Cosmos Holdings Inc. — Q2 2015 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2015; unaudited. The filing names the registrant as Cosmos Holdings Inc. (not Cosmos Health Inc.).
Business context
The company described itself as a holding company pursuing acquisitions while operating through Amplerissimo and its Greek subsidiary SkyPharm. Amplerissimo’s consulting and trading activities were its only active revenue-generating operations, but it reported no revenue in the first half of 2015. SkyPharm was preparing to enter pharmaceutical wholesale, remained in the licensing process, and lacked sufficient capital to begin operations.
Financial performance and position
| Metric | Q2 2015 / June 30, 2015 | Comparable period / prior balance date |
|---|---|---|
| Revenue | $0 for Q2; $0 for first half | Q2 2014: $1.234 million; first half 2014: $2.015 million |
| Net income (loss) | Q2: $(132,620); first half: $(241,273) | Q2 2014: $928,283; first half 2014: $1.542 million |
| Comprehensive income (loss) | Q2: $(21,084); first half: $(691,185) | Q2 2014: $916,693; first half 2014: $1.475 million |
| Cash and equivalents | $188,055 | $446,604 at December 31, 2014 |
| Working capital | Approximately $4.754 million | Approximately $5.452 million at December 31, 2014 |
| Total assets / shareholders’ equity | $6.423 million / $4.811 million | $7.235 million / $5.474 million at December 31, 2014 |
| Current liabilities | $1.613 million, including $536,115 related-party notes and $970,863 taxes payable | $1.761 million at December 31, 2014 |
Operating expenses were $109,802 in Q2 and $194,085 for the first half, versus $168,261 and $241,434, respectively, in 2014. With no 2015 revenue, operating losses were $109,802 for Q2 and $194,085 for the half year; margins are not meaningful. First-half other expense was $47,188, including $43,611 of interest expense (the tax note characterizes the $43,611 as interest and penalties). EPS was reported as $(0.00) for 2015 and $0.01 for 2014.
Cash used in operating activities was $255,577 for the first half, compared with $44,353 provided in 2014. Investing activities used $33,820 for fixed assets; financing activities provided $67,000, principally from a related-party loan. The net cash decrease was $258,549. The balance sheet shows no separately identified long-term debt; related-party notes payable were $536,115 and current.
Material changes, outlook, and risks
- Revenue fell to zero because Amplerissimo had no new engagements, and the company swung from first-half 2014 profit to a first-half 2015 loss. Management attributed lower quarterly operating expenses mainly to public-company costs and acquisition-related activity.
- Foreign currency translation reduced first-half comprehensive results by $449,912; Q2 included a $111,536 translation gain. The company reported a full valuation allowance against deferred tax assets in its jurisdictions.
- Amplerissimo had paid $6.146 million toward the €7 million purchase price for B2IN, parent of Greek pharmaceutical logistics operator Unilog. Closing was subject to conditions outside the company’s control; an August 18, 2015 extension set March 30, 2016 as the extended closing date and provided for return of the deposit if the transaction did not close or was terminated by Amplerissimo.
- The company also disclosed a proposed 70% investment in a mobile technology company, with an initial stated commitment to source and invest more than $15 million. The transaction had not closed; completion and financing were uncertain.
- Management expected to fund operations with available cash, operating receipts, debt or equity financing, or management loans, but management was not obligated to provide funds. The filing warns that insufficient resources could threaten OTC quotation and ongoing SEC reporting. No formal financial guidance was provided.
- Subsequent events included a new $50,000 CEO loan at 2% interest, due December 16, 2016. Existing CEO loans were also outstanding, with certain maturities extended. SkyPharm’s licensing, capital availability, and ability to launch remained uncertain.
- Management concluded disclosure controls were effective as of June 30, 2015; no material change in internal control over financial reporting was reported. No legal proceedings or off-balance-sheet arrangements were disclosed.
Important facts for investors to verify
- Whether the B2IN/Unilog acquisition closed by the extended deadline and whether the $6.146 million deposit was recovered or applied to the purchase.
- The status, funding needs, and terms of the proposed mobile technology investment and the stated commitment exceeding $15 million.
- How the company will finance near-term operations given $188,055 of cash, operating cash outflow, and no obligation for management to lend.
- The nature and settlement status of the $970,863 tax payable and the $43,611 interest and penalties expense.
- Whether SkyPharm obtained required Greek pharmaceutical-wholesaler licensing and secured the capital needed to commence operations.