Cosmos Holdings Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2015; filed April 20, 2016. This is an annual report, and the filing does not provide standalone fourth-quarter results. The registrant is identified in the filing as Cosmos Holdings Inc.
Business context
The company shifted its focus toward pharmaceutical wholesaling through SkyPharm, its Greek subsidiary. SkyPharm received a five-year Greek wholesale pharmaceutical license in July 2015 and began sales in November. The company also continued Amplerissimo’s consulting and trading activities, although its two consulting clients requested no services during 2015. Sales were concentrated in a small number of pharmaceutical wholesalers and were generated entirely outside the United States.
Financial performance and liquidity
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $533,802 | $7,639,022 |
| Gross profit / margin | $48,993 / 9.2% | $7,639,022 / 100% as presented |
| Operating income (loss) | $(442,459) | $7,115,777 |
| Net income (loss) | $(6,687,912) | $6,044,691 |
| Comprehensive income (loss) | $(7,112,625) | $5,352,407 |
| Cash from operating activities | $(497,089) | $6,525,625 |
| Cash and cash equivalents at year-end | $198,049 | $446,604 |
| Working capital | $(1,358,236) deficit | $5,452,000 approximately |
Revenue fell approximately 93%, primarily because Amplerissimo had no new engagements and SkyPharm started selling late in the year. The 2015 results included a $6,150,508 write-off of the B2IN acquisition investment, $86,898 of interest expense, and a $424,713 foreign-currency translation loss. The reported net loss per share was $0.05.
At year-end, total assets were $657,621 and total current liabilities were $1,905,412. Current liabilities included $1,032,128 of taxes payable and approximately $474,000 in notes and loans payable, including related-party amounts. The auditor stated that the working-capital deficit and accumulated deficit raised substantial doubt about the company’s ability to continue as a going concern. The financial statements were audited with an unmodified opinion that included a going-concern emphasis.
Material changes, outlook, and risks
- The company abandoned its planned acquisition of B2IN/Unilog after paying a substantial deposit. The filing says management determined the deposit would not be recovered and recorded a write-off; elsewhere, the subsequent-events note says the company had the right to terminate and request its return after March 30, 2016.
- Management said year-end cash and working capital would cover estimated operating requirements for the next 12 months and estimated baseline costs below $180,000. It also planned to raise capital through product sales and common-stock sales, but gave no assurance it could do so. Additional funds may be needed to execute its expansion plans.
- Plans included growing SkyPharm’s customer base in Europe, entering additional markets, expanding into generic drugs, cosmetics and supplements, and evaluating acquisitions. The filing reports no binding agreements for these plans.
- Revenue concentration was high: two customers represented 87.21% of 2015 revenue; MPA Pharma GmbH alone accounted for 68.84%. Germany accounted for 68.84% of revenue and the United Kingdom for 26.50%.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end. Disclosed weaknesses included inadequate segregation of duties, insufficient review and oversight, and insufficient investment controls. The auditor did not audit internal controls.
- Other risks include intense competition, pharmaceutical regulation and compliance requirements, foreign-currency exposure, limited access to capital, and potential difficulty trading the company’s OTC penny stock. The company had no full-time parent-company employees; subsidiaries reported 14 employees.
- In November 2015, Grigorios Siokas acquired 95 million shares from the former CEO for $1 and became the controlling shareholder. He became CEO and CFO in February 2016. The company reported no cash dividends and no separately designated audit committee or independent directors.
Key facts for investors to verify
- Whether any part of the B2IN deposit was recovered or recoverable: the filing gives inconsistent indications, and the reported write-off amount differs between sections ($6.1505 million in the income statement versus approximately $6.0419 million in the acquisition note).
- The composition, tax-jurisdiction status, payment timing, and potential settlement of the $1.032 million taxes payable balance.
- Available financing and cash needs, given the $198,049 year-end cash balance, working-capital deficit, and going-concern warning.
- SkyPharm’s subsequent sales, gross margins, customer concentration, and ability to convert receivables and inventory into cash.
- Progress in remediating the disclosed internal-control material weaknesses and the reliability of future reporting.
- The filing reports 125,630,532 shares outstanding at year-end and again as of April 20, 2016; investors should verify current share count, ownership, and any subsequent financing or dilution.