default. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023 (See Note 17).
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 ($ i 2,000,000), the May 8 Note ($ i 2,000,000), and the February Note ($ i 1,000,000). As of December 31, 2021 and 2020, the Company had a principal balance of $ i 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 and 2020, the Company had accrued an aggregate total of $ i 210,574 and $ i 148,685, respectively, 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 $ i 3,000,000 payable to an unaffiliated third-party lender. i 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. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023 (See Note 17).
| F-35 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
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 i 259,741 shares of common stock at the rate of $ i 3.85 per share in exchange for an aggregate of $ i 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 $ i 3.11 per share and as such, the Company recorded a gain of $ i 192,205. Interest will continue 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 $ i 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 $ i 60,166 in accrued interest expense.
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 ($ i 611,500). i 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. As of December 31, 2020, the Company had no accrued interest and a principal balance of €500,000 ($ i 611,500), of which $ i 543,557 is classified as Notes payable – long term portion on the consolidated balance sheet. During the year ended December 31, 2021, the Company repaid €55,556 ($ i 62,878) of the principal and as of December 31, 2021, the Company has accrued interest of $ i 5,642 related to this note and a principal balance of €444,444 ($ i 503,022), of which $ i 377,270 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 ($ i 578,850). i 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 $ i 3,100 and a principal balance of €500,000 ($565,900), of which $ i 477,637 is classified as Notes payable – long term portion on the 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 ($ i 366,900) loan from the Greek government. i 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 i 50% forgiveness of the loan and recorded $ i 177,450 as other income. As of December 31, 2021 the principal balance was $ i 169,770.
On June 24, 2020, i the Company received a loan £50,000 ($68,310) from the United Kingdom government. The loan has a six-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement. The Company may prepay this loan without penalty at any time. The Company repaid £2,335 ($ i 3,233) of principal during the year ended December 31, 2021, and the balance as of December 31, 2021 was £47,665 ($ i 64,347).
| F-36 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
Distribution and Equity Agreement
As discussed in Note 2 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) i 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 $ i 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 $ i 2,750,000 upon the Company’s receipt of gross sales of CAD $ i 6,500,000 and an additional CAD $ i 2,750,000 upon receipt of gross sales of CAD $ i 13,000,000.
As discussed in Note 2, the Company attributed no value to the shares received in Marathon pursuant to (a) above. In relation to i 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, 2021, the Company would be required to issue 431,270 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 instruments issued by the Company were not affected.
None of the above loans were made by any related parties.
i
NOTE 12 – LEASES
i The Company has various lease agreements with terms up to 10 years, comprising leases of office space. 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.
The Company’s weighted-average remaining lease term relating to its operating leases is i 6.6 years, with a weighted-average discount rate of i 6.74%.
The Company incurred lease expense for its operating leases of $ i 260,664 and $ i 188,400 which was included in “General and administrative expenses,” for the years ended December 31, 2021 and 2020, respectively.
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of December 31, 2021.
i
Maturity of Lease Liability |
|
|
| |
2022 |
| $ | i 211,538 |
|
2023 |
|
| i 182,316 |
|
2024 |
|
| i 111,026 |
|
2025 |
|
| i 111,026 |
|
2026 and thereafter |
|
| i 418,723 |
|
Total undiscounted operating lease payments |
| $ | i 1,034,629 |
|
Less: Imputed interest |
|
| ( i 200,164 | ) |
Present value of operating lease liabilities |
| $ | i 834,465 |
|
| F-37 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
The Company’s weighted-average remaining lease term relating to its finance leases is i 3.2 years, with a weighted-average discount rate of i 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 December 31, 2021:
Maturity of Lease Liability |
|
|
| |
2022 |
| $ | i 85,231 |
|
2023 |
|
| i 72,849 |
|
2024 |
|
| i 55,765 |
|
2025 |
|
| i 27,744 |
|
2026 and thereafter |
|
| i 4,211 |
|
Total undiscounted finance lease payments |
| $ | i 245,800 |
|
Less: Imputed interest |
|
| ( i 24,321 | ) |
Present value of finance lease liabilities |
| $ | i 221,479 |
|
The Company had financing cash flows used in finances leases of $ i 92,105 and $ i 85,804 for the years ended December 31, 2021 and 2020, respectively.
The Company incurred interest expense on its finance leases of $ i 11,576 and $ i 13,759 which was included in “Interest expense,” for the years ended December 31, 2021 and 2020, respectively. The Company incurred amortization expense on its finance leases of $ i 97,270 and $ i 123,533 which was included in “Depreciation and amortization expense,” for the years ended December 31, 2021 and 2020, respectively.
i
NOTE 13 – 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 December 31, 2021 and 2020, there were no pending or threatened lawsuits, other than the May Debt Exchange transaction disclosed in Note 8, that could reasonably be expected to have a material effect on the results of the Company’s operations.
Advisory Agreements
On April 18, 2018, SkyPharm S.A. entered into a ten-year Advisory Agreement with Synthesis Management Limited (the “Advisor”). The Advisor was retained to assist SkyPharm to secure corporate finance capital. The Advisor shall be paid €104,000 per year during the ten-year term.
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 director of the Company is a principal of the Consultant. As consideration for services rendered, the Company will pay the consultant $ i 4,000 a month until the Company commences trading on NASDAQ. Upon NASDAQ listing, i 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.
/
| F-38 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
On July 7, 2021, the Company entered into an agreement with a non-exclusive financial advisor and placement agent. i 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: i 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.
i
NOTE 14 – EARNINGS PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss) attributable to the Company, decreased with respect to net income or increased with respect to net loss by dividends declared on preferred stock by using the weighted-average number of common shares outstanding. The dilutive effect of incremental common shares potentially issuable under outstanding options, warrants and restricted shares is included in diluted earnings per share in 2021 and 2020 utilizing the treasury stock method. The computations of basic and diluted per share data were as follows:
i
|
| 2021 |
|
| 2020 |
| ||
Numerator for Basic and Diluted Earnings Per Share: |
|
|
|
|
|
| ||
Net income (loss) |
| $ | ( i 15,594,682 | ) |
| $ | i 820,786 |
|
Denominator for Basic Earnings Per Share: |
|
|
|
|
|
|
|
|
Weighted Average Shares |
|
| i 16,423,335 |
|
|
| i 13,270,097 |
|
Potentially Dilutive Common Shares |
|
| - |
|
|
| i 37,698 |
|
Adjusted Weighted Average Shares |
|
| i 16,423,335 |
|
|
| i 13,307,795 |
|
Basic and Diluted Net Income (Loss) per Share |
|
| ( i 0.95 | ) |
|
| i 0.06 |
|
The following table summarized the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2021 and 2020 as such shares would have had an anti-dilutive effect:
/
| F-39 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
i
|
| 2021 |
|
| 2020 |
| ||
Common Stock Warrants |
|
| i 3,567,827 |
|
|
| - |
|
Common Stock Options |
|
| i 37,000 |
|
|
| - |
|
Convertible Debt |
|
| i 218,977 |
|
|
| - |
|
Total |
|
| i 3,823,804 |
|
|
| - |
|
i
NOTE 15 – STOCK OPTIONS AND WARRANTS
As of December 31, 2021, there were i 37,000 options outstanding and i 37,000 options exercisable with i expiration dates of January 2022.
A summary of the Company’s option activity during the years ended December 31, 2021 and 2020 is presented below:
i
|
|
|
|
|
|
|
| Weighted |
|
|
|
| ||||
|
|
|
|
| Weighted |
|
| Average |
|
|
|
| ||||
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| ||||
|
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
Options |
| Shares |
|
| Price |
|
| Term |
|
| Value |
| ||||
Balance Outstanding, January 1, 2020 |
|
| i 74,000 |
|
| $ | i 1.32 |
|
|
| i 1.47 |
|
| $ | i 64,800 |
|
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited |
|
| ( i 12,000 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance Outstanding, December 31, 2020 |
|
| i 62,000 |
|
| $ | i 1.19 |
|
|
| i 0.60 |
|
| $ | i 242,200 |
|
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| ( i 25,000 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
Balance Outstanding, December 31, 2021 |
|
| i 37,000 |
|
| $ | i 1.32 |
|
|
| i 0.01 |
|
| $ | i 75,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2021 |
|
| i 37,000 |
|
| $ | i 1.32 |
|
|
| i 0.01 |
|
| $ | i 75,850 |
|
As of December 31, 2021, there were i 3,698,238 warrants outstanding and i 3,698,238 warrants exercisable with i expiration dates from May 2023 through March 2024.
Warrant Anti-Dilution Adjustment and Deemed Dividend
The Company’s warrants outstanding contain certain anti-dilution adjustments if the Company issues shares of its common stock at a lower price per share than the applicable exercise price of the underlying warrant. If any such dilutive issuance occurs prior to the exercise of such warrant, the exercise price will be adjusted downward to a price equal to the common stock issuance, and the number of warrants that may be purchase upon exercise is increased proportionately so that the aggregate exercise price payable under the warrant shares shall be the same as the aggregate exercise price in effect immediately prior to such adjustment. On December 21, 2021, the Company issued its common stock upon conversion of its convertible debt at an issuance price of $ i 2.02 per share. As a result, the Company issued additional warrants to the Company’s existing warrant holders to purchase i 2,533,565 shares of common stock with an exercise price of $ i 2.02 per share. The new warrants were issued with a weighted average contractual term of i 2.04 years. The deemed dividend was recorded as an increase to accumulated deficit and additional paid-in capital and reduced net income available to common shareholders by the same amount. The Company valued (a) the fair value of the warrants immediately before the re-pricing in the amount of $ i 1,915,077, (b) the fair value of the warrants immediately after the re-pricing in the amount of $ i 9,548,110, and (c) recorded the difference as deemed dividend in the amount of $ i 7,633,033. The warrants were valued using the Black-Scholes option pricing model using the following terms: a) fair value of common stock of $ i 3.75, b) i exercise prices of $5.00, $6.00 and $7.50 before re-pricing, c) exercise price of $ i 2.02 after re-pricing, d) i terms of 1.40 years, 1.97 years, 2.20 years and 2.26 years, e) dividend rate of i 0%, and f) risk free interest rate of i 0.41%.
/
| F-40 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
A summary of the Company’s warrant activity for the years ending December 31, 2021 and 2020 is as follows:
|
|
|
|
|
|
|
| Weighted |
|
|
|
| ||||
|
|
|
|
| Weighted |
|
| Average |
|
|
|
| ||||
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| ||||
|
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
Warrants |
| Shares |
|
| Price |
|
| Term |
|
| Value |
| ||||
Balance Outstanding, January 1, 2020 |
|
| i 1,164,673 |
|
| $ | i 6.41 |
|
|
| i 4.01 |
|
| $ | - |
|
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance Outstanding, December 31, 2020 |
|
| i 1,164,673 |
|
| $ | i 6.41 |
|
|
| i 3.01 |
|
| $ | i 5,360 |
|
Granted |
|
| i 2,533,565 |
|
|
| i 2.02 |
|
|
| i 2.04 |
|
|
| - |
|
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance Outstanding, December 31, 2021 |
|
| i 3,698,238 |
|
| $ | i 2.02 |
|
|
| i 2.03 |
|
| $ | i 4,992,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2021 |
|
| i 3,698,238 |
|
| $ | i 2.02 |
|
|
| i 2.03 |
|
| $ | i 4,992,621 |
|
i
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. The following table presents our revenue disaggregated by country for the years ended:
i
Country |
| 2021 |
|
| 2020 |
| ||
Croatia |
| $ | i 18,441 |
|
| $ | i 24,840 |
|
Cyprus |
|
| i 112,640 |
|
|
| i 36,987 |
|
Denmark |
|
| i 53,710 |
|
|
| i 537,098 |
|
France |
|
| - |
|
|
| i 18,988 |
|
Germany |
|
| i 13,370 |
|
|
| i 1,314,381 |
|
Greece |
|
| i 55,564,240 |
|
|
| i 51,259,784 |
|
Ireland |
|
| - |
|
|
| i 36,349 |
|
Italy |
|
| i 15,446 |
|
|
| i 75,183 |
|
Jordan |
|
| - |
|
|
| i 29,635 |
|
Libya |
|
| - |
|
|
| i 1,028 |
|
Netherlands |
|
| - |
|
|
| i 188,890 |
|
Poland |
|
| - |
|
|
| i 29,358 |
|
UK |
|
| i 461,820 |
|
|
| i 1,853,816 |
|
Total |
| $ | i 56,239,667 |
|
| $ | i 55,406,337 |
|
| F-41 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
i
NOTE 17 – SUBSEQUENT EVENTS
Extension of Maturity Dates on Existing Promissory Notes
On February 23, 2022, the Company entered into allonges to extend the maturity dates of existing Senior Promissory Notes to i June 30, 2023 (See Note 11).
Security Purchase Agreement – Preferred Stock
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 i 6,000 shares of the Company’s Series A Convertible Preferred Stock, or the Series A Shares, at a price of $1,000.00 per share, and i 2,000,000 warrants to purchase shares of common stock, or the Warrants, for aggregate gross proceeds of approximately $ i 6 million. 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.
Settlement of Debt
On February 28, 2022, the Company issued i 238,000 shares of common stock upon the triggering event which was approval of the listing of the Company’s common stock to the Nasdaq to settle $ i 1,190,000 (€1,000,000) of debt.
Extension to Debt Agreement
On March 3rd 2022, the Company’s wholly-owned subsidiary, SkyPharm SA, signed an extension to the facility agreement dated on May 12th 2017 relating to the USD $ i 4,000,000 loan. Based on the updated repayment terms the facility’s final repayment date was extended to i January 2023 (see Note 11).
/
| F-42 |
| Table of Contents |
Item 9A. 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/Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
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 ineffective due to material weaknesses stated in Management’s Report on Internal Control over Financial Reporting set forth below.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
| · | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions; |
| · | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and |
| · | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
With the participation of the Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on this evaluation, our management has concluded that our internal controls over financial reporting were ineffective as of December 31, 2021, as the result of the below weaknesses.
| 3 |
| Table of Contents |
AS 2201 and the SEC define the term “material weakness” as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.” We had the following material weaknesses at December 31, 2021 set forth below:
| · | The Company has a lack of proper segregation of duties. |
| · | The Company’s internal control structure lacks multiple levels of review and oversight. |
Remediation of Deficiencies and Material Weaknesses
We are in the process of remediating all material weaknesses present in our internal controls.
· | The Company has a lack of proper segregation of duties. |
We are in the process of updating the organizational chart in order to reallocate roles among personnel and emphasize sharing the responsibilities of key business processes by distributing the discrete functions of these processes to multiple people and departments. Specifically, we have delegated the following processes to different personnel; authorization, custody, recordkeeping, and reconciliation. For example, a manager authorizing discount sales is not responsible for maintaining accounts receivable records or handling cash receipts. In addition, we have set access rights at the data and our software based on the job responsibilities and level of the personnel, therefore unauthorized users are not able to change any data on the system or process to bank transactions.
· | The Company’s internal control structure lacks multiple levels of review and oversight. |
We are in the process of developing multiple levels of review based on job responsibilities and level of personnel. For example, management reviews whether the bank reconciliations are being prepared on a timely basis by the preparer and whether there are discrepancies between the general ledger and the bank statements. Another example is the review of management accounting information by the CFO and his authorization for material transactions and adjustments. Also, the payroll is prepared by an outsourcing company, which is then reviewed by the Accountant and then the CFO approves the payroll expense and proceeds to payments.
Limitations on the Effectiveness of Internal Controls
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting are or will be capable of preventing or detecting all errors or all fraud. Any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements, due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns may occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risk.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation requirement of Section 404(b) of the Sarbanes-Oxley Act by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control 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, our internal control over financial reporting.
| 4 |
| Table of Contents |
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| 5 |
| Table of Contents |
| ||
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| |
| ||
|
| |
| Common Stock Purchase Warrant dated September 4, 2017 issued to Roth Capital Partners LLC (15) | |
|
| |
| ||
|
| |
| ||
|
|
|
| ||
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|
|
| ||
|
|
|
| ||
|
|
|
| Pledge Agreement, by and between Grigorios Siokas and Synthesis Peer-to Peer Income Fund (4) | |
|
|
|
| ||
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|
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| ||
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| ||
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| ||
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| ||
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| ||
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| ||
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| 6 |
| Table of Contents |
| 7 |
| Table of Contents |
| 8 |
| Table of Contents |
| 9 |
| Table of Contents |
| ||
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| ||
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| ||
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| ||
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| ||
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| ||
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|
|
|
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* |
| ||
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.* |
| 10 |
| Table of Contents |
* | Previously filed with this Report |
|
|
** | Filed with this Report |
|
|
(1) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 12, 2021. |
|
|
(2) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on March 1, 2022. |
|
|
(3) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 9, 2015. |
|
|
(4) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on August 16, 2016. |
|
|
(5) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on September 16, 2016. |
|
|
(6) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on October 5, 2016. |
|
|
(7) | Incorporated by reference to the Current Report on Form 8-K/A filed by the Registrant on March 28, 2017. |
|
|
(8) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on April 14, 2017. |
|
|
(9) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on May 18, 2017. |
|
|
(10) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 16, 2017. |
|
|
(11) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on December 27, 2017. |
|
|
(12) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on February 21, 2018. |
|
|
(13) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on March 19, 2018. |
|
|
(14) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 3, 2013. |
|
|
(15) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 5, 2018. |
|
|
(16) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on May 31, 2018. |
|
|
(17) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 26, 2018. |
|
|
(18) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on July 19, 2018. |
|
|
(19) | Incorporated by reference to the filing of the Annual Report on Form 10-K filed by the Registrant on April 17, 2018. |
|
|
(20) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 27, 2018. |
| 11 |
| Table of Contents |
(21) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 19, 2018. |
|
|
(22) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 13, 2018. |
|
|
(23) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 21, 2018. |
|
|
(24) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on February 6, 2019. |
|
|
(25) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on February 19, 2019. |
|
|
(26) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 4, 2019. |
|
|
(27) | Incorporated by reference to Registration Statement on Form S-1/A (No. 333-222061) filed by the Registrant on January 31, 2018. |
|
|
(28) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on May 16, 2019. |
|
|
(29) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on May 28, 2019. |
|
|
(30) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 25, 2019. |
|
|
(31) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 23, 2020. |
|
|
(32) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on May 15, 2020. |
|
|
(33) | Incorporated by reference to the filing of the Current Report on Form 10-Q filed by the Registrant on August 13, 2020. |
|
|
(34) | Incorporated by reference to the filing of the Report on Form 8-K filed by the Registrant on September 24, 2020. |
|
|
(35) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 21, 2020. |
|
|
(36) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on November 13, 2020. |
|
|
(37) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on November 16, 2020. |
|
|
(38) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on November 17, 2020. |
| 12 |
| Table of Contents |
(39) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 22, 2020. |
|
|
(40) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 11, 2021. |
|
|
(41) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 2, 2021. |
|
|
(42) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 8, 2021. |
|
|
(43) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on May 17, 2021. |
|
|
(44) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 21, 2021. |
|
|
(45) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 25, 2021. |
|
|
(46) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on July 14, 2021. |
|
|
(47) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on July 27, 2021. |
|
|
(48) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on August 10, 2021. |
|
|
(49) | Incorporated by reference to the filing of the Current Report on Form 10-Q filed by the Registrant on August 16, 2021. |
|
|
(50) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 21, 2021. |
|
|
(51) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 1, 2022. |
|
|
(52) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on October 4, 2018 |
None.
| 13 |
| Table of Contents |
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: December 15, 2022 | By: | /s/ Grigorios Siokas | |
| |||
In accordance with the Exchange Act, this report has been duly signed by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signatures |
| Title |
| Date |
| ||||
/s/ Grigorios Siokas |
| Chief Executive Officer and Director |
| |
| (Principal Executive Officer) | |||
|
|
|
|
|
/s/ Georgios Terzis |
| Chief Financial Officer |
| |
| (Principal Financial Officer, and Principal Accounting Officer) |
|
| |
|
| |||
| Director |
| ||
| ||||
| Secretary and Director |
| ||
| ||||
/s/ John J. Hoidas |
| Director |
| |
|
|
|
|
|
| Director |
| ||
|
|
|
|
| 14 |
| This ‘10-K/A’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 8/5/26 | ||||
| 12/31/25 | ||||
| 11/18/25 | ||||
| 12/15/23 | ||||
| 6/30/23 | ||||
| Filed on: | 12/16/22 | EFFECT | ||
| 12/15/22 | EFFECT | |||
| 11/29/22 | 4/A | |||
| 10/31/22 | ||||
| 9/17/22 | ||||
| 6/30/22 | 10-Q, NT 10-Q | |||
| 5/6/22 | ||||
| 4/15/22 | 10-K | |||
| 3/31/22 | 10-Q, NT 10-K, NT 10-Q | |||
| 3/1/22 | 8-K, DEF 14C | |||
| 2/28/22 | 8-K, DEF 14C | |||
| 2/23/22 | 8-K | |||
| 1/1/22 | ||||
| For Period end: | 12/31/21 | 10-K, 5, NT 10-K | ||
| 12/29/21 | ||||
| 12/21/21 | ||||
| 12/15/21 | ||||
| 12/8/21 | 4, 8-K, 8-K/A | |||
| 11/16/21 | 8-K | |||
| 10/31/21 | ||||
| 10/30/21 | ||||
| 10/12/21 | 8-K | |||
| 10/4/21 | 8-K | |||
| 9/30/21 | 10-Q | |||
| 9/21/21 | 8-K | |||
| 9/17/21 | 8-K | |||
| 9/15/21 | ||||
| 8/31/21 | ||||
| 8/16/21 | 10-Q | |||
| 8/10/21 | 8-K | |||
| 8/4/21 | 8-K | |||
| 7/30/21 | ||||
| 7/27/21 | 8-K/A | |||
| 7/19/21 | 4, 8-K, 8-K/A | |||
| 7/14/21 | 4, 8-K | |||
| 7/13/21 | 4, 8-K | |||
| 7/7/21 | ||||
| 7/1/21 | ||||
| 6/30/21 | 10-Q | |||
| 6/25/21 | 4, 8-K | |||
| 6/23/21 | 4, 8-K | |||
| 6/21/21 | 4, 8-K | |||
| 6/18/21 | 8-K | |||
| 6/16/21 | ||||
| 5/17/21 | 10-Q | |||
| 5/10/21 | ||||
| 5/6/21 | ||||
| 4/8/21 | 8-K | |||
| 4/2/21 | 8-K | |||
| 3/11/21 | 8-K | |||
| 2/23/21 | ||||
| 2/5/21 | 8-K | |||
| 1/7/21 | ||||
| 12/31/20 | 10-K, 5, NT 10-K | |||
| 12/30/20 | ||||
| 12/22/20 | 8-K | |||
| 12/21/20 | 4, 8-K | |||
| 12/16/20 | ||||
| 11/30/20 | ||||
| 11/19/20 | ||||
| 11/17/20 | 8-K | |||
| 11/16/20 | 10-Q | |||
| 11/13/20 | 8-K/A | |||
| 10/31/20 | ||||
| 10/29/20 | 8-K | |||
| 10/21/20 | 4 | |||
| 10/10/20 | ||||
| 9/30/20 | 10-Q | |||
| 9/24/20 | 8-K | |||
| 9/23/20 | 8-K | |||
| 9/16/20 | ||||
| 8/31/20 | ||||
| 8/13/20 | 10-Q | |||
| 8/4/20 | ||||
| 7/31/20 | 4 | |||
| 7/3/20 | ||||
| 6/30/20 | 10-Q | |||
| 6/24/20 | ||||
| 6/23/20 | ||||
| 6/8/20 | ||||
| 5/22/20 | ||||
| 5/18/20 | ||||
| 5/15/20 | 10-Q | |||
| 5/12/20 | ||||
| 5/8/20 | ||||
| 5/5/20 | ||||
| 4/30/20 | ||||
| 3/23/20 | 8-K | |||
| 3/15/20 | ||||
| 2/25/20 | ||||
| 1/1/20 | ||||
| 12/31/19 | 10-K, NT 10-K | |||
| 7/25/19 | 8-K | |||
| 6/25/19 | 8-K | |||
| 5/28/19 | 4, 8-K | |||
| 5/17/19 | ||||
| 5/16/19 | 8-K | |||
| 5/15/19 | 8-K | |||
| 4/4/19 | 8-K | |||
| 3/18/19 | ||||
| 2/19/19 | 8-K | |||
| 2/6/19 | 8-K | |||
| 12/31/18 | 10-K, 10-K/A, 5, 5/A, NT 10-K | |||
| 12/21/18 | 4, 8-K | |||
| 12/20/18 | 4, 8-K | |||
| 12/19/18 | 8-K, 8-K/A | |||
| 12/13/18 | 8-K | |||
| 10/19/18 | 8-K | |||
| 10/17/18 | 8-K | |||
| 10/4/18 | 8-K | |||
| 10/1/18 | ||||
| 9/27/18 | 8-K | |||
| 9/5/18 | 8-K | |||
| 7/19/18 | 8-K | |||
| 7/16/18 | 8-K | |||
| 6/26/18 | 8-K | |||
| 5/31/18 | 424B3, 8-K | |||
| 5/22/18 | ||||
| 5/17/18 | ||||
| 5/16/18 | ||||
| 4/18/18 | 8-K | |||
| 4/17/18 | 10-K | |||
| 3/19/18 | 8-K | |||
| 3/16/18 | ||||
| 2/21/18 | 8-K | |||
| 1/31/18 | S-1/A | |||
| 12/27/17 | 8-K/A | |||
| 11/21/17 | ||||
| 11/16/17 | 8-K | |||
| 5/18/17 | 8-K | |||
| 5/12/17 | 8-K, NT 10-Q | |||
| 4/14/17 | 8-K | |||
| 3/28/17 | 8-K | |||
| 11/15/16 | 8-K | |||
| 11/4/16 | 4 | |||
| 10/5/16 | 8-K | |||
| 9/16/16 | 8-K | |||
| 8/16/16 | 8-K | |||
| 11/16/15 | NT 10-Q | |||
| 11/9/15 | 8-K | |||
| 11/21/14 | 8-K | |||
| 8/1/14 | ||||
| 11/14/13 | 8-K/A | |||
| 10/3/13 | 8-K | |||
| 9/27/13 | 3, 8-K, 8-K/A | |||
| 7/21/09 | ||||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 1/18/23 Cosmos Health Inc. S-3 4:530K Discount Edgar/FA 12/21/22 Cosmos Health Inc. 424B5 1:403K Discount Edgar/FA |