Cosmos Health Inc 10-Q for FY2020 Q1

Cosmos Health Inc. (COSM)

10-Q 2020-05-15 For: 2020-03-31

Added on April 07, 2026

About this 10-Q

Cosmos Health Inc filed this 10-Q on May 15, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $11.93M; up 23.2% from $9.68M a year earlier
Net loss: $483.31K; compared with a net loss of $217.17K a year earlier
Diluted EPS: -$0.04; compared with -$0.02 a year earlier

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Nevada		27-0611758
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

141 West Jackson Blvd, Suite 4236 Chicago, Illinois		60604
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)		Emerging growth company	¨

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited).

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	36

Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	44

Item 4.	Controls and Procedures.	44

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	45

Item 3.	Defaults Upon Senior Securities.	45

Item 4.	Mine Safety Disclosures.	45

Item 5.	Other Information.	45

Item 6.	Exhibits.	46

SIGNATURES		47

COSMOS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2020			December 31, 2019
	(Unaudited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	984,881		$	38,537
Accounts receivable, net		11,017,329			7,348,945
Accounts receivable - related party		738,283			1,919,043
Marketable securities		212,900			238,940
Inventory		3,414,734			3,474,220
Other investments		4,298			4,381
Prepaid expenses and other current assets		1,531,657			1,549,055
Prepaid expenses and other current assets - related party		2,343,924			5,940,124
Operating lease right-of-use asset		441,441			498,180
Financing lease right-of-use asset		132,494			167,310

TOTAL CURRENT ASSETS		20,821,941			21,178,735

Property and equipment, net		1,705,033			1,734,781
Goodwill and intangible assets, net		255,433			263,681
Other assets		689,756			702,439

TOTAL ASSETS	$	23,472,163		$	23,879,636

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	6,833,489		$	8,561,681
Accounts payable and accrued expenses - related party		35,162			240,302
Customer advances		170,990			247,318
Convertible notes payable, net of unamortized discount of $0 and $29,509, respectively		1,400,000			1,470,491
Notes payable		13,297,462			12,029,724
Notes payable - related party		1,346,376			1,375,532
Lines of credit		3,435,005			2,750,992
Loans payable - related party		1,487,807			1,026,264
Taxes payable		172,632			175,939
Operating lease liability, current portion		111,806			139,556
Financing lease liability, current portion		50,064			58,185
Other current liabilities		154,668			165,271

TOTAL CURRENT LIABILITIES		28,495,461			28,241,255

Share settled debt obligation		1,554,590			1,554,590
Operating lease liability, net of current portion		328,309			353,024
Financing lease liability, net of current portion		74,681			82,523
Other liabilities		107,023			109,073
TOTAL LIABILITIES		30,560,064			30,340,465

Commitments and Contingencies (see Note 13)		-			-

STOCKHOLDERS' DEFICIT:
Preferred stock, $0.001 par value; 100,000,000 shares authorized; 0 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively		-			-
Common stock, $0.001 par value; 300,000,000 shares authorized; 13,225,387 shares issued and 12,860,059 outstanding as of March 31, 2020 and December 31, 2019		13,225			13,225
Additional paid-in capital		13,525,749			13,525,749
Treasury stock, 365,328 shares as of March 31, 2020 and December 31, 2019		(411,854	)		(411,854	)
Accumulated deficit		(20,054,920	)		(19,571,610	)
Accumulated other comprehensive loss		(160,101	)		(16,339	)

TOTAL STOCKHOLDERS' DEFICIT		(7,087,901	)		(6,460,829	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	23,472,163		$	23,879,636

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

COSMOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)

	Three Months Ended March 31,
	2020			2019

REVENUE	$	11,933,248		$	9,683,341

COST OF GOODS SOLD		10,740,077			9,057,179

GROSS PROFIT		1,193,171			626,162

OPERATING EXPENSES
General and administrative expenses		867,599			743,531
Depreciation and amortization expense		100,008			56,373
TOTAL OPERATING EXPENSES		967,607			799,904

INCOME (LOSS) FROM OPERATIONS		225,564			(173,742	)

OTHER INCOME (EXPENSE)
Other income (expense), net		(11,434	)		2,357
Interest expense - related party		(66	)		(66	)
Interest expense		(412,055	)		(259,712	)
Non-cash interest expense		(29,509	)		(229,713	)
Gain (loss) on equity investments, net		(22,172	)		606,125
Foreign currency transaction loss, net		(227,134	)		(160,640	)
TOTAL OTHER EXPENSE, NET		(702,370	)		(41,649	)

LOSS BEFORE INCOME TAXES		(476,806	)		(215,391	)

INCOME TAX EXPENSE		(6,504	)		(1,782	)

NET LOSS		(483,310	)		(217,173	)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment, net		(143,762	)		61,629

TOTAL COMPREHENSIVE LOSS	$	(627,072	)	$	(155,544	)

BASIC NET LOSS PER SHARE	$	(0.04	)	$	(0.02	)
DILUTED NET LOSS PER SHARE	$	(0.04	)	$	(0.02	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		13,225,387			13,384,574
Diluted		13,225,387			13,384,574

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

Cosmos Holdings, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT


																						Other
	Preferred Stock				Common Stock						Additional		Treasury Stock									Comprehensive			Total
	No. of Shares		Value		No. of Shares			Value			Paid-in Capital		No. of Shares			Value			Accumulated Deficit			Income (Loss)			Stockholders' Deficit

Balance at January 1, 2019		-		-		13,878,757		$	13,879		$	13,133,982		(193,690	)	$	(225,494	)	$	(16,272,645	)	$	32,828		$	(3,317,450	)
Foreign currency translation adjustment, net		-		-		-			-			-		-			-			-			61,629			61,629
Cancellation of pre-delivery shares issued in connection with convertible debentures		-		-		(573,742	)		(574	)		574		-			-			-			-			-
Purchase of treasury stock from third party		-		-		-			-			-		(23,847	)		(71,541	)		-			-			(71,541	)
Net loss		-		-		-			-			-		-			-			(217,173	)		-			(217,173	)
Balance at March 31, 2019		-		-		13,305,015			13,305			13,134,556		(217,537	)		(297,035	)		(16,489,818	)		94,457			(3,544,535	)

Balance at January 1, 2020		-		-		13,225,387		$	13,225		$	13,525,749		(365,328	)	$	(411,854	)	$	(19,571,610	)	$	(16,339	)	$	(6,460,829	)
Foreign currency translation adjustment, net		-		-		-			-			-		-			-			-			(143,762	)		(143,762	)
Net loss		-		-		-			-			-		-			-			(483,310	)		-			(483,310	)
Balance at March 31, 2020		-		-		13,225,387			13,225			13,525,749		(365,328	)		(411,854	)		(20,054,920	)		(160,101	)		(7,087,901	)

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

COSMOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Three Months Ended March 31,
	2020			2019

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(483,310	)	$	(217,173	)
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:
Depreciation and amortization expense		61,760			56,373
Amortization of right-of-use assets		38,248			69,632
Amortization of debt discounts		29,509			229,713
Lease expense		53,600			-
Interest on finance leases		2,301			-
(Gain) loss on change in fair value of equity investments		22,172			(606,125	)
Changes in Assets and Liabilities:
Accounts receivable, net		(3,668,384	)		(816,540	)
Accounts receivable - related party		1,180,760			(269,447	)
Inventory		59,486			452,208
Prepaid expenses and other current assets		17,398			290,663
Prepaid expenses and other current assets - related party		3,596,200			(31,767	)
Other assets		12,683			8,551
Accounts payable and accrued expenses		(1,728,192	)		349,271
Accounts payable and accrued expenses - related party		(205,140	)		(10,884	)
Customer advances		(76,328	)		50,866
Other current liabilities		(10,603	)		(41,426	)
Lease liabilities		(41,542	)		(27,417	)
Taxes payable		(3,307	)		-
Other liabilities		(2,050	)		29,569
NET CASH USED IN OPERATING ACTIVITIES		(1,144,739	)		(483,933	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets		(54,223	)		(462,545	)
Proceeds from sale of investments		-			333,014
NET CASH USED IN INVESTING ACTIVITIES		(54,223	)		(129,531	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of convertible note payable		(100,000	)		(365,513	)
Proceeds from convertible note payable		-			-
Payment of related party note payable		(3,305	)		(14,035	)
Proceeds from note payable		1,310,000			-
Payment of related party loan		(49,572	)		(38,175	)
Proceeds from related party loan		516,819			-
Payment of lines of credit		(3,344,072	)		(1,875,720	)
Proceeds from lines of credit		4,079,719			2,518,913
Payments of finance lease liability		(19,886	)		(8,121	)
Purchase of treasury stock		-			(71,541	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		2,389,703			145,808

Effect of exchange rate changes on cash		(244,397	)		(87,031	)

NET CHANGE IN CASH		946,344			(554,687	)

CASH AT BEGINNING OF PERIOD		38,537			864,343
CASH AT END OF PERIOD	$	984,881		$	309,656

Supplemental Disclosure of Cash Flow Information

Cash paid during the period:
Interest	$	124,178		$	119,770
Income tax	$	11,605		$	-

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Cancellation of pre-delivery shares issued for conversion of convertible notes payable	$	-		$	574

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

	Estimated Useful Life
Leasehold improvements and technical works		Lesser of lease term or 40 years
Vehicles		6 years
Machinery		20 years
Furniture, fixtures and equipment		5–10 years
Computers and software		3-5 years

	March 31, 2020						Total Carrying
	Level 1		Level 2		Level 3		Value
Marketable securities – ICC International Cannabis Corp.	$	14,100		-		-	$	14,100
Marketable securities – Divsersa S.A.		196,525		-		-		196,525
Marketable securities – National Bank of Greece		2,275		-		-		2,275
	$	212,900					$	212,900

	December 31, 2019						Total Carrying
	Level 1		Level 2		Level 3		Value
Marketable securities – ICC International Cannabis Corp.	$	33,000		-		-	$	33,000
Marketable securities – Divsersa S.A.		200,290		-		-		200,290
Marketable securities – National Bank of Greece		5,650		-		-		5,650
	$	238,940					$	238,940

	March 31, 2020			December 31, 2019
Leasehold improvements	$	563,304		$	548,000
Vehicles		112,893			115,055
Furniture, fixtures and equipment		1,418,701			1,439,839
Computers and software		106,587			85,052
		2,201,485			2,187,946
Less: Accumulated depreciation and amortization		(496,452	)		(453,165	)
Total	$	1,705,033		$	1,734,781

	March 31, 2020			December 31, 2019
License	$	50,000		$	50,000
Trade name / mark		36,997			36,997
Customer base		176,793			176,793
		263,790			263,790
Less: Accumulated amortization		(58,054	)		(49,806	)
Subtotal		205,736			213,984
Goodwill		49,697			49,697
Total	$	255,433		$	263,681

	2020			2019

Beginning Balance	$	1,375,532		$	1,793,437
Payments		(3,305	)		(382,055	)
Foreign currency translation		(25,851	)		(35,850	)
Ending Balance	$	1,346,376		$	1,375,532

	March 31, 2020		December 31, 2019
National	$	2,629,327	$	1,940,045
Alpha		805,678		810,947
Eurobank		-		-
Total	$	3,435,005	$	2,750,992

	2020			2019

Beginning balance notes		1,500,000			365,513
New notes		-			1,500,000
Payments		(100,000	)		(365,513	)
Subtotal notes		1,400,000			1,500,000
Debt discount at year end		-			(29,509	)
Note payable net of discount		1,400,000			1,470,491

March 31, 2020	Loan Facility		Bridge Loans		Trade Facility			Third Party			Total
Beginning balance	$	3,078,442	$	191,287	$	6,245,400		$	2,514,595		$	12,029,724
Proceeds		-		-		-			1,310,000			1,310,000
Payments		-		-		-			(227,912	)		(227,912	)
Foreign currency translation		-		-		(42,200	)		(62	)		(42,262	)
Ending Balance	$	3,078,442	$	191,287	$	6,203,200		$	3,824,533		$	13,297,462

	·	The Lender will provide Decahedron a facility of up to €2,750,000 ($3,424,850) secured against Decahedron’s receivables from the sale of branded and generic pharmaceutical sales.

	·	The total facility will be calculated as 95% of the agreed upon value of Decahedron’s receivables.

·	The term of the Decahedron Facility will be for 12 months.

·	The obligations of Decahedron are guaranteed by the Company pursuant to a Cross Guarantee and Indemnity Agreement.

·	The Lender has the right to make payments directly to Decahedron’s suppliers.

·	The following fees should be paid in connection with the Decahedron Facility:

	o	2% of the maximum principal amount as an origination fee.

	o	A one percent (1%) monthly fee.

·	The Lender will provide SkyPharm a facility of up to €2,000,000 ($2,203,200) secured against SkyPharm’s receivables from the sale of branded and generic pharmaceutical sales. In the event that accounts receivable become uncollectible, the Company will be obligated to pay back the notes in full.

·	The total facility will be calculated as 95% of the agreed upon value of Decahedron’s receivables.

·	The term of the SkyPharm Facility will be for 12 months.

·	The obligations of SkyPharm are guaranteed by the Company pursuant to a Cross Guarantee and Indemnity Agreement.

·	The Lender has the right to make payments directly to SkyPharm’s suppliers.

·	The following fees should be paid in connection with the SkyPharm Facility:

	o	2% of the maximum principal amount as an origination fee.

	o	A one percent (1%) monthly fee.

	·	A listing of approved purchasers;

	·	To permit SkyPharm to request Synthesis to make payments under the TFF directly to SkyPharm so that SkyPharm can discharge its obligations to a commodity seller directly;

	·	To prohibit SkyPharm from entering into a commodity contract which grants more than seventy-five (75) days delay between the payment for products and receipt of the purchase price and placed other limitations on terms of commodity contracts;

	·	If Grigorios Siokas, CEO of Cosmos Holdings Inc. (“Cosmos”), ceases to own or control at least fifty-one (51%) percent of the shares of Cosmos, or SkyPharm ceases to be a wholly-owned subsidiary of Cosmos, either event shall constitute an Event of Default (as defined);

	·	The maximum aggregate amount of the TFF is €15,000,000, although there is no commitment for any future loans under the TFF;

	·	The interest rate on the TFF for: (i) all lending in U.S. dollars is the one-month LIBOR plus six (6%) percent margin; and (ii) for all lending in Euro, the one-month Euribor Rate plus six (6%) percent per annum, commencing June 1, 2018.

	·	Synthesis is permitted to terminate the TFF at any time and demand repayment of all outstanding principal and interest in full within six (6) months from the date of notification.

Maturity of Lease Liability
Remainder of 2020	$	114,222
2021		80,728
2022		52,877
2023		52,877
2024		52,877
Thereafter		198,288
Total undiscounted finance lease payments	$	551,869
Less: Imputed interest		111,722
Present value of finance lease liabilities	$	440,146

Maturity of Lease Liability
Remainder of 2020	$	44,001
2021		45,391
2022		27,831
2023		16,268
2024		4,047
Thereafter		-
Total undiscounted finance lease payments	$	137,539
Less: Imputed interest		12,828
Present value of finance lease liabilities	$	124,710

	·	50,000 shares upon the successful conclusion of Preclinical Trials.

	·	50,000 shares upon the conclusion of Phase I testing.

	·	50,000 shares upon the conclusion of Phase II testing.

	·	50,000 shares upon the conclusion of Phase III testing.

					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
Options	Shares		Price		Term		Value
Balance Outstanding, December 31, 2019		74,000	$	1.32		2.47	$	198,000
Granted		-		-		-		-
Forfeited		-		-		-		-
Exercised		-		-		-		-
Expired		-		-		-		-
Balance Outstanding, March 31, 2020		74,000	$	1.32		1.32	$	24,750

Exercisable, March 31, 2020		74,000	$	1.32		1.32	$	24,750

Country	March 31, 2020		March 31, 2019
Belgium	$	-	$	-
Croatia		-		5,395
Denmark		-		57,657
France		1,091		42,061
Georgia		-		-
Germany		667,302		2,076,814
Greece		10,689,681		5,456,573
Hungary		36,140		49,912
Indonesia		-		-
Iraq		-		-
Ireland		35,113		132,417
Italy		6,041		73,437
Jordan		9,417		20,432
Netherlands		41,983		337,683
Poland		33,455		138,270
Turkey		28,398		24,695
UK		384,627		1,267,995
Total	$	11,933,248	$	9,683,341

	·	Drug shortages due to ban of exports

	·	Problems/restrictions in supply chain

	·	Logistics delays (5-7 days)

	·	Restrictions on employees’ ability to work (10% of employees are working from home)

	·	Liquidity issues (AR/AP) – payment delays and new government regulations for freezing payment terms

	·	National or EU long lasting recession

Exhibit No.		Document Description

10.1		Form of May 5, 2020 Senior Promissory Note with Personal Guaranty of Grigorios Siokas

10.2		Form of May 8, 2020 Senior Promissory Note with Personal Guaranty of Grigorios Siokas

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

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

101.INS		XBRL Instance Document**

101.SCH		XBRL Taxonomy Extension Schema Document**

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB		XBRL Taxonomy Extension Label Linkbase Document**

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**

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

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

	Cosmos Holdings Inc.

Date: May 15, 2020	By:	/s/ Grigorios Siokas
		Grigorios Siokas
		Chief Executive Officer
		(Principal Executive Officer,
		Acting Principal Financial Officer and
		Acting Principal Accounting Officer)

	COSMOS HOLDINGS INC.

	By:
	Name:	Grigorios Siokas
	Title:	CEO

	LENDER:

	By:
	Name:

1.	I have reviewed this report on Form 10-Q of Cosmos Holdings Inc.;

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

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

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

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

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

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

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

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

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

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