EXHIBIT 16.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(AMENDMENT NO. 1)
CURRENT REPORT
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EXPLANATORY NOTE
On April 26, 2024, Cosmos Health Inc. (the “Company”) filed a Current Report on Form 8-K (the “Original Report”) to report the dismissal of KPMG Certified Auditors S.A. (“KPMG”) as the Company’s independent registered public accounting firm, effective immediately, and related matters under Item 4.01 of Form 8-K.
This Current Report on Form 8-K/A (the “Amendment”) is being filed by the Company to amend the Original Report to include disclosure regarding the appointment of new independent registered auditors of the Company, as required under Item 4.01(b), and to file Exhibit 16.1, Letter from KPMG to the SEC and Exhibit 16.2, Response Letter from Cosmos Health Inc. to KPMG.
Item 4.01 of the Original Report is amended and restated in its entirety as set forth below. Except as set forth herein, no other modifications have been made to the Original Report.
ITEM 4.01 CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT
(a) Dismissal of Previous Independent Registered Public Accounting Firm
On April 26, 2024, the Company dismissed KPMG as the Company’s independent registered accountant, effective immediately. The Company’s Audit Committee, mindful of certain filing deadlines under the US securities laws, unanimously voted in favor to dismiss KPMG as the Company’s independent auditors. KPMG was unable to complete the audit of the Company’s financial statements for the year ended December 31, 2023 on a timely basis. The Company’s Board of Directors agreed with such recommendation.
KPMG had previously been appointed on August 7, 2023 as the Company’s independent registered public accounting firm with the engagement of the review of the Company’s Third Quarter Form 10-Q and the audit of the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2023. As previously disclosed, during the two most recent fiscal years and through August 7, 2023, the Company had not consulted with KPMG regarding any matter that was the subject of a disagreement or a reportable event described in Items 304(a)(1)(iv) or (v), respectively, of Regulation S-K under the Securities Exchange Act of 1934.
During the subsequent interim period from August 7, 2023 through April 25, 2024, the Company is of the opinion that: there were no (a) disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedure, which disagreements, if not resolved to KPMG’s satisfaction, would have caused KPMG to make reference to the subject matter thereof in connection with its report for such period; or (b) reportable events, as described under Item 304(a)(1)(v) of Regulation S-K.
We furnished a copy of the disclosures in this report to KPMG and had requested that KPMG furnish us with a letter addressed to the SEC stating whether such firm agrees with the statements made by the Company in response to this Item 4.01, if not, stating the respects in which it does not agree. A copy of the letter is being filed as Exhibit 16.1 to this Amendment.
In their letter, KPMG has the contrary opinion that there have been disagreements, between KPMG and the Company, on matters of “accounting principles or practices, financial statement disclosures, or auditing scope or procedure”, and, more specifically, that KPMG has identified certain transactions with a third party consignment vendor that suggested that an illegal act may have occurred and asked the Company’s Audit Committee to undertake a prompt investigation and to facilitate additional audit procedures, that the request was reiterated multiple times and that, at the time of their dismissal, they were not aware of an investigation having been initiated and the additional audit procedures had not been performed.
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The Company objects to such statements made by KPMG and provides a response letter, which is being filed herein as Exhibit 16.2 to this Amendment. Contrary to KMPG’s assertions, KPMG never informed the Company’s Audit Committee that “an illegal act may have occurred”. Instead, KPMG’s comments consistently referred to concerns over an inventory account and the related transactions between the Company and the third-party vendor. As soon as the issue was raised with the Chairman of the Company’s Audit Committee, the Audit Committee informed the Company and the Company has taken prompt actions in regard to such concerns. An independent inventory count was conducted on April 30, 2024 and the count substantiated the transaction in question.
Regardless of the arrangement of the inventory count in order to solve such specific concern, on April 10, 2024, the Chairman of the Company’s Audit Committee was informed that KPMG had suspended all further audit work and, as a result, the Company was unable to timely file its Form 10-K for fiscal year 2023 within the SEC deadlines.
(b) Engagement of New Independent Registered Public Accounting Firm
On April 29, 2024, RBSM LLP (“RBSM”) was appointed as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements as of and for the fiscal year ended December 31, 2023.
During the two most recent fiscal years and through April 25, 2024, the Company had not consulted with RBSM regarding any matter that was the subject of a disagreement or a reportable event described in Items 304(a)(1)(iv) or (v), respectively, of Regulation S-K.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
COSMOS HEALTH INC. | |||
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Date: May 1, 2024 | By: | /s/ Georgios Terzis | |
Georgios Terzis |
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Chief Financial Officer | |||
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EXHIBIT 16.1
EXHIBIT 16.2
May 1, 2024
By electronic mail
TO: KPMG Certified Auditors S.A.
44 Syngrou Avenue
117 42 Athens, Greece
Dear KPMG Certified Auditors S.A.,
The Board of Directors of Cosmos Health Inc. ("Cosmos" or the "Company") and its Audit Committee have reviewed your letter dated April 29, 2024, which was provided to the Company for purposes of being filed as Exhibit 16.1 to the Amendment of the Company's Current Report on Form 8-K filed on April 26, 2024, by which the Company announced your dismissal as Company's independent auditors.
The Company believes that the statements you make in your letter are conflicting with the facts of your engagement history, your involvement in and contemporaneous awareness of the transaction at issue. Therefore, with this letter the Company strongly objects to said statements contained in your April 29, 2024 letter.
As you are aware, throughout the course of the audit, especially when it became apparent to the Company that KPMG would not timely complete the audit, the Company began to inquire of KPMG as to the timing and remaining steps necessary to complete the audit.
Unfortunately, the failure to timely complete the Company's audit has caused the Company to miss its March 31, 2024 deadline (and, subsequently the extended deadline of April 15, 2024) to file Form 10-K and the Company has since received a letter from NASDAQ that could lead to a delisting if not cured. Only on March 21, 2024, just ten (10) days before the initial deadline to file Form 10-K, did KPMG provide a briefing of outstanding issues in order to complete the Company's audit.
On April 10, 2024 (five (5) days before the extended deadline to file Form 10-K), KPMG met with the Chairman of the Company's Audit Committee and informed him that an inventory count at a third-party consignment vendor in its presence was necessary to confirm the validity and/or accuracy of the related transaction between the Company and such third-party and that, in the interim, all further audit work had been suspended. The Company’s Audit Committee immediately responded and brought this requirement to the Company’s attention, requesting an inventory count to be arranged and the Audit Committee to be informed by April 22, 2024.
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On April 12, 2024, April 14, 2024 and April 22, 2024, the Company inquired of KPMG as to the timing and remaining steps necessary to complete the audit. The Company never heard back from KPMG as to the timing or remaining steps. On April 22, 2024, upon receiving such information from the Company, the Audit Committee Chair informed KPMG that an independent inventory count at a third-party consignment vendor would take place on April 30, 2024. Additionally, on April 23, 2024, the Audit Committee asked KPMG if KPMG was in possession of any additional information which gave KPMG concerns over the inventory and the related transaction. To date, KPMG has not provided the Company with any such documentation and assured at the time that “should additional information worthy of your (the Audit Committee’s) attention be available we will share it with you”.
Again, as KPMG informed the Company’s Audit Committee on April 10, 2024 that all audit work was suspended and as the Company was facing certain filing deadlines, on April 26, 2024 the Company terminated KPMG.
Contrary to KPMG's claims contained in the April 29, 2024 letter, the Audit Committee informed the Board of Directors that KPMG never informed the Audit Committee that "an illegal act may have occurred". Instead, KPMG's comments initially referred to concerns over the inventory count and the related transaction and your request to investigate the transaction if the inventory count was not taken or it was not satisfactory; and subsequently, in addition to the inventory count, that the recording of the transaction on the books and records of the Company may possibly have been inaccurate.
The Company has taken prompt actions in regard to such inquiry and, on April 30, 2024, the independent inventory count was conducted. The count substantiated the inventory in question.
On April 30, 2024, the Company engaged RBSM LLP as its new auditors and has also informed RBSM of all of KPMG's concerns.
In light of KPMG's audit role and the regular updates and communications between KPMG and the Company, the Company views your letter as factually inaccurate.
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| /s/ Grigorios Siokas |
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| Grigorios Siokas, Chief Executive Officer |
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| Cosmos Health Inc. |
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