Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Overview
Prime Estates and Developments, Inc. was incorporated in the State of Nevada on July 21, 2009 for the purpose of acquiring and operating commercial real estate and real estate related assets. On November 14, 2013, we changed our name to Cosmos Holdings Inc.
On September 27, 2013, Prime Estates and Developments, Inc. closed a reverse take-over transaction by which it acquired a private company whose principal activities are the trading of products, providing representation, and provision of consulting services to various sectors as described below. Pursuant to a Share Exchange Agreement between the Registrant and Amplerissimo Ltd, a company incorporated in Cyprus and Dimitrios Goulielmos, sole shareholder of Amplerissimo, we acquired 100% of Amplerissimo’s issued and outstanding common stock.
We are currently focusing our existing operations on expanding the business of our new subsidiary, Amperlissimo, and have transitioned to becoming a holding company. In that connection, the Company is currently actively looking for potential acquisition candidates in various industries including but not limited to pharmaceutical industry and related pharmaceutical logistics companies that fill prescriptions, cargo shipping industry, green and Hi-Tech technologies, food industry, and insurance industry. We have identified and had discussions with several potential candidates. Although we have held discussions with several potential acquisition candidates, at this time we have no binding agreement, commitment or obligation to acquire any other company. Currently, Amperlissimo’s principal activities are the trading of products, providing representation, and provision of consulting services to various sectors as described in herein. In the interim, we plan on continuing to offer the same products and services through Amperlissimo which include: data mining, statistical data analysis, research and analysis, negotiating services, credit risk analysis, credit management, conducting case studies, introduction services, e-commerce consulting, marketing management consulting, expansion strategies consulting, information systems consulting, and business management software consulting. We also intend to add additional services to the ones that we currently offer, including systems integration, accredited partnership services, and installation and resale of third parties systems and software. We intend to accomplish this by new cooperative agreements or acquisition of other existing companies. However, at this time we have no binding agreement, commitment or obligation for any such ventures.
The Company plans to expand its operations to the pharmaceutical sector if and when in the future we have sufficient capital and then we create three wholly-owned subsidiaries that will focus on the wholesale of pharmaceutical products in the European Union countries. On April 30, 2014, we entered into an Exclusive Cooperation Agreement (the “Agreement”) with Grigorios Siokas to assume the position of Manager of Pharmaceutical Division of the Company. This Agreement was filed on Form 8-K on May 1, 2014, and you should refer to this agreement for a full explanation of the terms and conditions of the Agreement. We hope to raise capital in the forms of debt and equity financing to begin our operations in the pharmaceutical sector. As of the date of the filing of this report we have not created any of the subsidiaries that will focus on the wholesale of the pharmaceutical products and have not raised any capital and otherwise do not have the capital resources necessary to commence this line of business. There can be no assurance that we will ever raise the required capital; and even if we do, there is no assurance that we will ever commence or successfully develop this line of business, notwithstanding the Agreement.
Emerging Growth Company
We are an “emerging growth company” (“EGC”) that is exempt from certain financial disclosure and governance requirements for up to five years as defined in the Jumpstart Our Business Startups Act (“the JOBS Act”), that eases restrictions on the sale of securities; and increases the number of shareholders a company must have before becoming subject to the U.S. Securities and Exchange Commission’s (SEC’s) reporting and disclosure rules (See “Emerging Growth Companies” section above). We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
Results of Operations
Quarter ended March 31, 2014 versus 2013
We had only de minimus costs during quarter ended March 31, 2013. During the quarter ended March 31, 2013, the company had expenses of $0 in both revenue and expenses. Since then, the Company has undertaken several engagements in our operating subsidiary in Cyprus, Amplerissimo. For the quarter ended March 31, 2014, we had revenues of $781,056. For the three months ended March 31, 2014, we had direct costs of $0 associated with our projects, and general and administrative costs of $73,173, for a net operating income of $707,883. We had interest expense of $2,441, all of which is related.
Additionally, we had unrealized foreign currency losses of $56,224 for the twelve months ended March 31, 2014 such that our net comprehensive income for the period was $557,992.
Plan of Operation in the Next Twelve Months
Specifically, our plan of operations for the next 12 months is as follows:
We plan on continuing to offer the same products and services through Amperlissimo which include: data mining, statistical data analysis, research and analysis, negotiating services, credit risk analysis, credit management, conducting case studies, introduction services, e-commerce consulting, marketing management consulting, expansion strategies consulting, information systems consulting, and business management software consulting. We also intend to add additional services to the ones that we currently offer, including systems integration, accredited partnership services, and installation and resale of third parties systems and software. We intend to accomplish this by new cooperative agreements or acquisition of other existing companies. We anticipate that we will spend approximately $15,000 to evaluate the different methods of adding services. This cost is made of up primarily legal, planning and structuring, and accounting due diligence. We currently have no binding agreements, commitments or contracts for new cooperative agreements or acquisition of other existing companies.
In addition to adding services we also plan to evaluate offering our services to different geographical markets. We currently have focused our services to our customers throughout Europe. We plan on expanding our geographical reach to: United Arab Emirates, Jordan, Malta, Lebanon, Algeria, and Saudi Arabia. Some of the methods we will use to accomplish this are: marketing our services through the internet to new geographic areas, creating strategic relationships with companies in the new geographical regions, and possibly acquiring companies that operate in different geographical regions. We anticipate that we will spend $15,000 evaluating the different methods and regions we plan on expanding too. This cost is made of up primarily legal, planning and structuring, and accounting due diligence. We currently have no binding agreements, commitments or contracts in any different geographical markets including United Arab Emirates, Jordan, Malta, Lebanon, Algeria, and Saudi Arabia.
As to potential acquisitions, SEC filing requirement are such that we will have to file audited financial statements of all our operations, including any acquired business. So we plan that our first step in any potential acquisition process we undertake is to ascertain whether we can obtain audited financials of a company if we were to acquire them. We anticipate that we will spend approximately $30,000 to locate, conduct due diligence, and evaluate possible acquisitions. As noted above, as of the date of this report, we do not have any binding agreements, commitments, or understandings with any potential acquisition candidates.
We plan to continue our efforts to collect our accounts receivables from our customers. As of April 9, 2014, our accounts receivable were €5,177,947 or approximately $7,094,823.
Significant Equipment
We do not intend to purchase any significant equipment for the next twelve months.
Employees
We do not have plans to change the number of our employees during the next twelve months.
Liquidity and Capital Resources
As of March 31, 2014, we had $984,789 of cash and a working capital of $506,749.
We believe that our current cash in our bank account as of March 31, 2014 will satisfy our estimated operating cash requirements only until the end of December 2014. All our costs, which we anticipate that we will incur in the next 12 months irrespective of business development activities, including costs associated with meeting SEC requirements for staying public, are estimated to be less than $300,000 annually.
We have salaries payable, resulting from accrued but unpaid compensation, due to Messrs. Mavrogiannis and Drakopoulos in the amounts totaling $76,592 and $102,500 respectively. We also have $165,000 liability resulting from costs accrued by an agreement with Green Era Ltd. in which our previous CEO and director Mr. Panagiotis Drakopoulos is a shareholder in.
As of the date of this filing we have issued invoices to our clients for the total amount of €5,747,947 or $7,875,837. Through March 31, 2014, we collected €570,000 on those invoices, or about $781,000. Totals amounts billed for which revenue recognition has yet to be realized as of March 31, 2014 totaled $7,094,823 (€5,177,947). Based upon our agreements with our clients who owe us the total of $7,094,823 these uncollected, payments were due on Jan. 31, 2014. Further, it is important to note that none of the amounts billed that have not been collected are accounted for as revenue or accounts receivable on the financial statements included with this Form 10-Q. The reason for this is US GAAP, under which we are required to prepare our financial statements, provides that we have reasonable assurance of collectability before recording our amounts billed as accounts receivable and subsequently revenue. At the present time we do not have reasonable assurance that we will in fact collect such amounts, given our limited history with these customers, and as such under GAAP we are not recognizing the amounts as revenue. At the present time we do not have reasonable assurance and we choose not to recognize the billed and unpaid amounts set forth above.
The expenses described above are anticipated to be funded from cash generated from the operations of the Company including collection of receivables, from debt or equity financing, or from a loan from management, to the extent that funds are available to do so. Management is not obligated to provide these or any other funds. Except for amounts due under our issued invoices to our clients for the total amount of approximately $7,094,823 all of which are overdue, we have no agreement to secure additional debt or equity funds from any source. Accordingly, we do not have sufficient funds to cover our anticipated operational expenses, as described above, let alone fund any of our expansion plans, for the entire next 12 months. If we don’t have sufficient funds to meet our SEC filing requirements, we may lose the qualification for quotation and our securities would no longer trade on the over the counter markets. Further, as a consequence we would fail to satisfy our SEC reporting obligations, and investors would then own stock in a company that does not provide the disclosure available in quarterly and annual reports filed with the SEC and investors may have increased difficulty in selling their stock as we will be non-reporting. If we do not collect the remainder of these invoiced amounts and do not generate future cash flow or raise additional funds from debt or equity financing, we may have to cease operations and investors could lose their entire investment. This could be in part because without sufficient funds, we may have to cease doing business altogether sometime during the next 12 months if we do not have sufficient funds to meet our anticipated operating costs for the next 12 months, which as noted above, is the case as of the date of this filing.
Revenue Recognition
We consider revenue recognizable when persuasive evidence of an arrangement exists, the price is fixed or determinable, goods or services have been delivered, and collectability is reasonably assured. These criteria are assumed to have been met if a customer orders an item, the goods or services have been shipped or delivered to the customer, and we have sufficient evidence of collectability, such a payment history with the customer. Revenue that is billed and received in advance such as recurring weekly or monthly services are initially deferred and recognized as revenue over the period the services are provided.
Our records with our two customers to date have not been sufficient to satisfy all of the four requirements. The company has successfully worked with its customers to obtain the necessary documents to satisfy the first three criteria for all transactions including: price to our customer being fixed or determinable, persuasive evidence of an arrangement exists between us and our customer, delivery has occurred or services have been rendered. However because the customers that we provide services to are relatively new we have not met the collection criteria for transactions we have not yet collected cash on. Totals billed for which revenue recognition has yet to be realized totaled $7,094,823 (€5,177,947).The reason for this is US GAAP, under which we are required to prepare our financial statements, provides that we have reasonable assurance of collectability before recording our amounts billed as accounts receivable and subsequently revenue. At the present time we do not have reasonable assurance and we choose not to recognize the billed amounts as revenues.
Off Balance Sheet Arrangements
As of March 31, 2014, there were no off balance sheet arrangements.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Foreign Currency. The Company requires translation of the Amplerissimo financial statements from euros to dollars since the reverse take-over on September 27, 2013. Assets and liabilities of all foreign operations are translated at year-end rates of exchange, and the statements of operations are translated at the average rates of exchange for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholders’ equity until the entity is sold or substantially liquidated. Gains or losses from foreign currency transactions (transactions denominated in a currency other than the entity’s local currency) are included in net (loss) earnings.
Income Taxes. The Company provides for income taxes in accordance with ASC Topic 740 (ASC 740). Income taxes are accounted for under the asset and liability method with deferred tax assets and liabilities recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be reversed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance for the amounts of any tax benefits which, more likely than not, will not be realized.
The Company is liable for income taxes in the Republic of Cyprus. The statutory corporate income tax rate in Cyprus is 12.5% and tax losses are carried forward indefinitely subject to certain rules regarding change of ownership of a company. Therefore, we have calculated potential benefits of income tax losses, subject to the restrictions below.
Future tax benefits of net operating loss carryforwards generated in the U.S. by the parent company represent the primary component of the Company’s deferred tax assets. Under ASC 740 “Accounting for Income Taxes”, the Company evaluates at every reporting period whether the benefit of such losses will more likely than not be realized. Based on the Company’s history of taxable losses in the US and the potential annual limitation on future utilization if it is determined that a change in ownership as defined in IRC 382 has occurred, the Company has determined that it is not more likely than not that the tax benefit of such losses will be realized prior to their expiration and thus has recorded a full valuation allowance against their net deferred tax assets.
Recently Issued Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:
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Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and
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Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.
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The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.
In July 2013, the FASB issued ASU 201311, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry-forward, a Similar Tax Loss, or a Tax Credit Carry-forward Exists (a consensus of the FASB Emerging Issues Task Force) . As a result of applying this ASU, an unrecognized tax benefit should be presented as a reduction of a deferred tax asset for a net operating loss (NOL) or other tax credit carry-forward when settlement in this manner is available under the tax law. The assessment of whether settlement is available under the tax law would be based on facts and circumstances as of the balance sheet reporting date and would not consider future events (e.g., upcoming expiration of related NOL carry-forwards). This classification should not affect an entity’s analysis of the realization of its deferred tax assets. Gross presentation in the rollforward of unrecognized tax positions in the notes to the financial statements would still be required. However, since the Internal Revenue Code Section 382 limits the amount of net operating loss carry-forwards that can be utilized upon a change in control, we have eliminated the deferred tax asset and related valuation allowance. Therefore, the adoption of ASU 2013 11 is not expected to have a material impact on our financial position or results of operations.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Not applicable.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer/Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
The Company’s management, with the participation of the Company’s Chief Executive Officer/Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer/Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective.
Changes in Internal Control over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Securities Exchange Act) during the fiscal quarter ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
We have continued to implement the controls and procedures concerning revenue recognition as described in previous SEC filings.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Unregistered Sales of Equity Securities.
None in the quarter ended March 31, 2014
The Registrant did not sell any registered securities during the three months ended March 31, 2014.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
None.
Item 6. Exhibits.
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Exhibit No.
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Document Description
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31.1
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Certification of CEO/CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1*
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Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
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Exhibit 101
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Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.**
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101.INS
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XBRL Instance Document**
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101.SCH
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XBRL Taxonomy Extension Schema Document**
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document**
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document**
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document**
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document**
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* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Cosmos Holdings Inc.
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Date: May 20, 2014
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By:
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/s/ Dimitrios Goulielmos
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Dimitrios Goulielmos
Principal Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Date: May 20, 2014
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By:
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/s/ Dimitrios Goulielmos
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Dimitrios Goulielmos
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Principal Executive Officer, Acting Principal Financial Officer and Acting Principal Accounting Officer and Director
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EXHIBIT INDEX
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Exhibit No.
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Document Description
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31.1
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Certification of CEO/CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1*
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Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
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Exhibit 101
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Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.**
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| 101.INS |
XBRL Instance Document**
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101.SCH
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XBRL Taxonomy Extension Schema Document**
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document**
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document**
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document**
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document**
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* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.