UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from __________ to __________
Commission file number: 000-54436
| COSMOS HOLDINGS INC. |
| (Exact name of registrant as specified in its charter) |
| Nevada |
| 27-0611758 |
| (State or other jurisdiction of Company or organization) |
| (I.R.S. Employer Identification No.) |
|
| ||
| 141 West Jackson Blvd, Suite 4236, Chicago, IL. |
| 60604 |
| (Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number: (312) 536-3102
Securities registered under Section 12(b) of the Exchange Act:
| Title of each class |
| Name of each exchange on which registered |
| None |
| not applicable |
Securities registered under Section 12(g) of the Exchange Act:
| Title of each class |
| Name of each exchange on which registered |
| Common Stock, par value $0.001 |
| not applicable |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
| (Do not check if a smaller reporting company) | Emerging growth company | ☐ | |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter $12,946,815 as of June 30, 2020.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 16,066,962 as of April 15, 2021.
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FORWARD-LOOKING STATEMENTS
Statements contained or incorporated by reference in this document contain information that includes or is based on “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, of the Exchange Act. These statements, including estimates of future revenues, future expenses, future net income and future net income per share, contained in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is included in this document, are subject to risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed results of operations. We have tried, whenever possible, to identify such statements by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plan,” “projected,” “forecast,” “will,” “may” or similar expressions.
We have based these forward-looking statements on our current expectations and projections about the growth of our business, our financial performance and the development of our industry. Because these statements reflect our current views concerning future events, these forward-looking statements involve risks and uncertainties. Investors should note that many factors, could affect our future financial results and could cause our actual results to differ materially from those expressed in forward-looking statements contained or incorporated by reference in this document.
We do not undertake any obligation to update our forward-looking statements after the date of this document for any reason, even if new information becomes available or other events occur in the future, except as may be required under applicable securities law. You are advised to consult any further disclosures we make on related subjects in our reports filed with the Securities and Exchange Commission (SEC).
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Company Overview
Cosmos Holdings Inc. (“us”, “we”, or the “Company”) is a multinational pharmaceutical company. The Company imports, exports and distributes pharmaceutical products of brand-name and generic pharmaceuticals, over-the-counter (OTC) medicines, and a variety of dietary and vitamin supplements through its established network. Currently, the Company operates its business through its three wholly-owned subsidiaries: (i) SkyPharm, headquartered in Thessaloniki, Greece; (ii) Decahedron Ltd., head-quartered in Harlow, United Kingdom; and (iii) Cosmofarm, headquartered in Athens, Greece. Cosmofarm was acquired in 2018 and we expect this expansion has increased our sales and profit margins as we vertically integrate our business model. The Company also has an extensive and established distribution direct and indirect network within the European Union (EU).
The Company’s cross-border pharmaceutical business serves wholesale pharmaceutical distributors and independent retail pharmacies across the EU through a network of three strategic distribution centers, as well as an additional warehousing facility. Pharmaceutical manufacturers generally implement variable pricing strategies within the EU market. Identifying and evaluating price spreads between EU member states enables the Company to source brand-name pharmaceuticals from countries where ex-factory prices are comparatively low and export to countries where the same products are priced higher. The Company focuses on leveraging its growing purchasing scale and supplier relationships to secure discounts and provide pharmaceuticals at reduced prices and on continuing to drive organic growth at attractive margins for its cross-border pharmaceutical wholesale business.
The Company’s focus is primarily on branded pharmaceutical and some generic pharmaceuticals. The Company has also begun to expand into the nutraceutical segment and has already launched its own line of vitamins and food supplement products. Through the sale of pharmaceutical products, the Company has created a wide network of pharmaceutical wholesalers and pharmacies that we believe we can utilize to promote and sell our proprietary nutraceutical brand. There is growing demand for various food supplements. We serve this demand by offering quality products to our existing network of wholesalers and pharmacies. Pharmacies are still the key channels for distribution and sales of food supplements in the European market.
The Company regularly evaluates and undertakes strategic initiatives to expand its distribution reach, improve its profit margins, and strengthen its competitive position. In 2018, the Company entered the vitamins and dietary supplements segment and in the fourth quarter of 2018, the Company posted the first sales of its own brand of nutraceuticals: Sky Premium Life. Through the December 2018 acquisition of Cosmofarm, the Company entered the full-line pharmaceutical wholesale distribution segment. Cosmofarm now serves approximately 1500 independent retail pharmacies and 40 pharmaceutical wholesalers in the greater Athens, Greece region by providing brand-name and generic pharmaceuticals, over-the-counter medicines, vitamins, and dietary supplements.
Concerning our vitamins and food supplement division, we have expanded our business in developing our own brand of vitamins and food supplements. The brand name of our product line is Sky Life Premium. We have a contract with Doc Pharma S.A. to develop and manufacture the products according to our specifications. Doc Pharma S.A is considered a related party to the Company due to the fact that the Chief Executive Officer (“CEO”) of Doc Pharma is the wife of Grigorios Siokas, the Company’s CEO and principal shareholder, who also served as a principal of Doc Pharma SA in the past. Sales of our own brand of nutraceuticals began in the fourth quarter of 2018. Our current business has provided us with access to wholesalers both from the sourcing and the sales division of our wholesale business. We sell our products to vendors that supply us with pharmaceutical products as well as to our clients to whom we currently sell pharmaceutical products.
We are also closely monitoring the legal framework for prescription and non-prescription derivatives of cannabis products as it develops in Europe. As the legal framework and processes are developed and implemented in each respective EU country, we will utilize our existing network to distribute both prescription and non-prescription derivatives of cannabis products to our current customer base. We currently intend to only distribute prescription and non-prescription derivates of cannabis products to approved EU countries and not in the US. The Company intends to await further clarification from the U.S. Government on cannabis regulation prior to determining whether to enter the domestic market.
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We regularly evaluate acquisition targets that would allow us to expand our distribution reach and/or vertically integrate into the supply chain of pharmaceutical products that we currently distribute. We believe that the demand for reasonably-priced medicines, delivered on time and in the highest quality is set to increase in the years to come, as the population’s life expectancy increases. With our product portfolio of patented and non-patented medicines, we contribute to the optimization of efficient medicinal care, and thereby lowering cost for health insurance funds, companies, and patients. We also believe that the demand for non-prescription wellness products such as food and dietary supplements will continue to increase as individuals are increasingly supplementing their nutritional intake.
We believe the EU pharmaceutical import/export market will continue to grow. We continue to encounter competition in the market as we grow. The competition comes in the form of level of service, reliability, and product quality. On the procurement side we continue to expand our vendor base. In order to minimize business risks, we diversify our sources of supply. We maintain our high-quality standards by carefully selecting and qualifying our suppliers as well as actively ensuring that our suppliers meet our standard of quality control on an ongoing basis.
As of July 22, 2015, the Hellenic Ministry of Health and more specifically the National Organization for Medicines granted to SkyPharm a license for the wholesale of pharmaceutical products for human use. The license is valid for a period of five years and pursuant to the EU directive of (2013/C343/02). SkyPharm is subject to the Guidelines of the Good Distribution Practices of the European Union (the “Good Distribution Practices”) for the sale and distribution of medical products for human use. SkyPharm believes it has properly incorporated all the methodologies, procedures, processes and resources in order to be in accordance with the guidelines of the Good Distribution Practices. Our warehouse has been equipped with the proper equipment, specifically with the proper shelves, working tables, medicines, cold fridge and barcode machines to comply with all requirements. The Company commenced sales of pharmaceutical products in the beginning of November 2015.
Decahedron received its Wholesale Distribution Authorization for human use on November 7, 2013, from the UK Medicines and Healthcare Products Regulatory Agency (MHRA) in accordance with Regulation 18 of the Human Medicines Regulations 2012 (SI 2012/1916) and it is subject to the provision of those Regulations and the Medicines Act 1971. This license will continue to remain in force from the date of issue by the Licensing Authority unless cancelled, suspended, revoked or varied as to the period of its validity or relinquished by the authorization holder.
Business Environment
The Company conducts its business within the pharmaceutical industry and is active in both branded and generic pharmaceutical product markets. The pharmaceutical industry is highly competitive and is subject to comprehensive government regulations. Many factors may significantly affect the Company’s sales of its products, including, but not limited to, efficacy, safety, price and cost-effectiveness, marketing effectiveness, product labeling, quality control and quality assurance. Currently, most of the products that the Company is trading, compete with other products already on the market in the same therapeutic category, and are subject to potential competition from new products that competitors may introduce in the future.
Generic medicines are the pharmaceutical and therapeutic equivalents of branded pharmaceutical products and are generally marketed under their generic (chemical) names rather than by brand names. Typically, a generic drug may not be marketed until the expiration of applicable patent(s) on the corresponding branded product, unless a resolution of patent litigation results in an earlier opportunity to enter the market. Generic drugs are the same as branded products in dosage form, safety, efficacy, route of administration, quality, performance characteristics and intended use, but they are sold generally at prices below those of the corresponding branded products. Generic drugs provide a cost-effective alternative for consumers, while maintaining the same high quality, efficacy, safety profile, purity and stability of the branded product.
The Company started operating within the Health Products & Food Supplements industry markets in 2018. These specific industries are highly competitive, and many factors may significantly affect the Company’s sales of its products, including, but not limited to, price and cost-effectiveness, marketing effectiveness, product labeling, quality control and quality assurance. Currently, the Company has added vitamins and food supplements into the portfolio of products that it wholesales to its clients. The Company has also developed and is selling its own brand of food supplements under the brand name Sky Life Premium.
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Corporate Strategy
The main strategy initiative is focused on continuing our progress in becoming a global pharmaceutical wholesale and import/export company through the development of a lean and efficient operating model. We are committed to serving our customers while continuing to innovate and provide products that make a difference in the lives of individuals. We strive to maximize our shareholders’ value by adapting to market realities and customer needs. Our strategy involves building a multinational network or wholesalers, distributors, and pharmacies and simultaneously continuing to expand the portfolio of products that we distribute to that network.
We are committed to driving organic growth at attractive margins by improving execution, optimizing cash flow and leveraging our strong market position, while maintaining a streamlined cost structure throughout each of our businesses. We continue to further align our organization to our customers’ needs in a more seamless and unified way, while supporting corporate strategy and accelerating growth. Implementing this disciplined, focused strategy has allowed us to significantly expand our business, and we believe we are well-positioned to grow revenue and increase operating income through the execution of the following key elements of our business:
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| · | Optimize and Grow Our Pharmaceutical Sourcing and Distribution Businesses. We believe we are well-positioned in size and market breadth to continue to grow our trading businesses of pharmaceutical products as we invest to improve our operating and capital efficiencies through further automated systems. Sourcing and distribution, including specialty pharmaceuticals, anchors our growth and position in the pharmaceutical supply channel as we provide superior services and deliver value-added products, which improve the efficiency and competitiveness of healthcare providers, thus allowing the pharmaceutical supply channel to better deliver healthcare to patients. |
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| · | Product Expansion of Branded Pharmaceuticals: Branded pharmaceutical products are the primary product category that we distribute, import and export. We constantly evaluate product availability, pricing, demand trends, and patent expirations to maximize our performance. As the patents for branded products near expiration, the generic equivalents enter the marketplace and the demand for those branded products start to decrease. We monitor these cycles closely and always look to find value in pricing fluctuations caused by the patent expirations as the generic equivalents enter the market. | |
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| · | Geographic Expansion of Generic Pharmaceuticals: Generic pharmaceutical products are the secondary product category that we import and export. We apply the same discipline to generics that we do to the branded. We evaluate the demand and supply dynamics of branded products as their patents expire. This insight sheds light on the demand for generic products that take their place. Understanding the historical and market specific characteristics of generic product demand provides insight that we use to give guidance to our vendors that source our generic drug exports. | |
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| · | Nutraceutical & Health Products: The industry of nutraceuticals is a highly promising market that offers high margins. We are always looking to expand the portfolio of products along with an increase of point of sales coverage level. We also convenience our customers by providing them a larger portfolio of products that they can source from a single vendor. In addition to being wholesalers for food supplements and related products we also created our own brand of products to sell to our current customer base. Our wholesale business gives insight to what products are in demand and we communicate with our customer base to identify which products to develop. Sales of our own brand of nutraceuticals began in the fourth quarter of 2018. Our own branded nutraceuticals carry significantly higher margins than simply serving as a wholesaler for other brands. |
| · | Research & Development: We are committed to strategic R&D across each business unit with a particular focus for food supplements with inherently lower risk profiles and clearly defined regulatory pathways. We are constantly evaluating the demand for food supplements in the markets that we currently distribute pharmaceutical products to. This research and analysis determine which food and nutritional supplements we choose to develop as well as their formulations. This approach maximizes the probability of successfully competing with other brands in the marketplace. | |
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| · | Acquisitions: We regularly evaluate acquisition targets that would allow us to expand our distribution reach and/or vertically integrate into the supply chain of the products that we currently distribute. In addition to focusing on organic growth drivers, we are also actively pursuing accretive acquisitions that offer long-term revenue growth, margin expansion through synergies, and the ability to maintain a flexible capital structure. | |
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| · | Cannabis derived products: We closely monitor the legal framework for prescription and non-prescription derivatives of cannabis products as it develops in Europe. As the legal framework and processes are developed and implemented in each respective EU country, we intend to utilize our existing network to distribute both prescription and non-prescription derivatives of cannabis products to our current customer base. We currently intend to only distribute prescription and non-prescription derivatives of cannabis products to approved EU countries and not in the US. | |
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| · | Clientele Expansion of Direct to Pharmacy Wholesale Network: We are expanding into the full-line wholesale distribution business through acquisition. Full-line pharmaceutical wholesalers provide the local markets with branded pharmaceuticals, generic pharmaceuticals, over-the-counter (OTC) medicines, vitamins and food supplements. By expanding our pharmaceutical distribution business, we expect to have a better ability to source more branded and generic products directly from manufacturers and sell our vitamins, food supplements and cosmetic products directly to pharmacies for better prices. We expect this expansion to increase our sales and profit margins as we vertically integrate into the supply chain. |
To successfully execute our corporate strategy, we believe that the Company must adopt, incorporate and maintain the aforementioned core strengths, although no assurances can be made that the Company will be able to effectively implement these strategies.
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Sales and Marketing
The majority of our products are represented directly and indirectly through a dedicated sales force team. Our sales force targets mainly wholesale distributors and other healthcare providers. We sell our products principally through independent wholesale distributors, but we also sell directly to other healthcare providers such as; clinics, government agencies, independent retail and specialty pharmacies and independent specialty distributors. Customer service representatives are centralized in order to respond to customer needs in a timely and effective manner.
Products & Services
Products
The current principal activity of SkyPharm is the creation, development and trading of its own proprietary branded nutraceutical products line “Sky Premium Life”. The Company’s portfolio currently includes 70 product codes including vitamins, minerals and other herbal extracts. The Company’s expectation is to reach 150 product codes by end of 2021.The principal activity of Decahedron is the trading of branded and generic pharmaceutical products and medicines across mainly the European Union member states. Decahedron buys from pharmacies and other wholesale pharmaceutical companies and resells these products mainly to other EU countries. We purchase excess inventories at a discount from wholesalers and export approximately 11,000 pharmaceutical product codes to EU member states capturing contract price differentials in the process. The Company only purchases stock with purchase orders at hand, limiting inventory risk. EU countries have put into force new legal frameworks and mandates that boost the parallel trade market in order to deflate healthcare pricing across the region.
Services
The principal activity of Cosmofarm is the distribution of a full range of branded pharmaceutical products, over-the-counter products, cosmetics, nursery, and dietary products to pharmacies across Greece. Cosmofarm utilizes the latest technology in pharmaceutical storage and retrieval systems to ensure the quality and accuracy of its distribution. Our facility utilizes ROWA (German pharmacy robotics) technologies to automate our procurement, inventory management, and order execution. ROWA boasts a zero-error rate, faster order picking, and automated order picking process. We stay in the forefront of quality assurance and accuracy by investing in the most innovative machinery and software available to pharmaceutical distributors. Our company supports all its customers with special product offerings, seasonal products, and all the top brands and trending products.
We believe that the entire aforementioned product life cycle would take approximately six weeks to two months, from the demand list to the payment for the shipment.
In addition, Cosmofarm distributes to a growing network of over 1,500 pharmacies and 85 wholesalers primarily located in the greater Athens area. Cosmofarm consistently invests in upgrading automation capacity. Cosmofarm operates a fully automated ROWA robotic warehouse system that ensures 0% error selection rate and accelerates the distribution process while ensuring higher cost-efficiency from local competitors.
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Our subsidiaries SkyPharm and Decahedron trade over 400 different types of pharmaceutical products and Cosmofarm trades over 32,000 different types of pharmaceutical products with the principal products being the following:
| Product Description | Percentage of | Treatment |
| Total Current Sales | ||
| BOWA DISPOSABLE SURGICAL MASK TYPE IIR (PACK OF 10) | 3.46% | Protection from viruses |
| SURGICAL MASK 3 PLY | 2.27% | Protection from viruses |
| .DOC ANTISEPTIC 70% 100ml | 2.18% | Protection from viruses |
| DYSPORT PD.INJ.SOL. 1x500U | 1.81% | Musculoskeletal diseases |
| 3-PLY DISPOSABLE MASK | 1.48% | Protection from viruses |
| DISPOSABLE COPPER FACE MASK TYPE IIR | 1.40% | Protection from viruses |
| PREVENAR 13 PFS 0,5ML | 0.99% | Pneumococcal vaccine |
| PROLIA INJ.SOL. PF.SYR 1x60MG | 0.90% | Musculoskeletal diseases |
| ELIQUIS F.C.TABL. 60x5MG | 0.89% | Antithrombotic |
| ELIQUIS F.C.TABL. 60x2,5MG | 0.88% | Antithrombotic |
| MELATONIN SPRAY 12MLX60 DOSES 1MG S | 0.70% | insomnia |
| XARELTO F.C.TABL.28x20MG | 0.67% | Antithrombotic |
| TRULICITY INJ.SOL. 1,5MG BTX2PF PEN | 0.61% | Insulin for diabetes |
| VAXIGRIP TETRA INJ.SUSP.(15+15+15+15)MCG/0,5ML | 0.56% | Flu vaccine |
| .SKY VITAMIN C TABL. 500MG BTx60 | 0.55% | Strengthen immune system |
| BOWA MEDICAL CHILDREN MASK TYPE IIR | 0.49% | Protection from viruses |
| VICTOZA INJ.SOL.PF. PEN 2x3MLx6MG/ML | 0.45% | Insulin for diabetes |
| XARELTO F.C.TABL.28x15MG | 0.42% | Antithrombotic |
| .SKY KING EROS CAPS BTX60 | 0.42% | Erectile Dysfunction |
| XULTOPHY V2 INJ.(100+3,6MG)/ML 3X3 | 0.40% | Insulin for diabetes |
We are formulating a broader and more diversified pharmaceutical product portfolio and a greater selection of targets for potential development. We target products with limited competition for reasons such as trading complexity or the market size, which make our pharmaceutical products a key growth driver of our portfolio and complementary to other product offerings.
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Customers
Through our subsidiaries, SkyPharm and Decahedron, we primarily sell pharmaceutical products directly to a limited number of large wholesale drug distributors who, in turn, supply-sell the products to other wholesalers, hospitals, pharmacies, and governmental agencies across the European Union member states. Total revenues from the customers that accounted for 10% or more of our total consolidated revenues during the years ended December 31, 2020 & 2019 are as follows:
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| 2020 |
|
| 2019 |
| ||
| Medihelm SA |
|
| 14.79 | % |
|
| 3.00 | % |
| Doc Pharma |
|
| 5.06 | % |
|
| 2.00 | % |
| Liafarm |
|
| 3.25 | % |
|
| 5.25 | % |
No other customer generated over 10% of our total revenues.
We have a diverse customer base that includes wholesalers and retail healthcare providers. We make a significant amount of our sales to a relatively small number of pharmaceutical wholesalers. These customers represent an essential part of the distribution chain of our products. Pharmaceutical wholesalers have undergone, and are continuing to undergo, significant consolidation in a worldwide basis. This consolidation resulted in these groups gaining additional purchasing leverage and consequently increasing the product pricing pressures facing our business.
Geographic Markets
All of our revenues are generated from operations in the European Union or otherwise earned outside the U.S. All of our foreign operations are subject to risks inherent in conducting business abroad, including price and currency exchange controls, fluctuations in the relative values of currencies, political and economic instability and restrictive governmental actions including. Our geographical market sales distribution of our total consolidated revenues during the years ended December 31, 2020 and 2019 are as follows:
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|
| 2020 |
|
| 2019 |
| ||
| Greece |
|
| 92.31 | % |
|
| 65.71 | % |
| Germany |
|
| 2.51 | % |
|
| 16.82 | % |
| UK |
|
| 3.34 | % |
|
| 8.22 | % |
| Hungary |
|
| 0.00 | % |
|
| 2.76 | % |
| Netherlands |
|
| 0.34 | % |
|
| 2.13 | % |
| Ireland |
|
| 0.07 | % |
|
| 1.18 | % |
| Libya |
|
| 0.08 | % |
|
| 1.00 | % |
| Poland |
|
| 0.05 | % |
|
| 0.78 | % |
| Italy |
|
| 0.14 | % |
|
| 0.49 | % |
| France |
|
| 0.03 | % |
|
| 0.39 | % |
| Denmark |
|
| 0.97 | % |
|
| 0.25 | % |
| Croatia |
|
| 0.04 | % |
|
| 0.06 | % |
| Turkey |
|
| 0.00 | % |
|
| 0.06 | % |
| Jordan |
|
| 0.05 | % |
|
| 0.05 | % |
| Indonesia |
|
| 0.00 | % |
|
| 0.02 | % |
| Georgia |
|
| 0.00 | % |
|
| 0.01 | % |
| Belgium |
|
| 0.00 | % |
|
| 0.00 | % |
| Cyprus |
|
| 0.07 | % |
|
| 0.00 | % |
| Total |
|
| 100.00 | % |
|
| 100.00 | % |
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We currently sell the products to wholesalers through our own sales force. We do not sell directly to large drug store chains or through distributors in countries where we do not have our own sales staff. As part of our sales marketing and promotion program, we use direct advertising, direct mailings, trading techniques, direct and personal contacts, exhibition of products at medical conventions and sponsor medical education symposia.
Suppliers
We obtain pharmaceuticals and over the counter pharmaceutical products directly from manufacturers and other wholesalers of pharmaceutical products, three of which set forth below are the largest suppliers of our purchases in the fiscal years ended December 31, 2020 and 2019. The loss of a supplier could adversely affect our business if alternate sources of supply are unavailable since we are committed to be the primary source of pharmaceutical products for a majority of our customers. We believe that our relationships with our suppliers are strong. The 4 largest suppliers in fiscal year ended December 31, 2020 accounted for approximately 22.40% of our purchases.
| Supplier |
| 2020 |
|
| 2019 |
| ||
| Doc Pharma S.A |
|
| 10.34 | % |
|
| 5.80 | % |
| Vianex S.A |
|
| 4.71 | % |
|
| 2.77 | % |
| Pfizer Hellas |
|
| 4.19 | % |
|
| 3.13 | % |
| Farmaserv Lilly |
|
| 3.16 | % |
|
| 2.52 | % |
Doc Pharma S.A is considered a related party to the Company due to the fact that the CEO of Doc Pharma is the wife of Grigorios Siokas, the Company’s CEO and principal shareholder, who also served as a principal of Doc Pharma SA in the past.
Competition
Our pharmaceutical businesses are conducted in intensely competitive and often highly regulated markets. Many of our trading of pharmaceutical products face competition in the form of branded or generic drugs that treat similar diseases or indications. The principal forms of competition include efficacy, safety, ease of use, and cost effectiveness. The means of competition vary across product categories and business groups, demonstrating that the value of our trading products is a critical factor for success in all of our principal businesses.
Our competitors include other trading companies, smaller companies, with generic drug and consumer healthcare products. We compete with other companies that manufacture and sell products that treat diseases or indications similar to those treated by our trading pharmaceutical products.
Our competitive position in pharmaceutical sector is affected by several factors, including, among others, the amount and effectiveness of our and our competitors’ promotional resources; customer acceptance; product quality; our and our competitors’ introduction of new products, ingredients, claims, dosage forms, or other forms of innovation; and pricing, regulatory and legislative matters (such as product labeling, patient access and prescription).
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The branded pharmaceutical industry is highly competitive. Our products compete with products manufactured by many other companies in highly competitive markets throughout the EU territory and internationally as well. Competitors include many of the major brand name and generic manufacturers of pharmaceutical products. If competitors introduce new products, delivery systems or processes with therapeutic or cost advantages, our products can be subject to progressive price reductions or decreased volume of sales, or both.
In the generic pharmaceutical market, we might face intense competition from other generic drug manufacturers, brand name pharmaceutical companies, existing brand equivalents and manufacturers of therapeutically similar drugs.
By specializing in high barrier to entry products, we endeavor to market more profitable and longer-lived products relative to commodity generic products. We believe that our competitive advantages include our integrated team-based approach to product development that combines our formulation, regulatory, legal and commercial capabilities; our ability to introduce new generic equivalents for brand-name drugs; our ability to meet customer expectations; and the breadth of our existing generic product portfolio offering.
Newly introduced generic products with limited or no other generic competition typically garner higher prices. At the expiration of the exclusivity period, other generic distributors may enter the market, resulting in a significant price decline for the drug. Consequently, the maintenance of profitable operations in generic pharmaceuticals depends, in part, on our ability to select, develop and launch new generic products in a timely and cost-efficient manner and to maintain efficient, high quality business capabilities.
Operating conditions have become more challenging under the mounting global pressures of competition, industry regulation and cost containment. We continue to take measures to evaluate, adapt and improve our organization and business practices to better meet customer and public needs. We also seek to continually enhance the organizational effectiveness of all of our functions, including efforts to accurately and ethically launch and promote our products.
Information Systems
The Company operates its full-service wholesale pharmaceutical distribution facilities in Europe on one primary enterprise resource planning (“ERP”) system that provides for, among other things, electronic order entry by customers, invoice preparation and purchasing, and inventory tracking. We are currently making significant investments to enhance and upgrade the ERP system.
Additionally, we are improving our entity-wide infrastructure environment to drive efficiency, capabilities, and speed to market. We will continue to invest in advanced information systems and automated warehouse technology. For example, in an effort to comply with future pedigree and other supply chain custody requirements we expect to continue to make significant investments in our secure supply chain information systems.
The Company processes a substantial portion of its purchase orders, invoices, and payments electronically. However, it continues to make substantial investments to expand its electronic interface with its suppliers. The Company has integrated warehouse operating system, which are used to manage the majority of transactional volume. The warehouse operating system has improved the distribution services productivity and operating leverage.
Government Regulations
Government authorities in the EU and in other countries extensively regulate, among other things, the research, development, testing, approval, manufacturing, labeling, post-approval monitoring and reporting, packaging, advertising and promotion, storage, distribution, marketing and export and import of pharmaceutical products. As such, our branded pharmaceutical products and the generic product candidates are subject to extensive regulation both before and after approval. The process of obtaining regulatory approvals and the subsequent compliance with applicable state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with these regulations could result in, among other things, warning letters, civil penalties, delays in approving or refusal to approve a pharmaceutical product.
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Our business is mainly the trading of branded and generic pharmaceutical products and medicines within the EU member states. In order to be able to operate our business, we need to comply with EU regulations, as well as EU member states regulations that govern various operations of our business. The most important government regulation that applies to our business is the granting to our companies SkyPharm and Decahedron of the Authorization for Wholesale Distribution of Medicinal Products for human use. In order for this Authorization to be granted the companies need to always comply with certain Good Distribution Practices (GDP) that mainly assure the proper storage, handling, distribution and trade of the pharmaceutical products.
SkyPharm received its Authorization for the Wholesale Distribution of Medical Products for humans use on July 22, 2015, from the Hellenic Republic National Organization for Medicines in accordance with Law 1316/1983, and the inspection by the National Organization for Medicines dated July 16, 2015 in accordance with the Guidelines 2013/C31/01. The license is valid for five years and expires on July 22, 2020. Pursuant to the EU directive of (2013/C 343/01), the Company is subject to fulfill the Guidelines of the Good Distribution Practices of medical products for human use. The Company submitted its application for renewal one month before the license expiration to the Hellenic Republic National Organization, but according to the EMA (eudragmdp.ema.europa.eu/inspections/view/wda/WDAHomePage.xhtml): “Due to the restrictions caused by COVID-19, the period of validity of MIA’s, WDA’s, GMP and GDP certificates is automatically extended until the end of 2021. On-site inspections will resume as soon as there is a consensus that the period of the public health crisis has passed. The clarifying remark section of individual MIA’s, WDA’s, GMP and GDP certificates will indicate any exceptions. Competent authorities reserve the right to inspect a manufacturing site should the need arise.” Therefore, the Company is eligible to continue its operations until the end of 2021.
Decahedron received its Wholesale Distribution Authorization for human use on November 7, 2013, from the UK Medicines and Healthcare Products Regulatory Agency (MHRA) in accordance with Regulation 18 of the Human Medicines Regulations 2012 (SI 2012/1916) and it is subject to the provisions of those Regulations and the Medicines Act 1971. This License will continue to remain in force from the date of issue by the Licensing Authority unless cancelled, suspended, revoked or varied as to the period of its validity or relinquished by the authorization holder.
Our subsidiary, SkyPharm, is ISO 9001 certified for a management system for the trade and distribution of pharmaceuticals. As part of the certification process by the International Organization for Standardization, we need to be compliant with the General Data Protection Regulation (GDPR) adopted by the European Union in May 2018. GDPR applies to the processing of personal data of persons in the EU by a controller or processor neither of which apply to SkyPharm.
Patents, Trademarks, Licenses and Proprietary Property
We have developed or acquired various proprietary pharmaceutical and nutraceutical products, wholesale licenses, processes, software, and other intellectual property that are used either to facilitate the conduct of our business or that are made available as products or services to customers.
At present, besides the above licenses we do not have any intellectual property or other licenses, including, but not limited to, patents, trademarks, franchises, concessions, and royalty agreements or other proprietary interests.
We rely on confidentiality agreements with our employees, consultants and other parties to protect, among other things, trade secrets and other proprietary technology. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that other third parties will not otherwise gain access to our trade secrets and other intellectual property
International Cannabis Corp. (f/k/a Kaneh Bosm Biotechnology Inc.) - Cannabis
Distribution and Equity Agreement
On March 19, 2018, the Company entered into a Distribution and Equity Acquisition Agreement (the “Distribution and Equity Acquisition Agreement”) with Marathon Global Inc. (“Marathon”), a company incorporated in the Province of Ontario, Canada. Marathon was formed to be a global supplier of Cannabis, cannabidiol (CBD) and/or any Cannabis Extract products, extracts, ancillaries and derivatives (collectively, the “Products”). The Company was appointed the exclusive distributor of the Products initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. The Company has no present intention to distribute any Products under this Agreement in the United States or otherwise participate in cannabis operations in the United States. The Company intends to await further clarification from the U.S. Government on cannabis regulation prior to determining whether to enter the domestic market.
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The Distribution and Equity Acquisition Agreement is to remain in effect indefinitely unless Marathon fails to provide Market Competitive (as defined) product pricing and Marathon has not become profitable within five (5) years of the agreement. The transaction closed on May 22, 2018 after the due diligence period, following which the Company received: (a) a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services; and (b) received cash of CAD $2,000,000, subject to repayment in Common Shares of the Company if it fails to meet certain performance milestones. The Company is entitled to receive an additional CAD $2,750,000 upon the Company’s receipt of gross sales of CAD $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000. The Company was also given the right to nominate one director to the Marathon board of directors.
Share Exchange Agreements
On May 17, 2018, the Company entered into a Share Exchange Agreement with Marathon, Kaneh Bosm Biotechnology Inc. (n/k/a International Cannabis Corp. (OTC: KNHBF)) and certain other sellers of Marathon capital stock. Under the Share Exchange Agreement, the Company agreed to transfer 2.5 million shares in Marathon to KBB, a Company incorporated under the laws of the Province of British Columbia and a public reporting issuer on the Canadian Securities Exchange, in exchange for 5 million shares of KBB. On July 16, 2018, the Company completed a new Share Exchange Agreement (the “New SEA”) by and among Marathon, KBB, and certain other sellers of Marathon capital stock. Pursuant to the terms of the New SEA, the Company transferred its remaining one-half interest (2.5 million shares) in Marathon to KBB. The Company received an additional five million shares of KBB. Completion of the New SEA by the Company was subject to satisfaction of various conditions precedent all of which were satisfied. The ten million shares of KBB owned by the Company constituted approximately 7% of the 141,219,108 shares of capital stock of KBB then issued and outstanding. The Company does not have the ability to exercise significant influence over KBB.
Employees
As of December 31, 2020, our subsidiaries in Greece had 85 full-time employees in total, of which 14 engaged in the sales department, 2 in exports, 3 in the procurement department, 1 in the marketing department, 21 in warehouse services 12 in logistics/transportation works, 2 in quality assurance, 6 in finance & accounting department, 4 in management, 3 in cleaning, 3 in administration, 10 in the call center, 2 in B2B e-shop and 2 in the IT department. Our employees are not members of any unions. We consider our relations with our employees to be good and have not experienced any work stoppages, slowdowns or other serious labor problems that have materially impeded our business operations.
As of December 31, 2020, Decahedron had three full-time employees, 1 in management, 1 in quality assurance and 1 in the warehouse and the parent company has 1 employee in administration.
We have a team with a significant track record in the pharmaceutical business. In order to achieve our strategic objectives, we have, and will remain, focused on hiring and retaining a highly skilled management team that has extensive experience and specific skill sets relating to the sales, selection, development and commercialization of pharmaceutical products. We intend to continue our efforts to build and expand this team as we grow our business. No assurances can be given that the Company will be able to retain any additional persons.
Product Insurance
We have insurance in place for our warehouses and the products in stock against any damage or theft, but we do not insure our products after the sale, since we are working under an Ex-works policy, and thus our clients are responsible for the transportation and the insurance of the products against any damage. In the future, we will continue to reevaluate our decision and may purchase product liability insurance to cover some of or all of our product liability risk.
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Research and Development Expenditures
The Company entered into a Research & Development agreement with Doc Pharma S.A. Doc Pharma S.A is considered a related party to the Company due to the fact that the CEO of Doc Pharma is the wife of Grigorios Siokas, the Company’s CEO and principal shareholder, who also served as a principal of Doc Pharma SA in the past. Doc Pharma is a pharmaceutical manufacturer with production facilities in Athens, Greece, certified under Good Manufacturer Practices (GMP). The agreement outlines the development and contract manufacturing of Cosmos Holdings’ complete line of Nutraceutical Products. Under the agreement, Doc Pharma S.A. will provide its services to research, develop formulation, complete product registration, design product packaging, and provide market-ready products. The first sales of our own brand of nutraceuticals were posted in the fourth quarter of 2018.
Subsidiaries
As of year-end, the Company’s subsidiaries were SkyPharm S.A. based in Greece, Cosmofarm Ltd based in Greece, and Decahedron Ltd based in the United Kingdom.
Available Information
Our internet address is http://www.cosmoshold.com. We post links on our website to the following filings as soon as reasonably practicable after they are electronically filed or furnished to the SEC: annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendment to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. All such filings are available through our website free of charge. The information on our Internet website is not incorporated by reference into this Form 10-K or our other securities filings and is not a part of such filings
Information about the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330 or 1-202-551-8090. You can also access our filings through the SEC’s internet address site: www.sec.gov, under our OTCQX ticker COSM.
The Company is not required to provide the information called for in this item due to its status as a Smaller Reporting Company.
Item 1B. Unresolved Staff Comments
Not applicable.
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The Company rents four corporate offices:
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| · | US Office corporate office is located at 141 W. Jackson Blvd, Suite 4236, Chicago, Illinois 60604. Beginning in January 2015, the monthly rent expense is $709, which was paid through December 31, 2017. The lease expired as of May 31, 2019, however, the Company entered into a two-year amendment to that lease that commenced as of June 1, 2019 through May 31, 2021. The monthly rate from June 1, 2019 through May 31, 2020 was $709 per month and increased to $730 per month from June 1, 2020 through May 31, 2021. |
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| · | The Greece office of SkyPharm is located at 5, Agiou Georgiou Street, 57001, Pylaia, Thessaloniki, Greece. The Company has renewed the lease for a three-year period which commenced on September 1, 2020 at the rate of €6,950 (approximately $7,930) per month. |
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| · | The offices of Decahedron are located at Unit 14 Spice Green Centre, Flex Meadow, Harlow, CM19, 5TR, Essex, U.K. for which we pay approximately ₤1,908 ($2,430) per month, under a one-year amendment to a lease dated October 25, 2011, which commenced on October 25, 2016 and expires on October 24,2021. The Company leased one more property for five -years, located at Unit 14 Spice Green Centre, Flex Meadow, Harlow, CM19 5TR, Essex, U.K.The commencement of the lease was on September 25, 2020 at the rate of 3,500GBP ($4,730) per month. |
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| · | As of March 31, 2019, the offices of Cosmofarm were located at Gonata Stylianou 15, Peristeri, Attiki, Greece 12133. The Company has a ten-year lease which commenced on July 18, 2018, at the rate of €3,333 ($3,809), subject to a grace period until September 30, 2018. Rent expense did not accrue from July 18, 2018, to September 30, 2018. The Company rents additional square footage at Missonos 15-17, Neos Kosmos, Athens, Attiki, Greece, 11743. The Company has a three-year lease which commenced on May 1, 2017, at a rate of €400 ($457) per month. The Company renewed its lease for three years commencing February 1, 2021 at a rate of €400 ($457) per month. |
Each of the above facilities is adequate for the Company’s current needs.
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 4. Mine Safety Disclosures
None
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Market Information
Our common stock has been quoted through various over-the-counter systems at various times since 2009. Our common stock is currently quoted on the OTC QX under the symbol “COSM,” but there is a limited public trading market for our common stock. The liquidity of our shares on the OTC QX is limited and prices quoted may not be a reliable indication of the value of our common stock. The quotations do not reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
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Holders of Our Common Stock
As of December 31, 2020, we had 13,225,387 shares of our common stock issued and 12,860,059 shares outstanding, held by approximately 176 stockholders of record. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.
Dividends
We have not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. We intend to retain future earnings, if any, to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Our future payment of dividends will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors that our board of directors may deem relevant. Our accumulated deficit currently limits our ability to pay dividends.
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Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock should our stock ever be traded on a public market. Therefore, stockholders may have difficulty selling our securities.
Securities Authorized for Issuance under Equity Compensation Plans
We do not have any equity compensation plans.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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.
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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.
Presentation of Information
As used in this prospectus, the terms “we,” “us” “our” and the “Company” mean Cosmos Holdings Inc. unless the context requires otherwise. The following discussion and analysis should be read in conjunction with our audited (and unaudited) financial statements and the related notes that appear elsewhere in this prospectus. All dollar amounts in this registration statement refer to U.S. dollars unless otherwise indicated.
Overview
On September 27, 2013, the Company closed a reverse take-over transaction pursuant to which it acquired a private company whose principal activities are the trading of products, providing representation, and provision of consulting services to various industries. Pursuant to a Share Exchange Agreement between the Company and Amplerissimo Ltd. (“Amplerissimo”), a company incorporated in Cyprus, we acquired 100% of Amplerissimo’s issued and outstanding common stock. On November 14, 2013, we changed our name to Cosmos Holdings Inc. and changed our focus and business strategy to the healthcare and pharmaceutical industry.
The Company, through its subsidiaries, is operating within the pharmaceutical industry and in order to compete successfully in the healthcare industry, must demonstrate that its products offer medical benefits as well as cost advantages. Currently, most of the products that the Company is trading, compete with other products already on the market in the same therapeutic category, and are subject to potential competition from new products that competitors may introduce in the future.
We are currently focusing our existing operations on expanding the business of our subsidiaries, SkyPharm (Greece) and Decahedron (UK), in order to become an international pharmaceutical company. The Company’s focus will be on Branded Pharmaceuticals, Over-the-Counter (OTC) medicines, and Generic Pharmaceuticals. The Company also intends to expand into Food Supplements and targets areas where we can build and maintain a strong position. The Company has already created its own line of vitamins and food supplement products under the brand name Sky Life Premium and targets areas where it can build and maintain a strong position. The Company uses a differentiated operating model based on a lean, nimble and decentralized structure, with an emphasis on acquisitions of established companies and our ability to maintain better pharmaceutical assets than others. This operating model and the execution of our corporate strategy are designed to enable the Company to achieve sustainable growth and create added value for our shareholders. In particular, we look to enhance our pharmaceutical and over-the-counter product lines by acquiring or licensing rights to additional products and regularly evaluate selective company acquisition opportunities.
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On November 15, 2017, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors (the “Buyers”) with which it had no prior relationship, pursuant to which the Company issued for a purchase price of $3,000,000, $3,350,000 in aggregate principal amount of Senior Convertible Notes (the “Notes”) to the Buyers, convertible into 670,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) at $5.00 per share and warrants to purchase an aggregate of 536,000 shares of Common Stock exercisable at $7.50 per share (the “Warrants”.)
On August 25, 2017, we received shareholder and board approval for a reverse stock split of our common stock on the basis of issuing one (1) share of common stock in exchange for each ten (10) shares of common stock issued and outstanding. On November 21, 2017, the reverse stock split was made affective by FINRA. On November 21, 2017, the Company effected a one-for-ten (1:10) reverse stock split whereby the Company decreased, by a ratio of one-for-ten (1:10) the number of issued and outstanding shares of Common Stock. Proportionate adjustments for the reverse stock split were made to the Company’s outstanding stock options, and warrants including all share and per-share data, for all amounts and periods presented in the consolidated financial statements. All share and per share date in this Report gave retroactive effect to the reverse stock split unless otherwise noted.
On September 4, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) and completed the financing with two institutional investors who had previously purchased $3,350,000 principal amount of senior convertible notes in November 2017 (the “November Notes”) as amended in February 2018 and September 2018. The Company issued, for a $2,000,000 purchase price, $2,233,333 in aggregate principal amount of Senior Convertible Notes (the “Notes”) convertible into 372,223 shares of Common Stock at $6.00 per share and five-year Warrants to purchase an aggregate of 357,334 shares of common stock exercisable at $7.50 per share. The Company received net proceeds of $1,845,000 after deduction of offering costs. See “Debt Obligations - Senior Convertible Notes” below.
On December 19, 2018, the Company completed the purchase of all capital stock of Cosmofarm Ltd., a pharmaceutical wholesaler based in Athens, Greece. The principal of the selling shareholder is Panagiotis Kozaris, who remained with Cosmofarm as a director and chief operating officer once it became a wholly-owned subsidiary of the Company. Grigorios Siokas, the Company’s CEO, became the new CEO of Cosmofarm. Mr. Kozaris had no prior relationship to the Company other than as an independent shareholder. The purchase price payable is €200,000 evidenced by a promissory note. Closing of the acquisition was subject to satisfactory completion of due diligence, delivery of audited and interim financial statements of Cosmofarm subject to being audited by PCAOB auditors, no material adverse change in the business or financial condition of Cosmofarm, all necessary consents and approvals to complete the acquisition have been obtained and other customary closing conditions.
Cosmofarm’s primary activity as a pharmaceutical wholesaler is the distribution of pharmaceuticals (mainly prescription), OTC products and nutraceuticals to a growing network of over 320 pharmacies and 14 wholesalers primarily located in the greater Athens, Greece region. To boost cost-efficiency and better facilitate its growing operations, the Company t relocated to a larger building in March 2019. Cosmofarm also seeks to expand its current operations automation investments by acquiring fully-integrated order management systems and additional robotic logistics over equipment.
The Effects of COVID-19 on Our 2020 Operations
The World Health Organization (WHO) declared the coronavirus outbreak a pandemic on January 30, 2020. Since the outbreak in China in December 2019, COVID-19 has expanded its impact to Europe, where all of our operations reside as well as our employees, suppliers and customers. To date, our operations have been affected by the following adverse risks:
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Adverse Risks
· Drug shortages due to ban of exports
· Problems/restrictions in supply chain
· Logistics delays
· Restrictions on employees’ ability to work
· Liquidity issues (AR/AP) – payment delays and new government regulations for freezing payment terms
· National or EU long lasting recession
Subsequent to year-end, management has identified opportunities as listed below, that could balance, at least in part, the adverse effects of COVID-19 during the fiscal year-end 2020. However, there can be no assurance that this will occur prior to a vaccine and treatment becoming effective.
Opportunities
· Sales increase of OTC products branded
· Sales increase of food supplements (Vitamin D3, Vitamin C, multivitamins)
· Sales increase of antibacterial products and medicine masks
· Obtain exclusive distribution rights for detection test kits for COVID-19
· Governmental financing incentives related to liquidity
· VAT incentives (in the UK the VAT of imports is waived on medical products)
Management’s Expectations
Management believes that there could be a positive long-term outcome, which could result in an increase in sales of OTC branded products, food supplements, antibacterial products and medical masks. However, there is no guarantee of such results. Therefore, we will increase R&D as we are aiming to innovate and create new products in order to help combat against COVID-19. We have adapted our strategy in response to COVID-19 and will continue to do so, since we are expecting the impact of COVID-19 to continue for the next 18-24 months.
What Effect Will COVID-19 Have on the Company’s Disclosure Controls
Management does not believe COVID-19 will have a significant effect on our disclosure controls as there have been no changes to date. Our operations have continued at a normal pace, at least 90% of our staff continue to work on site and those staff who are working remotely have no impact on our disclosure controls.
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Results of Operations
Year ended December 31, 2020 versus December 31, 2019
For the year ended December 31, 2020, the Company had net income of $820,786 on revenue of $55,406,337, versus a net loss of $3,298,965 on revenue of $39,676,385, for the year ended December 31, 2019.
Revenue
Revenue during the Company’s twelve-month period ended December 31, 2020, increased by 40% as compared to revenues in the period ended December 31, 2019. This increase is mainly because of the increase of sales and by expanding the portfolio of our own branded products Sky Life Premium, which continued the expansion of point sales even more aggressively during the year ended December 31, 2020.
Our future revenue growth will continue to be affected by various factors such as industry growth trends, including drug utilization, the introduction of new innovative brand therapies, the likely increase in the number of generic drugs that will be available over the next few years as a result of the expiration of certain drug patents held by brand-name pharmaceutical manufacturers and the rate of conversion from brand products to those generic drugs, price increases and price deflation, general economic conditions in the member states of European Union, competition within the industry, customer consolidation, changes in pharmaceutical manufacturer pricing and distribution policies and practices, increased downward pressure on government and other third party reimbursement rates to our customers, and changes in government rules and regulations.
Cost of Goods Sold
For the twelve months ended December 31, 2020, we had direct costs of goods sold of $47,345,957 associated to cost of goods sold versus $36,014,116 from the prior fiscal year ended December 31, 2019. Cost of goods sold year over year increased by 31% in 2020 as compared to 2019 due directly to the increase in revenue.
Gross Profit
Gross profit for the year ended December 31, 2020 was $8,060,380 compared with the $3,662,269 for the year ended December 31, 2019. Gross profit increased by $4,398,111 or 120% from the prior fiscal year. The increase in the gross profit was primarily due to the increase of Company’s main revenue source of trading, sourcing and distribution of pharmaceutical products, as well as the increase in sales of our own brand of nutraceuticals; SkyPremium Life.
Operating Expenses
For the year ended December 31, 2020, we had general and administrative costs of $5,346,087, sales and marketing expenses of $763,170 and depreciation and amortization expense of $397,595 for a net operating profit of $2,835,777. For the year ended December 31, 2019, we had general and administrative costs of $3,523,450, depreciation and amortization expense of $394,628, for a net operating loss of $255,809.
The approximate 36% increase in operating expenses in the year ended December 31, 2020, versus the prior year ended, is primarily due to sales and marketing expenses for launching our own branded nutraceuticals. Also, there is an increase of the payroll due to new Salesforce team and third-party services.
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Interest Expenses
For the year ended December 31, 2020, we had interest expense of $2,761,004 and non-cash interest expenses of $34,106 related to the fair value of warrants for services, extinguishment of debt and the amortization of debt discount versus the year ending December 31, 2019 where we had interest expense of $1,412,465, non-cash interest expenses of $320,205 related to the fair value of warrants for services, extinguishment of debt and the amortization of debt discount and $264 of interest related to loans from related parties.
Unrealized Foreign Currency Losses
Additionally, we had an unrealized foreign currency translation income of $875,235 for the year ended December 31, 2020 such that our net comprehensive income for the period was $1,692,021 versus the unrealized foreign currency loss of $49,167 such that our net comprehensive loss for the period was $3,348,132 for the twelve months ended December 31, 2019. The increase relates to the increase in intercompany loans from the parent related to capital raises and the volatility/fluctuation from the prior year of the Euro to USD exchange.
Going Concern
The Company’s consolidated financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company had net income of $820,786, net cash used in operations of $11,501,718, working capital of $5,979,870 and had an accumulated deficit of $18,750,824 as of December 31, 2020. During the fiscal year, the Company has undergone a strategic review process to help find a definitive solution to the Company’s accumulated deficit constraints. Options under consideration in the strategic review process include, but are not limited to, securing new debt, exchange debt for equity, restructuring current debt facilities from short term into long-term making the proper actions for new fund raising. The Company has adequate cash from operations in order to cover its operating costs and to continue as a going concern for the next 12 months due to Covid-19 pandemic.
In order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include raising additional capital through increased sales of product and by sale of common shares. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Liquidity and Capital Resources
As of December 31, 2020, the Company had working capital of $5,979,870 versus a working capital deficit of $7,062,250 as of December 31, 2019. This increase in the working capital surplus is primarily attributed to the Company’s operating profit in the year ending as of December 31, 2020.
As of December 31, 2020, the Company had net cash of $628,395 versus $38,537 as of December 31, 2019. For the twelve months ended December 31, 2020, net cash used in operating activities was $11,501,718 versus $4,788,842 net cash used in operating activities for the twelve months ended December 31, 2019. The Company has devoted substantially all of its cash resources to apply its investment program to expand through organic business growth and, where appropriate, the execution on selective company and license acquisitions, and incurred significant general and administrative expenses to enable it to finance and grow its business and operations.
During the year ended December 31, 2020, there was $117,744 net cash used in investing activities versus $588,929 used in during the year ended December 31, 2019. In the year ending December 31, 2020 this was due to the purchase of fixed assets. In the year ending December 31, 2019, this was due to proceeds from the sale of investments offset by the purchase of fixed assets.
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During the year ended December 31, 2020, there was $12,460,541 of net cash and cash equivalents provided by financing activities versus $3,587,330 provided by financing activities during the year ended December 31, 2019.
We believe that our current cash in our bank account and working capital as of December 31, 2020 will satisfy our estimated operating cash requirements for the next twelve months. However, the Company will require additional financing in fiscal year 2021 in order to continue at its expected level of operations and potential acquisitions. If the Company is unable to raise additional funds in the future on acceptable terms, or at all, it may be forced to curtail its development activities.
We anticipate using cash in our bank account as of December 31, 2020, cash generated from the operations of the Company and its operating subsidiaries and from debt or equity financing, or from loans from management, to the extent that funds are available to do so to conduct our business in the upcoming year. Management is not obligated to provide these or any other funds.
Debt Obligations
January 27, 2020 Senior Promissory Note
On January 27, 2020, the Company executed a Senior Promissory Note (the “January Note”) in the principal amount of $250,000 payable to an unaffiliated third-party lender who had previously loaned the Company $2,500,000. The January Note bears interest at the rate of five (5%) percent per annum, paid quarterly in arrears. The January Note matures on May 15, 2020 unless in default. The Company may prepay the January Note within the first six (6) months by payment of unpaid interest for the first six (6) months and, after six (6) months, with a two (2%) percent ($5,000) premium. On February 5, 2021 the Company converted the entire outstanding balance into shares of the Company’s common stock.
February 25, 2020 Senior Promissory Note
On February 25, 2020, the Company executed a Senior Promissory Note (the “February Note”) in the principal amount of $1,000,000 payable to an unaffiliated third-party lender. The February Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The February Note matured on April 30, 2020 unless in default. The Company repaid the principal balance of this note on July 10, 2020 in full.
May 15, 2019 Senior Convertible Note
On May 15, 2019, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Buyer”). Upon the closing of this financing, on May 17, 2019, the Company issued for a purchase price of $1,500,000 in principal amount a Senior Convertible Note (the “May 2019 Note”) to the Buyer.
The May 2019 Note provides that the Company will repay the principal amount of the May 2019 Note on the ten (10) month anniversary date of the date of issue. The maturity date was amended on March 23, 2020 to September 16, 2020 and further amended on September 23, 2020 to June 16, 2021. Interest at the rate of nineteen (19%) percent per annum shall be payable on the first day of each calendar month.
The May 2019 Note is convertible at any time by the Holder into 250,000 shares of common stock, par value $0.001 per share at the rate of $6.00 per share, subject to adjustment (the “Conversion Price”). Upon an Event of Default (regardless of whether such event has been cured), the Buyer may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the then Volume-Weighted Average Price (as defined, the “VWAP”). The Company considered the need for the conversion feature to be bifurcated under ASC 815 and determined that it does not meet the requirements. Additionally, the Company determined the effective conversion rate under ASC 470-20 “Debt with Conversion and Other Options” and determined that the instrument is out of the money and no beneficial conversion feature was recorded.
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The May 2019 Note is senior in right of payment to all other existing and future indebtedness of the Company except Permitted Senior Indebtedness (as defined in the May 2019 Note), including $12 million of senior secured indebtedness of the Company and its subsidiaries under an existing senior loan agreement, plus defined amounts of purchase money indebtedness in connection with bona fide acquisitions.
The May 2019 Note includes customary Events of Default and provides that the Buyer may require the Company to redeem (regardless of whether the Event of Default has been cured) all or a portion of the Note at a redemption premium of one hundred twenty-five (125%) percent, multiplied by the greater of the conversion rate and the then current market price. The Buyer may also require redemption of the May 2019 Note upon a Change of Control (as defined) at a premium of one hundred twenty-five (125%) percent. The Company has the right to redeem the May 2019 Note at any time, in whole or in part, in cash at a price equal to 120% of the then outstanding conversion amount.
Conversion of the May 2019 Note is subject to a blocker provision which prevents any holder from converting the May 2019 Note into shares of common stock if its beneficial ownership of the common stock would exceed 9.99% of the Company’s issued and outstanding common stock.
Amendment of May 15, 2019 Senior Convertible Note
On March 23, 2020, the Company entered into a Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”). The Company entered into a Securities Purchase Agreement (the “SPA”) with the Buyer on May 15, 2019, pursuant to which the Company issued a Convertible Note (the “Note”) in the principal amount of $1,500,000. The Note was due on or before March 15, 2020 and was not paid (the “Existing Default”). The Note provides that upon an Event of Default, the Buyer may, among other things, require the Company to redeem all or a portion of the Note at a redemption premium of 120%, multiplied by the product of the conversion rate ($6.00per share) and the then current market price.
The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): (September 16, 2020 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date), (b)during the Forbearance Period waive the prepayment premium to any Company Optional Redemption, and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to September 16, 2020. The Scheduled Required Prepayments are $100,000 upon signing the Agreement and five (5) monthly payments thereafter aggregating $200,000 with all amounts outstanding under the Note due on September 16, 2020. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers and directors and advisors of the Company) or factoring and purchase order indebtedness, the Company shall effect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments.
On September 23, 2020, the Company entered into a Second Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”). The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): June 16, 2021 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date), (b) during the Forbearance Period (as defined) waive the prepayment premium to any Company Optional Redemption (which will result in the 120% redemption premium effectively replaced with 100%), and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to June 16, 2021. The Scheduled Required Prepayments are $63,000 upon signing the Agreement and eight (8) monthly payments thereafter aggregating $480,000 with the remaining $607,000 outstanding under the Note due on June 16, 2021. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers, directors and 10% or greater shareholders of the Company) or factoring and purchase order indebtedness, the Company shall effect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments.
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As of December 31, 2019, the Company had a principal balance $1,500,000 on the May 2019 Note and the Company had accrued $25,334 in interest expense. During the year ended December 31, 2020, the Company repaid $593,000 such that as of December 31, 2020, the Company had a principal balance $907,000 on the May 2019 Note and the Company had accrued $15,420 in interest expense.
Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission for this transaction equal to six (6%) percent of the total gross proceeds of the offering. This 6% fee or $90,000 was recorded as debt discount along with the $30,000 in legal fees associated with the May 2019 Note. These fees will be amortized over the term of the note. For the year ended December 31, 2019, the Company has recorded amortization of $90,491.
Related Party Indebtedness
Grigorios Siokas
During the year ended December 31, 2018, the Company borrowed €1,622,700 ($1,858,965) and $382,000 of loans payable from Grigorios Siokas and repaid €269,000 ($308,166) and $155,000 of these loans. These loans are non-interest bearing and have no maturity dates. As of December 31, 2018, the Company had an outstanding principal balance of $1,777,799, consisting of €1,353,700 ($1,550,799) and $227,000, in loans payable to Grigorios Siokas. During the year ended December 31, 2019, the Company borrowed total additional proceeds of $585,914, repaid €233,567 ($262,226) of these loans and converted $1,050,000 of these loans into 140,001 shares of common stock at a conversion rate of $7.50 per share. These loans are non-interest bearing and have no maturity dates. As of December 31, 2019, the Company had an outstanding principal balance under these loans of $1,026,264 consisting of €297,314 ($303,502) and $722,762, in loans payable to Grigorios Siokas.
On December 20, 2018, the €1,500,000 ($1,718,400) note payable, originally borrowed pursuant to a Loan Agreement with a third-party lender, dated March 16, 2018, was transferred to Grigorios Siokas. The note bears an interest rate of 4.7% per annum and has a maturity date of March 18, 2019. During the year ended December 31, 2019, the Company repaid €300,000 ($336,810) and as of December 31, 2019, the Company had an outstanding principal balance of €1,200,000 ($1,347,240) and accrued interest of €144,207 ($128,447).
On May 28, 2019, the Company entered into a Debt Exchange Agreement with Grigorios Siokas. The agreement provided for the issuance by the Company of 66,667 shares of common stock, at the rate of $7.50 per share, or an aggregate of $500,000, in exchange for $500,000 of existing loans by Mr. Siokas to the Company. The Company valued this transaction at fair value and recorded a $259,999 gain on extinguishment of related party debt to additional paid-in capital.
On June 24, 2019, the Company entered into a Debt Exchange Agreement with Grigorios Siokas. The agreement provided for the issuance by the Company of 73,334 shares of common stock, at the rate of $7.50 per share, or an aggregate of $550,000, in exchange for $550,000 of existing loans by Mr. Siokas to the Company. The Company valued this transaction at fair value and recorded a $269,126 gain on extinguishment of related party debt to additional paid-in capital.
As of December 31, 2029, the Company has an outstanding principal balance of €400,000 ($489,200) and accrued interest of €158,287 ($193,585).As of December 31, 2020, the Company has an outstanding principal balance of €400,000 ($489,200) and accrued interest of €158,287 ($193,585).
Grigorios Siokas is the Company’s CEO and principal shareholder and is hence considered a related party to the Company.
Dimitrios Goulielmos
On November 21, 2014, SkyPharm entered into a Loan Agreement with Dimitrios Goulielmos, former Chief Executive Officer, and a current director of the Company, pursuant to which the Company borrowed €330,000 ($401,115) from Mr. Goulielmos. The Loan bore an interest rate of 2% per annum and was due and payable in full on May 11, 2015. On November 4, 2015, €130,000 ($142,860) in principal and the related accrued interest of €733 ($806) was forgiven and the remaining balance of €200,000 will no longer accrue interest as part of the stock purchase agreement with Grigorios Siokas on November 4, 2015 referenced above. The Company repaid €146,500 in prior years. During the year ended December 31, 2019, the Company paid back an additional €40,300 ($45,245) and as of December 31, 2019, an outstanding principal balance of €13,200 ($14,820) and €0 ($0) accrued interest remains. During the year ended December 31, 2020, the Company paid back an additional €3,000 ($3,669) and as of December 31, 2020, an outstanding principal balance of €10,200 ($12,464) and €0 ($0) accrued interest remains.
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Plan of Operation in the Next Twelve Months
Specifically, our plan of operations for the next 12 months is as follows:
We assess the foreseeable development of the Company as being positive. Over the medium term we assume that we will be able to further expand our market shares. However, during the course of further organizational optimization there may be associated extraordinary additional costs.
The Company is growing its business through organic growth by expanding the portfolio of own branded products and the penetration into new geographical market and channels that would add value to the Company’s business and for its Shareholders. This growth is expected to be driven by entering into new markets and countries where the Company can sell and distribute a more profitable series of pharmaceutical products, over-the-counter medicines, and nutraceuticals. It is committed to capitalizing on sales growth opportunities by expanding its customer baseline across the European market, as well as entering markets outside the European Union.
The Company is also committed to pursuing various forms of business development; this can include trading, alliances, licenses, joint ventures, dispositions and acquisitions. Moreover, it hopes to continue to build on its portfolio of pharmaceutical products and expand its OTC and nutraceutical product portfolio. Thus, the Company is developing a sound sales distribution network specializing in food supplement products.
The Company’s main objective is expanding the business operations of its subsidiaries by concentrating its efforts on becoming an international pharmaceutical Company. The Company views its business development activity as an enabler of its strategies, and it seeks to generate earnings growth and enhance shareholder value by pursuing a disciplined, strategic, and financial approach to evaluating business development opportunities. Under these principles the Company assesses businesses and assets as part of its regular, ongoing portfolio review process and continues to consider trading development activities for its businesses.
The Company, in the following twelve months, intends to substantially grow its business operations within EU countries and to other countries in the nutraceutical and the OTC and generic pharmaceutical products market. These industries are highly competitive and may significantly affect the Company’s sales of these products, including, but not limited to, price and cost-effectiveness, marketing effectiveness, product labeling, quality control, and quality assurance.
In addition, the Company seeks to pursue gross profit margin efficiency, by focusing on new revenue streams and sales channels that would positively affect gross profits, such as e-commerce, specialized sales representatives and retail companies. The Company’s objective is the optimization of operating expenses across all entities without compromising the quality of the Company’s services and products.
Changes in the behavior and spending patterns of purchasers of pharmaceutical and healthcare products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of doctor visits, and foregoing healthcare insurance coverage, may impact the Company’s business.
In addition to expanding the its product portfolio, the Company also plans to evaluate offering its products and services to different geographical markets. It is currently focused on its customers throughout the EU. The Company plans on expanding its geographical reach to new areas outside of the EU market, although it currently has no binding agreements, commitments or contracts in any of these geographical markets. Some of the methods the Company intends to use to accomplish this are: promoting its brand and marketing its products and services through the Internet to new geographic areas, creating strategic relationships with companies in different geographical regions. The Company anticipates that it will spend approximately $100,000 evaluating the different methods and regions to which it plans to expand. This cost is made up of primarily marketing and promotional fees as well as related development expenses. The Company assesses the foreseeable development of the Company as being positive. It expects to continue growing through expansion into adjacent products, product categories and channels, as well as through entry into new geographic markets. The Company evaluates potential licensed product acquisition targets based on whether they have the capacity to deliver a return on invested capital.
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The pharmaceutical sector offers a large growth potential within the European pharmaceutical market, if service, price and quality are strictly directed towards the customer requirements. The Company will continue to encounter competition in the market by product, service, reliability, and a high level of quality. On the procurement side, the Company can access a wide range of supply possibilities. To minimize business risks, the Company diversifies its sources of supply all over Europe. It secures its high-quality demands through careful supplier qualification and selection, as well as active suppliers’ system management.
The Company will evaluate and, where appropriate, execute on opportunities to expand its network of pharmacies and products in areas that it believes will offer above average growth characteristics and attractive margins. In particular, it is looking to continue to enhance its product lines by acquiring or licensing rights to additional products and regularly evaluate selective acquisition and license opportunities. In addition, it remains committed to strategic research and development across each business unit with a particular focus on assets with inherently lower risk profiles and clearly defined governmental regulatory pathways.
While the Company intends to pursue these milestones, there may be circumstances where, for valid business reasons or due to factors beyond the control of the Company (e.g., the COVID-19 pandemic), a re-allocation of efforts may be necessary or advisable. Although the Company does not currently anticipate that the COVID-19 pandemic will cause material delays in the timelines or estimates set out above, due to the evolving nature of COVID-19 and its impacts, these timelines and estimates may require adjustment in the future.
The Company intends to spend the funds available to it in debt repayment, intangible assets acquisitions, R&D, sales and marketing expenses. Due to the uncertain nature of the industry in which the Company will operate, projects may be frequently reviewed and reassessed. Accordingly, while it is currently intended by management that the available funds will be expended as set forth above, actual expenditures may in fact differ from these amounts and allocations.
Significant Equipment
We do not intend to purchase any significant equipment for the next twelve months aside from a few pieces of IT equipment. Nevertheless, we will replace essential equipment for operations if it is required within the year.
Employees
In order to achieve our strategic objectives, we have, and will remain, focused on hiring and retaining a highly skilled management team that has extensive experience and specific skill sets relating to the sales, selection, development and commercialization of pharmaceutical products. We intend to continue our efforts to build and expand this team as we grow our business. We have plans to increase the number of our employees by adding more sales people during the next twelve months.
Revenue Recognition
The Company adopted the modified retrospective adoption in accordance with ASC 606 – Revenue from Contracts with Customers, on January 1, 2018. The new guidance introduces a five-step model for recognizing revenue by applying the following steps: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the performance obligations are satisfied by transferring the promised goods to the customer. Once these steps are met, revenue is recognized upon delivery of the product. Adoption of ASC 606 has not changed the timing and nature of the Company’s revenue recognition and there has been no material effect on the Company’s financial statements.
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Off Balance Sheet Arrangements
As of December 31, 2020, 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. 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 accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes, ASC 740 “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are 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, as well as net operating loss carryforwards. 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 recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company is liable for income taxes in Greece and the United Kingdom of England. The corporate income tax rate in Greece is 24%, (tax losses are carried forward for five years effective January 1, 2013 (prior to 2013, losses were carried forward indefinitely) and 19% in the United Kingdom of England. Losses may also be subject to limitation under certain rules regarding change of ownership.
We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Our review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets.
We recognize the impact of an uncertain tax position in our financial statements if, in management’s judgment, the position is not more-likely-then-not sustainable upon audit based on the position’s technical merits. This involves the identification of potential uncertain tax positions, the evaluation of applicable tax laws and an assessment of whether a liability for an uncertain tax position is necessary. We operate and are subject to audit in multiple taxing jurisdictions.
We record interest and penalties related to income taxes as a component of interest and other expense, respectively.
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740 “Accounting for Income Taxes” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of the U.S. net operating losses have not been recognized in this financial statement because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
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The Company has net operating loss carry-forwards in our parent, Cosmos Holdings Inc., which are applicable to future taxable income in the United States (if any). Additionally, the Company has income tax liabilities in the United Kingdom of England. The income tax assets and liabilities are not able to be netted. We therefore reserve the income tax assets applicable to the United States, but recognize the income tax liabilities in Greece and the United Kingdom of England. Losses may also be subject to limitation under certain rules regarding change of ownership.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective January 1, 2024, for the Company. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
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Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Cosmos Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cosmos Holdings, Inc. and its subsidiaries (collectively the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders' deficit, and cash flows, for each of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Matter
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net accumulated deficit that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
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Inventory Valuation — Refer to Note 1 to the Financial Statements
Critical Audit Matter Description
The Company computes inventory using the weighted average method and consists primarily of finished goods and packaging materials, i.e., packaged pharmaceutical products and the wrappers and containers they are sold in. The Company assesses inventory at each reporting date in order to assert that it is recorded at net realizable value, giving consideration to, among other factors: whether the product is valued at the lower-of-cost or net realizable value; and the estimation of excess, expired or obsolete inventory. Most of the Company’s inventory provisions are based on the Company’s inventory levels and forecasted demand as well as physical condition, expiration date and current market conditions. Most of the Company’s inventory items are eligible for return to suppliers when pre-agreed product requirements, including, but not limited to, physical condition and expiration date, are not met.
Significant judgment is exercised by the Company to determine inventory carrying value adjustments, specifically the provisions for excess or obsolete inventories, and includes the following:
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| · | Developing assumptions such as forecasts of future sales quantities and the selling prices, which are sensitive to the competitiveness of product offerings, customer requirements, and product life cycles. |
Given these factors and assumptions are forward-looking and could be affected by future economic and market conditions, the related audit effort to evaluate management’s inventory valuation adjustments was extensive and required a high degree of auditor judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our principal audit procedures related to the Company’s inventory valuation methodology included the following:
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| · | We selected a sample of inventory items and performed the following procedures: |
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| o | Tested the mathematical accuracy of Company’s inventory schedule by comparing the quantities and carrying value of on-hand inventories to related unit sales, both historical and forecasted. |
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| o | Assessed and tested the reasonableness of the significant assumptions (e.g., sales and marketing forecast and usage). |
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| o | Inquired with operations team and evaluated the adequacy of management’s adjustments to sales forecasts by analyzing potential changes in line with product life cycles and/or identified alternative customer uses. |
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| o | Assessed whether there were any potential sources of contrary information, including historical forecast accuracy or history of significant revisions to previously recorded inventory valuation adjustments, and performed sensitivity analyses over significant assumptions to evaluate the changes in inventory valuation that would result from changes in the assumptions. |
We have served as the Company's auditor since 2019.
/s/ Armanino LLP
San Francisco, California
April 15, 2021
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| COSMOS HOLDINGS, INC. | |||||
| CONSOLIDATED BALANCE SHEETS |
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| December 31, 2020 |
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| December 31, 2019 |
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| ASSETS |
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| CURRENT ASSETS: |
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| Cash and cash equivalents |
| $ | 628,395 |
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| $ | 38,537 |
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| Accounts receivable, net |
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| 23,440,650 |
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| 7,348,945 |
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| Accounts receivable - related party |
|
| 3,468,564 |
|
|
| 1,919,043 |
|
| Marketable securities |
|
| 222,792 |
|
|
| 238,940 |
|
| Inventory |
|
| 3,292,557 |
|
|
| 3,474,220 |
|
| Prepaid expenses and other current assets |
|
| 5,148,441 |
|
|
| 1,553,436 |
|
| Prepaid expenses and other current assets - related party |
|
| 3,468,653 |
|
|
| 5,940,124 |
|
| Operating lease right-of-use asset |
|
| 833,763 |
|
|
| 498,180 |
|
| Financing lease right-of-use asset |
|
| 269,131 |
|
|
| 167,310 |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL CURRENT ASSETS |
|
| 40,772,946 |
|
|
| 21,178,735 |
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| 1,757,213 |
|
|
| 1,734,781 |
|
| Goodwill and intangible assets, net |
|
| 230,506 |
|
|
| 263,681 |
|
| Other assets |
|
| 905,318 |
|
|
| 702,439 |
|
| Deferred tax assets |
|
| 178,430 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL ASSETS |
| $ | 43,844,413 |
|
| $ | 23,879,636 |
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
| $ | 11,973,981 |
|
| $ | 7,761,517 |
|
| Accounts payable and accrued expenses - related party |
|
| 1,733 |
|
|
| 240,302 |
|
| Accrued interest |
|
| 742,374 |
|
|
| 800,164 |
|
| Customer advances |
|
| 22,340 |
|
|
| 247,318 |
|
| Convertible notes payable, net of unamortized discount of $494,973 and $29,509, respectively |
|
| 952,027 |
|
|
| 1,470,491 |
|
| Derivative liability - convertible note |
|
| 460,728 |
|
|
| - |
|
| Notes payable |
|
| 12,042,712 |
|
|
| 12,029,724 |
|
| Notes payable - related party |
|
| 501,675 |
|
|
| 1,375,532 |
|
| Lines of credit |
|
| 5,076,684 |
|
|
| 2,750,992 |
|
| Loans payable - related party |
|
| 1,629,246 |
|
|
| 1,026,264 |
|
| Taxes payable |
|
| 760,446 |
|
|
| 175,939 |
|
| Operating lease liability, current portion |
|
| 200,204 |
|
|
| 139,556 |
|
| Financing lease liability, current portion |
|
| 89,926 |
|
|
| 58,185 |
|
| Other current liabilities |
|
| 339,000 |
|
|
| 165,271 |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL CURRENT LIABILITIES |
|
| 34,793,076 |
|
|
| 28,241,255 |
|
|
|
|
|
|
|
|
|
|
|
| Share settled debt obligation |
|
| 1,554,590 |
|
|
| 1,554,590 |
|
| Notes payable - long term portion |
|
| 10,771,882 |
|
|
| - |
|
| Operating lease liability, net of current portion |
|
| 590,538 |
|
|
| 353,024 |
|
| Financing lease liability, net of current portion |
|
| 188,172 |
|
|
| 82,523 |
|
| Other liabilities |
|
| 107,168 |
|
|
| 109,073 |
|
| TOTAL LIABILITIES |
|
| 48,005,426 |
|
|
| 30,340,465 |
|
|
|
|
|
|
|
|
|
|
|
| Commitments and Contingencies (see Note 12) |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| STOCKHOLDERS' DEFICIT: |
|
|
|
|
|
|
|
|
| Preferred stock, $0.001 par value; 100,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2020 and 2019, respectively |
|
| - |
|
|
| - |
|
| Common stock, $0.001 par value; 300,000,000 shares authorized; 13,485,128 and 13,225,587 shares issued and 13,069,800 and 12,860,059 outstanding as of December 31, 2020 and 2019, respectively |
|
| 13,484 |
|
|
| 13,225 |
|
| Additional paid-in capital |
|
| 14,333,285 |
|
|
| 13,525,749 |
|
| Treasury stock, 415,328 and 365,328 shares as of December 31, 2020 and 2019, respectively |
|
| (611,854 | ) |
|
| (411,854 | ) |
| Accumulated deficit |
|
| (18,750,824 | ) |
|
| (19,571,610 | ) |
| Accumulated other comprehensive loss |
|
| 854,896 |
|
|
| (16,339 | ) |
|
|
|
|
|
|
|
|
|
|
| TOTAL STOCKHOLDERS' DEFICIT |
|
| (4,161,013 | ) |
|
| (6,460,829 | ) |
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT |
| $ | 43,844,413 |
|
| $ | 23,879,636 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
| Table of Contents |
| COSMOS HOLDINGS, INC. | |||||
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
|
|
| Years Ended December 31, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| REVENUE |
| $ | 55,406,337 |
|
| $ | 39,676,385 |
|
|
|
|
|
|
|
|
|
|
|
| COST OF GOODS SOLD |
|
| 47,345,957 |
|
|
| 36,014,116 |
|
|
|
|
|
|
|
|
|
|
|
| GROSS PROFIT |
|
| 8,060,380 |
|
|
| 3,662,269 |
|
|
|
|
|
|
|
|
|
|
|
| OPERATING EXPENSES |
|
|
|
|
|
|
|
|
| General and administrative expenses |
|
| 4,185,322 |
|
|
| 3,289,413 |
|
| Sales and marketing expenses |
|
| 763,170 |
|
|
| 234,037 |
|
| Depreciation and amortization expense |
|
| 397,595 |
|
|
| 394,628 |
|
| TOTAL OPERATING EXPENSES |
|
| 5,346,087 |
|
|
| 3,918,078 |
|
|
|
|
|
|
|
|
|
|
|
| INCOME (LOSS) FROM OPERATIONS |
|
| 2,714,293 |
|
|
| (255,809 | ) |
|
|
|
|
|
|
|
|
|
|
| OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
| Other income, net |
|
| 4,571 |
|
|
| 233,877 |
|
| Interest expense |
|
| (2,761,004 | ) |
|
| (1,412,729 | ) |
| Interest income |
|
| 65,865 |
|
|
| - |
|
| Non-cash interest expense |
|
| (34,106 | ) |
|
| (320,205 | ) |
| Loss on equity investments, net |
|
| (34,443 | ) |
|
| (1,220,085 | ) |
| Gain on extinguishment of debt |
|
| 942,029 |
|
|
| - |
|
| Change in fair value of derivative liability |
|
| (4,158 | ) |
|
| - |
|
| Foreign currency transaction gain (loss), net |
|
| 305,274 |
|
|
| (141,199 | ) |
| TOTAL OTHER EXPENSE, NET |
|
| (1,515,972 | ) |
|
| (2,860,341 | ) |
|
|
|
|
|
|
|
|
|
|
| INCOME (LOSS) BEFORE INCOME TAXES |
|
| 1,198,321 |
|
|
| (3,116,150 | ) |
|
|
|
|
|
|
|
|
|
|
| INCOME TAX EXPENSE |
|
| (377,535 | ) |
|
| (182,815 | ) |
|
|
|
|
|
|
|
|
|
|
| NET INCOME (LOSS) |
|
| 820,786 |
|
|
| (3,298,965 | ) |
|
|
|
|
|
|
|
|
|
|
| OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
|
|
|
|
| Foreign currency translation adjustment, net |
|
| 871,235 |
|
|
| (49,167 | ) |
|
|
|
|
|
|
|
|
|
|
| TOTAL COMPREHENSIVE INCOME (LOSS) |
| $ | 1,692,021 |
|
| $ | (3,348,132 | ) |
|
|
|
|
|
|
|
|
|
|
| BASIC NET INCOME (LOSS) PER SHARE |
| $ | 0.06 |
|
| $ | (0.25 | ) |
| DILUTED NET INCOME (LOSS) PER SHARE |
| $ | 0.06 |
|
| $ | (0.25 | ) |
|
|
|
|
|
|
|
|
|
|
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
| Basic |
|
| 13,270,097 |
|
|
| 13,273,596 |
|
| Diluted |
|
| 13,307,794 |
|
|
| 13,273,596 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
| Table of Contents |
| Cosmos Holdings, Inc. | ||||||||
| CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
| |||||||||||||||
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
| Other |
|
| Total |
| |||||||||||||
|
|
| Common Stock |
|
| Paid-in |
|
| Treasury Stock |
|
| Accumulated |
|
| Comprehensive |
|
| Stockholders' |
| ||||||||||||||
|
|
| No. of Shares |
|
| Amount |
|
| Capital |
|
| No. of Shares |
|
| Amount |
|
| Deficit |
|
| Income (Loss) |
|
| Deficit |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
| Balance at January 1, 2019 |
|
| 13,878,757 |
|
| $ | 13,879 |
|
| $ | 13,133,982 |
|
|
| (193,689 | ) |
| $ | (225,494 | ) |
| $ | (16,272,645 | ) |
| $ | 32,828 |
|
| $ | (3,317,450 | ) |
| Foreign currency translation adjustment, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (49,167 | ) |
|
| (49,167 | ) |
| Cancellation of pre-delivery shares issued in connection with convertible debentures |
|
| (573,742 | ) |
|
| (574 | ) |
|
| 574 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Purchase of treasury stock from third party |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (391,268 | ) |
|
| (845,247 | ) |
|
| - |
|
|
| - |
|
|
| (845,247 | ) |
| Conversion of related party debt to common stock |
|
| 140,001 |
|
|
| 140 |
|
|
| 1,049,860 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,050,000 |
|
| Cancellation of treasury shares |
|
| (219,629 | ) |
|
| (220 | ) |
|
| (658,667 | ) |
|
| 219,629 |
|
|
| 658,887 |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,298,965 | ) |
|
| - |
|
|
| (3,298,965 | ) |
| Balance at December 31, 2019 |
|
| 13,225,387 |
|
|
| 13,225 |
|
|
| 13,525,749 |
|
|
| (365,328 | ) |
|
| (411,854 | ) |
|
| (19,571,610 | ) |
|
| (16,339 | ) |
|
| (6,460,829 | ) |
| Foreign currency translation adjustment, net |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 871,235 |
|
|
| 871,235 |
|
| Conversion of note payable into shares of common stock |
|
| 259,741 |
|
|
| 259 |
|
|
| 807,536 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 807,795 |
|
| Purchase of treasury stock from third party |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (50,000 | ) |
|
| (200,000 | ) |
|
| - |
|
|
| - |
|
|
| (200,000 | ) |
| Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 820,786 |
|
|
| - |
|
|
| 820,786 |
|
| Balance at December 31, 2020 |
|
| 13,485,128 |
|
| $ | 13,484 |
|
| $ | 14,333,285 |
|
|
| (415,328 | ) |
| $ | (611,854 | ) |
| $ | (18,750,824 | ) |
| $ | 854,896 |
|
| $ | (4,161,013 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
| Table of Contents |
| COSMOS HOLDINGS, INC. |
| ||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
|
|
|
| ||||||
|
|
| Years Ended December 31, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
| Net income (loss) |
| $ | 820,786 |
|
| $ | (3,298,965 | ) |
| Adjustments to Reconcile Net Income (Loss) to Net Cash Used In Operating Activities: |
|
|
|
|
|
|
|
|
| Depreciation and amortization expense |
|
| 274,062 |
|
|
| 234,086 |
|
| Amortization of right-of-use assets |
|
| 123,533 |
|
|
| 160,542 |
|
| Amortization of debt discounts |
|
| 34,105 |
|
|
| 320,205 |
|
| Lease expense |
|
| 188,400 |
|
|
| 185,540 |
|
| Interest on finance leases |
|
| 13,759 |
|
|
| - |
|
| Deferred income taxes |
|
| (178,430 | ) |
|
| - |
|
| Gain on extinguishment of debt |
|
| (942,029 | ) |
|
| - |
|
| Change in fair value of the derivative liability |
|
| 4,158 |
|
|
| - |
|
| Loss on change in fair value of equity investments |
|
| 34,443 |
|
|
| 1,220,085 |
|
| Changes in Assets and Liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable, net |
|
| (14,417,946 | ) |
|
| (2,595,654 | ) |
| Accounts receivable - related party |
|
| (1,299,818 | ) |
|
| (1,729,283 | ) |
| Inventory |
|
| 393,154 |
|
|
| (271,453 | ) |
| Prepaid expenses and other current assets |
|
| (3,332,839 | ) |
|
| 76,773 |
|
| Prepaid expenses and other current assets - related party |
|
| 2,800,862 |
|
|
| (983,063 | ) |
| Other assets |
|
| (131,700 | ) |
|
| (77,047 | ) |
| Accounts payable and accrued expenses |
|
| 3,448,613 |
|
|
| 3,101,143 |
|
| Accounts payable and accrued expenses - related party |
|
| (240,189 | ) |
|
| 100,746 |
|
| Accrued interest |
|
| 654,297 |
|
|
| (472,926 | ) |
| Customer advances |
|
| (230,505 | ) |
|
| (819,882 | ) |
| Other current liabilities |
|
| 173,729 |
|
|
| 54,059 |
|
| Lease liabilities |
|
| (217,210 | ) |
|
| (142,846 | ) |
| Taxes payable |
|
| 584,507 |
|
|
| 175,939 |
|
| Other liabilities |
|
| (59,460 | ) |
|
| (26,841 | ) |
| NET CASH USED IN OPERATING ACTIVITIES |
|
| (11,501,718 | ) |
|
| (4,788,842 | ) |
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Purchase of fixed assets |
|
| (117,744 | ) |
|
| (672,789 | ) |
| Proceeds from sale of investments |
|
| - |
|
|
| 1,261,718 |
|
| NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES |
|
| (117,744 | ) |
|
| 588,929 |
|
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Payment of convertible note payable |
|
| (593,000 | ) |
|
| (365,514 | ) |
| Proceeds from convertible note payable |
|
| 497,000 |
|
|
| 1,380,000 |
|
| Payment of related party note payable |
|
| (996,136 | ) |
|
| (382,055 | ) |
| Payment of note payable |
|
| (5,230,725 | ) |
|
| (221,418 | ) |
| Proceeds from note payable |
|
| 16,556,710 |
|
|
| 2,500,000 |
|
| Payment of related party loan |
|
| (149,695 | ) |
|
| (262,226 | ) |
| Proceeds from related party loan |
|
| 721,723 |
|
|
| 585,915 |
|
| Payment of lines of credit |
|
| (18,428,823 | ) |
|
| (11,098,839 | ) |
| Proceeds from lines of credit |
|
| 20,369,291 |
|
|
| 12,371,190 |
|
| Payments of finance lease liability |
|
| (85,804 | ) |
|
| (74,476 | ) |
| Purchase of treasury stock |
|
| (200,000 | ) |
|
| (845,247 | ) |
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
| 12,460,541 |
|
|
| 3,587,330 |
|
|
|
|
|
|
|
|
|
|
|
| Effect of exchange rate changes on cash |
|
| (251,221 | ) |
|
| (213,223 | ) |
|
|
|
|
|
|
|
|
|
|
| NET CHANGE IN CASH |
|
| 589,858 |
|
|
| (825,806 | ) |
|
|
|
|
|
|
|
|
|
|
| CASH AT BEGINNING OF PERIOD |
|
| 38,537 |
|
|
| 864,343 |
|
| CASH AT END OF PERIOD |
| $ | 628,395 |
|
| $ | 38,537 |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental Disclosure of Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash paid during the period: |
|
|
|
|
|
|
|
|
| Interest |
| $ | 955,376 |
|
| $ | 447,731 |
|
| Income tax |
| $ | 14,127 |
|
| $ | 11,605 |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental Disclosure of Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cancellation of pre-delivery shares issued for conversion of convertible notes payable |
| $ | - |
|
| $ | 574 |
|
| Discounts related to beneficial conversion features of convertible debentures |
| $ | - |
|
| $ | 120,000 |
|
| Conversion of notes payable to common stock |
| $ | 807,795 |
|
| $ | 1,050,000 |
|
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Cosmos Holdings, Inc. is an international pharmaceutical wholesaler. The Company imports, exports and distributes brand-name and generic pharmaceuticals, over-the-counter (“OTC”) medicines, a variety of vitamins, and dietary supplements. Through December 31, 2020, we operated our business through three wholly owned subsidiaries: (i) SkyPharm S.A. (“SkyPharm”), headquartered in Thessaloniki, Greece; (ii) Decahedron Ltd. (“Decahedron”), headquartered in Harlow, United Kingdom (“UK”); and (iii) Cosmofarm Ltd. (“Cosmofarm”), headquartered in Athens, Greece. Our business is primarily comprised of cross-border sales of brand-name pharmaceutical products in the European Union (“EU”). Our cross-border pharmaceutical wholesale business serves wholesale pharmaceutical distributors and independent retail pharmacies across the EU through a network of three strategic distribution centers, as well as an additional warehousing facility. Pharmaceutical manufacturers generally implement variable pricing strategies within the EU market. Identifying and evaluating price spreads between EU member states enables us to source brand-name pharmaceuticals from countries where ex-factory prices are comparatively low and export to countries where the same products are priced higher. We remain focused on leveraging our growing purchasing scale and supplier relationships to secure discounts and provide pharmaceuticals at reduced prices and continuing to drive organic growth at attractive margins for our cross-border pharmaceutical wholesale business.
We regularly evaluate and undertake strategic initiatives to expand our distribution reach, improve our profit margins, and strengthen our competitive position. In 2018, we entered the vitamins and dietary supplements segment and in the fourth quarter of 2018 we posted the first sales of our own brand of nutraceuticals; SkyPremium Life. Through the December 2018 acquisition of Cosmofarm, we entered the full-line pharmaceutical wholesale distribution segment. Cosmofarm now serves approximately 370 independent retail pharmacies and 40 pharmaceutical wholesalers in the greater Athens region by providing a reliable supply of brand-name and generic pharmaceuticals, OTC medicines, vitamins, and dietary supplements. We invest in technology to enhance safety, distribution and warehousing efficiency and reliability. For example, Cosmofarm operates two fully automated ROWA, a German robotic warehouse system, that ensure 0% error selection rate, accelerate order fulfillment, and yield higher cost-efficiency in our Athens distribution center.
We make use of analytics and customer feedback from our EU-wide network of wholesale pharmaceutical distributors and independent retail pharmacies to identify and evaluate which nutraceutical product codes to develop to add to our SkyPremium Life portfolio. We intend to continue to bring SkyPremium Life products to market primarily through our existing network of over 160 pharmaceutical wholesale clients and vendors and approximately 370 independent retail pharmacies in the EU. There is growing demand for vitamins and food supplements and we are committed to developing quality products and creating enhanced customer value.
We are also closely monitoring the legal framework for prescription and non-prescription derivatives of cannabis products as it develops in Europe. As the legal framework and processes are developed and implemented in each respective EU country, we intend to utilize our existing network to distribute both prescription and non-prescription derivatives of cannabis products to our current customer base. We currently intend to only distribute prescription and non-prescription derivatives of cannabis products to approved EU countries and not in the US.
We regularly evaluate acquisition targets that would allow us to expand our distribution reach and/or vertically integrate into the supply chain of the products that we currently distribute. We believe that the demand for reasonably priced medicines, delivered on time and in the highest quality is set to increase in the years to come, as the population’s life expectancy increases. With our product portfolio of patented and non-patented medicines, we contribute to the optimization of efficient medicinal care, and thereby lowering cost for health insurance funds, companies, and patients. We also believe that the demand for non-prescription wellness products such as food and dietary supplements will continue to increase as individuals are increasingly supplementing their nutritional intake.
We believe the EU pharmaceutical import/export market will continue to grow. We continue to encounter competition in the market as we grow. The competition comes in the form of level of service, reliability, and product quality. On the procurement side, we continue to expand our vendor base. In order to minimize business risks, we diversify our sources of supply. We maintain our high-quality standards by carefully selecting and qualifying our suppliers as well as actively ensuring that our suppliers meet our standard of quality control on an ongoing basis.
On July 22, 2015, the Hellenic Ministry of Health and more specifically the National Organization for Medicines granted SkyPharm a license for the wholesale of pharmaceutical products for human use. The license is valid for a period of five years and pursuant to the EU directive of (2013/C343/01).
Decahedron received its Wholesale Distribution Authorization for human use on November 7, 2013, from the UK Medicines and Healthcare Products Regulatory Agency (MHRA) in accordance with Regulation 18 of the Human Medicines Regulations 2012 (SI 2012/1916) and it is subject to the provision of those Regulations and the Medicines Act 1971. This license will continue to remain in force from the date of issue by the Licensing Authority unless cancelled, suspended, revoked or varied as to the period of its validity or relinquished by the authorization holder.
On February 1, 2019, the Hellenic Ministry of Health and the National Organization for Medicines extended the validity of Cosmofarm’s license for the wholesale of pharmaceutical products for human use for a period of five years and pursuant to the EU directive of (2013/C 343/01).
| F-7 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Corporate History and Structure
Cosmos Holdings, Inc. was incorporated in the State of Nevada under the name Prime Estates and Developments, Inc. on July 21, 2009. On November 14, 2013, we changed our name to Cosmos Holdings, Inc.
On September 27, 2013, the Company, closed a reverse merger 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. Pursuant to a Share Exchange Agreement between the Registrant and Amplerissimo Ltd., a company incorporated in Cyprus (“Amplerissimo”), the Company acquired 100% of Amplerissimo’s issued and outstanding common stock. As a result of the reverse take-over transaction, Amplerissimo became a wholly owned subsidiary of the Company.
On August 1, 2014, the Company, through its Cypriot subsidiary Amplerissimo, formed SkyPharm S.A., a Greek Company (“SkyPharm”), a subsidiary that focuses on the trading, sourcing and distribution of pharmaceutical products.
In February 2017, the Company completed the acquisition of Decahedron Ltd., a UK Company (“Decahedron”) consummating the transactions contemplated by the Stock Purchase Agreement, dated November 17, 2016 as amended (the “Decahedron SPA”). Pursuant to the terms of the Decahedron SPA, the shareholders of Decahedron received an aggregate of 170,000 shares of common stock of the Company (the “Stock Consideration”), which were delivered following the closing in exchange for all of the ordinary shares of Decahedron for the stock consideration. Decahedron is a fully licensed wholesaler of pharmaceutical products and its primary activity is the distribution, import and export of pharmaceuticals.
On November 21, 2017, the Company effected a one-for-ten (1:10) reverse stock split whereby the Company decreased, by a ratio of one-for-ten (1:10) the number of issued and outstanding shares of common stock. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, and warrants including all share and per-share data, for all amounts and periods presented in the consolidated financial statements.
On September 29, 2018, Amplerissimo transferred its remaining 22% investment in SkyPharm to the Company. The Company now holds 100% of the capital of SkyPharm as a wholly-owned subsidiary of the Company. On September 30, 2018, the Company entered into a Share Purchase Agreement with an unaffiliated third party and sold 100% of the issued capital of its subsidiary, Amplerissimo.
On December 19, 2018, the Company completed the purchase of all of the capital stock of Cosmofarm Ltd., a pharmaceutical wholesaler based in Athens, Greece. The principal of the selling shareholder is Panagiotis Kozaris, who remained with Cosmofarm as a director and chief operating officer once it became a wholly owned subsidiary of the Company. Grigorios Siokas, the Company’s CEO, became the new CEO of Cosmofarm. Mr. Kozaris had no prior relationship to the Company other than as an independent shareholder. The purchase price payable is €200,000 evidenced by a promissory note.
Going Concern
The Company’s consolidated financial statements are prepared in conformity with U.S. GAAP, which contemplates the continuation of the Company as a going concern. For the year ended December 31, 2020, the Company had revenue of $55,406,337, net income of $820,786 and net cash used in operations of $11,501,718. Additionally, as of December 31, 2020, the Company had working capital of $5,979,870, an accumulated deficit of $18,750,824, and stockholders’ deficit of $4,161,013. It is management’s opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the date of this filing.
| F-8 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
During the fiscal year, the Company has undergone strategic review processes to help find a definitive solution to the Company's accumulated deficit constraints. Options under consideration in the strategic review process include, but are not limited to, securing new debt, exchange debt to equity, restructuring current debt facilities from short term to long term and making the proper actions for new fund raising.
The consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.
The Company has adequate cash from operations in order to cover its operating costs and to continue at a going concern basis. Nevertheless, the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund its operations. If the Company is unable to obtain adequate capital, it could be forced to cease development of operations.
In order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations, the Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include raising additional capital through increased sales of product and by sale of equity and/or debt. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described herein and eventually secure other sources of financing and attain profitable operations.
Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
The accompanying consolidated financial statements have been prepared in accordance with principles generally accepted in the United States of America.
Principles of Consolidation
Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries, SkyPharm S.A., Decahedron Ltd. and Cosmofarm Ltd. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Effects of COVID-19
Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of April 15, 2021, the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
| F-9 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Foreign Currency Translation and Other Comprehensive Income (Loss)
The functional currency of the Company’s subsidiaries is the Euro and British Pound. For financial reporting purposes, both the Euro (“EUR”) and British Pound (“GBP”) have been translated into United States dollars ($) and/or (USD) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive loss as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of EUR or GBP to USD after the balance sheet date.
Other Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included in the consolidated results of operations as incurred.
As of December 31, 2020 and 2019, the exchange rates used to translate amounts in Euros into USD and British Pounds into USD for the purposes of preparing the consolidated financial statements were as follows:
|
|
| December 31, 2020 |
|
| December 31, 2019 |
| ||
| Exchange rate on balance sheet dates |
|
|
|
|
|
| ||
| EUR: USD exchange rate |
|
| 1.2230 |
|
|
| 1.1227 |
|
| GBP: USD exchange rate |
|
| 1.3662 |
|
|
| 1.3185 |
|
|
|
|
|
|
|
|
|
|
|
| Average exchange rate for the period |
|
|
|
|
|
|
|
|
| EUR: USD exchange rate |
|
| 1.1410 |
|
|
| 1.1194 |
|
| GBP: USD exchange rate |
|
| 1.2829 |
|
|
| 1.2767 |
|
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2020 and December 31, 2019, there were no cash equivalents.
The Company maintains bank accounts in the United States denominated in U.S. Dollars and in Greece and in Bulgaria all of which are denominated in Euros. Additionally, the Company maintains a bank account in the United Kingdom denominated in British Pounds. As of December 31, 2020, the amounts in these accounts were $448,659, $134,935 and $1,651. As of December 31, 2019, the amounts in these accounts were $14,451, $10,987 and $4,080. Additionally, as of December 31, 2020 and 2019, the Company had cash on hand in the amount of $31,604 and $52,489, respectively.
Reclassifications to Prior Period Financial Statements and Adjustments
Certain reclassifications have been made in the Company’s financial statements of the prior period to conform to the current year presentation. $4,381 in other investments for the year ended December 31, 2019 was reclassified to other current assets. $800,164 in accounts payable and accrued expenses was reclassified to accrued interest. For the year ended December 31, 2019, $264 in interest expense – related parties was reclassified to interest expense. Additionally, for the year ended December 31, 2019, $234,037, respectively in sales and marketing expenses were reclassified from general and administrative expenses. These reclassifications have no impact on previously reported net loss.
| F-10 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Accounts Receivable, net
Accounts receivable are stated at their net realizable value. The allowance for doubtful accounts against gross accounts receivable reflects the best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. At December 31, 2020 and 2019, the Company’s allowance for doubtful accounts was $715,845 and $529,252, respectively.
Tax Receivables
The Company pays Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of its business in most of the countries in which it operates related to the procurement of merchandise and/or services it acquires and/or on sales and taxable income. The Company also collects VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services it sells. If the output VAT exceeds the input VAT, this creates a VAT payable to the government. If the input VAT exceeds the output VAT, this creates a VAT receivable from the government. The VAT tax return is filed on a monthly basis offsetting the payables against the receivables. In observance of EU regulations for intra-EU cross-border sales, our subsidiaries in Greece, SkyPharm and Cosmofarm, do not charge VAT for sales to wholesale drug distributors registered in other European Union member states. As of December 31, 2020 and 2019, the Company had a VAT net payable balance of $159,198 and $136,891 respectively, recorded in the consolidated balance sheet as prepaid expenses and other current assets.
Inventory
Inventory is stated at net realizable value using the weighted average method. Inventory consists primarily of finished goods and packaging materials, i.e. packaged pharmaceutical products and the wrappers and containers they are sold in. A periodic inventory system is maintained by 100% count. Inventory is replaced periodically to maintain the optimum stock on hand available for immediate shipment.
The Company writes-down inventories to net realizable value based on physical condition, expiration date, current market conditions, as well as forecasted demand. The Company’s inventories are not highly susceptible to obsolescence. Many of the Company’s inventory items are eligible for return to our suppliers when pre-agreed product requirements, including, but not limited to, physical condition and expiration date, are not met.
Property and Equipment, net
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided on a straight-line basis over the useful lives (except for leasehold improvements which are depreciated over the lesser of the lease term or the useful life) of the assets as follows:
|
| Estimated Useful Life | |||
| Leasehold improvements and technical works |
| Lesser of lease term or 40 years | ||
| Vehicles |
| 6 years | ||
| Machinery |
| 20 years | ||
| Furniture, fixtures and equipment |
| 5–10 years |
| |
| Computers and software |
| 3-5 years | ||
Depreciation expense was $240,886 and $201,000 for the years ended December 31, 2020 and 2019, respectively.
| F-11 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Impairment of Long-Lived Assets
In accordance with ASC 360-10, Long-lived Assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. For the years ended December 31, 2020 and 2019, the Company had no impairment of long-lived assets.
Goodwill and Intangibles, net
The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.
On December 19, 2018, as a result of the acquisition of Cosmo farm, the Company recorded $49,697 of goodwill.
Intangible assets with definite useful lives are recorded on the basis of cost and are amortized on a straight-line basis over their estimated useful lives. The Company uses a useful life of 5 years for an import/export license. The Company evaluates the remaining useful life of intangible assets annually to determine whether events and circumstances warrant a revision to the remaining amortization period. If the estimate of the intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized prospectively over that revised remaining useful life. As of December 31, 2020, no revision to the remaining amortization period of the intangible assets was made.
Amortization expense was $33,176 and $33,086 for the years ended December 31, 2020 and 2019, respectively.
Equity Method Investment
For those investments in common stock or in-substance common stock in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, the investment is accounted for under the equity method. The Company records its share in the earnings of the investee and is included in “Equity earnings of affiliate” in the consolidated statement of operations. The Company assesses its investment for other-than-temporary impairment when events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable and recognizes an impairment loss to adjust the investment to its then current fair value.
| F-12 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Investments in Equity Securities
Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01, and accordingly, investments in equity securities are accounted for at fair value with changes in fair value recognized in net income. Equity securities are classified as short-term or long-term based on the nature of the securities and their availability to meet current operating requirements. Equity securities that are readily available for use in current operations are reported as a component of current assets in the accompanying consolidated balance sheets. Equity securities that are not considered available for use in current operations would be reported as a component of long-term assets in the accompanying consolidated balance sheets. For equity securities with no readily determinable fair value, the Company elects a measurement alternative to fair value. Under this alternative, the Company measures the investments at cost, less any impairment, and adjusted for changes resulting from observable price changes in transactions for identical or similar investments of the investee. The election to use the measurement alternative is made for each eligible investment.
As of December 31, 2020, investments consisted of 3,000,000 shares, which traded at a closing price of $0 per share or a value of $0 of ICC International Cannabis Corp., 40,000 shares which traded at a closing price of $5.45 per share, or value of $218,183 of Diversa S.A. and 16,666 shares which traded at a closing price of $0.28 per share or value of $4,609 of National Bank of Greece. Additionally, the Company has $4,772 in equity securities of Pancreta bank, which are not publicly traded and recorded at cost. See Note 2, for additional investments in equity securities.
Fair Value Measurement
The Company applies FASB ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
The following table presents assets that are measured and recognized at fair value as of December 31, 2020 and 2019, on a recurring basis:
|
|
| December 31, 2020 |
|
| Total Carrying |
| ||||||||||
|
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
| Marketable securities – ICC International Cannabis Corp. |
| $ | - |
|
|
| - |
|
|
| - |
|
| $ | - |
|
| Marketable securities – Divsersa S.A. |
|
| 218,183 |
|
|
| - |
|
|
| - |
|
|
| 218,183 |
|
| Marketable securities – National Bank of Greece |
|
| 4,609 |
|
|
| - |
|
|
| - |
|
|
| 4,609 |
|
|
|
| $ | 222,792 |
|
|
|
|
|
|
|
|
|
| $ | 222,792 |
|
| F-13 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
|
|
| December 31, 2019 |
|
| Total Carrying |
| ||||||||||
|
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
| Marketable securities – ICC International Cannabis Corp. |
| $ | 33,000 |
|
|
| - |
|
|
| - |
|
| $ | 33,000 |
|
| Marketable securities – Divsersa S.A. |
|
| 200,290 |
|
|
| - |
|
|
| - |
|
|
| 200,290 |
|
| Marketable securities – National Bank of Greece |
|
| 5,650 |
|
|
| - |
|
|
| - |
|
|
| 5,650 |
|
|
|
| $ | 238,940 |
|
|
|
|
|
|
|
|
|
| $ | 238,940 |
|
FASB ASC 825-10-25 Fair Value Option, (“ASC 825-10-25”), expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.
Derivative Instruments
Derivative financial instruments are recorded in the accompanying consolidated balance sheets at fair value in accordance with ASC 815. When the Company enters into a financial instrument such as a debt or equity agreement (the “host contract”), the Company assesses whether the economic characteristics of any embedded features are clearly and closely related to the primary economic characteristics of the remainder of the host contract. When it is determined that (i) an embedded feature possesses economic characteristics that are not clearly and closely related to the primary economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would meet the definition of a financial derivative instrument, then the embedded feature is bifurcated from the host contract and accounted for as a derivative instrument. The estimated fair value of the derivative feature is recorded in the accompanying consolidated balance sheets separately from the carrying value of the host contract. Subsequent changes in the estimated fair value of derivatives are recorded as a gain or loss in the Company’s consolidated statements of operations.
Customer Advances
The Company receives prepayments from certain customers for pharmaceutical products prior to those customers taking possession of the Company’s products. The Company records these receipts as customer advances until it has met all the criteria for recognition of revenue including passing control of the products to its customer, at such point, the Company will reduce the customer and deposits balance and credit the Company’s revenues.
Revenue Recognition
In accordance with ASC 606, Revenue from Contracts with Customers, the Company uses a five-step model for recognizing revenue by applying the following steps: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the performance obligations are satisfied by transferring the promised goods to the customer. Once these steps are met, revenue is recognized upon delivery of the product.
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”) and Staff Accounting Bulletin No. 107 (“SAB 107”) issued by the SEC in March 2005 regarding its interpretation of ASC 718. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite service period. The Company values any employee or non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.
The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASU 2018-07, “Compensation-Stock Compensation-Improvements to Nonemployee Share-Based Payment Accounting.”
| F-14 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Foreign Currency Translations and Transactions
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 earnings.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash investments and accounts receivable.
The following tables show the number of the Company’s clients which contributed 10% or more of revenue and accounts receivable, respectively:
|
|
| Year Ended December 31, |
|
| Year Ended December 31, |
| ||
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Number of 10% clients |
|
| 1 |
|
|
| 0 |
|
| Percentage of total revenue |
|
| 14.82 | % |
|
| n/a |
|
| Percentage of total AR |
|
| 14.65 | % |
|
| n/a |
|
Income Taxes
The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes ASC 740. Under this method, deferred tax assets and liabilities are 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, as well as net operating loss carry forwards. 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 recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company is liable for income taxes in Greece and the United Kingdom of England. The corporate income tax rate is 24% in Greece (tax losses are carried forward for five years effective January 1, 2013) and 19% in United Kingdom of England. Losses may also be subject to limitation under certain rules regarding change of ownership.
| F-15 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Our review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets. At December 31, 2020 the Company has maintained a valuation allowance against all net deferred tax assets in each jurisdiction in which it is subject to income tax.
The Company periodically reviews the uncertainties and judgments related to the application of complex income tax regulations to determine income tax liabilities in several jurisdictions. The Company uses a “more likely than not” criterion for recognizing the income tax benefit of uncertain tax positions and establishing measurement criteria for income tax benefits. The Company has evaluated the impact of these positions and due to the fact that the fiscal years 2013 - 2014 are unaudited by the Greek tax authorities, a potential tax liability has not been identified because there is a limitation on periods that the Tax authorities can audit retrospectively 5 years prior to the current fiscal year. Therefore, no prospective tax audit from tax authorities may arise. The amount of the liability as of December 31, 2020 and 2019, was $0 and $79,716, respectively, and has been excluded from recording as a long-term liability within the consolidated balance sheets.
Retirement and Termination Benefits
Under Greek labor law, employees are entitled to lump-sum compensation in the event of termination or retirement. The amount depends on the employee’s work experience and renumeration as of the day of termination or retirement. If an employee remains with the company until full-benefit retirement, the employee is entitled to a lump-sum equal to 40% of the compensation to be received if the employee were to be dismissed on the same day. The Company periodically reviews the uncertainties and judgements related to the application of the relevant labor law regulations to determine retirement and termination benefits obligations of its Greek subsidiaries. The Company has evaluated the impact of these regulations and has identified a potential retirement and termination benefits liability. The amount of the liability as of December 31, 2020 and December 31, 2019, was $107,167 and $77,170, respectively, and has been recorded as a long-term liability within the consolidated balance sheets.
Basic and Diluted Net Income (Loss) per Common Share
Basic income per share is calculated by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per share is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method. In accordance with ASC 260, Earnings Per Share, the following table reconciles basic shares outstanding to fully diluted shares outstanding.
|
|
| Years Ended December 31, |
| |||||
|
|
| 2020 |
|
| 2019 |
| ||
| Weighted average number of common shares outstanding Basic |
|
| 13,270,097 |
|
|
| 13,273,596 |
|
| Potentially dilutive common stock equivalents |
|
| 37,698 |
|
|
| - |
|
| Weighted average number of common and equivalent shares outstanding – Diluted |
|
| 13,307,795 |
|
|
| 13,273,596 |
|
Common stock equivalents are included in the diluted income per share calculation only when option exercise prices are lower than the average market price of the common shares for the period presented.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective January 1, 2024, for the Company. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
| F-16 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
NOTE 2 –MARKETABLE SECURITIES
Distribution and Equity Agreement
On March 19, 2018, the Company entered into a Distribution and Equity Acquisition Agreement (the “Distribution and Equity Acquisition Agreement”) with Marathon Global Inc. (“Marathon”), a company incorporated in the Province of Ontario, Canada. Marathon was formed to be a global supplier of cannabis, cannabidiol (CBD) and/or any cannabis extract products, extracts, ancillaries and derivatives (collectively, the “Products”). The Company was appointed the exclusive distributor of the Products initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. The Company has no present intention to distribute any Products under this Agreement in the United States or otherwise participate in cannabis operations in the United States. The Company intends to await further clarification from the U.S. Government on cannabis regulation prior to determining whether to enter the domestic market.
The Distribution and Equity Acquisition Agreement is to remain in effect indefinitely unless Marathon fails to provide Market Competitive (as defined) product pricing and Marathon has not become profitable within five (5) years of the agreement. The transaction closed on May 22, 2018 after the due diligence period, following which the Company received: (a) a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services; and (b) received cash of CAD $2,000,000, subject to repayment in common shares of the Company if it fails to meet certain performance milestones. The Company is entitled to receive an additional CAD $2,750,000 upon the Company’s receipt of gross sales of CAD $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000. The Company was also given the right to nominate one director to the Marathon board of directors.
Since Marathon is a newly formed entity with no assets and no activity, the Company attributed no value to the 5 million shares in Marathon which was received as consideration for the distribution services. As described below, the Company exchanged the Marathon shares in May and July 2018.
Share Exchange Agreements
On May 17, 2018, the Company entered into a Share Exchange Agreement (the “SEA”) with Marathon, ICC International Cannabis Corp (“ICC”) formerly known as Kaneh Bosm Biotechnology Inc. (“KBB”) and certain other sellers of Marathon capital stock. Under the SEA, the Company transferred 2.5 million shares in Marathon to ICC, a Company incorporated under the laws of the Province of British Columbia and a public reporting issuer on the Canadian Securities Exchange, in exchange for 5 million shares of ICC. The Company accounted for the exchange at fair value and recognized a gain on exchange of its investment in Marathon of $1,953,000 included in “Gains on exchange of equity investments” in the consolidated statements of operations.
On July 16, 2018, the Company completed a Share Exchange Agreement (the “New SEA”) with Marathon, ICC, and certain other sellers of Marathon capital stock whereby the Company transferred its remaining one-half interest (2.5 million shares) in Marathon to KBB for an additional 5 million shares of ICC. The Company accounted for the exchange at fair value and recognized a gain on exchange of its investment in Marathon of $2,092,200 in the year ended December 31, 2018. The ten million shares of ICC owned by the Company constituted approximately 7% of the 141,219,108 shares of capital stock of KBB then issued and outstanding. The Company does not have the ability to exercise significant influence over ICC.
The Company determined the fair value of both exchanges based on an actively quoted stock price of ICC received in exchange for the Marathon shares. The Company continues to fair value its investment in ICC with changes recognized in earnings each period and was recorded as an unrealized gain on exchange of investment during the nine months ended December 31, 2020 of $13,500. The value of the investments as of December 31, 2020 and December 31, 2019, was $0 and $33,000, respectively.
| F-17 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Since no value was attributed to the 33 1/3% equity ownership interest in Marathon received as consideration for the distribution services, the Company would receive variable consideration in future for its services under the Distribution and Equity Acquisition Agreement, if certain milestones are achieved. Refer to Note 10 for the accounting associated with the cash of CAD $2 million received upfront. Variable consideration to be received in the future upon achieving the gross sales milestones described above, is constrained as the Company estimates that it is probable that a significant reversal of revenue could occur. In assessing the constraint, the Company considered its limited experience with the Products, new geographic markets and similar transactions, which affect the Company’s ability to estimate the likelihood of a probable revenue reversal. Therefore, no revenue has been recognized for the years ended December 31, 2020 and 2019. The Company will continue to reassess variable consideration at each reporting period and update the transaction price when it becomes probable that a significant revenue reversal would not occur.
As of December 31, 2020, in addition to the 3,000,000 ICC shares valued at $0, as noted above, marketable securities also consisted of the following: 40,000 shares which traded at a closing price of $5.45 per share, or value of $218,183 of Diversa S.A. and 16,666 shares which traded at a closing price of $0.28 per share or value of $4,609 of National Bank of Greece. The Company recorded a net unrealized loss on the fair value of these investments of $2,246 during the year ended December 31, 2020.
CosmoFarmacy LP
In June 2019, the Company entered into an agreement with an unaffiliated third party to incorporate CosmoFarmacy L.P. for the purpose of providing strategic management consulting services and the retail trade of pharmaceutical products, OTC and beauty products to pharmacies. CosmoFarmacy was incorporated with a 30-year term through May 31, 2049. The unaffiliated third party is the general partner (the “GP”) of the limited partnership and is responsible for management and decision-making associated with CosmoFarmacy. The initial share capital was set to EUR 150,000 which was later increased to EUR 500,000. The GP contributed the pharmacy license (the “License”) valued at EUR 350,000 (30-year term) to operate the business of CosmoFarmacy in exchange for a 70% equity ownership. The Company is a limited partner and contributed cash of EUR 150,000 for the remaining 30% equity ownership. CosmoFarmacy is not publicly traded and the Company’s investment has been recorded using the equity method of accounting. The value of the investment as of December 31, 2020 and 2019, was $183,450 and $163,575, respectively, and is included in “Other assets” on the Company’s consolidated balance sheet.
During the year ended December 31, 2019, the Company recognized a cash balance of $221,457 related to its acquisition of Cosmofarm. The cash was used to purchase the investment in CosmoFarmacy described above. Since the accounting for the acquisition of Cosmofarm was completed during the year ended December 31, 2018, the Company recognized the asset through earnings and is included in other income within the condensed consolidated statement of operations for the year ended December 31, 2019.
NOTE 3 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net consists of the following at December 31:
|
|
| 2020 |
|
| 2019 |
| ||
| Leasehold improvements |
| $ | 560,711 |
|
| $ | 548,000 |
|
| Vehicles |
|
| 105,057 |
|
|
| 115,055 |
|
| Furniture, fixtures and equipment |
|
| 1,632,654 |
|
|
| 1,439,839 |
|
| Computers and software |
|
| 149,005 |
|
|
| 85,052 |
|
|
|
|
| 2,447,427 |
|
|
| 2,187,946 |
|
| Less: Accumulated depreciation |
|
| (690,214 | ) |
|
| (453,165 | ) |
| Total |
| $ | 1,757,213 |
|
| $ | 1,734,781 |
|
| F-18 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
NOTE 4 – GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill and intangible, net assets consist of the following at December 31,:
|
|
| 2020 |
|
| 2019 |
| ||
| License |
| $ | 50,000 |
|
| $ | 50,000 |
|
| Trade name /mark |
|
| 36,997 |
|
|
| 36,997 |
|
| Customer Base |
|
| 176,793 |
|
|
| 176,793 |
|
|
|
|
| 263,790 |
|
|
| 263,790 |
|
| Less: Accumulated amortization |
|
| (82,981 | ) |
|
| (49,806 | ) |
| Subtotal |
|
| 180,809 |
|
|
| 213,984 |
|
| Goodwill |
|
| 49,697 |
|
|
| 49,697 |
|
| Total |
| $ | 230,506 |
|
| $ | 263,681 |
|
NOTE 5 – CAPITAL STRUCTURE
Preferred Stock
The Company is authorized to issue 100 million shares of preferred stock, which have liquidation preference over the common stock and are non-voting. As of December 31, 2020 and 2019, no preferred shares have been issued.
Common Stock
The Company is authorized to issue 300 million shares of common stock. As of December 31, 2020 and 2019, the Company had 13,485,128 and 13,325,587 shares of our common stock issued and 13,069,800 and 12,860,059 shares outstanding, respectively.
On January 7, 2019 and February 5, 2019, 465,325 and 108,417, respectively, shares of common stock were cancelled, these shares were the remaining pre-delivery shares related to the convertible notes in Note 9.
Purchase of Treasury Shares
On November 30, 2018, the Company entered into a stock purchase agreement with an officer and director of the Company, whereby for consideration of $60,000, the Company repurchased 20,000 shares of its common stock at $3.00 per share. As per the agreement, the sale and transfer of the shares occurred on November 30, 2018, the date of signing, however the Company is entitled to pay the full consideration in tranches until August 2019. During the year ended December 31, 2018, the Company paid consideration of $11,317 and had a related party payable of $48,683, which was paid in full during the year ended December 31, 2019.
On February 5, 2019, the Company entered into a Stock Purchase Agreement (the “SPA”) with an institutional noteholder. The SPA provides for the Company’s purchase of 193,408 shares of the Company’s common stock at $3.00 per share or an aggregate of $580,224. Payment was scheduled over a five-month period, subject to acceleration if the Company effects an eligible equity offering. As of December 31, 2019, the Company had made $580,224 in payments. All of the 193,408 shares have been transferred back to the Company and cancelled.
| F-19 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
On February 18, 2019, the Company entered into a Stock Purchase Agreement (the “SPA”) with an institutional noteholder. The SPA provides for the Company’s purchase of 83,341 shares of the Company’s common stock at $3.00 per share or an aggregate of $250,023. Payment was scheduled over a five-month period, subject to acceleration, if the Company effects an eligible equity offering. As of December 31, 2019, the Company had made $250,023 in payments. 26,221 shares were transferred back to the Company and subsequently cancelled. The additional 57,120 were transferred to the Company, have not yet been cancelled, and are recorded in treasury.
On June 20, 2019, the Company entered into a stock purchase agreement with a former officer and director of Decahedron, whereby for consideration of $15,000, the Company repurchased 114,518 shares of its common stock. As per the agreement, the sale and transfer of the shares occurred on June 20, 2019, the date of signing. During the year ended December 31, 2019, the Company paid consideration of $15,000.
On July 31, 2020, the Company entered into a Stock Purchase Agreement (the “July SPA”) with a shareholder. The July SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. As of December 31, 2020, the Company made $40,000 in payments.
On August 31, 2020, the Company entered into two Stock Purchase Agreements (the “August SPAs”) with a shareholder. The August SPAs provide for the Company’s purchase of an aggregate total of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. As of December 31, 2020, the Company made $40,000 in payments.
On September 30, 2020, the Company entered into a Stock Purchase Agreement (the “July SPA”) with a shareholder. The July SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. As of December 31, 2020, the Company made $40,000 in payments.
On October 31, 2020, the Company entered into a Stock Purchase Agreement (the “July SPA”) with a shareholder. The July SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. As of December 31, 2020, the Company made $40,000 in payments.
On November 30, 2020, the Company entered into a Stock Purchase Agreement (the “July SPA”) with a shareholder. The July SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. As of December 31, 2020, the Company made $40,000 in payments.
Potentially Dilutive Securities
No options warrants or other potentially dilutive securities other than those disclosed above have been issued as of December 31, 2020.
NOTE 6 – INCOME TAXES
The domestic and foreign components of income (loss) before (benefit) provision for income taxes were as follows (in thousands):
|
|
| 12/31/2020 |
|
| 12/31/2019 |
| ||
| Domestic |
| $ | (2,901,276 | ) |
| $ | (2,515,360 | ) |
| Foreign |
|
| 4,099,597 |
|
|
| (600,790 | ) |
|
|
| $ | 1,198,321 |
|
| $ | (3,116,150 | ) |
| F-20 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
The components of the (benefit) provision for income taxes are as follows (in thousands):
|
|
| 12/31/2020 |
|
| 12/31/2019 |
| ||
| Current tax provision |
|
|
|
|
|
| ||
| Federal |
| $ | - |
|
| $ | - |
|
| State |
|
| - |
|
|
| - |
|
| Foreign |
|
| 555,965 |
|
|
| 182,815 |
|
| Total current tax provision |
| $ | 555,965 |
|
| $ | 182,815 |
|
|
|
|
|
|
|
|
|
|
|
| Deferred tax provision |
|
|
|
|
|
|
|
|
| Domestic |
| $ | - |
|
| $ | - |
|
| State |
|
| - |
|
|
| - |
|
| Foreign |
|
| (178,430 | ) |
|
| - |
|
| Total deferred tax provision |
| $ | (178,430 | ) |
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Total current provision |
| $ | 377,535 |
|
| $ | 182,815 |
|
The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2020 and 2019 is as follows:
|
|
| 12/31/2020 |
|
| 12/31/2019 |
| ||
| US |
|
|
|
|
|
| ||
| Income (loss) before income taxes |
| $ | 1,198,321 |
|
| $ | (3,116,150 | ) |
| Taxes under statutory US tax rates |
| $ | 251,647 |
|
| $ | (654,391 | ) |
| Increase (decrease) in taxes resulting from: |
|
|
|
|
|
|
|
|
| Increase in valuation allowance |
| $ | 216,518 |
|
| $ | 1,521,175 |
|
| Foreign tax rate differential |
| $ | (55,540 | ) |
| $ | 9,028 |
|
| Permanent differences |
| $ | (218,216 | ) |
| $ | 94,520 |
|
| US tax on foreign income |
| $ | 604,419 |
|
| $ | - |
|
| Prior period adjustments |
| $ | (97,829 | ) |
| $ | (713,466 | ) |
| State taxes |
| $ | (323,464 | ) |
| $ | (74,051 | ) |
| Income tax expense |
| $ | 377,535 |
|
| $ | 182,815 |
|
| F-21 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consist of the following:
|
|
| 12/31/2020 |
|
| 12/31/2019 |
| ||
| Net operating loss carryforward |
| $ | 1,494,424 |
|
| $ | 1,270,650 |
|
| Capital loss carryforward |
|
| 801,744 |
|
|
| 801,744 |
|
| Nonqualified stock options |
|
| 170,297 |
|
|
| 184,545 |
|
| Accrued expenses |
|
| 7,389 |
|
|
| 7,389 |
|
| Lease liability |
|
| 247,797 |
|
|
| - |
|
| Gain on extinguishment of debt |
|
| 179,958 |
|
|
| - |
|
| Depreciation |
|
| 4,226 |
|
|
| 2,418 |
|
| Mark to market adjustment in securities |
|
| 357,829 |
|
|
| 348,422 |
|
| Total deferred tax assets |
|
| 3,263,664 |
|
|
| 2,615,168 |
|
|
|
|
|
|
|
|
|
|
|
| Intangibles |
|
| (10,729 | ) |
|
| (10,729 | ) |
| Right of use asset |
|
| (253,818 | ) |
|
|
|
|
| Goodwill |
|
| (14,473 | ) |
|
| (14,473 | ) |
| Total deferred tax liabilities |
|
| (279,020 | ) |
|
| (25,202 | ) |
| Valuation allowance |
|
| (2,806,214 | ) |
|
| (2,589,966 | ) |
| Net deferred tax assets (liabilities) |
| $ | 178,430 |
|
| $ | - |
|
At December 31, 2020, the Company had U.S. net operating loss ("NOL") carryforwards of approximately 4,112,907 that may be offset against future taxable income, subject to limitation under IRC Section 382. Of the $4.1 million Federal NOL carryforwards, $2.5 million are pre-2018 and begin to expire in 2031. The remaining balance of $1.6 million, are limited to utilization of 80% of taxable income but do not have an expiration. At December 31, 2020, the Company had fully utilized all non-US NOL carryforwards. A tax benefit has been reported in the December 31, 2020 for the release of the non-US valuation allowance, based on a more likely than not criterion and in consideration of all available positive and negative evidence.
The Company applied the “more-likely-than-not” recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in no unrecognized tax benefits as of December 31, 2020 and December 31, 2019, respectively.
NOTE 7 – RELATED PARTY TRANSACTIONS
On the date of our inception, we issued 2 million shares of our common stock to our three officers and directors which were recorded at no value (offsetting increases and decreases in common stock and additional paid-in capital).
| F-22 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Doc Pharma S.A.
As of December 31, 2020, the Company has a prepaid balance of $3,468,653 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $3,468,564. As of December 31, 2019, the Company has a prepaid balance of $2,449,484 and an accounts payable balance of $25,346, resulting in a net prepaid balance of $2,424,138 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $613,264.
During the years ended December 31, 2020 and 2019, the Company purchased a total of $5,983,809 and $3,464,725 of products from Doc Pharma S.A., respectively. During the years ended December 31, 2020 and 2019 the Company had $2,843,260 and $873,041 revenue from Doc Pharma S.A., respectively.
Doc Pharma S.A is considered a related party to the Company due to the fact that the CEO of Doc Pharma is the wife of Grigorios Siokas, the Company’s CEO and principal shareholder, who also served as a principal of Doc Pharma S.A. in the past.
Notes Payable – Related Party
A summary of the Company’s related party notes payable during the years ended December 31, 2020 and 2019 is presented below:
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Beginning Balance |
| $ | 1,375,532 |
|
| $ | 1,793,437 |
|
| Payments |
|
| (996,136 | ) |
|
| (382,055 | ) |
| Foreign currency translation |
|
| 122,279 |
|
|
| (35,850 | ) |
| Ending Balance |
| $ | 501,675 |
|
| $ | 1,375,532 |
|
Grigorios Siokas
On December 20, 2018, the €1,500,000 ($1,718,400) note payable, originally borrowed pursuant to a Loan Agreement with a third-party lender, dated March 16, 2018, was transferred to Grigorios Siokas. The note bears an interest rate of 4.7% per annum and matured on March 18, 2019 pursuant to the original agreement. The note is not in default and the maturity date has been extended until December 31, 2021. As of December 31, 2019, the note had an outstanding principal balance of €1,200,000 ($1,347,240) and accrued interest of €144,207 ($128,447). During the year ended December 31, 2020 the Company repaid €800,000 ($978,400). As of December 31, 2020, the Company has an outstanding balance of €400,000 ($489,200) and accrued interest of €158,287 ($193,585).
Grigorios Siokas is the Company’s CEO and principal shareholder.
Dimitrios Goulielmos
On November 21, 2014, the Company entered into an agreement with Dimitrios Goulielmos, as amended on November 4, 2016. Pursuant to the amendment, this loan has no maturity date and is non-interest bearing. During the year ended December 31, 2019, the Company repaid €40,300 ($45,245) and a principal balance of €13,200 ($14,820) remained as of December 31, 2019. During the year ended December 31, 2020, the Company repaid €3,000 ($3,669) and a principal balance of €10,200 ($12,475) remained as of December 31, 2020.
Dimitrios Goulielmos is a current director and former CEO of the Company.
| F-23 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
DOC Pharma S.A.
On November 1, 2015, the Company entered into a €12,000 ($12,662) Loan Agreement with Doc Pharma S.A, pursuant to which Doc Pharma S.A., paid existing bills of the Company in the amount of €12,000 ($12,662), excluding the Vendor Bills. The loan bears an interest rate of 2% per annum and was due and payable in full on October 31, 2016. As of December 31, 2019, the Company has an outstanding principal balance of €12,000 ($13,472) and accrued interest expense of $1,100. On December 18, 2020, the Company repaid the principal of this loan. As of December 31, 2020, the Company has an outstanding principal balance of $0 and accrued interest expense of $1,364.
The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2020 and 2019, the Company recorded a foreign currency translation gain of $122,279 and a loss of $35,850 respectively.
Loans Payable – Related Party
A summary of the Company’s related party loans payable during the years ended December 31, 2020 and 2019 is presented below:
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Beginning Balance |
| $ | 1,026,264 |
|
| $ | 1,775,251 |
|
| Proceeds |
|
| 725,563 |
|
|
| 585,915 |
|
| Payments |
|
| (149,695 | ) |
|
| (262,226 | ) |
| Conversion of debt |
|
| - |
|
|
| (1,050,000 | ) |
| Reclassification of receivable |
|
| - |
|
|
| 2,547 |
|
| Foreign currency translation |
|
| 27,114 |
|
|
| (25,223 | ) |
| Ending Balance |
| $ | 1,629,246 |
|
| $ | 1,026,264 |
|
Grigorios Siokas
From time-to-time Grigorios Siokas loans the Company funds in the form of non-interest bearing, no-term loans. As of December 31, 2018, the Company had an outstanding principal balance of $1,777,799, consisting of €1,353,700 ($1,550,799) and $227,000, in loans payable to Grigorios Siokas. During the year ended December 31, 2019, the Company borrowed total additional proceeds of $585,914, repaid €233,567 ($262,226) of these loans and converted $1,050,000 of these loans into 140,001 shares of common stock at a conversion rate of $7.50 per share (see below). As of December 31, 2019, the Company had an outstanding principal balance under these loans of $1,026,264 consisting of €297,314 ($303,502) and $722,762, in loans payable to Grigorios Siokas. During the year ended December 31, 2020, the Company borrowed additional proceeds of €266,200 ($325,563) and $400,000 and repaid €122,400 ($149,695) of these loans. As of December 31, 2020, the Company had an outstanding balance under these loans of $1,629,246.
On May 28, 2019, the Company entered into a Debt Exchange Agreement with Grigorios Siokas. The agreement provided for the issuance by the Company of 66,667 shares of common stock, at the rate of $7.50 per share, or an aggregate of $500,000, in exchange for $500,000 of existing loans by Mr. Siokas to the Company. The Company valued this transaction at fair value and recorded a $259,999 gain on extinguishment of related party debt to additional paid-in capital.
On June 24, 2019, the Company entered into a Debt Exchange Agreement with Grigorios Siokas. The agreement provided for the issuance by the Company of 73,334 shares of common stock, at the rate of $7.50 per share, or an aggregate of $550,000, in exchange for $550,000 of existing loans by Mr. Siokas to the Company. The Company valued this transaction at fair value and recorded a $269,126 gain on extinguishment of related party debt to additional paid-in capital.
The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2020 and 2019, the Company recorded $30,954 and $25,223, respectively.
Except as set forth above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons.
| F-24 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
NOTE 8 – LINES OF CREDIT
A summary of the Company’s lines of credit during the years ended December 31, 2020 and 2019 is presented below:
|
|
| 2020 |
|
| 2019 |
| ||
| National |
| $ | 3,540,550 |
|
| $ | 1,940,045 |
|
| Alpha |
|
| 1,106,894 |
|
|
| 810,947 |
|
| National - COVID |
|
| 429,240 |
|
|
| - |
|
| Total |
| $ | 5,076,684 |
|
| $ | 2,750,992 |
|
The line of credit with National Bank of Greece is being renewed annually with current interest rates of 6.00%, 4.35% (“COSME 2”) and 4.35% (plus the 6-month Euribor plus any contributions currently in force by law on certain lines of credit), (“COSME 1”). The maximum borrowing allowed for the 6% line of credit was $2,690,600 and $1,684,050 at December 31, 2020 and December 31, 2019, respectively for the 6% line of credit. The outstanding balance was $2,411,182 and $973,961 at December 31, 2020 and 2019, respectively.
The maximum borrowing allowed was $1,223,000 and $1,122,700 at December 31, 2020 and December 31, 2019, respectively, for the 4.35% lines of credit. The outstanding balance was $1,129,368 and $966,084 at December 31, 2020 and December 31, 2019, respectively.
The line of credit with Alpha Bank of Greece is renewed annually with a current interest rate of 6.00%. The maximum borrowing allowed was $1,223,000 and $1,122,700 at December 31, 2020 and December 31, 2019, respectively. The outstanding balance was $1,106,894 and $810,947 at December 31, 2020 and December 31, 2019, respectively.
In the year ended December 31, 2018, the Company had a line of credit with Eurobank of Greece which had an interest rate of 8.55% and a maximum borrowing allowed of $572,800. The outstanding balance was $286,829 at December 31, 2018 and was paid back in full during the year ended December 31, 2019.
Interest expense for the year ended December 31, 2020 and 2019, was $270,655 and $85,090, respectively.
Under the agreements, the Company is required to maintain certain financial ratios and covenants. These lines of credit were assumed in the Company’s acquisition of Cosmofarm. During the years ended December 31, 2020 and 2019, the Company was in compliance with these ratios and covenants.
COVID-19 Government Funding
On June 23, 2020, the Company’s subsidiary Cosmofarm M.S. entered into an agreement with the “National Bank of Greece SA” (the “Bank”) to borrow a maximum of €500,000 ($611,500) under a proposed plan which will operate the same as the line of credit above. The proposed plan has a maturity date of sixty (60) months from the date of the first disbursement, which includes a grace period of nine months. The total amount of the initial proceeds were paid in 3 equal monthly installments. The Company received the first disbursement of €390,790 ($483,243) on July 10, 2020, the second disbursement in the amount of €42,385 ($48,639) was received on July 28, 2020 and the final disbursement of €66,825 ($75,091) on August 11, 2020. The line of credit is interest bearing from the date of receipt and is payable every three (3) months at an interest rate of 2.7%. The outstanding balance was $429,240 at December 31, 2020.
Interest expense for year ended December 31, 2020 was $3,910.
| F-25 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
NOTE 9 – CONVERTIBLE DEBT
A summary of the Company’s convertible debt during the years ended December 31, 2020 and 2019 is presented below:
|
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
|
| ||
| Beginning balance notes |
|
| 1,500,000 |
|
|
| 365,513 |
|
| New notes |
|
| 540,000 |
|
|
| 1,500,000 |
|
| Payments |
|
| (593,000 | ) |
|
| (365,513 | ) |
| Subtotal notes |
|
| 1,447,000 |
|
|
| 1,500,000 |
|
| Debt discount at year end |
|
| (494,973 | ) |
|
| (29,509 | ) |
| Convertible debt, net of discount |
|
| 952,027 |
|
|
| 1,470,491 |
|
All of the convertible debt is classified as short-term within the consolidated balance sheet as it all matures and will be paid back within fiscal year 2021.
November 15, 2017 Securities Purchase Agreement
On November 15, 2017, the Company entered into a Securities Purchase Agreement with institutional investors (the “Buyers”), pursuant to which the Company issued on November 16, 2017 for a purchase price of $3,000,000, $3,350,000 in aggregate principal amount of Senior Convertible Notes (the “Existing Notes”) to the Buyers, convertible into approximately 670,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at $5.00 per share and five-year warrants (the “Warrants”) to purchase an aggregate of 536,000 shares of Common Stock exercisable at $7.50 per share. The Notes contained an original issue discount of $350,000. Of the $3,000,000 purchase price, $240,000 went directly to financing costs (see below) and $74,000 went directly to legal fees such that the Company received net proceeds of $2,686,000.
On February 20, 2018, the Company entered into two separate Amendment and Exchange Agreements (“Exchange Agreements”) with the Buyers for new senior convertible notes (“New Notes”) in exchange for existing notes. Each New Note is identical in all material respects to the Existing Note, except that (i) the New Note was not convertible into shares of the Company’s common stock (the “Common Stock”) until April 20, 2018; (ii) all future cash installment payments under such New Note will be made at a redemption price equal to 112% of the applicable installment amount; (iii) the Company’s existing obligation to initially deliver pre-delivery shares of its common stock to the holder of such New Note was deferred until April 20, 2018; and (iv) at any time on or before June 20, 2018, the Company had the right, at its option, to redeem all, or any part, of the amounts then outstanding under such New Note in cash at a redemption price equal to 125% of such amounts then outstanding under such New Note. The Company will repay the principal amount of the Notes in equal monthly installments beginning on January 1, 2018 and repeating on the first business day of each calendar month thereafter until the fourteenth (14th) month anniversary date of issue.
| F-26 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
On September 26, 2018, the Company entered into a second amendment which extended the maturity dates of the notes to February 1, 2019. On April 24, 2018, 670,001 pre-delivery shares were issued. On January 7, 2019 and February 5, 2019, 465,625 and 108,417 pre-delivery shares, respectively, were cancelled upon full payment of both notes. Eighty-five (85%) percent of any cash proceeds received by the holders of the Notes from the sale of pre-delivery shares issued as collateral shall be applied against the particular installment amount then due. The Notes are senior in right of payment to all existing and future indebtedness except Permitted Indebtedness which includes $12 million of senior secured indebtedness of the Company and its subsidiaries under the above described Synthesis loan agreements, plus a defined amount of purchase money indebtedness in connection with bona fide acquisitions. The Company evaluated the debt modification in accordance with ASC 470-50 and concluded that the debt qualified for debt extinguishment as the 10% cash flow test was met. As a result, the Existing Notes were written off and the New Notes were recorded at fair value as of February 20, 2018. The Company wrote off the remaining principal balance of $2,871,429 of the Existing Notes along with the remaining $2,596,838 of debt discounts related to the Existing Notes of which $1,140,711 was a reduction to additional paid-in-capital representing the intrinsic value of the existing beneficial conversion feature. The Company recorded the New Notes in the amount of $3,216,000 and a total debt discount of $3,216,000 in relation to the intrinsic value of the new beneficial conversion feature of $2,880,000 and an original issue discount of $336,000. This resulted in a net loss on extinguishment of debt in the amount of $1,464,698 and additional net equity related to the beneficial conversion feature of $1,739,289.
The New Notes were not convertible until April 18, 2018 pursuant to the February 20, 2018 amendment. Beginning April 20, 2018, the Holder may convert the New Notes into shares of Common Stock at the rate of $5.00 per share. In the event of an issuance of Common Stock for a consideration less than the Conversion Price (other than Excluded Securities, as defined) the Conversion Price shall be reduced to the price of the dilutive issuance, (the “Conversion Price”). Upon an Event of Default (as defined), the Buyers may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the Volume-Weighted Average Price (as defined, the “VWAP”). The Company valued the beneficial conversion feature of the Existing Notes at intrinsic value and recorded $1,140,711 to debt discount, of which $405,743 was amortized through February 19, 2018. On February 20, 2018, the remaining debt discount was written off and the Company recorded a new debt discount as discussed above.
On December 12, 2018, the Company entered into a Third Amendment and Exchange Agreement (“Third Exchange Agreement”) with the Buyers whereby the existing 536,000 warrants issued to such investors in connection with the November 15, 2017 Securities Purchase Agreement were retired in exchange for 727,683 new warrants. Additionally, the investors agreed to convert $1,333,333 of the debt related to the September 4, 2018 Securities Purchase Agreement at a reduced conversion price of $3.478. The Company issued those 383,363 shares on December 13, 2018. The Third Exchange agreement was considered to be an inducement to conversion and accounted for in accordance with ASC 470-20. Accordingly, the Company recorded a modification expense of $1,778,952 for the year ended December 31, 2018.
During the year ended December 31, 2018, there were principal conversions in the amount of $432,419 and the Company repaid principal on the New Notes in the amount of $2,680,000, such that the remaining outstanding principal balance of the New Notes as of December 31, 2018 was $103,610. The Company repaid this remaining balance in the year ended December 31, 2019.
The Company recorded a total of $3,350,000 of debt discounts related to the above Existing Notes in the year ended December 31, 2017. A total of $360,890 was amortized during the year ended December 31, 2017 and an additional $392,272 related to the debt discount of the Existing Notes was amortized through February 19, 2018. As a result of the Exchange Agreement discussed above, the debt discounts of the Existing Notes were written off and a total of $3,216,000 of debt discounts were recorded during the year ended December 31, 2018. The debt discounts are being amortized over the term of the debt. Amortization of the debt discounts of the New Notes for the year ended December 31, 2018 was $3,170,386. The additional $45,613 was amortized in the year ended December 31, 2019.
September 4, 2018 Securities Purchase Agreement
On September 4, 2018, the Company entered into a Securities Purchase Agreement with two institutional investors (the “Buyers”) pursuant to which the Company issued for a purchase price of $2,000,000, $2,233,333 in aggregate principal amount of Senior Convertible Notes (the “September 2018 Notes”) to the Buyers, convertible into 372,223 shares of the Company’s common stock, par value $.001 per share at $6.00 per share (with the exception of the conversion related to the Third Exchange Agreement), and warrants to purchase an aggregate of 357,334 shares of Common Stock exercisable at $7.50 per share (the “Warrants”). The Notes contained an original issue discount of $233,332. Of the $2,000,000 purchase price, $140,000 went directly to financing costs (see below) and $15,000 went directly to legal fees such that the Company received net proceeds of $1,845,000.
| F-27 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
The September 2018 Notes provide that the Company will repay the principal amount of Notes in equal monthly installments including a 5% installment fee, which is recorded as interest expense, beginning on November 1, 2018 and repeating on the first business day of each calendar month thereafter until May 1, 2019. During the year ended December 31, 2018, the Company recorded $31,905 in installment fees. During the year ended December 31, 2019, the Company recorded $13,097 in installment fees.
The Notes were convertible at any time by the Holder into shares of Common Stock at the rate of $6.00 per share (with the exception of the conversion pursuant to the Third Exchange Agreement described below), subject to full ratchet anti-dilution adjustment (the “Conversion Price”). According to the original terms of the agreement, the Company was to pre-deliver up to 372,222 shares of common stock to the Buyers. Eighty-five percent (85%) of any cash proceeds received by the Buyers from the sale of the Pre-Delivery Shares would then be applied against the particular installment amount due on such Installment Date under the Note. The Company had three months to deliver the Pre-Delivery shares, however the debt was repaid prior to the opportunity to deliver those shares. The Registration Statement (No. 333-227813) covering 150% of the number of shares underlying the Notes and warrants was declared effective on November 1, 2018. Upon an Event of Default (regardless of whether such event has been cured), the Buyers may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the then Volume-Weighted Average Price (as defined, the “VWAP”). The Company valued the beneficial conversion feature of the Existing Notes at intrinsic value and recorded $934,922 to debt discount, which will be amortized over the life of the Notes.
Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission for this transaction equal to seven (7%) percent of the total gross proceeds of the offering, or $140,000, and the issuance of five-year warrants to purchase seven (7%) percent of the shares of common stock issued or issuable in this offering (excluding shares of Common Stock issuable upon exercise of any Warrants issued to investors), or 26,056 shares; and will receive seven (7%) percent of any cash proceeds received from the exercise of any Warrants sold in the offering with an expiration equal to or less than twenty-four (24) months. The warrants are exercisable six months after the issue date or March 4, 2019, at $6.00 per share and were valued at a fair value of $157,969 which was fully expensed during the year ended December 31, 2018. The $140,000 cash commission was recorded as debt discount and will be amortized over the term of the Notes.
During the year ended December 31, 2018, there were principal conversions in the amount of $1,333,333 at a conversion price of $3.478 pursuant to the Third Exchange Agreement and the Company repaid principal of $638,095, such that the remaining outstanding principal balance of the Notes as of December 31, 2018 was $261,903.
During the year ended December 31, 2019, the Company repaid the remaining principal balance in the amount of $261,903, such that the remaining outstanding principal balance of the Notes as of December 31, 2019 is zero.
The Company recorded a total of $2,233,332 of debt discounts related to the above Notes during the year ended December 31, 2018. The debt discounts are being amortized over the term of the debt. Amortization of the debt discounts for the year ended December 31, 2018 was $2,049,232. As a result of the final payment of the Notes, the remaining debt discount of $184,100 was amortized during the year ended December 31, 2019.
Securities Purchase Agreement executed on May 15, 2019
On May 15, 2019, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Buyer”). Upon the closing of this financing, on May 17, 2019, the Company issued for a purchase price of $1,500,000 in principal amount a Senior Convertible Note (the “May 2019 Note”) to the Buyer.
The May 2019 Note provided that the Company will repay the principal amount of the May 2019 Note on or before March 15, 2020.
| F-28 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
On March 23, 2020, the Company entered into a Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”).
The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): (September 16, 2020 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date”), (b) during the Forbearance Period waive the prepayment premium to any Company Optional Redemption, and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to September 16, 2020. The Scheduled Required Prepayments are $100,000 upon signing the Agreement and five (5) monthly payments thereafter aggregating $200,000 with all amounts outstanding under the Note due on September 16, 2020. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers and directors and advisors of the Company) or factoring and purchase order indebtedness, the Company shall effect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments.
On September 23, 2020, the Company entered into a Second Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”). The Note was due to be paid in full on or before September 16, 2020 and was not paid (the “Existing Default”). The Note provides that upon an Event of Default, the Buyer may, among other things, require the Company to redeem all or a portion of the Note at a redemption premium of 120%, multiplied by the product of the conversion rate ($6.00per share) and the then current market price.
The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): June 16, 2021 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date), (b) during the Forbearance Period (as defined) waive the prepayment premium to any Company Optional Redemption (which will result in the 120% redemption premium effectively replaced with 100%), and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to June 16, 2021. The Scheduled Required Prepayments are $63,000 upon signing the Agreement and eight (8) monthly payments thereafter aggregating $480,000 with the remaining $607,000 outstanding under the Note due on June 16, 2021. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers, directors and 10% or greater shareholders of the Company) or factoring and purchase order indebtedness, the Company shall effect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments.
The May 2019 Note is convertible at any time by the Holder into 250,000 shares of common stock, par value $0.001 per share at the rate of $6.00 per share, subject to adjustment (the “Conversion Price”). Upon an Event of Default (regardless of whether such event has been cured), the Buyer may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the then Volume-Weighted Average Price (as defined, the “VWAP”). The Company considered the need for the conversion feature to be bifurcated under ASC 815 and determined that it does not meet the requirements. Additionally, the Company determined the effective conversion rate under ASC 470-20 and determined that the instrument is out of the money and no beneficial conversion feature was recorded.
The May 2019 Note is senior in right of payment to all other existing and future indebtedness of the Company except Permitted Senior Indebtedness (as defined in the May 2019 Note), including $12 million of senior secured indebtedness of the Company and its subsidiaries under an existing senior loan agreement, plus defined amounts of purchase money indebtedness in connection with bona fide acquisitions.
The May 2019 Note includes customary Events of Default and provides that the Buyer may require the Company to redeem (regardless of whether the Event of Default has been cured) all or a portion of the Note at a redemption premium equal to the greater of: (i) the product of the redemption premium of one hundred twenty-five (125%) percent, multiplied by the conversion amount, and (ii) the product of the conversion rate ($6.00 per share) multiplied by the product of 125% multiplied by the then current market price. The Buyer may also require redemption of the May 2019 Note upon a Change of Control (as defined) at a premium of one hundred twenty-five (125%) percent. The Company has the right to redeem the May 2019 Note at any time, in whole or in part, in cash at a price equal to 120% of the then outstanding conversion amount.
| F-29 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Conversion of the May 2019 Note is subject to a blocker provision which prevents any holder from converting the May 2019 Note into shares of common stock if its beneficial ownership of the common stock would exceed 9.99% of the Company’s issued and outstanding common stock.
As of December 31, 2019, the Company had a principal balance $1,500,000 on the May 2019 Note and the Company had accrued $25,334 in interest expense. During the year ended December 31, 2020, the Company repaid $593,000 such that as of December 31, 2020, the Company had a principal balance $907,000 on the May 2019 Note and the Company had accrued $15,420 in interest expense.
Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission for this transaction equal to six (6%) percent of the total gross proceeds of the offering. This 6% fee or $90,000 was recorded as debt discount along with the $30,000 in legal fees associated with the May 2019 Note. These fees will be amortized over the term of the note. The Company amortized $90,491 in the year ended December 31, 2019 and the remaining $29,509 was amortized during the year ended December 31, 2020.
December 21, 2020 Securities Purchase Agreement
On December 21, 2020 (the “Issue Date”), Cosmos Holdings, Inc. (“Cosmos”, the “Borrower” or the “Company”) entered into a convertible promissory note with Platinum Point Capital, LLC (the “Holder”, “Lender” or “Platinum”).
The Company issued the $540,000 Note in exchange for $500,000 in cash and included a $40,000 Original Issue Discount (“OID”) and paid $3,000 in financing costs. The principal amount together with interest at the rate of eight percent (8.0%) per annum, compounded annually (the “Interest Rate”), will be paid to the Lenders on or before the Maturity Date (December 31, 2021 or as defined below). Accrued interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. In the event that on or before the Maturity Date, the Note either (i) have not been converted or have not been otherwise satisfied in full or (ii) an Event of Default occurs, then the applicable rate of interest on the outstanding amount of the Note since inception shall be the Interest Rate plus eighteen percent (18.0%), the Default Interest. Unless previously converted, the principal and accrued interest on the Note is due and payable in cash (USD) upon the earlier of (i) December 31, 2021, (ii) a Change of Control (as defined below) or (iii), an Event of Default (as defined below) (collectively, the “Maturity Date”).
The Note may be prepaid in whole or part beginning from the issue date until a date not later than 180 days thereafter, the Company shall have the right to prepay the full amount outstanding under the Note (principal and accrued interest), in full by making a payment to the Holder in an amount equal to one hundred twenty (120%) multiplied by the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of the Note plus (y) Default Interest, if any.
The Holder shall have the right at any time from the Issue Date to convert all or part of the outstanding and unpaid principal amount of the Note into Common Stock at the Conversion Price of as defined below.
|
| a) | The Conversion Price. The Conversion Price shall equal the Variable Conversion Price (subject to stock splits, dividends, rights offerings or similar events) shall mean seventy-five percent (75%) multiplied by the Market Price defined as the average of the three (3) lowest trading prices for common stock during the fifteen (15) trading day period ending on the latest complete trading day prior to the conversion date. |
|
|
|
|
|
| b) | Conversion upon Qualified Financing. If the Company engaged in a registered offering resulting in an “uplisting” to a higher-tiered trading market (a “Qualified Financing”), the Holder has the option to convert any outstanding debt due under this Note at seventy-five (75%) of the per share offering price. |
|
|
|
|
|
| c) | Conversion Price During Major Announcements. In the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other Company (other than a merger in which the Borrower is the surviving or continuing Company and its capital stock is unchanged or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase fifty percent (50%) or more of the Borrower's Common Stock (or any other takeover scheme), then the Conversion Price shall, effective upon the announcement date shall be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. |
| F-30 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature and a derivative liability which is accounted for separately. The Company measured the beneficial conversion feature’s intrinsic value on December 16, 2020 and determined that the embedded derivative was valued at $456,570 which was recorded as a debt discount, and together with the original issue discount and transaction expenses of $43,000, in the aggregate of $499,570, is being amortized over the life of the loan. As of December 31, 2020, the fair value of the derivative liability was $460,728 and for the year ended December 31, 2020 the Company recorded a loss of $4,158 from the change in fair value of derivative liability as other expense in the consolidated statements of operations and comprehensive income (loss).
Derivative Liabilities
The table below provides a summary of the changes in fair value, including net transfers in and/or out of all financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended December 31, 2020:
|
|
| Amount |
| |
| Balance on December 31, 2019 |
| $ | - |
|
| Issuances to debt discount |
|
| 456,570 |
|
| Change in fair value of derivative liabilities |
|
| 4,158 |
|
| Balance on December 31, 2020 |
| $ | 460,728 |
|
The fair value of the derivative conversion features and warrant liabilities as of December 31, 2020 were calculated using a Monte-Carlo option model valued with the following assumptions:
|
|
| December 31, |
| |
| Dividend yield |
|
| 0 | % |
| Expected volatility |
| 140.4%-142.5 | % | |
| Risk free interest rate |
| 0.11%-0.12 | % | |
| Contractual terms (in years) |
| 1.00 – 1.04 |
| |
NOTE 10 – DEBT
A summary of the Company’s third-party debt during the years ended December 31, 2020 and 2019 is presented below:
| December 31, 2020 |
| Loan Facility |
|
| Bridge Loans |
|
| Trade Facility |
|
| Third Party |
|
| COVID Loans |
|
| Total |
| ||||||
| Beginning balance |
|
| 3,078,442 |
|
|
| 191,287 |
|
|
| 6,245,400 |
|
|
| 2,514,595 |
|
|
| - |
|
|
| 12,029,724 |
|
| Proceeds |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 16,121,500 |
|
|
| 435,210 |
|
|
| 16,556,710 |
|
| Payments |
|
| - |
|
|
| (191,287 | ) |
|
| - |
|
|
| (5,006,115 | ) |
|
| - |
|
|
| (5,230,725 | ) |
| Conversion of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (807,795 | ) |
|
|
|
|
|
| (807,795 | ) |
| Debt extinguishment |
|
| (12,066 | ) |
|
| - |
|
|
| - |
|
|
| (192,205 | ) |
|
| - |
|
|
| (204,271 | ) |
| Foreign currency translation |
|
| 269,047 |
|
|
| - |
|
|
| 200,600 |
|
|
| 1,304 |
|
|
| - |
|
|
| 470,951 |
|
| Reclass of long-term portion of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,771,882 | ) |
| Ending Balance |
|
| 3,302,100 |
|
|
| - |
|
|
| 6,446,000 |
|
|
| 12,631,284 |
|
|
| 435,210 |
|
|
| 12,042,712 |
|
| F-31 |
| Table of Contents |
| December 31, 2019 |
| Loan Facility |
|
| Bridge Loans |
|
| Trade Facility |
|
| Third Party |
|
| Total |
| |||||
| Beginning balance |
| $ | 3,078,442 |
|
| $ | 191,287 |
|
| $ | 6,291,199 |
|
| $ | 242,805 |
|
| $ | 9,803,733 |
|
| Proceeds |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,500,000 |
|
|
| 2,500,000 |
|
| Payments |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (227,912 | ) |
|
| (227,912 | ) |
| Foreign currency translation |
|
| - |
|
|
| - |
|
|
| (45,799 | ) |
|
| (298 | ) |
|
| (46,097 | ) |
| Ending Balance |
| $ | 3,078,442 |
|
| $ | 191,287 |
|
| $ | 6,245,400 |
|
| $ | 2,514,595 |
|
| $ | 12,029,724 |
|
On November 16, 2015, the Company entered into a Loan Agreement with Panagiotis Drakopoulos, former Director and former Chief Executive Officer, pursuant to which the Company borrowed €40,000 ($42,832) as a note payable from Mr. Drakopoulos. The note bears an interest rate of 6% per annum and was due and payable in full on November 15, 2016. As of December 31, 2019, the Company had an outstanding principal balance of €13,000 ($14,595) and accrued interest of €4,166 ($4,677). During the year ended December 31, 2020, the Company repaid €5,000 ($5,862) of this loan. As of December 31, 2020, the Company had an outstanding principal balance of €8,000 ($9,784) and accrued interest of €4,785 ($5,852).
On December 19, 2018, pursuant to the terms of the Cosmofarm SPA (See Note 1), the Company issued a non-interest-bearing promissory note in the amount of €200,000 ($227,912). The note had a maturity date of December 19, 2019. The Company had an outstanding balance of €200,000 ($227,912) as of December 31, 2018. During the year ended December 31, 2019, the Company repaid the outstanding balance of the note.
Loan Facility Agreement and Bridge Loans
Loan Facility
On August 4, 2016, the Company’s wholly owned subsidiary SkyPharm entered into a Loan Facility Agreement, guaranteed by Grigorios Siokas, with Synthesis Peer-To Peer-Income Fund (the “Loan Facility” the “Lender”). The Loan Facility initially provided SkyPharm with a credit facility of up to $1,292,769 (€1,225,141). Any advance under the Loan Facility accrues interest at a rate of 10% per annum and requires quarterly interest payments commencing on September 30, 2016. The amounts owed under the Loan Facility shall be repayable upon the earlier of (i) three months following the demand of the Lender; or (ii) August 31, 2018. No prepayment is permitted pursuant to the terms of the Loan Facility. The Synthesis Facility Agreement as amended is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas.
On September 13, 2016, SkyPharm entered into a First Deed of Amendment with the Loan Facility increasing the maximum loan amount to $1,533,020 as a result of the Lender having advanced $240,251 (€227,629) to SkyPharm.
On March 23, 2017, SkyPharm entered into an Amended and Restated Loan Facility Agreement (the “A&R Loan Facility”), with the Loan Facility which increased the loan amount to an aggregate total of $2,664,960 (€2,216,736) as a result of the lender having advanced $174,000 (€164,898) in September 2016, $100,000 (€94,769) in October 2016, $250,000 (€236,922) in November 2016, $452,471 (€428,800) in December 2016, $155,516 (€129,360) in January 2017, $382,327 (€318,023) in July 2017 and $70,000 (€58,227) in December 2017. The A&R Loan Facility amends and restates certain provisions of the Loan Facility Agreement, dated as of August 4, 2016, by and among the same parties. Advances under the A&R Loan Facility continue to accrue interest at a rate of 10% per annum from the applicable date of each drawdown and require quarterly interest payments. The A&R Facility now permits prepayments at any time. The amounts owed under the A&R Loan Facility were repayable upon the earlier of (i) seventy-five days following the demand of the Lender; or (ii) August 31, 2018. The A&R Loan Facility is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas (the “Pledged Shares”). The A&R Loan Facility was also amended to provide additional affirmative and negative covenants of Sky Pharm and the Guarantor during the term of loans remain outstanding, including, but not limited to, the consent of the Lender in connection with (i) the Company or any of its subsidiaries incurring any additional indebtedness; or (ii) in the event of any increase in the Company’s issued and outstanding shares of Common Stock, the Pledged Shares shall be increased to an amount equal to a minimum of ten percent (10%) of the issued and outstanding shares of the Company. As of December 31, 2019, the outstanding balance under the A&R Loan Facility was $3,078,442 (€2,741,999) and accrued interest expense of $609,607 (€542,983) had been recorded.
| F-32 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
On April 18, 2018, the Company entered into an amendment with the Lender that was effective as of January 1, 2018, pursuant to which the maturity dates for all advances was extended to December 31, 2021. Additionally, the interest rate was amended such that the interest rate for all advances is 4% plus the 3-Month Libor rate. The Loan Facility also forgave €35,060 ($40,000) in fees related to the July 6, 2017 advance. As a result, the Company reduced the unamortized portion of debt discount that related to those fees and recorded a gain on debt settlement of €19,763 ($23,354).
Bridge Loans
In 2017, the Company entered into loan agreements with Synthesis Peer-To-Peer Income Fund (the “Bridge Loans”) in the amounts of €41,590 ($50,000), €100,000 ($120,220) and €31,388 ($34,745). The Company had accrued interest expense of an aggregate total of €24,608 ($27,627) for both loans and the outstanding balances of these loans was €45,809 ($50,000), €83,333 ($106,542), €31,388 ($34,745), respectively, as of December 31, 2019.
On June 30, 2020, the Company entered into a settlement agreement whereby the Company agreed to make certain payments to the creditor and the creditor will accept such payments as full discharge of the outstanding debt of the Loan Facility and Bridge Loans. In accordance with the settlement agreement, interest will accrue from June 30, 2020 until repayment in full at a rate of 6% per annum for the first year and 5.25% per annum for the second year calculated on the balance outstanding from day to day during such period. Interest is due on the 10th day of each calendar month. If any amount, principal or interest is unpaid on its due date interest shall accrue from the due date until the date of its payment until the date of its payment in full at the rate of 7.25% per annum. The Company will make quarterly payments of €125,000 beginning May 6, 2021 with a final payment of €2,200,000 on May 6, 2022. The Company evaluated the settlement agreement for debt modification in accordance with ASC 470-50 and concluded the debt qualified for debt extinguishment as the 10% cash flow test was met. As a result, the $3,772,446 of principal and accrued interest was written off and the new debt was recorded at fair value as of June 30, 2020 in the amount of $3,033,990. For the year ended December 31, 2020, the Company recorded a gain on extinguishment of debt in the amount of $749,824, of which $12,066 related to the principal of the loans and the balance related to the accrued interest. As of December 31, 2020, the Company has accrued interest expense of $33,021 and the principal balance of the debt is $3,302,100, of which $2,843,475 is classified as Notes payable – long term portion on the consolidated balance sheet.
The debt is subject to acceleration in an Event of Default (as defined in the Notes). This agreement is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas, as described above under A&R Loan Facility.
Trade Facility Agreements
On April 10, 2017, Decahedron entered into a Trade Finance Facility Agreement (the “Decahedron Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”). The Decahedron Facility provides the following material terms:
|
| · | The Lender will provide Decahedron a facility of up to €2,750,000 ($3,363,250) secured against Decahedron’s receivables from the sale of branded and generic pharmaceutical sales. |
|
| · | The total facility will be calculated as 95% of the agreed upon value of Decahedron’s receivables. |
|
| · | The term of the Decahedron Facility will be for 12 months. | |
|
| · | The obligations of Decahedron are guaranteed by the Company pursuant to a Cross Guarantee and Indemnity Agreement. | |
|
| · | The Lender has the right to make payments directly to Decahedron’s suppliers. | |
|
| · | The following fees should be paid in connection with the Decahedron Facility: | |
|
| o | 2% of the maximum principal amount as an origination fee. | |
|
| o | A one percent (1%) monthly fee. | |
| F-33 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
The current draw on the Decahedron Facility is $0.
On May 12, 2017, SkyPharm entered into a Trade Finance Facility Agreement (the “SkyPharm Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”). The SkyPharm Facility provides the following material terms:
|
| · | The Lender will provide SkyPharm a facility of up to €2,000,000 ($2,446,400) secured against SkyPharm’s receivables from the sale of branded and generic pharmaceutical sales. In the event that accounts receivable becomes uncollectible, the Company will be obligated to pay back the notes in full. | |
|
| · | The total facility will be calculated as 95% of the agreed upon value of Decahedron’s receivables. | |
|
| · | The initial term of the SkyPharm Facility was for 12 months. | |
|
| · | The obligations of SkyPharm are guaranteed by the Company pursuant to a Cross Guarantee and Indemnity Agreement. | |
|
| · | The Lender has the right to make payments directly to SkyPharm’s suppliers. | |
|
| · | The following fees should be paid in connection with the SkyPharm Facility: | |
|
| o | 2% of the maximum principal amount as an origination fee. | |
|
| o | A one percent (1%) monthly fee. | |
The Company obtained consents from Synthesis Peer-to-Peer Income Fund in connection with obtaining the Lender.
On November 16, 2017, SkyPharm signed an amended agreement with Synthesis Structured Commodity Trade Finance Limited that increased the maximum aggregate facility limit from €2,000,000 ($2,291,200) to €6,000,000 ($6,736,200). All other terms of the original agreement remain the same. The Company also obtained consents from Synthesis Peer-to-Peer Income Fund in connection with obtaining the November 2017 convertible debt financing.
On May 12, 2018, the Company borrowed an additional €270,000 ($247,117) in funds.
On May 16, 2018, SkyPharm S.A., as Commodity Buyer, entered into a Supplemental Deed of Amendment (the “Deed”) relating to a Trade Finance Facility dated May 12, 2017, as amended, with Synthesis Structured Commodity Trade Finance Limited (“Synthesis”), as Loan Receivables Originator. Under the Trade Finance Facility (the “TFF”) first entered into on May 12, 2017, as amended, there was a principal balance of €5,866,910 ($5,369,678) outstanding as of March 31, 2018. SkyPharm made a payment of €1,000,000 ($1,123,600) of interest and principal on May 31, 2018 under the terms and conditions of the Deed. Additionally, the maturity date for the facility has been amended such that, the full principal amount is to be repaid no later than May 31, 2021, subject to a repayment schedule to be agreed upon by SkyPharm and Synthesis Structure Commodity Trade Finance Limited. Synthesis Structure Commodity Trade Finance Limited may extend this final repayment date at its sole discretion.
| F-34 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
The TFF was amended to provide, among other things:
|
| · | A listing of approved purchasers; |
|
| · | To permit SkyPharm to request Synthesis to make payments under the TFF directly to SkyPharm so that SkyPharm can discharge its obligations to a commodity seller directly; |
|
| · | To prohibit SkyPharm from entering into a commodity contract which grants more than seventy-five (75) days delay between the payment for products and receipt of the purchase price and placed other limitations on terms of commodity contracts; |
|
| · | If Grigorios Siokas, CEO of Cosmos Holdings Inc. (“Cosmos”), ceases to own or control at least fifty-one (51%) percent of the shares of Cosmos, or SkyPharm ceases to be a wholly-owned subsidiary of Cosmos, either event shall constitute an Event of Default (as defined); |
|
| · | The maximum aggregate amount of the TFF is €15,000,000, although there is no commitment for any future loans under the TFF; |
|
| · | The interest rate on the TFF for: (i) all lending in U.S. dollars is the one-month LIBOR plus six (6%) percent margin; and (ii) for all lending in Euro, the one-month Euribor Rate plus six (6%) percent per annum, commencing June 1, 2018. |
|
| · | Synthesis is permitted to terminate the TFF at any time and demand repayment of all outstanding principal and interest in full within six (6) months from the date of notification. |
The Deed is conditioned upon, among other things, execution and perfection of a Bulgarian Amended Pledge (“BAP”) having priority over the Bulgarian Pledge Accounts with Unicredit Bulbank AD; and the Approved Purchasers are to make all payments to SkyPharm directly to the BAP.
On May 16, 2018, SkyPharm and Synthesis also entered into an Account Merge Agreement (the “Pledge”) as a requirement under the above-described Deed. Under the Pledge, Synthesis is to receive a first ranking securities interest in SkyPharm’s outstanding receivables under the Bulgarian bank account.
On October 17, 2018, the Company entered into a further amended agreement with Synthesis whereby the current balance on the TFF as of October 1, 2018, which was €4,866,910 ($5,629,555) and related accrued interest of €453,094 ($524,094) would be split into two principal balances of Euro €2,000,000 and USD $4,000,000. Interest on the new balances commenced on October 1, 2018 at 6% per annum plus one-month Euribor, when it is positive, on the Euro balance and 6% per annum plus one-month Libor on the USD balance. The Company will repay the principal amounts of each balance beginning no later than August 31, 2018 in quarterly installments of €125,000 and US $150,000. The loan matures on August 31, 2021. The Company evaluated the amended agreement under ASC 470-50 and concluded that it did not meet the 10% cash flow test and recorded debt modification expense of $138,110.
On December 30, 2020, the Company transferred the Euro €2,000,000 loan to a new third-party lender. The terms remained the same except interest will now accrue at 5.5% per annum plus Euribor. The principal is to be repaid in a total of five quarterly installments beginning October 31, 2021 of 50,000 Euro each with a final repayment of 1,800,000 Euro payable on the earlier of 24 months after December 30, 2020 or October 31, 2022.
As of December 31, 2019, the Company had a principal balance of €2,000,000 ($2,245,400) and $4,000,000 under the TFF and the Company had accrued $10,000 and $12,661, respectively in interest expense related to this agreement. As of December 31, 2020, the Company had principal balances of €2,000,000 ($2,446,000), of which $2,384,850 is classified as Notes payable – long term portion on the consolidated balance sheet, and $4,000,000 under the agreements and the Company had accrued $402 and $16,185 respectively, in interest expense related to these agreements.
| F-35 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
Distribution and Equity Agreement
As discussed in Note 2 above, the Company entered into a Distribution and Equity Acquisition Agreement with Marathon. The Company was appointed the exclusive distributor of the Products (as defined) initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. As consideration for its services, Company received: (a) a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services; and (b) received cash of CAD $2,000,000, subject to repayment in Common Shares of the Company if it fails to meet certain performance milestones. The Company is entitled to receive an additional CAD $2,750,000 upon the Company’s receipt of gross sales of CAD $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000.
As discussed in Note 2, the Company attributed no value to the shares received in Marathon pursuant to (a) above. In relation to the CAD $2 million cash received noted in (b) above, the Company accounted for its obligation to issue a variable number of the Company’s Common Shares as Share-settled debt obligation in accordance with ASC 480 measured at fair value or the settlement amount of $1,554,590 (CAD $2 million). If settlement were to occur on December 31, 2020, the Company would be required to issue 298,875 common shares to settle its debt obligation. The Company could be obligated to potentially issue an unlimited number of common shares to settle its Share-settled debt obligation. If such events were to occur, the Company would be required to increase its authorized share capital and since increasing the authorized share capital is within the control of the Company, as our CEO controls greater than 50% of the outstanding common stock of the Company, the original classification of equity-classified financial instruments issued by the Company were not affected.
Senior Promissory Notes executed on April 1 and 3, 2019
On April 1 and 3, 2019, the Company executed Senior Promissory Notes (the “Notes”) each in the principal amount of $250,000 payable to an unaffiliated third-party lender. The Notes bear interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The Notes originally matured on April 1 and 3, 2020 unless prepaid or in default. On April 1, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for both notes is April 1, 2021. Additionally, pursuant to the amendment, the Company may now prepay the Notes at any time without penalty.
The Notes are subject to acceleration in an Event of Default (as defined in the Notes). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the Notes. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $250,000 and $250,000 on these notes and the Company had accrued $9,452 and $28,098, respectively, in interest expense. As of December 31, 2020, the Company had a principal balance $250,000 and $250,000 on these notes and the Company had accrued $46,026 and $64,364 respectively, in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
Senior Promissory Note executed on April 9,2019
On April 9, 2019, the Company executed a Senior Promissory Note (the “Note”) in the principal amount of $250,000 payable to an unaffiliated third-party lender who had previously loaned the Company $500,000. The Note bears interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The Note originally matured on April 9, 2020, unless prepaid or in default. As of April 9, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now April 9, 2021 and the Company may now prepay the loan without penalty at any time.
The Note is subject to acceleration in an Event of Default (as defined in the Note). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $250,000 on this Note and the Company had accrued $27,431 in interest expense. As of December 31, 2020, the Company had a principal balance $250,000 on this Note and the Company had accrued $63,697 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
| F-36 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
July 24, 2019 Senior Promissory Note
On July 24, 2019, the Company executed a Senior Promissory Note (the “July Note”) in the principal amount of $750,000 payable to an unaffiliated third-party lender who had previously loaned the Company $750,000. The funds represented by the July Note were advanced between July 19 and 24, 2019. The July Note bears interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The July Note originally matured on July 24, 2020. On July 24, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now July 24, 2021 and the Company may now prepay the loan without penalty at any time.
The July Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the July Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $750,000 on this note and the Company had accrued $49,625 in interest expense.
As of December 31, 2020, the Company had a principal balance $750,000 on this note and the Company had accrued $158,429 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
August 1, 2019 Senior Promissory Note
On August 1, 2019, the Company executed a Senior Promissory Note (the “August Note”) in the principal amount of $500,000 payable to an unaffiliated third-party lender who had previously loaned the Company $1,500,000. The August Note bears interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The August Note originally matured on August 1, 2020. On August 1, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now August 1, 2021 and the Company may now prepay the loan without penalty at any time.
The August Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the August Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $500,000 on this note and the Company had accrued $31,438 in interest expense. As of December 31, 2020, the Company had a principal balance $500,000 on this note and the Company had accrued $103,972 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
October 23, 2019 Senior Promissory Note
On October 23, 2019, the Company executed a Senior Promissory Note (the “October Note”) in the principal amount of $250,000 payable to an unaffiliated third-party lender who had previously loaned the Company $2,000,000. The October Note bears interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The October Note originally matured on October 23, 2020, unless prepaid or in default. As of October 23, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now October 23, 2021 and the Company may prepay the October Note at any time without penalty
The October Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the October Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $250,000 on this note and the Company had accrued $7,705 in interest expense. As of December 31, 2020, the Company had a principal balance $250,000 on this note and the Company had accrued $43,971 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
| F-37 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
December 6, 2019 Senior Promissory Note
On December 6, 2019, the Company executed a Senior Promissory Note (the “December Note”) in the principal amount of $250,000 payable to an unaffiliated third-party lender who had previously loaned the Company $2,250,000. The December Note originally bore interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The Note originally matured on March 31, 2020, unless prepaid or in default. As of March 31, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now December 31, 2020. The note is not in default and on February 5, 2021 the Company converted the entire outstanding principal balance into shares of the Company’s common stock (See Note 16). Additionally, the interest rate changed to 10% per annum from March 31, 2020 through maturity and the Company may now prepay the December Note at any time without penalty.
The December Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the December Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $250,000 on this note and the Company had accrued $890 in interest expense. As of December 31, 2020, the Company had a principal balance $250,000 on this note and the Company had accrued $21,952 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
January 27, 2020 Senior Promissory Note
On January 27, 2020, the Company executed a Senior Promissory Note (the “January Note”) in the principal amount of $250,000 payable to an unaffiliated third-party lender who had previously loaned the Company $2,500,000. The January Note bore interest at the rate of five (5%) percent per annum, paid quarterly in arrears. The January Note originally matured on May 15, 2020 unless in default. On May 15, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now December 31, 2020. Additionally, the interest rate was changed to 10% per annum and the Company may now prepay the January Note at any time without penalty.
The January Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the January Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2020, the Company had a principal balance of $250,000 on this note and the Company had accrued $18,458 in interest expense.
February 25, 2020 Senior Promissory Note
On February 25, 2020, the Company executed a Senior Promissory Note (the “February Note”) in the principal amount of $1,000,000 payable to an unaffiliated third-party lender. The February Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The February Note matured on April 30, 2020.
The February Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the February Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the February Note. The Company was not in default at that time. The Company also repaid all accrued interest related to the February Note.
| F-38 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
February and March 2020 Notes
On February 27, 2020 and March 23,2020, the Company executed two Senior Promissory Notes (the “Quarter-1 Notes”) in the principal amounts of $25,000 and $35,000, respectively, payable to an unaffiliated third-party lender. The Quarter-1 Notes originally bore interest at the rate of five (5%) percent per annum, paid quarterly in arrear and mature on December 31, 2020 unless in default. On June 1, 2020 the Company entered into an amendment pursuant to which the interest rate was changed to 10% per annum and the Company may now prepay the Quarter-1 Notes at any time without penalty.
The Quarter-1 Notes are subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the Quarter-1 Notes. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2020, the Company had a principal balance of $25,000 and $35,000, respectively, on these notes and the Company had accrued an aggregate of $3,963 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
April 23, 2020 Senior Promissory Note
On April 23, 2020, the Company executed a Senior Promissory Note (the “April Note”) in the principal amount of $200,000 payable to an unaffiliated third-party lender who had previously loaned the Company $2,750,000. The April Note bears interest at the rate of five (5%) percent per annum through May 31, 2020 and then shall change to 1% per annum effective June 1, 2020 paid quarterly in arrears. The April Note matures on December 31, 2020 unless in default. The Company may prepay the April Note within the first six (6) months by payment of unpaid interest for the first six (6) months and, after six (6) months, with a two (2%) percent ($4,000) premium.
The April Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the April Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2020, the Company had a principal balance of $200,000 on this note and the Company had accrued $2,772 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
May 5, 2020 Senior Promissory Note
On May 5, 2020, the Company executed a Senior Promissory Note (the “May 5 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender who had previously loaned the Company $1,000,000. The May 5 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 5 Note matured on December 31, 2020.
The May 5 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 5 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the May 5 Note. The Company also repaid the accrued interest related to this note.
May 8, 2020 Senior Promissory Note
On May 8, 2020, the Company executed a Senior Promissory Note (the “May 8 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender who had previously loaned the Company $3,000,000. The May 8 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 8 Note matured on June 8, 2020.
| F-39 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
The May 8 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 8 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the May 8 Note. The Company also repaid the accrued interest related to this note.
May 18, 2020 and July 3, 2020 Senior Promissory Notes
May 18, 2020 Senior Promissory Note
On May 18, 2020, the Company executed a Senior Promissory Note (the “May 18 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender. The May 18 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 18 Note matured on December 31, 2020. The note is not in default and the Company is currently in negotiations with the lender to extend the maturity date.
The May 18 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 18 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2020, the Company had a principal balance of $2,000,000 on this note.
July 3, 2020 Senior Promissory Note
On July 3, 2020, the Company executed a Senior Promissory Note (the “July 3 Note”) in the principal amount of $5,000,000 payable to an unaffiliated third-party lender. The July 3 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The July 3 Note matures on June 30, 2022 unless in default.
The July 3 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the July 3 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection.
The Company used the proceeds from the July 3 Note to repay the principal outstanding on the May 5 Note ($2,000,000), the May 8 Note ($2,000,000), and the February Note ($1,000,000). As of December 31, 2020, the Company had a principal balance of $5,000,000 on this note, which is classified as long-term on the consolidated balance sheet.
As of December 31, 2020, the Company has accrued an aggregate total of $148,685 in interest expense related to these loans.
August 4, 2020 Senior Promissory Note
On August 4, 2020, the Company executed a Senior Promissory Note (the “August 4 Note”) in the principal amount of $3,000,000 payable to an unaffiliated third-party lender. The August 4 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The August 4 Note matures on December 31, 2020 unless in default.
The August 4 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the August 4 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection.
| F-40 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
On October 29, 2020, the Company entered into a debt exchange agreement with the lender whereby the Company issued 259,741 shares of common stock at the rate of $3.85 per share in exchange for an aggregate of $1,000,000 principal amount of the existing loan. The fair market value of the Company’s common stock on the date of exchange was $3.11 per share and as such, the Company recorded a gain of $192,205. Interest will continue to accrue on the remaining debt and the converted amount until December 31, 2020. As of December 31, 2020, the Company had a principal balance of $2,000,000 on this note and prepaid interest of $8,514. The note is not in default and the Company is in negotiations with the lender to extend the maturity date.
November 19, 2020 Debt Agreement
On November 19, 2020, the Company entered into an agreement with a third-party lender in the principal amount of €500,000 ($611,500). The note matures on November 18, 2025 and bears an annual interest rate, based on a 360-day year, of 3.3% plus .6% plus 6-month Euribor when Euribor is positive. Pursuant to the terms of the agreement, there is a six-month grievance from the first deposit date, which was November 19, 2020, for both interest accrual and principal repayment. The principal is to be repaid in 18 quarterly installments of €27,000 with the first payment due 9 months from the first deposit. As of December 31, 2020, the Company had no accrued interest and a principal balance of €500,000 ($611,500), of which $543,557 is classified as Notes payable – long term portion on the consolidated balance sheet.
COVID-19 Government Loans
On May 12, 2020, the Company was granted and on May 22, 2020 the Company received a €300,000 ($366,900) loan from the Greek government. The loan will be repaid in 40 equal monthly instalments beginning on January 1, 2022 and bears an interest rate of 0.94% per annum. As a condition to the loan, the Company was required to retain the same number of employees until October 31, 2020.
On June 24, 2020 the Company received a loan £50,000 ($68,310) from the Greek government. The loan has a six-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement. The Company may prepay this loan without penalty at any time.
None of the above loans were made by any related parties.
NOTE 11 – LEASES
The Company has various lease agreements with terms up to 10 years, comprising leases of office space. Some leases include options to purchase, terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.
The assets and liabilities from operating and finance leases are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.
The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate, which is determined using the interest rate of our long-term debt as of January 1, 2019.
The Company’s weighted-average remaining lease term relating to its operating leases is 7.3 years, with a weighted-average discount rate of 6.74%.
The Company incurred lease expense for its operating leases of $188,400 and $223,927 which was included in “General and administrative expenses,” for the year ended December 31, 2020 and 2019, respectively.
| F-41 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of December 31, 2020.
| Maturity of Lease Liability |
|
|
| |
| 2021 |
| $ | 248,288 |
|
| 2022 |
|
| 218,083 |
|
| 2023 |
|
| 192,583 |
|
| 2024 |
|
| 58,704 |
|
| Thereafter |
|
| 220,107 |
|
| Total undiscounted operating lease payments |
| $ | 937,765 |
|
| Less: Imputed interest |
|
| (147,023 | ) |
| Present value of operating lease liabilities |
| $ | 790,742 |
|
The Company’s weighted-average remaining lease term relating to its finance leases is 5.11 years, with a weighted-average discount rate of 6.74%.
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s finance leases as of December 31, 2020:
| Maturity of Lease Liability |
|
|
| |
| 2021 |
| $ | 105,620 |
|
| 2022 |
|
| 76,252 |
|
| 2023 |
|
| 65,939 |
|
| 2024 |
|
| 49,688 |
|
| 2025 |
|
| 16,430 |
|
| Thereafter |
|
| - |
|
| Total undiscounted finance lease payments |
| $ | 313,929 |
|
| Less: Imputed interest |
|
| (35,831 | ) |
| Present value of finance lease liabilities |
| $ | 278,098 |
|
The Company had financing cash flows used in finances leases of $85,804 and 74,476 for the years ended December 31, 2020 and 2019, respectively.
The Company incurred interest expense on its finance leases of $13,759 and $10,927 which was included in “Interest expense,” for the years ended December 31, 2020 and 2019, respectively. The Company incurred amortization expense on its finance leases of $123,533 and $160,542 which was included in “Depreciation and amortization expense,” for the years ended December 31, 2020 and 2019, respectively.
| F-42 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, the Company may be involved in litigation relating to claims arising out of the Company’s operations in the normal course of business. As of December 31, 2020 and 2019, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations.
Placement Agreement
On August 8, 2017, the Company entered into an agreement with a third-party placement agent (the “Agent”) who served serve as the Company’s exclusive placement agent or sole book running manager with respect to any offerings of equity or equity-linked securities as well as any debt offering with the two organizations named in the agreement (the “Offering”) for a period of 120 days. In the event that an Offering is agreed upon by the Agent and the Company, the Company shall provide payment as follows: (1) a cash commission of 6% of the total gross proceeds for two named investors (2) a cash commission of 4% of total gross proceeds from five named investors and (3) excluding the five named investors in “(2)” a cash commission equal to 8% of the total gross proceeds from the Offering and the issuance to the Agent or its designees of warrants covering 8% of the shares of common stock issued or issuable by the Company in the Offering. Additionally, the Agent will receive a cash fee of 8% payable within 5 business days, but only in the event of, the receipt by the Company of any cash proceeds from the exercise of any warrants with an expiration equal to or less than 24 months sold in the Offering. In connection with the Company’s November 16, 2017 Note offering, the Agent received a cash commission of $240,000, equal to eight (8%) percent of the total gross proceeds of the offering and the issuance of five-year warrants to purchase eight (8%) percent of the shares of common stock issued or issuable in the offering (excluding shares of common stock issuable upon exercise of any warrants issued to investors, or 53,600 shares); however, will receive eight (8%) percent of any cash proceeds received from the exercise of any warrants sold in the offering with an expiration equal to or less than twenty-four (24) months. The warrants are exercisable six (6) months after the date of issuance, or as of May 16, 2018.
In connection with the Company’s September 4, 2018 Note offering, the Agent received a cash commission for this transaction of $140,000, equal to seven (7%) percent of the total gross proceeds of the offering and the issuance of five-year warrants to purchase seven (7%) percent of the shares of common stock issued or issuable in this offering (excluding shares of common stock issuable upon exercise of any warrants issued to investors, or 26,056 shares); however, will receive seven (7%) percent of any cash proceeds received from the exercise of any warrants sold in the offering with an expiration equal to or less than twenty-four (24) months. The warrants are exercisable six (6) months after the date of issuance, or March 4, 2019.
Advisory Agreement
On April 18, 2018, SkyPharm S.A. entered into a ten-year Advisory Agreement with Synthesis Management Limited (the “Advisor”). The Advisor was retained to assist SkyPharm to secure corporate finance capital. The Advisor shall be paid €104,000 per year during the ten-year term.
NOTE 13 – EARNINGS PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss) attributable to the Company, decreased with respect to net income or increased with respect to net loss by dividends declared on preferred stock by using the weighted-average number of common shares outstanding. The dilutive effect of incremental common shares potentially issuable under outstanding options, warrants and restricted shares is included in diluted earnings per share in 2020 and 2019 utilizing the treasury stock method. The computations of basic and diluted per share data were as follows:
|
|
| 2020 |
|
| 2019 |
| ||
| Numerator for Basic and Diluted Earnings Per Share: |
|
|
|
|
|
| ||
| Net income (loss) |
| $ | 820,786 |
|
| $ | (3,298,965 | ) |
| Denominator for Basic Earnings Per Share: |
|
|
|
|
|
|
|
|
| Weighted Average Shares |
|
| 13,270,097 |
|
|
| 13,273,596 |
|
| Potentially Dilutive Common Shares |
|
| 37,698 |
|
|
| - |
|
| Adjusted Weighted Average Shares |
|
| 13,307,795 |
|
|
| 13,273,596 |
|
| Basic and Diluted Net Income (Loss) per Share |
|
| 0.06 |
|
|
| (0.25 | ) |
| F-43 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
The following table summarized the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2020 and 2019 as such shares would have had an anti-dilutive effect:
|
|
| 2020 |
|
| 2019 |
| ||
| Common stock warrants |
|
| - |
|
|
| - |
|
| Common Stock Options |
|
| - |
|
|
| 42,808 |
|
| Convertible Debt |
|
| - |
|
|
| - |
|
| Total |
|
| - |
|
|
| 42,808 |
|
NOTE 14 - STOCK OPTIONS AND WARRANTS
As of December 31, 2020, there were 62,000 options outstanding and 62,000 options exercisable with expiration dates commencing January 2021 and continuing through January 2022.
A summary of the Company’s option activity during the years ended December 31, 2020 and 2019 is presented below:
|
|
|
|
|
|
| Weighted |
|
|
| |||||||
|
|
|
|
| Weighted |
|
| Average |
|
|
| ||||||
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| |||||
|
|
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
| Options |
| Shares |
|
| Price |
|
| Term |
|
| Value |
| ||||
| Balance Outstanding, December 31, 2018 |
|
| 74,000 |
|
| $ | 1.32 |
|
|
| 2.47 |
|
| $ | 198,000 |
|
| Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Balance Outstanding, December 31, 2019 |
|
| 74,000 |
|
| $ | 1.32 |
|
|
| 1.47 |
|
| $ | 64,800 |
|
| Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Forfeited |
|
| (12,000 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
| Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Balance Outstanding, December 31, 2020 |
|
| 62,000 |
|
| $ | 1.19 |
|
|
| 0.60 |
|
| $ | 242,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable, December 31, 2020 |
|
| 62,000 |
|
| $ | 1.19 |
|
|
| 0.60 |
|
| $ | 242,200 |
|
| F-44 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
A summary of the Company’s warrant activity for the years ending December 31, 2020 and 2019 is as follows:
|
|
|
|
|
|
| Weighted |
|
|
| |||||||
|
|
|
|
| Weighted |
|
| Average |
|
|
| ||||||
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| |||||
|
|
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||
| Warrants |
| Shares |
|
| Price |
|
| Term |
|
| Value |
| ||||
| Balance Outstanding, December 31, 2018 |
|
| 1,164,673 |
|
| $ | 6.41 |
|
|
| 5.01 |
|
| $ | - |
|
| Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Balance Outstanding, December 31, 2019 |
|
| 1,164,673 |
|
| $ | 6.41 |
|
|
| 4.01 |
|
| $ | - |
|
| Granted |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Forfeited |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Balance Outstanding, December 31, 2020 |
|
| 1,164,673 |
|
| $ | 6.41 |
|
|
| 3.01 |
|
| $ | 5,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercisable, December 31, 2020 |
|
| 1,164,673 |
|
| $ | 6.41 |
|
|
| 3.01 |
|
| $ | 5,360 |
|
NOTE 15 – DISAGGREGATION OF REVENUE
ASC 606-10-50-5 requires that entities disclose disaggregated revenue information in categories (such as type of good or service, geography, market, type of contract, etc). ASC 606-10-55-89 explains that the extent to which an entity’s revenue is disaggregated depends on the facts and circumstances that pertain to the entity’s contracts with customers and that some entities may need to use more than one type of category to meet the objective for disaggregating revenue.
The Company disaggregates revenue by country to depict the nature and economic characteristics affecting revenue. The following table presents our revenue disaggregated by country for the years ended:
| Country |
| 2020 |
|
| 2019 |
| ||
| Croatia |
| $ | 24,840 |
|
| $ | 22,497 |
|
| Cyprus |
|
| 36,987 |
|
|
| - |
|
| Denmark |
|
| 537,098 |
|
|
| 97,905 |
|
| France |
|
| 18,988 |
|
|
| 153,422 |
|
| Georgia |
|
| - |
|
|
| 5,301 |
|
| Germany |
|
| 1,314,381 |
|
|
| 6,672,511 |
|
| Greece |
|
| 51,259,784 |
|
|
| 26,101,316 |
|
| Hungary |
|
| - |
|
|
| 1,094,446 |
|
| Indonesia |
|
| - |
|
|
| 7,172 |
|
| Ireland |
|
| 36,349 |
|
|
| 467,965 |
|
| Italy |
|
| 75,183 |
|
|
| 196,044 |
|
| Jordan |
|
| 29,635 |
|
|
| 20,144 |
|
| Libya |
|
| 1,028 |
|
|
| 396,333 |
|
| Netherlands |
|
| 188,890 |
|
|
| 846,479 |
|
| Poland |
|
| 29,358 |
|
|
| 307,624 |
|
| Spain |
|
| - |
|
|
| - |
|
| Turkey |
|
| - |
|
|
| 24,347 |
|
| UK |
|
| 1,853,816 |
|
|
| 3,262,880 |
|
| Total |
| $ | 55,406,337 |
|
| $ | 39,676,385 |
|
| F-45 |
| Table of Contents |
COSMOS HOLDINGS, INC.
Notes to the Consolidated Financial Statements
December 31, 2020
NOTE 16 – SUBSEQUENT EVENTS
January 7, 2021 Subscription Agreement
On January 7, 2021 (the “Issue Date”), the Company entered into a subscription agreement with an unaffiliated third party, whereby the Company issued for a purchase price of $100,000 in principal amount a convertible promissory note. The note bears an interest rate of 8% per annum and matures on the earlier of (i) consummation of the Company listing its common shares on the NEO Stock Exchange or October 31, 2021.
Upon the consummation of a NEO listing, the total principal and accrued interest outstanding on the note will convert into shares of the Company’s common stock at a 25% discount to the prices of the common shares sold in the financing to be conducted in conjunction with the NEO listing. In the event that a NEO listing is not consummated on or before October 31, 2021, the note holder will have the option, in part or in full, to have the note repaid with interest, or convert the note into Company common stock at a 25% discount to the 30-day volume-weighted average price of the Common Shares on the most senior stock exchange in North American on which the common shares are trading prior to conversion.
Exchange Agreement
The Company entered into an Amended and Restated Debt Exchange Agreement (the “Agreement”) dated as of February 5, 2021, with an unaffiliated third-party lender (the “Lender”). This Agreement replaced in its entirety the Debt Exchange Agreement between the parties dated as of December 18, 2020, which was deemed to be null and void.
The Agreement provides for the issuance by the Company of 781,819 shares of common stock (the “Exchange Shares”), at the rate of $3.85 per share, in exchange for an aggregate of $3,010,000 principal amount (the “Debt”) of existing loans made by the Lender to the Company.
The market price at the time this Agreement was negotiated was $3.85 per share. Certain “make whole” provisions and the grant of warrants were eliminated. Interest was accrued through the date of the Agreement. Thereafter, all accrued and unpaid interest, as well as any unpaid fees, shall be paid in three (3) equal monthly installments following the closing of a planned Canadian public offering. Pursuant to this Agreement, Grigorios Siokas, the Company’s Chief Executive Officer and principal shareholder, will be released from all personal guarantees on the Debt.
Stock Purchase Agreement
On February 5, 2021, the Company entered into a Stock Purchase Agreement (the “February SPA”) with an unaffiliated third-party. The February SPA provides for the Company’s to sell 65,000 shares of the Company’s common stock held in treasury at $3.85 per share or a total of $250,000.
February 5, 2021 Consulting Agreement
The Company entered into a Consulting Agreement (the “Agreement”) effective as of February 5, 2021, with a non-affiliated consultant (the “Consultant”). The Company engaged the Consultant to perform consulting services relating to Company management, debt structure, business plans and business development in connection with any capitalization transactions involving the Company and any newly created or existing entities. The Agreement is for a term of nine (9) months with an initial term of ninety (90) days (the “Initial Term”). The Agreement is terminable by the Company for any reason upon written notice at any time after the Initial Term.
The Company agreed to pay Consultant and its assignees an aggregate of 1,800,000 restricted shares of Common Stock at the rate of 200,000 shares per month, which shall be issued and fully paid for in consideration of the Consultant’s considerable expertise and experience and its commitment to work for the Company. However, in the event the Agreement is terminated for any reason after the Initial Term, the shares are subject to a claw back for any months remaining after the Termination Date. The Consultant retained 800,000 of the 1,800,000 shares and agreed with an assignee and the Company that 1,600,000 of the 1,800,000 shares shall be held in book entry for six (6) months from the date of this Agreement, subject to the above claw back.
| F-46 |
| Table of Contents |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
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 Principal Executive Officer/Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Principal Executive Officer/Principal 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 Principal Executive Officer and the Principal Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were partially effective. The Internal Auditor of the Company has already developed the existing internal controls and processes. The Company will also hire one more person to join the internal audit team within 2021 in order to empower the reassurance of regulatory compliance with SEC reporting requirements.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:
|
| · | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions; |
|
| · | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and |
|
| · | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
With the participation of the Chief Executive Officer/Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on this evaluation, our management has concluded that our internal control over financial reporting was partially effective as of December 31, 2020, as the result of a weakness. The weakness results from deficiencies in internal control that collectively constitute a weakness.
A significant deficiency is a deficiency, or combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness; yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting. We had the following material weaknesses at December 31, 2020:
|
| · | The Company has a lack of proper segregation of duties. |
|
| · | The Company’s internal control structure lacks multiple levels of review and oversight. |
| 30 |
| Table of Contents |
Remediation of Deficiencies and Material Weaknesses
We are unable to remedy all material weaknesses present in our internal controls until we are able to hire additional employees, so that we may then introduce checks and balances on internal controls.
We have put systems in place to deal with the revenue recognition deficiencies which include: having persuasive evidence that an arrangement exists in the form of a signed agreement, the price is fixed and determinable by having a purchase order signed by our customer and the company, written confirmation that goods or services have been delivered. The collectability aspect of revenue recognition will be met when we establish a collection history with our customers.
We have proceeded to different types of controls in order to remediate deficiencies;
Preventive controls: segregation of duties on main areas such as payroll, fixed assets, inventory and IT controls.
Detective controls: reconciliations on main areas such as payroll, fixed assets, inventory, Accounts payable, Accounts receivable, as well as, physical counts of inventory are performed on a monthly/quarterly/annual basis according to the risk the company is exposed.
Corrective controls: when we find errors or discrepancies on the controls the Internal Auditor passes them to management team and colleagues who are involved either written or verbally.
Limitations on the Effectiveness of Internal Controls
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting are or will be capable of preventing or detecting all errors or all fraud. Any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements, due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns may occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risk.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.
None
| 31 |
| Table of Contents |
Item 10. Directors, Executive Officers and Corporate Governance
Our current directors, officers and managers are listed below. Each of our managers will serve for one year or until their respective successors are elected and qualified. Our officers serve at the pleasure of the Board.
| Name |
| Age |
| Position |
|
| ||||
| Grigorios Siokas |
| 55 |
| CEO and Director |
|
|
|
|
|
|
| Pavlos Ignatiades |
| 58 |
| Chief Operating Officer |
|
|
|
|
|
|
| Georgios Terzis | 39 | CFO | ||
|
| ||||
| Demetrios G. Demetriades |
| 54 |
| Secretary and Director |
|
|
|
|
|
|
| Dimitrios Goulielmos | 53 | Director | ||
|
|
|
|
|
|
| John J. Hoidas |
| 55 |
| Director |
|
|
|
|
|
|
| Peter Goldstein |
| 58 |
| Executive Director |
Grigorios Siokas joined us as CEO, CFO and Director on February 26, 2016. He has over 15 years’ experience in the pharmaceutical industry. Since 2014, he has served as the CEO and Operations Manager of SkyPharm SA a wholly-owned subsidiary of the Company. SkyPharm SA is a pharmaceutical company located in Greece that mainly exports medicines from Greece to other European countries, such as Germany, England and Denmark. Prior to 2014, Mr. Siokas worked in a variety of sectors of the pharmaceutical industry mostly in the trading of medicines in Greece and other European countries. Additionally, since 2000 he has been a major shareholder in various pharmaceutical companies such as: Ippokratis Pharmaceuticals, (annual sales of over € 78 million); Thrakis Pharmaceuticals, (annual sales of over € 20 million); Thessalias Pharmaceuticals, (annual sales of over € 18 million); and ZED Pharma SA, (annual sales of over € 35 million). During the 1990s, Mr. Siokas founded and operated a marble wholesale import – export company in Germany. Within a period of two years he became the 4th biggest Greek marble importer in Germany. He also ran a Tour Operation with many different airlines, serving millions of customers. Grigorios Siokas has a Bachelor’s Degree in Geology from the Aristotle University of Thessaloniki, Greece. He received a Masters in management and finance from the University of Stuttgart and the University of Tuebigen, Germany.
Pavlos Ignatiades was elected COO on November 11, 2020. He has been a senior portfolio manager and the CEO of INVESTMENT ANALYSIS S.A for over 10 years operating in the Athens Stock Exchange. He worked as an independent financial analyst for listed companies in Greece and abroad while he oversaw foreign funds (American and Asian) targeted at Greek innovative companies. Since the beginning of Cosmos Holdings, he is in charge of the daily activities of all subsidiaries and overviews all strategic tasks of the organization.
| 32 |
| Table of Contents |
Georgios Terzis was elected CFO on November 11, 2020. Prior thereto he was employed by the Company as International Finance Manager. He has served as an Executive Consultant to several multinational advisory firms where, he achieved commitments of more than >€50mil funding, financing and state incentives to a numerus investment in healthcare, logistics, RES and manufacturing industries. George holds an MBA from Alba Graduate Business school and a Bachelor’s Degree in Financial Management from University of Attica. He is certified as an independent valuator of companies and private investments by the European Commission.
Demetrios G. Demetriades was elected as Secretary and Director of the Company effective January 13, 2014. Since January 2003, Mr. Demetriades has been Director of Highlander Spring Trading Ltd, a trading company. From November 2000 to December 2002 he was Marketing Director of Eurolink Securities Ltd which was involved in trading in the Cyprus Stock Exchange. From January 1995 to November 2000 he was Supervising Officer of Laiki Factors Ltd a financing company. As a member of the board, Mr. Demetriades contributes the benefits of his trading, executive leadership and management experience. Mr. Demetriades will be compensated for his service from time-to-time as the Board of Directors will determine.
Dimitrios Goulielmos joined us as CEO, CFO and Director on September 27, 2013 and resigned as an officer as of February 26, 2016 but retained his position as a Director of the Company. Since 1991, he has been principal attorney at the law firm of Goulielmos D. & Partners. He contributes to the Board the benefits of his legal, academic, and business background. Mr. Goulielmos is a fourth-generation attorney. He received his law degree with Excellency from the Aristotle University of Thessaloniki in 1988. He did post graduate studies for International transactions and Company law at Paris France and at the LSE of London, England. In 2004 he was elected Vice-president of EUROPECHE the organization that was established by the European Committee for the consultation and proposal of solutions in the sector of Community Fishery. The same year he was also elected as National representative of Hellas in the MEDISAMAK, the organization responsible for all Mediterranean countries, in the sector of Fishery. In year 2007 he was reelected as Vice-President of EUROPECHE. He is a member of the social dialogue group of ACFA, of EU on labor affairs. He is an honorary lifetime member of International Who’s Who Historical Society. Mr. Goulielmos has extensive experience in law, international deals, mergers, acquisitions, negotiations, international application of licenses, and real estate management which he will contribute to the Board.
John J. Hoidas was appointed a Member of the Company’s Board of Directors on November 18, 2016 and he became the fourth member of the Board of Directors of the Company. Mr. Hoidas is a wealth management professional with extensive experience in the capital markets and specifically in the financing of pharmaceutical companies. He is currently the senior vice president of Uhlmann Price Securities based in Chicago. Over the previous years he achieved to raise significant amounts of capital for late stage pre-IPO companies such as Organovo (ONVO), Invivo Therapeutics (NVIV) and Matinas BioPharma (MTNB) to name a few. He has served as a broker dealer to the following firms: Kingsbury Capital Investment Advisors, Kingsbury Capital LLC, Spencer Trask Ventures.
Peter Goldstein was elected Executive Director of the Company on October 15, 2020. Peter Goldstein, age 58, has over 30 years of diverse and global entrepreneurial, client advisory and capital market experience. With a background in international business, he has worked across a range of markets and industries, holding positions including investment banker, chairman, chief executive officer, and advisor to public, private, and emerging growth companies. Goldstein has achieved capital market objectives by drawing on his strengths in M&A, strategic planning and transaction structuring, as well as his own entrepreneurial success. He has steered and completed initial public offerings (IPO), uplisting and reverse merger transactions, secured private placements and designed successful crowdfunding campaigns.
In July 2018, he founded Exchange Listing, LLC to provide growth companies with a cost-effective one-stop strategic planning and implementation service to list on senior exchanges such as NASDAQ, NYSE and NEO. His most recent advisory success, Mr. Goldstein advised on Siyata Mobile (NasdaqCM: SYTA) upsized $12.6 Million U.S. Initial Public Offering and listing on the NASDAQ which closed in September 2020.
Mr. Goldstein is founder and chief executive officer of Grandview Capital Partners, Inc., a company that has provided M&A, financial, operational, and organizational consulting services to businesses globally across a wide range of industries. He previously founded Grandview Capital, Inc., a boutique investment bank, where he served as managing director of investment banking.
In addition to advising other businesses, Goldstein launched and successfully grew several of his own companies. He was Co-Founder and chairman of the board of Staffing 360 Solutions, Inc. NASDAQ: STAF, an emerging public company in the international staffing sector engaged in the acquisition of domestic and international staffing agencies. He began his entrepreneurial career as founder and CEO of a specialty food distributor, which pioneered the farm-to-table organic produce industry in top-tier New York City restaurants.
Mr. Goldstein has an MBA in International Business from the University of Miami, and held the Series 7, 24,79, 99 and 66 registrations with FINRA.
| 33 |
| Table of Contents |
Term of Office
Our Directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Legal Proceedings
No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:
|
| · | Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time, |
|
| · | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses), |
|
| · | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities, |
|
| · | Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
|
| · | Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity. |
|
| · | Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity. |
|
| · | Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity. |
Audit Committee
We have a separately-designated standing audit committee, which is appointed by the Board of Directors of Cosmos Holdings Inc. Our three independent directors, John Hoidas, Demetrios Demetriades and Peter Goldstein serve on the Audit Committee. Primary function of the committee is to assist the Board of Directors in overseeing (1) the financial reporting and accounting processes of the Company, and (2) the financial statements audits of the Company. The Committee also prepares a written report to be included in the annual proxy statement of the Company pursuant to the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). In furtherance of these purposes, the Committee shall maintain direct communication among the Company’s independent auditors and the Board of Directors. The independent auditors and any other registered public accounting firm engaged in preparing or issuing an audit report or performing other audit review or attest services for the Company shall report directly to the Committee and are ultimately accountable to the Committee and the Board of Directors.
| 34 |
| Table of Contents |
In discharging its oversight role, the Committee is authorized to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company. The Committee shall have the sole authority to retain at the Company’s expense outside legal, accounting or other advisors to advise the Committee and to receive appropriate funding, as determined by the Committee, from the Company for the payment of the compensation of such advisors and for the payment of ordinary administrative expenses of the Committee that are necessary to carry out its duties. The Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditors to attend a meeting of the Committee or to meet with any member of, or advisors to, the Committee. The Committee may also meet with the Company’s investment bankers or financial analysts who follow the Company.
The Committee shall meet no less frequently than four times per year, with additional meetings as circumstances warrant. The Committee shall also meet periodically with management, the internal auditors, if any, and the independent auditors in separate executive sessions. The Committee shall record the minutes of all such meetings and shall submit the minutes of its meetings to, or discuss the matters deliberated at each meeting with, the Board of Directors. The Company’s chief financial or accounting officer shall function as the management liaison officer to the Committee.
Director Independence
Our board of directors has determined that John Hoidas, Dimitrios Goulielmos and Demetrios G. Demetriades qualifie as an “independent board member” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended December 31, 2020, one person, John Hoidas, failed to file, on a timely basis, one identified report required by Section 16(a) of the Exchange Act during fiscal year ended December 31, 2020.
Code of Ethics
We have adopted a Code of Ethics for Financial Executives, which includes our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of our Code of Ethics has previously been filed as an exhibit with the SEC.
Item 11. Executive Compensation
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to both to our officers and to our directors for all services rendered in all capacities to us for our fiscal year ended December 31, 2020 and 2019.
| 35 |
| Table of Contents |
SUMMARY COMPENSATION TABLE
| Name |
| YE 12/31 |
| Salary ($) |
|
| Bonus ($) |
|
| Stock Awards ($) |
|
| Option Awards ($) |
|
| Non-Equity Incentive Plan Compensation ($) |
|
| Nonqualified Deferred Compensation Earnings ($) |
|
| All Other Compensation ($) |
|
| Total ($) |
| ||||||||
| Grigorios |
| 2020 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Siokas (1) |
| 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Georgios |
| 2020 |
|
| 6,200 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Terzis |
| 2019 |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
________________
| (1) | Mr. Siokas became the Company’s Chief Executive Officer and Director of the Company in 2016. |
| (2) | Mr. Terzis became the Company’s Chief Financial Officer on November 11, 2020. |
Narrative Disclosure to the Summary Compensation Table
There are no arrangements or plans in which we provide pension, retirement or similar benefits for executive officers.
Outstanding Equity Awards at Fiscal Year-End
The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of December 31, 2020.
OUTSTANDING EQUITY AWARDS AT YEAR END
|
|
| Option Awards |
|
| Stock Awards |
| ||||||||||||||||||||||
|
|
| Number of Securities Underlying Unexercised Options |
|
| Option Exercise |
|
| Option Expiration |
|
| No. of Shares or Units of Stock that Have Not |
|
| Market Value of Shares or Units of Stock that Have Not |
|
| Equity Incentive Plan Awards: No. of Unearned Shares, Units or Other Rights That Have Not |
| ||||||||||
| Name |
| Exercisable |
|
| Un-exercisable |
|
| Price ($) |
|
| Date |
|
| Vested (#) |
|
| Vested ($) |
|
| Vested |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
| Grigorios Siokas |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Georgios Terzis |
|
| 25,000 |
|
|
| - |
|
| $ | 0.40 |
|
| 01/01/21 |
|
|
| - |
|
|
| - |
|
|
| - |
| |
|
|
|
| 25,000 |
|
|
| - |
|
| $ | 0.40 |
|
| 01/01/22 |
|
|
| - |
|
|
| - |
|
|
| - |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Dimitrios Goulielmos |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| John Hoidas |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Demetrios G. Demetriades |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Director Compensation
During the fiscal year ended December 31, 2020, no compensation was awarded to, earned by, or paid to our current director for services rendered in any capacities to us.
In the future we may grant options to our directors to purchase shares of common stock as determined by our Board of Directors or a compensation committee that may be established.
Stock Option Plans
We did not have a stock option plan as of December 31, 2020.
| 36 |
| Table of Contents |
The following table sets forth information regarding the beneficial ownership of our common stock as of April 8 2021, for each of the following persons, after giving effect to the transaction under the Exchange Agreement:
|
| · | all such directors and executive officers as a group; and |
|
| · | each person who is known by us to own beneficially five percent or more of our common stock prior to the change of control transaction. |
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Unless otherwise indicated in the table, the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the shareholder’s name. The percentage of class beneficially owned set forth below is based on 16,066,962 shares of common stock issued and outstanding on April 8, 2021. We calculated beneficial ownership according to Rule 13d-3 of the Securities Exchange Act of 1934, as amended as of that date (the “Exchange Act”). Shares of our Common Stock issuable upon exercise of options or warrants or conversion of Notes that are exercisable or convertible within sixty (60) days of April 8, 2021 are included as beneficially owned by the holder, but not deemed outstanding for computing the percentage of any other Stockholder for Percentage of Common Stock Beneficially Owned Immediately. Beneficial ownership generally includes voting and dispositive power with respect to securities. Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole dispositive power with respect to all shares beneficially owned.
| Name and Address of Beneficial Owners of Common Stock |
| Title of Class |
| Amount and Nature of Beneficial Ownership |
|
| % of Common Stock |
| ||
|
|
|
|
|
|
|
|
|
| ||
| Grigorios Siokas [1] |
| Common |
|
| 7,724,539 |
|
|
| 48.08 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| Dimitrios Goulielmos [2] |
| Common |
|
| 540,000 |
|
|
| 3.36 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| DIRECTORS AND OFFICERS |
|
|
|
| 8,264,539 |
|
|
| 51.44 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| 5% SHAREHOLDERS |
|
|
|
|
|
|
|
|
|
|
| Hudson Bay Ltd [3] |
|
|
|
| 1,009,594 | [4] |
|
| 6.28 | % |
____________
| (1) | Mr. Siokas has a voting block of 7,845,639 common shares, or 48.08% of the issued and outstanding common stock of the Company as of April 8, 2021. |
|
| |
| (2)
| Mr. Goulielmos is the owner of Jaron Trading Limited a company that holds 40,000 common shares. Therefore Mr. Goulielmos, in addition to the 500,000 common shares that he personally owns, he controls the 40,000 that belongs to Jaron Trading Limited. Attributing these shares to Mr. Goulielmos gives him a voting block of 540,000 shares, or 3.36% of the issued and outstanding common stock of the Company at April 8, 2021. |
| (3)
| The address for this entity is 777 Third Avenue, 30th Floor, New York, New York 10017. Hudson Bay Capital Management, L.P., the investment manager of Hudson Bay Master Fund Ltd., has voting and investment power over these securities. Sander Gerber is the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management, L.P. Each of Hudson Bay Master Fund Ltd. and Sander Gerber disclaims beneficial ownership over these securities. |
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|
|
| (4)
| As reported on Schedule 13G/A filed with the SEC on February 9, 2021, beneficial ownership of Hudson Bay Ltd. includes shares of common stock issuable upon conversion of convertible Notes (which have since been repaid) and shares issuable upon exercise of Warrants that are held by such holder. Conversion of the Notes and exercise of the Warrants are each subject to a blocker provision which prevents any holder from converting or exercising, as applicable, the Notes or the Warrants into shares of Common Stock if its beneficial ownership of the Common Stock would exceed 9.99% of the Company’s issued and outstanding Common Stock (each, a “Blocker”). |
Percentages are based on 16,066,962 shares outstanding at April 8, 2021.
Other than the shareholders listed above, we know of no other person who is the beneficial owner of more than five percent (5%) of our common stock.
| 37 |
| Table of Contents |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Grigorios Siokas
During the year ended December 31, 2020, the Company borrowed proceeds of €266,200 ($325,563) and $400,000 and repaid €122,400 ($149,695) of these loans. These loans are non-interest bearing and have no maturity dates. As of December 31, 2020, the Company has an outstanding principal balance of $1,629,246.under these loans.
On December 20, 2018, the €1,500,000 ($1,718,400) note payable, originally borrowed pursuant to a Loan Agreement with a third-party lender, dated March 16, 2018, was transferred to Grigorios Siokas. The note bears an interest rate of 4.7% per annum and had a maturity date of March 18, 2019. As of December 31, 2020, the Company has an outstanding balance of €400,000 ($489,200) and accrued interest of €158,287 ($193,585).
Grigorios Siokas is the Company’s CEO and principal shareholder, and is hence considered a related party to the Company.
Doc Pharma
As of December 31, 2020, the Company has a prepaid balance of $3,4468,653 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $3,468,564. As of December 31, 2019, the Company has a prepaid balance of $2,449,484 and an accounts payable balance of $25,346, resulting in a net prepaid balance of $2,424,138 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $613,264.
During the years ended December 31, 2020 and 2019, the Company purchased a total of $5,983,809 and $3,464,725 of products from Doc Pharma S.A., respectively. During the years ended December 31, 2020 and 2019 the Company had $2,843,260 and $873,041 revenue from Doc Pharma S.A., respectively.
On November 1, 2015, the Company entered into a €12,000 ($12,662) Loan Agreement with Doc Pharma S.A, pursuant to which Doc Pharma S.A., paid existing bills of the Company in the amount of €12,000 ($12,662), excluding the Vendor Bills. The loan bears an interest rate of 2% per annum and was due and payable in full on October 31, 2016. On December 18, 2020, the Company repaid the principal of this loan. As of December 31, 2020, the Company has an outstanding principal balance of $0 and accrued interest expense of $1,364.
On October 3, 2017, the Company, via its subsidiary SkyPharm, signed an Assignment Contract with Doc Pharma S.A. for various services that include the market analysis, research, development of formulas of products, design of product packaging, registration of products, and manufacturing of a new line of dietary supplement products. SkyPharm was given the exclusive rights to market and distribute the supplements in both the domestic Greece market and the international market, either through companies owned by the Company or third parties. Following product design and development, Doc Pharma S.A. will provide the Company with a complete dossier with all necessary data to be submitted to the National Organization for Medicines for required approvals. The total price of the project is €455,000 plus the corresponding VAT. We had no expense related to the agreement in the year ended December 31, 2020. The total length of the contract was through December 31, 2018. The contract is subject to earlier termination upon written notice if: (i) for any reason, the marketing license for the products expires or if lifted, revoked or suspended; (ii) Doc Pharma’s production license is revoked for the category of supplements under the contract; (iii) either party breaches the contract and it is not cured within thirty (30) days of written notice to the other party; or (iv) the bankruptcy or similar proceedings by one of the parties.
| 38 |
| Table of Contents |
Doc Pharma S.A is considered a related party to the Company due to the fact that the CEO of Doc Pharma is the wife of Grigorios Siokas, the Company’s CEO and principal shareholder, who also served as a principal of Doc Pharma SA in the past.
Dimitrios Goulielmos
On November 21, 2014, SkyPharm entered into a Loan Agreement with Dimitrios Goulielmos, former Chief Executive Officer, and a current director of the Company, pursuant to which the Company borrowed €330,000 ($401,115) from Mr. Goulielmos. The Loan bore an interest rate of 2% per annum and was due and payable in full on May 11, 2015. On November 4, 2015, €130,000 ($142,860) in principal and the related accrued interest of €733 ($806) was forgiven and the remaining balance of €200,000 will no longer accrue interest as part of the stock purchase agreement with Grigorios Siokas on November 4, 2015. During the year ended December 31, 2020, the Company paid back an additional €3,000 ($3,669) and as of December 31, 2020, an outstanding principal balance of €10,200 ($12,464) and €0 ($0) accrued interest remains.
Dimitrios Goulielmos is a current director and former CEO of the Company, and is hence considered a related party to the Company.
Item 14. Principal Accountant Fees and Services
On January 18, 2019, the Company’s Board of Directors approved the engagement of Armanino LLP (“Armanino”) as the Company’s new Independent Certified Public Accountants, and the Company entered into an engagement agreement with Armanino on January 18, 2019. Armanino performed the audit of the Company’s consolidated financial statements for the fiscal years ended December 31, 2020 and December 31, 2019 and issued the audit report in this Annual Report.
The following table presents: (1) estimated fees for professional audit services rendered by Armanino for the audit of our annual financial statements and for other services for the year ended December 31, 2020; and (2) fees for professional audit services rendered by MB for the audit of our annual financial statements and for other services for the years ended December 31, 2020 and 2019.
| Financial Statements for the Year Ended |
| Audit Services |
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| Audit Related Fees |
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| Tax Fees |
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| Other Fees |
| ||||
| December 31, 2020 |
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| ARMANINO LLP |
| $ | 115,000 |
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| - |
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| - |
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| - |
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| December 31, 2019 |
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| ARMANINO LLP |
| $ | 75,000 |
|
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| - |
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| - |
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| - |
|
As defined by the SEC, (i) “audit fees” are fees for professional services rendered by our principal accountant for the audit of our annual financial statements and review of financial statements included in our Form 10-K, or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years; (ii) “audit-related fees” are fees for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “audit fees;” (iii) “tax fees” are fees for professional services rendered by our principal accountant for tax compliance, tax advice, and tax planning; and (iv) “all other fees” are fees for products and services provided by our principal accountant, other than the services reported under “audit fees,” “audit-related fees,” and “tax fees.”
Audit Fees for the fiscal years ended December 31, 2020 and 2019 were for professional services rendered for the audits and quarterly reviews of the financial statements of the Company, consents, and other assistance required to complete the year-end audit of the financial statements.
As the Company has a formal audit committee, the services described above were approved by the audit committee under the de minimus exception provided by Rule 2-01(c)(7)(i)(C) under Regulation S-X.Further, as the Company has a formal audit committee, the Company has audit committee pre-approval policies and procedures.
| 39 |
| Table of Contents |
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
| 40 |
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| Pledge Agreement, by and between Grigorios Siokas and Synthesis Peer-to Peer Income Fund (5) | |
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| 41 |
| Table of Contents |
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| Form of Securities Purchase Agreement by and Among Cosmos Holdings Inc and the Buyer (42) | |
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| 42 |
| Table of Contents |
| 101.INS |
| XBRL Instance Document* |
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| 101.SCH |
| XBRL Taxonomy Extension Schema Document* |
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| 101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document* |
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| 101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document* |
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| 101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document* |
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| 101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document* |
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| 101 |
| 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.* |
_____________
| * | Filed with this Report |
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| (1) | Incorporated by reference to the Registration Statement on Form S-1 (File No. 333-162597) filed by the Registrant on October 20, 2009. |
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| (2) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on May 1, 2014. |
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| (3) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on January 9, 2017. |
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| (4) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 9, 2015. |
| 43 |
| Table of Contents |
| (5) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on August 16, 2016. |
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| (6) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on September 16, 2016. |
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| (7) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on October 5, 2016. |
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| (8) | Incorporated by reference to the Current Report on Form 8-K dated as of November 16, 2016 filed by the Registrant on November 22, 2016. |
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| (9) | Incorporated by reference to the Current Report on Form 8-K dated as of November 17, 2016 filed by the Registrant on November 22, 2016. |
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| (10) | Incorporated by reference to the Current Report on Form 8-K/A filed by the Registrant on February 13, 2017. |
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| (11) | Incorporated by reference to the Current Report on Form 8-K/A filed by the Registrant on March 28, 2017. |
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| (12) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on April 14, 2017. |
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| (13) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant in October 11, 2017. |
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| (14) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 16, 2017. |
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| (15) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on May 18, 2017. |
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| (16) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on April 1, 2014. |
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| (17) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 26, 2014. |
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| (18) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on January 5, 2015. |
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| (19) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on March 31, 2015. |
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| (20) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 9, 2015. |
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| (21) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on December 27, 2017. |
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| (22) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on February 21, 2018. |
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| (23) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on March 19, 2018. |
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| (24) | Incorporated by reference to Registration Statement on Form S-1/A (No. 333-222061) filed by the Registrant on January 22, 2018. |
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| (25) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 3, 2013. |
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| (26) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 5, 2018. |
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| (27) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on May 31, 2018. |
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| (28) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 26, 2018. |
| 44 |
| Table of Contents |
| (29) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on July 19, 2018. |
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| (30) | Incorporated by reference to the filing of the Annual Report on Form 10-K filed by the Registrant on April 17, 2018. |
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| (31) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 27, 2018. |
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| (32) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 19, 2018. |
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| (33) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 13, 2018. |
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| (34) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 21, 2018. |
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| (35) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on January 25, 2019. |
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| (36) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on February 6, 2019. |
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| (37) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on February 19, 2019. |
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| (38) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 7, 2019. |
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| (39) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 4, 2019. |
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| (40) | Incorporated by reference to Registration Statement on Form S-1/A (No. 333-222061) filed by the Registrant on January 31, 2018. |
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| (41) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 4, 2018. |
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| (42) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on May 16, 2019 |
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| (43) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on May 28, 2019. |
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| (44) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 25, 2019. |
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| (45) | Incorporated by reference to the filing of the Current Report on Form 8-Kfiled by the Registrant on March 23, 2020. |
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| (46) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on May 15, 2020 |
| (47) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on August 13, 2020 |
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| (48) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 24, 2020 |
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| (49) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 15, 2020 |
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| (50) | Incorporated by reference to the filing of the Current Report on Form 8-K/A filed by the Registrant on November 13, 2020 |
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| (51) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on November 16, 2020 |
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| (52) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on November 17, 2020 |
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| (53) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 22, 2020 |
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| (54) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 11, 2020 |
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| (55) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 2, 2021 |
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| (56) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 8, 2021 |
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| (57) | Incorporated by reference to the filing of the Annual Report on Form 10-K filed by the Registrant on April 14, 2020 |
None.
| 45 |
| Table of Contents |
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant 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: April 15, 2021 | By: | /s/ Grigorios Siokas | |
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| Grigorios Siokas | ||
In accordance with the Exchange Act, this report has been duly signed by the following persons on behalf of the Company and in the capacities and on the dates indicated.
| Signatures |
| Title |
| Date |
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| /s/ Grigorios Siokas |
| Chief Executive Officer and Director |
| April 15, 2021 |
| Grigorios Siokas |
| (Principal Executive Officer) | ||
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| /s/ Georgios Terzis |
| Chief Financial Officer |
| April 15, 2021 |
| Georgios Terzis |
| (PrincipalFinancial Officer, And Principal Accounting Officer) |
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| /s/ Dimitrios Goulielmos |
| Director |
| April 15, 2021 |
| Dimitrios Goulielmos | ||||
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| /s/ Demetrios G. Demetriades |
| Secretary and Director |
| April 15, 2021 |
| Demetrios G. Demetriades | ||||
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| /s/ John J. Hoidas |
| Director |
| April 15, 2021 |
| John J. Hoidas | ||||
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| /s/ Peter Goldstein |
| Executive Director |
| April 15, 2021 |
| Peter Goldstein |
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| 46 |
EXHIBIT 31.1
CERTIFICATION
I, Grigorios Siokas, certify that:
| 1. | I have reviewed this report on Form 10-K of Cosmos Holdings Inc.; | |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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| Cosmos Holdings Inc. | ||
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| Date: April 15, 2021 | By: | /s/ Grigorios Siokas |
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| Grigorios Siokas |
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| Chief Executive Officer |
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EXHIBIT 31.2
CERTIFICATION
I, Georgios Terzis, certify that:
| 1. | I have reviewed this report on Form 10-K of Cosmos Holdings Inc.; | |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function): |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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| Cosmos Holdings Inc. | ||
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| Date: April 15, 2021 | By: | /s/ Georgios Terzis |
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| Georgios Terzis |
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| Chief Financial Officer |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned hereby certifies that the Annual Report on Form 10-K for the year ended December 31, 2020 of Cosmos Holdings Inc. (the “Company”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
| Cosmos Holdings Inc. | ||
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| Date: April 15, 2021 | By: | /s/ Grigorios Siokas |
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| Grigorios Siokas |
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| Principal Executive Officer |
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A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Cosmos Holdings Inc. and will be retained by Cosmos Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned hereby certifies that the Annual Report on Form 10-K for the year ended December 31, 2020 of Cosmos Holdings Inc. (the “Company”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 and that the information contained in such Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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| Date: April 15, 2021 | By: | /s/ Georgios Terzis |
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| Georgios Terzis |
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| Principal Financial Officer and Principal Accounting Officer |
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A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Cosmos Holdings Inc. and will be retained by Cosmos Holdings Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
Cover - USD ($) |
12 Months Ended | ||
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Dec. 31, 2020 |
Apr. 15, 2021 |
Jun. 30, 2020 |
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| Cover [Abstract] | |||
| Entity Registrant Name | Cosmos Holdings Inc. | ||
| Entity Central Index Key | 0001474167 | ||
| Document Type | 10-K | ||
| Amendment Flag | false | ||
| Entity Voluntary Filers | No | ||
| Current Fiscal Year End Date | --12-31 | ||
| Entity Well Known Seasoned Issuer | No | ||
| Entity Small Business | true | ||
| Entity Shell Company | false | ||
| Entity Emerging Growth Company | false | ||
| Entity Current Reporting Status | Yes | ||
| Document Period End Date | Dec. 31, 2020 | ||
| Entity Filer Category | Non-accelerated Filer | ||
| Document Fiscal Period Focus | FY | ||
| Document Fiscal Year Focus | 2020 | ||
| Entity Common Stock Shares Outstanding | 16,066,962 | ||
| Entity Public Float | $ 12,946,815 | ||
| Document Annual Report | true | ||
| Document Transition Report | false | ||
| Entity Interactive Data Current | Yes |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| CURRENT LIABILITIES: | ||
| Convertible notes payable, net of unamortized discount | $ 494,973 | $ 29,509 |
| STOCKHOLDERS' DEFICIT | ||
| Common stock, shares par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 300,000,000 | 300,000,000 |
| Common stock, shares issued | 13,485,128 | 13,225,587 |
| Common stock, shares outstanding | 13,069,800 | 12,860,059 |
| Preferred stock, shares par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Treasury stock | 415,328 | 365,328 |
ORGANIZATION AND NATURE OF BUSINESS |
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| NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS | Cosmos Holdings, Inc. is an international pharmaceutical wholesaler. The Company imports, exports and distributes brand-name and generic pharmaceuticals, over-the-counter (“OTC”) medicines, a variety of vitamins, and dietary supplements. Through December 31, 2020, we operated our business through three wholly owned subsidiaries: (i) SkyPharm S.A. (“SkyPharm”), headquartered in Thessaloniki, Greece; (ii) Decahedron Ltd. (“Decahedron”), headquartered in Harlow, United Kingdom (“UK”); and (iii) Cosmofarm Ltd. (“Cosmofarm”), headquartered in Athens, Greece. Our business is primarily comprised of cross-border sales of brand-name pharmaceutical products in the European Union (“EU”). Our cross-border pharmaceutical wholesale business serves wholesale pharmaceutical distributors and independent retail pharmacies across the EU through a network of three strategic distribution centers, as well as an additional warehousing facility. Pharmaceutical manufacturers generally implement variable pricing strategies within the EU market. Identifying and evaluating price spreads between EU member states enables us to source brand-name pharmaceuticals from countries where ex-factory prices are comparatively low and export to countries where the same products are priced higher. We remain focused on leveraging our growing purchasing scale and supplier relationships to secure discounts and provide pharmaceuticals at reduced prices and continuing to drive organic growth at attractive margins for our cross-border pharmaceutical wholesale business.
We regularly evaluate and undertake strategic initiatives to expand our distribution reach, improve our profit margins, and strengthen our competitive position. In 2018, we entered the vitamins and dietary supplements segment and in the fourth quarter of 2018 we posted the first sales of our own brand of nutraceuticals; SkyPremium Life. Through the December 2018 acquisition of Cosmofarm, we entered the full-line pharmaceutical wholesale distribution segment. Cosmofarm now serves approximately 370 independent retail pharmacies and 40 pharmaceutical wholesalers in the greater Athens region by providing a reliable supply of brand-name and generic pharmaceuticals, OTC medicines, vitamins, and dietary supplements. We invest in technology to enhance safety, distribution and warehousing efficiency and reliability. For example, Cosmofarm operates two fully automated ROWA, a German robotic warehouse system, that ensure 0% error selection rate, accelerate order fulfillment, and yield higher cost-efficiency in our Athens distribution center.
We make use of analytics and customer feedback from our EU-wide network of wholesale pharmaceutical distributors and independent retail pharmacies to identify and evaluate which nutraceutical product codes to develop to add to our SkyPremium Life portfolio. We intend to continue to bring SkyPremium Life products to market primarily through our existing network of over 160 pharmaceutical wholesale clients and vendors and approximately 370 independent retail pharmacies in the EU. There is growing demand for vitamins and food supplements and we are committed to developing quality products and creating enhanced customer value.
We are also closely monitoring the legal framework for prescription and non-prescription derivatives of cannabis products as it develops in Europe. As the legal framework and processes are developed and implemented in each respective EU country, we intend to utilize our existing network to distribute both prescription and non-prescription derivatives of cannabis products to our current customer base. We currently intend to only distribute prescription and non-prescription derivatives of cannabis products to approved EU countries and not in the US.
We regularly evaluate acquisition targets that would allow us to expand our distribution reach and/or vertically integrate into the supply chain of the products that we currently distribute. We believe that the demand for reasonably priced medicines, delivered on time and in the highest quality is set to increase in the years to come, as the population’s life expectancy increases. With our product portfolio of patented and non-patented medicines, we contribute to the optimization of efficient medicinal care, and thereby lowering cost for health insurance funds, companies, and patients. We also believe that the demand for non-prescription wellness products such as food and dietary supplements will continue to increase as individuals are increasingly supplementing their nutritional intake.
We believe the EU pharmaceutical import/export market will continue to grow. We continue to encounter competition in the market as we grow. The competition comes in the form of level of service, reliability, and product quality. On the procurement side, we continue to expand our vendor base. In order to minimize business risks, we diversify our sources of supply. We maintain our high-quality standards by carefully selecting and qualifying our suppliers as well as actively ensuring that our suppliers meet our standard of quality control on an ongoing basis.
On July 22, 2015, the Hellenic Ministry of Health and more specifically the National Organization for Medicines granted SkyPharm a license for the wholesale of pharmaceutical products for human use. The license is valid for a period of five years and pursuant to the EU directive of (2013/C343/01).
Decahedron received its Wholesale Distribution Authorization for human use on November 7, 2013, from the UK Medicines and Healthcare Products Regulatory Agency (MHRA) in accordance with Regulation 18 of the Human Medicines Regulations 2012 (SI 2012/1916) and it is subject to the provision of those Regulations and the Medicines Act 1971. This license will continue to remain in force from the date of issue by the Licensing Authority unless cancelled, suspended, revoked or varied as to the period of its validity or relinquished by the authorization holder.
On February 1, 2019, the Hellenic Ministry of Health and the National Organization for Medicines extended the validity of Cosmofarm’s license for the wholesale of pharmaceutical products for human use for a period of five years and pursuant to the EU directive of (2013/C 343/01).
Corporate History and Structure
Cosmos Holdings, Inc. was incorporated in the State of Nevada under the name Prime Estates and Developments, Inc. on July 21, 2009. On November 14, 2013, we changed our name to Cosmos Holdings, Inc.
On September 27, 2013, the Company, closed a reverse merger 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. Pursuant to a Share Exchange Agreement between the Registrant and Amplerissimo Ltd., a company incorporated in Cyprus (“Amplerissimo”), the Company acquired 100% of Amplerissimo’s issued and outstanding common stock. As a result of the reverse take-over transaction, Amplerissimo became a wholly owned subsidiary of the Company.
On August 1, 2014, the Company, through its Cypriot subsidiary Amplerissimo, formed SkyPharm S.A., a Greek Company (“SkyPharm”), a subsidiary that focuses on the trading, sourcing and distribution of pharmaceutical products.
In February 2017, the Company completed the acquisition of Decahedron Ltd., a UK Company (“Decahedron”) consummating the transactions contemplated by the Stock Purchase Agreement, dated November 17, 2016 as amended (the “Decahedron SPA”). Pursuant to the terms of the Decahedron SPA, the shareholders of Decahedron received an aggregate of 170,000 shares of common stock of the Company (the “Stock Consideration”), which were delivered following the closing in exchange for all of the ordinary shares of Decahedron for the stock consideration. Decahedron is a fully licensed wholesaler of pharmaceutical products and its primary activity is the distribution, import and export of pharmaceuticals.
On November 21, 2017, the Company effected a one-for-ten (1:10) reverse stock split whereby the Company decreased, by a ratio of one-for-ten (1:10) the number of issued and outstanding shares of common stock. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, and warrants including all share and per-share data, for all amounts and periods presented in the consolidated financial statements.
On September 29, 2018, Amplerissimo transferred its remaining 22% investment in SkyPharm to the Company. The Company now holds 100% of the capital of SkyPharm as a wholly-owned subsidiary of the Company. On September 30, 2018, the Company entered into a Share Purchase Agreement with an unaffiliated third party and sold 100% of the issued capital of its subsidiary, Amplerissimo.
On December 19, 2018, the Company completed the purchase of all of the capital stock of Cosmofarm Ltd., a pharmaceutical wholesaler based in Athens, Greece. The principal of the selling shareholder is Panagiotis Kozaris, who remained with Cosmofarm as a director and chief operating officer once it became a wholly owned subsidiary of the Company. Grigorios Siokas, the Company’s CEO, became the new CEO of Cosmofarm. Mr. Kozaris had no prior relationship to the Company other than as an independent shareholder. The purchase price payable is €200,000 evidenced by a promissory note.
Going Concern
The Company’s consolidated financial statements are prepared in conformity with U.S. GAAP, which contemplates the continuation of the Company as a going concern. For the year ended December 31, 2020, the Company had revenue of $55,406,337, net income of $820,786 and net cash used in operations of $11,501,718. Additionally, as of December 31, 2020, the Company had working capital of $5,979,870, an accumulated deficit of $18,750,824, and stockholders’ deficit of $4,161,013. It is management’s opinion that these conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the date of this filing.
During the fiscal year, the Company has undergone strategic review processes to help find a definitive solution to the Company's accumulated deficit constraints. Options under consideration in the strategic review process include, but are not limited to, securing new debt, exchange debt to equity, restructuring current debt facilities from short term to long term and making the proper actions for new fund raising.
The consolidated financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.
The Company has adequate cash from operations in order to cover its operating costs and to continue at a going concern basis. Nevertheless, the ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund its operations. If the Company is unable to obtain adequate capital, it could be forced to cease development of operations.
In order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations, the Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include raising additional capital through increased sales of product and by sale of equity and/or debt. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described herein and eventually secure other sources of financing and attain profitable operations.
Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
The accompanying consolidated financial statements have been prepared in accordance with principles generally accepted in the United States of America.
Principles of Consolidation
Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries, SkyPharm S.A., Decahedron Ltd. and Cosmofarm Ltd. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Effects of COVID-19
Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of April 15, 2021, the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Foreign Currency Translation and Other Comprehensive Income (Loss)
The functional currency of the Company’s subsidiaries is the Euro and British Pound. For financial reporting purposes, both the Euro (“EUR”) and British Pound (“GBP”) have been translated into United States dollars ($) and/or (USD) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive loss as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of EUR or GBP to USD after the balance sheet date.
Other Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included in the consolidated results of operations as incurred.
As of December 31, 2020 and 2019, the exchange rates used to translate amounts in Euros into USD and British Pounds into USD for the purposes of preparing the consolidated financial statements were as follows:
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2020 and December 31, 2019, there were no cash equivalents.
The Company maintains bank accounts in the United States denominated in U.S. Dollars and in Greece and in Bulgaria all of which are denominated in Euros. Additionally, the Company maintains a bank account in the United Kingdom denominated in British Pounds. As of December 31, 2020, the amounts in these accounts were $448,659, $134,935 and $1,651. As of December 31, 2019, the amounts in these accounts were $14,451, $10,987 and $4,080. Additionally, as of December 31, 2020 and 2019, the Company had cash on hand in the amount of $31,604 and $52,489, respectively.
Reclassifications to Prior Period Financial Statements and Adjustments
Certain reclassifications have been made in the Company’s financial statements of the prior period to conform to the current year presentation. $4,381 in other investments for the year ended December 31, 2019 was reclassified to other current assets. $800,164 in accounts payable and accrued expenses was reclassified to accrued interest. For the year ended December 31, 2019, $264 in interest expense – related parties was reclassified to interest expense. Additionally, for the year ended December 31, 2019, $234,037, respectively in sales and marketing expenses were reclassified from general and administrative expenses. These reclassifications have no impact on previously reported net loss.
Accounts Receivable, net
Accounts receivable are stated at their net realizable value. The allowance for doubtful accounts against gross accounts receivable reflects the best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. At December 31, 2020 and 2019, the Company’s allowance for doubtful accounts was $715,845 and $529,252, respectively.
Tax Receivables
The Company pays Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of its business in most of the countries in which it operates related to the procurement of merchandise and/or services it acquires and/or on sales and taxable income. The Company also collects VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services it sells. If the output VAT exceeds the input VAT, this creates a VAT payable to the government. If the input VAT exceeds the output VAT, this creates a VAT receivable from the government. The VAT tax return is filed on a monthly basis offsetting the payables against the receivables. In observance of EU regulations for intra-EU cross-border sales, our subsidiaries in Greece, SkyPharm and Cosmofarm, do not charge VAT for sales to wholesale drug distributors registered in other European Union member states. As of December 31, 2020 and 2019, the Company had a VAT net payable balance of $159,198 and $136,891 respectively, recorded in the consolidated balance sheet as prepaid expenses and other current assets.
Inventory
Inventory is stated at net realizable value using the weighted average method. Inventory consists primarily of finished goods and packaging materials, i.e. packaged pharmaceutical products and the wrappers and containers they are sold in. A periodic inventory system is maintained by 100% count. Inventory is replaced periodically to maintain the optimum stock on hand available for immediate shipment.
The Company writes-down inventories to net realizable value based on physical condition, expiration date, current market conditions, as well as forecasted demand. The Company’s inventories are not highly susceptible to obsolescence. Many of the Company’s inventory items are eligible for return to our suppliers when pre-agreed product requirements, including, but not limited to, physical condition and expiration date, are not met.
Property and Equipment, net
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided on a straight-line basis over the useful lives (except for leasehold improvements which are depreciated over the lesser of the lease term or the useful life) of the assets as follows:
Depreciation expense was $240,886 and $201,000 for the years ended December 31, 2020 and 2019, respectively.
Impairment of Long-Lived Assets
In accordance with ASC 360-10, Long-lived Assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. For the years ended December 31, 2020 and 2019, the Company had no impairment of long-lived assets.
Goodwill and Intangibles, net
The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.
On December 19, 2018, as a result of the acquisition of Cosmo farm, the Company recorded $49,697 of goodwill.
Intangible assets with definite useful lives are recorded on the basis of cost and are amortized on a straight-line basis over their estimated useful lives. The Company uses a useful life of 5 years for an import/export license. The Company evaluates the remaining useful life of intangible assets annually to determine whether events and circumstances warrant a revision to the remaining amortization period. If the estimate of the intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized prospectively over that revised remaining useful life. As of December 31, 2020, no revision to the remaining amortization period of the intangible assets was made.
Amortization expense was $33,176 and $33,086 for the years ended December 31, 2020 and 2019, respectively.
Equity Method Investment
For those investments in common stock or in-substance common stock in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, the investment is accounted for under the equity method. The Company records its share in the earnings of the investee and is included in “Equity earnings of affiliate” in the consolidated statement of operations. The Company assesses its investment for other-than-temporary impairment when events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable and recognizes an impairment loss to adjust the investment to its then current fair value.
Investments in Equity Securities
Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01, and accordingly, investments in equity securities are accounted for at fair value with changes in fair value recognized in net income. Equity securities are classified as short-term or long-term based on the nature of the securities and their availability to meet current operating requirements. Equity securities that are readily available for use in current operations are reported as a component of current assets in the accompanying consolidated balance sheets. Equity securities that are not considered available for use in current operations would be reported as a component of long-term assets in the accompanying consolidated balance sheets. For equity securities with no readily determinable fair value, the Company elects a measurement alternative to fair value. Under this alternative, the Company measures the investments at cost, less any impairment, and adjusted for changes resulting from observable price changes in transactions for identical or similar investments of the investee. The election to use the measurement alternative is made for each eligible investment.
As of December 31, 2020, investments consisted of 3,000,000 shares, which traded at a closing price of $0 per share or a value of $0 of ICC International Cannabis Corp., 40,000 shares which traded at a closing price of $5.45 per share, or value of $218,183 of Diversa S.A. and 16,666 shares which traded at a closing price of $0.28 per share or value of $4,609 of National Bank of Greece. Additionally, the Company has $4,772 in equity securities of Pancreta bank, which are not publicly traded and recorded at cost. See Note 2, for additional investments in equity securities.
Fair Value Measurement
The Company applies FASB ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
The following table presents assets that are measured and recognized at fair value as of December 31, 2020 and 2019, on a recurring basis:
FASB ASC 825-10-25 Fair Value Option, (“ASC 825-10-25”), expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.
Derivative Instruments
Derivative financial instruments are recorded in the accompanying consolidated balance sheets at fair value in accordance with ASC 815. When the Company enters into a financial instrument such as a debt or equity agreement (the “host contract”), the Company assesses whether the economic characteristics of any embedded features are clearly and closely related to the primary economic characteristics of the remainder of the host contract. When it is determined that (i) an embedded feature possesses economic characteristics that are not clearly and closely related to the primary economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would meet the definition of a financial derivative instrument, then the embedded feature is bifurcated from the host contract and accounted for as a derivative instrument. The estimated fair value of the derivative feature is recorded in the accompanying consolidated balance sheets separately from the carrying value of the host contract. Subsequent changes in the estimated fair value of derivatives are recorded as a gain or loss in the Company’s consolidated statements of operations.
Customer Advances
The Company receives prepayments from certain customers for pharmaceutical products prior to those customers taking possession of the Company’s products. The Company records these receipts as customer advances until it has met all the criteria for recognition of revenue including passing control of the products to its customer, at such point, the Company will reduce the customer and deposits balance and credit the Company’s revenues.
Revenue Recognition
In accordance with ASC 606, Revenue from Contracts with Customers, the Company uses a five-step model for recognizing revenue by applying the following steps: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the performance obligations are satisfied by transferring the promised goods to the customer. Once these steps are met, revenue is recognized upon delivery of the product.
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”) and Staff Accounting Bulletin No. 107 (“SAB 107”) issued by the SEC in March 2005 regarding its interpretation of ASC 718. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite service period. The Company values any employee or non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.
The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASU 2018-07, “Compensation-Stock Compensation-Improvements to Nonemployee Share-Based Payment Accounting.”
Foreign Currency Translations and Transactions
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 earnings.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash investments and accounts receivable.
The following tables show the number of the Company’s clients which contributed 10% or more of revenue and accounts receivable, respectively:
Income Taxes
The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes ASC 740. Under this method, deferred tax assets and liabilities are 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, as well as net operating loss carry forwards. 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 recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company is liable for income taxes in Greece and the United Kingdom of England. The corporate income tax rate is 24% in Greece (tax losses are carried forward for five years effective January 1, 2013) and 19% in United Kingdom of England. Losses may also be subject to limitation under certain rules regarding change of ownership.
We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Our review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets. At December 31, 2020 the Company has maintained a valuation allowance against all net deferred tax assets in each jurisdiction in which it is subject to income tax.
The Company periodically reviews the uncertainties and judgments related to the application of complex income tax regulations to determine income tax liabilities in several jurisdictions. The Company uses a “more likely than not” criterion for recognizing the income tax benefit of uncertain tax positions and establishing measurement criteria for income tax benefits. The Company has evaluated the impact of these positions and due to the fact that the fiscal years 2013 - 2014 are unaudited by the Greek tax authorities, a potential tax liability has not been identified because there is a limitation on periods that the Tax authorities can audit retrospectively 5 years prior to the current fiscal year. Therefore, no prospective tax audit from tax authorities may arise. The amount of the liability as of December 31, 2020 and 2019, was $0 and $79,716, respectively, and has been excluded from recording as a long-term liability within the consolidated balance sheets.
Retirement and Termination Benefits
Under Greek labor law, employees are entitled to lump-sum compensation in the event of termination or retirement. The amount depends on the employee’s work experience and renumeration as of the day of termination or retirement. If an employee remains with the company until full-benefit retirement, the employee is entitled to a lump-sum equal to 40% of the compensation to be received if the employee were to be dismissed on the same day. The Company periodically reviews the uncertainties and judgements related to the application of the relevant labor law regulations to determine retirement and termination benefits obligations of its Greek subsidiaries. The Company has evaluated the impact of these regulations and has identified a potential retirement and termination benefits liability. The amount of the liability as of December 31, 2020 and December 31, 2019, was $107,167 and $77,170, respectively, and has been recorded as a long-term liability within the consolidated balance sheets.
Basic and Diluted Net Income (Loss) per Common Share
Basic income per share is calculated by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per share is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method. In accordance with ASC 260, Earnings Per Share, the following table reconciles basic shares outstanding to fully diluted shares outstanding.
Common stock equivalents are included in the diluted income per share calculation only when option exercise prices are lower than the average market price of the common shares for the period presented.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective January 1, 2024, for the Company. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements. |
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MARKETABLE SECURITIES |
12 Months Ended |
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Dec. 31, 2020 | |
| MARKETABLE SECURITIES | |
| NOTE 2 - MARKETABLE SECURITIES | Distribution and Equity Agreement
On March 19, 2018, the Company entered into a Distribution and Equity Acquisition Agreement (the “Distribution and Equity Acquisition Agreement”) with Marathon Global Inc. (“Marathon”), a company incorporated in the Province of Ontario, Canada. Marathon was formed to be a global supplier of cannabis, cannabidiol (CBD) and/or any cannabis extract products, extracts, ancillaries and derivatives (collectively, the “Products”). The Company was appointed the exclusive distributor of the Products initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. The Company has no present intention to distribute any Products under this Agreement in the United States or otherwise participate in cannabis operations in the United States. The Company intends to await further clarification from the U.S. Government on cannabis regulation prior to determining whether to enter the domestic market.
The Distribution and Equity Acquisition Agreement is to remain in effect indefinitely unless Marathon fails to provide Market Competitive (as defined) product pricing and Marathon has not become profitable within five (5) years of the agreement. The transaction closed on May 22, 2018 after the due diligence period, following which the Company received: (a) a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services; and (b) received cash of CAD $2,000,000, subject to repayment in common shares of the Company if it fails to meet certain performance milestones. The Company is entitled to receive an additional CAD $2,750,000 upon the Company’s receipt of gross sales of CAD $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000. The Company was also given the right to nominate one director to the Marathon board of directors.
Since Marathon is a newly formed entity with no assets and no activity, the Company attributed no value to the 5 million shares in Marathon which was received as consideration for the distribution services. As described below, the Company exchanged the Marathon shares in May and July 2018.
Share Exchange Agreements
On May 17, 2018, the Company entered into a Share Exchange Agreement (the “SEA”) with Marathon, ICC International Cannabis Corp (“ICC”) formerly known as Kaneh Bosm Biotechnology Inc. (“KBB”) and certain other sellers of Marathon capital stock. Under the SEA, the Company transferred 2.5 million shares in Marathon to ICC, a Company incorporated under the laws of the Province of British Columbia and a public reporting issuer on the Canadian Securities Exchange, in exchange for 5 million shares of ICC. The Company accounted for the exchange at fair value and recognized a gain on exchange of its investment in Marathon of $1,953,000 included in “Gains on exchange of equity investments” in the consolidated statements of operations.
On July 16, 2018, the Company completed a Share Exchange Agreement (the “New SEA”) with Marathon, ICC, and certain other sellers of Marathon capital stock whereby the Company transferred its remaining one-half interest (2.5 million shares) in Marathon to KBB for an additional 5 million shares of ICC. The Company accounted for the exchange at fair value and recognized a gain on exchange of its investment in Marathon of $2,092,200 in the year ended December 31, 2018. The ten million shares of ICC owned by the Company constituted approximately 7% of the 141,219,108 shares of capital stock of KBB then issued and outstanding. The Company does not have the ability to exercise significant influence over ICC.
The Company determined the fair value of both exchanges based on an actively quoted stock price of ICC received in exchange for the Marathon shares. The Company continues to fair value its investment in ICC with changes recognized in earnings each period and was recorded as an unrealized gain on exchange of investment during the nine months ended December 31, 2020 of $13,500. The value of the investments as of December 31, 2020 and December 31, 2019, was $0 and $33,000, respectively.
Since no value was attributed to the 33 1/3% equity ownership interest in Marathon received as consideration for the distribution services, the Company would receive variable consideration in future for its services under the Distribution and Equity Acquisition Agreement, if certain milestones are achieved. Refer to Note 10 for the accounting associated with the cash of CAD $2 million received upfront. Variable consideration to be received in the future upon achieving the gross sales milestones described above, is constrained as the Company estimates that it is probable that a significant reversal of revenue could occur. In assessing the constraint, the Company considered its limited experience with the Products, new geographic markets and similar transactions, which affect the Company’s ability to estimate the likelihood of a probable revenue reversal. Therefore, no revenue has been recognized for the years ended December 31, 2020 and 2019. The Company will continue to reassess variable consideration at each reporting period and update the transaction price when it becomes probable that a significant revenue reversal would not occur.
As of December 31, 2020, in addition to the 3,000,000 ICC shares valued at $0, as noted above, marketable securities also consisted of the following: 40,000 shares which traded at a closing price of $5.45 per share, or value of $218,183 of Diversa S.A. and 16,666 shares which traded at a closing price of $0.28 per share or value of $4,609 of National Bank of Greece. The Company recorded a net unrealized loss on the fair value of these investments of $2,246 during the year ended December 31, 2020.
CosmoFarmacy LP
In June 2019, the Company entered into an agreement with an unaffiliated third party to incorporate CosmoFarmacy L.P. for the purpose of providing strategic management consulting services and the retail trade of pharmaceutical products, OTC and beauty products to pharmacies. CosmoFarmacy was incorporated with a 30-year term through May 31, 2049. The unaffiliated third party is the general partner (the “GP”) of the limited partnership and is responsible for management and decision-making associated with CosmoFarmacy. The initial share capital was set to EUR 150,000 which was later increased to EUR 500,000. The GP contributed the pharmacy license (the “License”) valued at EUR 350,000 (30-year term) to operate the business of CosmoFarmacy in exchange for a 70% equity ownership. The Company is a limited partner and contributed cash of EUR 150,000 for the remaining 30% equity ownership. CosmoFarmacy is not publicly traded and the Company’s investment has been recorded using the equity method of accounting. The value of the investment as of December 31, 2020 and 2019, was $183,450 and $163,575, respectively, and is included in “Other assets” on the Company’s consolidated balance sheet.
During the year ended December 31, 2019, the Company recognized a cash balance of $221,457 related to its acquisition of Cosmofarm. The cash was used to purchase the investment in CosmoFarmacy described above. Since the accounting for the acquisition of Cosmofarm was completed during the year ended December 31, 2018, the Company recognized the asset through earnings and is included in other income within the condensed consolidated statement of operations for the year ended December 31, 2019. |
PROPERTY AND EQUIPMENT, NET |
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| NOTE 3 - PROPERTY AND EQUIPMENT, NET | Property, plant and equipment, net consists of the following at December 31:
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GOODWILL AND INTANGIBLE ASSETS NET |
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| NOTE 4- GOODWILL AND INTANGIBLE ASSETS NET | Goodwill and intangible assets, net consist of the following at December 31,:
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CAPITAL STRUCTURE |
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| CAPITAL STRUCTURE | |
| NOTE 5 - CAPITAL STRUCTURE | Preferred Stock
The Company is authorized to issue 100 million shares of preferred stock, which have liquidation preference over the common stock and are non-voting. As of December 31, 2020 and 2019, no preferred shares have been issued.
Common Stock
The Company is authorized to issue 300 million shares of common stock. As of December 31, 2020 and 2019, the Company had 13,485,128 and 13,325,587 shares of our common stock issued and 13,069,800 and 12,860,059 shares outstanding, respectively.
On January 7, 2019 and February 5, 2019, 465,325 and 108,417, respectively, shares of common stock were cancelled, these shares were the remaining pre-delivery shares related to the convertible notes in Note 9.
Purchase of Treasury Shares
On November 30, 2018, the Company entered into a stock purchase agreement with an officer and director of the Company, whereby for consideration of $60,000, the Company repurchased 20,000 shares of its common stock at $3.00 per share. As per the agreement, the sale and transfer of the shares occurred on November 30, 2018, the date of signing, however the Company is entitled to pay the full consideration in tranches until August 2019. During the year ended December 31, 2018, the Company paid consideration of $11,317 and had a related party payable of $48,683, which was paid in full during the year ended December 31, 2019.
On February 5, 2019, the Company entered into a Stock Purchase Agreement (the “SPA”) with an institutional noteholder. The SPA provides for the Company’s purchase of 193,408 shares of the Company’s common stock at $3.00 per share or an aggregate of $580,224. Payment was scheduled over a five-month period, subject to acceleration if the Company effects an eligible equity offering. As of December 31, 2019, the Company had made $580,224 in payments. All of the 193,408 shares have been transferred back to the Company and cancelled.
On February 18, 2019, the Company entered into a Stock Purchase Agreement (the “SPA”) with an institutional noteholder. The SPA provides for the Company’s purchase of 83,341 shares of the Company’s common stock at $3.00 per share or an aggregate of $250,023. Payment was scheduled over a five-month period, subject to acceleration, if the Company effects an eligible equity offering. As of December 31, 2019, the Company had made $250,023 in payments. 26,221 shares were transferred back to the Company and subsequently cancelled. The additional 57,120 were transferred to the Company, have not yet been cancelled, and are recorded in treasury.
On June 20, 2019, the Company entered into a stock purchase agreement with a former officer and director of Decahedron, whereby for consideration of $15,000, the Company repurchased 114,518 shares of its common stock. As per the agreement, the sale and transfer of the shares occurred on June 20, 2019, the date of signing. During the year ended December 31, 2019, the Company paid consideration of $15,000.
On July 31, 2020, the Company entered into a Stock Purchase Agreement (the “July SPA”) with a shareholder. The July SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. As of December 31, 2020, the Company made $40,000 in payments.
On August 31, 2020, the Company entered into two Stock Purchase Agreements (the “August SPAs”) with a shareholder. The August SPAs provide for the Company’s purchase of an aggregate total of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. As of December 31, 2020, the Company made $40,000 in payments.
On September 30, 2020, the Company entered into a Stock Purchase Agreement (the “July SPA”) with a shareholder. The July SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. As of December 31, 2020, the Company made $40,000 in payments.
On October 31, 2020, the Company entered into a Stock Purchase Agreement (the “July SPA”) with a shareholder. The July SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. As of December 31, 2020, the Company made $40,000 in payments.
On November 30, 2020, the Company entered into a Stock Purchase Agreement (the “July SPA”) with a shareholder. The July SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. As of December 31, 2020, the Company made $40,000 in payments.
Potentially Dilutive Securities
No options warrants or other potentially dilutive securities other than those disclosed above have been issued as of December 31, 2020. |
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| NOTE 6 - INCOME TAXES | The domestic and foreign components of income (loss) before (benefit) provision for income taxes were as follows (in thousands):
The components of the (benefit) provision for income taxes are as follows (in thousands):
The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2020 and 2019 is as follows:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consist of the following:
At December 31, 2020, the Company had U.S. net operating loss ("NOL") carryforwards of approximately 4,112,907 that may be offset against future taxable income, subject to limitation under IRC Section 382. Of the $4.1 million Federal NOL carryforwards, $2.5 million are pre-2018 and begin to expire in 2031. The remaining balance of $1.6 million, are limited to utilization of 80% of taxable income but do not have an expiration. At December 31, 2020, the Company had fully utilized all non-US NOL carryforwards. A tax benefit has been reported in the December 31, 2020 for the release of the non-US valuation allowance, based on a more likely than not criterion and in consideration of all available positive and negative evidence.
The Company applied the “more-likely-than-not” recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in no unrecognized tax benefits as of December 31, 2020 and December 31, 2019, respectively. |
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RELATED PARTY TRANSACTIONS |
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| NOTE 7 - RELATED PARTY TRANSACTIONS | On the date of our inception, we issued 2 million shares of our common stock to our three officers and directors which were recorded at no value (offsetting increases and decreases in common stock and additional paid-in capital).
Doc Pharma S.A.
As of December 31, 2020, the Company has a prepaid balance of $3,468,653 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $3,468,564. As of December 31, 2019, the Company has a prepaid balance of $2,449,484 and an accounts payable balance of $25,346, resulting in a net prepaid balance of $2,424,138 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $613,264.
During the years ended December 31, 2020 and 2019, the Company purchased a total of $5,983,809 and $3,464,725 of products from Doc Pharma S.A., respectively. During the years ended December 31, 2020 and 2019 the Company had $2,843,260 and $873,041 revenue from Doc Pharma S.A., respectively.
Doc Pharma S.A is considered a related party to the Company due to the fact that the CEO of Doc Pharma is the wife of Grigorios Siokas, the Company’s CEO and principal shareholder, who also served as a principal of Doc Pharma S.A. in the past.
Notes Payable – Related Party
A summary of the Company’s related party notes payable during the years ended December 31, 2020 and 2019 is presented below:
Grigorios Siokas
On December 20, 2018, the €1,500,000 ($1,718,400) note payable, originally borrowed pursuant to a Loan Agreement with a third-party lender, dated March 16, 2018, was transferred to Grigorios Siokas. The note bears an interest rate of 4.7% per annum and matured on March 18, 2019 pursuant to the original agreement. The note is not in default and the maturity date has been extended until December 31, 2021. As of December 31, 2019, the note had an outstanding principal balance of €1,200,000 ($1,347,240) and accrued interest of €144,207 ($128,447). During the year ended December 31, 2020 the Company repaid €800,000 ($978,400). As of December 31, 2020, the Company has an outstanding balance of €400,000 ($489,200) and accrued interest of €158,287 ($193,585).
Grigorios Siokas is the Company’s CEO and principal shareholder.
Dimitrios Goulielmos
On November 21, 2014, the Company entered into an agreement with Dimitrios Goulielmos, as amended on November 4, 2016. Pursuant to the amendment, this loan has no maturity date and is non-interest bearing. During the year ended December 31, 2019, the Company repaid €40,300 ($45,245) and a principal balance of €13,200 ($14,820) remained as of December 31, 2019. During the year ended December 31, 2020, the Company repaid €3,000 ($3,669) and a principal balance of €10,200 ($12,475) remained as of December 31, 2020.
Dimitrios Goulielmos is a current director and former CEO of the Company.
DOC Pharma
On November 1, 2015, the Company entered into a €12,000 ($12,662) Loan Agreement with Doc Pharma S.A, pursuant to which Doc Pharma S.A., paid existing bills of the Company in the amount of €12,000 ($12,662), excluding the Vendor Bills. The loan bears an interest rate of 2% per annum and was due and payable in full on October 31, 2016. As of December 31, 2019, the Company has an outstanding principal balance of €12,000 ($13,472) and accrued interest expense of $1,100. On December 18, 2020, the Company repaid the principal of this loan. As of December 31, 2020, the Company has an outstanding principal balance of $0 and accrued interest expense of $1,364.
The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2020 and 2019, the Company recorded a foreign currency translation gain of $122,279 and a loss of $35,850 respectively.
Loans Payable – Related Party
A summary of the Company’s related party loans payable during the years ended December 31, 2020 and 2019 is presented below:
Grigorios Siokas
From time-to-time Grigorios Siokas loans the Company funds in the form of non-interest bearing, no-term loans. As of December 31, 2018, the Company had an outstanding principal balance of $1,777,799, consisting of €1,353,700 ($1,550,799) and $227,000, in loans payable to Grigorios Siokas. During the year ended December 31, 2019, the Company borrowed total additional proceeds of $585,914, repaid €233,567 ($262,226) of these loans and converted $1,050,000 of these loans into 140,001 shares of common stock at a conversion rate of $7.50 per share (see below). As of December 31, 2019, the Company had an outstanding principal balance under these loans of $1,026,264 consisting of €297,314 ($303,502) and $722,762, in loans payable to Grigorios Siokas. During the year ended December 31, 2020, the Company borrowed additional proceeds of €266,200 ($325,563) and $400,000 and repaid €122,400 ($149,695) of these loans. As of December 31, 2020, the Company had an outstanding balance under these loans of $1,629,246.
On May 28, 2019, the Company entered into a Debt Exchange Agreement with Grigorios Siokas. The agreement provided for the issuance by the Company of 66,667 shares of common stock, at the rate of $7.50 per share, or an aggregate of $500,000, in exchange for $500,000 of existing loans by Mr. Siokas to the Company. The Company valued this transaction at fair value and recorded a $259,999 gain on extinguishment of related party debt to additional paid-in capital.
On June 24, 2019, the Company entered into a Debt Exchange Agreement with Grigorios Siokas. The agreement provided for the issuance by the Company of 73,334 shares of common stock, at the rate of $7.50 per share, or an aggregate of $550,000, in exchange for $550,000 of existing loans by Mr. Siokas to the Company. The Company valued this transaction at fair value and recorded a $269,126 gain on extinguishment of related party debt to additional paid-in capital.
The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2020 and 2019, the Company recorded $30,954 and $25,223, respectively.
Except as set forth above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons. |
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LINES OF CREDIT |
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| NOTE 8 - LINES OF CREDIT | A summary of the Company’s lines of credit during the years ended December 31, 2020 and 2019 is presented below:
The line of credit with National Bank of Greece is being renewed annually with current interest rates of 6.00%, 4.35% (“COSME 2”) and 4.35% (plus the 6-month Euribor plus any contributions currently in force by law on certain lines of credit), (“COSME 1”). The maximum borrowing allowed for the 6% line of credit was $2,690,600 and $1,684,050 at December 31, 2020 and December 31, 2019, respectively for the 6% line of credit. The outstanding balance was $2,411,182 and $973,961 at December 31, 2020 and 2019, respectively.
The maximum borrowing allowed was $1,223,000 and $1,122,700 at December 31, 2020 and December 31, 2019, respectively, for the 4.35% lines of credit. The outstanding balance was $1,129,368 and $966,084 at December 31, 2020 and December 31, 2019, respectively.
The line of credit with Alpha Bank of Greece is renewed annually with a current interest rate of 6.00%. The maximum borrowing allowed was $1,223,000 and $1,122,700 at December 31, 2020 and December 31, 2019, respectively. The outstanding balance was $1,106,894 and $810,947 at December 31, 2020 and December 31, 2019, respectively.
In the year ended December 31, 2018, the Company had a line of credit with Eurobank of Greece which had an interest rate of 8.55% and a maximum borrowing allowed of $572,800. The outstanding balance was $286,829 at December 31, 2018 and was paid back in full during the year ended December 31, 2019.
Interest expense for the year ended December 31, 2020 and 2019, was $270,655 and $85,090, respectively.
Under the agreements, the Company is required to maintain certain financial ratios and covenants. These lines of credit were assumed in the Company’s acquisition of Cosmofarm. During the years ended December 31, 2020 and 2019, the Company was in compliance with these ratios and covenants.
COVID-19 Government Funding
On June 23, 2020, the Company’s subsidiary Cosmofarm M.S. entered into an agreement with the “National Bank of Greece SA” (the “Bank”) to borrow a maximum of €500,000 ($611,500) under a proposed plan which will operate the same as the line of credit above. The proposed plan has a maturity date of sixty (60) months from the date of the first disbursement, which includes a grace period of nine months. The total amount of the initial proceeds were paid in 3 equal monthly installments. The Company received the first disbursement of €390,790 ($483,243) on July 10, 2020, the second disbursement in the amount of €42,385 ($48,639) was received on July 28, 2020 and the final disbursement of €66,825 ($75,091) on August 11, 2020. The line of credit is interest bearing from the date of receipt and is payable every three (3) months at an interest rate of 2.7%. The outstanding balance was $429,240 at December 31, 2020.
Interest expense for year ended December 31, 2020 was $3,910. |
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CONVERTIBLE DEBT |
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| NOTE 9 - CONVERTIBLE DEBT | A summary of the Company’s convertible debt during the years ended December 31, 2020 and 2019 is presented below:
All of the convertible debt is classified as short-term within the consolidated balance sheet as it all matures and will be paid back within fiscal year 2021.
November 15, 2017 Securities Purchase Agreement
On November 15, 2017, the Company entered into a Securities Purchase Agreement with institutional investors (the “Buyers”), pursuant to which the Company issued on November 16, 2017 for a purchase price of $3,000,000, $3,350,000 in aggregate principal amount of Senior Convertible Notes (the “Existing Notes”) to the Buyers, convertible into approximately 670,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) at $5.00 per share and five-year warrants (the “Warrants”) to purchase an aggregate of 536,000 shares of Common Stock exercisable at $7.50 per share. The Notes contained an original issue discount of $350,000. Of the $3,000,000 purchase price, $240,000 went directly to financing costs (see below) and $74,000 went directly to legal fees such that the Company received net proceeds of $2,686,000.
On February 20, 2018, the Company entered into two separate Amendment and Exchange Agreements (“Exchange Agreements”) with the Buyers for new senior convertible notes (“New Notes”) in exchange for existing notes. Each New Note is identical in all material respects to the Existing Note, except that (i) the New Note was not convertible into shares of the Company’s common stock (the “Common Stock”) until April 20, 2018; (ii) all future cash installment payments under such New Note will be made at a redemption price equal to 112% of the applicable installment amount; (iii) the Company’s existing obligation to initially deliver pre-delivery shares of its common stock to the holder of such New Note was deferred until April 20, 2018; and (iv) at any time on or before June 20, 2018, the Company had the right, at its option, to redeem all, or any part, of the amounts then outstanding under such New Note in cash at a redemption price equal to 125% of such amounts then outstanding under such New Note. The Company will repay the principal amount of the Notes in equal monthly installments beginning on January 1, 2018 and repeating on the first business day of each calendar month thereafter until the fourteenth (14th) month anniversary date of issue.
On September 26, 2018, the Company entered into a second amendment which extended the maturity dates of the notes to February 1, 2019. On April 24, 2018, 670,001 pre-delivery shares were issued. On January 7, 2019 and February 5, 2019, 465,625 and 108,417 pre-delivery shares, respectively, were cancelled upon full payment of both notes. Eighty-five (85%) percent of any cash proceeds received by the holders of the Notes from the sale of pre-delivery shares issued as collateral shall be applied against the particular installment amount then due. The Notes are senior in right of payment to all existing and future indebtedness except Permitted Indebtedness which includes $12 million of senior secured indebtedness of the Company and its subsidiaries under the above described Synthesis loan agreements, plus a defined amount of purchase money indebtedness in connection with bona fide acquisitions. The Company evaluated the debt modification in accordance with ASC 470-50 and concluded that the debt qualified for debt extinguishment as the 10% cash flow test was met. As a result, the Existing Notes were written off and the New Notes were recorded at fair value as of February 20, 2018. The Company wrote off the remaining principal balance of $2,871,429 of the Existing Notes along with the remaining $2,596,838 of debt discounts related to the Existing Notes of which $1,140,711 was a reduction to additional paid-in-capital representing the intrinsic value of the existing beneficial conversion feature. The Company recorded the New Notes in the amount of $3,216,000 and a total debt discount of $3,216,000 in relation to the intrinsic value of the new beneficial conversion feature of $2,880,000 and an original issue discount of $336,000. This resulted in a net loss on extinguishment of debt in the amount of $1,464,698 and additional net equity related to the beneficial conversion feature of $1,739,289.
The New Notes were not convertible until April 18, 2018 pursuant to the February 20, 2018 amendment. Beginning April 20, 2018, the Holder may convert the New Notes into shares of Common Stock at the rate of $5.00 per share. In the event of an issuance of Common Stock for a consideration less than the Conversion Price (other than Excluded Securities, as defined) the Conversion Price shall be reduced to the price of the dilutive issuance, (the “Conversion Price”). Upon an Event of Default (as defined), the Buyers may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the Volume-Weighted Average Price (as defined, the “VWAP”). The Company valued the beneficial conversion feature of the Existing Notes at intrinsic value and recorded $1,140,711 to debt discount, of which $405,743 was amortized through February 19, 2018. On February 20, 2018, the remaining debt discount was written off and the Company recorded a new debt discount as discussed above.
On December 12, 2018, the Company entered into a Third Amendment and Exchange Agreement (“Third Exchange Agreement”) with the Buyers whereby the existing 536,000 warrants issued to such investors in connection with the November 15, 2017 Securities Purchase Agreement were retired in exchange for 727,683 new warrants. Additionally, the investors agreed to convert $1,333,333 of the debt related to the September 4, 2018 Securities Purchase Agreement at a reduced conversion price of $3.478. The Company issued those 383,363 shares on December 13, 2018. The Third Exchange agreement was considered to be an inducement to conversion and accounted for in accordance with ASC 470-20. Accordingly, the Company recorded a modification expense of $1,778,952 for the year ended December 31, 2018.
During the year ended December 31, 2018, there were principal conversions in the amount of $432,419 and the Company repaid principal on the New Notes in the amount of $2,680,000, such that the remaining outstanding principal balance of the New Notes as of December 31, 2018 was $103,610. The Company repaid this remaining balance in the year ended December 31, 2019.
The Company recorded a total of $3,350,000 of debt discounts related to the above Existing Notes in the year ended December 31, 2017. A total of $360,890 was amortized during the year ended December 31, 2017 and an additional $392,272 related to the debt discount of the Existing Notes was amortized through February 19, 2018. As a result of the Exchange Agreement discussed above, the debt discounts of the Existing Notes were written off and a total of $3,216,000 of debt discounts were recorded during the year ended December 31, 2018. The debt discounts are being amortized over the term of the debt. Amortization of the debt discounts of the New Notes for the year ended December 31, 2018 was $3,170,386. The additional $45,613 was amortized in the year ended December 31, 2019.
September 4, 2018 Securities Purchase Agreement
On September 4, 2018, the Company entered into a Securities Purchase Agreement with two institutional investors (the “Buyers”) pursuant to which the Company issued for a purchase price of $2,000,000, $2,233,333 in aggregate principal amount of Senior Convertible Notes (the “September 2018 Notes”) to the Buyers, convertible into 372,223 shares of the Company’s common stock, par value $.001 per share at $6.00 per share (with the exception of the conversion related to the Third Exchange Agreement), and warrants to purchase an aggregate of 357,334 shares of Common Stock exercisable at $7.50 per share (the “Warrants”). The Notes contained an original issue discount of $233,332. Of the $2,000,000 purchase price, $140,000 went directly to financing costs (see below) and $15,000 went directly to legal fees such that the Company received net proceeds of $1,845,000.
The September 2018 Notes provide that the Company will repay the principal amount of Notes in equal monthly installments including a 5% installment fee, which is recorded as interest expense, beginning on November 1, 2018 and repeating on the first business day of each calendar month thereafter until May 1, 2019. During the year ended December 31, 2018, the Company recorded $31,905 in installment fees. During the year ended December 31, 2019, the Company recorded $13,097 in installment fees.
The Notes were convertible at any time by the Holder into shares of Common Stock at the rate of $6.00 per share (with the exception of the conversion pursuant to the Third Exchange Agreement described below), subject to full ratchet anti-dilution adjustment (the “Conversion Price”). According to the original terms of the agreement, the Company was to pre-deliver up to 372,222 shares of common stock to the Buyers. Eighty-five percent (85%) of any cash proceeds received by the Buyers from the sale of the Pre-Delivery Shares would then be applied against the particular installment amount due on such Installment Date under the Note. The Company had three months to deliver the Pre-Delivery shares, however the debt was repaid prior to the opportunity to deliver those shares. The Registration Statement (No. 333-227813) covering 150% of the number of shares underlying the Notes and warrants was declared effective on November 1, 2018. Upon an Event of Default (regardless of whether such event has been cured), the Buyers may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the then Volume-Weighted Average Price (as defined, the “VWAP”). The Company valued the beneficial conversion feature of the Existing Notes at intrinsic value and recorded $934,922 to debt discount, which will be amortized over the life of the Notes.
Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission for this transaction equal to seven (7%) percent of the total gross proceeds of the offering, or $140,000, and the issuance of five-year warrants to purchase seven (7%) percent of the shares of common stock issued or issuable in this offering (excluding shares of Common Stock issuable upon exercise of any Warrants issued to investors), or 26,056 shares; and will receive seven (7%) percent of any cash proceeds received from the exercise of any Warrants sold in the offering with an expiration equal to or less than twenty-four (24) months. The warrants are exercisable six months after the issue date or March 4, 2019, at $6.00 per share and were valued at a fair value of $157,969 which was fully expensed during the year ended December 31, 2018. The $140,000 cash commission was recorded as debt discount and will be amortized over the term of the Notes.
During the year ended December 31, 2018, there were principal conversions in the amount of $1,333,333 at a conversion price of $3.478 pursuant to the Third Exchange Agreement and the Company repaid principal of $638,095, such that the remaining outstanding principal balance of the Notes as of December 31, 2018 was $261,903.
During the year ended December 31, 2019, the Company repaid the remaining principal balance in the amount of $261,903, such that the remaining outstanding principal balance of the Notes as of December 31, 2019 is zero.
The Company recorded a total of $2,233,332 of debt discounts related to the above Notes during the year ended December 31, 2018. The debt discounts are being amortized over the term of the debt. Amortization of the debt discounts for the year ended December 31, 2018 was $2,049,232. As a result of the final payment of the Notes, the remaining debt discount of $184,100 was amortized during the year ended December 31, 2019.
Securities Purchase Agreement executed on May 15, 2019
On May 15, 2019, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Buyer”). Upon the closing of this financing, on May 17, 2019, the Company issued for a purchase price of $1,500,000 in principal amount a Senior Convertible Note (the “May 2019 Note”) to the Buyer.
The May 2019 Note provided that the Company will repay the principal amount of the May 2019 Note on or before March 15, 2020.
On March 23, 2020, the Company entered into a Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”).
The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): (September 16, 2020 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date”), (b) during the Forbearance Period waive the prepayment premium to any Company Optional Redemption, and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to September 16, 2020. The Scheduled Required Prepayments are $100,000 upon signing the Agreement and five (5) monthly payments thereafter aggregating $200,000 with all amounts outstanding under the Note due on September 16, 2020. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers and directors and advisors of the Company) or factoring and purchase order indebtedness, the Company shall effect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments.
On September 23, 2020, the Company entered into a Second Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”). The Note was due to be paid in full on or before September 16, 2020 and was not paid (the “Existing Default”). The Note provides that upon an Event of Default, the Buyer may, among other things, require the Company to redeem all or a portion of the Note at a redemption premium of 120%, multiplied by the product of the conversion rate ($6.00per share) and the then current market price.
The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): June 16, 2021 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date), (b) during the Forbearance Period (as defined) waive the prepayment premium to any Company Optional Redemption (which will result in the 120% redemption premium effectively replaced with 100%), and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to June 16, 2021. The Scheduled Required Prepayments are $63,000 upon signing the Agreement and eight (8) monthly payments thereafter aggregating $480,000 with the remaining $607,000 outstanding under the Note due on June 16, 2021. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers, directors and 10% or greater shareholders of the Company) or factoring and purchase order indebtedness, the Company shall effect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments.
The May 2019 Note is convertible at any time by the Holder into 250,000 shares of common stock, par value $0.001 per share at the rate of $6.00 per share, subject to adjustment (the “Conversion Price”). Upon an Event of Default (regardless of whether such event has been cured), the Buyer may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the then Volume-Weighted Average Price (as defined, the “VWAP”). The Company considered the need for the conversion feature to be bifurcated under ASC 815 and determined that it does not meet the requirements. Additionally, the Company determined the effective conversion rate under ASC 470-20 and determined that the instrument is out of the money and no beneficial conversion feature was recorded.
The May 2019 Note is senior in right of payment to all other existing and future indebtedness of the Company except Permitted Senior Indebtedness (as defined in the May 2019 Note), including $12 million of senior secured indebtedness of the Company and its subsidiaries under an existing senior loan agreement, plus defined amounts of purchase money indebtedness in connection with bona fide acquisitions.
The May 2019 Note includes customary Events of Default and provides that the Buyer may require the Company to redeem (regardless of whether the Event of Default has been cured) all or a portion of the Note at a redemption premium equal to the greater of: (i) the product of the redemption premium of one hundred twenty-five (125%) percent, multiplied by the conversion amount, and (ii) the product of the conversion rate ($6.00 per share) multiplied by the product of 125% multiplied by the then current market price. The Buyer may also require redemption of the May 2019 Note upon a Change of Control (as defined) at a premium of one hundred twenty-five (125%) percent. The Company has the right to redeem the May 2019 Note at any time, in whole or in part, in cash at a price equal to 120% of the then outstanding conversion amount.
Conversion of the May 2019 Note is subject to a blocker provision which prevents any holder from converting the May 2019 Note into shares of common stock if its beneficial ownership of the common stock would exceed 9.99% of the Company’s issued and outstanding common stock.
As of December 31, 2019, the Company had a principal balance $1,500,000 on the May 2019 Note and the Company had accrued $25,334 in interest expense. During the year ended December 31, 2020, the Company repaid $593,000 such that as of December 31, 2020, the Company had a principal balance $907,000 on the May 2019 Note and the Company had accrued $15,420 in interest expense.
Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission for this transaction equal to six (6%) percent of the total gross proceeds of the offering. This 6% fee or $90,000 was recorded as debt discount along with the $30,000 in legal fees associated with the May 2019 Note. These fees will be amortized over the term of the note. The Company amortized $90,491 in the year ended December 31, 2019 and the remaining $29,509 was amortized during the year ended December 31, 2020.
December 21, 2020 Securities Purchase Agreement
On December 21, 2020 (the “Issue Date”), Cosmos Holdings, Inc. (“Cosmos”, the “Borrower” or the “Company”) entered into a convertible promissory note with Platinum Point Capital, LLC (the “Holder”, “Lender” or “Platinum”).
The Company issued the $540,000 Note in exchange for $500,000 in cash and included a $40,000 Original Issue Discount (“OID”) and paid $3,000 in financing costs. The principal amount together with interest at the rate of eight percent (8.0%) per annum, compounded annually (the “Interest Rate”), will be paid to the Lenders on or before the Maturity Date (December 31, 2021 or as defined below). Accrued interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. In the event that on or before the Maturity Date, the Note either (i) have not been converted or have not been otherwise satisfied in full or (ii) an Event of Default occurs, then the applicable rate of interest on the outstanding amount of the Note since inception shall be the Interest Rate plus eighteen percent (18.0%), the Default Interest. Unless previously converted, the principal and accrued interest on the Note is due and payable in cash (USD) upon the earlier of (i) December 31, 2021, (ii) a Change of Control (as defined below) or (iii), an Event of Default (as defined below) (collectively, the “Maturity Date”).
The Note may be prepaid in whole or part beginning from the issue date until a date not later than 180 days thereafter, the Company shall have the right to prepay the full amount outstanding under the Note (principal and accrued interest), in full by making a payment to the Holder in an amount equal to one hundred twenty (120%) multiplied by the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of the Note plus (y) Default Interest, if any.
The Holder shall have the right at any time from the Issue Date to convert all or part of the outstanding and unpaid principal amount of the Note into Common Stock at the Conversion Price of as defined below.
The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature and a derivative liability which is accounted for separately. The Company measured the beneficial conversion feature’s intrinsic value on December 16, 2020 and determined that the embedded derivative was valued at $456,570 which was recorded as a debt discount, and together with the original issue discount and transaction expenses of $43,000, in the aggregate of $499,570, is being amortized over the life of the loan. As of December 31, 2020, the fair value of the derivative liability was $460,728 and for the year ended December 31, 2020 the Company recorded a loss of $4,158 from the change in fair value of derivative liability as other expense in the consolidated statements of operations and comprehensive income (loss).
Derivative Liabilities
The table below provides a summary of the changes in fair value, including net transfers in and/or out of all financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the year ended December 31, 2020:
The fair value of the derivative conversion features and warrant liabilities as of December 31, 2020 were calculated using a Monte-Carlo option model valued with the following assumptions:
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DEBT |
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| NOTE 10 - DEBT | A summary of the Company’s third-party debt during the years ended December 31, 2020 and 2019 is presented below:
On November 16, 2015, the Company entered into a Loan Agreement with Panagiotis Drakopoulos, former Director and former Chief Executive Officer, pursuant to which the Company borrowed €40,000 ($42,832) as a note payable from Mr. Drakopoulos. The note bears an interest rate of 6% per annum and was due and payable in full on November 15, 2016. As of December 31, 2019, the Company had an outstanding principal balance of €13,000 ($14,595) and accrued interest of €4,166 ($4,677). During the year ended December 31, 2020, the Company repaid €5,000 ($5,862) of this loan. As of December 31, 2020, the Company had an outstanding principal balance of €8,000 ($9,784) and accrued interest of €4,785 ($5,852).
On December 19, 2018, pursuant to the terms of the Cosmofarm SPA (See Note 1), the Company issued a non-interest-bearing promissory note in the amount of €200,000 ($227,912). The note had a maturity date of December 19, 2019. The Company had an outstanding balance of €200,000 ($227,912) as of December 31, 2018. During the year ended December 31, 2019, the Company repaid the outstanding balance of the note.
Loan Facility Agreement and Bridge Loans
Loan Facility
On August 4, 2016, the Company’s wholly owned subsidiary SkyPharm entered into a Loan Facility Agreement, guaranteed by Grigorios Siokas, with Synthesis Peer-To Peer-Income Fund (the “Loan Facility” the “Lender”). The Loan Facility initially provided SkyPharm with a credit facility of up to $1,292,769 (€1,225,141). Any advance under the Loan Facility accrues interest at a rate of 10% per annum and requires quarterly interest payments commencing on September 30, 2016. The amounts owed under the Loan Facility shall be repayable upon the earlier of (i) three months following the demand of the Lender; or (ii) August 31, 2018. No prepayment is permitted pursuant to the terms of the Loan Facility. The Synthesis Facility Agreement as amended is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas.
On September 13, 2016, SkyPharm entered into a First Deed of Amendment with the Loan Facility increasing the maximum loan amount to $1,533,020 as a result of the Lender having advanced $240,251 (€227,629) to SkyPharm.
On March 23, 2017, SkyPharm entered into an Amended and Restated Loan Facility Agreement (the “A&R Loan Facility”), with the Loan Facility which increased the loan amount to an aggregate total of $2,664,960 (€2,216,736) as a result of the lender having advanced $174,000 (€164,898) in September 2016, $100,000 (€94,769) in October 2016, $250,000 (€236,922) in November 2016, $452,471 (€428,800) in December 2016, $155,516 (€129,360) in January 2017, $382,327 (€318,023) in July 2017 and $70,000 (€58,227) in December 2017. The A&R Loan Facility amends and restates certain provisions of the Loan Facility Agreement, dated as of August 4, 2016, by and among the same parties. Advances under the A&R Loan Facility continue to accrue interest at a rate of 10% per annum from the applicable date of each drawdown and require quarterly interest payments. The A&R Facility now permits prepayments at any time. The amounts owed under the A&R Loan Facility were repayable upon the earlier of (i) seventy-five days following the demand of the Lender; or (ii) August 31, 2018. The A&R Loan Facility is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas (the “Pledged Shares”). The A&R Loan Facility was also amended to provide additional affirmative and negative covenants of Sky Pharm and the Guarantor during the term of loans remain outstanding, including, but not limited to, the consent of the Lender in connection with (i) the Company or any of its subsidiaries incurring any additional indebtedness; or (ii) in the event of any increase in the Company’s issued and outstanding shares of Common Stock, the Pledged Shares shall be increased to an amount equal to a minimum of ten percent (10%) of the issued and outstanding shares of the Company. As of December 31, 2019, the outstanding balance under the A&R Loan Facility was $3,078,442 (€2,741,999) and accrued interest expense of $609,607 (€542,983) had been recorded.
On April 18, 2018, the Company entered into an amendment with the Lender that was effective as of January 1, 2018, pursuant to which the maturity dates for all advances was extended to December 31, 2021. Additionally, the interest rate was amended such that the interest rate for all advances is 4% plus the 3-Month Libor rate. The Loan Facility also forgave €35,060 ($40,000) in fees related to the July 6, 2017 advance. As a result, the Company reduced the unamortized portion of debt discount that related to those fees and recorded a gain on debt settlement of €19,763 ($23,354).
Bridge Loans
In 2017, the Company entered into loan agreements with Synthesis Peer-To-Peer Income Fund (the “Bridge Loans”) in the amounts of €41,590 ($50,000), €100,000 ($120,220) and €31,388 ($34,745). The Company had accrued interest expense of an aggregate total of €24,608 ($27,627) for both loans and the outstanding balances of these loans was €45,809 ($50,000), €83,333 ($106,542), €31,388 ($34,745), respectively, as of December 31, 2019.
On June 30, 2020, the Company entered into a settlement agreement whereby the Company agreed to make certain payments to the creditor and the creditor will accept such payments as full discharge of the outstanding debt of the Loan Facility and Bridge Loans. In accordance with the settlement agreement, interest will accrue from June 30, 2020 until repayment in full at a rate of 6% per annum for the first year and 5.25% per annum for the second year calculated on the balance outstanding from day to day during such period. Interest is due on the 10th day of each calendar month. If any amount, principal or interest is unpaid on its due date interest shall accrue from the due date until the date of its payment until the date of its payment in full at the rate of 7.25% per annum. The Company will make quarterly payments of €125,000 beginning May 6, 2021 with a final payment of €2,200,000 on May 6, 2022. The Company evaluated the settlement agreement for debt modification in accordance with ASC 470-50 and concluded the debt qualified for debt extinguishment as the 10% cash flow test was met. As a result, the $3,772,446 of principal and accrued interest was written off and the new debt was recorded at fair value as of June 30, 2020 in the amount of $3,033,990. For the year ended December 31, 2020, the Company recorded a gain on extinguishment of debt in the amount of $749,824, of which $12,066 related to the principal of the loans and the balance related to the accrued interest. As of December 31, 2020, the Company has accrued interest expense of $33,021 and the principal balance of the debt is $3,302,100, of which $2,843,475 is classified as Notes payable – long term portion on the consolidated balance sheet.
The debt is subject to acceleration in an Event of Default (as defined in the Notes). This agreement is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas, as described above under A&R Loan Facility.
Trade Facility Agreements
On April 10, 2017, Decahedron entered into a Trade Finance Facility Agreement (the “Decahedron Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”). The Decahedron Facility provides the following material terms:
The current draw on the Decahedron Facility is $0.
On May 12, 2017, SkyPharm entered into a Trade Finance Facility Agreement (the “SkyPharm Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”). The SkyPharm Facility provides the following material terms:
The Company obtained consents from Synthesis Peer-to-Peer Income Fund in connection with obtaining the Lender.
On November 16, 2017, SkyPharm signed an amended agreement with Synthesis Structured Commodity Trade Finance Limited that increased the maximum aggregate facility limit from €2,000,000 ($2,291,200) to €6,000,000 ($6,736,200). All other terms of the original agreement remain the same. The Company also obtained consents from Synthesis Peer-to-Peer Income Fund in connection with obtaining the November 2017 convertible debt financing.
On May 12, 2018, the Company borrowed an additional €270,000 ($247,117) in funds.
On May 16, 2018, SkyPharm S.A., as Commodity Buyer, entered into a Supplemental Deed of Amendment (the “Deed”) relating to a Trade Finance Facility dated May 12, 2017, as amended, with Synthesis Structured Commodity Trade Finance Limited (“Synthesis”), as Loan Receivables Originator. Under the Trade Finance Facility (the “TFF”) first entered into on May 12, 2017, as amended, there was a principal balance of €5,866,910 ($5,369,678) outstanding as of March 31, 2018. SkyPharm made a payment of €1,000,000 ($1,123,600) of interest and principal on May 31, 2018 under the terms and conditions of the Deed. Additionally, the maturity date for the facility has been amended such that, the full principal amount is to be repaid no later than May 31, 2021, subject to a repayment schedule to be agreed upon by SkyPharm and Synthesis Structure Commodity Trade Finance Limited. Synthesis Structure Commodity Trade Finance Limited may extend this final repayment date at its sole discretion.
The TFF was amended to provide, among other things:
The Deed is conditioned upon, among other things, execution and perfection of a Bulgarian Amended Pledge (“BAP”) having priority over the Bulgarian Pledge Accounts with Unicredit Bulbank AD; and the Approved Purchasers are to make all payments to SkyPharm directly to the BAP.
On May 16, 2018, SkyPharm and Synthesis also entered into an Account Merge Agreement (the “Pledge”) as a requirement under the above-described Deed. Under the Pledge, Synthesis is to receive a first ranking securities interest in SkyPharm’s outstanding receivables under the Bulgarian bank account.
On October 17, 2018, the Company entered into a further amended agreement with Synthesis whereby the current balance on the TFF as of October 1, 2018, which was €4,866,910 ($5,629,555) and related accrued interest of €453,094 ($524,094) would be split into two principal balances of Euro €2,000,000 and USD $4,000,000. Interest on the new balances commenced on October 1, 2018 at 6% per annum plus one-month Euribor, when it is positive, on the Euro balance and 6% per annum plus one-month Libor on the USD balance. The Company will repay the principal amounts of each balance beginning no later than August 31, 2018 in quarterly installments of €125,000 and US $150,000. The loan matures on August 31, 2021. The Company evaluated the amended agreement under ASC 470-50 and concluded that it did not meet the 10% cash flow test and recorded debt modification expense of $138,110.
On December 30, 2020, the Company transferred the Euro €2,000,000 loan to a new third-party lender. The terms remained the same except interest will now accrue at 5.5% per annum plus Euribor. The principal is to be repaid in a total of five quarterly installments beginning October 31, 2021 of 50,000 Euro each with a final repayment of 1,800,000 Euro payable on the earlier of 24 months after December 30, 2020 or October 31, 2022.
As of December 31, 2019, the Company had a principal balance of €2,000,000 ($2,245,400) and $4,000,000 under the TFF and the Company had accrued $10,000 and $12,661, respectively in interest expense related to this agreement. As of December 31, 2020, the Company had principal balances of €2,000,000 ($2,446,000), of which $2,384,850 is classified as Notes payable – long term portion on the consolidated balance sheet, and $4,000,000 under the agreements and the Company had accrued $402 and $16,185 respectively, in interest expense related to these agreements.
Distribution and Equity Agreement
As discussed in Note 2 above, the Company entered into a Distribution and Equity Acquisition Agreement with Marathon. The Company was appointed the exclusive distributor of the Products (as defined) initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. As consideration for its services, Company received: (a) a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services; and (b) received cash of CAD $2,000,000, subject to repayment in Common Shares of the Company if it fails to meet certain performance milestones. The Company is entitled to receive an additional CAD $2,750,000 upon the Company’s receipt of gross sales of CAD $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000.
As discussed in Note 2, the Company attributed no value to the shares received in Marathon pursuant to (a) above. In relation to the CAD $2 million cash received noted in (b) above, the Company accounted for its obligation to issue a variable number of the Company’s Common Shares as Share-settled debt obligation in accordance with ASC 480 measured at fair value or the settlement amount of $1,554,590 (CAD $2 million). If settlement were to occur on December 31, 2020, the Company would be required to issue 298,875 common shares to settle its debt obligation. The Company could be obligated to potentially issue an unlimited number of common shares to settle its Share-settled debt obligation. If such events were to occur, the Company would be required to increase its authorized share capital and since increasing the authorized share capital is within the control of the Company, as our CEO controls greater than 50% of the outstanding common stock of the Company, the original classification of equity-classified financial instruments issued by the Company were not affected.
Senior Promissory Notes executed on April 1 and 3, 2019
On April 1 and 3, 2019, the Company executed Senior Promissory Notes (the “Notes”) each in the principal amount of $250,000 payable to an unaffiliated third-party lender. The Notes bear interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The Notes originally matured on April 1 and 3, 2020 unless prepaid or in default. On April 1, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for both notes is April 1, 2021. Additionally, pursuant to the amendment, the Company may now prepay the Notes at any time without penalty.
The Notes are subject to acceleration in an Event of Default (as defined in the Notes). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the Notes. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $250,000 and $250,000 on these notes and the Company had accrued $9,452 and $28,098, respectively, in interest expense. As of December 31, 2020, the Company had a principal balance $250,000 and $250,000 on these notes and the Company had accrued $46,026 and $64,364 respectively, in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
Senior Promissory Note executed on April 9,2019
On April 9, 2019, the Company executed a Senior Promissory Note (the “Note”) in the principal amount of $250,000 payable to an unaffiliated third-party lender who had previously loaned the Company $500,000. The Note bears interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The Note originally matured on April 9, 2020, unless prepaid or in default. As of April 9, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now April 9, 2021 and the Company may now prepay the loan without penalty at any time.
The Note is subject to acceleration in an Event of Default (as defined in the Note). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $250,000 on this Note and the Company had accrued $27,431 in interest expense. As of December 31, 2020, the Company had a principal balance $250,000 on this Note and the Company had accrued $63,697 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
July 24, 2019 Senior Promissory Note
On July 24, 2019, the Company executed a Senior Promissory Note (the “July Note”) in the principal amount of $750,000 payable to an unaffiliated third-party lender who had previously loaned the Company $750,000. The funds represented by the July Note were advanced between July 19 and 24, 2019. The July Note bears interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The July Note originally matured on July 24, 2020. On July 24, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now July 24, 2021 and the Company may now prepay the loan without penalty at any time.
The July Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the July Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $750,000 on this note and the Company had accrued $49,625 in interest expense.
As of December 31, 2020, the Company had a principal balance $750,000 on this note and the Company had accrued $158,429 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
August 1, 2019 Senior Promissory Note
On August 1, 2019, the Company executed a Senior Promissory Note (the “August Note”) in the principal amount of $500,000 payable to an unaffiliated third-party lender who had previously loaned the Company $1,500,000. The August Note bears interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The August Note originally matured on August 1, 2020. On August 1, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now August 1, 2021 and the Company may now prepay the loan without penalty at any time.
The August Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the August Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $500,000 on this note and the Company had accrued $31,438 in interest expense. As of December 31, 2020, the Company had a principal balance $500,000 on this note and the Company had accrued $103,972 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
October 23, 2019 Senior Promissory Note
On October 23, 2019, the Company executed a Senior Promissory Note (the “October Note”) in the principal amount of $250,000 payable to an unaffiliated third-party lender who had previously loaned the Company $2,000,000. The October Note bears interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The October Note originally matured on October 23, 2020, unless prepaid or in default. As of October 23, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now October 23, 2021 and the Company may prepay the October Note at any time without penalty
The October Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the October Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $250,000 on this note and the Company had accrued $7,705 in interest expense. As of December 31, 2020, the Company had a principal balance $250,000 on this note and the Company had accrued $43,971 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
December 6, 2019 Senior Promissory Note
On December 6, 2019, the Company executed a Senior Promissory Note (the “December Note”) in the principal amount of $250,000 payable to an unaffiliated third-party lender who had previously loaned the Company $2,250,000. The December Note originally bore interest at the rate of fifteen (15%) percent per annum, paid quarterly in arrears. The Note originally matured on March 31, 2020, unless prepaid or in default. As of March 31, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now December 31, 2020. The note is not in default and on February 5, 2021 the Company converted the entire outstanding principal balance into shares of the Company’s common stock (See Note 16). Additionally, the interest rate changed to 10% per annum from March 31, 2020 through maturity and the Company may now prepay the December Note at any time without penalty.
The December Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the December Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2019, the Company had a principal balance $250,000 on this note and the Company had accrued $890 in interest expense. As of December 31, 2020, the Company had a principal balance $250,000 on this note and the Company had accrued $21,952 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
January 27, 2020 Senior Promissory Note
On January 27, 2020, the Company executed a Senior Promissory Note (the “January Note”) in the principal amount of $250,000 payable to an unaffiliated third-party lender who had previously loaned the Company $2,500,000. The January Note bore interest at the rate of five (5%) percent per annum, paid quarterly in arrears. The January Note originally matured on May 15, 2020 unless in default. On May 15, 2020, the Company entered into an amendment with the lender pursuant to which the new maturity date for the note is now December 31, 2020. Additionally, the interest rate was changed to 10% per annum and the Company may now prepay the January Note at any time without penalty.
The January Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the January Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2020, the Company had a principal balance of $250,000 on this note and the Company had accrued $18,458 in interest expense.
February 25, 2020 Senior Promissory Note
On February 25, 2020, the Company executed a Senior Promissory Note (the “February Note”) in the principal amount of $1,000,000 payable to an unaffiliated third-party lender. The February Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The February Note matured on April 30, 2020.
The February Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the February Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the February Note. The Company was not in default at that time. The Company also repaid all accrued interest related to the February Note.
February and March 2020 Notes
On February 27, 2020 and March 23,2020, the Company executed two Senior Promissory Notes (the “Quarter-1 Notes”) in the principal amounts of $25,000 and $35,000, respectively, payable to an unaffiliated third-party lender. The Quarter-1 Notes originally bore interest at the rate of five (5%) percent per annum, paid quarterly in arrear and mature on December 31, 2020 unless in default. On June 1, 2020 the Company entered into an amendment pursuant to which the interest rate was changed to 10% per annum and the Company may now prepay the Quarter-1 Notes at any time without penalty.
The Quarter-1 Notes are subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the Quarter-1 Notes. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2020, the Company had a principal balance of $25,000 and $35,000, respectively, on these notes and the Company had accrued an aggregate of $3,963 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
April 23, 2020 Senior Promissory Note
On April 23, 2020, the Company executed a Senior Promissory Note (the “April Note”) in the principal amount of $200,000 payable to an unaffiliated third-party lender who had previously loaned the Company $2,750,000. The April Note bears interest at the rate of five (5%) percent per annum through May 31, 2020 and then shall change to 1% per annum effective June 1, 2020 paid quarterly in arrears. The April Note matures on December 31, 2020 unless in default. The Company may prepay the April Note within the first six (6) months by payment of unpaid interest for the first six (6) months and, after six (6) months, with a two (2%) percent ($4,000) premium.
The April Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the April Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2020, the Company had a principal balance of $200,000 on this note and the Company had accrued $2,772 in interest expense. On February 5, 2021, pursuant to an exchange agreement, the Company converted the principal balance of the note into shares of the Company’s common stock (See Note 16).
May 5, 2020 Senior Promissory Note
On May 5, 2020, the Company executed a Senior Promissory Note (the “May 5 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender who had previously loaned the Company $1,000,000. The May 5 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 5 Note matured on December 31, 2020.
The May 5 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 5 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the May 5 Note. The Company also repaid the accrued interest related to this note.
May 8, 2020 Senior Promissory Note
On May 8, 2020, the Company executed a Senior Promissory Note (the “May 8 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender who had previously loaned the Company $3,000,000. The May 8 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 8 Note matured on June 8, 2020.
The May 8 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 8 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the May 8 Note. The Company also repaid the accrued interest related to this note.
May 18, 2020 and July 3, 2020 Senior Promissory Notes
May 18, 2020 Senior Promissory Note
On May 18, 2020, the Company executed a Senior Promissory Note (the “May 18 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender. The May 18 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 18 Note matured on December 31, 2020. The note is not in default and the Company is currently in negotiations with the lender to extend the maturity date.
The May 18 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 18 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2020, the Company had a principal balance of $2,000,000 on this note.
July 3, 2020 Senior Promissory Note
On July 3, 2020, the Company executed a Senior Promissory Note (the “July 3 Note”) in the principal amount of $5,000,000 payable to an unaffiliated third-party lender. The July 3 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The July 3 Note matures on June 30, 2022 unless in default.
The July 3 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the July 3 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection.
The Company used the proceeds from the July 3 Note to repay the principal outstanding on the May 5 Note ($2,000,000), the May 8 Note ($2,000,000), and the February Note ($1,000,000). As of December 31, 2020, the Company had a principal balance of $5,000,000 on this note, which is classified as long-term on the consolidated balance sheet.
As of December 31, 2020, the Company has accrued an aggregate total of $148,685 in interest expense related to these loans.
August 4, 2020 Senior Promissory Note
On August 4, 2020, the Company executed a Senior Promissory Note (the “August 4 Note”) in the principal amount of $3,000,000 payable to an unaffiliated third-party lender. The August 4 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The August 4 Note matures on December 31, 2020 unless in default.
The August 4 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the August 4 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection.
On October 29, 2020, the Company entered into a debt exchange agreement with the lender whereby the Company issued 259,741 shares of common stock at the rate of $3.85 per share in exchange for an aggregate of $1,000,000 principal amount of the existing loan. The fair market value of the Company’s common stock on the date of exchange was $3.11 per share and as such, the Company recorded a gain of $192,205. Interest will continue to accrue on the remaining debt and the converted amount until December 31, 2020. As of December 31, 2020, the Company had a principal balance of $2,000,000 on this note and prepaid interest of $8,514. The note is not in default and the Company is in negotiations with the lender to extend the maturity date.
November 19, 2020 Debt Agreement
On November 19, 2020, the Company entered into an agreement with a third-party lender in the principal amount of €500,000 ($611,500). The note matures on November 18, 2025 and bears an annual interest rate, based on a 360-day year, of 3.3% plus .6% plus 6-month Euribor when Euribor is positive. Pursuant to the terms of the agreement, there is a six-month grievance from the first deposit date, which was November 19, 2020, for both interest accrual and principal repayment. The principal is to be repaid in 18 quarterly installments of €27,000 with the first payment due 9 months from the first deposit. As of December 31, 2020, the Company had no accrued interest and a principal balance of €500,000 ($611,500), of which $543,557 is classified as Notes payable – long term portion on the consolidated balance sheet.
COVID-19 Government Loans
On May 12, 2020, the Company was granted and on May 22, 2020 the Company received a €300,000 ($366,900) loan from the Greek government. The loan will be repaid in 40 equal monthly instalments beginning on January 1, 2022 and bears an interest rate of 0.94% per annum. As a condition to the loan, the Company was required to retain the same number of employees until October 31, 2020.
On June 24, 2020 the Company received a loan £50,000 ($68,310) from the Greek government. The loan has a six-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement. The Company may prepay this loan without penalty at any time.
None of the above loans were made by any related parties. |
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LEASES |
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| NOTE 11 - LEASES | The Company has various lease agreements with terms up to 10 years, comprising leases of office space. Some leases include options to purchase, terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.
The assets and liabilities from operating and finance leases are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.
The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate, which is determined using the interest rate of our long-term debt as of January 1, 2019.
The Company’s weighted-average remaining lease term relating to its operating leases is 7.3 years, with a weighted-average discount rate of 6.74%.
The Company incurred lease expense for its operating leases of $188,400 and $223,927 which was included in “General and administrative expenses,” for the year ended December 31, 2020 and 2019, respectively.
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of December 31, 2020.
The Company’s weighted-average remaining lease term relating to its finance leases is 5.11 years, with a weighted-average discount rate of 6.74%.
The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s finance leases as of December 31, 2020:
The Company had financing cash flows used in finances leases of $85,804 and 74,476 for the years ended December 31, 2020 and 2019, respectively.
The Company incurred interest expense on its finance leases of $13,759 and $10,927 which was included in “Interest expense,” for the years ended December 31, 2020 and 2019, respectively. The Company incurred amortization expense on its finance leases of $123,533 and $160,542 which was included in “Depreciation and amortization expense,” for the years ended December 31, 2020 and 2019, respectively. |
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COMMITMENTS AND CONTINGENCIES |
12 Months Ended |
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| COMMITMENTS AND CONTINGENCIES | |
| NOTE 12 - COMMITMENTS AND CONTINGENCIES | Legal Matters
From time to time, the Company may be involved in litigation relating to claims arising out of the Company’s operations in the normal course of business. As of December 31, 2020 and 2019, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations.
Placement Agreement
On August 8, 2017, the Company entered into an agreement with a third-party placement agent (the “Agent”) who served serve as the Company’s exclusive placement agent or sole book running manager with respect to any offerings of equity or equity-linked securities as well as any debt offering with the two organizations named in the agreement (the “Offering”) for a period of 120 days. In the event that an Offering is agreed upon by the Agent and the Company, the Company shall provide payment as follows: (1) a cash commission of 6% of the total gross proceeds for two named investors (2) a cash commission of 4% of total gross proceeds from five named investors and (3) excluding the five named investors in “(2)” a cash commission equal to 8% of the total gross proceeds from the Offering and the issuance to the Agent or its designees of warrants covering 8% of the shares of common stock issued or issuable by the Company in the Offering. Additionally, the Agent will receive a cash fee of 8% payable within 5 business days, but only in the event of, the receipt by the Company of any cash proceeds from the exercise of any warrants with an expiration equal to or less than 24 months sold in the Offering. In connection with the Company’s November 16, 2017 Note offering, the Agent received a cash commission of $240,000, equal to eight (8%) percent of the total gross proceeds of the offering and the issuance of five-year warrants to purchase eight (8%) percent of the shares of common stock issued or issuable in the offering (excluding shares of common stock issuable upon exercise of any warrants issued to investors, or 53,600 shares); however, will receive eight (8%) percent of any cash proceeds received from the exercise of any warrants sold in the offering with an expiration equal to or less than twenty-four (24) months. The warrants are exercisable six (6) months after the date of issuance, or as of May 16, 2018.
In connection with the Company’s September 4, 2018 Note offering, the Agent received a cash commission for this transaction of $140,000, equal to seven (7%) percent of the total gross proceeds of the offering and the issuance of five-year warrants to purchase seven (7%) percent of the shares of common stock issued or issuable in this offering (excluding shares of common stock issuable upon exercise of any warrants issued to investors, or 26,056 shares); however, will receive seven (7%) percent of any cash proceeds received from the exercise of any warrants sold in the offering with an expiration equal to or less than twenty-four (24) months. The warrants are exercisable six (6) months after the date of issuance, or March 4, 2019.
Advisory Agreement
On April 18, 2018, SkyPharm S.A. entered into a ten-year Advisory Agreement with Synthesis Management Limited (the “Advisor”). The Advisor was retained to assist SkyPharm to secure corporate finance capital. The Advisor shall be paid €104,000 per year during the ten-year term. |
EARNINGS PER SHARE |
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| NOTE 13 - EARNINGS PER SHARE | Basic net income (loss) per share is computed by dividing net income (loss) attributable to the Company, decreased with respect to net income or increased with respect to net loss by dividends declared on preferred stock by using the weighted-average number of common shares outstanding. The dilutive effect of incremental common shares potentially issuable under outstanding options, warrants and restricted shares is included in diluted earnings per share in 2020 and 2019 utilizing the treasury stock method. The computations of basic and diluted per share data were as follows:
The following table summarized the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2020 and 2019 as such shares would have had an anti-dilutive effect:
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STOCK OPTIONS AND WARRANTS |
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| NOTE 14 - STOCK OPTIONS AND WARRANTS | As of December 31, 2020, there were 62,000 options outstanding and 62,000 options exercisable with expiration dates commencing January 2021 and continuing through January 2022.
A summary of the Company’s option activity during the years ended December 31, 2020 and 2019 is presented below:
A summary of the Company’s warrant activity for the years ending December 31, 2020 and 2019 is as follows:
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DISAGGREGATION OF REVENUE |
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| DISAGGREGATION OF REVENUE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 15 - DISAGGREGATION OF REVENUE | ASC 606-10-50-5 requires that entities disclose disaggregated revenue information in categories (such as type of good or service, geography, market, type of contract, etc). ASC 606-10-55-89 explains that the extent to which an entity’s revenue is disaggregated depends on the facts and circumstances that pertain to the entity’s contracts with customers and that some entities may need to use more than one type of category to meet the objective for disaggregating revenue.
The Company disaggregates revenue by country to depict the nature and economic characteristics affecting revenue. The following table presents our revenue disaggregated by country for the years ended:
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SUBSEQUENT EVENTS |
12 Months Ended |
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| SUBSEQUENT EVENTS | |
| NOTE 16 - SUBSEQUENT EVENTS | January 7, 2021 Subscription Agreement
On January 7, 2021 (the “Issue Date”), the Company entered into a subscription agreement with an unaffiliated third party, whereby the Company issued for a purchase price of $100,000 in principal amount a convertible promissory note. The note bears an interest rate of 8% per annum and matures on the earlier of (i) consummation of the Company listing its common shares on the NEO Stock Exchange or October 31, 2021.
Upon the consummation of a NEO listing, the total principal and accrued interest outstanding on the note will convert into shares of the Company’s common stock at a 25% discount to the prices of the common shares sold in the financing to be conducted in conjunction with the NEO listing. In the event that a NEO listing is not consummated on or before October 31, 2021, the note holder will have the option, in part or in full, to have the note repaid with interest, or convert the note into Company common stock at a 25% discount to the 30-day volume-weighted average price of the Common Shares on the most senior stock exchange in North American on which the common shares are trading prior to conversion.
Exchange Agreement
The Company entered into an Amended and Restated Debt Exchange Agreement (the “Agreement”) dated as of February 5, 2021, with an unaffiliated third-party lender (the “Lender”). This Agreement replaced in its entirety the Debt Exchange Agreement between the parties dated as of December 18, 2020, which was deemed to be null and void.
The Agreement provides for the issuance by the Company of 781,819 shares of common stock (the “Exchange Shares”), at the rate of $3.85 per share, in exchange for an aggregate of $3,010,000 principal amount (the “Debt”) of existing loans made by the Lender to the Company.
The market price at the time this Agreement was negotiated was $3.85 per share. Certain “make whole” provisions and the grant of warrants were eliminated. Interest was accrued through the date of the Agreement. Thereafter, all accrued and unpaid interest, as well as any unpaid fees, shall be paid in three (3) equal monthly installments following the closing of a planned Canadian public offering. Pursuant to this Agreement, Grigorios Siokas, the Company’s Chief Executive Officer and principal shareholder, will be released from all personal guarantees on the Debt.
Stock Purchase Agreement
On February 5, 2021, the Company entered into a Stock Purchase Agreement (the “February SPA”) with an unaffiliated third-party. The February SPA provides for the Company’s to sell 65,000 shares of the Company’s common stock held in treasury at $3.85 per share or a total of $250,000.
February 5, 2021 Consulting Agreement
The Company entered into a Consulting Agreement (the “Agreement”) effective as of February 5, 2021, with a non-affiliated consultant (the “Consultant”). The Company engaged the Consultant to perform consulting services relating to Company management, debt structure, business plans and business development in connection with any capitalization transactions involving the Company and any newly created or existing entities. The Agreement is for a term of nine (9) months with an initial term of ninety (90) days (the “Initial Term”). The Agreement is terminable by the Company for any reason upon written notice at any time after the Initial Term.
The Company agreed to pay Consultant and its assignees an aggregate of 1,800,000 restricted shares of Common Stock at the rate of 200,000 shares per month, which shall be issued and fully paid for in consideration of the Consultant’s considerable expertise and experience and its commitment to work for the Company. However, in the event the Agreement is terminated for any reason after the Initial Term, the shares are subject to a claw back for any months remaining after the Termination Date. The Consultant retained 800,000 of the 1,800,000 shares and agreed with an assignee and the Company that 1,600,000 of the 1,800,000 shares shall be held in book entry for six (6) months from the date of this Agreement, subject to the above claw back. |
ORGANIZATION AND NATURE OF BUSINESS (Policies) |
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| Basis of Financial Statement Presentation | The accompanying consolidated financial statements have been prepared in accordance with principles generally accepted in the United States of America. |
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| Principles of Consolidation | Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries, SkyPharm S.A., Decahedron Ltd. and Cosmofarm Ltd. All significant intercompany balances and transactions have been eliminated. |
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| Use of Estimates | The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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| The Effects of COVID-19 | Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of April 15, 2021, the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. |
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| Foreign Currency Translation and Other Comprehensive Income (Loss) | The functional currency of the Company’s subsidiaries is the Euro and British Pound. For financial reporting purposes, both the Euro (“EUR”) and British Pound (“GBP”) have been translated into United States dollars ($) and/or (USD) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss).” Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive loss as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of EUR or GBP to USD after the balance sheet date.
Other Comprehensive Income (Loss) for all periods presented includes only foreign currency translation gains (losses).
Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included in the consolidated results of operations as incurred.
As of December 31, 2020 and 2019, the exchange rates used to translate amounts in Euros into USD and British Pounds into USD for the purposes of preparing the consolidated financial statements were as follows:
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| Cash and Cash Equivalents | For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2020 and December 31, 2019, there were no cash equivalents.
The Company maintains bank accounts in the United States denominated in U.S. Dollars and in Greece and in Bulgaria all of which are denominated in Euros. Additionally, the Company maintains a bank account in the United Kingdom denominated in British Pounds. As of December 31, 2020, the amounts in these accounts were $448,659, $134,935 and $1,651. As of December 31, 2019, the amounts in these accounts were $14,451, $10,987 and $4,080. Additionally, as of December 31, 2020 and 2019, the Company had cash on hand in the amount of $31,604 and $52,489, respectively. |
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| Account receivable, net | Accounts receivable are stated at their net realizable value. The allowance for doubtful accounts against gross accounts receivable reflects the best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. At December 31, 2020 and 2019, the Company’s allowance for doubtful accounts was $715,845 and $529,252, respectively. |
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| Reclassifications to Prior Period Financial Statements and Adjustments | Certain reclassifications have been made in the Company’s financial statements of the prior period to conform to the current year presentation. $4,381 in other investments for the year ended December 31, 2019 was reclassified to other current assets. $800,164 in accounts payable and accrued expenses was reclassified to accrued interest. For the year ended December 31, 2019, $264 in interest expense – related parties was reclassified to interest expense. Additionally, for the year ended December 31, 2019, $234,037, respectively in sales and marketing expenses were reclassified from general and administrative expenses. These reclassifications have no impact on previously reported net loss. |
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| Tax Receivables | The Company pays Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of its business in most of the countries in which it operates related to the procurement of merchandise and/or services it acquires and/or on sales and taxable income. The Company also collects VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services it sells. If the output VAT exceeds the input VAT, this creates a VAT payable to the government. If the input VAT exceeds the output VAT, this creates a VAT receivable from the government. The VAT tax return is filed on a monthly basis offsetting the payables against the receivables. In observance of EU regulations for intra-EU cross-border sales, our subsidiaries in Greece, SkyPharm and Cosmofarm, do not charge VAT for sales to wholesale drug distributors registered in other European Union member states. As of December 31, 2020 and 2019, the Company had a VAT net payable balance of $159,198 and $136,891 respectively, recorded in the consolidated balance sheet as prepaid expenses and other current assets. |
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| Inventory | Inventory is stated at net realizable value using the weighted average method. Inventory consists primarily of finished goods and packaging materials, i.e. packaged pharmaceutical products and the wrappers and containers they are sold in. A periodic inventory system is maintained by 100% count. Inventory is replaced periodically to maintain the optimum stock on hand available for immediate shipment.
The Company writes-down inventories to net realizable value based on physical condition, expiration date, current market conditions, as well as forecasted demand. The Company’s inventories are not highly susceptible to obsolescence. Many of the Company’s inventory items are eligible for return to our suppliers when pre-agreed product requirements, including, but not limited to, physical condition and expiration date, are not met. |
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| Property and Equipment, net | Property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided on a straight-line basis over the useful lives (except for leasehold improvements which are depreciated over the lesser of the lease term or the useful life) of the assets as follows:
Depreciation expense was $240,886 and $201,000 for the years ended December 31, 2020 and 2019, respectively. |
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| Impairment of Long-Lived Assets | In accordance with ASC 360-10, Long-lived Assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. For the years ended December 31, 2020 and 2019, the Company had no impairment of long-lived assets. |
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| Goodwill and Intangibles, net | The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.
On December 19, 2018, as a result of the acquisition of Cosmo farm, the Company recorded $49,697 of goodwill.
Intangible assets with definite useful lives are recorded on the basis of cost and are amortized on a straight-line basis over their estimated useful lives. The Company uses a useful life of 5 years for an import/export license. The Company evaluates the remaining useful life of intangible assets annually to determine whether events and circumstances warrant a revision to the remaining amortization period. If the estimate of the intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized prospectively over that revised remaining useful life. As of December 31, 2020, no revision to the remaining amortization period of the intangible assets was made.
Amortization expense was $33,176 and $33,086 for the years ended December 31, 2020 and 2019, respectively. |
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| Equity Method Investment | For those investments in common stock or in-substance common stock in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, the investment is accounted for under the equity method. The Company records its share in the earnings of the investee and is included in “Equity earnings of affiliate” in the consolidated statement of operations. The Company assesses its investment for other-than-temporary impairment when events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable and recognizes an impairment loss to adjust the investment to its then current fair value. |
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| Investments in Equity Securities | Effective January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2016-01, and accordingly, investments in equity securities are accounted for at fair value with changes in fair value recognized in net income. Equity securities are classified as short-term or long-term based on the nature of the securities and their availability to meet current operating requirements. Equity securities that are readily available for use in current operations are reported as a component of current assets in the accompanying consolidated balance sheets. Equity securities that are not considered available for use in current operations would be reported as a component of long-term assets in the accompanying consolidated balance sheets. For equity securities with no readily determinable fair value, the Company elects a measurement alternative to fair value. Under this alternative, the Company measures the investments at cost, less any impairment, and adjusted for changes resulting from observable price changes in transactions for identical or similar investments of the investee. The election to use the measurement alternative is made for each eligible investment.
As of December 31, 2020, investments consisted of 3,000,000 shares, which traded at a closing price of $0 per share or a value of $0 of ICC International Cannabis Corp., 40,000 shares which traded at a closing price of $5.45 per share, or value of $218,183 of Diversa S.A. and 16,666 shares which traded at a closing price of $0.28 per share or value of $4,609 of National Bank of Greece. Additionally, the Company has $4,772 in equity securities of Pancreta bank, which are not publicly traded and recorded at cost. See Note 2, for additional investments in equity securities. |
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| Fair Value Measurement | The Company applies FASB ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.
The following table presents assets that are measured and recognized at fair value as of December 31, 2020 and 2019, on a recurring basis:
FASB ASC 825-10-25 Fair Value Option, (“ASC 825-10-25”), expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments. |
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| Derivative Instruments | Derivative financial instruments are recorded in the accompanying consolidated balance sheets at fair value in accordance with ASC 815. When the Company enters into a financial instrument such as a debt or equity agreement (the “host contract”), the Company assesses whether the economic characteristics of any embedded features are clearly and closely related to the primary economic characteristics of the remainder of the host contract. When it is determined that (i) an embedded feature possesses economic characteristics that are not clearly and closely related to the primary economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would meet the definition of a financial derivative instrument, then the embedded feature is bifurcated from the host contract and accounted for as a derivative instrument. The estimated fair value of the derivative feature is recorded in the accompanying consolidated balance sheets separately from the carrying value of the host contract. Subsequent changes in the estimated fair value of derivatives are recorded as a gain or loss in the Company’s consolidated statements of operations. |
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| Customer Advances | The Company receives prepayments from certain customers for pharmaceutical products prior to those customers taking possession of the Company’s products. The Company records these receipts as customer advances until it has met all the criteria for recognition of revenue including passing control of the products to its customer, at such point, the Company will reduce the customer and deposits balance and credit the Company’s revenues. |
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| Revenue Recognition | In accordance with ASC 606, Revenue from Contracts with Customers, the Company uses a five-step model for recognizing revenue by applying the following steps: (1) identify the contract with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the performance obligations are satisfied by transferring the promised goods to the customer. Once these steps are met, revenue is recognized upon delivery of the product. |
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| Stock-based Compensation | The Company records stock-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”) and Staff Accounting Bulletin No. 107 (“SAB 107”) issued by the SEC in March 2005 regarding its interpretation of ASC 718. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite service period. The Company values any employee or non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.
The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASU 2018-07, “Compensation-Stock Compensation-Improvements to Nonemployee Share-Based Payment Accounting.” |
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| Foreign Currency Translations and Transactions | 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 earnings. |
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| Concentrations of Credit Risk | Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash investments and accounts receivable.
The following tables show the number of the Company’s clients which contributed 10% or more of revenue and accounts receivable, respectively:
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| Income Taxes | The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes ASC 740. Under this method, deferred tax assets and liabilities are 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, as well as net operating loss carry forwards. 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 recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company is liable for income taxes in Greece and the United Kingdom of England. The corporate income tax rate is 24% in Greece (tax losses are carried forward for five years effective January 1, 2013) and 19% in United Kingdom of England. Losses may also be subject to limitation under certain rules regarding change of ownership.
We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Our review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets. At December 31, 2020 the Company has maintained a valuation allowance against all net deferred tax assets in each jurisdiction in which it is subject to income tax.
The Company periodically reviews the uncertainties and judgments related to the application of complex income tax regulations to determine income tax liabilities in several jurisdictions. The Company uses a “more likely than not” criterion for recognizing the income tax benefit of uncertain tax positions and establishing measurement criteria for income tax benefits. The Company has evaluated the impact of these positions and due to the fact that the fiscal years 2013 - 2014 are unaudited by the Greek tax authorities, a potential tax liability has not been identified because there is a limitation on periods that the Tax authorities can audit retrospectively 5 years prior to the current fiscal year. Therefore, no prospective tax audit from tax authorities may arise. The amount of the liability as of December 31, 2020 and 2019, was $0 and $79,716, respectively, and has been excluded from recording as a long-term liability within the consolidated balance sheets. |
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| Retirement and Termination Benefits | Under Greek labor law, employees are entitled to lump-sum compensation in the event of termination or retirement. The amount depends on the employee’s work experience and renumeration as of the day of termination or retirement. If an employee remains with the company until full-benefit retirement, the employee is entitled to a lump-sum equal to 40% of the compensation to be received if the employee were to be dismissed on the same day. The Company periodically reviews the uncertainties and judgements related to the application of the relevant labor law regulations to determine retirement and termination benefits obligations of its Greek subsidiaries. The Company has evaluated the impact of these regulations and has identified a potential retirement and termination benefits liability. The amount of the liability as of December 31, 2020 and December 31, 2019, was $107,167 and $77,170, respectively, and has been recorded as a long-term liability within the consolidated balance sheets. |
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| Basic and Diluted Net Income (Loss) per Common Share | Basic income per share is calculated by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per share is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method. In accordance with ASC 260, Earnings Per Share, the following table reconciles basic shares outstanding to fully diluted shares outstanding.
Common stock equivalents are included in the diluted income per share calculation only when option exercise prices are lower than the average market price of the common shares for the period presented. |
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| Recent Accounting Pronouncements | In August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective January 1, 2024, for the Company. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements.
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements. |
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ORGANIZATION AND NATURE OF BUSINESS (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ORGANIZATION AND NATURE OF BUSINESS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of consolidated financial statements |
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| Schedule of Property and equipment |
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| Fair value a measured and recognized asset |
|
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| Schedule of Concentrations of Credit Risk |
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| Basic and Diluted Net Loss per Common Share |
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PROPERTY AND EQUIPMENT NET (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property and equipment, net |
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GOODWILL AND INTANGIBLE ASSETS (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GOODWILL AND INTANGIBLE ASSETS NET | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Goodwill and Intangible assets |
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INCOME TAXES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of income before income tax domestic and foreign |
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| Schedule of provision for income taxes |
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| Summary of U.S. federal statutory rate |
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| Significant components of deferred tax assets and liabilities |
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RELATED PARTY TRANSACTIONS (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RELATED PARTY TRANSACTIONS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of related party notes payable |
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| Summary of related party loans payable |
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LINES OF CREDIT (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| LINES OF CREDIT | ||||||||||||||||||||||||||||||||||||||||||||||
| Summary of lines of credit |
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CONVERTIBLE DEBT (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CONVERTIBLE DEBT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of convertible debt |
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| Schedule of summary of the changes in fair value |
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DEBT (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEBT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of debt |
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LEASES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of operating leases |
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| Summary of finance leases |
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EARNINGS PER SHARE (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EARNINGS PER SHARE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Basic net income loss per share |
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| Schedule of diluted net loss per share |
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STOCK OPTIONS AND WARRANTS (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCK OPTIONS AND WARRANTS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of option activity during the year |
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| Summary of warrant activity during year |
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DISAGGREGATION OF REVENUE (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DISAGGREGATION OF REVENUE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Revenue disaggregated by country |
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ORGANIZATION AND NATURE OF BUSINESS (Details) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Euro [Member] | ||
| Average exchange rate for the period | ||
| USD exchange rate | 1.2230 | 1.1227 |
| USD average exchange rate | 1.1410 | 1.1194 |
| GBP [Member] | ||
| Average exchange rate for the period | ||
| USD exchange rate | 1.3662 | 1.3185 |
| USD average exchange rate | 1.2829 | 1.2767 |
ORGANIZATION AND NATURE OF BUSINESS (Details 1) |
12 Months Ended |
|---|---|
Dec. 31, 2020 | |
| Furniture, fixtures and equipment [Member] | Minimum [Member] | |
| Estimated Useful Life | 5 years |
| Furniture, fixtures and equipment [Member] | Maximum [Member] | |
| Estimated Useful Life | 10 years |
| Computers and software [Member] | Minimum [Member] | |
| Estimated Useful Life | 3 years |
| Computers and software [Member] | Maximum [Member] | |
| Estimated Useful Life | 5 years |
| Leasehold improvements and technical works [Member] | |
| Estimated useful life, description | Lesser of lease term or 40 years |
| Machinery [Member] | |
| Estimated Useful Life | 20 years |
| Vehicles [Member] | |
| Estimated Useful Life | 6 years |
ORGANIZATION AND NATURE OF BUSINESS (Details 3) - integer |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| ORGANIZATION AND NATURE OF BUSINESS (Details) | ||
| Number of 10% clients | 1 | 0 |
| Percentage of total revenue | 14.82% | |
| Percentage of total AR | 14.65% | |
ORGANIZATION AND NATURE OF BUSINESS (Details 4) - shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| ORGANIZATION AND NATURE OF BUSINESS (Details) | ||
| Weighted average number of common shares outstanding Basic | 13,270,097 | 13,273,596 |
| Potentially dilutive common stock equivalents | 37,698 | |
| Weighted average number of common and equivalent shares outstanding - Diluted | 13,307,795 | 13,273,596 |
MARKETABLE SECURITIES (Details Narrative) |
1 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|
|
Jul. 16, 2018
USD ($)
shares
|
May 17, 2018
USD ($)
shares
|
Dec. 31, 2020
USD ($)
$ / shares
shares
|
Dec. 31, 2020
CAD ($)
|
Dec. 31, 2020
EUR (€)
|
Dec. 31, 2019
USD ($)
|
Jun. 30, 2019 |
|
| Net unrealized loss on fair value investment | $ 2,246 | ||||||
| Marketable securities - Divsersa S.A. [Member] | |||||||
| Closing price of shares | $ / shares | $ 5.45 | ||||||
| Shares issued as marketable securities | shares | 40,000 | ||||||
| Marketable securities - National Bank of Greece [Member] | |||||||
| Closing price of shares | $ / shares | $ 0.28 | ||||||
| Marketable securities | $ 4,609 | ||||||
| Shares issued as marketable securities | shares | 16,666 | ||||||
| Stock issued during the period, amount | $ 218,183 | ||||||
| Marathon Global Inc [Member] | Distribution and Equity Acquisition Agreement [Member] | |||||||
| Upfront cash received | $ 2,000,000 | ||||||
| Equity interest acquired description | a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services | a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services | a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services | ||||
| Agreement term | 5 years | 5 years | 5 years | ||||
| Marathon Global Inc [Member] | Distribution and Equity Acquisition Agreement [Member] | Gross Sales One [Member] | |||||||
| Cash received upon gross sales | $ 2,750,000 | ||||||
| Gross sales | 13,000,000 | ||||||
| Marathon Global Inc [Member] | Distribution and Equity Acquisition Agreement [Member] | Gross Sales [Member] | |||||||
| Cash received upon gross sales | 2,750,000 | ||||||
| Gross sales | 6,500,000 | ||||||
| Marathon Global Inc [Member] | Share Exchange Agreement [Member] | |||||||
| Shares of Marathon transferred by company to KBB | shares | 2,500,000 | ||||||
| Gain on exchange of investment | $ 2,092,200 | $ 1,953,000 | |||||
| ICC [Member] | Share Exchange Agreement [Member] | |||||||
| Net unrealized loss on fair value investment | $ 13,500 | ||||||
| Investement | $ 0 | $ 33,000 | |||||
| Upfront cash received | $ 2,000,000 | ||||||
| Equity method investment shares acquired | shares | 5,000,000 | ||||||
| Description for ownership percentage | The ten million shares of ICC owned by the Company constituted approximately 7% of the 141,219,108 shares of capital stock of KBB then issued and outstanding. The Company does not have the ability to exercise significant influence over ICC | Since no value was attributed to the 33 1/3% equity ownership interest in Marathon received as consideration for the distribution services, the Company would receive variable consideration in future for its services under the Distribution and Equity Acquisition Agreement | Since no value was attributed to the 33 1/3% equity ownership interest in Marathon received as consideration for the distribution services, the Company would receive variable consideration in future for its services under the Distribution and Equity Acquisition Agreement | Since no value was attributed to the 33 1/3% equity ownership interest in Marathon received as consideration for the distribution services, the Company would receive variable consideration in future for its services under the Distribution and Equity Acquisition Agreement | |||
| Additional shares issued, shares | shares | 3,000,000 | ||||||
| Additional shares issued, amount | $ 0 | ||||||
| Kaneh Bosm Biotechnology Inc [Member] | Share Exchange Agreement [Member] | |||||||
| Transfer of shares | shares | 2,500,000 | ||||||
| Kaneh Bosm Biotechnology Inc [Member] | Share Exchange Agreement [Member] | Canadian Securities Exchange [Member] | |||||||
| Exchange of shares | shares | 5,000,000 | ||||||
| May and July 2018 [Member] | Marathon Global Inc [Member] | |||||||
| Consideration for the distribution services, shares | 5,000,000 | ||||||
| Cosmo Farmacy LP [Member] | |||||||
| Cash recognized | 221,457 | ||||||
| Investement | $ 183,450 | $ 163,575 | |||||
| Initial share capital | € | € 150,000 | ||||||
| Initial share capital increased | € | 500,000 | ||||||
| Pharmacy license value | € | € 350,000 | ||||||
| Maturity period of license | 30 years | 30 years | 30 years | ||||
| Ownership equity | 70.00% | ||||||
| cash contributed to limited partner | € | € 150,000 | ||||||
| Equity ownership remaining | 30.00% | ||||||
PROPERTY PLANT AND EQUIPMENT (Details) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Property plant and equipment | $ 2,447,427 | $ 2,187,946 |
| Less: Accumulated depreciation | (690,214) | (453,165) |
| Total | 1,757,213 | 1,734,781 |
| Computers and software [Member] | ||
| Property plant and equipment | 149,005 | 85,052 |
| Vehicles [Member] | ||
| Property plant and equipment | 105,057 | 115,055 |
| Leasehold Improvements [Member] | ||
| Property plant and equipment | 560,711 | 548,000 |
| Furniture, fixtures and equipment [Member] | ||
| Property plant and equipment | $ 1,632,654 | $ 1,439,839 |
GOODWILL AND INTANGIBLE ASSETS (Details) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Goodwill and intangible assets, gross | $ 263,790 | $ 263,790 |
| Less: Accumulated Amortization | (82,981) | (49,806) |
| Subtotal | 180,809 | 213,984 |
| Goodwill | 49,697 | 49,697 |
| Total | 230,506 | 263,681 |
| Customer Base [Member] | ||
| Goodwill and intangible assets, gross | 176,793 | 176,793 |
| Trademarks and Trade Names [Member] | ||
| Goodwill and intangible assets, gross | 36,997 | 36,997 |
| License [Member] | ||
| Goodwill and intangible assets, gross | $ 50,000 | $ 50,000 |
INCOME TAXES (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Loss before provision for income taxes | $ 1,198,321 | $ (3,116,150) |
| Domestic [Member] | ||
| Loss before provision for income taxes | (2,901,276) | (2,515,360) |
| Foreign [Member] | ||
| Loss before provision for income taxes | $ 4,099,597 | $ (600,790) |
INCOME TAXES (Details 1) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Current tax provision | ||
| Federal | $ 0 | $ 0 |
| State | 0 | 0 |
| Foreign | 555,965 | 182,815 |
| Total current tax provision | 555,965 | 182,815 |
| Deferred tax provision | ||
| Domestic | 0 | 0 |
| State | 0 | 0 |
| Foreign | (178,430) | 0 |
| Total deferred tax provision | (178,430) | 0 |
| Total current provision | $ 377,535 | $ 182,815 |
INCOME TAXES (Details 2) - US [Member] - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Income (loss) before income taxes | $ 1,198,321 | $ (3,116,150) |
| Taxes under statutory US tax rates | 251,647 | (654,391) |
| Increase (decrease) in taxes resulting from: | ||
| Increase in valuation allowance | 216,518 | 1,521,175 |
| Foreign tax rate differential | (55,540) | 9,028 |
| Permanent differences | (218,216) | 94,520 |
| US tax on foreign income | 604,419 | 0 |
| Prior period adjustments | (97,829) | (713,466) |
| State taxes | (323,464) | (74,051) |
| Income tax expense | $ 377,535 | $ 182,815 |
INCOME TAXES (Details 3) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Gain on extinguishment of debt | $ (942,029) | $ 0 |
| Right of use asset | 833,763 | 498,180 |
| Goodwill | 49,697 | 49,697 |
| Deferred Income Taxes [Member] | ||
| Net operating loss carryforward | 1,494,424 | 1,270,650 |
| Capital loss carryforward | 801,744 | 801,744 |
| Nonqualified Stock Options | 170,297 | 184,545 |
| Accrued expenses | 7,389 | 7,389 |
| Lease liability | 247,797 | 0 |
| Gain on extinguishment of debt | 179,958 | 0 |
| Depreciation | 4,226 | 2,418 |
| Mark to market adjustment to securities | 357,829 | 348,422 |
| Total Deferred tax assets | 3,263,664 | 2,615,168 |
| Intangibles | (10,729) | (10,729) |
| Right of use asset | (253,818) | 0 |
| Goodwill | (14,473) | (14,473) |
| Total Deferred tax liabilities | (279,020) | (25,202) |
| Valuation allowance | (2,806,214) | (2,589,966) |
| Net deferred tax assets (liabilities) | $ 178,430 | $ 0 |
INCOME TAXES (Details Narrative) |
12 Months Ended |
|---|---|
|
Dec. 31, 2020
USD ($)
| |
| Federal Statutory Income Tax Rate, description | Subject to limitation under IRC Section 382. Of the $4.1 million Federal NOL carryforwards, $2.5 million are pre-2018 and begin to expire in 2031. The remaining balance of $1.6 million, are limited to utilization of 80% of taxable income but do not have an expiration. |
| United States [Member] | |
| Net operating loss carry forward | $ 4,112,907 |
| Expiry | 2031 |
RELATED PARTY TRANSACTIONS (Details) - Notes Payable - Related Party [Member] - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Beginning Balance | $ 1,375,532 | $ 1,793,437 |
| Payments | (996,136) | (382,055) |
| Foreign currency translation | 122,279 | (35,850) |
| Ending Balance | $ 501,675 | $ 1,375,532 |
RELATED PARTY TRANSACTIONS (Details 1) - Loans Payable - Related Party [Member] - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Beginning Balance | $ 1,026,264 | $ 1,775,251 |
| Proceeds | 725,563 | 585,915 |
| Payments | (149,695) | (262,226) |
| Conversion of debt | 0 | (1,050,000) |
| Reclassification of receivable | 0 | 2,547 |
| Foreign currency translation | 27,114 | (25,223) |
| Ending Balance | $ 1,629,246 | $ 1,026,264 |
LINES OF CREDIT (Details) - USD ($) |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Lines of credit | $ 5,076,684 | $ 2,750,992 |
| Eurobank [Member] | ||
| Lines of credit | 42,240 | 0 |
| Alpha [Member] | ||
| Lines of credit | 1,106,894 | 810,947 |
| National [Member] | ||
| Lines of credit | $ 3,540,550 | $ 1,940,045 |
LINES OF CREDIT (Details Narrative) - USD ($) |
12 Months Ended | ||||||
|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Aug. 11, 2020 |
Jul. 28, 2020 |
Jul. 10, 2020 |
Jun. 23, 2020 |
|
| Borrowing | $ 1,223,000 | $ 1,122,700 | |||||
| Lines of credit | $ 5,076,684 | 2,750,992 | |||||
| Interest rate | 4.35% | ||||||
| Interest expense | $ 3,910 | ||||||
| Line of Credit [Member] | |||||||
| Interest expense | 270,655 | 85,090 | |||||
| Line of Credit [Member] | National Bank of Greece One [Member] | |||||||
| Borrowing | $ 2,690,600 | $ 1,684,050 | |||||
| Interest rate | 4.35% | 6.00% | |||||
| Outstanding debt balance | $ 973,961 | $ 2,411,182 | |||||
| National Bank of Greece Two [Member] | Line of Credit [Member] | |||||||
| Borrowing | $ 611,500 | ||||||
| Lines of credit | $ 429,240 | ||||||
| Interest rate | 2.70% | ||||||
| Disbursement amount | $ 75,091 | $ 48,639 | $ 483,243 | ||||
| Eurobank Bank of Greece [Member] | Line of Credit [Member] | |||||||
| Borrowing | $ 572,800 | ||||||
| Lines of credit | $ 286,829 | ||||||
| Interest rate | 8.55% | ||||||
| Alpha Bank of Greece [Member] | Line of Credit [Member] | |||||||
| Borrowing | $ 1,223,000 | 1,122,700 | |||||
| Lines of credit | 1,106,894 | $ 810,947 | |||||
| Interest rate | 6.00% | ||||||
| Outstanding debt balance | $ 1,129,368 | $ 966,084 | |||||
CONVERTIBLE DEBT (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| DEBT | ||
| Beginning balance notes | $ 1,500,000 | $ 365,513 |
| New notes | 540,000 | 1,500,000 |
| Payments | (593,000) | (365,513) |
| Subtotal notes | 1,447,000 | 1,500,000 |
| Debt discount at year end | (494,973) | (29,509) |
| Note payable net of discount | $ 952,027 | $ 1,470,491 |
CONVERTIBLE DEBT (Details 1) |
12 Months Ended |
|---|---|
|
Dec. 31, 2020
USD ($)
| |
| DEBT | |
| Balance on December 31, 2019, beginning balance | $ 0 |
| Issuances to debt discount | 456,570 |
| Change in fair value of derivative liabilities | 4,158 |
| Balance on December 31, 2020, ending balance | $ 460,728 |
CONVERTIBLE DEBT (Details 2) |
12 Months Ended |
|---|---|
Dec. 31, 2020 | |
| Dividend yield | 0.00% |
| Maximum [Member] | |
| Expected life | 1 year 15 days |
| Risk-free rate | 0.12% |
| Expected volatility | 142.50% |
| Minimum [Member] | |
| Expected life | 1 year |
| Risk-free rate | 0.11% |
| Expected volatility | 140.40% |
CONVERTIBLE DEBT (Details Narrative) - USD ($) |
1 Months Ended | 12 Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 13, 2018 |
Dec. 12, 2018 |
Sep. 04, 2018 |
Dec. 21, 2020 |
Sep. 23, 2020 |
Mar. 23, 2020 |
Jun. 17, 2019 |
Feb. 20, 2018 |
Feb. 19, 2018 |
Nov. 15, 2017 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
May 31, 2019 |
May 17, 2019 |
Apr. 24, 2018 |
|
| Convertible notes payable, principal amount | $ 2,680,000 | ||||||||||||||||
| Common stock, par value | $ 0.001 | $ 0.001 | |||||||||||||||
| Debt discount | $ 3,350,000 | ||||||||||||||||
| Amortization of debt discount | $ 392,272 | $ 34,105 | $ 320,205 | $ 360,890 | |||||||||||||
| Debt original issue discount | 43,000 | ||||||||||||||||
| Amortization amount | 499,570 | ||||||||||||||||
| Fair value of derivative liability | 460,728 | ||||||||||||||||
| Change in fair value of derivative liability | 4,158 | ||||||||||||||||
| Embedded derivative liability | 456,570 | ||||||||||||||||
| Outstanding principal balance | 103,610 | ||||||||||||||||
| Additional paid in capital | 14,333,285 | 13,525,749 | |||||||||||||||
| Gain on extinguishment of debt | (942,029) | 0 | |||||||||||||||
| Beneficial conversion feature | $ 0 | 120,000 | |||||||||||||||
| Convertible Notes [Member] | |||||||||||||||||
| Debt discount | 2,233,332 | ||||||||||||||||
| Amortization of debt discount | 2,049,232 | ||||||||||||||||
| Outstanding principal balance | $ 261,903 | ||||||||||||||||
| Beneficial conversion feature | $ 1,333,333 | ||||||||||||||||
| Conversion price | $ 3.478 | ||||||||||||||||
| Exchange Agreements [Member] | Senior Note [Member] | |||||||||||||||||
| Convertible notes payable, principal amount | $ 2,871,429 | ||||||||||||||||
| Common stock, par value | $ 5.00 | ||||||||||||||||
| Convertible debt, description | The Company evaluated the debt modification in accordance with ASC 470-50 and concluded that the debt qualified for debt extinguishment as the 10% cash flow test was met. | ||||||||||||||||
| Event of default conversion price, description | Upon an Event of Default (as defined), the Buyers may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the Volume-Weighted Average Price (as defined, the “VWAP”). | ||||||||||||||||
| Cash proceeds received by holders | 85.00% | ||||||||||||||||
| Additional paid in capital | $ 1,140,711 | ||||||||||||||||
| Aggregate indebtedness | $ 12,000,000 | ||||||||||||||||
| Per-delivery shares issued | 670,001 | ||||||||||||||||
| Third Amendment and Exchange Agreements [Member] | |||||||||||||||||
| Convertible notes payable, principal amount | $ 261,903 | ||||||||||||||||
| Exercise price | 6.00 | ||||||||||||||||
| Conversion price | $ 3.478 | ||||||||||||||||
| Repayment of principal | $ 638,095 | ||||||||||||||||
| Warrants retired | 536,000 | ||||||||||||||||
| Forbearance and Amendment Agreement [Member] | |||||||||||||||||
| Exercise price | 6.0 | ||||||||||||||||
| Prepayment amount | $ 63,000 | $ 100,000 | |||||||||||||||
| Aggregate outstanding amount | 480,000 | $ 200,000 | |||||||||||||||
| Remaining outstanding amount | $ 607,000 | ||||||||||||||||
| Event of default descriptions | The Note provides that upon an Event of Default, the Buyer may, among other things, require the Company to redeem all or a portion of the Note at a redemption premium of 120%, multiplied by the product of the conversion rate ($6.00per share) and the then current market price. | ||||||||||||||||
| Breach of agreement description | the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date), (b) during the Forbearance Period (as defined) waive the prepayment premium to any Company Optional Redemption (which will result in the 120% redemption premium effectively replaced with 100%), and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to June 16, 2021. | ||||||||||||||||
| Securities Purchase Agreement [Member] | Warrants [Member] | |||||||||||||||||
| Common stock, par value | $ 5.00 | ||||||||||||||||
| Debt original issue discount | $ 233,332 | ||||||||||||||||
| Proceeds from issuance of warrants | $ 2,686,000 | ||||||||||||||||
| Legal fees | $ 74,000 | ||||||||||||||||
| Maturity period | 5 years | ||||||||||||||||
| Common stock shares issuable upon conversion of debt/convertible securities | 357,334 | 536,000 | 536,000 | ||||||||||||||
| Securities Purchase Agreement [Member] | InstitutionalInvestor [Member] | |||||||||||||||||
| Convertible notes payable, principal amount | $ 1,500,000 | ||||||||||||||||
| Common stock, par value | $ 0.001 | ||||||||||||||||
| Legal fees | $ 30,000 | ||||||||||||||||
| Cash commission description | Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission for this transaction equal to six (6%) percent of the total gross proceeds of the offering. This 6% fee or $90,000 was recorded as debt discount along with the $30,000 in legal fees associated with the May 2019 Note. | ||||||||||||||||
| Securities Purchase Agreement [Member] | September 2018 Notes [Member] | Holder [Member] | |||||||||||||||||
| Common stock, par value | $ 6.00 | ||||||||||||||||
| Debt original issue discount | $ 934,922 | ||||||||||||||||
| Event of default conversion price, description | Upon an Event of Default (regardless of whether such event has been cured), the Buyers may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the then Volume-Weighted Average Price (as defined, the “VWAP”). | ||||||||||||||||
| Per-delivery shares issued | 372,222 | ||||||||||||||||
| Debt instrument maturity date | Nov. 01, 2018 | ||||||||||||||||
| Customary events of default, description | The Note at a redemption premium of one hundred twenty-five (125%) percent, multiplied by the greater of the conversion rate and the then current market price. The Buyer may also require redemption of the May 2019 Note upon a Change of Control (as defined) at a premium of one hundred twenty-five (125%) percent. The Company has the right to redeem the May 2019 Note at any time, in whole or in part, in cash at a price equal to 120% of the then outstanding conversion amount. | ||||||||||||||||
| Securities Purchase Agreement [Member] | May 2019 Note [Member] | Holder [Member] | |||||||||||||||||
| Convertible notes payable, principal amount | $ 1,500,000 | $ 907,000 | |||||||||||||||
| Event of default conversion price, description | Upon an Event of Default (regardless of whether such event has been cured), the Buyer may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the then Volume-Weighted Average Price (as defined, the “VWAP”). | ||||||||||||||||
| Common stock shares issuable upon conversion of debt/convertible securities | 250,000 | ||||||||||||||||
| Conversion price | $ 6.00 | $ 3.478 | |||||||||||||||
| Payment amount to related party | $ 12,000,000 | ||||||||||||||||
| Customary events of default, description | 2019 Note includes customary Events of Default and provides that the Buyer may require the Company to redeem (regardless of whether the Event of Default has been cured) all or a portion of the Note at a redemption premium equal to the greater of: (i) the product of the redemption premium of one hundred twenty-five (125%) percent, multiplied by the conversion amount, and (ii) the product of the conversion rate ($6.00 per share) multiplied by the product of 125% multiplied by the then current market price. The Buyer may also require redemption of the May 2019 Note upon a Change of Control (as defined) at a premium of one hundred twenty-five (125%) percent. The Company has the right to redeem the May 2019 Note at any time, in whole or in part, in cash at a price equal to 120% of the then outstanding conversion amount. | ||||||||||||||||
| Terms of Blocker Provision | Common stock would exceed 9.99% of the Company’s issued and outstanding common stock. | ||||||||||||||||
| Accrued expense | 25,334 | $ 15,420 | |||||||||||||||
| Repayment of amount | $ 593,000 | ||||||||||||||||
| Securities Purchase Agreement [Member] | Senior Note [Member] | |||||||||||||||||
| Common stock, par value | $ 0.001 | ||||||||||||||||
| Debt original issue discount | $ 350,000 | ||||||||||||||||
| Purchase price charged to financing costs | 240,000 | ||||||||||||||||
| Purchase price of financing cost | $ 3,000,000 | ||||||||||||||||
| Common stock shares issuable upon conversion of debt/convertible securities | 670,000 | ||||||||||||||||
| November 15, 2017 Securities Purchase Agreement [Member] | Third Amendment and Exchange Agreements [Member] | |||||||||||||||||
| Debt instrument maturity date | Dec. 11, 2023 | ||||||||||||||||
| Warrants issued | 727,683 | ||||||||||||||||
| September 4, 2018 Securities Purchase Agreement [Member] | Third Amendment and Exchange Agreements [Member] | |||||||||||||||||
| Conversion price | $ 3.478 | ||||||||||||||||
| Related Party Debt | $ 1,333,333 | ||||||||||||||||
| Debt modification expense | $ 1,778,952 | ||||||||||||||||
| Common stock issued | 383,363 | ||||||||||||||||
| Institutional investors [Member] | Securities Purchase Agreement [Member] | September 2018 Notes [Member] | |||||||||||||||||
| Convertible notes payable, principal amount | $ 2,233,333 | ||||||||||||||||
| Common stock, par value | $ 0.001 | ||||||||||||||||
| Common stock shares issuable upon conversion of debt/convertible securities | 372,223 | ||||||||||||||||
| Proceeds from issuance of warrants | $ 1,845,000 | ||||||||||||||||
| Legal fees | $ 15,000 | ||||||||||||||||
| Debt instrument maturity date | May 01, 2019 | ||||||||||||||||
| Purchase price charged to financing costs | $ 140,000 | ||||||||||||||||
| Purchase price of financing cost | $ 2,000,000 | ||||||||||||||||
| Exercise price | 7.50 | ||||||||||||||||
| Placement agent [Member] | Roth Capital Partners, LLC [Member] | |||||||||||||||||
| Amortization of debt discount | $ 184,100 | ||||||||||||||||
| Proceeds from issuance of warrants | $ 140,000 | ||||||||||||||||
| Debt instrument maturity date | Mar. 04, 2019 | ||||||||||||||||
| Terms of Blocker Provision | Will receive seven (7%) percent of any cash proceeds received from the exercise of any Warrants sold in the offering with an expiration equal to or less than twenty-four (24) months. | ||||||||||||||||
| Fair Value of Warrants | $ 157,969 | ||||||||||||||||
| Interest Rate | 5.00% | ||||||||||||||||
| Maturity period | 5 years | ||||||||||||||||
| Placement agent [Member] | Roth Capital Partners, LLC [Member] | Warrants [Member] | |||||||||||||||||
| Debt original issue discount | $ 140,000 | ||||||||||||||||
| Common stock shares issuable upon conversion of debt/convertible securities | 26,056 | ||||||||||||||||
| Warrants exercise price | $ 6.00 | ||||||||||||||||
| Senior Convertible Note 1 [Member] | Institutional investors [Member] | Securities Purchase Agreement [Member] | |||||||||||||||||
| Convertible notes payable, principal amount | $ 3,000,000 | ||||||||||||||||
| Senior Convertible Note 2 [Member] | Institutional investors [Member] | Securities Purchase Agreement [Member] | |||||||||||||||||
| Convertible notes payable, principal amount | $ 3,350,000 | ||||||||||||||||
| New Notes [Member] | Exchange Agreements [Member] | |||||||||||||||||
| Convertible notes payable, principal amount | $ 3,216,000 | ||||||||||||||||
| Debt discount | 3,216,000 | 1,140,711 | $ 3,216,000 | ||||||||||||||
| Amortization of debt discount | $ 405,743 | $ 45,613 | $ 3,170,386 | ||||||||||||||
| Debt original issue discount | 336,000 | ||||||||||||||||
| Gain on extinguishment of debt | 1,464,698 | ||||||||||||||||
| Beneficial conversion feature | 2,880,000 | ||||||||||||||||
| Adjustments to beneficial conversion feature and issue of debt discount | $ 1,739,289 | ||||||||||||||||
| Convertible Promissory Note [Member] | Securities Purchase Agreement [Member] | |||||||||||||||||
| Debt original issue discount | $ 40,000 | ||||||||||||||||
| Event of default conversion price, description | The Conversion Price shall equal the Variable Conversion Price (subject to stock splits, dividends, rights offerings or similar events) shall mean seventy-five percent (75%) multiplied by the Market Price defined as the average of the three (3) lowest trading prices for common stock during the fifteen (15) trading day period ending on the latest complete trading day prior to the conversion date. | ||||||||||||||||
| Event of default descriptions | Note since inception shall be the Interest Rate plus eighteen percent (18.0%), the Default Interest. Unless previously converted, the principal and accrued interest on the Note is due and payable in cash (USD) upon the earlier of (i) December 31, 2021, (ii) a Change of Control (as defined below) or (iii), an Event of Default (as defined below) (collectively, the “Maturity Date”). | ||||||||||||||||
| Financing cost | $ 3,000 | ||||||||||||||||
| Interest rate | 8.00% | ||||||||||||||||
| Note issued | $ 540,000 | ||||||||||||||||
| Note issued upon exchange for cash | $ 500,000 | ||||||||||||||||
| Convertible Notes [Member] | September 2018 [Member] | |||||||||||||||||
| Interest Rate | 5.00% | 5.00% | |||||||||||||||
| Installment fees | $ 13,097 | $ 31,905 | |||||||||||||||
DEBT (Details Narrative) - USD ($) |
1 Months Ended | 12 Months Ended | |||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 04, 2020 |
May 12, 2020 |
May 08, 2020 |
May 05, 2020 |
Dec. 06, 2019 |
May 12, 2018 |
May 12, 2017 |
Apr. 10, 2017 |
Mar. 16, 2017 |
Aug. 04, 2016 |
Nov. 19, 2020 |
Jun. 24, 2020 |
May 18, 2020 |
Apr. 23, 2020 |
Mar. 23, 2020 |
Feb. 27, 2020 |
Feb. 25, 2020 |
Jan. 27, 2020 |
Dec. 19, 2018 |
Oct. 17, 2018 |
May 31, 2018 |
Mar. 20, 2017 |
Nov. 16, 2015 |
Dec. 31, 2020 |
Dec. 30, 2020 |
Dec. 31, 2019 |
Dec. 20, 2018 |
Oct. 29, 2020 |
Jul. 03, 2020 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
Nov. 16, 2017 |
Jul. 31, 2017 |
Mar. 23, 2017 |
Jan. 31, 2017 |
Dec. 31, 2016 |
Nov. 30, 2016 |
Oct. 31, 2016 |
Sep. 30, 2016 |
Sep. 13, 2016 |
|
| Loan received from related party | $ 366,900 | $ 68,310 | |||||||||||||||||||||||||||||||||||||||
| Decription of loan payment for interest | The loan will be repaid in 40 equal monthly instalments beginning on January 1, 2022 and bears an interest rate of 0.94% per annum. | The loan has a six-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement. | |||||||||||||||||||||||||||||||||||||||
| Accured interest expense | $ 3,910 | ||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | $ 2,680,000 | ||||||||||||||||||||||||||||||||||||||||
| Gain on extingushment of debt, total | $ (204,271) | $ 0 | |||||||||||||||||||||||||||||||||||||||
| Shares issued | 13,485,128 | 13,325,587 | |||||||||||||||||||||||||||||||||||||||
| Trade Facility [Member] | |||||||||||||||||||||||||||||||||||||||||
| Payment of interest and principal | $ 1,123,600 | ||||||||||||||||||||||||||||||||||||||||
| July 24, 2019 [Member] | Senior Promissory Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 750,000 | ||||||||||||||||||||||||||||||||||||||||
| Maturity date | Jul. 24, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Accured interest expense | $ 158,429 | $ 49,625 | |||||||||||||||||||||||||||||||||||||||
| Interest rate | 15.00% | ||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | $ 750,000 | ||||||||||||||||||||||||||||||||||||||||
| Due to related party | 750,000 | 750,000 | |||||||||||||||||||||||||||||||||||||||
| October 23, 2019 [Member] | Senior Promissory Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 250,000 | ||||||||||||||||||||||||||||||||||||||||
| Maturity date | Oct. 23, 2020 | ||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | $ 250,000 | 250,000 | |||||||||||||||||||||||||||||||||||||||
| Accrued expenses | 43,971 | 7,705 | |||||||||||||||||||||||||||||||||||||||
| Loans payable | $ 2,000,000 | ||||||||||||||||||||||||||||||||||||||||
| Interest rate | 15.00% | ||||||||||||||||||||||||||||||||||||||||
| August 4, 2020 [Member] | Senior Promissory Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 3,000,000 | ||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | $ 3,000,000 | ||||||||||||||||||||||||||||||||||||||||
| Interest rate | 18.00% | ||||||||||||||||||||||||||||||||||||||||
| July 3, 2020 [Member] | Senior Promissory Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 5,000,000 | $ 5,000,000 | |||||||||||||||||||||||||||||||||||||||
| Interest rate | 18.00% | ||||||||||||||||||||||||||||||||||||||||
| Accrued expenses | $ 148,685 | ||||||||||||||||||||||||||||||||||||||||
| August 1, 2019 [Member] | Senior Promissory Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Maturity date | Aug. 01, 2020 | ||||||||||||||||||||||||||||||||||||||||
| Accured interest expense | $ 103,972 | ||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | 500,000 | 500,000 | |||||||||||||||||||||||||||||||||||||||
| Accrued expenses | 107,972 | 31,438 | |||||||||||||||||||||||||||||||||||||||
| Loans payable | $ 1,500,000 | ||||||||||||||||||||||||||||||||||||||||
| Interest rate | 15.00% | ||||||||||||||||||||||||||||||||||||||||
| On April 18, 2018 [Member] | |||||||||||||||||||||||||||||||||||||||||
| Maturity date | Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Gain on debt settlement | $ 23,354 | ||||||||||||||||||||||||||||||||||||||||
| Libor rate description | Additionally, the interest rate was amended such that the interest rate for all advances is 4% plus the 3-Month Libor rate | ||||||||||||||||||||||||||||||||||||||||
| March 23, 2020 Forbearance Agreement [Member] | Senior Promissory Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | $ 1,500,000 | ||||||||||||||||||||||||||||||||||||||||
| May 5, 2020 [Member] | Senior Promissory Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | 2,000,000 | ||||||||||||||||||||||||||||||||||||||||
| On May 8, 2020 [Member] | Senior Promissory Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | 200,000 | ||||||||||||||||||||||||||||||||||||||||
| On April 23, 2020[Member] | Senior Promissory Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | 200,000 | ||||||||||||||||||||||||||||||||||||||||
| Loan Facility July 6, 2017 [Member] | |||||||||||||||||||||||||||||||||||||||||
| Fees forgiven related to advance | 40,000 | ||||||||||||||||||||||||||||||||||||||||
| Bridge Loans [Member] | |||||||||||||||||||||||||||||||||||||||||
| Gain on extingushment of debt, total | 0 | 0 | |||||||||||||||||||||||||||||||||||||||
| Loan Facility [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | 3,302,100 | ||||||||||||||||||||||||||||||||||||||||
| Notes payable long term | 2,843,475 | ||||||||||||||||||||||||||||||||||||||||
| Accrued interest expense | $ 33,021 | ||||||||||||||||||||||||||||||||||||||||
| Description of loan repayement | In accordance with the settlement agreement, interest will accrue from June 30, 2020 until repayment in full at a rate of 6% per annum for the first year and 5.25% per annum for the second year calculated on the balance outstanding from day to day during such period. Interest is due on the 10th day of each calendar month. If any amount, principal or interest is unpaid on its due date interest shall accrue from the due date until the date of its payment until the date of its payment in full at the rate of 7.25% per annum. The Company will make quarterly payments of €125,000 beginning May 6, 2021 with a final payment of €2,200,000 on May 6, 2022. The Company evaluated the settlement agreement for debt modification in accordance with ASC 470-50 and concluded the debt qualified for debt extinguishment as the 10% cash flow test was met. As a result, the $3,772,446 of principal and accrued interest was written off and the new debt was recorded at fair value as of June 30, 2020 in the amount of $3,033,990. | ||||||||||||||||||||||||||||||||||||||||
| Gain on extingushment of debt, principal of loan | $ 12,066 | ||||||||||||||||||||||||||||||||||||||||
| Gain on extingushment of debt, total | $ 749,824 | 0 | |||||||||||||||||||||||||||||||||||||||
| Restricted shares | 1,000,000 | ||||||||||||||||||||||||||||||||||||||||
| Marathon [Member] | |||||||||||||||||||||||||||||||||||||||||
| Shares issued for settlement of debt | 298,875 | ||||||||||||||||||||||||||||||||||||||||
| Distribution and equity acquisition agreement, description | As consideration for its services, Company received: (a) a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services; and (b) received cash of CAD $2,000,000, subject to repayment in Common Shares of the Company if it fails to meet certain performance milestones. The Company is entitled to receive an additional CAD $2,750,000 upon the Company’s receipt of gross sales of CAD $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000. | ||||||||||||||||||||||||||||||||||||||||
| Settlement amount | $ 1,554,590 | ||||||||||||||||||||||||||||||||||||||||
| Cash received | 2,000,000 | ||||||||||||||||||||||||||||||||||||||||
| Grigorios Siokas [Member] | |||||||||||||||||||||||||||||||||||||||||
| Maturity date | Mar. 18, 2019 | ||||||||||||||||||||||||||||||||||||||||
| Interest rate | 4.70% | ||||||||||||||||||||||||||||||||||||||||
| Repayment of debt | 978,400 | ||||||||||||||||||||||||||||||||||||||||
| Grigorios Siokas [Member] | Senior Promissory Note [Member] | February and March 2020 Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 35,000 | $ 25,000 | 25,000 | ||||||||||||||||||||||||||||||||||||||
| Maturity date | Dec. 31, 2020 | Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||
| Accured interest expense | $ 3,963 | ||||||||||||||||||||||||||||||||||||||||
| Description of new maturity date | new maturity date for the note is now December 31, 2020.Additionally, the interest rate was changed to 10% per annum and the Company may now prepay the January Note at any time without penalty. | new maturity date for the note is now December 31, 2020.Additionally, the interest rate was changed to 10% per annum and the Company may now prepay the January Note at any time without penalty. | |||||||||||||||||||||||||||||||||||||||
| Interest rate | 5.00% | ||||||||||||||||||||||||||||||||||||||||
| Grigorios Siokas [Member] | Senior Promissory Note [Member] | February Note [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 1,000,000 | ||||||||||||||||||||||||||||||||||||||||
| Maturity date | Apr. 30, 2020 | Apr. 20, 2017 | |||||||||||||||||||||||||||||||||||||||
| Interest rate | 18.00% | ||||||||||||||||||||||||||||||||||||||||
| Grigorios Siokas [Member] | Senior Promissory Note [Member] | January 27, Note [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 250,000 | ||||||||||||||||||||||||||||||||||||||||
| Maturity date | May 15, 2020 | ||||||||||||||||||||||||||||||||||||||||
| Description of new maturity date | new maturity date for the note is now December 31, 2020.Additionally, the interest rate was changed to 10% per annum and the Company may now prepay the January Note at any time without penalty. | ||||||||||||||||||||||||||||||||||||||||
| Interest rate | 5.00% | ||||||||||||||||||||||||||||||||||||||||
| Accrued expenses | 18,458 | ||||||||||||||||||||||||||||||||||||||||
| Loans payable | 2,500,000 | ||||||||||||||||||||||||||||||||||||||||
| Unaffiliated Third Party [Member] | Senior Promissory Notes [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 3,000,000 | $ 2,000,000 | $ 2,000,000 | $ 2,000,000 | $ 200,000 | ||||||||||||||||||||||||||||||||||||
| Accrued expenses | 2,772 | ||||||||||||||||||||||||||||||||||||||||
| Loans payable | $ 3,000,000 | $ 1,000,000 | $ 2,750,000 | ||||||||||||||||||||||||||||||||||||||
| Description of loan repayment | The August 4 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The August 4 Note matures on December 31, 2020 unless in default. | The May 8 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 8 Note matured on June 8, 2020. | The May 5 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 5 Note matured on December 31, 2020. | The May 18 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 18 Note matured on December 31, 2020. The note is not in default and the Company is currently in negotiations with the lender to extend the maturity date. | The April Note bears interest at the rate of five (5%) percent per annum through May 31, 2020 and then shall change to 1% per annum effective June 1, 2020 paid quarterly in arrears. The April Note matures on December 31, 2020 unless in default. The Company may prepay the April Note within the first six (6) months by payment of unpaid interest for the first six (6) months and, after six (6) months, with a two (2%) percent ($4,000) premium. | The Company transferred the Euro €2,000,000 loan to a new third-party lender. The terms remained the same except interest will now accrue at 5.5% per annum plus Euribor. The principal is to be repaid in a total of five quarterly installments beginning October 31, 2021 of 50,000 Euro each with a final repayment of 1,800,000 Euro payable on the earlier of 24 months after December 30, 2020 or October 31, 2022. | |||||||||||||||||||||||||||||||||||
| Unaffiliated Third Party [Member] | Senior Promissory Notes [Member] | December 6, 2019 [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 250,000 | 250,000 | 250,000 | ||||||||||||||||||||||||||||||||||||||
| Maturity date | Mar. 31, 2020 | Apr. 16, 2017 | Apr. 20, 2017 | ||||||||||||||||||||||||||||||||||||||
| Accured interest expense | 21,952 | 890 | |||||||||||||||||||||||||||||||||||||||
| Description of new maturity date | new maturity date for the note is now December 31, 2020. Additionally, the interest rate changed to 10% per annum from March 31, 2020 through maturity and the Company may now prepay the December Note at any time without penalty | ||||||||||||||||||||||||||||||||||||||||
| Interest rate | 15.00% | 10.00% | 10.00% | ||||||||||||||||||||||||||||||||||||||
| Short term debt borrowing capacity | $ 2,250,000 | $ 50,000 | $ 120,220 | ||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | $ 250,000 | 250,000 | 250,000 | ||||||||||||||||||||||||||||||||||||||
| Unaffiliated Third Party [Member] | Senior Promissory Notes [Member] | April 1 to 3, 2019 [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 250,000 | 250,000 | |||||||||||||||||||||||||||||||||||||||
| Maturity date | Apr. 03, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Accured interest expense | $ 64,364 | 46,026 | |||||||||||||||||||||||||||||||||||||||
| Interest rate | 15.00% | ||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | $ 250,000 | 250,000 | |||||||||||||||||||||||||||||||||||||||
| Accrued expenses | 64,364 | 28,098 | |||||||||||||||||||||||||||||||||||||||
| Other expenses accrued | 9,452 | ||||||||||||||||||||||||||||||||||||||||
| Unaffiliated Third Party [Member] | Senior Promissory Notes [Member] | April 9, 2019 [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 250,000 | ||||||||||||||||||||||||||||||||||||||||
| Maturity date | Apr. 09, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Interest rate | 15.00% | ||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | $ 250,000 | 250,000 | |||||||||||||||||||||||||||||||||||||||
| Accrued expenses | 63,697 | 27,431 | |||||||||||||||||||||||||||||||||||||||
| Due from related party | 500,000 | ||||||||||||||||||||||||||||||||||||||||
| Unaffiliated Third Party [Member] | Senior Promissory Notes [Member] | October 23, 2019 [Member] | |||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | 250,000 | ||||||||||||||||||||||||||||||||||||||||
| Unaffiliated Third Party [Member] | Senior Promissory Notes [Member] | April 1, 2019 [Member] | |||||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | 250,000 | ||||||||||||||||||||||||||||||||||||||||
| SkyPharm [Member] | Trade Facility [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 5,369,678 | ||||||||||||||||||||||||||||||||||||||||
| Short term debt borrowing capacity | $ 2,446,400 | ||||||||||||||||||||||||||||||||||||||||
| Description for the repayment | The total facility will be calculated as 95% of the agreed upon value of Decahedron’s receivables. | ||||||||||||||||||||||||||||||||||||||||
| Term of credit facility | 12 months | ||||||||||||||||||||||||||||||||||||||||
| Credit facility origination fee, percentage | 2.00% | ||||||||||||||||||||||||||||||||||||||||
| Monthly credit fee, percentage | 1.00% | ||||||||||||||||||||||||||||||||||||||||
| Proceeds from debt | $ 247,117 | ||||||||||||||||||||||||||||||||||||||||
| SkyPharm [Member] | Trade Facility [Member] | Minimum [Member] | |||||||||||||||||||||||||||||||||||||||||
| Short term debt borrowing capacity | $ 2,291,200 | ||||||||||||||||||||||||||||||||||||||||
| SkyPharm [Member] | Trade Facility [Member] | Maximum [Member] | |||||||||||||||||||||||||||||||||||||||||
| Short term debt borrowing capacity | $ 6,736,200 | ||||||||||||||||||||||||||||||||||||||||
| SkyPharm [Member] | Bridge Loans [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | 106,542 | ||||||||||||||||||||||||||||||||||||||||
| Short term debt borrowing capacity | 50,000 | ||||||||||||||||||||||||||||||||||||||||
| Accrued expenses | 27,627 | ||||||||||||||||||||||||||||||||||||||||
| SkyPharm [Member] | Loan Facility [Member] | |||||||||||||||||||||||||||||||||||||||||
| Interest rate | 10.00% | ||||||||||||||||||||||||||||||||||||||||
| Short term debt borrowing capacity | $ 1,292,769 | ||||||||||||||||||||||||||||||||||||||||
| Description for the repayment | No prepayment is permitted pursuant to the terms of the Loan Facility. The Synthesis Facility Agreement as amended is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas. | ||||||||||||||||||||||||||||||||||||||||
| SkyPharm [Member] | Second amendment to loan facility agreement [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | 3,078,442 | ||||||||||||||||||||||||||||||||||||||||
| Short term debt borrowing capacity | $ 70,000 | $ 382,327 | $ 2,664,960 | $ 155,516 | $ 452,471 | $ 250,000 | $ 100,000 | $ 174,000 | |||||||||||||||||||||||||||||||||
| Accrued expenses | 609,607 | ||||||||||||||||||||||||||||||||||||||||
| Common stock shares issuable upon conversion of debt/convertible securities | 1,000,000 | ||||||||||||||||||||||||||||||||||||||||
| SkyPharm [Member] | Amendment to loan facility agreement [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 240,251 | ||||||||||||||||||||||||||||||||||||||||
| Short term debt borrowing capacity | $ 1,533,020 | ||||||||||||||||||||||||||||||||||||||||
| SkyPharm [Member] | Decahedron [Member] | Trade Facility [Member] | |||||||||||||||||||||||||||||||||||||||||
| Short term debt borrowing capacity | $ 363,250 | ||||||||||||||||||||||||||||||||||||||||
| Description for the repayment | The total facility will be calculated as 95% of the agreed upon value of Decahedrons receivables | ||||||||||||||||||||||||||||||||||||||||
| Term of credit facility | 12 months | ||||||||||||||||||||||||||||||||||||||||
| Credit facility origination fee, percentage | 2.00% | ||||||||||||||||||||||||||||||||||||||||
| Monthly credit fee, percentage | 1.00% | ||||||||||||||||||||||||||||||||||||||||
| Securities Purchase Agreement [Member] | Cosmofarm [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | 2,750,992 | ||||||||||||||||||||||||||||||||||||||||
| Promissory note issued | $ 227,912 | ||||||||||||||||||||||||||||||||||||||||
| Maturity date | Dec. 19, 2019 | ||||||||||||||||||||||||||||||||||||||||
| Loan Agreement [Member] | Panagiotis Drakopoulos [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | 9,784 | 14,595 | |||||||||||||||||||||||||||||||||||||||
| Maturity date | Nov. 15, 2016 | ||||||||||||||||||||||||||||||||||||||||
| Interest rate | 6.00% | ||||||||||||||||||||||||||||||||||||||||
| Short term debt borrowing capacity | $ 42,832 | ||||||||||||||||||||||||||||||||||||||||
| Accrued expenses | 5,852 | 4,677 | |||||||||||||||||||||||||||||||||||||||
| Repayment of debt | 5,862 | ||||||||||||||||||||||||||||||||||||||||
| Synthesis facility agreement [Member] | TFF [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 5,629,555 | ||||||||||||||||||||||||||||||||||||||||
| Accrued expenses | $ 524,094 | 402 | |||||||||||||||||||||||||||||||||||||||
| Description for amendment to agreement under ASU 470-50 | The Company evaluated the amended agreement under ASC 470-50 and concluded that it did not meet the 10% cash flow test and recorded debt modification expense of $138,110. | ||||||||||||||||||||||||||||||||||||||||
| Debt modification expense | $ 138,110 | ||||||||||||||||||||||||||||||||||||||||
| Debt split, balance | 2,446,000 | ||||||||||||||||||||||||||||||||||||||||
| Synthesis facility agreement [Member] | TFF [Member] | Principal balance 2 [Member] | |||||||||||||||||||||||||||||||||||||||||
| Maturity date | Aug. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Accrued expenses | 16,185 | 12,661 | |||||||||||||||||||||||||||||||||||||||
| Notes payable long term | 2,384,850 | ||||||||||||||||||||||||||||||||||||||||
| Debt split, balance | $ 4,000,000 | $ 4,000,000 | $ 4,000,000 | ||||||||||||||||||||||||||||||||||||||
| Interest rate description | 6% per annum plus one-month Libor on the USD balance | ||||||||||||||||||||||||||||||||||||||||
| Repayment of debt, periodic payments | $ 150,000 | ||||||||||||||||||||||||||||||||||||||||
| Frequency of periodic payments | Quarterly | ||||||||||||||||||||||||||||||||||||||||
| Debt Exchange Agreement [Member] | |||||||||||||||||||||||||||||||||||||||||
| Debt outstanding amount | $ 611,500 | $ 2,000,000 | |||||||||||||||||||||||||||||||||||||||
| Convertible notes payable, principal amount | 611,500 | 1,000,000 | |||||||||||||||||||||||||||||||||||||||
| Accrued expenses | $ 8,514 | ||||||||||||||||||||||||||||||||||||||||
| Notes payable long term | $ 543,557 | ||||||||||||||||||||||||||||||||||||||||
| Agreement description | The note matures on November 18, 2025 and bears an annual interest rate, based on a 360-day year, of 3.3% plus .6% plus 6-month Euribor when Euribor is positive. Pursuant to the terms of the agreement, there is a six-month grievance from the first deposit date, which was November 19, 2020, for both interest accrual and principal repayment. The principal is to be repaid in 18 quarterly installments of €27,000 with the first payment due 9 months from the first deposit. | ||||||||||||||||||||||||||||||||||||||||
| Shares issued | 259,741 | ||||||||||||||||||||||||||||||||||||||||
| Share issued price per share | $ 3.85 | ||||||||||||||||||||||||||||||||||||||||
| Gain on shares | $ 192,205 | ||||||||||||||||||||||||||||||||||||||||
LEASES (Details) - Operating Lease [Member] |
Dec. 31, 2020
USD ($)
|
|---|---|
| 2021 | $ 248,288 |
| 2022 | 218,083 |
| 2023 | 192,583 |
| 2024 | 58,704 |
| Thereafter | 220,107 |
| Total undiscounted operating lease payments | 937,765 |
| Less: Imputed interest | (147,023) |
| Present value of operating lease liabilities | $ 790,742 |
LEASES (Details 1) - Finance Lease [Member] |
Dec. 31, 2020
USD ($)
|
|---|---|
| 2021 | $ 105,620 |
| 2022 | 76,252 |
| 2023 | 65,939 |
| 2024 | 49,688 |
| 2025 | 16,430 |
| Thereafter | 0 |
| Total undiscounted finance lease payments | 313,929 |
| Less: Imputed interest | (35,831) |
| Present value of finance lease liabilities | $ 278,098 |
LEASES (Details Narrative) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| LEASES | ||
| Operating lease, term of agreements | The Company has various lease agreements with terms up to 10 years, comprising leases of office space | |
| Operating lease expense | $ 188,400 | $ 223,927 |
| Operating lease weighted-average remaining lease term | 7 years 3 months 18 days | |
| Operating lease, weighted average discount rate | 6.74% | |
| Finance lease, weighted average remaining lease term | 5 years 1 month 10 days | |
| Finance lease, weighted average discount rate | 6.74% | |
| Operating lease cash flows used in finance lease | $ 85,804 | 74,476 |
| Finance lease, interest expense | 13,759 | 0 |
| Finance lease, amortization expense | $ 123,533 | $ 160,542 |
COMMITMENTS AND CONTINGENCIES (Details Narrative) - Private Placement [Member] |
1 Months Ended | ||
|---|---|---|---|
Sep. 04, 2018 |
Aug. 08, 2017 |
Nov. 16, 2017 |
|
| Commitments and contingencies description | (1) a cash commission of 6% of the total gross proceeds for two named investors (2) a cash commission of 4% of total gross proceeds from five named investors and (3) excluding the five named investors in “(2)” a cash commission equal to 8% of the total gross proceeds from the Offering and the issuance to the Agent or its designees of warrants covering 8% of the shares of common stock issued or issuable by the Company in the Offering. | ||
| Cash commission description | In connection with the Company’s September 4, 2018 Note offering, the Agent received a cash commission for this transaction of $140,000, equal to seven (7%) percent of the total gross proceeds of the offering and the issuance of five-year warrants to purchase seven (7%) percent of the shares of common stock issued or issuable in this offering (excluding shares of common stock issuable upon exercise of any warrants issued to investors, or 26,056 shares) | In connection with the Company’s November 16, 2017 Note offering, the Agent received a cash commission of $240,000, equal to eight (8%) percent of the total gross proceeds of the offering and the issuance of five-year warrants to purchase eight (8%) percent of the shares of common stock issued or issuable in the offering (excluding shares of common stock issuable upon exercise of any warrants issued to investors, or 53,600 shares) |
EARNINGS PER SHARE (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Numerator for Basic and Diluted Earnings Per Share: | ||
| Net income (loss) | $ 820,786 | $ (3,298,965) |
| Denominator for Basic Earnings Per Share: | ||
| Weighted Average Shares | 13,270,097 | 13,273,596 |
| Potentially Dilutive Common Shares | 37,698 | |
| Adjusted Weighted Average Shares | 13,307,795 | 13,273,596 |
| Basic and Diluted Net (Loss) Income per Share | $ 0.06 | $ (0.25) |
EARNINGS PER SHARE (Details 1) - shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Excluded from computation of diluted net loss per share | 42,808 | |
| Convertible Debt [Member] | ||
| Excluded from computation of diluted net loss per share | ||
| Options [Member] | ||
| Excluded from computation of diluted net loss per share | 42,808 | |
| Warrants [Member] | ||
| Excluded from computation of diluted net loss per share | ||
STOCK OPTIONS AND WARRANTS (Details) - Stock Options [Member] - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Aggregate Intrinsic Value | ||
| Number of Shares Outstanding, Beginning | 74,000 | 74,000 |
| Granted | ||
| Forfeited | (12,000) | |
| Exercised | ||
| Expired | ||
| Number of Shares Outstanding, Ending | 62,000 | 74,000 |
| Number of Shares Exercisable | 62,000 | |
| Weighted Average Exercise Price Outstanding, Beginning | $ 1.32 | $ 1.32 |
| Weighted Average Exercise Price Outstanding, Ending | 1.19 | $ 1.32 |
| Weighted Average Exercise Price Exercisable | $ 1.19 | |
| Weighted Average Remaining Contractual Term Outstanding, Beginning | 1 year 5 months 19 days | 2 years 5 months 19 days |
| Weighted Average Remaining Contractual Term Outstanding, Ending | 7 months 6 days | 1 year 5 months 19 days |
| Weighted Average Remaining Contractual Term Exercisable | 7 months 6 days | |
| Aggregate Intrinsic Value Outstanding, Beginning | $ 64,800 | $ 198,000 |
| Aggregate Intrinsic Value Outstanding, Ending | 242,000 | $ 64,800 |
| Aggregate Intrinsic Value Exercisable | $ 242,000 | |
STOCK OPTIONS AND WARRANTS (Details 1) - Warrants [Member] - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Aggregate Intrinsic Value | ||
| Number of Shares Outstanding, Beginning | $ 1,164,673 | $ 1,164,673 |
| Granted | ||
| Forfeited | ||
| Expired | ||
| Number of Shares Outstanding, Ending | $ 1,164,673 | $ 1,164,673 |
| Number of Shares Exercisable | 1,164,673 | |
| Weighted Average Exercise Price Outstanding, Beginning | $ 6.41 | $ 6.41 |
| Weighted Average Exercise Price Outstanding, Ending | 6.41 | $ 6.41 |
| Weighted Average Exercise Price Exercisable | $ 6.41 | |
| Weighted Average Remaining Contractual Term Outstanding, Beginning | 4 years 4 days | 5 years 4 days |
| Weighted Average Remaining Contractual Term Outstanding, Ending | 3 years 4 days | 4 years 4 days |
| Weighted Average Remaining Contractual Term Exercisable | 3 years 4 days | |
| Aggregate Intrinsic Value Outstanding, Ending Balance | $ 5,360 | |
| Aggregate Intrinsic Value Exercisable | $ 5,360 | |
STOCK OPTIONS AND WARRANTS (Details Narrative) - Options [Member] |
12 Months Ended |
|---|---|
|
Dec. 31, 2020
shares
| |
| Number of Shares Exercisable | 62,000 |
| Number of Shares Outstanding, Beginning | 62,000 |
| Expired dates description | Expiration dates commencing January 2021 and continuing through January 2022. |
DISAGGREGATION OF REVENUE (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Revenue | $ 55,406,337 | $ 39,676,385 |
| Greece [Member] | ||
| Revenue | 51,259,784 | 26,101,316 |
| Libya [Member] | ||
| Revenue | 1,028 | 396,333 |
| Cyprus [Member] | ||
| Revenue | 36,987 | 0 |
| Croatia [Member] | ||
| Revenue | 24,840 | 22,497 |
| Denmark [Member] | ||
| Revenue | 537,098 | 97,905 |
| France [Member] | ||
| Revenue | 18,988 | 153,422 |
| Georgia [Member] | ||
| Revenue | 0 | 5,301 |
| Germany [Member] | ||
| Revenue | 1,314,381 | 6,672,511 |
| Hungary [Member] | ||
| Revenue | 0 | 1,094,446 |
| Indonesia [Member] | ||
| Revenue | 0 | 7,172 |
| Ireland [Member] | ||
| Revenue | 36,349 | 467,965 |
| Italy [Member] | ||
| Revenue | 75,183 | 196,044 |
| Jordan [Member] | ||
| Revenue | 29,635 | 20,144 |
| Netherlands [Member] | ||
| Revenue | 188,890 | 846,479 |
| Poland [Member] | ||
| Revenue | 29,358 | 307,624 |
| Spain [Member] | ||
| Revenue | 0 | 0 |
| Turkey [Member] | ||
| Revenue | 0 | 24,347 |
| UK [Member] | ||
| Revenue | $ 1,853,816 | $ 3,262,880 |
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - USD ($) |
Feb. 05, 2021 |
Jan. 07, 2021 |
|---|---|---|
| Exchange Agreement [Member] | ||
| Common stock exchange shares | 781,819 | |
| Exchange price per share | $ 3.85 | |
| Debt instrument converted amount | $ 3,010,000 | |
| Consulting Agreement [Member] | Consultant [Member] | ||
| Restricted stock shares issuable per month | 200,000 | |
| Restricted stock shares | 1,800,000 | |
| Agreement description | The Consultant retained 800,000 of the 1,800,000 shares and agreed with an assignee and the Company that 1,600,000 of the 1,800,000 shares shall be held in book entry for six (6) months from the date of this Agreement, subject to the above claw back. | |
| Subscription Agreement [Member] | ||
| Maturity date description | Matures on the earlier of (i) consummation of the Company listing its common shares on the NEO Stock Exchange or October 31, 2021. | |
| Discount percentage upon sale of common stock share | 25.00% | |
| Debt conversion description | The note holder will have the option, in part or in full, to have the note repaid with interest, or convert the note into Company common stock at a 25% discount to the 30-day volume-weighted average price of the Common Shares on the most senior stock exchange in North American on which the common shares are trading prior to conversion. | |
| Debt instrument, principal amount | $ 100,000 | |
| Interest rate | 8.00% | |
| Stock Purchase Agreement [Member] | Unaffiliated Third Party [Member] | ||
| Treasury stock shares sold | 65,000 | |
| Net proceeds of common stock | $ 250,000 | |
| Treasury stock, price per share | $ 3.85 |