Cosmos Holdings Inc. — Form 10-Q summary
Reporting period: Quarter and nine months ended September 30, 2015. The filing identifies the registrant as Cosmos Holdings Inc. (not Cosmos Health Inc.); financial statements are unaudited.
Business context
The company describes itself as a holding company pursuing acquisitions, with a stated focus on pharmaceutical trading and logistics. Its subsidiary SkyPharm was licensed in Greece on July 22, 2015 to wholesale human pharmaceuticals, but the filing says it lacked the capital needed to commence operations. The filing reports no revenue in 2015.
Financial highlights
| Metric | Q3 2015 | Nine months 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | $0 | $0 | Q3: $5,778,993; nine months: $7,794,216 |
| Net income (loss) | $(100,390) | $(341,663) | Q3: $4,749,437; nine months: $6,291,936 |
| Operating expenses | $75,152 | $269,237 | Q3: $192,738; nine months: $434,172 |
| Operating cash flow | Not separately provided | $(329,598) | Nine months: $6,798,270 provided |
- Q3 2015 foreign-currency translation gain was $55,764; nine-month translation loss was $394,148. Comprehensive loss was $44,626 for Q3 and $735,811 for the nine months.
- At September 30, cash was $155,868, down from $446,604 at year-end 2014. Working capital was approximately $4.738 million, versus $5.452 million at December 31, 2014.
- Total assets were $6.480 million and total liabilities were $1.714 million. Current liabilities included $1.038 million of taxes payable. Related-party notes payable totaled $590,128, including $540,128 current and $50,000 long term.
- The company paid $34,397 for fixed assets and received $117,000 net financing cash, principally from related-party borrowing, during the nine months. Cash declined by $290,736 overall.
- Basic and diluted loss per share rounded to $(0.00) for both 2015 periods. The filing reports 125,630,532 common shares issued and outstanding as of November 23, 2015.
Material changes and unusual items
- Revenue fell to zero from substantial 2014 revenue. Management attributed the absence of revenue to no new engagements through Amplerissimo, described as the only active subsidiary.
- The 2014 comparative profits included substantial revenue; the company moved to losses in 2015. Operating expenses were lower year over year, while interest expense remained a cost.
- A $6.214 million deposit had been paid toward the €7 million purchase of B2IN, parent of Greek pharmaceutical-logistics business Unilog. Closing remained subject to conditions outside the company’s control. Under an August 2015 extension, the deposit is returnable if closing has not occurred by March 30, 2016.
- CEO Dimitrios Goulielmos provided loans to the company at 2% interest, with maturities extended on certain loans. On November 4, 2015, he agreed to sell 95 million of his 100 million shares for $1, with the buyer also undertaking specified company debt obligations. The agreement also provides for certain related-party debt forgiveness contingent on repayment of obligations.
- The company recorded a full valuation allowance against net deferred tax assets. It reported $65,453 of interest and penalties as interest expense for the nine months.
Outlook, risks, and controls
Management planned to fund operations with available cash, operating cash flow, debt or equity financing, or management loans, but said management was not obligated to provide funds. It warned that failure to meet requirements could jeopardize OTC quotation and SEC reporting. The company outlined approximately $15,000 to evaluate service opportunities and $30,000 to locate and assess acquisitions; it reported no binding agreements for these initiatives. Its plans to develop pharmaceutical activities depend on obtaining capital, and the filing gives no assurance that they will succeed. Other stated risks include economic and regulatory changes, competition, interest rates, and availability of capital. No off-balance-sheet arrangements or legal proceedings were reported. Management concluded disclosure controls were effective at September 30, 2015 and reported no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether the B2IN/Unilog acquisition closes by March 30, 2016, and the status and recoverability of the $6.214 million deposit.
- The terms, completion, and debt consequences of the November 4 share-sale agreement, including the contingent related-party debt forgiveness.
- How the company will finance operations and whether SkyPharm has adequate capital to begin licensed wholesale operations.
- The composition, payment status, and potential penalties associated with the $1.038 million taxes payable and related-party borrowings.
- The filing’s balance sheet labels total stockholders’ deficit as $4.766 million while presenting that amount without parentheses; investors should verify its presentation against the underlying filed statements.