mos Health (COSM) - 2020 Q1 - Quarterly Report

PART I Item 1. Financial Statements (Unaudited) Presents Cosmos Holdings Inc.'s unaudited Q1 2020 consolidated financial statements, covering balance sheets, operations, cash flows, and notes Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show a slight decrease in total assets and an increase in total liabilities from December 31, 2019, to March 31, 2020, resulting in an increased stockholders' deficit | Metric | March 31, 2020 (Unaudited) | December 31, 2019 | | :----------------------------------------------------------------------------------------------------------- | :------------------------- | :------------------ | | ASSETS | | | | TOTAL CURRENT ASSETS | $20,821,941 | $21,178,735 | | Property and equipment, net | $1,705,033 | $1,734,781 | | Goodwill and intangible assets, net | $255,433 | $263,681 | | TOTAL ASSETS | $23,472,163 | $23,879,636 | | LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | TOTAL CURRENT LIABILITIES | $28,495,461 | $28,241,255 | | TOTAL LIABILITIES | $30,560,064 | $30,340,465 | | TOTAL STOCKHOLDERS' DEFICIT | $(7,087,901) | $(6,460,829) | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three months ended March 31, 2020, Cosmos Holdings Inc. reported increased revenue and gross profit compared to the same period in 2019, but also a higher net loss and total comprehensive loss, primarily due to increased operating expenses and other expenses, including foreign currency transaction losses | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | REVENUE | $11,933,248 | $9,683,341 | | COST OF GOODS SOLD | $10,740,077 | $9,057,179 | | GROSS PROFIT | $1,193,171 | $626,162 | | TOTAL OPERATING EXPENSES | $967,607 | $799,904 | | INCOME (LOSS) FROM OPERATIONS | $225,564 | $(173,742) | | TOTAL OTHER EXPENSE, NET | $(702,370) | $(41,649) | | NET LOSS | $(483,310) | $(217,173) | | TOTAL COMPREHENSIVE LOSS | $(627,072) | $(155,544) | | BASIC NET LOSS PER SHARE | $(0.04) | $(0.02) | | DILUTED NET LOSS PER SHARE | $(0.04) | $(0.02) | Consolidated Statements of Changes in Stockholders' Deficit The consolidated statements of changes in stockholders' deficit show a significant increase in accumulated deficit and accumulated other comprehensive loss from January 1, 2020, to March 31, 2020, primarily driven by the net loss and foreign currency translation adjustments | Metric | Balance at January 1, 2020 | Balance at March 31, 2020 | | :------------------------------------ | :------------------------- | :------------------------ | | Common Stock Value | $13,225 | $13,225 | | Additional Paid-in Capital | $13,525,749 | $13,525,749 | | Treasury Stock Value | $(411,854) | $(411,854) | | Accumulated Deficit | $(19,571,610) | $(20,054,920) | | Other Comprehensive Income (Loss) | $(16,339) | $(160,101) | | Total Stockholders' Deficit | $(6,460,829) | $(7,087,901) | Condensed Consolidated Statements of Cash Flows For the three months ended March 31, 2020, the company experienced a significant net cash inflow, primarily driven by financing activities, despite continued cash usage in operating and investing activities | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net Cash Used In Operating Activities | $(1,144,739) | $(483,933) | | Net Cash Used In Investing Activities | $(54,223) | $(129,531) | | Net Cash Provided By Financing Activities | $2,389,703 | $145,808 | | Effect of exchange rate changes on cash | $(244,397) | $(87,031) | | NET CHANGE IN CASH | $946,344 | $(554,687) | | CASH AT END OF PERIOD | $984,881 | $309,656 | Notes to Unaudited Condensed Consolidated Financial Statement Detailed notes explain accounting policies, business operations, financial instruments, debt, and related party transactions NOTE 1 – BASIS OF PRESENTATION Unaudited condensed consolidated financial statements adhere to GAAP for interim reporting and Form 10-Q - Financial statements are unaudited and prepared in accordance with GAAP for interim financial information and Form 10-Q, including normal recurring accruals[25] - Operating results for the three months ended March 31, 2020, are not necessarily indicative of the results for the full year ending December 31, 2020[25] NOTE 2 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN Cosmos Holdings Inc. operates as an international pharmaceutical wholesaler in the EU, facing substantial doubt about its ability to continue as a going concern due to accumulated deficits and net losses - Cosmos Holdings, Inc. is an international pharmaceutical wholesaler, importing, exporting, and distributing brand-name and generic pharmaceuticals, OTC medicines, vitamins, and dietary supplements primarily in the EU[26] - The Company operates through three wholly-owned subsidiaries: SkyPharm S.A. (Greece), Decahedron Ltd. (UK), and Cosmofarm Ltd. (Greece)[26] - The Company's financial statements raise substantial doubt about its ability to continue as a going concern due to a net loss of $483,310, net cash used in operations of $1,144,739, an accumulated deficit of $20,054,920, a working capital deficit of $7,673,520, and stockholders' deficit of $7,087,901 as of March 31, 2020[46] - Management plans to address the going concern issue by raising additional capital through increased product sales and equity/debt financing[49] Summary of Significant Accounting Policies Details the company's significant accounting policies, covering consolidation, estimates, assets, revenue, and income taxes - The Company's condensed consolidated accounts include its own and its wholly-owned subsidiaries' (SkyPharm S.A., Decahedron Ltd., and Cosmofarm Ltd.) accounts, with all significant intercompany balances and transactions eliminated[51] - Accounts receivable are stated at net realizable value, with an allowance for doubtful accounts of $551,723 as of March 31, 2020[56] - Inventory is stated at the lower-of-cost or net realizable value using the weighted average method and consists primarily of finished goods and packaging materials[58] - The Company adopted ASC 606, Revenue from Contracts with Customers, on January 1, 2018, recognizing revenue upon delivery of the product when performance obligations are satisfied; this adoption had no material effect on the financial statements[81] - The Company accounts for income taxes under the asset and liability method (ASC 740) and maintains a valuation allowance against all net deferred tax assets in each jurisdiction due to uncertainty of realization[86][88] NOTE 3 – INVESTMENTS The Company holds investments in equity securities, including ICC International Cannabis Corp., Diversa S.A., and National Bank of Greece, valued at fair value, and an equity method investment in CosmoFarmacy L.P - The Company was appointed exclusive distributor of cannabis, CBD, and