The accompanying notes are an integral part of these unaudited consolidated financial statements.
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
9,546,951
|
|
|
$
|
1,414,503
|
|
|
$
|
19,775,398
|
|
|
$
|
3,506,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE
|
|
|
8,772,138
|
|
|
|
1,269,553
|
|
|
|
18,156,795
|
|
|
|
3,192,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
774,813
|
|
|
|
144,950
|
|
|
|
1,618,603
|
|
|
|
314,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
752,198
|
|
|
|
173,498
|
|
|
|
2,416,540
|
|
|
|
466,293
|
|
Depreciation and amortization expense
|
|
|
6,167
|
|
|
|
2,421
|
|
|
|
17,199
|
|
|
|
6,956
|
|
Impairment of goodwill
|
|
|
-
|
|
|
|
-
|
|
|
|
1,949,884
|
|
|
|
-
|
|
TOTAL OPERATING EXPENSES
|
|
|
758,365
|
|
|
|
175,919
|
|
|
|
4,383,623
|
|
|
|
473,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAIN (LOSS) FROM OPERATIONS
|
|
|
16,448
|
|
|
|
(30,969
|
)
|
|
|
(2,765,020
|
)
|
|
|
(158,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
Interest expense - related party
|
|
|
(66
|
)
|
|
|
(919
|
)
|
|
|
(198
|
)
|
|
|
(2,741
|
)
|
Interest expense
|
|
|
(291,224
|
)
|
|
|
(53,794
|
)
|
|
|
(572,679
|
)
|
|
|
(103,803
|
)
|
Other expense
|
|
|
(13,295
|
)
|
|
|
(3,388
|
)
|
|
|
(26,529
|
)
|
|
|
(4,539
|
)
|
Foreign currency transaction gain (loss)
|
|
|
89,966
|
|
|
|
(5,555
|
)
|
|
|
292,937
|
|
|
|
(7,043
|
)
|
TOTAL OTHER INCOME (EXPENSE)
|
|
|
(214,619
|
)
|
|
|
(63,656
|
)
|
|
|
(306,469
|
)
|
|
|
(118,107
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(198,171
|
)
|
|
|
(94,625
|
)
|
|
|
(3,071,489
|
)
|
|
|
(277,024
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
|
-
|
|
|
|
12
|
|
|
|
(2,690
|
)
|
|
|
(773
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(198,171
|
)
|
|
|
(94,613
|
)
|
|
|
(3,074,179
|
)
|
|
|
(277,797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation loss
|
|
|
(51,474
|
)
|
|
|
(16,622
|
)
|
|
|
(178,151
|
)
|
|
|
(38,185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER COMPREHENSIVE LOSS
|
|
$
|
(249,645
|
)
|
|
$
|
(111,235
|
)
|
|
$
|
(3,252,330
|
)
|
|
$
|
(315,982
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED NET LOSS PER SHARE
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(0.02
|
)
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
|
12,823,622
|
|
|
|
12,563,053
|
|
|
|
12,764,720
|
|
|
|
12,563,053
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
COSMOS HOLDINGS, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,074,179
|
)
|
|
$
|
(277,797
|
)
|
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
17,199
|
|
|
|
6,956
|
|
Amortization of debt discount
|
|
|
87,677
|
|
|
|
5,885
|
|
Stock-based compensation
|
|
|
265,529
|
|
|
|
-
|
|
Issuance of common stock for services
|
|
|
401,800
|
|
|
|
-
|
|
Loss on goodwill impairment
|
|
|
1,949,884
|
|
|
|
-
|
|
Changes in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(2,137,831
|
)
|
|
|
(316,012
|
)
|
Inventory
|
|
|
(1,627,085
|
)
|
|
|
(189,435
|
)
|
Prepaid expenses
|
|
|
(2,242,785
|
)
|
|
|
(198,627
|
)
|
Prepaid expenses - related party
|
|
|
(465,927
|
)
|
|
|
(119,796
|
)
|
Other assets
|
|
|
(166,896
|
)
|
|
|
(55,880
|
)
|
Accounts payable and accrued expenses
|
|
|
1,056,165
|
|
|
|
70,681
|
|
Accounts payable and accrued expenses - related party
|
|
|
(12,778
|
)
|
|
|
(135,117
|
)
|
Taxes payable
|
|
|
209,667
|
|
|
|
36,331
|
|
Deferred revenue
|
|
|
-
|
|
|
|
(62,210
|
)
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
$
|
(5,739,560
|
)
|
|
$
|
(1,235,021
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of fixed assets
|
|
$
|
(13,925
|
)
|
|
$
|
(11,880
|
)
|
Cash received from acquisition
|
|
|
40,858
|
|
|
|
-
|
|
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
$
|
26,933
|
|
|
$
|
(11,880
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payment of related party note payable
|
|
$
|
(63,200
|
)
|
|
$
|
(44,952
|
)
|
Payment of note payable
|
|
|
(461,888
|
)
|
|
|
(148,904
|
)
|
Proceeds from note payable
|
|
|
6,891,203
|
|
|
|
1,968,940
|
|
Payment of related party loan
|
|
|
(232,051
|
)
|
|
|
(21,914
|
)
|
Proceeds from related party loan
|
|
|
625,641
|
|
|
|
51,127
|
|
Payment of loans payable
|
|
|
(20,082
|
)
|
|
|
(33,714
|
)
|
Sale of common stock and warrants
|
|
|
91,780
|
|
|
|
-
|
|
Deferred financing fees
|
|
|
(213,626
|
)
|
|
|
(140,475
|
)
|
Capital contribution
|
|
|
-
|
|
|
|
140
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
$
|
6,617,777
|
|
|
$
|
1,630,248
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
$
|
(269,568
|
)
|
|
$
|
38,377
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
|
635,582
|
|
|
|
421,724
|
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
716,590
|
|
|
|
198,049
|
|
CASH AT END OF PERIOD
|
|
$
|
1,352,172
|
|
|
$
|
619,773
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
127,157
|
|
|
$
|
-
|
|
Income Tax
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash Investing and Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of Decahedron
|
|
$
|
1,479,000
|
|
|
$
|
-
|
|
Reversal of proceeds due from noteholder due to repayment of note
|
|
$
|
11,813
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
NOTE 1 – BASIS OF PRESENTATION
The terms “COSM,” “we,” “the Company,” and “us” as used in this report refer to Cosmos Holdings Inc. The accompanying unaudited consolidated balance sheet as of September 30, 2017 and unaudited consolidated statements of operations for the three and nine months ended September 30, 2017 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management of COSM, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2017, are not necessarily indicative of the results that may be expected for the year ending December 31, 2017, or any other period. These unaudited consolidated financial statements and notes should be read in conjunction with the financial statements for each of the two years ended December 31, 2016 and 2015, included in the Company’s Annual Report on Form 10-K. The accompanying consolidated balance sheet as of December 31, 2016 has been derived from the audited financial statements filed in our Form 10-K and is included for comparison purposes in the accompanying balance sheet. Certain prior year amounts have been reclassified to conform to current year presentation.
NOTE 2 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN
Cosmos Holdings, Inc. (“Cosmos”, “The Company”, “we”, or “us”) was incorporated in the State of Nevada under the name Prime Estates and Developments, Inc. on July 21, 2009 for the purpose of acquiring and operating commercial real estate and real estate related assets.
On September 27, 2013 (the “Closing”), Cosmos Holding Inc. a Nevada corporation (“Cosmos Holdings, Inc.” or the “Registrant”), closed a reverse take-over transaction by which it acquired a private company whose principal activities are the trading of products, providing representation, and provision of consulting services to various sectors. Pursuant to a Share Exchange Agreement (the “Exchange Agreement”) between the Registrant and Amplerissimo Ltd, a company incorporated in Cyprus (“Amplerissimo”), the Registrant acquired 100% of Amplerissimo’s issued and outstanding common stock.
On August 1, 2014, we, through our Cypriot subsidiary Amplerissimo, formed SkyPharm S.A. a Greek corporation (“SkyPharm”) whose principal activities and operations are the development, marketing and sales of pharmaceutical, wellness and cosmetic products.
On February 10, 2017, the Company and Decahedron Ltd, a UK Corporation (“Decahedron”) consummated the transactions contemplated by the Stock Purchase Agreement, dated November 17, 2016 as amended (the “Decahedron SPA”). Pursuant to the terms of the Decahedron SPA, the shareholders of Decahedron received an aggregate of 1,700,000 shares of common stock of the Company (the “Stock Consideration”), which were delivered following the closing in exchange for all of the Ordinary Shares of Decahedron for the Stock Consideration. In accordance with the terms of the SPA, Mr. Lazarou remained as a director and officer of Decahedron.
On November 21, 2017, the Company effected a one-for-ten (1:10) reverse stock split whereby the Company decreased, by a ratio of one-for-ten (1:10) the number of retroactively issued and outstanding shares of Common Stock. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, warrants and equity incentive plans, including all share and per-share data, for all amounts and periods presented in the consolidated financial statements.
We are currently focusing our existing operations on expanding the business of SkyPharm and our new subsidiary Decahedron, we have concentrated our efforts on becoming an international pharmaceutical company. The Company’s focus will be on Branded Pharmaceuticals, Over-the-Counter (OTC) medicines, and Generic Pharmaceuticals. The Company also intends to expand into Cosmetic-Beauty Products as well as Food Supplements and we target areas where we can build and maintain a strong position. The Company uses a differentiated operating model based on a lean, nimble and decentralized structure, an emphasis on low risk license acquisition as well as Research & Development and our ability to be better owners of pharmaceutical assets than others. This operating model and the execution of our corporate strategy are enabling the Company to achieve sustainable growth and create shareholder value.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
We regularly evaluate and, where appropriate, execute on opportunities to expand through the acquisition of branded pharmaceutical products and pharmaceutical companies in areas that will serve patients that we believe will offer above average growth characteristics and attractive margins. In particular, we look to continue to enhance our pharmaceutical and over the counter product lines by acquiring or licensing rights to additional products and regularly evaluate selective acquisition opportunities.
Going Concern
The Company’s consolidated financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company generated a net loss of $3,074,179 for the nine months ended September 30, 2017, and has a working capital deficit of $3,546,938 and an accumulated deficit of $4,076,398 as of September 30, 2017. These conditions raise substantial doubt of the Company’s ability to continue as a going concern. The Company has not yet established an adequate ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease 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 sale of common shares. 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 in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
The accompanying consolidated financial statements have been prepared in accordance with principles generally accepted in the United States of America.
Principles of Consolidation
Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries, Amplerissimo Ltd, SkyPharm S.A. and Decahedron Ltd. All significant intercompany balances and transactions have been eliminated.
Reclassifications to Prior Period Financial Statements and Adjustments
Certain reclassifications have been made in the Company’s financial statements of the prior year to conform to the current year presentation. These reclassifications have no impact on previously reported net income.
Use of Estimates
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.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of September 30, 2017 and December 31, 2016, there were no cash equivalents.
The Company maintains bank accounts in the United States denominated in U.S. Dollars and in the Republic of Cyprus, in Greece and in Bulgaria all of them denominated in Euros. The Company also maintains bank accounts in the United Kingdom of Great Britain, dominated in Euros and Great Britain Pound (British Pounds Sterling).
Account Receivable
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.
Inventory
Inventory is stated at the lower of cost or market value using the weighted average method. Inventory consists primarily of finished goods and packaging materials, i.e. packaged pharmaceutical products and the wrappers and containers they are sold in. A periodic inventory system is maintained by 100% count. Inventory is replaced periodically to maintain the optimum stock on hand available for immediate shipment.
We write-down inventories to net realizable value based on forecasted demand and market conditions, which may differ from actual results.
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation. Depreciation is provided on a straight-line basis over the useful lives (except for leasehold improvements which are depreciated over the lesser of the lease term or the useful life) of the assets as follows:
|
|
Estimated Useful Life
|
|
Furniture and fixtures
|
|
5-7 years
|
|
Office and computer equipment
|
|
3-5 years
|
|
Depreciation expense was $10,831 and $6,956 for the nine months ended September 30, 2017 and 2016, respectively.
Intangible Assets
Intangible assets with definite useful lives are recorded on the basis of cost and are amortized on a straight-line basis over their estimated useful lives. The Company uses a useful life of 5 years for 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. At September 30, 2017, no revision to the remaining amortization period of the intangible assets was made.
Amortization expense was $6,368 and $0 for the nine months ended September 30, 2017 and 2016, respectively.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
Impairment of Long-Lived Assets
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.
Goodwill and Intangibles
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.
Prior to the acquisition of Decahedron, the Company had no record goodwill value. As a result of the acquisition of Decahedron, the Company tested and expensed 100% of the goodwill allocated to the acquisition costs, an amount equal to $1,949,884 for the period ending September 30, 2017.
Fair Value Measurement
The Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, or 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. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.
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:
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
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 Company did not have any Level 2 or Level 3 assets or liabilities as of September 30, 2017.
Cash is considered to be highly liquid and easily tradable as of September 30, 2017 and therefore classified as Level 1 within our fair value hierarchy.
In addition, FASB ASC 825-10-25 Fair Value Option, or ASC 825-10-25, was effective for January 1, 2008. 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.
Revenue Recognition
We consider revenue recognizable when persuasive evidence of an arrangement exists, the price is fixed or determinable, goods or services have been delivered, and collectability is reasonably assured. These criteria are assumed to have been met if a customer orders an item, the goods or services have been shipped or delivered to the customer, and we have sufficient evidence of collectability, such a payment history with the customer. Revenue that is billed and received in advance such as recurring weekly or monthly services are initially deferred and recognized as revenue over the period the services are provided.
Stock-based Compensation
The Company records stock based compensation in accordance with ASC section 718, “Stock Compensation” and Staff Accounting Bulletin (SAB) No. 107 (SAB 107) issued by the SEC in March 2005 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 ASC 505-50 “Equity-Based Payments to Non-Employees”.
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.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
Income Taxes
The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes ASC 740. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as net operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company is liable for income taxes in the Republic of Cyprus, Greece and the United Kingdom of England. The corporate income tax rate in Cyprus is 12.5%, 29% in Greece (tax losses are carried forward for five years effective January 1, 2013) and 20% in United Kingdom of England. 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 September 30, 2017 the Company has maintained a valuation allowance against all net deferred tax assets in each jurisdiction in which it is subject to income tax.
We recognize the impact of an uncertain tax position in our financial statements if, in management’s judgment, the position is not more-likely-then-not sustainable upon audit based on the position’s technical merits. This involves the identification of potential uncertain tax positions, the evaluation of applicable tax laws and an assessment of whether a liability for an uncertain tax position is necessary. As of September 30, 2017 the Company has no uncertain tax positions recorded in any jurisdiction where it is subject to income tax.
Basic and Diluted Net Income (Loss) per Common Share
Basic and diluted net loss per share calculations are calculated on the basis of the weighted average number of common shares outstanding during the periods presented. The per share amounts include the dilutive effect of common stock equivalents in periods with net income. Basic and diluted loss per share for each of the periods ended September 30, 2017 and 2016 is the same due to the anti-dilutive nature of potential common stock equivalents.
Recent Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), which simplifies the measurement of goodwill by eliminating Step 2 from the current goodwill impairment test in the event that there is evidence of an impairment based on qualitative or quantitative assessments. ASU 2017-04 does not change how the goodwill impairment is identified, and the Company will continue to perform a qualitative assessment annually to determine whether the two step impairment test is required. Until the adoption, current accounting standards require the impairment loss to be recognized under Step 2 of the impairment test. This requires the Company to calculate the implied fair value of goodwill by assigning fair value to the reporting unit’s assets and liabilities as if the reporting unit has been acquired in a business combination, then subsequently subtracting the implied goodwill from the carrying amount of the goodwill. The new standard would require the Company to determine the fair value of the reporting unit and subtract the carrying value from the fair value of the reporting unit to determine if there is an impairment. ASU 2017-04 is effective for the Company for fiscal years after December 15, 2019, and early adoption is permitted. ASU 2017-04 is required to be adopted prospectively, and the adoption is effective for annual goodwill impairment tests performed in the year of adoption. The Company does not believe that the adoption of ASU No. 2017-4 will have a material effect on the Company’s consolidated financial position or the Company’s consolidated results of operations
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
In January 2017, the FASB issued ASU No. 2017-01, “Clarifying the Definition of a Business,” with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as an acquisition of assets or a business. ASU No. 2017-01 is effective for the Company’s fiscal year commencing on January 1, 2018. The effect of this guidance is to be applied prospectively and early adoption is permitted. The Company does not believe that the adoption of ASU No. 2017-01 will have a material effect on the Company’s consolidated financial position or the Company’s consolidated results of operations.
In February 2016, the FASB issued ASU 2016-02, “Leases,” which will require lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. The changes become effective for the Company’s fiscal year beginning July 1, 2019. Modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, is required with an option to use certain transition relief. The Company expects this ASU will increase its current assets and current liabilities, but have no net material impact on its consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09--Revenue from Contracts with Customers (Topic 606). The guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The FASB delayed the effective date to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. In addition, in March and April 2016, the FASB issued new guidance intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. Both amendments permit the use of either a retrospective or cumulative effect transition method and are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early application permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its 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 financial statements.
NOTE 3 – ACQUISITION OF DECAHEDRON, LTD.
On February 10, 2017, the Company completed the acquisition pursuant to the Decahedron SPA acquiring 100% of the outstanding shares of Decahedron, a United Kingdom company. Decahedron is a pharmaceuticals wholesaler which specializes in imports and exports of branded and generic pharmaceutical products within the EEA and around the world. At closing, the Company acquired 100% of Decahedron’s outstanding shares in exchange for 170,000 shares of Cosmos common stock valued at $1,479,000 (the “Acquisition”).
The Company recognized the Decahedron assets acquired and liabilities assumed based upon the fair value of such assets and liabilities measured as of the date of acquisition. The aggregate purchase price for Decahedron has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the license held by Decahedron for the wholesale of pharmaceuticals in the United Kingdome and Europe, the remainder has been allocated to goodwill, none of which is tax deductible.
During the nine months ended September 30, 2017, we recorded an adjustment of $28,002 primarily related to other assets and an adjustment of the accounts payable associated with the Decahedron acquisition. We finalized our allocation of the purchase price during the nine months ended September 30, 2017. The final unaudited allocation of purchase price as of September 30, 2017, is as follows:
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
|
|
Preliminary Allocation as of
|
|
|
|
|
|
|
|
|
|
February 10,
|
|
|
Allocation
|
|
|
Final
|
|
|
|
2017
|
|
|
Adjustments
|
|
|
Allocation
|
|
Current assets
|
|
$
|
6,537
|
|
|
$
|
-
|
|
|
$
|
6,537
|
|
Intangible assets
|
|
|
50,000
|
|
|
|
-
|
|
|
|
50,000
|
|
Other assets
|
|
|
305,400
|
|
|
|
(216,562
|
)
|
|
|
88,838
|
|
Total assets acquired
|
|
|
361,937
|
|
|
|
(216,562
|
)
|
|
|
145,375
|
|
Liabilities assumed:
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
|
804,819
|
|
|
|
(188,560
|
)
|
|
|
616,259
|
|
Total liabilities assumed
|
|
|
804,819
|
|
|
|
(188,560
|
)
|
|
|
616,259
|
|
Net assets acquired
|
|
|
(442,882
|
)
|
|
|
(28,002
|
)
|
|
|
(470,884
|
)
|
Consideration:
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of Common Stock Issued at Acquisition
|
|
|
1,479,000
|
|
|
|
-
|
|
|
|
1,479,000
|
|
Goodwill
|
|
$
|
1,921,882
|
|
|
$
|
28,002
|
|
|
$
|
1,949,884
|
|
The components of the acquired intangible assets were as follows (in thousands):
|
|
Amount
|
|
|
Useful Life (Years)
|
|
Licenses (a)
|
|
$
|
50,000
|
|
|
|
5
|
|
|
|
$
|
50,000
|
|
|
|
-
|
|
_____________
(a) U.K Pharmaceutical Wholesale Distribution License
Unaudited Supplemental Pro Forma Data
The pro forma statements of operations data for the nine months ended September 30, 2017, below, give effect to the Decahedron Acquisition, described above, as if it had occurred at January 1, 2017. These amounts have been calculated after applying our accounting policies and adjusting the results of Decahedron intangible amortization that would have been charged assuming the fair value adjustments had been applied and incurred since January 1, 2017. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations.
Revenue of $2,622,547 and net loss of $255,672 since the acquisition date are included in the consolidated statement of operations and comprehensive income (loss) for nine months ended September 30, 2017.
Unaudited proforma results of operations for the nine months ended September 30, 2017 and 2016 as though the Company acquired Decahedron on the first of each fiscal year are set forth below.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
|
|
Nine Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
Revenues
|
|
$
|
19,968,845
|
|
|
$
|
5,007,806
|
|
Cost of revenues
|
|
|
18,356,228
|
|
|
|
4,672,794
|
|
Gross profit
|
|
|
1,612,617
|
|
|
|
335,012
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
4,411,620
|
|
|
|
614,515
|
|
Operating loss
|
|
|
(2,799,003
|
)
|
|
|
(279,503
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense)
|
|
|
(524,952
|
)
|
|
|
(238,528
|
)
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(3,323,955
|
)
|
|
$
|
(518,031
|
)
|
The purchase price exceeded the estimated fair value of the net assets acquired by $1,949,884 which was recorded as Goodwill. Goodwill represents the difference between the total purchase price for the net assets purchased from Decahedron and the aggregate fair values of tangible and intangible assets acquired, less liabilities assumed. At the conclusion of the acquisition, goodwill was reviewed for impairment and it was determined that indicators of impairment existed.
As of September 30, 2017, after our assessment of the totality of the events that could impair goodwill, it was the Company’s conclusion “it is not more likely than not” that the Goodwill was impaired. Therefore, the Company was not required to conduct a two-step quantitative goodwill impairment test. No events have occurred after September 30, 2017 that would affect the Company’s conclusion as of the September 30, 2017 assessment date. As a result of the Company’s assessment, 100% of the goodwill of $1,949,884 was recorded as an impairment of goodwill.
NOTE 4 – PREPAID DEFERRED FINANCING COSTS
On February 28, 2016, the Company entered into an agreement with Synthesis Management Limited (“Synthesis Management”) for the purpose of securing additional financing for the Company. On September 28, 2016, the Company advanced €125,000 ($133,725) to Synthesis Management. These advances are refundable if funding is not secured and if funding is secured, the amount will be applied to the note on day one as debt discount. As of September 30, 2017, the outstanding balance on the advance is €125,000 ($147,662).
In August, 2017 the Company entered into an agreement with Synthesis Multi Asset Architecture (“Synthesis Architecture”) for the purpose of securing additional financing for the Company. On August 14, 2017, the Company advanced Synthesis Architecture €180,840 ($213,627). These advances are refundable if funding is not secured and if funding is secured, the amount will be applied to the note on day one as debt discount. As of September 30, 2017, the outstanding balance on the advance is €180,840 ($213,627).
NOTE 5 – INCOME TAXES
At September 30, 2017, the Company’s effective tax rate differs from the US federal statutory tax rate primarily due to a valuation allowance recorded against net deferred tax assets in all jurisdictions in which the Company operates. At December 31, 2016, the Company’s effective tax rate differed from the US federal statutory tax rate primarily due to earnings taxed at the lower income tax rate in Cyprus.
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 September 30, 2017, the Company has a maintained a valuation allowance against all net deferred tax assets in each jurisdiction in which it is subject to income tax.
As of September 30, 2017 the Company has no uncertain tax positions recorded in any jurisdiction where it is subject to income tax. The Company has recorded $63,724 of interest and penalties as interest expense for the nine months ended September 30, 2017 in accordance with this policy.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
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 September 30, 2017 and December 31, 2016, no preferred shares have been issued.
Common Stock
The Company is authorized to issue 300 million shares of common stock and had issued 10,000,000 in connection with the merger with Amplerissimo and had 2,558,553 shares issued prior to the merger.
Under the Exchange Agreement, the Registrant completed the acquisition of all of the issued and outstanding shares of Amplerissimo through the issuance of 10,000,000 restricted shares of Common Stock to Dimitrios Goulielmos, the sole shareholder of Amplerissimo. Immediately prior to the Exchange Agreement transaction, the Registrant had 2,558,553 shares of Common Stock issued and outstanding. Immediately after the issuance of the shares the Registrant had 12,558,553 shares of Common Stock issued and outstanding.
The consideration provided pursuant to the Exchange Agreement was the issuance of 10,000,000 shares of our common stock.
On February 10, 2017 the Company and Decahedron consummated the acquisition of Decahedron SPA. Pursuant to the terms of the Decahedron SPA, the shareholders of Decahedron received an aggregate of 170,000 shares of common stock of the Company, which were delivered at closing in exchange for all of the Ordinary Shares of Decahedron for the Stock Consideration.
Shares Issued for Services
On March 1, 2017, the Company entered into a four-month consulting agreement with a third party investment advisory firm for consideration of 500 restricted shares of common stock to be issued during the period of the agreement for any introductions and related contributions the Company receives as a result of those introductions. As of September 30, 2017, no consideration has been earned and no shares have been issued related to this agreement.
On May 1, 2017, the Company entered into an 8-month consulting agreement with a third party for web design services commencing on May 1, 2017 and terminating on January 1, 2018. As compensation for creating, delivering and maintaining a website, the Company issued 2,000 shares of common stock on May 24, 2017. The shares were valued at $14,400, which was fully recognized in the nine months ended September 30, 2017.
On May 1, 2017, the Company entered into a five-month consulting agreement with a third party advisory firm for consideration of 2,000 shares of the Company’s common stock. The stock was issued on May 25, 2017 and fair valued at $7.20 per share or $14,400, which was fully recognized in the nine months ended September 30, 2017.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
On May 8, 2017, the Company entered into a one-year consulting agreement for advisory services with a third party investment relations firm. On May 18, 2017, the Company issued to the consultant 30,000 shares of the Company’s common stock valued at $219,000. The shares are considered to be a fully earned, nonrefundable, non-apportionable and non-ratable retainer as consideration for undertaking the agreement. In addition, the Company will pay the consultant $5,000 per month in cash for the term of the agreement.
On May 25, 2017, the Company entered into a 20-month consulting agreement with a third party advisory firm for consideration of 20,000 shares of the Company’s common stock. The stock was issued on May 25, 2017 and fair valued at $7.70 per share or $154,000, which will be amortized over the length of the agreement. For the nine months ending September 30, 2017, the Company has recorded $32,874 in consulting expense related to this agreement.
As of September 30, 2017 and December 31, 2016, the Company had 12,825,393 and 12,587,053 shares of Common Stock issued and outstanding, respectively.
Potentially Dilutive Securities
On October 1, 2016 the Company granted 12,000 options to an employee of the Company as compensation for being appointed the US Finance Manager of the Company. The options have an exercise period of four years with an exercise price of $2.00. In the event that he ceases to work for the Company for any reason, he will be entitled to a pro rata portion of the annual options. The options vest monthly with 12,000 options fully vested as of September 30, 2017. (See Note 10)
On January 1, 2017 the Company granted 25,000 options to an employee of the Company as compensation for being appointed the International Finance Manager of the Company. The options have an exercise period of four years with an exercise price of $1.00 per share. In the event that he ceases to work for the Company for any reason, he will be entitled to a pro rata portion of the annual options. The options vest monthly with 18,750 options fully vested as of September 30, 2017. (See Note 10)
On January 3, 2017 the Company granted 12,000 options to an employee of the Company as compensation for being appointed as a consultant of the Company. The options have an exercise period of five years with an exercise price of $2.00 per share. In the event that he ceases to work for the Company for any reason, he will be entitled to a pro rata portion of the annual options. The options vest monthly with 9,000 options fully vested as of September 30, 2017. (See Note 10)
Sales Pursuant to Regulation S
On April 7, 2017, the Company issued shares of common stock and warrants pursuant to a private placement conducted under the exemptions from registration under Regulation S. Each unit sold to investors consists of $35,000 face value purchase price of 5,000 shares plus warrants to purchase the number of equivalent shares. The Company retains the right to accept less than the $35,000 face value from any investor at its discretion.
The Company has entered into the following subscription agreements:
On April 10, 2017, the Company sold 4,580 shares at $7.00 per share for a total purchase price of $32,060 to a private investor. The investor also received 4,580 warrants that were valued using the Black Scholes valuation model to have a fair value of $2,375 (See Note 10).
On April 26, 2017, the Company sold 4,670 shares at $7.00 per share for a total purchase price of $32,690 to a private investor. The investor also received 4,670 warrants that were valued using the Black Scholes valuation model to have a fair value of $1,521 (See Note 10).
On May 16, 2017, the Company sold 790 shares at $7.00 per share for a total purchase price of $5,530 to a private investor. The investor also received 790 warrants that were valued using the Black Scholes valuation model to have a fair value of $130 (See Note 10).
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
On July 21, 2017, the Company sold 4,300 shares at $5.00 per share for a total purchase price of $21,500 to a private investor. The Company did not grant any warrants to the investor under this agreement.
No options, warrants or other potentially dilutive securities other than those disclosed above have been issued as of September 30, 2017 and December 31, 2016.
NOTE 7 – RELATED PARTY TRANSACTIONS
On the date of our inception, we issued 2 million shares of our common stock to our 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 September 30, 2017, the Company has a prepaid balance of €347,914 ($410,991) to DOC Pharma S.A., this comprises over 10.3% of the Company’s total prepaid balance. As of December 31, 2016, the Company owed €65 ($69) to DOC Pharma S.A.
On November 1, 2015, the Company entered into a €12,000 ($12,662) Loan Agreement with DOC Pharma S.A, pursuant to which DOC Pharma S.A., paid existing bills of the Company in the amount of €12,000, excluding the Vendor Bills. The loan bears an interest rate of 2% per annum and was due and payable in full on October 31, 2016. As of September 30, 2017, the Company has an outstanding principal balance under this note of €12,000 ($14,176) and accrued interest expense of $612.
Grigorios Siokas
On October 1, 2016, the Company borrowed €5,000 ($5,276) from Mr. Siokas related to its subsidiary’s purchase of additional capital of SkyPharm. The loan is non-interest bearing and has a maturity date of October 1, 2017. During the nine months ending September 30, 2017, the Company borrowed an additional €1,000 ($1,181). The outstanding balance as of September 30, 2017 was €6,000 ($7,088).
During the year ended December 31, 2016, the Company borrowed €90,500 ($95,496) as additional loans payable from Mr. Siokas. During the nine months ended September 30, 2017, the Company borrowed an additional €473,621 ($559,488) and paid back €123,000 ($145,300) of these loans. These loans have no formal agreements and bear no interest. As 1of September 30, 2017, the Company has an outstanding principal balance under these loans of €441,121 ($521,096).
As of September 30, 2017, the Company has recorded €59,646 ($70,459) in prepayments to Mr. Siokas for board of directors fees.
Ourania Matsouki
During the year ended December 31, 2016, the Company borrowed €44,995 ($47,479) from Mrs. Matsouki. During the nine months ended September 30, 2017, the Company borrowed an additional €55,000 ($64,982) and paid back €73,437 ($86,751). These loans have no formal agreement and bear no interest. As of September 30, 2017, the Company has an outstanding principal balance under these loans of €26,558 ($31,373).
Konstantinos Vassilopoulos
During the year ended December 31, 2016, Konstantinos Vassilopoulos, US Finance Manager, paid $10,179 of existing bills of the Company. During the nine months ended September 30, 2017, the Company paid back $9,810. There is no formal agreement related to these transactions. As of September 30, 2017 the outstanding balance under this loan is $369.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
Dimitrios Goulielmos
On November 21, 2014, SkyPharm entered into a Loan Agreement with Dimitrios Goulielmos, former Chief Executive Officer and a current director of the Company, pursuant to which the Borrower borrowed €330,000 ($401,115) from Mr. Goulielmos. The Loan bears an interest rate of 2% per annum and was due and payable in full on May 11, 2015. On November 4, 2015, €130,000 ($142,860) in principal and the related accrued interest of €733 ($806) was forgiven and the remaining balance of €200,000 will no longer accrue interest as part of the stock purchase agreement with Grigorios Siokas on November 4, 2015 referenced above. As of December 31, 2016, €60,000 ($63,312) of the loan was paid back. During the nine months ended September 30, 2017 an additional €53,500 ($63,200) was paid back and a principal balance of €86,500 ($102,182) and €0.00 of accrued interest remains.
In connection with the Decahedron SPA, on February 9, 2017, Decahedron, Medihelm S.A. and Nikolaos Lazarou entered into a liability transfer agreement whereby the loan previously provided Decahedron to the Mr. Lazarou prior to the acquisition would be cancelled in exchange for Mr. Lazarou’s personal assumption of approximately £172,310 ($220,988) owed to MediHelm S.A., a creditor of Decahedron.
Except as set forth above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons.
NOTE 8 – DEBT
On March 4, 2015, the Company entered into a $9,000 Loan Agreement with Mr. Angelo Drakopoulos, pursuant to which Mr. Drakopoulos paid a $9,000 outstanding bill on behalf of the Company. The loan bears an interest rate of 8% per annum and was due and payable in full on May 5, 2016. As of September 30, 2017, the Company has an outstanding principal balance under this note of $9,000 and accrued interest expense of $1,345.
On November 5, 2015, the Company entered into a Loan Agreement pursuant to which the Company borrowed €20,000 ($21,812), of which proceeds of €10,000 ($10,906) have been received as of December 31 2016. The loan bears an interest rate of 1% per annum and was due and payable in full on November 5, 2016. The Company repaid €2,000 ($2,110) as of December 31, 2016. The Company has repaid an additional €8,000 ($9,450) as of September 30, 2017. The Company has accrued interest expense of €435 ($514) and an outstanding balance under this note of €10,000 ($11,813) as of September 30, 2017.
On November 5, 2015, the Company entered into a Loan Agreement pursuant to which the Company borrowed €80,000 ($87,248) of which proceeds of €70,000 ($76,342) have been received as of December 31, 2016. The loan bears an interest rate of 5% per annum and was due and payable in full on November 5, 2016. As of December 31, 2016, the outstanding balance was €65,000 ($68,588). During the nine months ended September 30, 2017, the Company repaid €55,000 ($64,972) and reversed the €10,000 ($11,813) receivable that was never received.
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 ($43,624) 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. The Company repaid €10,000 ($11,813) during the nine months ended September 30, 2017. As of September 30, 2017, the Company has an outstanding principal balance under this note of €30,000 ($35,439) and accrued interest expense of €4,064 ($4,801).
During the year ended December 31, 2015, the Company borrowed €30,000 ($32,718) as a loan payable from Mr. Panagiotis Drakopoulos, former Director and former Chief Executive Officer. The loan had no formal agreement and bore no interest. During the year ended December 31, 2016, the Company repaid €13,000 ($13,718) of the loan. During the nine months ended September 30, 2016 the Company repaid the remaining €17,000 ($20,082). As of September 30, 2017, the loan has no outstanding balance.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
On February 5, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €20,000 ($21,104). The loan bore an interest rate of 6% and had no maturity date. During the nine months ended September 30, 2017, the Company repaid the loan and accrued interest of €1,020 ($1,204) in full.
On March 4, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €50,000 ($52,760) from a third party. On May 04, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed an additional €50,000 ($52,760). The loans bore an interest rate of 6% and a maturity date of March 4, 2017 and May 4, 2017, respectively. During the nine months ended September 30, 2017, the Company repaid both loans and accrued interest of €750 ($886) in full.
On April 19, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €100,000 ($105,520). The loan bore an interest rate of 6% and matured on April 19, 2017. During the nine months ended September 30, 2017, the Company repaid the loan and accrued interest of €3,100 ($3,662) in full.
On April 22, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €38,000 ($40,098). The loan bore an interest rate of 6% and matured on April 22, 2017. During the nine months ended September 30, 2017, the Company repaid the loan and accrued interest of €1,777 ($2,099) in full.
On May 24, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €50,000 ($52,760). The loan bears an interest rate of 6% and matured on May 24, 2017. During the nine months ended September 30, 2017, the Company repaid the principal balance of €50,000 ($59,065) in full. The Company has accrued interest expense of €2,798 ($3,305) as of September 30, 2017.
On October 18, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €10,000 ($10,552). The loan bears an interest rate of 10% and will mature on October 18, 2017. During the nine months ended September 30, 2017, the Company repaid the principal balance of €10,000 ($11,813) in full. The Company has accrued interest expense of €239 ($283) as of September 30, 2017.
Loan Facility Agreement
On August 4, 2016, the Company’s wholly owned subsidiary SkyPharm entered into a Loan Facility Agreement, guaranteed by Grigorios Siokas, with Synthesis Peer-To Peer-Income Fund (the “Loan Facility” the “Lender”). The Loan Facility initially provided SkyPharm with a credit facility of up to $1,292,769 (€1,225,141). Any advance under the Loan Facility accrues interest at a rate of 10% per annum and requires quarterly interest payments commencing on September 30, 2016. The amounts owed under the Loan Facility shall be repayable upon the earlier of (i) three months following the demand of the Lender; or (ii) August 31, 2018. No prepayment is permitted pursuant to the terms of the Loan Facility. The Synthesis Facility Agreement as amended is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas.
On September 13, 2016, Sky Pharm entered into a First Deed of Amendment with the Loan Facility increasing the maximum loan amount to $1,533,020 as a result of the Lender having advanced $240,251 (€227,629) to SkyPharm.
On March 23, 2017, SkyPharm entered into an Amended and Restated Loan Facility Agreement (the “A&R Loan Facility”), with the Loan Facility which increased the loan amount to an aggregate total of $2,664,960 (€2,491,083) as a result of the lender having advanced $174,000 (€164,898) in September 2016, $100,000 (€94,769) in October 2016, $250,000 (€236,922) in November 2016, $452,471 (€428,800) in December 2016, $155,516 (€131,648) in January 2017 and $342,327 (€289,788) in July 2017. The A&R Loan Facility amends and restates certain provisions of the Loan Facility Agreement, dated as of August 4, 2016, by and among the same parties. Advances under the A&R Loan Facility continue to accrue interest at a rate of 10% per annum from the applicable date of each drawdown and require quarterly interest payments. The A&R Facility now permits prepayments at any time. The amounts owed under the A&R Loan Facility shall be repayable upon the earlier of (i) seventy five days following the demand of the Lender; or (ii) August 31, 2018. The A&R Loan Facility is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas (the “Pledged Shares”). The A&R Loan Facility was also amended to provide additional affirmative and negative covenants of Sky Pharm and the Guarantor during the term of loans remain outstanding, including, but not limited to, the consent of the Lender in connection with (i) the Company or any of its subsidiaries incurring any additional indebtedness; or (ii) in the event of any increase in the Company’s issued and outstanding shares of Common Stock, the Pledged Shares shall be increased to an amount equal to a minimum of ten percent (10%) of the issued and outstanding shares of the Company.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
As of September 30, 2017, the outstanding balance under this note was $3,007,287 (€2,545,744) and accrued interest expense of $143,761 (€121,697) has been recorded.
The Company recorded €120,000 ($141,756) in debt discounts related to this note. The debt discounts are being amortized over the term of the debt. During the year ended December 31, 2016 the Company amortized a total of $14,507 (€13,748). Amortization of the debt discounts for the nine months ended September 30, 2017 was $52,796 (€47,368).
Bridge Loans
On March 16, 2017 and March 20, 2017, SkyPharm entered into loan agreements with the Synthesis Peer-To Peer-Income Fund (the “Bridge Loans”). The Bridge Loans provided to SkyPharm loans of €42,326 ($50,000) and €100,000 ($118,130), respectively. The Bridge Loans accrue interest at a rate of 10% per annum and were repayable on April 16, 2017 and April 20, 2017, respectively together with all other amounts then accrued and unpaid. On April 16, 2017, the maturity dates were amended for no additional consideration of change in terms and conditions. The maturity dates of both loans were amended and they matured on May 16, 2017 and May 20, 2017, respectively. The Company has accrued interest expense of an aggregate total of €7,335 ($8,665) for both loans and the outstanding balances of these loans was €42,326 ($50,000) and €100,000 ($118,130), respectively, as of September 30, 2017.
On May 5, 2017, SkyPharm entered into a loan agreement with Synthesis Peer-To-Peer Income Fund for €30,449 ($34,745). The loan accrues interest at a rate of 10% per annum and matures on September 30, 2017. The Company as accrued interest expense of €1,201 ($1,418) and the outstanding balance on this loan was €29,413 ($34,745) as of September 30, 2017.
Trade Facility Agreements
On April 10, 2017, Decahedron entered into a Trade Finance Facility Agreement (the “Decahedron Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”). The Decahedron Facility provides the following material terms:
|
·
|
The Lender will provide Decahedron a facility of up to €2,750,000 ($2,941,950) 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.
|
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
The current draw on the Decahedron Facility is $0.
On May 12, 2017, SkyPharm entered into a Trade Finance Facility Agreement (the “SkyPharm Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”). The SkyPharm Facility provides the following material terms:
|
·
|
The Lender will provide SkyPharm a facility of up to €2,000,000 ($2,282,200) secured against SkyPharm’s receivables from the sale of branded and generic pharmaceutical sales. In the event that accounts receivable becomes 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.
|
The current draw on the SkyPharm Facility is €5,216,910 ($6,162,736) and the Company has accrued €170,711 ($201,661) in monthly fees related to this agreement. The Company obtained consents from Synthesis Peer-to-Peer Income Fund in connection with obtaining the Lender. On November 16, 2017, the Company signed an amendment to the agreement for the additional proceeds borrowed.
The Company has recorded a total debt discount of €104,338 in origination fees associated with these loans, which will be amortized over the term of the agreements. Amortization of debt discount for the nine months ended September 30, 2017 was €31,295 ($34,881).
None of the above loans were made by any related parties.
NOTE 9 – 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 September 30, 2017, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations.
Operating Leases
The Company conducts its operations from an office located in Chicago, Illinois for which beginning in January 2015, the monthly rent expense is $730, which has been paid through December 31, 2015. The lease expired as of November 30, 2015, however, the Company has negotiated and entered into a new lease that commenced as of September 1, 2016 at a rate of $709 per month. Rent expense for the three and nine months ended September 30, 2017 was $2,126 and $6,377, respectively. Rent expense for the three and nine months ended September 30, 2016, was $2,126 and $2,834, respectively.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
The offices of Amplerissimo are located in Cyprus for which we paid approximately €110 ($122) per month on a month to month basis. Rent expense for the three and nine months ended September 30, 2017 was €330 ($368) and €990 ($1,103), respectively. Rent expense for the three and nine months ended September 30, 2016 was €330 ($368) and €990 ($1,105), respectively.
The offices of SkyPharm are located in Greece, Thessaloniki, for which we paid approximately €4,325 ($4,802) per month under a six year lease that commenced September 2014. In December 2015, the lease was revised to include an additional rental of the first floor at a rate of €800 ($886) per month. The lease was further revised in March 2016 to include another additional rental of the first floor at a rate of €800 ($886) per month beginning in May 2016. On May 30, 2016, the lease was revised again to include an additional rental of space at a rate of €1,825 ($2,021) per month beginning in June 2016. On March 23, 2017, SkyPharm entered into an additional three year lease at a rate of €1,250 per month that commenced May 2017. Rent expense for the three and nine months ended September 30, 2017 was €27,000 ($30,094) and €76,000 ($84,710), respectively. Rent expense for the three and nine months ended September 30, 2016 was €23,250 ($25,961) and €57,425 ($64,127), respectively.
The offices of Decahedron are located in Flex Meadow, Harlow, for which we pay approximately ₤1,908 ($2,415) per month, under a one year amendment to a lease dated October 25, 2011, which commenced on October 25, 2016. Rent expense from the date of acquisition through September 30, 2017 was ₤15,267 ($19,580).
Intellectual Property Sale Agreement
On October 1, 2016, the Company entered into an Intellectual Property Sale Agreement with Anastasios Tsekas and Olga Parthenea Georgatsou (the “IPSA”) for the purchase of certain intellectual property rights relating to proprietary pharmaceutical formulas and any related technical information arising or related thereto (the “Intellectual Property”). The IPSA provides that the sellers shall be entitled to an aggregate of 200,000 shares of common stock of the Company, none of which have been issued to date, and issuable as follows in equal parts to each seller:
|
·
|
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.
|
The Company has agreed to pay Anastasios Tsekas €1,500 per month until the first issuance of the shares referenced above. The Company has also agreed that in the event the Company disposes of the Intellectual Property prior to the periods referenced above, the sellers shall be entitled to the issuance of all the shares referenced above. The Company is in the process of locating a suitable lab to conduct the Preclincal trial phase, which has not yet begun as of the date of filing.
Letter of Intent
On June 21, 2017, the Company signed a new Letter of Intent (LOI) to acquire the outstanding shares of CC Pharma GmbH, a leading re-importer of EU pharmaceuticals to Germany. Under the terms of the LOI, Cosmos Holdings holds the exclusive right to complete its due diligence process and complete the transaction by October 31, 2017. In connection with the non-binding LOI, the Company is required to pay a non-refundable fee of €400,000 ($454,800) to the shareholders of CC Pharma GmbH in connection with the costs of due diligence and the exclusive right to negotiate the terms of the definitive agreements. On July 6, 2017, the Company paid the €400,000 ($454,800) to CC Pharma GmbH and the Company has recorded an expense of €400,000 ($454,800) for the nine months ended September 30, 2017. The Company did not enter into any definitive agreements by October 31, 2017 and is currently negotiating with CC Pharma for an extension. The Company makes no assurances that the parties will enter into any definitive agreements in the future.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
Placement Agreement
On August 8, 2017, the Company entered into an agreement with a third party placement agent (the “Agent”) who will serve as the Company’s exclusive placement agent or sole book running manager with respect to any offerings of equity or equity-linked securities as well as any debt offering with the two organizations named in the agreement (the “Offering”) for a period of 120 days. In the event that an Offering is agreed upon by the Agent and the Company, the Company shall provide payment as follows: (1) a cash commission of 6% of the total gross proceeds for two named investors (2) a cash commission of 4% of total gross proceeds from five named investors and (3) excluding the five named investors in “(2)” a cash commission equal to 8% of the total gross proceeds from the Offering and the issuance to the Agent or its designees of warrants covering 8% of the shares of common stock issued or issuable by the Company in the Offering. Additionally, the Agent will receive a cash fee of 8% payable within 5 business days, but only in the event of, the receipt by the Company of any cash proceeds from the exercise of any warrants with an expiration equal to or less than 24 months sold in the Offering.
NOTE 10 – STOCK OPTIONS AND WARRANTS
On October 1, 2016 the Company granted 12,000 options to an employee of the Company as compensation for being appointed the US Finance Manager of the Company. The options have an exercise period of four years with an exercise price of $2.00 per share. In the event that he ceases to work for the Company for any reason, he will be entitled to a pro rata portion of the annual options. The options vest monthly with 12,000 options fully vested as of September 30, 2017. The options were valued at $65,290 using the Black Scholes Option Pricing Model with the following inputs: stock price on measurement date: $5.80; Exercise price: $2.00; Option term: 4 years; Computed volatility: 159%. The Company expensed $16,636 in the year ended December 31, 2016. As of September 30, 2017 the Company has expensed an additional $48,654.
On January 1, 2017 the Company entered into an agreement whereby the employee was granted compensation of €1,000 per month and an annual retainer of 25,000 stock options as compensation for being appointed the International Finance Manager of the Company. The options have an exercise period of four years with an exercise price of $1.00. In the event that he ceases to work for the Company for any reason, he will be entitled to a pro rata portion of the annual options. The options vest monthly, with a total of 18,750 options fully vested as of September 30, 2017. The options were valued at $195,307 using the Black Scholes Option Pricing Model with the following inputs: stock price on measurement date: $8.20; Exercise price: $1.00; Option term: 4 years; Computed volatility: 136.76%. The fair value of the options will be amortized over a year with $146,079 expensed during the nine months ended September 30, 2017.
On January 3, 2017 the Company determined to create an advisory board and appointed Mr. Orestes Varvitsiotes as its first member. Mr. Varvitsiotes is a registered broker dealer who is currently engaged with Aegis Capital Corp. In connection therewith, the Company entered into an Advisory Board Member Consulting Agreement, dated as of January 3, 2017 whereby an annual retainer of 12,000 stock options was granted as compensation for services. The options have an exercise period of five years with an exercise price of $2.00. In the event that he ceases to work for the Company for any reason, he will be entitled to a pro rata portion of the annual options. The options vest monthly, with a total of 9,000 options fully vested as of September 30, 2017. The options were valued at $94,830 using the Black Scholes Option Pricing Model, with the following inputs: stock price on measurement date: $8.20; Exercise price: $2.00; Option term: 5 years; Computed volatility: 155.37%. The fair value of the options will be amortized over the year with $70,796 expensed during the nine months ended September 30, 2017.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
A summary of the Company’s option activity during the nine months ended September 30, 2017 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Options
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Balance Outstanding, December 31, 2016
|
|
|
12,000
|
|
|
$
|
2.00
|
|
|
|
3.75
|
|
|
$
|
74,400
|
|
Granted
|
|
|
37,000
|
|
|
|
1.32
|
|
|
|
3.58
|
|
|
|
150,800
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance Outstanding, September 30, 2017
|
|
|
49,000
|
|
|
$
|
1.49
|
|
|
|
3.44
|
|
|
|
191,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, September 30, 2017
|
|
|
39,750
|
|
|
$
|
1.53
|
|
|
|
3.41
|
|
|
$
|
153,900
|
|
In connection with a private placement that took place on April 7, 2017, the Company issued warrants at a 1:1 ratio for shares purchased by investors. The warrants were valued using the Black Scholes valuation model. A summary of the Company’s warrant activity for the nine months ending September 30, 2017 is as follows:
|
|
September 30, 2017
|
|
Volatility
|
|
|
76.66%-90.86
|
%
|
Expected term (in years)
|
|
|
1
|
|
Risk-free interest rate
|
|
|
1.07% - 1.11
|
%
|
Expected dividend yield
|
|
|
None
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Warrants
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Balance Outstanding, December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
10,040
|
|
|
|
30.00
|
|
|
|
1
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance Outstanding, September 30, 2017
|
|
|
10,040
|
|
|
$
|
30.00
|
|
|
|
.55
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, September 30, 2017
|
|
|
10,040
|
|
|
$
|
30.00
|
|
|
|
.55
|
|
|
$
|
-
|
|
NOTE 11 – SUBSEQUENT EVENTS
Purchase of Treasury Shares
Effective October 2, 2017, the Company entered into to a stock purchase agreement dated September 30, 2017, whereby for consideration of $1,387 the Company purchased 138,689 shares of its common stock from a third party investor. The shares were transferred to the Company on October 17, 2017 and will be held in treasury.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
Reverse Stock Split
On October 11, 2017, the Company authorized 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. The reverse stock split was approved and filed in the state of Nevada, and reported on Form 8-K filed on October 11, 2017. On November 21, 2017 the reverse stock split was approved by FINRA and the financial statements have been retroactively restated to reflect the split.
November 15, 2017 Securities Purchase Agreement
On November 15, 2017, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors (the “Buyers”) with which it had no prior relationship, pursuant to which the Company has agreed to issue for a purchase price of $3,000,000, $3,350,000 in aggregate principal amount of Senior Convertible Notes (the “Notes”) to the Buyers, convertible into 670,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) and warrants to purchase an aggregate of 536,000 shares of Common Stock (the “Warrants”.)
The Notes provide that the Company will repay the principal amount of Notes in equal monthly installments beginning on January 1, 2018 and repeating on the first business day of each calendar month thereafter until the fourteenth month anniversary date of issuance (each a “Installment Date”), and, subject to the Blocker (as defined below), the Company shall pre-deliver up to 670,000 shares of Common Stock to the Buyers in connection therewith (the “Pre-Delivery Shares”). Eighty-five (85%) percent of any cash proceeds received by the Buyers from the sale of Pre-Delivery Shares shall be applied against the particular installment amount due on such Installment Date under the Note. No interest will accrue under the Notes unless and until an Event of Default (as defined) has occurred and is not cured.
The Notes are convertible at any time by the Holder into shares of Common Stock at the rate of $5.00 per share, subject to full ratchet anti-dilution adjustment (the “Conversion Price”). Upon an Event of Default (as defined), the Buyers may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the Volume-Weighted Average Price (as defined, the “VWAP”).
The Notes are senior in right of payment to all existing and future indebtedness of the Company except Permitted Indebtedness (as defined in the Note), including $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.
The Notes include customary Events of Default and provide that the Buyers may require the Company to redeem (regardless of whether the Event of Default has been cured) all or a portion of the Notes at a redemption premium of one hundred twenty-five (125%) percent, multiplied by the greater of the conversion rate and the then current market price. The Buyers may also require redemption of the Notes upon a Change of Control (as defined) at a premium of one hundred twenty-five (125%) percent.
The Warrants have a five year term and are exercisable into a number of shares of Common Stock equal to approximately eighty (80%) percent of the number of shares of Common Stock the Buyers would receive if the Notes were fully converted upon the date of issuance of the Notes. The Warrants are exercisable at $7.50 per share (150% of the conversion price of the Notes) subject to full ratchet anti-dilution protection. The Warrants will be exercisable on a cashless basis if a registration statement is not effective covering the resale of the underlying Warrant Shares.
Conversion of the Notes and exercise of the Warrants are each subject to a blocker provision which prevents any holder from converting or exercising, as applicable, the Notes or the Warrants, into shares of Common Stock if its beneficial ownership of the Common Stock would exceed 4.99% (subject to adjustment not to exceed 9.99%) of the Company’s issued and outstanding Common Stock (each, a “Blocker”).
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
September 30, 2017
The Company is required to file, within thirty (30) days of the Closing, a registration statement covering one hundred fifty (150%) percent of the maximum number of shares, underlying the Notes and Warrants pursuant to a registration rights agreement with the Buyers (the “Registration Rights Agreement”).
As a condition to the closing of the Financing, each Buyer, severally, will be required to execute a leak-out agreement (each, a “Leak-Out Agreement”) restricting such Buyer’s sale of shares of Common Stock underlying the Notes and Warrants on any Trading Day to not more than such Buyer’s pro rata allocation of the greater of (x) sales with net proceeds of an aggregate of $20,000 or (y) twenty-five (25%) percent of the daily average trading volume of the Company’s Common Stock. If after the closing of the Financing there is no Event of Default under the Notes, the VWAP of the Company’s Common Stock for three (3) trading days is less than $0.15 per share, the Company may further restrict the Buyers from selling at less than $0.15 per share; provided that the portion of the Notes subject to redemption on each Installment Date shall thereafter double.
Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, will receive a cash commission for this transaction equal to eight (8%) percent of the total gross proceeds of the offering and the issuance of five-year warrants to purchase eight (8%) percent of the shares of Common Stock issued or issuable in this offering (excluding shares of Common Stock issuable upon exercise of any Warrants issued to investors); however, will receive eight (8%) percent of any cash proceeds received from the exercise of any Warrants sold in the offering with an expiration equal to or less than twenty-four (24) months.
Amendment of Trade Facility Agreement
On November 16, 2017, SkyPharm signed an amended agreement with Synthesis Structured Commodity Trade Finance Limited that increased the maximum aggregate facility limit from €2,000,000 to €6,000,000. All other terms of the original agreement remain the same (see Note 8).
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Cosmos Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Cosmos Holdings, Inc. and its subsidiaries (collectively, the "Company") as of December 31, 2016 and 2015 and the related consolidated statements of operations and other comprehensive income (loss), changes in stockholders' equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cosmos Holdings, Inc. and its subsidiaries as of December 31, 2016 and 2015 and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
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 financial statements, the Company has a working capital deficit and an accumulated deficit as of December 31, 2016. These conditions raise significant doubt about the Company's ability to continue as a going concern. Management's plans in this regard are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Malone Bailey, LLP
www.malonebailey.com
Houston, Texas
April 14, 2017, except
For Note 11 (b),
As to which the date is
December 14, 2017
COSMOS HOLDINGS, INC.
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
716,590
|
|
|
$
|
198,049
|
|
Accounts receivable
|
|
|
661,850
|
|
|
|
96,544
|
|
Other receivable
|
|
|
131,900
|
|
|
|
-
|
|
Inventory
|
|
|
464,219
|
|
|
|
191,874
|
|
Prepaid expenses and other current assets
|
|
|
646,530
|
|
|
|
60,709
|
|
Prepaid expenses and other current assets - related party
|
|
|
15,523
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS
|
|
|
2,636,612
|
|
|
|
547,176
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
429,203
|
|
|
|
59,916
|
|
Property and equipment, net
|
|
|
52,715
|
|
|
|
50,529
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
3,118,530
|
|
|
$
|
657,621
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
577,932
|
|
|
$
|
196,420
|
|
Accounts payable and accrued expenses - related party
|
|
|
13,759
|
|
|
|
140,513
|
|
Deferred revenue
|
|
|
-
|
|
|
|
62,210
|
|
Notes payable, net of discount of $110,561 and $0, respectively
|
|
|
2,872,472
|
|
|
|
109,060
|
|
Notes payable - related party
|
|
|
160,391
|
|
|
|
283,831
|
|
Loans payable
|
|
|
17,938
|
|
|
|
32,718
|
|
Loans payable - related party
|
|
|
148,250
|
|
|
|
48,532
|
|
Taxes payable
|
|
|
1,080,590
|
|
|
|
1,032,128
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
4,871,332
|
|
|
|
1,905,412
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
4,871,332
|
|
|
|
1,905,412
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' DEFICIT:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value; 100,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2016 and December 31, 2015, respectively
|
|
|
-
|
|
|
|
-
|
|
Common stock, $0.001 par value; 300,000,000 shares authorized; 12,587,053 and 12,563,053 shares issued and outstanding as of December 31, 2016 and December 31, 2015, respectively
|
|
|
12,587
|
|
|
|
12,563
|
|
Additional paid-in capital
|
|
|
287,293
|
|
|
|
246,541
|
|
Accumulated other comprehensive loss
|
|
|
(1,050,463
|
)
|
|
|
(1,105,678
|
)
|
Accumulated deficit
|
|
|
(1,002,219
|
)
|
|
|
(401,217
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS' DEFICIT
|
|
|
(1,752,802
|
)
|
|
|
(1,247,791
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
3,118,530
|
|
|
$
|
657,621
|
|
The accompanying notes are an integral part of these consolidated financial statements.
COSMOS HOLDINGS, INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
REVENUE
|
|
|
|
|
|
|
Revenue
|
|
|
6,755,436
|
|
|
$
|
533,802
|
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE
|
|
|
6,154,396
|
|
|
|
484,809
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
601,040
|
|
|
|
48,993
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
794,099
|
|
|
|
486,036
|
|
Depreciation expense
|
|
|
9,448
|
|
|
|
5,416
|
|
TOTAL OPERATING EXPENSES
|
|
|
803,547
|
|
|
|
491,452
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(202,507
|
)
|
|
|
(442,459
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
-
|
|
|
|
1,063
|
|
Other income
|
|
|
19
|
|
|
|
814
|
|
Interest expense - related party
|
|
|
(264
|
)
|
|
|
(3,481
|
)
|
Interest expense
|
|
|
(205,750
|
)
|
|
|
(86,898
|
)
|
Other expense
|
|
|
(12,764
|
)
|
|
|
(6,000
|
)
|
Write off on investment of B2IN
|
|
|
-
|
|
|
|
(6,150,508
|
)
|
Foreign currency transaction loss
|
|
|
(178,967
|
)
|
|
|
(240
|
)
|
TOTAL OTHER INCOME (EXPENSE)
|
|
|
(397,726
|
)
|
|
|
(6,245,250
|
)
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(600,233
|
)
|
|
|
(6,687,709
|
)
|
|
|
|
|
|
|
|
|
|
INCOME TAX BENEFIT (EXPENSE)
|
|
|
(769
|
)
|
|
|
(203
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(601,002
|
)
|
|
|
(6,687,912
|
)
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss)
|
|
|
55,215
|
|
|
|
(424,713
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER COMPREHENSIVE LOSS
|
|
|
(545,787
|
)
|
|
$
|
(7,112,625
|
)
|
|
|
|
|
|
|
|
|
|
BASIC NET LOSS PER SHARE
|
|
|
(0.05
|
)
|
|
$
|
(0.53
|
)
|
DILUTED NET LOSS PER SHARE
|
|
|
(0.05
|
)
|
|
$
|
(0.53
|
)
|
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
12,564,824
|
|
|
|
12,561,598
|
|
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
|
|
|
12,564,824
|
|
|
|
12,561,598
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Cosmos Holdings, Inc.
|
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
|
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Retained
|
|
|
Accumulated
Other
|
|
|
Total
Stockholders'
|
|
|
|
No. of
Shares
|
|
|
Value
|
|
|
No. of
Shares
|
|
|
Value
|
|
|
Paid-in
Capital
|
|
|
Earnings(Deficit)
|
|
|
Comprehensive
loss
|
|
|
Equity
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2014
|
|
|
-
|
|
|
|
-
|
|
|
|
12,558,553
|
|
|
|
12,559
|
|
|
|
(144,666
|
)
|
|
|
6,286,695
|
|
|
|
(680,965
|
)
|
|
|
5,473,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock for consulting services
|
|
|
-
|
|
|
|
-
|
|
|
|
4,500
|
|
|
|
4
|
|
|
|
28,348
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,352
|
|
Foreign currency translation effect
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(424,713
|
)
|
|
|
(424,713
|
)
|
Related party forgiveness of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
362,859
|
|
|
|
|
|
|
|
-
|
|
|
|
362,859
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,687,912
|
)
|
|
|
-
|
|
|
|
(6,687,912
|
)
|
Balance at December 31, 2015
|
|
|
-
|
|
|
$
|
-
|
|
|
|
12,563,053
|
|
|
$
|
12,563
|
|
|
$
|
246,541
|
|
|
$
|
(401,217
|
)
|
|
$
|
(1,105,678
|
)
|
|
$
|
(1,247,791
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation effect
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
55,215
|
|
|
|
55,215
|
|
Issuance of common stock for the exercise of options
|
|
|
-
|
|
|
|
-
|
|
|
|
24,000
|
|
|
|
24
|
|
|
|
23,976
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,000
|
|
Stock option expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,636
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16,636
|
|
Contribution of capital by an officer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
140
|
|
|
|
-
|
|
|
|
-
|
|
|
|
140
|
|
Net loss
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(601,002
|
)
|
|
|
-
|
|
|
|
(601,002
|
)
|
Balance at December 31, 2016
|
|
|
-
|
|
|
$
|
-
|
|
|
|
12,587,053
|
|
|
$
|
12,587
|
|
|
$
|
287,293
|
|
|
$
|
(1,002,219
|
)
|
|
$
|
(1,050,463
|
)
|
|
$
|
(1,752,802
|
)
|
The accompanying notes are an integral part of these consolidated financial statements.
|
|
Years Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(601,002
|
)
|
|
$
|
(6,687,912
|
)
|
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
9,448
|
|
|
|
5,416
|
|
Amortization of debt discount
|
|
|
16,063
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
16,636
|
|
|
|
28,352
|
|
Write off of investment of B2IN
|
|
|
-
|
|
|
|
6,150,508
|
|
Changes in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(565,306
|
)
|
|
|
(96,544
|
)
|
Inventory
|
|
|
(272,345
|
)
|
|
|
(191,874
|
)
|
Prepaid expenses
|
|
|
(585,821
|
)
|
|
|
(28,209
|
)
|
Prepaid expenses - related party
|
|
|
(15,523
|
)
|
|
|
-
|
|
Other assets
|
|
|
(369,287
|
)
|
|
|
(28,503
|
)
|
Accounts payable and accrued expenses
|
|
|
381,512
|
|
|
|
53,169
|
|
Accounts payable and accrued expenses - related party
|
|
|
(126,754
|
)
|
|
|
140,513
|
|
Taxes payable
|
|
|
48,508
|
|
|
|
95,785
|
|
Deferred revenue
|
|
|
(62,210
|
)
|
|
|
62,210
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
$
|
(2,126,081
|
)
|
|
$
|
(497,089
|
)
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of fixed assets
|
|
$
|
(12,816
|
)
|
|
$
|
-
|
|
Payment of financing management fee
|
|
|
(131,900
|
)
|
|
|
(43,952
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
$
|
(144,716
|
)
|
|
$
|
(43,952
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payment of related party note payable
|
|
$
|
(63,312
|
)
|
|
$
|
163,624
|
|
Payment of note payable
|
|
|
(176,218
|
)
|
|
|
-
|
|
Proceeds from note payable
|
|
|
2,871,993
|
|
|
|
87,248
|
|
Payment of related party loan
|
|
|
(15,300
|
)
|
|
|
(3,000
|
)
|
Proceeds from related party loan
|
|
|
148,250
|
|
|
|
48,532
|
|
Proceeds from loan payable
|
|
|
-
|
|
|
|
32,718
|
|
Payment of loans payable
|
|
|
(45,374
|
)
|
|
|
-
|
|
Proceeds from the exercise of stock options
|
|
|
24,000
|
|
|
|
-
|
|
Capital contribution
|
|
|
140
|
|
|
|
-
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
$
|
2,744,179
|
|
|
$
|
329,122
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
$
|
45,159
|
|
|
$
|
(36,636
|
)
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
|
518,541
|
|
|
|
(248,555
|
)
|
CASH AT BEGINNING OF YEAR
|
|
|
198,049
|
|
|
|
446,604
|
|
CASH AT END OF YEAR
|
|
$
|
716,590
|
|
|
$
|
198,049
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
|
|
|
|
Cash paid during the year:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
30,396
|
|
|
$
|
-
|
|
Income Tax
|
|
$
|
-
|
|
|
$
|
-
|
|
Supplemental Disclosure of Non-Cash Investing and Financing Activities
|
|
|
|
|
|
|
|
|
Note payable issued for payment of accounts payable
|
|
$
|
-
|
|
|
$
|
22,202
|
|
Proceeds receivable from issuance of loan agreement
|
|
|
-
|
|
|
|
21,812
|
|
Forgiveness of debt by related party
|
|
$
|
-
|
|
|
$
|
362,859
|
|
The accompanying notes are an integral part of these consolidated financial statements.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
December 31, 2016
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Cosmos Holdings, Inc. ("Cosmos", "The Company", "we", or "us") was incorporated in the State of Nevada under the name Prime Estates and Developments, Inc. on July 21, 2009 for the purpose of acquiring and operating commercial real estate and real estate related assets.
On September 27, 2013 (the "Closing"), Cosmos Holdings, Inc. a Nevada corporation ("Cosmos Holdings, Inc." or the "Registrant"), closed a reverse take-over transaction by which it acquired a private company whose principal activities are the trading of products, providing representation, and provision of consulting services to various sectors. Pursuant to a Share Exchange Agreement (the "Exchange Agreement") between the Registrant and Amplerissimo Ltd, a company incorporated in Cyprus ("Amplerissimo"), the Registrant acquired 100% of Amplerissimo's issued and outstanding common stock.
On August 1, 2014, we, through our Cypriot subsidiary Amplerissimo, formed SkyPharm S.A. a Greek Corporation ("SkyPharm") whose principal activities and operations are the development, marketing and sales of pharmaceutical and cosmetic products.
The Company had $6,755,436 total revenues and expended approximately $6,957,943 for the year ended December 31, 2016, in connection with these operations.
Going Concern
The Company's consolidated financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company generated a net loss of $601,002 for the year ended December 31, 2016, and has a working capital deficit of $2,234,720 and an accumulated deficit of $1,002,219 as of December 31, 2016. These conditions raise substantial doubt of the Company’s ability to continue as a going concern. The Company has not yet established an adequate ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease 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 sale of common shares. 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 in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
The accompanying consolidated financial statements have been prepared in accordance with principles generally accepted in the United States of America.
Principles of Consolidation
Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries, Amplerissimo Ltd and SkyPharm S.A. All significant intercompany balances and transactions have been eliminated
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
Use of Estimates
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.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2016 and December 31, 2015, there were no cash equivalents.
The Company maintains bank accounts in the United States denominated in U.S. Dollars and in the Republic of Cyprus, in Greece and in Bulgaria all of them denominated in Euros. For the year ended December 31, 2016, the amounts in these accounts were $3,143 and $19,876 (the Euro equivalent of which was €18,836). At December 31, 2015, the amounts in these accounts were $(190) and $7,808 (the Euro equivalent of which was €7,159).
Account Receivable
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.
Inventory
Inventory is stated at the lower of cost or market value using the weighted average method. Inventory consists primarily of finished goods and packaging materials, i.e. packaged pharmaceutical products and the wrappers and containers they are sold in. A periodic inventory system is maintained by 100% count. Inventory is replaced periodically to maintain the optimum stock on hand available for immediate shipment.
We write-down inventories to net realizable value based on forecasted demand and market conditions, which may differ from actual results.
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation. Depreciation is provided on a straight-line basis over the useful lives (except for leasehold improvements which are depreciated over the lesser of the lease term or the useful life) of the assets as follows:
|
|
Estimated Useful Life
|
|
Furniture and fixtures
|
|
5–7 years
|
|
Office and computer equipment
|
|
3-5 years
|
|
Depreciation expense was $9,448 and $5,416 for the years ended December 31, 2016 and December 31, 2015, respectively.
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
Impairment of Long-Lived Assets
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.
Fair Value Measurement
The Company adopted FASB ASC 820-Fair Value Measurements and Disclosures, or 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. The adoption of ASC 820 did not have an impact on the Company's financial position or operating results, but did expand certain disclosures.
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 Company did not have any Level 2 or Level 3 assets or liabilities as of December 31, 2016.
Cash is considered to be highly liquid and easily tradable as of December 31, 2016 and therefore classified as Level 1 within our fair value hierarchy.
In addition, FASB ASC 825-10-25 Fair Value Option, or ASC 825-10-25, was effective for January 1, 2008. 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.
Revenue Recognition
We consider revenue recognizable when persuasive evidence of an arrangement exists, the price is fixed or determinable, goods or services have been delivered, and collectability is reasonably assured. These criteria are assumed to have been met if a customer orders an item, the goods or services have been shipped or delivered to the customer, and we have sufficient evidence of collectability, such a payment history with the customer. Revenue that is billed and received in advance such as recurring weekly or monthly services are initially deferred and recognized as revenue over the period the services are provided.
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
Stock-based Compensation
The Company records stock based compensation in accordance with ASC section 718, "Stock Compensation" and Staff Accounting Bulletin (SAB) No. 107 (SAB 107) issued by the SEC in March 2005 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 ASC 505-50 "Equity-Based Payments to Non-Employees".
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:
|
|
Year Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Number of 10% clients
|
|
|
2
|
|
|
|
2
|
|
Percentage of total revenue
|
|
|
52.49
|
%
|
|
|
87.21
|
%
|
Percentage of total AR
|
|
|
26.09
|
%
|
|
|
46.97
|
%
|
Income Taxes
The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes ASC 740. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as net operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
The Company is liable for income taxes in the Republic of Cyprus and Greece. The corporate income tax rate in Cyprus is 12.5% and 29% in Greece and tax losses are carried forward for five years effective January 1, 2013 (prior to 2013, losses were carried forward indefinitely). 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, 2016 the Company has maintained a valuation allowance against all net deferred tax assets in each jurisdiction in which it is subject to income tax.
We recognize the impact of an uncertain tax position in our financial statements if, in management's judgment, the position is not more-likely-then-not sustainable upon audit based on the position's technical merits. This involves the identification of potential uncertain tax positions, the evaluation of applicable tax laws and an assessment of whether a liability for an uncertain tax position is necessary. As of December 31, 2016 the Company has no uncertain tax positions recorded in any jurisdiction where it is subject to income tax.
Basic and Diluted Net Income (Loss) per Common Share
Basic and diluted net loss per share calculations are calculated on the basis of the weighted average number of common shares outstanding during the periods presented. The per share amounts include the dilutive effect of common stock equivalents in years with net income. Basic and diluted loss per share for each of the years ended December 31, 2015 and 2016 is the same due to the anti-dilutive nature of potential common stock equivalents.
Recent Accounting Pronouncements
In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of the revenue standard issued in 2014, ASU 2014-09, Revenue from Contracts with Customers. In response to stakeholders' requests to defer the effective date of the guidance in ASU 2014-09 and in consideration of feedback received through extensive outreach with preparers, practitioners, and users of financial statements, the FASB proposed deferring the effective date of ASU 2014-09. Respondents to the proposal overwhelmingly supported a deferral. Respondents noted that providing sufficient time for implementation of the guidance in ASU 2014-09 is critical to its success.
In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, which requires that an entity classify deferred tax assets and liabilities as noncurrent on the balance sheet. Prior to the issuance of the standard, deferred tax assets and liabilities were required to be separated into current and noncurrent amounts on the basis of the classification of the related asset or liability. This ASU is effective for the Company on April 1, 2017, with early adoption permitted. The adoption of ASU No. 2015-17 is not expected to have a material impact on the Company's condensed consolidated financial statements or related disclosures.
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 financial statements.
NOTE 2 – LOAN RECEIVABLE
On February 28, 2016, the Company entered into an agreement with Synthesis Management Limited (“Synthesis Management”) to loan €125,000 ($131,900) to Synthesis Management for the purpose of paying a financing management fee. The Company made the payment to Synthesis Management on September 28, 2016. The loan is non-interest bearing and has a maturity date of December 31, 2016. As of the date of filing, the Company has agreed to extend the maturity date of the loan until December 31, 2017, however no formal written amendment has been delivered.
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
NOTE 3 – CAPITAL STRUCTURE
Common Stock
The Company is authorized to issue 300 million shares of common stock and had issued 100,000,000 in connection with the merger and had 2,558,553 shares issued prior to the merger.
Under the Exchange Agreement, the Registrant completed the acquisition of all of the issued and outstanding shares of Amplerissimo through the issuance of 10,000,000 restricted shares of Common Stock to Dimitrios Goulielmos, the sole shareholder of Amplerissimo. Immediately prior to the Exchange Agreement transaction, the Registrant had 2,558,553 shares of Common Stock issued and outstanding. Immediately after the issuance of the shares the Registrant had 12,558,553 shares of Common Stock issued and outstanding.
The consideration provided pursuant to the Exchange Agreement was the issuance of 10,000,000 shares of our common stock.
On April 28, 2015, the Company issued 4,500 shares of common stock to Hellenic American Securities for consulting services and has recorded consulting expense of $28,352 for the year ended December 31, 2015 based on the share price on the date of issuance. The terms of the consulting agreement call for payments of $1,000 per month plus 18,000 shares on an annual basis which will be issued quarterly. As of November 19, 2015, this agreement has been terminated due to lack of service. No additional shares will be issued under this agreement.
On November 4, 2016, the Board of Directors authorized the exercise of stock options held by a former director to purchase 24,000 shares of common stock and the Company recorded $24,000 in proceeds. (See Note 10.)
As of December 31, 2016 and 2015, the Company had 12,587,053 and 12,563,053 shares of Common Stock issued and outstanding, respectively.
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, 2016 and 2015, no preferred shares have been issued.
Potentially Dilutive Securities
On October 1, 2016 the Company granted 12,000 options to an employee of the Company as compensation for being appointed the US Finance Manager of the Company. The options have an exercise period of four years with an exercise price of $2.00. In the event that he ceases to work for the Company for any reason, he will be entitled to a pro rata portion of the annual options. The options vest monthly with 3,000 options fully vested as of December 31, 2016. (See Note 10.)
No options, warrants or other potentially dilutive securities other than those disclosed above have been issued as of December 31, 2016 and 2015.
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
NOTE 4 – INCOME TAXES
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, 2016 and 2015 is as follows:
|
|
12/31/2016
|
|
|
12/31/2015
|
|
US
|
|
|
|
|
|
|
Income before income taxes
|
|
$
|
(592,288
|
)
|
|
$
|
(6,687,709
|
))
|
Taxes under statutory US tax rates
|
|
$
|
(201,378
|
)
|
|
$
|
(2,273,821
|
))
|
Increase (decrease) in taxes resulting from:
|
|
|
|
|
|
|
|
|
Increase (decrease) in valuation allowance
|
|
$
|
193,451
|
|
|
$
|
159,457
|
|
Foreign tax rate differential
|
|
$
|
19,122
|
|
|
$
|
2,126,593
|
|
Permanent differences
|
|
$
|
360
|
|
|
$
|
183
|
|
State taxes
|
|
$
|
(11,594
|
)
|
|
$
|
(12,412
|
))
|
Income tax expense
|
|
$
|
(39
|
)
|
|
$
|
-
|
|
The increase in the Company's effective tax rate in the previous years was primarily attributable to an increase in revenue in Cyprus, which maintains a corporate income tax rate of 12.5%. The corporate income tax rate in Greece is 29%.The net increase in the valuation allowance was caused by the reversal of certain financial reporting accruals that were not previously deducted for tax.
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:
|
|
12/31/2016
|
|
|
12/31/2015
|
|
US
|
|
|
|
|
|
|
Net operating loss carry forward
|
|
$
|
329,848
|
|
|
$
|
247,025
|
|
Greece
|
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
|
|
176,443
|
|
|
|
77,319
|
|
Cyprus
|
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
|
|
11,052
|
|
|
|
11,018
|
|
Total deferred tax asset
|
|
|
517,343
|
|
|
|
335,362
|
|
Valuation allowance
|
|
|
(517,343
|
)
|
|
|
(335,362
|
)
|
Deferred tax asset, net
|
|
$
|
--
|
|
|
$
|
-
|
|
At December 31, 2016, the Company had US net operating loss carry forwards of approximately $329,848 that may be offset against future taxable income, subject to limitation under IRC Section 382, which begin to expire in 2031. At December 31, 2016, the Company had Greece net operating loss carry forwards of approximately $176,443 that may be offset against future taxable income which begin to expire in 2019. During the period ending December 31, 2016, the Company generated Cyprus net operating loss carry forwards of $11,052 which may be carryforward for five (5) years. The Company does not anticipate to generate taxable income in Cyprus in excess of its Cyprus net operating losses No tax benefit has been reported in the December 31, 2016 or 2015 consolidated financial statements due to the uncertainty surrounding the realizability of the benefit, based on a more likely than not criteria and in consideration of available positive and negative evidence.
The Company asserts that it will indefinitely reinvest the unremitted earnings and profits generated by Amplerissimo, their Cyprus subsidiary, in 2015. Accordingly, no US deferred tax liability has been established for the unremitted earnings and profits generated in Cyprus.
COSMOS HOLDINGS, INC.
Notes to Unaudited Consolidated Financial Statements
December 31, 2016
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, 2016 and December 31, 2015, respectively.
The Company has elected to classify interest and penalties that would accrue according to the provisions of relevant tax law as interest and other expense, respectively. As of December 31, 2016 the Company has accrued approximately $86,409 in other expense.
The Company's tax years since inception through 2016 remain open to examination by most taxing authorities.
Taxes payable are $1,080,590 and $1,032,128 as of December 31, 2016 and December 31, 2015, respectively.
NOTE 5 – RELATED PARTY TRANSACTIONS
On the date of our inception, we issued 2 million shares of our common stock to our 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, 2016, the Company has a prepaid balance of €65 ($69) to DOC Pharma S.A., this comprises over 13% of the Company's total prepaid balance. As of December 31, 2015, the Company owed €111,000 ($121,063) to DOC Pharma S.A.
On November 1, 2015, the Company entered into a €12,000 ($12,662) Loan Agreement with DOC Pharma S.A, pursuant to which DOC Pharma S.A., paid existing bills of the Company in the amount of €12,000, excluding the Vendor Bills. The loan will bear an interest rate of 2% per annum and will be due and payable in full on October 31, 2016. As of December 31, 2016, the Company has an outstanding principal balance under this note of €12,000 ($12,662) and accrued interest expense of $308.
Grigorios Siokas
As of December 31, 2016 the Company has prepaid expenses of €14,646 ($15,454) related to board of directors' fees and related taxes for Grigorios Siokas, Chief Executive Officer. During the year ended December 31, 2015, the Company borrowed €10,000 ($10,906) as loan payable from Mr. Grigorios Siokas. The loan has no formal agreement and bears no interest. During the year ended December 31, 2016, this loan has been paid back in full.
On October 1, 2016, the Company borrowed €5,000 ($5,276) from Mr. Siokas related to its subsidiary’s purchase of additional capital of SkyPharm. The loan is non-interest bearing and has a maturity date of October 1, 2017. The outstanding balance as of December 31, 2016 was €5,000 ($5,276).
During the year ended December 31, 2016, the Company borrowed €90,500 ($95,496) as an additional loan payable from Mr. Siokas. This loan has no formal agreement and bears no interest. As of December 31, 2016, the Company has an outstanding principal balance under this loan of €90,500 ($95,496).
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
Ourania Matsouki
During the year ended December 31, 2015, the Company borrowed €4,500 ($4,908) from Mrs. Ourania Matsouki, wife of Mr. Grigorios Siokas, Chief Executive Officer. This loan has no formal agreement and bears no interest. This loan was paid back in full during the year ended December 31, 2016.
During the year ended December 31, 2016, the Company borrowed an additional €44,995 ($47,479) from Mrs. Matsouki. This loan has no formal agreement and bears no interest. As of December 31, 2016, the Company has an outstanding principal balance under this loan of €44,995 ($47,479).
Konstantinos Vassilopoulos
During the year ended December 31, 2016, Konstantinos Vassilopoulos, US Finance Manager, paid $10,179 of existing bills of the Company. There is no formal agreement related to these transactions.
Dimitrios Goulielmos
On August 17, 2015, the Company entered into a Loan Agreement with Dimitrios Goulielmos, former Chief Executive Officer and a current Director of the Company, pursuant to which the Company borrowed $50,000 from Mr. Goulielmos. The loan will bear an interest rate of 2% per annum and is due and payable in full on December 15, 2016. As documented in Form 8-K that was filed on November 09, 2015, the loan amount has been fully forgiven by Mr. Goulielmos and was written off as of December 31, 2015.
On March 27, 2015, the Company entered into a Loan Agreement with Dimtrios Goulielmos, former Chief Executive Officer and a current Director of the Company, pursuant to which the Company borrowed $70,000 from Mr. Goulielmos. The loan will bear an interest rate of 2% per annum and is due and payable in full on December 15, 2015. As documented in Form 8-K that was filed on November 09, 2015, the loan amount has been fully forgiven by Mr. Goulielmos and was written off as of December 31, 2015.
On December 29, 2014, the Company entered into a Loan Agreement with Dimitrios Goulielmos, former Chief Executive Officer and a current director of the Company, pursuant to which the Company borrowed $100,000 from Mr. Goulielmos. The Loan will bear an interest rate of 2% per annum and will be due and payable in full on June 30, 2015. As documented in Form 8-K that was filed on November 09, 2015, the loan amount has been fully forgiven by Mr. Goulielmos and was written off as of December 31, 2015.
On November 21, 2014, SkyPharm entered into a Loan Agreement with Dimitrios Goulielmos, former Chief Executive Officer and a current director of the Company, pursuant to which the Borrower borrowed €330,000 ($401,115) from Mr. Goulielmos. The Loan will bear an interest rate of 2% per annum and will be due and payable in full on May 11, 2015. On November 4, 2015, €130,000 ($142,860) in principal and the related accrued interest of €733 ($806) was forgiven and the remaining balance of €200,000 will no longer accrue interest as part of the stock purchase agreement with Grigorios Siokas on November 4, 2015 referenced above. As of December 31, 2016, €60,000 ($63,312) of the loan was paid back, and a principal balance of €140,000 ($147,728) and €0.00 of accrued interest remains.
During 2015, the aggregate forgiveness of related party notes of $362,859 was accounted for as a capital transaction.
In 2014, the aggregate forgiveness of accrued salaries resulted in a gain of $173,092.
On December 29, 2014, the Company borrowed $3,000 from Dimitrios Goulielmos, former Chief Executive Officer and a current director of the Company. The loan was non-interest bearing and was repaid in full in January 2015.
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
November 2015 Stock Purchase Agreement
On November 4, 2015, Mr. Dimitrios Goulielmos (the "Seller") and Mr. Grigorios Siokas (the "Buyer") entered into a stock purchase agreement, whereby Mr. Goulielmos sold 9,500,000 shares of common stock to Mr. Siokas for $1.00. As part of the agreement, the Seller forgave and released the Company and the Company's subsidiary from all claims except for the repayment of €200,000 that was loaned by the Seller to SkyPharm. In exchange, the Buyer pledged to pay various obligations of the Company as listed in the Annex of the agreement as follows: $16,357 to Malone Bailey, $3,000 in accounting fees, $2,400 to Terzis, the Amplerissimo tax liability of €817,811 and various other obligations estimated between $5,000 and $10,000 (collectively the "Vendor Bills"). The Company subsequently paid the Vendor Bills. Notwithstanding the non-payment of the Vendor Bills by the buyer at that time, in connection with the sale of common stock to Mr. Siokas, on February 26, 2016, Dimitrios Goulielmos resigned from his positions as Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of Cosmos Holdings, Inc. (the "Company") but retained his position as a director on the Board of Directors. The Board of Directors appointed Grigorios Siokas to the offices of CEO and CFO and elected him to fill a vacancy and serve on the Board of Directors and as the Chairman of the Board.
We believe that all related party transactions were on terms at least as favorable as we would have secured in arm's-length transactions with third parties. Except as set forth above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons.
NOTE 6 – DEBT
On March 4, 2015, the Company entered into a $9,000 Loan Agreement with Mr. Angelo Drakopoulos, pursuant to which Mr. Drakopoulos paid a $9,000 outstanding bill on behalf of the Company. The loan will bear an interest rate of 8% per annum and will be due and payable in full on May 5, 2016. As of December 31, 2016, the Company has an outstanding principal balance under this note of $9,000 and accrued interest expense of $814.
On November 5, 2015, the Company entered into a Loan Agreement pursuant to which the Company borrowed €20,000 ($21,812), of which proceeds of €10,000 ($10,906) have been received as of December 31 2016. The loan will bear an interest rate of 1% per annum and is due and payable in full on November 5, 2016. The Company has repaid €2,000 ($2,110) as of December 31, 2016. The Company has accrued interest expense of €414 ($437) and an outstanding balance under this note of €18,000 ($18,994) as of December 31, 2016.
On November 5, 2015, the Company entered into a Loan Agreement pursuant to which the Company borrowed €80,000 ($87,248) of which proceeds of €70,000 ($76,342) have been received as of December 31, 2016. The loan will bear an interest rate of 5% per annum and is due and payable in full on November 5, 2016. The Company has accrued interest expense of €8,315 ($8,774) as of December 31, 2016. The outstanding balance under this note was €65,000 ($68,588) as of December 31, 2016.
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 ($43,624) as a note payable from Mr. Drakopoulos. The note will bear an interest rate of 6% per annum and is due and payable in full on November 15, 2016. As of December 31, 2016, the Company has an outstanding principal balance under this note of €40,000 ($42,208) and accrued interest expense of €2,710 ($2,860).
During the year ended December 31, 2015, the Company borrowed €30,000 ($32,718) as a loan payable from Mr. Panagiotis Drakopoulos, former Director and former Chief Executive Officer. The loan has no formal agreement and bear no interest. During the year ended December 31, 2016, the Company repaid €13,000 ($13,718) of the loan. As of December 31, 2016, the Company has an outstanding principal balance under this note of €17,000 ($17,938).
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
During the year ended December 31, 2015, the Company borrowed €30,000 ($32,718) from a third party. There was no formal agreement and the loan bears no interest. During the year ended December 31, 2016 this loan was paid back in full.
On January 6, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €150,000 ($158,280). The loan will bear an interest rate of 1% per annum and is due and payable in full on February 6, 2016. As of December 31, 2016, the loan and accrued interest of €458 ($483) was paid back by in full by the Company.
On February 5, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €20,000 ($21,104). The loan will bear an interest rate of 6% and has no maturity date. The Company has accrued interest expense of €1,090 ($1,150) as of December 31, 2016. The outstanding balance under this note was €20,000 ($21,104) as of December 31, 2016.
On March 4, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €50,000 ($52,760). The loan will bear an interest rate of 6% and a maturity date of March 4, 2017. The Company has accrued interest expense of €0.00 as of December 31, 2016. The outstanding balance under this note was €50,000 ($52,760) as of December 31, 2016.
On April 19, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €100,000 ($105,520). The loan will bear an interest rate of 6% and will mature on April 19, 2017. The Company has accrued interest expense of €2,226 ($2,349) as of December 31, 2016. The outstanding balance under this note was €100,000 ($105,520) as of December 31, 2016.
On April 22, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €38,000 ($40,098). The loan will bear an interest rate of 6% and will mature on April 22, 2017. The Company has accrued interest expense of €1,587 ($1,675) as of December 31, 2016. The outstanding balance under this note was €38,000 ($40,098) as of December 31, 2016.
On May 04, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €50,000 ($52,760). The loan will bear an interest rate of 6% and will mature on May 4, 2017. The Company has accrued interest expense of €560 ($590) as of December 31, 2016. The outstanding balance under this note was €50,000 ($52,760) as of December 31, 2016.
On May 24, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €50,000 ($52,760). The loan will bear an interest rate of 6% and will mature on May 24, 2017. The Company has accrued interest expense of €1,827 ($1,928) as of December 31, 2016. The outstanding balance under this note was €50,000 ($52,760) as of December 31, 2016.
On October 18, 2016, the Company entered into a Loan Agreement pursuant to which the Company borrowed €10,000 ($10,552). The loan will bear an interest rate of 10% and will mature on October 18, 2017. The Company has accrued interest expense of €203 ($214) as of December 31, 2016. The outstanding balance under this note was €10,000 ($10,552) as of December 31, 2016.
Loan Facility Agreement
On August 4, 2016, the Company's wholly owned subsidiary SkyPharm entered into a Loan Facility Agreement, guaranteed by Grigorios Siokas, with Synthesis Peer-To Peer-Income Fund (the "Loan Facility" the “Lender”). The Loan Facility initially provided SkyPharm with a credit facility of up to $1,292,769 (€1,225,141). Any advance under the Loan Facility accrues interest at a rate of 10% per annum and requires quarterly interest payments commencing on September 30, 2016. The amounts owed under the Loan Facility shall be repayable upon the earlier of (i) three months following the demand of the lender; or (ii) August 31, 2018. No prepayment is permitted pursuant to the terms of the Loan Facility. The Synthesis Facility Agreement is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas.
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
On September 13, 2016, Sky Pharm entered into a First Deed of Amendment with the Loan Facility increasing the maximum loan amount to $1,533,020 as a result of the lender having advanced $240,251 (€227,629) to SkyPharm.
On March 23, 2017, SkyPharm entered into a Second Deed of Amendment with the Loan facility which increased the loan amount to an aggregate total of $2,664,960 (€2,525,550) as a result of the lender having advanced $174,000 (€164,898) in September, $100,000 (€94,769) in October 2016, $250,000 (€236,922) in November 2016, $452,471 (€428,800) in December 2016 and $155,516 (€147,381) in January 2017.
As of December 31, 2016, the outstanding balance under this note was $2,509,444 (€2,378,169) and accrued interest expense of €49,928 ($47,316) has been recorded.
The Company recorded €120,000 ($126,624) in debt discounts related to this note. The debt discounts are being amortized over the term of the debt. Amortization of the debt discounts for the year ended December 31, 2016 was €14,507 ($16,063).
None of the above loans were made by any related parties.
NOTE 7 – 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, 2016, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations.
Operating Leases
The Company conducts its operations from an office located in Chicago, Illinois for which beginning in January 2015, the monthly rent expense is $730, which has been paid through December 31, 2015. The lease expired as of November 30, 2015, however, the Company has negotiated and entered into a new lease that commenced as of June 1, 2016 at a rate of $709 per month. Rent expense for the years ended December 31, 2016 and 2015, was $4,960 and $12,053, respectively.
The offices of Amplerissimo are located in Cyprus for which we paid approximately €110 ($122) per month under a one year lease which expired in July 2013 and was renewed through July 2015, whereupon rent continued to be paid by the Company on a month to month basis. Rent expense for the years ended December 31, 2016 and 2015 was €1,320 ($1,462) and €1,320 ($1,462), respectively.
The offices of SkyPharm are located in Greece, Thessaloniki, for which we paid approximately €4,325 ($4,802) per month under a six year lease that commenced September 2014. In December 2015, the lease was revised to include an additional rental of the first floor at a rate of €800 ($886) per month. The lease was further revised in March 2016 to include another additional rental of the first floor at a rate of €800 ($886) per month beginning in May 2016. On May 30, 2016, the lease was revised again to include an additional rental of space at a rate of €1,825 ($2,021) per month beginning in June 2016. Rent expense for the years ended December 31, 2016 was €80,675 ($89,323) and €54,597 ($60,614) respectively.
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
Intellectual Property Sale Agreement
On October 1, 2016, the Company entered into an Intellectual Property Sale Agreement with Anastasios Tsekas and Olga Parthenea Georgatsou (the “IPSA”) for the purchase of certain intellectual property rights relating to proprietary pharmaceutical formulas and any related technical information arising or related thereto (the “Intellectual Property”). The IPSA provides that the sellers shall be entitled to an aggregate of 200,000 shares of common stock of the Company, none of which have been issued to date, and issuable as follows in equal parts to each seller:
|
·
|
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.
|
The Company has agreed to pay Anastasios Tsekas €1,500 per month until the first issuance of the shares referenced above. The Company has also agreed that in the event the Company disposes of the Intellectual Property prior to the periods referenced above, the sellers shall be entitled to the issuance of all the shares referenced above.
NOTE 8 – 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 2016 and 2015 utilizing the treasury stock method. The computations of basic and diluted per share data were as follows:
|
|
12/31/2016
|
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(601,002
|
)
|
|
$
|
(6,687,912
|
)
|
Weighted average common shares outstanding – basic
|
|
|
12,564,824
|
|
|
|
12,561,598
|
|
Option awards
|
|
|
8,074
|
|
|
|
20,687
|
|
Weighted average common shares outstanding - dilutive
|
|
|
12,564,824
|
|
|
|
12,561,598
|
|
Basic and Diluted
|
|
|
(0.05
|
)
|
|
|
(0.53
|
)
|
NOTE 9 – DEPOSIT ON PENDING ACQUISITION
On August 19, 2014, Amplerissimo Ltd., a company incorporated in Cyprus and a subsidiary of the Company ("Amplerissimo") entered into a Share Purchase Agreement (the "Purchase Agreement") with B2IN S.A., a corporation organized under the laws of Greece ("B2IN"), Unilog Logistics S.A., a corporation organized under the laws of Greece and a wholly owned subsidiary of B2IN ("Unilog"), and Wilot Limited, a corporation organized under the laws of Cyprus ("Seller"). The transaction contemplated that, at the closing (the "Closing"), Amplerissimo would have acquired from Seller all of the outstanding capital stock of B2IN for a purchase price of seven million euros (€7,000,000) or approximately $7,634,000. As of December 31, 2015, €5,540,000 ($6,041,924) of this purchase price was paid to the Seller by Amplerissimo. The Company did not consummate the closing of the transaction; however, the Company has determined that the Seller will not refund any of the amounts previously paid to B2IN. Accordingly, as of December 31, 2015, €5,540,000 ($6,041,924) was written off and the balance of the deposit account is €0.00.
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
NOTE 10 - STOCK OPTIONS
On January 5, 2013, the Company granted 96,000 options to a former director, 72,000 of which were forfeited in a subsequent period. The options have an exercise period of four years with an exercise price of $1.00. In the event that the former director ceases to serve on the Board of Directors for any reason, the Director is entitled to a pro-rata portion of the annual options. The options were valued at $43,151 using the Black Scholes Option Pricing Model with the following inputs: stock price on measurement date: $1.80; Exercise price: $1.00; Option term: 4 years; Computed volatility: 448%. On November 4, 2016, the Board of Directors authorized the exercise of stock options held by the former director to purchase 24,000 shares of common stock.
On October 1, 2016 the Company granted 12,000 options to an employee of the Company as compensation for being appointed the US Finance Manager of the Company. The options have an exercise period of four years with an exercise price of $2.00. In the event that he ceases to work for the Company for any reason, he will be entitled to a pro rata portion of the annual options. The options vest monthly with 3,000 options fully vested as of December 31, 2016. The options were valued at $65,290 using the Black Sholes Option Pricing Model with the following inputs: stock price on measurement date: $5.80; Exercise price: $2.00; Option term: 4 years; Computed volatility: 159%. The Company expensed $16,636 as of December 31, 2016.
A summary of the Company’s option activity during the year ended December 31, 2016 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Options
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Balance Outstanding, December 31, 2015
|
|
|
24,000
|
|
|
$
|
1.00
|
|
|
|
1.02
|
|
|
$
|
-
|
|
Granted
|
|
|
12,000
|
|
|
|
2.00
|
|
|
|
4.00
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(24,000
|
)
|
|
|
1.00
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance Outstanding, December 31, 2016
|
|
|
12,000
|
|
|
$
|
2.00
|
|
|
|
3.75
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, December 31, 2016
|
|
|
3,000
|
|
|
$
|
2.00
|
|
|
|
3.75
|
|
|
$
|
-
|
|
NOTE 11 – SUBSEQUENT EVENTS
|
a)
|
Subsequent Events through April 14, 2017
|
Employment Agreement
On January 1, 2017 the Company entered into an agreement whereby the employee will be granted €1,000 per month and an annual retainer of 25,000 stock options as compensation for being appointed the International Finance Manager of the Company. The options have an exercise period of four years with an exercise price of $1.00. In the event that he ceases to work for the Company for any reason, he will be entitled to a pro rata portion of the annual options. The options were valued using the Black Sholes Option Pricing Model at $195,307, which will be amortized over the year.
Advisory Board Agreement
On January 3, 2017 the Company determined to create an advisory board and appointed Mr. Orestes Varvitsiotes as its first member. Mr. Varvitsiotes is a registered broker dealer who is currently engaged with Aegis Capital Corp. In connection therewith, the Company entered into an Advisory Board Member Consulting Agreement, dated as of January 3, 2017 whereby an annual retainer of 12,000 stock options was granted as compensation for services. The options have an exercise period of five years with an exercise price of $2.00. In the event that he ceases to work for the Company for any reason, he will be entitled to a pro rata portion of the annual options. The options were valued using the Black Sholes Option Pricing Model at $94,830, which will be amortized over the year.
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
Loan Facility Agreements
On January 13, 2017, Synthesis Peer-To Peer-Income Fund (the “Loan Facility”) advanced the Company an additional $155,516 in funding, the agreement between the Loan Facility and the Company was modified on March 23, 2017 to include the additional funding.
On March 16, 2017 and March 20, 2017, SkyPharm entered into loan agreements with the Synthesis Peer-To Peer-Income Fund (the “Bridge Loans”). The Bridge Loans provided to SkyPharm loans of $50,000 and $100,000, respectively. The Bridge Loans accrue interest at a rate of 10% per annum and are repayable on April 16, 2017 and April 20, 2017, respectively together with all other amounts then accrued and unpaid.
On March 23, 2017, Sky Pharm S.A. (“Sky Pharm”), a wholly owned subsidiary of Company entered into an Amended and Restated Loan Facility Agreement (the “A&R Loan Facility”), guaranteed by Grigorios Siokas, the Company’s Chief Executive Officer, with Synthesis Peer-To Peer-Income Fund (the “Lender”). The A&R Loan Facility amends and restates certain provisions of the Loan Facility Agreement, dated as of August 4, 2016, by and among the same parties. The A&R Loan Facility provides an increased facility size of $2,664,960.22, of which Sky Pharm has borrowed the entire balance. Advances under the A&R Loan Facility continue to accrue interest at a rate of 10% per annum from the applicable date of each drawdown and require quarterly interest payments. The A&R Facility now permits prepayments at any time. The amounts owed under the A&R Loan Facility shall be repayable upon the earlier of (i) seventy five days following the demand of the Lender; or (ii) August 31, 2018. The A&R Loan Facility is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas (the “Pledged Shares”). The A&R Loan Facility was also amended to provide additional affirmative and negative covenants of Sky Pharm and the Guarantor during the term of loans remain outstanding, including, but not limited to, the consent of the Lender in connection with (i) the Company or any of its subsidiaries incurring any additional indebtedness; or (ii) in the event of any increase in the Company’s issued and outstanding shares of Common Stock, the Pledged Shares shall be increased to an amount equal to a minimum of ten percent (10%) of the issued and outstanding shares of the Company.
On April 10, 2017, Decahedron Ltd. (“Decahedron”), a wholly owned subsidiary, as of February 9, 2017, of the Company entered into a Trade Finance Facility Agreement (the “Decahedron Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”). The Decahedron Facility provides the following material terms:
|
·
|
The Lender will provide Decahedron a facility of up to €2,750,000 ($2,901,800) 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.
|
COSMOS HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2016
The Company is in the process of obtaining the required consent from Synthesis Peer-To Peer-Income Fund in connection with certain negative covenants of the Company and Decahedron that restrict the Company and/or its
subsidiaries from incurring any additional indebtedness or encumbering their assets. There can be no assurance such consent will be obtained.
Letter of Intent with CC Pharma Gmbh
On January 18, 2017 the Company signed a Letter of Intent (LOI) with the owners of CC Pharma who intended to sell all of their shares to the Company.
According to the Letter of Intent, inter alia, the Parties agreed:
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·
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Parties shall negotiate a Share Purchase Agreement regarding the sale and transfer of CC Pharma shares to the Company.
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·
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Company shall be entitled to conduct due diligence with regard to financial, legal and tax matters and that the Parties shall cooperate in good faith to complete the due diligence process in due course.
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·
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The Parties will employ best efforts to achieve Closing of the Transaction by April 1, 2017.
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·
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Sellers grant to the Company the exclusive right to acquire their shares of CC Pharma Gmbh. This exclusive right expires on April 1, 2017. During this period the Sellers will not actively market or enter into negotiations with any other buyer.
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·
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Parties agreed that certain current managers of CC Pharma will remain managing directors of the Company at least until December 31, 2017. Parties will negotiate in good faith customary service agreements for the managing directors, whereby the Parties agree that the economic conditions of such new agreements shall be equal or more favorable for the managing directors compared to their current service agreements.
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Memoranda of Understanding- Stock Purchase Agreement – Completion/Closing of Acquisition
On February 9, 2017 the Company and Decahedron consummated the transactions contemplated by the Decahedron SPA. Pursuant to the terms of the Decahedron SPA, the shareholders of Decahedron received an aggregate of 170,000 shares of common stock of the Company (the “Stock Consideration”), which were delivered at closing in exchange for all of the Ordinary Shares of Decahedron for the Stock Consideration. In accordance with the terms of the SPA, Mr. Lazarou remained as a director and officer of Decahedron with a salary of 10,000 GBP per month (approximately US $12,270). The Company consummated this transaction on February 10, 2017. On April 7, 2017, the Company issued the 170,000 shares to Decahedron.
Consulting Agreement
On March 1, 2017, the Company entered into a four-month consulting agreement with ArKo European Business & Services GmbH for consideration of 500 restricted shares of common stock to be issued during the period of the agreement.
Convertible Promissory Note
In a board meeting on April 10, 2017, the members of the Board of Directors authorized the Company to negotiate additional financing through a convertible note payable to Coastal Capital Partners (Black Forest Capital, LLC). The proposed terms contemplate an aggregate total proceeds received from Coastal Capital Partners will be $500,000 in three separate tranches. Interest will be 8% per annum and the conversion rate will be 70% of the average of the lowest five trading prices of shares traded within twenty trading days prior to the date of conversion. As of the date of filing, the Company has not received any funds and there has been no formal agreement between the Company and Coastal Capital Partners. No assurances can be made that the Company will consummate these transactions.
On October 11, 2017, the Company authorized 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. The reverse stock split was approved and filed in the state of Nevada, and reported on Form 8-K filed on October 11, 2017. On November 21, 2017 the reverse stock split was approved by FINRA and the financial statements have been retroactively restated to reflect the split.
OUTSIDE BACK COVER OF PROSPECTUS
We have not authorized any dealer, salesperson or any other person to give any information or to represent anything other than those contained in this prospectus in connection with the offer contained herein, and, if given or made, you should not rely upon such information or representations as having been authorized by Cosmos Holdings Inc. This prospectus does not constitute an offer of any securities other than those to which it relates or an offer to sell, or a solicitation of an offer to buy, to those to which it relates in any state to any person to whom it is not lawful to make such offer in such state. The delivery of this prospectus at any time does not imply that the information herein is correct as of any time after the date of this prospectus.
DEALER PROSPECTUS DELIVERY REQUIREMENT
Until _______________, 2018, [
40 days from the date of this prospectus
], all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.
COSMOS HOLDINGS INC.
1,809,004 Shares
Common Stock
PROSPECTUS
__________, 2017
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered. None of the following expenses are payable by the Selling Securityholders. All of the amounts shown are estimates, except for the SEC registration fee.
SEC registration fee
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$
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1,376.36
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FINRA Registration Fee
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$
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1,658.26
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Legal fees and expenses
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$
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50,000.00
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Accounting fees and expenses
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$
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11,000.00
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Miscellaneous
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$
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1,965.38
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Total
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$
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66,000.00
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ITEM 14.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
We have not entered into separate indemnification agreements with any of our directors or officers. The Nevada Revised Statutes provide us with the power to indemnify any of our directors and officers. The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed to, our best interests. In a criminal action, the director or officer must not have had reasonable cause to believe his/her conduct was unlawful.
Under applicable sections of the Nevada Revised Statutes, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met the standards and will personally repay the expenses if it is determined the officer or director did not meet the standards.
Our Bylaws include certain indemnification provisions under which we are required to indemnify any of our current or former directors or officers against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him or them including an amount paid to settle an action or satisfy a judgment inactive criminal or administrative action or proceeding to which he is or they are made a party by reason of his or her being or having been a director of the Company. In addition, our Articles of Incorporation provide that the no director or officer of the Company shall be personally liable to the Company or any of its stockholders for damages for breach of fiduciary duty as a director or officer involving any act or omission of any such director or officer; provided, however, that these provisions do not eliminate or limit the liability of a director or officer (i) for acts or omissions which involve intentional misconduct, fraud or knowing violation of the law, or (ii) the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes.
At present, there is no pending litigation or proceeding involving any of our directors or officers regarding which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification. We also maintain insurance policies that indemnify our directors and officers against various liabilities, including liabilities arising under the Securities Act, which might be incurred by any director or officer in his or her capacity as such.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than payment by us for expenses incurred or paid by a director, officer or controlling person of ours in successful defense of any action, suit, or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction, the question of whether such indemnification by it is against public policy in the Securities Act and will be governed by the final adjudication of such issue.
ITEM 15.
RECENT SALES OF UNREGISTERED SECURITIES.
On November 16, 2017, the Company completed the sale of $3,350,000 in aggregate principal amount of Senior Convertible Notes (the “Notes”) to two institutional investors (the “Buyers”) with which it had no prior relationship, pursuant to a Securities Purchase Agreement (the “SPA”) for a purchase price of $3,000,000. The Notes are convertible into 670,000 shares of the Company’s common stock at $5.00 per share and Warrants to purchase an aggregate of 536,001 shares of common stock exercisable at $7.50 per share were issued.
Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission of $240,000, equal to eight (8%) percent of the total gross proceeds of the offering and the issuance of five-year Warrants to purchase eight (8%) percent of the shares of Common Stock issued or issuable in this offering (excluding shares of Common Stock issuable upon exercise of any Warrants issued to investors); however, will receive eight (8%) percent of any cash proceeds received from the exercise of any Warrants sold in the offering with an expiration equal to or less than twenty-four (24) months.
Exemption from registration for the above transaction was claimed by the Company pursuant to Section 4(a)(2) of the Securities Act with Rule 506 of Regulation D promulgated thereunder. The basis for the exemption was the representations and warranties made by the Buyers in the SPA.
The following securities were sold pursuant to the exemption afforded under Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”). There were no placement agents or underwriters for any of the following private placements:
On April 28, 2015, the Company issued 4,500 shares of common stock to Hellenic American Securities for consulting services for total consideration of $28,352 of services.
On November 4, 2016, the Company issued 24,000 shares of common stock to a former director upon the exercise of then outstanding stock options, at $1.00 per share.
On March 24, 2017, the Company issued 170,000 shares of common stock to the three owners of Decahedron Ltd. in consideration of the sale of all of the stock of such company to the Company.
On May 5, 2017, the Company issued 9,250 shares of common stock to the two persons for services rendered.
On May 18, 2017, the Company issued 30,000 shares of common stock to Integra Consulting Group LLC for consulting and public relations services, at $7.30 per share.
On May 24, 2017, the Company issued 2,000 shares of common stock for services for the creation and maintenance of the current website.
On May 25, 2017, the Company issued 2,000 shares of common stock for investment banking services, at $7.20 per share.
On May 25, 2017, the Company issued 20,000 shares of common stock for investment analysis services, at $7.70 per share.
On July 21, 2017, the Company sold 4,300 shares of common stock at $5.00 per share to a single investor.
On September 1, 2017, the Company issued 790 shares of common stock for consulting services.
On October 30, 2017, the Company issued 4,300 shares of common stock for consulting services, at $5.50 per share.
Between April 10, 2017 and May 16, 2017, the Company sold an aggregate of 10,040 shares of common stock at $7.00 per share and issued Warrants to purchase 10,040 shares of common stock. Exemption from registration was claimed pursuant to Regulation S promulgated under the Securities Act. The exemption was claimed on the basis of the representations and warranties contained in the offering documents.
ITEM 16. Exhibits and Financial Statement Schedules.
Exhibit No.
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Document Description
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3.1
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Articles of Incorporation of the Registrant dated November 14, 2013 (1)
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3.2
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Certificate of Amendment to Articles of Incorporation of the Registrant filed on October 11, 2017 (14)
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3.3
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Bylaws of the Registrant (1)
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4.1
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Form of Securities Purchase Agreement dated November 15, 2017 by and among Cosmos Holdings Inc. and the Buyers listed (15)
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4.2
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Form of Senior Convertible Note (15)
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4.3
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Form of Warrant to Purchase Common Stock (15)
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4.4
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Form of Leak-Out Agreement (15)
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4.5
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Form of Registration Rights Agreement (15)
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5.1
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Opinion of Davidoff Hutcher & Citron LLP as to legality*
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10.1
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Master Services Agreement, dated January 15, 2013, by and between Amplerissimo Ltd. and Millenia International Group Ltd. (2)
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10.2
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Master Services Agreement, dated May 15, 2013, , by and between Amplerissimo Ltd. and Tech Telecoms and Trade Limited (2)
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10.3
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Exclusive Cooperation Agreement, dated April 30, 2014, by and between the Registrant and Grigorios Siokas (3)
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10.4
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Advisory Board Member Consulting Agreement, dated as of January 3, 2017, by and between the Company and Orestes Varvitsiotes (4)
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10.5
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Stock Purchase Agreement, dated November 4, 2015, by and between Grigorios Siokas and Dimitrios S. Goulielmos (5)
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10.6
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Loan Facility Agreement, dated as of August 4, 2016, by and among SkyPharm S/A, Grigorious Siokas, as Guarantor and Synthesis Peer to Peer Income Fund. (6)
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10.7
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Pledge Agreement, by and between Grigorios Siokas and Synthesis Peer-to Peer Income Fund (6)
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10.8
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First Deed of Amendment relating to Loan Facility Agreement, dated as of August 4, 2016, by and among Sky Pharm S.A., as Borrower, Grigorios Siokas, as Guarantor and Synthesis Peer-to Peer Income Fund (7)
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10.9
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Intellectual Property Sale Agreement, dated as of October 1, 2016, by and among the Company, Anastasios Tsekas and Olga Parthenea Georgatsou (8)
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10.10
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Employment Agreement, dated as of October 1, 2016, by and between the Company and Konstantinos Vassilopoulos (8)
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10.11
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Stock Purchase Agreement, dated as of November 16, 2016, by and among Company, Medihelm Pharmaceutical Wholesellers SA, Konstantinos Metsovitis and Eleni Metsovitis (9)
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10.12
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Stock Purchase Agreement, dated as of November 17, 2016, by and among the Company, Decahedron Ltd. and Nikolaos Lazarou (10)
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10.13
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Amendment to the Stock Purchase Agreement, dated as of February 9, 2017 by and among the Company, Decahedron Ltd., Nikolaos Lazarou, Vasiliki Kappou, Misel Kappou (11)
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10.14
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Amended and Restating Loan Facility Agreement, dated as of March 23, 2017, by and among SkyPharm S.A., as Borrower, Grigorios Siokas, as Guarantor and Synthesis Peer-to Peer Income Fund, as Lender (12)
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10.15
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Trade Finance Facility Offer Letter, dated as of April 10, 2017, by and between Decahedron Ltd. and Synthesis Structured Commodity Trade Finance Limited. (13)
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10.16
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Trade Finance Facility Agreement, dated as of April 10, 2017, by and between Decahedron Ltd. and Synthesis Structured Commodity Trade Finance Limited. (13)
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10.17
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Cross Guarantee and Indemnity Agreement, dated as of April 10, 2017, by and among Cosmos Holdings Inc., Decahedron Ltd. and Synthesis Structured Commodity Trade Finance Limited. (13)
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10.18
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Security Assignment of Receivables and other Contractual Rights, dated as of April 10, 2017, by and between Decahedron Ltd. and Synthesis Structured Commodity Trade Finance Limited. (13)
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10.19
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Trade Finance Facility Agreement, dated May 12, 2017 by and between SkyPharm S.A and Synthesis Structured Commodity Finance Limited. (16)
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10.20
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Cross Guarantee and Indemnity Agreement dated May 12, 2017 by and between SkyPharm S.A., as Commodity Buyer, Cosmos Holdings Inc. as Guartor and Synthesis Structured Commodity Trade Finance Limited (16)
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10.21
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Security Assignment of Receivables and other Contractual Rights, dated May 12, 2017 by and between SkyPharm S.A and Synthesis Structured Commodity Trade Finance Limited (16)
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23.1
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Consent of Davidoff Hutcher & Citron LLP
*
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23.2
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Consent of Malone Bailey, LLP*
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_____________
*Filed with this Registration Statement
101.INS
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XBRL Instance Document**
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101.SCH
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XBRL Taxonomy Extension Schema Document**
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document**
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document**
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document**
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document**
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Exhibit 101
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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.**
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________________
(1)
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Incorporated by reference to the Registration Statement on Form S-1 (File No. 333-162597) filed by the Registrant on October 20, 2009.
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(2)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 14, 2013.
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(3)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on May 1, 2014.
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(4)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on January 9, 2017.
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(5)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 9, 2015.
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(6)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on August 4, 2016.
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(7)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on September 16, 2016.
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(8)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on October 5, 2016.
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(9)
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Incorporated by reference to the Current Report on Form 8-K dated as of November 16, 2016 filed by the Registrant on November 22, 2016.
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(10)
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Incorporated by reference to the Current Report on Form 8-K dated as of November 17, 2016 filed by the Registrant on November 22, 2016.
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(11)
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Incorporated by reference to the Current Report on Form 8-K/A filed by the Registrant on February 13, 2017.
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(12)
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Incorporated by reference to the Current Report on Form 8-K/A filed by the Registrant on March 28, 2017.
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(13)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on April 14, 2017.
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(14)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant in October 11, 2017.
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(15)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 16, 2017.
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(16)
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Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on May 18, 2017
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*
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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 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
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**
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XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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