Cosmos Holdings Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparative figures are for FY2020. The filing describes an international pharmaceutical wholesaler and distributor with its own Sky Premium Life nutraceutical line. Nearly all revenue came from Greece, and all revenue was generated outside the United States.
Financial results
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $56.24 million | $55.41 million |
| Gross profit / gross margin | $8.33 million / approximately 14.8% | $8.06 million / approximately 14.5% |
| Operating income (loss) | $(4.53) million | $2.71 million |
| Net income (loss) | $(7.96) million | $0.82 million |
| Net loss attributable to common stockholders | $(15.59) million | $0.82 million |
| Cash from (used in) operating activities | $(7.10) million | $(11.50) million |
| Cash and cash equivalents at year-end | $0.29 million | $0.63 million |
| Working capital | $10.95 million | $6.48 million |
| Total assets / total liabilities | $49.43 million / $45.05 million | $43.84 million / $48.01 million |
| Stockholders’ equity (deficit) | $4.38 million | $(4.16) million |
Revenue rose 1.5%, while cost of goods sold increased 1.2%; management attributed higher gross profit partly to Sky Premium Life sales. Operating expenses increased to $12.86 million from $5.35 million, primarily reflecting $5.90 million of stock-based compensation and $1.09 million of doubtful-account provisions. Interest expense was $2.82 million, with a further $0.76 million of non-cash interest expense. Investing activities used $0.83 million; financing activities provided $7.27 million. The filing reports total debt maturities of $17.91 million, including $5.55 million due in 2022 and $11.71 million in 2023; lines of credit were reported separately at $5.11 million, including $4.74 million current.
Material changes and unusual items
- The company moved from FY2020 net income to a FY2021 net loss, despite modest revenue and gross-profit growth.
- A $7.63 million deemed dividend from warrant anti-dilution repricing increased the loss attributable to common stockholders; it did not represent operating expense or cash outflow.
- Share-based compensation of $5.90 million related to 1.8 million restricted shares issued to a consultant was a major expense. The filing also reports $6.00 million of related-party debt exchanged for common shares and $3.01 million of third-party senior notes converted to shares.
- Foreign currency translation produced a $1.01 million comprehensive loss, versus $0.87 million of translation income in FY2020. Foreign currency transaction loss was $0.49 million.
- Greece represented 98.8% of FY2021 revenue. One customer, Medihelm SA, accounted for 15.33% of revenue and 35.08% of accounts receivable.
Outlook, risks and other disclosures
- No quantified revenue or earnings guidance was provided. Management planned to expand Sky Premium Life to 150 product codes by the end of 2022 and pursue geographic expansion, e-commerce, distribution partnerships and acquisitions.
- Management said cash and working capital were expected to support the next 12 months, but also anticipated additional financing in 2022. The auditor highlighted substantial doubt about the company’s ability to continue as a going concern; management’s plans include raising capital, increasing sales, and refinancing or exchanging debt, with no assurance of success.
- Key risks include low cash relative to operating needs, significant debt and interest costs, customer and geographic concentration, foreign-exchange exposure, pharmaceutical regulation and supply-chain disruption, competition, and potential additional capital requirements. COVID-19-related risks included shortages, logistics delays and payment delays.
- Related-party exposures include manufacturing and R&D arrangements with Doc Pharma, which is linked to the CEO’s family, and borrowing and debt exchanges involving CEO Grigorios Siokas. The filing reports substantial balances and transactions with Doc Pharma.
- Disclosure controls and internal control over financial reporting were assessed as partially effective. Identified weaknesses included inadequate segregation of duties and insufficient levels of review and oversight; remediation was in progress.
- Subsequent events included Nasdaq trading commencement on February 28, 2022, a private placement generating approximately $6 million gross proceeds, and extensions of certain debt maturities. These occurred after the reporting date.
Investor verification priorities
- Reconcile the going-concern warning with management’s liquidity assessment, financing needs, cash runway and debt maturities.
- Review debt balances, interest rates, collateral, guarantees, covenant compliance and the 2022–2023 repayment schedule, including post-year-end extensions.
- Assess the quality and collectability of receivables, especially the concentrated customer exposure, and the basis for the $1.09 million doubtful-account provision.
- Examine the valuation and dilution effects of warrants, convertible instruments, related-party debt exchanges and the $7.63 million deemed dividend.
- Evaluate related-party manufacturing, prepayments, receivables and payables involving Doc Pharma, including pricing and governance safeguards.
- Track progress in remediating internal-control weaknesses and whether the planned nutraceutical expansion and geographic growth produce sustainable margins and cash flow.