☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 000-54436 Registrant's telephone number: (312) 536-3102 Securities registered under Section 12(g) of the Exchange Act: Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required t ...

Revenue Performance - Revenue for Q3 2022 was $12,016,098, a decrease of 11.62% compared to $13,595,418 in Q3 2021[280] - Revenue for the nine months ended September 30, 2022, was $38,296,402, down 4.41% from $40,061,419 in the same period of 2021[280] Gross Profit Analysis - Gross profit for Q3 2022 was $1,783,897 (23.9%), compared to $2,345,570 (17.3%) in Q3 2021, reflecting a decrease of 23.95%[283] - Gross profit for the nine months ended September 30, 2022, was $5,521,701 (14.4%), an increase of 2.56% from $5,383,748 (13.4%) in the same period of 2021[283] Cost of Goods Sold - Cost of goods sold for Q3 2022 was $10,232,201, a decrease of 9.05% from $11,249,848 in Q3 2021[281] - Cost of goods sold for the nine months ended September 30, 2022, was $32,774,701, down 5.49% from $34,677,671 in the same period of 2021[281] Operating Loss - The Company reported a net operating loss of $344,112 for Q3 2022, a decrease of 62.37% compared to a loss of $914,551 in Q3 2021[284] - For the nine months ended September 30, 2022, the net operating loss was $176,224, a significant decrease of 95.62% from $4,022,120 in the same period of 2021[285] Foreign Currency Loss - The Company experienced an unrealized foreign currency loss of $1,029,141 for Q3 2022, compared to a loss of $214,216 in Q3 2021[288] Working Capital - As of September 30, 2022, the Company had working capital of $1,945,076, down from $10,950,492 as of December 31, 2021[289] Cash Flow from Operating Activities - The net cash used in operating activities was $4,552,332 for the nine months ended September 30, 2022, compared to $5,549,269 in the same period of 2021[290] Financing Activities - The Company reported net cash provided by financing activities of $4,477,843 for the nine months ended September 30, 2022, down from $6,475,402 in 2021[292] Future Plans and Expansion - The company aims to enhance its pharmaceutical and over-the-counter product lines through acquisitions and licensing opportunities[259] - The company has expanded its distribution network to over 40,000 pharmacies in Europe and 1,500 pharmacies in Greece[260] - The company launched its proprietary nutraceutical products "Sky Premium Life®" in 2018 and "Mediterranation®" in 2022, with over 80 product codes[264] - The company entered into a binding letter of intent to acquire a pharmaceutical company for €1,700,000 in cash and 433,334 shares of common stock[274] - The Company plans to expand its nutraceutical portfolio to 150 SKUs by the end of 2022, including advanced formulations and clinical studies[295] - The Company aims for geographic expansion in the EU, Asia, USA, and Canada through exclusive distributors and acquisitions of nutraceutical companies[295] - The Company intends to enhance its product offerings by acquiring generics, biosimilars, and OTC licenses while focusing on strategic R&D[296] Risks and Financial Outlook - The Company anticipates using available cash and financing to support business operations in the upcoming year, with potential risks of losing quotation qualifications if requirements are not met[293]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ___________ to ___________ Commission file number: 000-54436 COSMOS HOLDINGS INC. | --- | --- | |--------------------------------------------------------------------------------|----------------------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ___________ to ___________ Commission file number: 000-54436 COSMOS HOLDINGS INC. (Exact name of registrant as specified in its charter) Nevada 27-0611758 (State or other jurisdiction of (I.R.S. Emplo ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from __________ to __________ Commission file number: 000-54436 COSMOS HOLDINGS INC. (Exact name of registrant as specified in its charter) | --- | --- | |----------------------------------------------- ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section provides essential filing details for Cosmos Holdings Inc., including registrant information and shares outstanding [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides essential identification details for Cosmos Holdings Inc., including its incorporation state, IRS Employer Identification Number, principal executive offices, and contact number - Cosmos Holdings Inc. is incorporated in Nevada with IRS Employer Identification No. **27-0611758**. Its principal executive offices are located at 141 West Jackson Blvd, Suite 4236 Chicago, Illinois 60604, and the registrant's telephone number is **(312) 536-3102**[3](index=3&type=chunk) - The company is classified as a 'Smaller reporting company' and has filed all required reports under Section 13 or 15(d) of the Exchange Act during the past 12 months, and has submitted electronically every Interactive Data File as required by Rule 405 of Regulation S-T[3](index=3&type=chunk)[4](index=4&type=chunk) [Shares Outstanding](index=2&type=section&id=Shares%20Outstanding) As of November 15, 2021, Cosmos Holdings Inc. reported 17,332,628 shares issued and 17,039,208 shares outstanding of its common stock Common Stock Shares (as of November 15, 2021) | Metric | Count | | :-------------- | :----------- | | Shares Issued | 17,332,628 | | Shares Outstanding | 17,039,208 | [PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Cosmos Holdings Inc., including the balance sheets, statements of operations and comprehensive income (loss), statements of changes in stockholders' deficit, and statements of cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=2&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The balance sheet shows an increase in total assets and stockholders' equity, while total liabilities decreased from December 31, 2020, to September 30, 2021. Current assets saw a modest increase, primarily driven by accounts receivable, net, and cash and cash equivalents Condensed Consolidated Balance Sheet Highlights | Metric | September 30, 2021 (Unaudited) | December 31, 2020 | | :--------------------------- | :----------------------------- | :---------------- | | Total Current Assets | $44,283,835 | $40,772,946 | | Total Assets | $47,677,339 | $43,844,413 | | Total Current Liabilities | $37,427,495 | $34,793,076 | | Total Liabilities | $43,026,378 | $48,005,426 | | Total Stockholders' Equity (Deficit) | $4,650,961 | $(4,161,013) | - Cash and cash equivalents increased from **$628,395** at December 31, 2020, to **$1,033,875** at September 30, 2021[9](index=9&type=chunk) - Accounts receivable, net, increased from **$23,440,650** to **$27,189,507**, while accounts receivable - related party decreased from **$3,468,564** to **$2,924,075**[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20(LOSS)) The company reported a net loss for both the three and nine months ended September 30, 2021, a significant decline from net income in the prior year periods. This was primarily driven by increased operating expenses, particularly general and administrative costs, and non-cash interest expense, despite a slight increase in revenue for the nine-month period Key Financial Performance (3 Months Ended September 30) | Metric | 2021 | 2020 | | :------------------------- | :------------- | :------------- | | REVENUE | $13,595,418 | $14,352,098 | | COST OF GOODS SOLD | $11,249,848 | $11,954,788 | | GROSS PROFIT | $2,345,570 | $2,397,310 | | TOTAL OPERATING EXPENSES | $3,260,121 | $1,317,307 | | INCOME (LOSS) FROM OPERATIONS | $(914,551) | $1,080,003 | | NET INCOME (LOSS) | $(1,936,543) | $757,866 | | BASIC NET INCOME (LOSS) PER SHARE | $(0.11) | $0.06 | Key Financial Performance (9 Months Ended September 30) | Metric | 2021 | 2020 | | :------------------------- | :------------- | :------------- | | REVENUE | $40,061,419 | $39,105,318 | | COST OF GOODS SOLD | $34,677,671 | $33,166,706 | | GROSS PROFIT | $5,383,748 | $5,938,612 | | TOTAL OPERATING EXPENSES | $9,405,868 | $3,646,732 | | INCOME (LOSS) FROM OPERATIONS | $(4,022,120) | $2,291,880 | | NET INCOME (LOSS) | $(6,489,502) | $1,651,867 | | BASIC NET INCOME (LOSS) PER SHARE | $(0.40) | $0.12 | - Total operating expenses for the nine months ended September 30, 2021, significantly increased to **$9,405,868** from **$3,646,732** in the prior year, primarily due to a substantial rise in general and administrative expenses and stock-based compensation[12](index=12&type=chunk)[274](index=274&type=chunk) [Consolidated Statements of Changes in Stockholders' Deficit](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS%27%20DEFICIT) The company's stockholders' deficit improved significantly, moving from a deficit of $(4,161,013) at January 1, 2021, to a positive equity of $4,650,961 by September 30, 2021. This improvement was largely driven by increases in additional paid-in capital from debt conversions and restricted stock issuances, despite accumulated deficits and foreign currency translation adjustments Changes in Stockholders' Equity (Deficit) Summary | Metric | January 1, 2021 | September 30, 2021 | | :----------------------------------- | :-------------- | :----------------- | | Common Stock Value | $13,484 | $17,332 | | Additional Paid-in Capital | $14,333,285 | $30,146,413 | | Treasury Stock Value | $(611,854) | $(439,844) | | Accumulated Deficit | $(18,750,824) | $(25,240,326) | | Accumulated Other Comprehensive Income | $854,896 | $167,386 | | Total Stockholders' Equity (Deficit) | $(4,161,013) | $4,650,961 | - Additional paid-in capital increased substantially due to the sale of treasury stock to a third party (**$249,350**), restricted stock issued to consultants (**$1,187,650** and **$1,968,000**), conversion of notes payable into common stock (**$2,563,582** and **$1,313,796**), conversion of related party debt (**$2,999,500** and **$2,249,625**), and beneficial conversion features related to convertible notes payable (**$294,000**)[15](index=15&type=chunk)[16](index=16&type=chunk) - The accumulated deficit worsened from **$(18,750,824)** to **$(25,240,326)** during the nine months ended September 30, 2021, reflecting net losses during the period[15](index=15&type=chunk)[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the nine months ended September 30, 2021, the company experienced significant cash outflows from operating and investing activities, offset by substantial cash inflows from financing activities, resulting in a net increase in cash. Operating cash flow improved compared to the prior year, while investing activities saw increased outlays for property, equipment, and licenses Cash Flow Summary (9 Months Ended September 30) | Cash Flow Activity | 2021 | 2020 | | :----------------------------- | :-------------- | :-------------- | | Net Cash Used In Operating Activities | $(5,549,269) | $(10,342,115) | | Net Cash Used In Investing Activities | $(835,425) | $(113,845) | | Net Cash Provided By Financing Activities | $6,475,402 | $10,984,011 | | Effect of Exchange Rate Changes on Cash | $314,772 | $515,043 | | NET CHANGE IN CASH | $405,480 | $1,043,094 | | CASH AT END OF PERIOD | $1,033,875 | $1,081,631 | - Operating activities used less cash in 2021 (**$5,549,269**) compared to 2020 (**$10,342,115**), partly due to significant stock-based compensation (**$5,147,076**) and changes in accounts receivable[18](index=18&type=chunk) - Investing activities saw increased cash usage, primarily for the purchase of property and equipment (**$521,758**) and licenses (**$313,667**) in 2021[18](index=18&type=chunk) [Note 1 – Basis of Presentation](index=8&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information, including normal recurring accruals, and should be read in conjunction with the Company's latest annual report on Form 10-K. Interim results are not indicative of full-year performance - Financial statements are prepared in accordance with U.S. GAAP for interim financial information and instructions to Form 10-Q, Article 8 of Regulation S-X[21](index=21&type=chunk) - All adjustments (normal recurring accruals) considered necessary for fair presentation have been included[21](index=21&type=chunk) - Operating results for the three and nine months ended September 30, 2021, are not necessarily indicative of the results for the full year ending December 31, 2021, or any other period[21](index=21&type=chunk) [Note 2 – Organization, Nature of Business and Going Concern](index=8&type=section&id=NOTE%202%20%E2%80%93%20ORGANIZATION,%20NATURE%20OF%20BUSINESS%20AND%20GOING%20CONCERN) Cosmos Holdings Inc. is a multinational pharmaceutical company operating through subsidiaries in Greece and the UK, focusing on importing, exporting, and distributing pharmaceuticals, OTC medicines, and nutraceuticals. The company faces a 'going concern' doubt due to accumulated deficits and net losses, and is actively pursuing financing and strategic initiatives to address these challenges - Cosmos Holdings Inc. operates as a multinational pharmaceutical company, importing, exporting, and distributing brand-name and branded pharmaceuticals, OTC medicines, and dietary/vitamin supplements through SkyPharm (Greece), Decahedron Ltd. (UK), and Cosmofarm (Greece)[22](index=22&type=chunk) - The company leverages price spreads within the EU to source pharmaceuticals at lower prices and export to higher-priced countries, aiming for organic growth and attractive margins[23](index=23&type=chunk) - The company launched its own brand of nutraceuticals, Sky Premium Life, in 2018 and expanded into full-line pharmaceutical wholesale distribution through the acquisition of Cosmofarm in 2018, which serves approximately **1500** independent retail pharmacies in Athens[24](index=24&type=chunk) - The company's ability to continue as a going concern is in substantial doubt due to a net loss of **$6,489,502** and net cash used in operations of **$5,549,269** for the nine months ended September 30, 2021, and an accumulated deficit of **$25,240,326**[38](index=38&type=chunk) - Management plans to address the going concern issue by securing new debt, exchanging debt for equity, restructuring current debt, and new fundraising, alongside increasing product sales[39](index=39&type=chunk)[42](index=42&type=chunk) [Summary of Significant Accounting Policies](index=10&type=section&id=Summary%20of%20Significant%20Accounting%20Policies) This section details the company's key accounting policies, including principles of consolidation, use of estimates, impact of COVID-19, cash and cash equivalents, reclassifications, accounts receivable, tax receivables, inventory valuation, property and equipment depreciation, impairment of long-lived assets, goodwill and intangibles, equity method investments, fair value measurements, revenue recognition, stock-based compensation, foreign currency translation, income taxes, retirement benefits, and earnings per share calculations - The company's consolidated accounts include its wholly-owned subsidiaries: SkyPharm S.A., Decahedron Ltd., and Cosmofarm Ltd., with all significant intercompany balances and transactions eliminated[44](index=44&type=chunk) - Inventory is stated at net realizable value using the weighted average method and consists primarily of finished goods and packaging materials. Write-downs occur based on physical condition, expiration date, market conditions, and forecasted demand[54](index=54&type=chunk)[55](index=55&type=chunk) - Goodwill and intangible assets are reviewed for impairment annually or upon triggering events, using fair value measurement techniques, including discounted cash flow methodology for goodwill[58](index=58&type=chunk) - Revenue is recognized using a five-step model (ASC 606) upon transfer of promised goods to the customer[72](index=72&type=chunk) - The company accounts for income taxes under the asset and liability method (ASC 740), recognizing deferred tax assets and liabilities. A valuation allowance is maintained against net deferred tax assets in the United States[76](index=76&type=chunk)[79](index=79&type=chunk) - The company is evaluating the effect of ASU 2020-06, which simplifies accounting for convertible instruments, effective January 1, 2024, with early adoption permitted[84](index=84&type=chunk)[87](index=87&type=chunk) [Note 3 – Marketable Securities](index=16&type=section&id=NOTE%203%20%E2%80%93%20MARKETABLE%20SECURITIES) The company holds marketable securities, including shares in Diversa S.A. and National Bank of Greece, which are valued at fair value. An initial distribution and equity agreement with Marathon Global Inc. led to share exchanges with ICC International Cannabis Corp., though no value was attributed to the Marathon shares initially, and future revenue from this agreement is constrained due to estimation uncertainties - As of September 30, 2021, marketable securities included **40,000** shares of Diversa S.A. valued at **$206,534** and **16,666** shares of National Bank of Greece valued at **$4,669**. The company recorded a net unrealized gain of **$317** on these investments during the nine months ended September 30, 2021[98](index=98&type=chunk) - The company entered a Distribution and Equity Acquisition Agreement with Marathon Global Inc., receiving a **33 1/3%** equity interest (**5 million shares**) in Marathon and **CAD $2,000,000** cash. The Marathon shares were later exchanged for **10 million shares** of ICC International Cannabis Corp[88](index=88&type=chunk)[89](index=89&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - No value was attributed to the Marathon shares received for distribution services, and future variable consideration from the agreement is constrained due to limited experience and estimation uncertainties, thus no revenue has been recognized for the period ended September 30, 2021[94](index=94&type=chunk)[95](index=95&type=chunk) [Note 4 – Property and Equipment, Net](index=17&type=section&id=NOTE%204%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT,%20NET) Property and equipment, net, increased from $1,757,213 at December 31, 2020, to $1,968,505 at September 30, 2021, primarily driven by additions to furniture, fixtures, and equipment, offset by accumulated depreciation Property and Equipment, Net | Category | September 30, 2021 | December 31, 2020 | | :--------------------------- | :----------------- | :---------------- | | Leasehold improvements | $531,011 | $560,711 | | Vehicles | $98,868 | $105,057 | | Furniture, fixtures and equipment | $2,062,739 | $1,632,654 | | Computers and software | $143,015 | $149,005 | | Less: Accumulated depreciation and amortization | $(867,128) | $(690,214) | | Total | $1,968,505 | $1,757,213 | - Depreciation expense for the nine months ended September 30, 2021, was **$218,664**, up from **$183,156** in the prior year[56](index=56&type=chunk) [Note 5 – Goodwill and Intangible Assets, Net](index=17&type=section&id=NOTE%205%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLE%20ASSETS,%20NET) Goodwill and intangible assets, net, significantly increased from $230,506 at December 31, 2020, to $508,267 at September 30, 2021, primarily due to a substantial increase in licenses, offset by accumulated amortization Goodwill and Intangible Assets, Net | Category | September 30, 2021 | December 31, 2020 | | :--------------------------- | :----------------- | :---------------- | | License | $352,507 | $50,000 | | Trade name / mark | $36,997 | $36,997 | | Customer base | $176,793 | $176,793 | | Subtotal (Intangible Assets) | $458,570 | $180,809 | | Goodwill | $49,697 | $49,697 | | Total | $508,267 | $230,506 | - The significant increase in licenses from **$50,000** to **$352,507** contributed to the overall rise in intangible assets[101](index=101&type=chunk) - Amortization expense for intangible assets was **$24,746** for the nine months ended September 30, 2021[61](index=61&type=chunk) [Note 6 – Income Taxes](index=18&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20TAXES) The company is subject to income taxes in Greece (22%) and the United Kingdom (19%) but has made no U.S. federal income tax provisions due to no U.S. taxable income. A valuation allowance is maintained against net deferred tax assets in the United States, while foreign valuation allowances were reversed as of December 31, 2020 - No provisions for income taxes have been made for U.S. federal taxation due to no U.S. taxable income for the three and nine months ended September 30, 2021 and 2020[103](index=103&type=chunk) - Corporate income tax rates are **22%** in Greece and **19%** in the United Kingdom[78](index=78&type=chunk)[103](index=103&type=chunk) - A valuation allowance is maintained against all net deferred tax assets in the United States, while foreign valuation allowances were reversed as of December 31, 2020[105](index=105&type=chunk) - Deferred tax assets amounted to **$111,468** as of September 30, 2021, down from **$178,430** at December 31, 2020[106](index=106&type=chunk) [Note 7 – Capital Structure](index=18&type=section&id=NOTE%207%20%E2%80%93%20CAPITAL%20STRUCTURE) The company's capital structure saw significant changes, including an increase in common stock issued and outstanding, sale and cancellation of treasury shares, and substantial increases in additional paid-in capital through consulting agreements and multiple debt-to-equity exchange agreements, particularly with related parties Common Stock Issued and Outstanding | Metric | September 30, 2021 | December 31, 2020 | | :------------------------- | :----------------- | :---------------- | | Shares Authorized | 300,000,000 | 300,000,000 | | Shares Issued | 17,332,628 | 13,485,128 | | Shares Outstanding | 17,039,208 | 13,069,800 | - The company sold **65,000** treasury shares for **$250,000** in February 2021 and cancelled **57,120** treasury shares valued at **$171,360** in September 2021[109](index=109&type=chunk)[111](index=111&type=chunk) - A consulting agreement effective February 5, 2021, resulted in the issuance of **1,800,000** restricted shares of common stock, valued at **$5,904,000**, with **$5,147,076** recorded as stock-based compensation by September 30, 2021[113](index=113&type=chunk)[114](index=114&type=chunk) - Multiple debt exchange agreements, including those with related parties (Grigorios Siokas), converted significant principal amounts of debt into common stock, increasing additional paid-in capital by **$3,000,000**, **$1,000,000**, and **$1,250,000** respectively, for related party debt, and **$1,314,117** for a senior institutional lender[116](index=116&type=chunk)[117](index=117&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) [Note 8 – Related Party Transactions](index=20&type=section&id=NOTE%208%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) The company engages in significant transactions with related parties, primarily Doc Pharma S.A. (whose CEO is the wife of Cosmos's CEO) and Grigorios Siokas (Cosmos's CEO). These transactions include inventory purchases, R&D agreements, and substantial debt and loan arrangements, many of which have been converted into equity - Doc Pharma S.A. is a related party due to the CEO's wife being Doc Pharma's CEO. Transactions include inventory purchases (**$2,164,913** for nine months ended Sep 30, 2021) and an R&D agreement for **250** nutritional supplements for Sky Premium Life, costing **€1,425,000** plus VAT[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - Grigorios Siokas, the Company's CEO, holds a related party note payable of **$474,889** as of September 30, 2021, with an extended maturity date to December 31, 2021[132](index=132&type=chunk) - Related party loans payable to Grigorios Siokas totaled **$1,492,132** as of September 30, 2021. During the nine months ended September 30, 2021, **$5,250,001** of these loans were converted into common stock, and **$600,000** was forgiven as part of a lawsuit settlement[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) [Note 9 – Lines of Credit](index=22&type=section&id=NOTE%209%20%E2%80%93%20LINES%20OF%20CREDIT) The company maintains several lines of credit with Greek banks (National Bank of Greece, Alpha Bank, Pancreta Bank) and a COVID-19 government loan, totaling $4,667,324 as of September 30, 2021. These facilities are renewed annually, bear interest, and are guaranteed by customer receivable checks, functioning as a type of factoring Lines of Credit Summary | Bank / Facility | September 30, 2021 | December 31, 2020 | | :------------------- | :----------------- | :---------------- | | National Bank of Greece | $2,726,522 | $3,540,550 | | Alpha Bank of Greece | $1,033,174 | $1,106,894 | | Pancreta Bank | $481,759 | - | | National – COVID | $425,869 | $429,240 | | Total | $4,667,324 | $5,076,684 | - Interest rates for these lines of credit range from **4.35%** to **6.10%**[144](index=144&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) - Interest expense from lines of credit for the nine months ended September 30, 2021, was **$165,245**, up from **$141,979** in the prior year[150](index=150&type=chunk) - The lines of credit are guaranteed by customer receivable checks and are not considered direct debt obligations, functioning as a type of factoring[151](index=151&type=chunk) [Note 10 – Convertible Debt](index=23&type=section&id=NOTE%2010%20%E2%80%93%20CONVERTIBLE%20DEBT) The company's convertible debt decreased from $952,027 at December 31, 2020, to $785,794 at September 30, 2021, net of discounts. This reduction is primarily due to payments and conversions of notes into common stock, while new convertible notes were issued. The company also recognized derivative liabilities associated with embedded conversion features Convertible Debt Summary | Metric | 2021 | 2020 | | :----------------------------------- | :------------ | :-------- | | Beginning balance convertible notes | $1,447,000 | $1,500,000 | | New notes | $625,000 | $540,000 | | Payments | $(529,000) | $(593,000) | | Conversion to common stock | $(350,000) | - | | Convertible note payable, net of discount | $785,794 | $952,027 | - All convertible debt is classified as short-term, maturing within fiscal year 2021[156](index=156&type=chunk) - The company converted **$350,000** in principal and **$24,144** in accrued interest from a December 2020 convertible note into **126,501** shares of common stock[163](index=163&type=chunk) - Derivative liabilities related to embedded conversion features were valued at **$115,073** as of September 30, 2021, with a gain of **$213,490** recognized from changes in fair value for the nine months ended September 30, 2021[166](index=166&type=chunk)[178](index=178&type=chunk) [Note 11 – Debt](index=26&type=section&id=NOTE%2011%20%E2%80%93%20DEBT) The company's total third-party debt decreased from $22,814,594 at December 31, 2020, to $18,159,605 at September 30, 2021, primarily due to significant debt conversions into equity and payments, partially offset by new borrowings. This section details various loan facilities, trade finance agreements, and senior promissory notes, many of which are personally guaranteed by the CEO Third-Party Debt Summary | Debt Category | September 30, 2021 | December 31, 2020 | | :------------------------- | :----------------- | :---------------- | | Loan Facility | $1,296,624 | $3,302,100 | | Trade Facility | $6,315,400 | $6,446,000 | | Third Party (various notes) | $10,134,803 | $12,631,284 | | COVID Loans | $412,778 | $435,510 | | Total Debt | $18,159,605 | $22,814,594 | - A significant portion of debt was converted into equity, including **$4,616,500** from various facilities, and **$3,010,000** from prior year senior promissory notes, resulting in a gain on debt extinguishment of **$445,636**[180](index=180&type=chunk)[191](index=191&type=chunk) - Several senior promissory notes, including the May 18, 2020 (**$2,000,000**), July 3, 2020 (**$5,000,000**), and August 4, 2020 (**$2,000,000**) notes, bear **18%** interest and are personally guaranteed by CEO Grigorios Siokas. Negotiations are ongoing to extend maturity dates for some of these notes[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) [Note 12 – Leases](index=30&type=section&id=NOTE%2012%20%E2%80%93%20LEASES) The company holds various operating and finance leases for office space, with terms up to 10 years. Lease assets and liabilities are recognized at the commencement date based on the present value of lease payments. Operating lease liabilities totaled $913,633 and finance lease liabilities totaled $263,239 as of September 30, 2021 - The weighted-average remaining lease term for operating leases is **6.63 years**, with a weighted-average discount rate of **6.74%**[211](index=211&type=chunk) Operating Lease Liabilities (as of September 30, 2021) | Period | Amount | | :--------------------------- | :----------- | | Remainder of 2021 | $63,464 | | 2022 | $223,010 | | 2023 | $198,872 | | 2024 | $116,255 | | 2025 | $112,144 | | Thereafter | $421,509 | | Total undiscounted operating lease payments | $1,135,254 | | Less: Imputed interest | $(221,621) | | Present value of operating lease liabilities | $913,633 | Finance Lease Liabilities (as of September 30, 2021) | Period | Amount | | :--------------------------- | :----------- | | Remainder of 2021 | $26,268 | | 2022 | $93,492 | | 2023 | $80,119 | | 2024 | $62,191 | | 2025 | $31,959 | | Thereafter | $2,005 | | Total undiscounted finance lease payments | $296,034 | | Less: Imputed interest | $(32,795) | | Present value of finance lease liabilities | $263,239 | - Interest expense on finance leases was **$9,995**, and amortization expense was **$80,287** for the nine months ended September 30, 2021[219](index=219&type=chunk) [Note 13 – Commitments and Contingencies](index=31&type=section&id=NOTE%2013%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The company has no material pending or threatened legal matters. However, it has entered into several advisory agreements, including a ten-year agreement with Synthesis Management Limited and two recent agreements in July 2021 related to NASDAQ listing efforts and capital raising, involving cash fees, stock, and warrants - As of September 30, 2021, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the company's operations[220](index=220&type=chunk) - A ten-year Advisory Agreement with Synthesis Management Limited requires annual payments of **€104,000**[221](index=221&type=chunk) - A two-year advisory agreement related to NASDAQ listing involves monthly payments (**$4,000**, increasing to **$10,000** upon listing), a **$100,000** bonus upon listing and capital raise milestones, and **200,000** shares of common stock to be issued upon NASDAQ trading[222](index=222&type=chunk) - Two July 2021 agreements with financial advisors/placement agents involve cash fees (**7-10%** of gross proceeds), warrants (**5-10%** of shares issued), and expense reimbursements for capital raising efforts[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk) [Note 14 – Stock Options and Warrants](index=32&type=section&id=NOTE%2014%20%E2%80%93%20STOCK%20OPTIONS%20AND%20WARRANTS) As of September 30, 2021, the company had 37,000 stock options outstanding and exercisable with a weighted average exercise price of $1.32 and a remaining contractual term of 0.26 years. Additionally, 1,164,673 warrants were outstanding and exercisable with a weighted average exercise price of $6.41 and a remaining contractual term of 2.26 years Stock Option Activity (9 Months Ended September 30, 2021) | Metric | Number of Shares | Weighted Average Exercise Price | | :----------------------------------- | :--------------- | :------------------------------ | | Balance outstanding, December 31, 2020 | 62,000 | $1.19 | | Expired | (25,000) | - | | Balance outstanding, September 30, 2021 | 37,000 | $1.32 | | Exercisable, September 30, 2021 | 37,000 | $1.32 | Warrant Activity (9 Months Ended September 30, 2021) | Metric | Number of Shares | Weighted Average Exercise Price | | :----------------------------------- | :--------------- | :------------------------------ | | Balance outstanding, December 31, 2020 | 1,164,673 | $6.41 | | Balance outstanding, September 30, 2021 | 1,164,673 | $6.41 | | Exercisable, September 30, 2021 | 1,164,673 | $6.41 | - The aggregate intrinsic value for outstanding options was **$123,050**, and for warrants was **$0** as of September 30, 2021[228](index=228&type=chunk)[229](index=229&type=chunk) [Note 15 – Disaggregation of Revenue](index=33&type=section&id=NOTE%2015%20%E2%80%93%20DISAGGREGATION%20OF%20REVENUE) The company disaggregates its revenue by country to reflect the nature and economic characteristics affecting revenue. Greece remains the primary revenue source, with significant contributions from the UK and Germany in prior periods, though some countries showed declines in 2021 Revenue Disaggregated by Country (3 Months Ended September 30) | Country | 2021 | 2020 | | :---------- | :----------- | :----------- | | Greece | $13,555,718 | $13,405,280 | | UK | $23,318 | $419,025 | | Germany | $(102) | $155,742 | | Denmark | $(488) | $229,929 | | Cyprus | $13,982 | $5,343 | | Total | $13,595,418 | $14,352,099 | Revenue Disaggregated by Country (9 Months Ended September 30) | Country | 2020 | | :---------- | :----------- | | Greece | $36,062,729 | | UK | $1,501,261 | | Germany | $948,282 | | Denmark | $229,929 | | Croatia | $8,796 | | Total | $39,105,318 | - Greece consistently represents the largest portion of the company's revenue, showing a slight increase for the three months ended September 30, 2021, compared to the prior year[236](index=236&type=chunk) [Note 16 – Subsequent Events](index=33&type=section&id=NOTE%2016%20%E2%80%93%20SUBSEQUENT%20EVENTS) Subsequent to the reporting period, effective October 4, 2021, the company amended its articles of incorporation and filed a certificate of designation for Series A Preferred Stock. This preferred stock is convertible into common stock at a conversion price based on a formula tied to the NASDAQ uplisting, with a floor of $3.00 per share, and does not entitle holders to dividends or liquidation distributions - On October 4, 2021, the company amended its articles of incorporation and filed a certificate of designation for Series A Preferred Stock[239](index=239&type=chunk) - Series A Preferred Stock is convertible into common stock at the lower of **$4.00** or **80%** of the average volume-weighted average price for the common stock for five days prior to uplisting, subject to a **$3.00** per share floor[240](index=240&type=chunk) - Holders of Series A Preferred Stock are not entitled to dividends or distributions in the event of liquidation[241](index=241&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on the company's financial performance, condition, and future outlook, including an overview of its business segments, the impact of COVID-19, and strategic plans. It highlights the shift to a net loss, the drivers behind revenue and expense changes, and the company's liquidity challenges and plans to address them [Overview](index=34&type=section&id=Overview) Cosmos Holdings Inc. is a multinational pharmaceutical company operating through wholesale import/export, full-line wholesale, nutraceuticals (Sky Premium Life), and branded pharmaceuticals. The company's strategy focuses on organic growth, market expansion, and technology investment, but it faces risks from supply chain disruptions, price hikes, and healthcare spending cuts. COVID-19 has presented both adverse risks (drug shortages, logistics delays) and opportunities (increased sales of OTC products, government financing) - The company operates in four main business segments: wholesale import/export of branded pharmaceutical products, full-line wholesale distribution (Cosmofarm S.A.), proprietary nutraceutical products (Sky Premium Life), and branded pharmaceuticals[249](index=249&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk)[254](index=254&type=chunk) - Sky Premium Life nutraceuticals portfolio includes at least **87** product codes, with a target of **150** by end of 2021, manufactured exclusively by related party Doc Pharma S.A. and distributed through digital channels like Amazon and Tmall[252](index=252&type=chunk) - Key risks include supply chain disruption, medicine price hikes, and cuts in healthcare spending, particularly in the EU's poorer member states[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk) - COVID-19 has caused adverse risks such as drug shortages, supply chain problems, and liquidity issues, but also presented opportunities like increased sales of OTC products, food supplements, and antibacterial products, as well as governmental financing incentives[264](index=264&type=chunk)[265](index=265&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) For the nine months ended September 30, 2021, revenue increased by 2.44% to $40.06 million, but the company reported a net loss of $6.49 million, a significant decline from a net income of $1.65 million in the prior year. This was primarily driven by a 275.49% increase in operating expenses, largely due to stock-based compensation and higher general and administrative costs, and unrealized foreign currency losses Revenue and Net Income (Loss) Comparison | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $13,595,418 | $14,352,098 | $40,061,419 | $39,105,318 | | Net Income (Loss) | $(1,936,543) | $757,866 | $(6,489,502) | $1,651,867 | - Gross profit decreased by **2.16%** for the three-month period and **9.34%** for the nine-month period, primarily due to increased Cost of Goods Sold (COGS) and a shift towards lower-margin full-line wholesale revenue[272](index=272&type=chunk) - Total operating expenses for the nine months ended September 30, 2021, increased by **275.49%** to **$9,405,868**, mainly driven by **$5,147,077** in stock-based compensation and higher legal, consulting, and outsourced accounting costs[274](index=274&type=chunk) - Other income (expense) for the nine-month period included increased interest expense (**$2,182,715**), non-cash interest expense (**$492,391**), and a foreign currency loss of **$392,472**[277](index=277&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2021, the company's working capital increased to $6.86 million, and cash on hand rose to $1.03 million. While operating activities continued to use cash, financing activities provided significant inflows, primarily from proceeds from lines of credit, to support operations and growth. The company anticipates relying on existing cash, operational cash flow, and further debt or equity financing to fund future operations Liquidity Metrics | Metric | September 30, 2021 | December 31, 2020 | | :------------------------- | :----------------- | :---------------- | | Working Capital | $6,856,340 | $5,979,870 | | Cash | $1,033,875 | $628,395 | | Net Cash Used in Operating Activities (9 months) | $(5,498,368) | $(10,342,115) | | Net Cash Provided by Financing Activities (9 months) | $6,475,402 | $10,984,011 | - Proceeds from lines of credit totaled **$18,139,012**, with payments of **$18,281,863**, resulting in a net decrease of **$142,851** in lines of credit for the nine months ended September 30, 2021[282](index=282&type=chunk) - The company's ability to continue as a going concern is dependent on obtaining adequate capital, with plans to raise additional capital through increased sales and equity/debt financing[42](index=42&type=chunk)[283](index=283&type=chunk) [Plan of Operation in the Next Twelve Months](index=38&type=section&id=Plan%20of%20Operation%20in%20the%20Next%20Twelve%20Months) The company's operational plan for the next twelve months focuses on organic growth in full-line wholesale by expanding client base and product distribution, enhancing sales of its Sky Premium Life nutraceuticals across Europe and Asia through digital channels, securing more exclusive distribution rights for branded pharmaceuticals, developing B2B/B2C platforms, and investing in robotic automation systems to improve efficiency and reduce costs - Plans include developing and expanding full-line wholesale business organically by securing new clients and distributing more profitable pharmaceutical products, OTC medicines, and nutraceuticals across Europe and beyond[287](index=287&type=chunk) - The company intends to expand Sky Premium Life nutraceutical sales across Europe, Asia, and other countries through exclusive wholesale distributors and digital sales channels, aiming to increase product codes to **150 SGUs**[290](index=290&type=chunk) - Strategic initiatives include obtaining more exclusive distribution rights for branded pharmaceutical products in Europe and developing B2B/B2C platforms to redefine customer/supplier relationships, improve supply chain management, and increase customer loyalty[291](index=291&type=chunk)[292](index=292&type=chunk) - Investment in an additional robotic system for fast-moving items is expected to lead to cost savings, time efficiency, error avoidance, increased productivity, and reduced delivery time[293](index=293&type=chunk) [Off Balance Sheet Arrangements](index=39&type=section&id=Off%20Balance%20Sheet%20Arrangements) As of September 30, 2021, the company reported no off-balance sheet arrangements - There were no off-balance sheet arrangements as of September 30, 2021[298](index=298&type=chunk) [Critical Accounting Policies](index=40&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies include revenue recognition (ASC 606), foreign currency translation, and income taxes (ASC 740). These policies involve significant management judgment, particularly in estimating the realization of deferred tax assets and assessing uncertain tax positions, with a valuation allowance maintained against U.S. deferred tax assets - Revenue recognition follows ASC 606, applying a five-step model to identify contracts, performance obligations, transaction price, allocation, and recognition upon transfer of goods[300](index=300&type=chunk) - Foreign currency assets and liabilities are translated at year-end rates, and operations statements at average rates, with gains/losses from translation accumulated in stockholders' deficit and transaction gains/losses included in net earnings[301](index=301&type=chunk) - Income taxes are accounted for under ASC 740, using the asset and liability method. A valuation allowance is established for deferred tax assets if their realization is not considered more likely than not, particularly for U.S. net deferred tax assets[302](index=302&type=chunk)[304](index=304&type=chunk)[308](index=308&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk.](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) As a smaller reporting company, Cosmos Holdings Inc. is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide information on quantitative and qualitative disclosures about market risk[309](index=309&type=chunk) [Item 4. Controls and Procedures.](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the company's disclosure controls and procedures were partially effective as of September 30, 2021. The company is actively remediating identified material weaknesses by increasing internal audit personnel and strengthening existing procedures, with a newly appointed board member advising on systems, controls, and procedures - The company's disclosure controls and procedures were evaluated as partially effective as of September 30, 2021[314](index=314&type=chunk) - To remediate material weaknesses, the company has increased personnel resources, including hiring an Internal Auditor Assistant, to strengthen procedures, improve operating practices, and develop new policies and controls[315](index=315&type=chunk) - A new board member was appointed to advise on the completeness, integrity, reliability, and accuracy of systems, controls, and procedures. The Audit Committee, composed of three independent directors, oversees financial reporting and accounting processes[316](index=316&type=chunk)[317](index=317&type=chunk) [PART II - OTHER INFORMATION](index=42&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures [Item 1. Legal Proceedings.](index=42&type=section&id=Item%201.%20Legal%20Proceedings.) The company previously disclosed a Debt Exchange Agreement from May 10, 2021, where CEO Grigorios Siokas forewent repayment of $600,000 in indebtedness owed to him by the company as part of a settlement for a Section 16(b) lawsuit. This resulted in a $600,000 increase in additional paid-in capital and a decrease in the related party loan during the quarter ended September 30, 2021 - CEO Grigorios Siokas agreed to forego repayment of **$600,000** of indebtedness owed to the company as part of a settlement for a Section 16(b) lawsuit[322](index=322&type=chunk) - This settlement resulted in a **$600,000** increase in additional paid-in capital and a corresponding decrease in the related party loan during the quarter ended September 30, 2021[322](index=322&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This item is not applicable to Cosmos Holdings Inc. as a smaller reporting company - Item 1A. Risk Factors is not applicable[323](index=323&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) There were no unregistered sales of equity securities or use of proceeds to report in this period, as previously reported on Form 8-K - No unregistered sales of equity securities and use of proceeds to report, as previously reported on Form 8-K[325](index=325&type=chunk) [Item 3. Defaults Upon Senior Securities.](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) The company reported no defaults upon senior securities - No defaults upon senior securities[327](index=327&type=chunk) [Item 4. Mine Safety Disclosures.](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to Cosmos Holdings Inc - Item 4. Mine Safety Disclosures is not applicable[329](index=329&type=chunk) [Item 5. Other Information.](index=42&type=section&id=Item%205.%20Other%20Information.) The company reported no other information for this period - No other information to report[331](index=331&type=chunk) [Item 6. Exhibits.](index=42&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL instance and taxonomy documents for financial data - Exhibits include CEO and CFO certifications (**31.1, 31.2, 32.1, 32.2**) pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[334](index=334&type=chunk)[340](index=340&type=chunk) - XBRL (Extensible Business Reporting Language) documents (**101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE**) are furnished for the consolidated financial statements[334](index=334&type=chunk)[340](index=340&type=chunk) [SIGNATURES](index=43&type=section&id=SIGNATURES) This section contains the official signatures for the Form 10-Q filing [Signatures](index=43&type=section&id=Signatures) The Form 10-Q report was signed on November 15, 2021, by Grigorios Siokas, Chief Executive Officer (Principal Executive Officer), and Georgios Terzis, Chief Financial Officer (Principal Financial Officer, and Principal Accounting Officer), on behalf of Cosmos Holdings Inc - The report was signed by Grigorios Siokas, CEO, and Georgios Terzis, CFO, on November 15, 2021[339](index=339&type=chunk)

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes on accounting policies and financial accounts [Item 1. Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Cosmos Holdings Inc., including the balance sheets, statements of operations and comprehensive income (loss), statements of changes in stockholders' deficit, and statements of cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial accounts [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2021 (Unaudited) | December 31, 2020 | | :---------------------------------- | :------------------------ | :---------------- | | Total Assets | $45,157,374 | $43,844,413 | | Total Liabilities | $44,772,826 | $48,005,426 | | Total Stockholders' Equity (Deficit) | $384,548 | $(4,161,013) | | Current Assets | $42,315,260 | $40,772,946 | | Current Liabilities | $31,897,535 | $34,793,076 | - Total assets increased by **$1.31 million**, while total liabilities decreased by **$3.23 million**, leading to a significant improvement in stockholders' equity from a deficit to a positive balance[8](index=8&type=chunk)[9](index=9&type=chunk)[12](index=12&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This section details the company's financial performance over specific periods, including revenue, expenses, and net income or loss Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2021 | 2020 | Change (YoY) | | :---------------------------------- | :------------- | :------------- | :----------- | | Revenue | $26,466,001 | $24,753,220 | +6.92% | | Cost of Goods Sold | $23,427,823 | $21,211,918 | +10.45% | | Gross Profit | $3,038,178 | $3,541,302 | -14.21% | | Total Operating Expenses | $6,145,747 | $2,329,425 | +163.83% | | Income (Loss) From Operations | $(3,107,569) | $1,211,877 | -356.43% | | Net Income (Loss) | $(4,552,959) | $894,001 | -609.49% | | Basic Net Income (Loss) Per Share | $(0.29) | $0.07 | -514.29% | | Diluted Net Income (Loss) Per Share | $(0.29) | $0.07 | -514.29% | - Despite a **6.92% increase in revenue** for the six months ended June 30, 2021, the company reported a **net loss of $4.55 million**, a significant decline from a net income of $0.89 million in the prior year, primarily due to a substantial increase in operating expenses[14](index=14&type=chunk) [Consolidated Statements of Changes in Stockholders' Deficit](index=4&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Deficit) This section tracks changes in the equity section of the balance sheet, reflecting transactions with owners and comprehensive income (loss) Stockholders' Deficit Changes (January 1 to June 30, 2021) | Metric | January 1, 2021 | June 30, 2021 | | :---------------------------------- | :-------------- | :------------ | | Total Stockholders' Deficit | $(4,161,013) | $384,548 | | Common Stock (Value) | $13,484 | $16,566 | | Additional Paid-in Capital | $14,333,285 | $23,901,367 | | Accumulated Deficit | $(18,750,824) | $(23,303,783) | - The company's total stockholders' deficit improved by **$4.55 million**, moving from a deficit to a positive balance, largely driven by a **$9.57 million increase in additional paid-in capital** from restricted stock issuance and debt-to-equity conversions[17](index=17&type=chunk)[18](index=18&type=chunk) - Key contributions to additional paid-in capital include **$2,564,364 from conversion of notes payable**, **$3,000,000 from conversion of related party debt**, and **$1,968,000 from restricted stock issued to a consultant**[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities over a period Cash Flow Highlights (Six Months Ended June 30) | Metric | 2021 | 2020 | | :---------------------------------- | :------------- | :------------- | | Net Cash Used in Operating Activities | $(2,519,394) | $(5,876,080) | | Net Cash Used in Investing Activities | $(12,100) | $(86,378) | | Net Cash Provided by Financing Activities | $2,724,871 | $8,301,764 | | Net Change in Cash | $177,377 | $2,367,971 | | Cash at End of Period | $805,772 | $2,406,508 | - Net cash used in operating activities decreased by **$3.36 million** year-over-year, while net cash provided by financing activities decreased by **$5.58 million**, resulting in a lower net change in cash for the period[20](index=20&type=chunk)[21](index=21&type=chunk) [Note 1 – Basis of Presentation](index=7&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) This note explains the accounting principles and conventions used in preparing the financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC Form 10-Q instructions, omitting some disclosures required for complete annual statements[22](index=22&type=chunk) - Operating results for the three and six months ended June 30, 2021, are not necessarily indicative of the full year's results[22](index=22&type=chunk) [Note 2 – Organization, Nature of Business and Going Concern](index=7&type=section&id=Note%202%20%E2%80%93%20Organization,%20Nature%20of%20Business%20and%20Going%20Concern) This note describes the company's operations, business segments, and assesses its ability to continue as a going concern - Cosmos Holdings Inc. is a multinational pharmaceutical company distributing brand-name and generic pharmaceuticals, OTC medicines, and dietary supplements across the EU through subsidiaries SkyPharm, Decahedron, and Cosmofarm[23](index=23&type=chunk)[24](index=24&type=chunk) - The company launched its own nutraceutical brand, 'Sky Premium Life,' in 2018 and acquired Cosmofarm in 2018 to expand into full-line pharmaceutical wholesale distribution[26](index=26&type=chunk)[27](index=27&type=chunk) - The company's ability to continue as a going concern is in substantial doubt due to a **net loss of $4,552,959** for the six months ended June 30, 2021, and an **accumulated deficit of $23,303,783**[39](index=39&type=chunk) - Management is exploring strategic options including securing new debt, exchanging debt for equity, restructuring current debt, and new fundraising to address financial constraints[40](index=40&type=chunk)[43](index=43&type=chunk) [Summary of Significant Accounting Policies](index=9&type=section&id=Summary%20of%20Significant%20Accounting%20Policies) This section outlines the key accounting policies and methods used in preparing the financial statements - Financial statements are prepared under U.S. GAAP, consolidating wholly-owned subsidiaries, and involve management estimates[44](index=44&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - No specific event or circumstance from COVID-19 required an update to estimates or judgments as of August 16, 2021[48](index=48&type=chunk) - Accounts receivable, net, had an allowance for doubtful accounts of **$693,485** as of June 30, 2021[52](index=52&type=chunk) - Inventory is stated at net realizable value using the weighted average method and is not highly susceptible to obsolescence[56](index=56&type=chunk)[57](index=57&type=chunk) - Revenue is recognized using a five-step model upon transfer of product control to the customer[74](index=74&type=chunk) - Income taxes are accounted for under the asset and liability method, with deferred tax assets and liabilities recognized for temporary differences and net operating loss carryforwards[79](index=79&type=chunk) [Note 3 – Marketable Securities](index=15&type=section&id=Note%203%20%E2%80%93%20Marketable%20Securities) This note provides details on the company's investments in marketable securities, including their fair values and any related gains or losses Marketable Securities Holdings | Marketable Security | June 30, 2021 Value | December 31, 2020 Value | | :---------------------------------- | :------------------ | :-------------------- | | Diversa S.A. | $211,368 | $218,183 | | National Bank of Greece | $4,739 | $4,609 | | ICC International Cannabis Corp. | $0 | $0 | - The Company recorded a net unrealized gain of **$279** on the fair value of marketable securities for the six months ended June 30, 2021[98](index=98&type=chunk) - Investment in CosmoFarmacy L.P. (**30% equity ownership**) was **$177,720** as of June 30, 2021, recorded using the equity method[99](index=99&type=chunk) [Note 4 – Property and Equipment, Net](index=16&type=section&id=Note%204%20%E2%80%93%20Property%20and%20Equipment,%20Net) This note details the company's tangible assets, including their cost, accumulated depreciation, and net book value Property and Equipment, Net | Asset Category | June 30, 2021 | December 31, 2020 | | :---------------------------------- | :-------------- | :---------------- | | Leasehold improvements | $543,451 | $560,711 | | Vehicles | $101,183 | $105,057 | | Computers and software | $142,216 | $149,005 | | Total Property and Equipment, net | $1,578,041 | $1,757,213 | - Depreciation expense for the six months ended June 30, 2021, was **$149,812**, compared to $124,251 in the prior year[58](index=58&type=chunk) [Note 5 – Goodwill and Intangible Assets, Net](index=17&type=section&id=Note%205%20%E2%80%93%20Goodwill%20and%20Intangible%20Assets,%20Net) This note provides information on the company's intangible assets, including goodwill, licenses, and trade names, and their amortization Goodwill and Intangible Assets, Net | Asset Category | June 30, 2021 | December 31, 2020 | | :---------------------------------- | :-------------- | :---------------- | | License | $50,000 | $50,000 | | Trade name / mark | $36,997 | $36,997 | | Customer base | $176,793 | $176,793 | | Goodwill | $49,697 | $49,697 | | Total Goodwill and Intangible Assets, net | $214,099 | $230,506 | - Amortization expense for the six months ended June 30, 2021, was **$16,407**, consistent with $16,497 in the prior year[65](index=65&type=chunk) [Note 6 – Income Taxes](index=17&type=section&id=Note%206%20%E2%80%93%20Income%20Taxes) This note details the company's income tax provisions, including deferred tax assets and liabilities, and applicable tax rates - The corporate income tax rate is **22% in Greece** and **19% in the United Kingdom**[105](index=105&type=chunk)[106](index=106&type=chunk) - Deferred tax assets increased to **$286,329** at June 30, 2021, from $178,430 at December 31, 2020[108](index=108&type=chunk) - A valuation allowance is maintained against all net deferred tax assets in the United States, while foreign valuation allowances were reversed as of December 31, 2020[107](index=107&type=chunk) [Note 7 – Capital Structure](index=17&type=section&id=Note%207%20%E2%80%93%20Capital%20Structure) This note describes the company's equity components, including common stock, additional paid-in capital, and treasury shares Common Stock Information | Metric | June 30, 2021 | December 31, 2020 | | :---------------------------------- | :-------------- | :---------------- | | Common Stock Issued | 16,566,947 | 13,485,128 | | Common Stock Outstanding | 16,216,619 | 13,069,800 | - The Company sold **65,000 treasury shares for $250,000** in February 2021[117](index=117&type=chunk) - **1,800,000 restricted shares** were issued to a consultant, valued at **$5,904,000**, resulting in **$3,157,451 in stock-based compensation** recorded for the six months ended June 30, 2021[119](index=119&type=chunk) - A debt exchange agreement in June 2021 converted **$3,000,000 of related party loans into 500,000 common shares**[122](index=122&type=chunk) [Note 8 – Related Party Transactions](index=19&type=section&id=Note%208%20%E2%80%93%20Related%20Party%20Transactions) This note details transactions and balances with related parties, including affiliates, officers, and directors Related Party Balances (June 30, 2021) | Related Party | Transaction Type | Balance | | :---------------------------------- | :------------------- | :-------- | | Doc Pharma S.A. | Net Prepaid Balance | $2,740,173 | | Doc Pharma S.A. | Accounts Receivable | $3,135,184 | | Doc Pharma S.A. | Accounts Payable | $177,161 | | Grigorios Siokas (CEO) | Notes Payable | $473,920 | | Dimitrios Goulielmos (Director) | Notes Payable | $12,085 | | Grigorios Siokas (CEO) | Loans Payable | $704,403 | - Purchases from Doc Pharma S.A. totaled **$1,413,924** for the six months ended June 30, 2021, while revenue from Doc Pharma S.A. was **$796,917**[127](index=127&type=chunk) - A **$600,000 related party loan** from Grigorios Siokas was forgiven and recorded to additional paid-in capital as part of a lawsuit settlement[141](index=141&type=chunk) - An aggregate of **$3,000,000 of loans** from Grigorios Siokas were converted into **500,000 shares of common stock** in June 2021[142](index=142&type=chunk) [Note 9 – Lines of Credit](index=21&type=section&id=Note%209%20%E2%80%93%20Lines%20of%20Credit) This note provides information on the company's credit facilities, including outstanding balances and interest rates Lines of Credit Outstanding (June 30, 2021) | Lender | Outstanding Balance | Interest Rate | | :---------------------------------- | :------------------ | :------------ | | National Bank of Greece | $3,093,644 | 4.35% - 6.00% | | Alpha Bank of Greece | $1,019,368 | 6.00% | | Pancretan Bank | $532,191 | 6.10% | | National - COVID | $393,709 | 2.7% | | Total Lines of Credit | $5,038,912 | | - Total lines of credit decreased slightly from **$5,076,684** at December 31, 2020, to **$5,038,912** at June 30, 2021[144](index=144&type=chunk) - Interest expense for lines of credit was **$153,589** for the six months ended June 30, 2021, up from $110,420 in the prior year[149](index=149&type=chunk) [Note 10 – Convertible Debt](index=22&type=section&id=Note%2010%20%E2%80%93%20Convertible%20Debt) This note details the company's convertible debt instruments, including their principal balances, conversion features, and derivative liabilities Convertible Debt Summary | Metric | June 30, 2021 | December 31, 2020 | | :---------------------------------- | :-------------- | :---------------- | | Convertible note payable, net of discount | $766,496 | $952,027 | | May 2019 Note principal balance | $545,000 | $907,000 | | December 2020 Note principal balance | $540,000 | $540,000 | | January 2021 Note principal balance | $100,000 | $0 | - The December 2020 and January 2021 convertible notes include embedded conversion features recognized as derivative liabilities[174](index=174&type=chunk)[180](index=180&type=chunk) - Gains from changes in the fair value of derivative liabilities were **$65,787** (December 2020 note) and **$22,082** (January 2021 note) for the six months ended June 30, 2021[175](index=175&type=chunk)[180](index=180&type=chunk) [Note 11 – Debt](index=25&type=section&id=Note%2011%20%E2%80%93%20Debt) This note provides comprehensive information on the company's various debt obligations, including loan facilities, trade facilities, and senior promissory notes Third-Party Debt Summary (before reclassification) | Debt Category | June 30, 2021 | December 31, 2020 | | :---------------------------------- | :-------------- | :---------------- | | Loan Facility | $3,175,264 | $3,302,100 | | Trade Facility | $6,369,600 | $6,446,000 | | Third Party Debt | $9,601,878 | $12,631,284 | | COVID Loans | $424,470 | $435,510 | | Total Debt | $19,571,212 | $22,814,594 | - The Company converted **$3,010,000 of prior year senior promissory notes into 781,819 common shares** in February 2021, resulting in a **gain on debt extinguishment of $445,636**[212](index=212&type=chunk) - Outstanding principal balances include **$2,000,000 for the May 18, 2020 Senior Promissory Note**, **$5,000,000 for the July 3, 2020 Senior Promissory Note**, and **$2,000,000 for the August 4, 2020 Senior Promissory Note**, all bearing **18% interest**[217](index=217&type=chunk)[219](index=219&type=chunk)[223](index=223&type=chunk) [Note 12 – Leases](index=30&type=section&id=Note%2012%20%E2%80%93%20Leases) This note outlines the company's lease arrangements, distinguishing between operating and finance leases, and their financial impact Lease Terms and Rates | Lease Type | Weighted-Average Remaining Lease Term | Weighted-Average Discount Rate | | :---------------------------------- | :------------------------------------ | :----------------------------- | | Operating Leases | 6.71 years | 6.74% | | Finance Leases | 2.7 years | 6.74% | - Operating lease expense was **$99,610** for the six months ended June 30, 2021[233](index=233&type=chunk) - The present value of operating lease liabilities was **$969,459** and finance lease liabilities was **$261,025** as of June 30, 2021[236](index=236&type=chunk)[237](index=237&type=chunk) [Note 13 – Commitments and Contingencies](index=31&type=section&id=Note%2013%20%E2%80%93%20Commitments%20and%20Contingencies) This note discloses the company's contractual obligations and potential liabilities from legal actions or other events - As of June 30, 2021, there were no pending or threatened lawsuits expected to have a material effect on operations[240](index=240&type=chunk) - The Company has a ten-year Advisory Agreement with Synthesis Management Limited for **€104,000 per year**[241](index=241&type=chunk) - A related party Research and Development agreement with Doc Pharma for 250 nutritional supplements totals **€1,425,000 plus VAT**, terminating December 31, 2025[242](index=242&type=chunk) [Note 14 – Stock Options and Warrants](index=31&type=section&id=Note%2014%20%E2%80%93%20Stock%20Options%20and%20Warrants) This note provides details on the company's outstanding stock options and warrants, including their exercise prices and terms Stock Options and Warrants Outstanding (June 30, 2021) | Instrument | Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | | :---------------------------------- | :---------- | :------------------------------ | :------------------------------------------ | | Stock Options | 37,000 | $1.32 | 0.51 years | | Warrants | 1,164,673 | $6.41 | 2.52 years | [Note 15 – Disaggregation of Revenue](index=32&type=section&id=Note%2015%20%E2%80%93%20Disaggregation%20of%20Revenue) This note breaks down the company's revenue by various categories, such as geographic region or product type Revenue Disaggregated by Country (Six Months Ended June 30) | Country | 2021 | 2020 | | :---------------------------------- | :------------- | :------------- | | Greece | $25,958,364 | $22,657,446 | | UK | $332,659 | $1,082,236 | | Denmark | $54,700 | - | | Croatia | $11,982 | $8,617 | | Italy | $15,731 | $22,048 | | Germany | $13,617 | $792,540 | | Total Revenue | $26,466,001 | $24,753,220 | - Greece remains the primary revenue source, contributing **$25.96 million** for the six months ended June 30, 2021[254](index=254&type=chunk) [Note 16 – Subsequent Events](index=33&type=section&id=Note%2016%20%E2%80%93%20Subsequent%20Events) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - The Company entered into multiple advisory agreements in July 2021 for NASDAQ listing and financial advisory services, involving cash fees, warrants, and stock issuances[255](index=255&type=chunk)[256](index=256&type=chunk)[259](index=259&type=chunk) - Debt exchange agreements with CEO Grigorios Siokas in July 2021 converted **$2,250,000 of loans into 375,000 common shares**[260](index=260&type=chunk)[261](index=261&type=chunk) - On July 14, 2021, **$150,000 in principal and $24,144 in interest** from convertible debt were converted into **55,021 common shares**[262](index=262&type=chunk) - An August 4, 2021 debt exchange agreement with a senior institutional lender converted **€1,350,000 ($1,599,480) principal into 321,500 common shares**[264](index=264&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations for the three and six months ended June 30, 2021. It covers business overview, segment performance, regulatory environment, risks, the impact of COVID-19, and future operational plans, alongside a discussion of liquidity, capital resources, and critical accounting policies [Overview](index=35&type=section&id=Overview) This section provides a general description of the company's business, operations, and key strategic initiatives - Cosmos Holdings, Inc. operates in wholesale import/export, full-line wholesale distribution, nutraceuticals (Sky Premium Life brand with **67 product codes**, expanding to **71 by end of 2021**), and generics[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk)[278](index=278&type=chunk) - Subsidiary licenses (SkyPharm, Decahedron, Cosmofarm S.A.) are valid, with SkyPharm's license extended until end of 2021 due to COVID-19[279](index=279&type=chunk)[280](index=280&type=chunk) - Key risks include supply chain disruption, increasing drug prices, and cuts in healthcare spending[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk) - COVID-19 presents adverse risks (drug shortages, supply chain issues) but also opportunities for increased sales of OTC products, food supplements, and antibacterial products, with plans for increased R&D[287](index=287&type=chunk)[288](index=288&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, discussing revenue, cost of goods sold, operating expenses, and net income (loss) Revenue and Profitability Trends (Six Months Ended June 30) | Metric | 2021 | 2020 | Change (YoY) | | :---------------------------------- | :------------- | :------------- | :----------- | | Revenue | $26,466,001 | $24,753,220 | +6.92% | | Cost of Goods Sold | $23,427,823 | $21,211,918 | +10.45% | | Gross Profit | $3,038,178 | $3,541,302 | -14.21% | | Income (Loss) From Operations | $(3,107,569) | $1,211,877 | -356.43% | | Net Income (Loss) | $(4,552,959) | $894,001 | -609.49% | - Revenue increased by **6.92%** for the six months ended June 30, 2021, driven by Cosmofarm's organic growth and increased demand for 'Sky Premium Life' nutraceuticals and full-line wholesale[292](index=292&type=chunk) - Gross profit decreased by **14.21%** due to a disproportionate increase in cost of goods sold, reflecting higher demand for lower-margin full-line wholesale products[293](index=293&type=chunk)[296](index=296&type=chunk) - Operating expenses surged by **163.83%**, primarily due to **$3,157,451 in stock-based compensation** from a consulting agreement, leading to a significant operating loss[14](index=14&type=chunk)[298](index=298&type=chunk) - Other income (expense) shifted to a net expense of **$(1,544,799)** for the six months, driven by higher interest expense and foreign currency losses, partially offset by a gain on debt extinguishment[14](index=14&type=chunk)[301](index=301&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations, including cash flow and funding strategies Liquidity Metrics | Metric | June 30, 2021 | December 31, 2020 | | :---------------------------------- | :-------------- | :---------------- | | Working Capital | $10,417,725 | $5,979,870 | | Cash | $805,772 | $628,395 | - Net cash used in operating activities decreased to **$(2,519,394)** for the six months ended June 30, 2021, from $(5,876,080) in the prior year[304](index=304&type=chunk) - Net cash provided by financing activities decreased to **$2,724,871** from $8,301,764, primarily due to lower proceeds from notes payable and lines of credit[306](index=306&type=chunk) - The Company plans to fund operations using existing cash, operational cash flow, and debt or equity financing, acknowledging the substantial doubt about its ability to continue as a going concern[307](index=307&type=chunk) [Plan of Operation in the Next Twelve Months](index=39&type=section&id=Plan%20of%20Operation%20in%20the%20Next%20Twelve%20Months) This section outlines the company's strategic objectives and operational plans for the upcoming year to drive growth and efficiency - The Company plans organic growth by securing new clients, expanding existing business, increasing distribution channels, and distributing more profitable pharmaceutical products, OTC medicines, and nutraceuticals across Europe and internationally[311](index=311&type=chunk) - It intends to expand 'Sky Premium Life' nutraceutical sales through digital channels, penetrate the UK market, and increase its product portfolio from **67 to 150 SKUs**[313](index=313&type=chunk) - Plans include expanding in the generic pharmaceutical market by obtaining more exclusive distribution rights and developing B2B/B2C platforms to improve supply chain management and customer loyalty[314](index=314&type=chunk)[315](index=315&type=chunk) - The acquisition of an additional robotic system for fast-moving items is expected to yield cost savings, time efficiency, error avoidance, and increased productivity[316](index=316&type=chunk)[317](index=317&type=chunk) [Off Balance Sheet Arrangements](index=40&type=section&id=Off%20Balance%20Sheet%20Arrangements) This section discloses any financial arrangements that are not recorded on the balance sheet but could impact the company's financial position - As of June 30, 2021, the Company had no off-balance sheet arrangements[322](index=322&type=chunk) [Critical Accounting Policies](index=40&type=section&id=Critical%20Accounting%20Policies) This section highlights the accounting policies that require significant judgment and estimation by management, which could materially affect financial results - Critical accounting policies include revenue recognition (ASC 606), foreign currency translation (assets/liabilities at year-end rates, operations at average rates), and income taxes (ASC 740, asset and liability method, valuation allowances, uncertain tax positions)[324](index=324&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk)[332](index=332&type=chunk)[333](index=333&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Cosmos Holdings Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide market risk disclosures[334](index=334&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the Company's disclosure controls and procedures, their evaluation, changes in internal controls over financial reporting, and the role and composition of the Audit Committee [Disclosure Controls and Procedures](index=41&type=section&id=Disclosure%20Controls%20and%20Procedures) This section describes the controls and procedures designed to ensure that information required to be disclosed is recorded, processed, summarized, and reported timely - Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Company's disclosure controls and procedures were partially effective as of June 30, 2021[337](index=337&type=chunk) [Changes in Internal Controls Over Financial Reporting](index=41&type=section&id=Changes%20in%20Internal%20Controls%20Over%20Financial%20Reporting) This section reports any material changes in the company's internal control over financial reporting during the period - The Company increased personnel resources, including hiring an Internal Auditor Assistant, to remediate identified material weaknesses and strengthen existing procedures[338](index=338&type=chunk) - A new board member has been appointed to advise on systems, controls, and procedures, and the Audit Committee is evaluating existing controls[339](index=339&type=chunk) [Audit Committee](index=41&type=section&id=Audit%20Committee) This section describes the composition, responsibilities, and activities of the company's Audit Committee - The Audit Committee consists of three independent directors: John Hoidas, Demetrios Demetriades, and Peter Goldstein[341](index=341&type=chunk) - Its primary function is to oversee financial reporting, accounting processes, and financial statement audits, maintaining direct communication with independent auditors[341](index=341&type=chunk)[342](index=342&type=chunk) - The Committee has the authority to retain outside legal, accounting, or other advisors and meets no less frequently than four times per year[343](index=343&type=chunk)[344](index=344&type=chunk) [PART II - OTHER INFORMATION](index=42&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers other required information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and a list of exhibits [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) This section details legal matters, specifically the settlement of a Section 16(b) lawsuit involving the CEO - The Company settled a Section 16(b) lawsuit where CEO Grigorios Siokas agreed to forego repayment of **$600,000 of indebtedness** owed to him, recorded as additional paid-in capital and a decrease in related party loans[346](index=346&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This item is not applicable for the Company - This item is not applicable[347](index=347&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms no unregistered sales of equity securities or use of proceeds were reported during the period - No unregistered sales of equity securities or use of proceeds were reported, as previously disclosed on Form 8-K[349](index=349&type=chunk) [Item 3. Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities - No defaults upon senior securities were reported[351](index=351&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the Company - This item is not applicable[353](index=353&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) This section indicates that no other information was reported - No other information was reported[355](index=355&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including advisory agreements, CEO/CFO certifications, and XBRL documents - Exhibits include Capital Market Advisory Agreement (10.1), CEO/CFO certifications under Sarbanes-Oxley Act (31.1, 31.2, 32.1, 32.2), and XBRL Instance, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase Documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[359](index=359&type=chunk)[365](index=365&type=chunk) [SIGNATURES](index=43&type=section&id=SIGNATURES) The report is signed by the Chief Executive Officer and Chief Financial Officer, certifying its submission - The report was signed by Grigorios Siokas, Chief Executive Officer, and Georgios Terzis, Chief Financial Officer, on August 16, 2021[364](index=364&type=chunk)

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the reporting period [Item 1. Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited).) This section presents Cosmos Holdings Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, equity changes, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets and total liabilities from December 31, 2020, to March 31, 2021, while the stockholders' deficit improved during the period | Metric | March 31, 2021 (Unaudited) | December 31, 2020 | | :---------------------- | :------------------------- | :------------------ | | Total Assets | $41,694,927 | $43,844,413 | | Total Liabilities | $44,499,607 | $48,005,426 | | Total Stockholders' Deficit | $(2,804,680) | $(4,161,013) | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) The company experienced a decrease in revenue and gross profit, leading to a significantly higher net loss and comprehensive loss for the three months ended March 31, 2021, compared to the same period in 2020, primarily due to increased operating expenses, especially stock-based compensation | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $11,619,076 | $11,933,248 | | Cost of Goods Sold | $10,617,741 | $10,740,077 | | Gross Profit | $1,001,335 | $1,193,171 | | Operating Expenses | $2,732,433 | $967,607 | | Income (Loss) from Operations | $(1,731,098) | $225,564 | | Net Loss | $(2,173,903) | $(483,310) | | Comprehensive Loss | $(2,647,481) | $(627,072) | | Basic & Diluted EPS | $(0.14) | $(0.04) | - Operating expenses increased significantly by **182.4%** (from $967,607 to $2,732,433) primarily due to stock-based compensation consulting agreement[11](index=11&type=chunk)[272](index=272&type=chunk) [Consolidated Statements of Changes in Stockholders' Deficit](index=4&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Deficit) The company's total stockholders' deficit improved from $(4,161,013) at January 1, 2021, to $(2,804,680) by March 31, 2021, primarily due to additional paid-in capital from restricted stock issued to a consultant and conversion of notes payable into common stock, despite a net loss and foreign currency translation adjustment | Metric | January 1, 2021 | March 31, 2021 | | :---------------------- | :-------------- | :------------- | | Common Stock (shares) | 13,485,128 | 16,066,947 | | Common Stock (value) | $13,484 | $16,066 | | Additional Paid-in Capital | $14,333,285 | $18,333,867 | | Accumulated Deficit | $(18,750,824) | $(20,924,727) | | Total Stockholders' Deficit | $(4,161,013) | $(2,804,680) | - Additional paid-in capital increased significantly due to the sale of treasury stock to a third party (**$249,350**) and restricted stock issued to a consultant (**$1,187,650**)[14](index=14&type=chunk) - Conversion of notes payable into common stock contributed **$2,564,364** to stockholders' deficit[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced net cash used in operating activities, a minimal amount used in investing activities, and net cash provided by financing activities for the three months ended March 31, 2021. Cash at the end of the period decreased compared to the beginning of the period | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------------- | :-------------------------------- | :-------------------------------- | | Net Cash Used in Operating Activities | $(665,339) | $(1,144,739) | | Net Cash Used in Investing Activities | $(2,310) | $(54,223) | | Net Cash Provided by Financing Activities | $380,118 | $2,389,703 | | Net Change in Cash | $(196,588) | $946,344 | | Cash at End of Period | $431,807 | $984,881 | - Non-cash investing and financing activities included the conversion of notes payable to common stock totaling **$2,564,364** in Q1 2021[21](index=21&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statement](index=6&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statement) This section provides detailed disclosures on the company's accounting policies, business operations, financial instruments, debt, equity, and other significant financial information, including the impact of COVID-19 and related party transactions [NOTE 1 – BASIS OF PRESENTATION](index=6&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note outlines the basis for preparing the unaudited condensed consolidated financial statements, adhering to GAAP for interim reporting - Unaudited condensed consolidated financial statements prepared in accordance with GAAP for interim financial information, Form 10-Q, and Article 8 of Regulation S-X[22](index=22&type=chunk) - Operating results for Q1 2021 are not indicative of the full year 2021 or any other period[22](index=22&type=chunk) [NOTE 2 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN](index=6&type=section&id=NOTE%202%20%E2%80%93%20ORGANIZATION,%20NATURE%20OF%20BUSINESS%20AND%20GOING%20CONCERN) This note describes Cosmos Holdings Inc.'s business as a multinational pharmaceutical company and addresses the substantial doubt about its ability to continue as a going concern - Cosmos Holdings Inc. is a multinational pharmaceutical company importing, exporting, and distributing brand-name and generic pharmaceuticals, OTC medicines, and dietary/vitamin supplements through subsidiaries in Greece (SkyPharm, Cosmofarm) and the UK (Decahedron Ltd.)[23](index=23&type=chunk) - The company faces substantial doubt about its ability to continue as a going concern due to a net loss of **$2,173,903**, net cash used in operations of **$665,339**, an accumulated deficit of **$20,924,727**, and stockholders' deficit of **$2,804,680** for the three months ended March 31, 2021[44](index=44&type=chunk) - Management plans to address going concern issues by securing new debt, exchanging debt to equity, restructuring current debt, and new fundraising[45](index=45&type=chunk)[49](index=49&type=chunk) - The period of validity for SkyPharm's wholesale license has been automatically extended until the end of **2021** due to COVID-19 restrictions[32](index=32&type=chunk) [NOTE 3 – MARKETABLE SECURITIES](index=14&type=section&id=NOTE%203%20%E2%80%93%20MARKETABLE%20SECURITIES) This note details the company's marketable securities, including investments in Diversa S.A., National Bank of Greece, and CosmoFarmacy L.P | Marketable Securities | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Diversa S.A. | $209,495 | $218,183 | | National Bank of Greece | $4,854 | $4,609 | | Total | $214,349 | $222,792 | - The company recorded a net unrealized gain of **$440** on the fair value of these investments during the three months ended March 31, 2021[103](index=103&type=chunk) - Investment in CosmoFarmacy L.P. (**30%** equity ownership) is recorded using the equity method, valued at **$176,145** as of March 31, 2021[104](index=104&type=chunk) [NOTE 4 – PROPERTY AND EQUIPMENT, NET](index=15&type=section&id=NOTE%204%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT,%20NET) This note provides a breakdown of the company's property and equipment, net of accumulated depreciation and amortization | Category | March 31, 2021 | December 31, 2020 | | :---------------------------- | :------------- | :---------------- | | Leasehold improvements | $538,684 | $560,711 | | Vehicles | $100,286 | $105,057 | | Furniture, fixtures and equipment | $1,575,228 | $1,632,654 | | Computers and software | $137,903 | $149,005 | | Less: Accumulated depreciation and amortization | $(728,069) | $(690,214) | | Total | $1,623,962 | $1,757,213 | - Depreciation expense was **$71,471** for the three months ended March 31, 2021, compared to **$53,512** for the same period in 2020[63](index=63&type=chunk) [NOTE 5 – GOODWILL AND INTANGIBLE ASSETS, NET](index=15&type=section&id=NOTE%205%20%E2%80%93%20GOODWILL%20AND%20INTANGIBLE%20ASSETS,%20NET) This note presents the company's goodwill and intangible assets, including licenses, trade names, and customer base, net of accumulated amortization | Category | March 31, 2021 | December 31, 2020 | | :---------------------------- | :------------- | :---------------- | | License | $50,000 | $50,000 | | Trade name / mark | $36,997 | $36,997 | | Customer base | $176,793 | $176,793 | | Less: Accumulated amortization | $(91,139) | $(82,981) | | Subtotal | $172,651 | $180,809 | | Goodwill | $49,697 | $49,697 | | Total | $222,348 | $230,506 | - Amortization expense for intangible assets was **$8,158** for the three months ended March 31, 2021, compared to **$8,248** for the same period in 2020[69](index=69&type=chunk) [NOTE 6 – INCOME TAXES](index=16&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20TAXES) This note details the company's income tax provisions, corporate tax rates in its operating regions, and deferred tax assets with valuation allowances - No provisions for income taxes were made for U.S. operations due to no taxable income[108](index=108&type=chunk) - Corporate tax rates are **22%** in Greece and **19%** in the United Kingdom[108](index=108&type=chunk) - A valuation allowance is maintained against all net deferred tax assets in the United States, while foreign valuation allowances were reversed at December 31, 2020[110](index=110&type=chunk) | Deferred Tax Assets | March 31, 2021 | December 31, 2020 | | :------------------ | :------------- | :---------------- | | Benefit for tax | $499,368 | $178,430 | [NOTE 7 – CAPITAL STRUCTURE](index=16&type=section&id=NOTE%207%20%E2%80%93%20CAPITAL%20STRUCTURE) This note outlines the company's common stock, treasury share transactions, and restricted stock issuances to consultants, impacting additional paid-in capital - As of March 31, 2021, **16,066,947** shares of common stock were issued and **15,716,619** shares were outstanding[113](index=113&type=chunk) - The company sold **65,000** treasury shares to an unaffiliated third-party for **$250,000** on February 5, 2021[119](index=119&type=chunk) - **1,800,000** restricted shares of common stock, valued at **$5,904,000**, were issued to a consultant, with **$1,189,451** recorded as stock-based compensation for the **400,000** shares earned through March 31, 2021[123](index=123&type=chunk) [NOTE 8 – RELATED PARTY TRANSACTIONS](index=17&type=section&id=NOTE%208%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note details transactions with related parties, including Doc Pharma S.A. and loans/notes payable to the CEO and a director | Related Party (Doc Pharma S.A.) | March 31, 2021 | December 31, 2020 | | :------------------------------ | :------------- | :---------------- | | Prepaid balance | $3,522,041 | $3,468,653 | | Accounts payable | $27,453 | $1,733 | | Receivable balance | $3,247,612 | $3,468,564 | - Purchases from Doc Pharma S.A. were **$589,261** (Q1 2021) and **$670,631** (Q1 2020); revenue from Doc Pharma S.A. was **$290,598** (Q1 2021) and **$261,543** (Q1 2020)[127](index=127&type=chunk) | Related Party Notes Payable | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Grigorios Siokas (CEO) | $469,720 | $489,200 | | Dimitrios Goulielmos (Director) | $11,978 | $12,475 | | Related Party Loans Payable (Grigorios Siokas) | March 31, 2021 | December 31, 2020 | | :--------------------------------------------- | :------------- | :---------------- | | Outstanding Balance | $1,941,773 | $1,629,246 | [NOTE 9 – LINES OF CREDIT](index=18&type=section&id=NOTE%209%20%E2%80%93%20LINES%20OF%20CREDIT) This note provides information on the company's various lines of credit, including outstanding balances, interest expense, and compliance with covenants | Line of Credit | March 31, 2021 | December 31, 2020 | | :---------------------- | :------------- | :---------------- | | National Bank of Greece | $2,837,626 | $3,540,550 | | Alpha Bank | $1,088,358 | $1,106,894 | | Pancretan Bank | $364,550 | - | | National - COVID | $489,592 | $429,240 | | Total | $4,780,126 | $5,076,684 | - Interest expense for lines of credit was **$16,501** (Q1 2021) and **$17,673** (Q1 2020)[144](index=144&type=chunk) - The company was in compliance with financial ratios and covenants for these lines of credit[144](index=144&type=chunk) [NOTE 10 – CONVERTIBLE DEBT](index=19&type=section&id=NOTE%2010%20%E2%80%93%20CONVERTIBLE%20DEBT) This note details the company's convertible debt, including new issuances, payments, debt discounts, and changes in fair value of derivative liabilities | Convertible Debt (Net) | March 31, 2021 | December 31, 2020 | | :--------------------- | :------------- | :---------------- | | Beginning balance notes | $1,447,000 | $1,500,000 | | New notes | $100,000 | $540,000 | | Payments | $(180,000) | $(593,000) | | Subtotal notes | $1,367,000 | $1,447,000 | | Debt discount | $(507,483) | $(494,973) | | Net of discount | $859,517 | $952,027 | - All convertible debt is classified as short-term, maturing within fiscal year **2021**[147](index=147&type=chunk) - The company recorded a gain of **$61,373** from the change in fair value of derivative liability for the three months ended March 31, 2021[172](index=172&type=chunk)[175](index=175&type=chunk) | Derivative Liabilities (Level 3) | Amount | | :------------------------------- | :----- | | Balance on December 31, 2020 | $460,728 | | Issuances to debt discount | $62,619 | | Change in fair value | $(61,373) | | Balance on March 31, 2021 | $461,974 | [NOTE 11 – DEBT](index=22&type=section&id=NOTE%2011%20%E2%80%93%20DEBT) This note provides a comprehensive overview of the company's third-party debt, including conversions, extinguishments, and a share-settled debt obligation | Third-Party Debt (Total) | March 31, 2021 | December 31, 2020 | | :----------------------- | :------------- | :---------------- | | Beginning balance | $22,814,594 | $12,029,724 | | Conversion of debt | $(3,010,000) | $(807,795) | | Debt extinguishment | - | $(204,271) | | Foreign currency translation | $(267,575) | $470,951 | | Reclass of long-term portion | $(10,303,924) | $(10,771,882) | | Ending Balance | $9,233,095 | $12,042,712 | - A gain on debt extinguishment of **$445,636** was recorded due to an amended debt exchange agreement on February 5, 2021, converting **$3,010,000** principal into common stock[202](index=202&type=chunk) - The company has a share-settled debt obligation of **$1,554,590** (CAD **$2 million**) related to a Distribution and Equity Agreement with Marathon Global Inc., which could require issuing a variable number of common shares[218](index=218&type=chunk) [NOTE 12 – LEASES](index=27&type=section&id=NOTE%2012%20%E2%80%93%20LEASES) This note details the company's operating and finance leases, including present value of liabilities, remaining lease terms, discount rates, and associated expenses | Lease Type | Present Value of Liabilities (March 31, 2021) | Weighted-Average Remaining Lease Term | Weighted-Average Discount Rate | | :-------------- | :------------------------------------------ | :------------------------------------ | :----------------------------- | | Operating Leases | $769,772 | 4.84 years | 6.74% | | Finance Leases | $256,898 | 2.68 years | 6.74% | - Lease expense for operating leases was **$64,577** (Q1 2021) and **$53,576** (Q1 2020)[223](index=223&type=chunk) - Interest expense on finance leases was **$4,453** (Q1 2021); amortization expense on finance leases was **$26,755** (Q1 2021)[230](index=230&type=chunk) [NOTE 13 – COMMITMENTS AND CONTINGENCIES](index=28&type=section&id=NOTE%2013%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses the company's legal proceedings and significant contractual commitments, including an advisory agreement - No pending or threatened lawsuits that could reasonably be expected to have a material effect on operations as of March 31, 2021[231](index=231&type=chunk) - An Advisory Agreement with Synthesis Management Limited requires a payment of **€104,000** per year for a ten-year term[232](index=232&type=chunk) [NOTE 14 – STOCK OPTIONS AND WARRANTS](index=28&type=section&id=NOTE%2014%20%E2%80%93%20STOCK%20OPTIONS%20AND%20WARRANTS) This note provides details on the company's outstanding stock options and warrants, including their exercise prices and remaining contractual terms | Instrument | Outstanding (March 31, 2021) | Exercisable (March 31, 2021) | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | | :--------- | :--------------------------- | :--------------------------- | :------------------------------ | :------------------------------------------ | | Options | 37,000 | 37,000 | $1.32 | 0.76 years | | Warrants | 1,164,673 | 1,164,673 | $6.41 | 2.76 years | [NOTE 15 – DISAGGREGATION OF REVENUE](index=28&type=section&id=NOTE%2015%20%E2%80%93%20DISAGGREGATION%20OF%20REVENUE) This note disaggregates the company's revenue by geographical region for the three months ended March 31, 2021 and 2020 | Country | March 31, 2021 | March 31, 2020 | | :-------- | :------------- | :------------- | | Greece | $11,453,496 | $10,689,681 | | UK | $66,831 | $384,627 | | Germany | $13,613 | $667,302 | | Denmark | $54,686 | - | | Cyprus | $14,723 | - | | Italy | $15,727 | $6,041 | | Total | $11,619,076 | $11,933,248 | - Revenue decreased by **2.63%** year-over-year, primarily due to decreased demand for full-line wholesale products[268](index=268&type=chunk) [NOTE 16 – SUBSEQUENT EVENTS](index=29&type=section&id=NOTE%2016%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events occurring after the balance sheet date, including a lawsuit settlement with the CEO - Grigorios Siokas agreed to settle a lawsuit by reimbursing the company **$600,000**, comprising **$120,000** in attorneys' fees and **$4,137** in litigation costs in cash, and relieving the company of certain debt owed to him[241](index=241&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on the company's financial condition and operational results for the three months ended March 31, 2021, discussing revenue, expenses, liquidity, and future plans, while also addressing the impact of COVID-19 and critical accounting policies [Available Information](index=29&type=section&id=Available%20Information) This section directs readers to review the interim financial statements and prior annual report for comprehensive financial information - Readers should review interim Condensed Consolidated Financial Statements and notes in this report, and Management's Discussion and Analysis in the Form 10-K for the year ended December 31, 2020[244](index=244&type=chunk) [Forward-Looking Statements](index=29&type=section&id=Forward-Looking%20Statements) This section cautions that statements about future events are forward-looking and subject to risks, with no obligation for the company to update them - Statements identified by words like 'believes,' 'expects,' and 'anticipates' are forward-looking and subject to risks and uncertainties[245](index=245&type=chunk)[246](index=246&type=chunk) - Factors affecting future prospects include economic conditions, regulatory changes, capital availability, interest rates, and competition[247](index=247&type=chunk) - The company undertakes no obligation to update or revise any forward-looking statements[247](index=247&type=chunk) [Overview](index=30&type=section&id=Overview) This section provides an overview of Cosmos Holdings Inc.'s business as a multinational pharmaceutical distributor, its operational efficiencies, and the impact of COVID-19 - Cosmos Holdings Inc. is a multinational pharmaceutical company focused on import/export and wholesale distribution of branded and generic pharmaceuticals, OTC products, and its own nutraceutical brand, 'Sky Premium Life,' primarily in Europe[248](index=248&type=chunk)[249](index=249&type=chunk)[253](index=253&type=chunk) - The company utilizes robotic systems (ROWA robotics) in its Athens distribution center for **0%** error selection rate, accelerated order fulfillment, and higher cost-efficiency[25](index=25&type=chunk)[252](index=252&type=chunk) - The company is monitoring the legal framework for cannabis product derivatives in Europe and intends to distribute them to approved EU countries, not the US, once processes are developed[29](index=29&type=chunk) - COVID-19 has presented adverse risks such as drug shortages, supply chain disruptions, and liquidity issues, but also opportunities like increased sales of OTC products, food supplements, and antibacterial products, and potential for COVID-19 test kit distribution[264](index=264&type=chunk)[265](index=265&type=chunk) [Results of Operations (Three-Months Ended March 31, 2021)](index=32&type=section&id=Results%20of%20Operations%20(Three-Months%20Ended%20March%2031,%202021)) This section analyzes the company's financial performance for the three months ended March 31, 2021, highlighting changes in revenue, gross profit, operating expenses, and net loss | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (%) | | :---------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Revenue | $11,619,076 | $11,933,248 | -2.63% | | Cost of Goods Sold | $10,617,741 | $10,740,077 | -1.14% | | Gross Profit | $1,001,335 | $1,193,171 | -16.1% | | Operating Expenses | $2,732,433 | $967,607 | +182.4% | | Income (Loss) from Operations | $(1,731,098) | $225,564 | -867% | | Net Loss | $(2,173,903) | $(483,310) | +349.8% | | Unrealized Foreign Currency Loss | $(473,578) | $(143,762) | +229.4% | | Net Comprehensive Loss | $(2,647,481) | $(627,072) | +322.2% | - The decrease in revenue and gross profit is mainly due to a decrease in demand for full-line wholesale products[268](index=268&type=chunk)[271](index=271&type=chunk) - The significant increase in operating expenses is primarily due to a stock-based compensation consulting agreement[272](index=272&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's working capital, cash position, cash flow activities, and plans for funding future operations | Metric | March 31, 2021 | December 31, 2020 | | :---------------------- | :------------- | :---------------- | | Working Capital | $6,817,608 | $5,979,870 | | Cash | $431,807 | $628,395 | | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------------- | :-------------------------------- | :-------------------------------- | | Net Cash Used in Operating Activities | $(665,339) | $(1,144,755) | | Net Cash Used in Investing Activities | $(2,310) | $(54,223) | | Net Cash Provided by Financing Activities | $380,118 | $2,389,703 | - Financing activities in Q1 2021 included **$100,000** from a convertible note, **$250,000** from treasury stock sale, and a net decrease of **$96,832** from lines of credit[280](index=280&type=chunk) - The company anticipates funding operations through existing cash, operational cash flow, and future debt or equity financing, or loans from management[281](index=281&type=chunk) [Revenue Recognition](index=33&type=section&id=Revenue%20Recognition) This section explains the company's adoption of ASC 606 for revenue recognition and its immaterial impact on financial statements - The company adopted ASC 606, 'Revenue from Contracts with Customers,' on January 1, 2018, using a five-step model[282](index=282&type=chunk) - Adoption of ASC 606 has not materially changed the timing and nature of revenue recognition or the company's financial statements[282](index=282&type=chunk) [Plan of Operation in the Next Twelve Months](index=33&type=section&id=Plan%20of%20Operation%20in%20the%20Next%20Twelve%20Months) This section outlines the company's strategic initiatives for the next twelve months, focusing on organic growth, acquisitions, product expansion, and operational improvements - **Organic Growth**: Expand client base, increase distribution channels, and distribute more profitable pharmaceutical products, OTC medicines, and nutraceuticals across Europe and beyond[286](index=286&type=chunk) - **Acquisitions**: Acquire additional pharmaceutical companies to penetrate new markets and products[287](index=287&type=chunk) - **Nutraceutical Products**: Expand 'Sky Premium Life' sales through digital channels across Europe, penetrate the UK market, and increase product codes from **67** to **150**[288](index=288&type=chunk) - **Generics**: Expand in the generic pharmaceutical products market and obtain more exclusive distribution rights in Europe, leveraging Doc Pharma's licenses[289](index=289&type=chunk) - **B2B/B2C Platforms**: Develop platforms to redefine customer/supplier relationships, improve supply chain management, increase customer loyalty, and reduce costs/errors[290](index=290&type=chunk) - **Robotic Automation Systems**: Purchase an additional robotic system to enhance cost savings, time efficiency, errors avoidance, and productivity[291](index=291&type=chunk) - **New Listing**: Pursue listing the company's securities on the NEO Stock Exchange for greater liquidity, visibility, and access to capital[293](index=293&type=chunk) - The company assesses its foreseeable development as positive, aiming to expand market shares, but acknowledges risks from a difficult and competitive environment, increasing purchase prices, and stagnating selling prices[295](index=295&type=chunk)[296](index=296&type=chunk) [Off Balance Sheet Arrangements](index=34&type=section&id=Off%20Balance%20Sheet%20Arrangements) This section confirms that the company had no off-balance sheet arrangements as of March 31, 2021 - As of March 31, 2021, there were no off-balance sheet arrangements[297](index=297&type=chunk) [Critical Accounting Policies](index=34&type=section&id=Critical%20Accounting%20Policies) This section outlines the company's critical accounting policies for revenue recognition, foreign currency translation, and income taxes - **Revenue Recognition**: Adopted ASC 606 on January 1, 2018, using a five-step model[299](index=299&type=chunk) - **Foreign Currency**: Assets and liabilities of foreign operations are translated at year-end rates, statements of operations at average rates; translation gains/losses accumulated in stockholders' equity; transaction gains/losses included in net earnings[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk) - **Income Taxes**: Accounts for income taxes under ASC 740 (asset and liability method); deferred tax assets and liabilities recognized for temporary differences and NOLs; a valuation allowance is maintained against US net deferred tax assets[305](index=305&type=chunk)[309](index=309&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) As a smaller reporting company, Cosmos Holdings Inc. is not required to provide quantitative and qualitative disclosures about market risk - Not applicable for smaller reporting companies[310](index=310&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures.) This section details the company's disclosure controls and procedures, their evaluation, and planned changes to internal controls, including the role and composition of the Audit Committee [Disclosure Controls and Procedures](index=35&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the company maintains disclosure controls and procedures for timely and accurate reporting under the Securities Exchange Act - The company maintains disclosure controls and procedures designed to ensure timely and accurate reporting of information required by the Securities Exchange Act[312](index=312&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were partially effective as of March 31, 2021, with plans to hire an Internal Auditor Assistant - Management concluded that the company's disclosure controls and procedures were partially effective as of March 31, 2021[313](index=313&type=chunk) - The company plans to hire an Internal Auditor Assistant in **2021** to strengthen regulatory compliance[313](index=313&type=chunk) [Changes in Internal Controls Over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Controls%20Over%20Financial%20Reporting) The company is increasing personnel resources, including an Internal Auditor Assistant, and evaluating controls to strengthen internal controls and prepare for new committee appointments - The company is increasing personnel resources, including hiring an Internal Auditor Assistant, to eliminate identified material weaknesses and strengthen internal controls[314](index=314&type=chunk)[315](index=315&type=chunk) - New board members and the existing Audit Committee are evaluating controls and procedures and preparing for the appointment of Nominate and Compensation Committees[316](index=316&type=chunk) [Audit Committee](index=36&type=section&id=Audit%20Committee) This section details the composition and primary functions of the Audit Committee, including oversight of financial reporting and direct communication with auditors - The Audit Committee consists of three independent directors: John Hoidas, Demetrios Demetriades, and Peter Goldstein[317](index=317&type=chunk) - Its primary function is to oversee the company's financial reporting, accounting processes, and financial statement audits, maintaining direct communication with independent auditors[317](index=317&type=chunk) - The Committee is authorized to investigate matters, access company records, and retain outside legal, accounting, or other advisors at the company's expense[318](index=318&type=chunk) [PART II - OTHER INFORMATION](index=36&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers other required disclosures, including legal proceedings, equity sales, defaults, market risk, and exhibits filed with the report [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings.) The company reported no material legal proceedings as of the reporting date - None[321](index=321&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) There were no unregistered sales of equity securities or use of proceeds to report in this period, as previously disclosed on Form 8-K - None to report in this period; previously reported on Form 8-K[323](index=323&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) The company reported no defaults upon senior securities - None[325](index=325&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company's operations - Not applicable[327](index=327&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information.) The company reported no other information for this item - None[329](index=329&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the 10-Q report, including a Debt Exchange Agreement, CEO/CFO certifications under the Sarbanes-Oxley Act, and XBRL instance documents - Debt Exchange Agreement dated May 10, 2021, between Cosmos Holdings, Inc. and Grigorios Siokas[333](index=333&type=chunk) - Certification of CEO and CFO pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002[342](index=342&type=chunk) - XBRL Instance Document and Taxonomy Extension Documents[342](index=342&type=chunk) [SIGNATURES](index=37&type=section&id=SIGNATURES) The report was signed on behalf of Cosmos Holdings Inc. by Grigorios Siokas, Chief Executive Officer, on May 17, 2021 - Signed by Grigorios Siokas, Chief Executive Officer (Principal Executive Officer)[339](index=339&type=chunk) - Date: May 17, 2021[339](index=339&type=chunk)

10-K 1 cosm_10k.htm FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from __________ to __________ Commission file number: 000-54436 COSMOS HOLDINGS INC. (Exact name of registrant as specified in its charter) | --- | --- | |----------------- ...

[PART I - FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and related disclosures for the reporting period [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited).) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of changes in stockholders' deficit, and statements of cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=2&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This statement provides a snapshot of the company's assets, liabilities, and stockholders' deficit at specific points in time | ASSETS | September 30, 2020 (USD) | December 31, 2019 (USD) | | :--- | :--- | :--- | | **CURRENT ASSETS:** | | | | Cash and cash equivalents | $1,081,631 | $38,537 | | Accounts receivable, net | $17,448,886 | $7,348,945 | | TOTAL CURRENT ASSETS | $35,876,474 | $21,178,735 | | **TOTAL ASSETS** | **$38,569,324** | **$23,879,636** | | **LIABILITIES AND STOCKHOLDERS' DEFICIT** | | | | TOTAL CURRENT LIABILITIES | $41,208,722 | $28,241,255 | | **TOTAL LIABILITIES** | **$43,339,326** | **$30,340,465** | | **TOTAL STOCKHOLDERS' DEFICIT** | **$(4,770,002)** | **$(6,460,829)** | - Total assets increased by approximately **61.5%** from **$23.88 million** at December 31, 2019, to **$38.57 million** at September 30, 2020[10](index=10&type=chunk)[11](index=11&type=chunk) - Total liabilities also increased significantly by about **42.8%** from **$30.34 million** to **$43.34 million** over the same period[10](index=10&type=chunk)[11](index=11&type=chunk) - The stockholders' deficit improved from **$(6.46) million** to **$(4.77) million**, indicating a reduction in the deficit[10](index=10&type=chunk)[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) This statement details the company's revenues, expenses, and net income or loss over specific reporting periods | Metric | Three Months Ended Sep 30, 2020 (USD) | Three Months Ended Sep 30, 2019 (USD) | Nine Months Ended Sep 30, 2020 (USD) | Nine Months Ended Sep 30, 2019 (USD) | | :--- | :--- | :--- | :--- | :--- | | REVENUE | $14,352,098 | $9,685,850 | $39,105,318 | $27,883,147 | | COST OF GOODS SOLD | $11,954,788 | $8,886,084 | $33,166,706 | $25,988,226 | | GROSS PROFIT | $2,397,310 | $799,766 | $5,938,612 | $1,894,921 | | INCOME (LOSS) FROM OPERATIONS | $1,080,003 | $(116,562) | $2,291,880 | $(816,192) | | NET INCOME (LOSS) | $757,866 | $(1,633,349) | $1,651,867 | $(3,390,555) | | BASIC NET INCOME (LOSS) PER SHARE | $0.06 | $(0.12) | $0.12 | $(0.26) | | DILUTED NET INCOME (LOSS) PER SHARE | $0.06 | $(0.12) | $0.12 | $(0.26) | - For the three months ended September 30, 2020, revenue increased by **48.18%** year-over-year, and gross profit surged by **199.75%**[11](index=11&type=chunk)[12](index=12&type=chunk)[282](index=282&type=chunk)[284](index=284&type=chunk)[287](index=287&type=chunk) - The company reported a net income of **$757,866**, a significant improvement from a net loss of **$1,633,349** in the prior-year period[11](index=11&type=chunk)[12](index=12&type=chunk)[282](index=282&type=chunk)[284](index=284&type=chunk)[287](index=287&type=chunk) - For the nine months ended September 30, 2020, revenue grew by **40.25%**, gross profit increased by **213.40%**, and the company achieved a net income of **$1,651,867**, reversing a net loss of **$3,390,555** from the previous year[11](index=11&type=chunk)[12](index=12&type=chunk)[282](index=282&type=chunk)[284](index=284&type=chunk)[287](index=287&type=chunk) [Consolidated Statements of Changes in Stockholders' Deficit](index=4&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20DEFICIT) This statement outlines changes in the company's equity components, including common stock, additional paid-in capital, and accumulated deficit | Metric | Balance at January 1, 2020 (USD) | Balance at September 30, 2020 (USD) | | :--- | :--- | :--- | | Common Stock Value | $13,225 | $13,225 | | Additional Paid-in Capital | $13,525,749 | $13,525,749 | | Treasury Stock Value | $(411,854) | $(491,854) | | Accumulated Deficit | $(19,571,610) | $(17,919,743) | | Accumulated Other Comprehensive Loss | $(16,339) | $102,621 | | **TOTAL STOCKHOLDERS' DEFICIT** | **$(6,460,829)** | **$(4,770,002)** | - The total stockholders' deficit decreased from **$(6,460,829)** at January 1, 2020, to **$(4,770,002)** at September 30, 2020, primarily due to net income of **$757,866** for the quarter and **$1,377,311** for the period ending June 30, 2020, and a positive foreign currency translation adjustment[17](index=17&type=chunk)[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This statement categorizes cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity | Nine Months Ended Sep 30, 2020 (USD) | Nine Months Ended Sep 30, 2019 (USD) | | :--- | :--- | :--- | | Net income (loss) | $1,651,867 | $(3,390,555) | | NET CASH USED IN OPERATING ACTIVITIES | $(10,342,115) | $(3,572,812) | | NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES | $(113,845) | $616,716 | | NET CASH PROVIDED BY FINANCING ACTIVITIES | $10,984,011 | $3,465,905 | | Effect of exchange rate changes on cash | $515,043 | $(193,945) | | NET CHANGE IN CASH | $1,043,094 | $315,864 | | CASH AT END OF PERIOD | $1,081,631 | $1,180,207 | - Net cash used in operating activities increased significantly to **$10.34 million** for the nine months ended September 30, 2020, compared to **$3.57 million** in the prior year[19](index=19&type=chunk)[20](index=20&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - Investing activities used **$113,845**, a decrease from **$616,716** provided in the prior year[19](index=19&type=chunk)[20](index=20&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - Financing activities provided **$10.98 million**, up from **$3.47 million**, primarily driven by proceeds from notes payable and lines of credit[19](index=19&type=chunk)[20](index=20&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - The company ended the period with **$1.08 million** in cash, a substantial increase from **$38,537** at the beginning of the period[19](index=19&type=chunk)[20](index=20&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statement](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statement) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [NOTE 1 – BASIS OF PRESENTATION](index=7&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note describes the accounting principles and conventions used in preparing the interim financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, and should be read in conjunction with the Company's 2019 Form 10-K[21](index=21&type=chunk)[22](index=22&type=chunk) - Management believes all necessary adjustments (normal recurring accruals) for fair presentation have been included[21](index=21&type=chunk)[22](index=22&type=chunk) [NOTE 2 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN](index=8&type=section&id=NOTE%202%20%E2%80%93%20ORGANIZATION%2C%20NATURE%20OF%20BUSINESS%20AND%20GOING%20CONCERN) This note details the company's structure, primary business activities, and assessment of its ability to continue as a going concern - Cosmos Holdings, Inc. is an international pharmaceutical wholesaler operating through subsidiaries SkyPharm S.A., Decahedron Ltd., and Cosmofarm Ltd[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - The business focuses on cross-border sales of brand-name pharmaceuticals in the EU, leveraging price spreads between member states[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - The company also expanded into vitamins and dietary supplements with its '**SkyPremium Life**' brand and full-line pharmaceutical wholesale distribution through Cosmofarm[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - The company is monitoring the legal framework for cannabis derivatives in Europe, intending to distribute prescription and non-prescription products in approved EU countries[26](index=26&type=chunk)[27](index=27&type=chunk) - It also evaluates acquisition targets to expand distribution and vertically integrate[26](index=26&type=chunk)[27](index=27&type=chunk) - The Company's ability to continue as a going concern is in doubt due to a working capital deficit of **$5,332,248**, an accumulated deficit of **$17,919,743**, and net cash used in operations of **$10,342,115** for the nine months ended September 30, 2020[42](index=42&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) - Management plans to raise additional capital through increased sales and equity/debt financing[42](index=42&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) [NOTE 3 – MARKETABLE SECURITIES](index=16&type=section&id=NOTE%203%20%E2%80%93%20MARKETABLE%20SECURITIES) This note outlines the company's investments in marketable securities and related transactions - The Company entered a Distribution and Equity Acquisition Agreement with Marathon Global Inc. for exclusive distribution of cannabis products in Europe, receiving a **33 1/3%** equity interest (**5 million shares**) in Marathon and **CAD $2,000,000** cash, subject to repayment if performance milestones are not met[89](index=89&type=chunk)[90](index=90&type=chunk) - The Company exchanged its Marathon shares for **10 million shares** of ICC International Cannabis Corp. in two separate agreements in May and July 2018, recognizing significant gains on exchange[92](index=92&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk) - As of September 30, 2020, the ICC shares were valued at **$0**, and the Company recorded a net unrealized loss of **$7,894** on other marketable securities (Diversa S.A. and National Bank of Greece)[92](index=92&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk) - In June 2019, the Company invested **EUR 150,000** for a **30%** equity ownership in CosmoFarmacy L.P., a limited partnership for strategic management consulting and retail pharmaceutical trade, accounted for using the equity method[98](index=98&type=chunk)[99](index=99&type=chunk) - The investment was valued at **$175,845** as of September 30, 2020[98](index=98&type=chunk)[99](index=99&type=chunk) [NOTE 4 – PROPERTY AND EQUIPMENT, NET](index=18&type=section&id=NOTE%204%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT%2C%20NET) This note provides details on the company's property and equipment, including depreciation and amortization | Asset Category | September 30, 2020 (USD) | December 31, 2019 (USD) | | :--- | :--- | :--- | | Leasehold improvements | $537,389 | $548,000 | | Vehicles | $120,138 | $115,055 | | Furniture, fixtures and equipment | $1,515,228 | $1,439,839 | | Computers and software | $141,975 | $85,052 | | Total Gross Property and Equipment | $2,314,730 | $2,187,946 | | Less: Accumulated depreciation and amortization | $(615,000) | $(453,165) | | **Total Property and Equipment, net** | **$1,699,730** | **$1,734,781** | - Net property and equipment decreased slightly from **$1,734,781** at December 31, 2019, to **$1,699,730** at September 30, 2020[100](index=100&type=chunk) - This change is primarily due to accumulated depreciation and amortization of **$615,000**, offsetting increases in vehicles, furniture, and computers[100](index=100&type=chunk) [NOTE 5 – INTANGIBLE ASSETS, NET](index=18&type=section&id=NOTE%205%20%E2%80%93%20INTANGIBLE%20ASSETS%2C%20NET) This note describes the company's intangible assets, such as licenses and goodwill, and their amortization | Intangible Asset Category | September 30, 2020 (USD) | December 31, 2019 (USD) | | :--- | :--- | :--- | | License | $50,000 | $50,000 | | Trade name / mark | $36,997 | $36,997 | | Customer base | $176,793 | $176,793 | | Total Gross Intangible Assets | $263,790 | $263,790 | | Less: Accumulated amortization | $(74,642) | $(49,806) | | Subtotal | $179,180 | $213,984 | | Goodwill | $49,697 | $49,697 | | **Total Intangible Assets, net** | **$238,845** | **$263,681** | - Net intangible assets decreased from **$263,681** at December 31, 2019, to **$238,845** at September 30, 2020, primarily due to increased accumulated amortization[102](index=102&type=chunk)[63](index=63&type=chunk) - Goodwill remained constant at **$49,697**, resulting from the Cosmofarm acquisition[102](index=102&type=chunk)[63](index=63&type=chunk) [NOTE 6 – INCOME TAXES](index=18&type=section&id=NOTE%206%20%E2%80%93%20INCOME%20TAXES) This note explains the company's income tax provisions, deferred tax assets, and liabilities across different jurisdictions - The Company is subject to income taxes in Greece (**24%** corporate tax rate) and the United Kingdom (**19%** corporate tax rate)[80](index=80&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - No U.S. federal income tax provision was made due to no U.S. taxable income[80](index=80&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - A valuation allowance is maintained against all net deferred tax assets in each jurisdiction due to uncertainty of realization[82](index=82&type=chunk)[83](index=83&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - A potential tax liability of **$83,238** (vs. **$79,716** in 2019) related to unaudited fiscal years 2013-2014 in Greece is recorded as a long-term liability[82](index=82&type=chunk)[83](index=83&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) [NOTE 7 – CAPITAL STRUCTURE](index=19&type=section&id=NOTE%207%20%E2%80%93%20CAPITAL%20STRUCTURE) This note details the company's authorized and outstanding shares of common and preferred stock, and treasury stock - The Company is authorized to issue **100 million shares** of preferred stock, with none issued as of September 30, 2020[108](index=108&type=chunk)[109](index=109&type=chunk) - It is authorized to issue **300 million shares** of common stock, with **13,225,387 shares** issued and **12,840,059 shares** outstanding as of September 30, 2020[108](index=108&type=chunk)[109](index=109&type=chunk) - The Company purchased treasury shares through stock purchase agreements in 2019 and 2020, including **20,000 shares** for **$80,000** in the nine months ended September 30, 2020[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - No options, warrants, or other potentially dilutive securities were issued as of September 30, 2020[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) [NOTE 8 – RELATED PARTY TRANSACTIONS](index=19&type=section&id=NOTE%208%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) This note discloses significant transactions and balances with related parties, including notes and loans payable - The Company has significant transactions with Doc Pharma S.A., a related party due to the CEO's wife being Doc Pharma's CEO[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) - As of September 30, 2020, the Company had a net prepaid balance of **$3,227,853** and a receivable balance of **$2,277,571** with Doc Pharma[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) - Purchases from Doc Pharma totaled **$3,994,896** and revenue from Doc Pharma was **$1,696,904** for the nine months ended September 30, 2020[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) Related Party Notes Payable Summary | Metric | 2020 (USD) | 2019 (USD) | | :--- | :--- | :--- | | Beginning Balance | $1,375,532 | $1,793,437 | | Payments | $(941,357) | $(382,055) | | Foreign currency translation | $60,770 | $(35,850) | | Ending Balance | $494,945 | $1,375,532 | - Notes payable to related parties, primarily CEO Grigorios Siokas, decreased from **$1,375,532** at December 31, 2019, to **$494,945** at September 30, 2020, largely due to repayments of **$941,357**[118](index=118&type=chunk)[124](index=124&type=chunk)[126](index=126&type=chunk) - Loans payable to related parties, also primarily Grigorios Siokas, increased from **$1,026,264** to **$1,525,485** over the same period, with new proceeds of **$594,836**[118](index=118&type=chunk)[124](index=124&type=chunk)[126](index=126&type=chunk) [NOTE 9 – LINES OF CREDIT](index=21&type=section&id=NOTE%209%20%E2%80%93%20LINES%20OF%20CREDIT) This note provides information on the company's available and utilized lines of credit from financial institutions Lines of Credit Summary | Bank | September 30, 2020 (USD) | December 31, 2019 (USD) | | :--- | :--- | :--- | | National Bank of Greece | $2,822,030 | $1,940,045 | | Alpha Bank of Greece | $1,002,669 | $810,947 | | National - COVID | $428,740 | $0 | | **Total** | **$4,253,439** | **$2,750,992** | - Total lines of credit increased from **$2,750,992** at December 31, 2019, to **$4,253,439** at September 30, 2020[128](index=128&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - This includes new COVID-19 government funding of **$428,740** from National Bank of Greece, with an interest rate of **2.7%**[128](index=128&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - The Company was in compliance with financial ratios and covenants for these lines of credit[128](index=128&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) [NOTE 10 – CONVERTIBLE DEBT](index=22&type=section&id=NOTE%2010%20%E2%80%93%20CONVERTIBLE%20DEBT) This note details the terms, balances, and conversion features of the company's convertible debt instruments Convertible Debt Summary | Metric | 2020 (USD) | 2019 (USD) | | :--- | :--- | :--- | | Beginning balance notes | $1,500,000 | $365,513 | | New notes | $0 | $1,500,000 | | Payments | $(413,000) | $(365,513) | | Subtotal notes | $1,087,000 | $1,500,000 | | Debt discount at year end | $0 | $(29,509) | | Note payable net of discount | $1,087,000 | $1,470,491 | - The Company's convertible debt, primarily the May 2019 Note, had a principal balance of **$1,087,000** as of September 30, 2020, after repayments of **$413,000** during the nine months[136](index=136&type=chunk)[141](index=141&type=chunk)[146](index=146&type=chunk) - The maturity date was extended to **June 16, 2021**, through forbearance agreements, which also waived prepayment premiums and adjusted repayment schedules[136](index=136&type=chunk)[141](index=141&type=chunk)[146](index=146&type=chunk) - The May 2019 Note is convertible at **$6.00 per share**, with an alternative conversion price upon default[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[147](index=147&type=chunk) - It is senior to other indebtedness and includes customary events of default and redemption premiums[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[147](index=147&type=chunk) - Debt discount of **$120,000** (commission and legal fees) was fully amortized by September 30, 2020[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[147](index=147&type=chunk) [NOTE 11 – DEBT](index=24&type=section&id=NOTE%2011%20%E2%80%93%20DEBT) This note provides a comprehensive overview of the company's various third-party debt obligations and related activities Third-Party Debt Summary (September 30, 2020) | Category | Beginning Balance (USD) | Proceeds (USD) | Payments (USD) | Debt Extinguishment (USD) | Foreign Currency Translation (USD) | Ending Balance (USD) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Loan Facility | $3,078,442 | $0 | $(82,061) | $(29,035) | $115,803 | $3,083,149 | | Bridge Loans | $191,287 | $0 | $(165,995) | $(25,292) | $0 | $0 | | Trade Facility | $6,245,400 | $0 | $0 | $0 | $99,200 | $6,344,600 | | Third Party | $2,514,595 | $15,510,000 | $(5,005,862) | $0 | $645 | $13,019,378 | | COVID Loans | $0 | $416,295 | $0 | $0 | $0 | $398,955 | | **Total** | **$12,029,724** | **$15,926,295** | **$(5,253,918)** | **$(54,327)** | **$215,648** | **$22,863,422** | - Total third-party debt increased from **$12,029,724** at December 31, 2019, to **$22,863,422** at September 30, 2020[149](index=149&type=chunk)[216](index=216&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - This was primarily driven by **$15,510,000** in new proceeds from various senior promissory notes, including a **$5,000,000** note and a **$3,000,000** note in Q3 2020, and **$416,295** from COVID-19 government loans[149](index=149&type=chunk)[216](index=216&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - A settlement agreement for the Loan Facility and Bridge Loans resulted in debt extinguishment, writing off **$3,828,630** of principal and accrued interest and recording new debt at fair value of **$3,033,990**, leading to a gain on extinguishment of debt of **$795,418**[156](index=156&type=chunk) [NOTE 12 – LEASES](index=32&type=section&id=NOTE%2012%20%E2%80%93%20LEASES) This note outlines the company's operating and finance lease arrangements, including liabilities and expenses - The Company recognizes assets and liabilities from operating and finance leases based on the present value of remaining lease payments[225](index=225&type=chunk)[228](index=228&type=chunk)[230](index=230&type=chunk) - Operating lease liabilities totaled **$385,562** with a weighted-average remaining lease term of **7.3 years** and a discount rate of **6.74%**[225](index=225&type=chunk)[228](index=228&type=chunk)[230](index=230&type=chunk) Operating Lease Liability Maturity (September 30, 2020) | Period | Amount (USD) | | :--- | :--- | | Remainder of 2020 | $25,060 | | 2021 | $85,041 | | 2022 | $56,270 | | 2023 | $56,270 | | 2024 | $56,270 | | Thereafter | $210,982 | | Total undiscounted operating lease payments | $489,894 | | Less: Imputed interest | $104,332 | | Present value of operating lease liabilities | $385,562 | - Finance lease liabilities totaled **$221,978** with a weighted-average remaining lease term of **2.21 years** and a discount rate of **6.74%**[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) - The Company incurred **$148,218** in operating lease expense and **$9,197** in interest expense on finance leases for the nine months ended September 30, 2020[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) [NOTE 13 – COMMITMENTS AND CONTINGENCIES](index=33&type=section&id=NOTE%2013%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's contractual commitments and potential contingent liabilities - As of September 30, 2020, there were no pending or threatened lawsuits expected to have a material effect on the Company's operations[235](index=235&type=chunk) - Under an Intellectual Property Sale Agreement, the Company is committed to issue **200,000 shares** of common stock upon successful completion of preclinical and three phases of clinical trials for proprietary pharmaceutical formulas[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) - Monthly payments of **€1,500** are made until the first share issuance[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) - The Company has placement agreements with a third-party agent for equity/debt offerings, involving cash commissions (**6-8%** of gross proceeds) and warrants (**7-8%** of shares issued/issuable)[242](index=242&type=chunk)[243](index=243&type=chunk)[245](index=245&type=chunk) - An advisory agreement with Synthesis Management Limited requires **€104,000** per year for ten years[242](index=242&type=chunk)[243](index=243&type=chunk)[245](index=245&type=chunk) [NOTE 14 – STOCK OPTIONS AND WARRANTS](index=34&type=section&id=NOTE%2014%20%E2%80%93%20STOCK%20OPTIONS%20AND%20WARRANTS) This note provides details on the company's outstanding stock options and warrants, including exercise prices and terms Stock Option Activity (Nine Months Ended September 30, 2020) | Metric | Number of Shares | Weighted Average Exercise Price (USD) | Weighted Average Remaining Contractual Term | | :--- | :--- | :--- | :--- | | Balance Outstanding, December 31, 2019 | 74,000 | $1.32 | 2.47 | | Balance Outstanding, September 30, 2020 | 74,000 | $1.32 | 0.71 | | Exercisable, September 30, 2020 | 74,000 | $1.32 | 0.71 | Warrant Activity (Nine Months Ended September 30, 2020) | Metric | Number of Shares | Weighted Average Exercise Price (USD) | Weighted Average Remaining Contractual Term | | :--- | :--- | :--- | :--- | | Balance Outstanding, December 31, 2019 | 1,164,673 | $6.41 | 5.01 | | Balance Outstanding, September 30, 2020 | 1,164,673 | $6.41 | 3.26 | | Exercisable, September 30, 2020 | 1,164,673 | $6.41 | 3.26 | - As of September 30, 2020, there were **74,000 stock options** outstanding and exercisable, with a weighted average exercise price of **$1.32** and a remaining contractual term of **0.71 years**[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - Additionally, **1,164,673 warrants** were outstanding and exercisable, with a weighted average exercise price of **$6.41** and a remaining contractual term of **3.26 years**[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) [NOTE 15 – DISAGGREGATION OF REVENUE](index=35&type=section&id=NOTE%2015%20%E2%80%93%20DISAGGREGATION%20OF%20REVENUE) This note breaks down the company's revenue by geographic region and other relevant categories Revenue Disaggregated by Country (Nine Months Ended September 30) | Country | 2020 Revenue (USD) | 2019 Revenue (USD) | | :--- | :--- | :--- | | Greece | $36,062,729 | $17,688,527 | | UK | $1,501,261 | $2,717,952 | | Germany | $948,282 | $5,350,465 | | Denmark | $229,929 | $89,580 | | Netherlands | $156,392 | $763,889 | | Ireland | $35,833 | $376,380 | | Poland | $28,941 | $270,306 | | Italy | $27,265 | $157,398 | | Jordan | $19,710 | $20,216 | | Croatia | $8,796 | $5,338 | | Cyprus | $5,343 | $0 | | Georgia | $5,320 | $0 | | France | $1,113 | $142,919 | | Libya | $42,844 | $0 | | Hungary | $36,881 | $261,092 | | Indonesia | $0 | $7,197 | | Iraq | $0 | $2,134 | | Turkey | $0 | $24,434 | | **Total** | **$39,105,318** | **$27,833,147** | - Total revenue increased by **40.57%** from **$27,833,147** in 2019 to **$39,105,318** in 2020 for the nine months ended September 30[252](index=252&type=chunk)[253](index=253&type=chunk) - Greece remained the largest revenue contributor, significantly increasing from **$17.69 million** to **$36.06 million**[252](index=252&type=chunk)[253](index=253&type=chunk) - However, revenue from the UK, Germany, Netherlands, and Ireland saw notable decreases[252](index=252&type=chunk)[253](index=253&type=chunk) [NOTE 16 – SUBSEQUENT EVENTS](index=36&type=section&id=NOTE%2016%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note reports significant events that occurred after the balance sheet date but before the financial statements were issued - On October 5, 2020, CEO Grigorios Siokas entered a **12-month** advisory agreement with PGS Ventures B.V. for strategic analysis of North American capital markets[254](index=254&type=chunk) - The advisor will be paid **$8,000 per month** in common stock until NEO Exchange listing, then **$10,000** (**$5,000 cash** from Company, **$5,000 stock/considerations** from Mr. Siokas)[254](index=254&type=chunk) - Peter Goldstein, principal of PGS Ventures B.V., was appointed Executive Director to the Company's Board of Directors effective October 15, 2020[254](index=254&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on the Company's financial condition and results of operations for the three and nine months ended September 30, 2020, discussing business overview, segment performance, impact of COVID-19, liquidity, and future plans [Overview](index=37&type=section&id=Overview) This section provides a general introduction to the company's business, segments, and operational context [Summary](index=37&type=section&id=Summary) This subsection briefly outlines the company's formation, industry focus, and operational subsidiaries - Cosmos Holdings, Inc. was formed in 2009, shifted focus to the healthcare and pharmaceutical industry in 2013, and operates through subsidiaries SkyPharm S.A. (Greece), Decahedron Ltd. (UK), and Cosmofarm Ltd. (Greece), specializing in pharmaceutical trading and distribution across the EU[262](index=262&type=chunk) [Business Segments](index=37&type=section&id=Business%20Segments) This subsection describes the company's distinct operational divisions, including pharmaceuticals, nutraceuticals, and generics - The Company operates in four main segments: Wholesale Import/Export of branded pharmaceuticals (SkyPharm, Decahedron), Full-line Wholesale distribution (Cosmofarm with robotic systems), Nutraceuticals (proprietary '**Sky Premium Life**' brand with **67+ product codes**), and Generics (distribution rights to **47+ generic licenses** via Doc Pharma S.A.)[263](index=263&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[269](index=269&type=chunk) - The nutraceutical market is seen as under-penetrated in Europe with high growth potential and margin contribution, driving the Company's focus on developing quality products[268](index=268&type=chunk) [Regulations and Licenses](index=37&type=section&id=Regulations%20and%20Licenses) This subsection details the regulatory compliance and necessary licenses for the company's pharmaceutical operations - Subsidiaries SkyPharm, Decahedron, and Cosmofarm hold wholesale pharmaceutical product licenses in Greece and the UK, complying with EU directives and Good Distribution Practices, which are crucial for market share and operations[270](index=270&type=chunk)[271](index=271&type=chunk) [Risks](index=38&type=section&id=Risks) This subsection identifies key operational and market risks that could impact the company's performance - Key risks include supply chain disruption due to reliance on 'emerging markets', potential drug shortages from export bans, increased competition from generic approvals, and cuts in healthcare spending, particularly in EU member states like Greece[275](index=275&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk) [The Effects of COVID-19 on Our 2020 Operations](index=38&type=section&id=The%20Effects%20of%20COVID-19%20on%20Our%202020%20Operations) This subsection discusses the impact of the COVID-19 pandemic on the company's business activities and strategies - COVID-19 has adversely affected operations through drug shortages, supply chain restrictions, and logistics delays, but management anticipates positive long-term outcomes, including increased sales of OTC products, nutraceuticals, and antibacterial items[278](index=278&type=chunk) - The Company secured exclusive agreements for COVID-19 detection kits and Copper mask distribution in Greece, Cyprus, UK, and Germany, expecting increased sales[278](index=278&type=chunk)[279](index=279&type=chunk) - It also received **$398,955** in government funding and tax postponements to assist with liquidity[278](index=278&type=chunk)[279](index=279&type=chunk) [What Effect Will Covid-19 Have on the Company's Disclosure Controls](index=38&type=section&id=What%20Ef%20ect%20Will%20Covid-19%20Have%20on%20the%20Company's%20Disclosure%20Controls) This subsection assesses the potential influence of COVID-19 on the effectiveness of the company's disclosure controls - Management does not believe COVID-19 will significantly affect disclosure controls, as operations continue normally with most staff working on-site, and remote work has no impact on controls[281](index=281&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue, expenses, and profitability trends [Three- and Nine-Months Period Ended September 30, 2020 and 2019](index=39&type=section&id=Three-%20and%20Nine-Months%20Period%20Ended%20September%2030%2C%202020%20and%202019) This subsection provides a comparative analysis of financial results for the specified interim periods [Revenue](index=39&type=section&id=Revenue) This subsection examines the company's top-line performance and key drivers of revenue growth | Period | 2020 Revenue (USD) | 2019 Revenue (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $14,352,098 | $9,685,850 | 48.18% | | Nine Months Ended Sep 30 | $39,105,318 | $27,883,147 | 40.25% | - Revenue increased significantly due to organic growth from Cosmofarm's expansion, increased demand for medical equipment during COVID-19, and higher sales of food supplements and the '**Sky Premium Life**' nutraceutical brand[282](index=282&type=chunk) [Cost of Goods Sold](index=39&type=section&id=Cost%20of%20Goods%20Sold) This subsection analyzes the direct costs associated with the goods sold by the company | Period | 2020 COGS (USD) | 2019 COGS (USD) | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $11,954,788 | $8,886,084 | | Nine Months Ended Sep 30 | $33,166,706 | $25,988,226 | - Cost of goods sold increased in line with revenue but not proportionally, as '**Sky Premium Life**' products and medical equipment (masks, gloves, oximeters) have higher margins, leading to a higher markup[285](index=285&type=chunk) [Gross Profit](index=39&type=section&id=Gross%20Profit) This subsection discusses the company's profitability after accounting for the cost of goods sold | Period | 2020 Gross Profit (USD) | 2019 Gross Profit (USD) | Change (%) | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $2,397,310 | $799,766 | 199.75% | | Nine Months Ended Sep 30 | $5,938,612 | $1,894,921 | 213.40% | - Gross profit saw substantial increases of **199.75%** for the three months and **213.40%** for the nine months, driven by higher demand for '**Sky Premium Life**' products and medical devices, which yield better margins[287](index=287&type=chunk) [Operating Expenses](index=39&type=section&id=Operating%20Expenses) This subsection reviews the company's general, administrative, sales, marketing, and depreciation expenses | Expense Category | Three Months Ended Sep 30, 2020 (USD) | Three Months Ended Sep 30, 2019 (USD) | Nine Months Ended Sep 30, 2020 (USD) | Nine Months Ended Sep 30, 2019 (USD) | | :--- | :--- | :--- | :--- | :--- | | General and administrative expenses | $1,017,686 | $808,138 | $2,702,259 | $2,444,351 | | Sales and marketing expenses | $211,874 | $15,342 | $645,930 | $26,632 | | Depreciation and amortization expense | $87,747 | $92,848 | $298,543 | $240,130 | | Net Operating Income (Loss) | $1,080,003 | $(116,562) | $2,291,880 | $(816,192) | - Operating expenses increased, primarily due to higher advertisement and payroll expenses[288](index=288&type=chunk) - Despite this, the Company achieved a net operating gain of **$1,080,003** for the three months and **$2,291,880** for the nine months, a significant turnaround from losses in the prior year[288](index=288&type=chunk) [Other Income (Expense)](index=39&type=section&id=Other%20Income%20(Expense)) This subsection details non-operating income and expenses, including interest, gains/losses, and foreign currency effects - Other income/expense for the nine months ended September 30, 2020, included **$1,853,216** in interest expense, a **$795,418** gain on extinguishment of debt (Synthesis loan), and a **$394,983** foreign currency gain[290](index=290&type=chunk) - This compares to **$955,593** interest expense, **$1,103,035** loss on equity investments, and a **$457,362** foreign currency loss in the prior year[290](index=290&type=chunk) [Unrealized Foreign Currency losses](index=40&type=section&id=Unrealized%20Foreign%20Currency%20losses) This subsection reports the impact of exchange rate fluctuations on the company's financial position - The Company reported an unrealized foreign currency gain of **$79,882** for the three months and **$118,960** for the nine months ended September 30, 2020, contributing to total comprehensive income of **$837,748** and **$1,770,827**, respectively[292](index=292&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term obligations and fund its operations - As of September 30, 2020, the Company had a working capital deficit of **$5,332,248**, an improvement from **$7,062,520** at December 31, 2019[293](index=293&type=chunk)[294](index=294&type=chunk) - Cash balance increased significantly to **$1,081,631** from **$38,537**[293](index=293&type=chunk)[294](index=294&type=chunk) - Net cash used in operating activities was **$10,342,115** for the nine months ended September 30, 2020, while net cash provided by financing activities was **$10,984,011**, primarily from new debt and lines of credit[294](index=294&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - The Company plans to use existing cash, operational cash flow, and debt/equity financing to fund operations, but management cannot assure adequate capital, raising doubt about its ability to continue as a going concern[298](index=298&type=chunk) [Revenue Recognition](index=40&type=section&id=Revenue%20Recognition) This section explains the accounting policies and methods used to recognize revenue from contracts with customers - The Company adopted ASC 606, Revenue from Contracts with Customers, on January 1, 2018[299](index=299&type=chunk)[300](index=300&type=chunk) - This five-step model for revenue recognition has not materially changed the timing or nature of the Company's revenue recognition[299](index=299&type=chunk)[300](index=300&type=chunk) [Plan of Operation in the Next Twelve Months](index=41&type=section&id=Plan%20of%20Operation%20in%20the%20Next%20Twelve%20Months) This section outlines the company's strategic objectives and operational initiatives for the upcoming year - The Company's strategic focus for the next twelve months includes organic growth by securing new clients and expanding existing business, acquiring additional pharmaceutical companies, and enhancing sales of its '**Sky Premium Life**' nutraceutical products, including penetration into the UK market and increasing product codes to **150**[304](index=304&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk) - Other plans involve expanding into the generic pharmaceutical market by obtaining more exclusive distribution rights, developing B2B/B2C platforms for improved customer relationships and efficiency, purchasing an additional robotic automation system for cost savings and productivity, and listing securities on the NEO Exchange and OTCQX for greater liquidity and capital access[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk)[311](index=311&type=chunk) [Off Balance Sheet Arrangements](index=42&type=section&id=Off%20Balance%20Sheet%20Arrangements) This section discloses any material transactions, agreements, or other arrangements not recorded on the balance sheet - As of September 30, 2020, the Company had no off-balance sheet arrangements[315](index=315&type=chunk) [Critical Accounting Policies](index=42&type=section&id=Critical%20Accounting%20Policies) This section describes the accounting policies that require significant judgment and estimation by management - The Company's critical accounting policies include Revenue Recognition (ASC 606), Foreign Currency Translation (assets/liabilities at year-end rates, operations at average rates, gains/losses in equity or net earnings), and Income Taxes (asset and liability method, deferred taxes, valuation allowances, uncertain tax positions)[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk)[323](index=323&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) As a smaller reporting company, Cosmos Holdings, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company, as a smaller reporting company, is exempt from providing quantitative and qualitative disclosures about market risk[327](index=327&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures.) This section addresses the Company's disclosure controls and procedures, their evaluation, and ongoing changes to remediate identified material weaknesses in internal controls over financial reporting [Disclosure Controls and Procedures](index=43&type=section&id=Disclosure%20Controls%20and%20Procedures) This section describes the company's systems designed to ensure timely and accurate financial reporting - The Company maintains disclosure controls and procedures designed to ensure timely recording, processing, summarizing, and reporting of information required by the Securities Exchange Act[329](index=329&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=43&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section presents management's assessment of the effectiveness of the company's disclosure controls - Management concluded that the Company's disclosure controls and procedures were not effective as of September 30, 2020, due to material weaknesses including lack of segregation of duties, insufficient internal controls structure review, and inadequate documentation of internal policies[330](index=330&type=chunk) - Management is committed to remediating these weaknesses and expects to complete the process in the near future, believing they do not materially affect the reported financial results[330](index=330&type=chunk) [Changes in Internal Controls Over Financial Reporting](index=44&type=section&id=Changes%20in%20Internal%20Controls%20Over%20Financial%20Reporting) This section details any material changes or remediation efforts regarding the company's internal controls - The Company is increasing personnel resources and technical expertise to eliminate material weaknesses, including hiring an Internal Auditor to strengthen procedures and prepare for SOX controls, and an IT professional to enhance software and security[332](index=332&type=chunk) - Remediation efforts include setting procedures for financial reporting evaluation/approval, improving documentation and reconciliations, increasing controls on Information Management Systems, appointing new board members for oversight, establishing a code of ethical conduct, and assigning more distinctive roles to employees to reduce error and fraud risk[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) [PART II - OTHER INFORMATION](index=44&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section includes non-financial disclosures and other required information not covered in Part I [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings.) The Company reported no legal proceedings as of the reporting period - There are no legal proceedings to report[342](index=342&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The Company reported no unregistered sales of equity securities or use of proceeds not previously disclosed - There are no unregistered sales of equity securities and use of proceeds to report[344](index=344&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) The Company reported no defaults upon senior securities - There are no defaults upon senior securities to report[346](index=346&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) The Company reported no mine safety disclosures - There are no mine safety disclosures to report[348](index=348&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information.) The Company reported no other information - There is no other information to report[349](index=349&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed as part of the Form 10-Q, including promissory notes, certifications under Sarbanes-Oxley Act, and XBRL interactive data files Key Exhibits Filed | Exhibit No. | Document Description | | :--- | :--- | | 10.1 | Form of August 4, 2020 Senior Promissory Note in the amount of $3,000,000 with Personal Guaranty of Grigorios Siokas | | 31.1* | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2* | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32.1* | Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 32.2* | Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 101.INS | XBRL Instance Document** | | 101.SCH | XBRL Taxonomy Extension Schema Document** | | 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document** | | 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document** | | 101.LAB | XBRL Taxonomy Extension Label Linkbase Document** | | 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document** | [SIGNATURES](index=45&type=section&id=SIGNATURES) The report is signed by Grigorios Siokas, Chief Executive Officer, Acting Principal Financial Officer, and Acting Principal Accounting Officer of Cosmos Holdings Inc., on November 13, 2020 - The report was signed by Grigorios Siokas, Chief Executive Officer, Acting Principal Financial Officer, and Acting Principal Accounting Officer, on November 13, 2020[357](index=357&type=chunk)[359](index=359&type=chunk)